Three years of post-1998 economic and institutional reforms in Slovakia offer valuable lessons to the transition reform process of the EU non-accession countries in the Region.

Following the 1998 parliamentary elections that brought into power a reform Government, I was asked by a key economic and institutional policy maker of Slovakia, Deputy Prime Minister for Economic Affairs Ivan Miklos, to return to Slovakia and join his team as his Special Advisor.  Over the past two and a half years, I have advised and worked closely with Prime Minister Mikulas Dzurinda, Mr. Miklos and a number of Cabinet members, including the Deputy Prime Minister for European Integration, the Minister of Finance, the Minister of Foreign Affairs and the Minister of Justice.  I have worked on a host of issues ranging from the relations with International Financial Institutions, accession processes to the European Union and the Organization for Economic Cooperation and Development (OECD), economic macro-stabilization, policies for attracting foreign direct investment, to designing, creating support and implementing key legal and institutional reforms.  Working with the Slovak Government has been an excellent opportunity to implement in practice those skills, knowledge and experience about the transition reform process that I developed in my five years as Senior Counsel at the World Bank.

The current Slovak Government consists of a broad coalition that defeated the authoritarian regime of ex-Prime Minister Vladimir Meciar who was in power from 1994 through 1998.  The coalition comprises diverging political parties, from the ex-Communists to the Christian Democrats. The ability to work with key reform leaders in Slovakia across the political spectrum enabled me to have a unique exposure to the policy-making and political processes within the context of a transition country.

My research proposal has two parts. The first part is Slovakia specific. In it, I would like to analyze and document the economic, legal reform and institutional policy-making processes, and how they were affected by the breadth and composition of the ruling coalition.  I would analyze the consensus-seeking and consensus-building mechanisms used and the policy trade-offs that have had to be made in the process.  I would further analyze the main “engines of reform” in Slovakia, both from within and from outside the Government.  Outside the Government I would look specifically at two important reform constituencies:  the free press and its critical role in pushing for economic and institutional reforms as well as acting as Government watch-dog; and independent think-tanks and their role in creating/supplementing capacity for the reform agenda as well as acting as policy critics of the Government.  The thesis for this first part of my research is that without the engines of reform from outside the Government, it would have been much more difficult, if not impossible in some instances, for the divergent political parties, representing a whole plethora of interests, to join together and support unified policy choices.

In the second part, I would like to look at Slovakia as one of the transition countries in the Central and Eastern European Region that offers useful lessons to other countries, especially in the Balkans and parts of the former Soviet Union.  Due to its specific political conditions, the last three years in Slovakia were key for carrying out all critical macroeconomic, microeconomic and institutional reforms - a process that was carried out three to five years earlier in the countries that are “frontrunners” to early EU accession.  After the split of Czechoslovakia, touted as the “velvet divorce” in 1993, Slovakia managed in the initial period to keep lockstep with its more advanced and affluent Western neighbor, the Czech Republic.  As part of the “Visegrad Four” group of countries (comprising Czech Republic, Hungary, Poland and Slovakia), Slovakia was in line for the first round of accession to the OECD and NATO.  Due to the authoritarian nature of the 1994 through 1998 Government, Slovakia was excluded from the first “waves” of enlargement of both organizations.  It was also excluded from accession negotiations with the European Union.  The election of a democratic and reform Government in 1998 enabled Slovakia to get back on track and out of international isolation.  It also provided an opportunity to continue important transition reforms across the economic landscape that were aborted during the Meciar regime.

The thesis for the second part of my research is that as a “latecomer” to the transition process Slovakia demonstrates that now, with over ten years experience in transition, there are very few reform areas that lack technical answers.  There are two greater challenges than “transition expertise and know-how” for reformers in transition countries - how to make unpopular reforms politically palatable; and how to gather the human capacity necessary to design and carry out critical reforms in the usually short political window of opportunity.  The accumulated knowledge and experience from countries that started transition reforms early is capable of addressing, if not resolving, most policy issues.  For example, faced with macroeconomic instability, double deficits and potential financial and banking crises, it was clear WHAT needed to be done in Slovakia in 1999.  The same was true of most structural and institutional reforms, such as bank and enterprise restructuring, privatization or regulation of natural monopolies.  The difficult part has been to convince the electorate and make the population accept and absorb the painful reforms and changes.

Even a greater challenge than reaching political consensus for reforms in Slovakia proved to be the chronic lack of human capacity in the state administration to initiate, design, carry forth and implement necessary reforms.  There are few people in the state administration with the talents needed for market reforms.  The low pay scales for public employees exacerbate the problem. Unfortunately, it is very difficult for state administration to design and carry out reforms, if the state administration itself has not been reformed. This capacity constraint in Slovakia has resulted in some slowdown of the reform zeal and in several cases, the passing of unsatisfactory reform legislation.  This pattern has been true at different stages in all transition countries.  Just like in Slovakia, it is bound to be repeated throughout the EU non-accession transition countries, unless a concerted action is taken.  Buttressing Government capacity to design and carry out reforms is a critical area of involvement for independent think-tanks and other non-governmental organizations (NGOs).  In Slovakia, the plan for decentralization, reform of central state administration, and the national program of fight against corruption were all designed with the help of expertise accumulated in the non-Governmental sector.  A similar pattern is emerging, for example, in Serbia, where several key reformers in the Federal and Serbian Governments themselves come from the NGO community.  As a result there is active communication and interchange between the Governmental and non-Governmental sectors that greatly aids the transition reform process.

A cogent analysis and presentation of the Slovak experience can be of great practical importance to the countries in the Region that still have critical transition reforms ahead of them.  Among the most useful lessons will be:  how to build consensus for the most appropriate policy choices; how to draw together constituencies and support for carrying out painful reforms; how to engage think-tanks in helping with the design of these reforms.

To end on a perhaps controversial note, even the EU - when it absorbs the first group of entrants - may use some of the transition reform examples to push through unpopular reforms, whether dealing with agricultural subsidies, social assistance, pension or health system reforms.
 
 

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