Communicating Slovak reforms: Lessons from Central European Tiger

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Communicating Slovak reformsLessons from
Central European Tiger
ONDREJ SOCUVKA Economic Advisor to US Ambassador
in Slovakia

• Free market Road show conference
• Prague, May 12th, 2008

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Introduction

• Introduction
• Key Reforms in Slovakia
• Communication Strategy
• Lessons learned
• Questions

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LONG-TERM SUSTAINABILITY SUPPORTED BY MAJOR
STRUCTURAL REFORMS
1989 2005
FUNCTIONING MARKET ECONOMY

• CENTRALLY PLANNED ECONOMY

GOALS OF REFORMS TYPE OF REFORMS

• high and sustainable growth
• long-term competitiveness
• Lisabon strategy goals

• functioning market economy

• privatizations
• price deregulations
• market institutions

• structural reforms

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Key REFORMS in Slovakia

• Dzurinda government 2002 (center-right,
  unilateral focus on reforms, sound
  macroeconomics)
• Social Reform
• Tax Reform
• Judiciary Reform
• Health Care System Reform -
• Education Reform -

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MAIN REFORMS improving Business Environment in
Slovakia

• Tax reform 19 flat tax
• Fair, effective, simple
• Taxation of Consumption not work activity
• Judiciary Reform
• Fight corruption, zero tolerance
• Labor Market reform
• Active Labor Market Policy mobility
• Flexible Labor Code, it is better to work

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PROBLEMATIC reforms

• Healthcare Reform
• Effect of 20 SK (1) payments
• Privatization of hospitals
• Timing (the election year)
• Education System Reform
• Unsuccessful complex higher education reform
• Not enough political capital to pass

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SUCCESS of reforms

• Political compromise/dedication
• Non-political experts nominations
• Strong communication strategy

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COMMUNICATION strategy

• Spokespersons at ministries members of senior
  advisory teams
• Coordination of messages between gov. office and
  ministries
• Reach out to the people regions

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POLITICS of Reforms

• Strong and Clear Political Will
• Weak Opposition Arguments
• Experts on Top Gov. Positions
• Media (facilitator)
• Timing (difficult reforms in the beginning
  first VAT, than 19 and excise tax)
• Coordination of Reformist Steps (Tax, Pensions,
  Decentralization, Healthcare)
• Communication to Citizens

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MACROECONOMIC Numbers

• Real wages growth 6,3 (06), 4,3 (07)
• GDP growth 10,4 (2007)
• Inflation 2,2 (March 2008)
• 100.000 new jobs created from 2002
• Unemployment 7 (2008)
• FDI (more than 1bln EUR in 07, Samsung)

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PROBLEMS identified

• Coalition governments in EU countries
• Political discussions unavoidable
• Macroeconomic messages
• GDP, Inflation too distant from citizens
• What will I have in my pocket from this reform?
• Timing
• Healthcare reform introduced in election year
• Education reform (tuition, exit exams)

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POLITICAL Problems

• Transparency issues
• Privatization decisions (hospitals, airports
  etc.)
• Dubious votes of opposition MPs
• Political elites too satisfied with themselves
• Detroit of East, World best reformer, CEE
  Tiger
• Slovaks are pessimistic
• Lack of populist spending

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RESULTS of elections in 2006

• New government
• 40 populist leftists, nationalists and Meciar
• Grasping benefits of reforms (macroeconomic
  growth, stability of public spending)
• Schengen entry in 2007, Euro in 2009
• No changes to the reforms
• Populist policies based on opinion polls
• Opposition not coordinated, no VISION

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CURRENT government

• Fund difference capitalists want to exploit
• Increasing government spending
• EURO adoption in 2009
• Increasing government regulation (energy)
• Changes in Labor Code, Pension System
• Less attractive business environment
• Luckily not as bad as it could be

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LESSONS LEARNED

• Focus message on citizens, can you eat GDP?
• More listening and less talking
• Clear and simple message
• Reforms for citizens not elites
• Political struggles
• Transparency

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FUTURE GOALS

• Smaller but effective state administration
  (limited gov spending, lower taxes)
• Transfer macroeconomics into increasing living
  standards of citizens
• Improve business environment
• Knowledge based economy (RD, innovation, IT,
  development of HR)

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Questions and Answers
Thank you for your attention! email
ondrejsocuvka_at_gmail.com