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  • Social & Economic Reforms on the Eve of the EU Accession: Case of SlovakiaMartin Angelovi & Vladimr BenResearch Centre of the Slovak Foreign Policy Association, n.o.Hlavn 11, 080 01 Preov, Slovak Republice-mail: benc@sfpa.sktel./fax: +421 51 7721 018web: www.sfpa.skUkraine, 30.03.2015

  • About us Established in 1993 as a civic association: think-tank (NGO)Central office in Bratislava and regional office in Preov (Eastern Slovakia)In 2004: Research Center (non-profit, MFA of the SR is a shareholder)Activities and aims:Provide independent expert studies of crucial questions of international relations and foreign policy of the SR;Publish periodical and nonperiodical expert publications that serve to deepen knowledge in the field of international relationships and foreign policy of the SR;Arrange expert events and take part in international scientific co-operation in the field of international relations and security;Enhance expert discussion on international relations and foreign affairs of the SR;Create a favorable conditions for the growth of the next generation of Slovak experts in the field of international relationships;Incite the interest of the wider Slovak public in events throughout the world, as well as a deeper understanding of the significance of foreign policy and its link with domestic policy.

  • About us no. II.6 research programs:European StudiesInternational SecurityCentral and Southeastern Europe (mostly V4, Balkan + Turkey)Eastern Europe (Ukraine, Russia, Central Asia) Economic Policies and Development AssistanceSlovak-Ukraine Research and Educational Center (SUREC)

    Periodical publications: Foreign Policy (SK), International Issues (EN), Yearbook of the SR foreign policy (SK, EN), SUREC newsletter (SK, UA)Staff: 7 senior + 4 junior researchers, 3 project managers/assistantsResources: 45% own projects (EU & US funds and donors + Norway grants), 35% MFA (incl. Slovak Aid) & SK institutions (contracts, grants), 15% contracts (private sec. + Universities), 5% Membership fees

  • Slovakia Ukraine

    IndicatorUkraineSlovakiaThe population- (July 2014)44 291 4135410 267Area - sq km603 55049 035HDI 2014 (total score/ranking in the world)0,734 / 830,830 / 37Index of Economic Freedom 2014 (total score/ranking in the world)49,3 / 9766,4 / 33Corruption Perceptions Index 2014 (total score/ranking in the world)26 / 14250 / 54Doing Business 2014 (celkov skre / poradie vo svete)59,21 / 11271,73 / 35GDP per capita in PPP (1993 / 2013)1 258 / 7 4007 453 / 24 700Inflation in % (1993 / 2014)Over 100! / 0,725,1 / 1,7Unemployment in % (1993 / 2014)0,4 / 812,7 / 14,4Public debt in % of GDP (1997 / 2013)? / 40,633,7 / 55,5Current account balance (2013)11,92 bil. USD3,315 bil. USD

  • Unique reforms in Slovakia 1999-20051999 2005: Fiscal reform2000/2001: Banking system reform2002: Administration reform 8 higher self-governments, transfer of competences to municipalities2003: Tax reform unitary tax (19% - VAT and income tax), programming in government budget2003/2004: Social system reform decrease of social benefits, active searching for a job, public works, retraining2004: Pension system reform private accounts, private pension funds2000-2005: Privatisation of state monopolies (telecommunication, gas distribution, energetic sector, banks)

    Unsuccessful reforms: health care system, educational system, justice

  • Fiscal and banking system reformFiscal reform: to increase the effectiveness of the use of public financial resourcesTransparency of expendituresLimitation of state guaranties to private and state owned companiesImplementation of EU standards to public administration (ESA 95 + IPSAS, budgeting, reporting, accounting)Strengthening of the strategic planningMidterm framework of public finances (multiyear budgeting at least for 3 years), programming in budgeting (aims>activities>budget)Joint prognosis for public administration New analytical centre of government IPFMacroeconomic and tax prognosis system using independent experts and private sectorCentralisation of financial flows of public administrationSystem of state treasure-house - one account for whole public administration (except municipalities and higher self-governing units)Creation of the Agency for management of debt and liquidity (ARDAL)

    Bank system reformIndependence of National bank of SlovakiaStrict regulation of banks esp. in the area of loan supervisionPaying off bad loans in amount if 4,5 bil. EURBankrupting bad banks and privatisation of the whole banking sector

  • Tax reformAim: support of the production side of the economy, simplicity and effectivity of the tax systemDirect taxes: introduction of flat individual tax for private persons and companies (19%)elimination of dividend, inheritance, gift taxes, and real estate transfer taxelimination of virtually all exceptions, exemptions, deductions, special rates, and special regimesIndirect taxesintroduction of one single rate of 19% (before: 20% and 14%), 2007 introduction of decreased VAT rate 10% for pharmaceuticals and health material, 2008 - books and newspapers harmonisation of excise taxes with EUResults: shift from direct to indirect taxesradical simplification of the tax systemintroduction of low nominal rates (at that time lowest in EU)19% flat individual income tax, 19% corporate tax,19% unified VAT on all goods and services - without any exception>>> transparent tax system that motivates investments

  • Decentralisation of public administration (2001-2005)Aim: more effective functioning of the public administration, supporting subsidiarity

    Transfer of more than 400 competences to municipalities and higher self-government unitsTransport, social affairs, regional schools (basic and secondary schools), agriculture, health, construction, regional development ...Fiscal decentralisation Right to have and manage own taxes of municipalities New distribution mechanism for income tax of private personsNew fiscal rules (balanced current budget, limitations for loans)Programming (Programs of economic and social development + 3-years budget programming)

    Problems: unfinished municipalisation: plenty of small villages (not economically effective)

  • Dual system of public administration in Slovakia 2004decentralisationNew 50 district offices of general administration??? Missing district levelSome ministries made their own regional units, e.g. 46 Social offices, 8 Educational offices etc.decentralisation

  • Pension system reformAim: sustainable public finances, introduction of 3 pillar systemChanges in 1st pillar (continuous system)increasing the working/retirement age till 62 years, valorisation of pensions based on combination of inflation and wage growthincreasing the meritoriousness (increasing maximum pension limits)contributions at 18% of the assessment base payable solely to the PAYGO system(early) old-age pension paid exclusively by the Social Insurance Agencyrecommended option particularly for people who will not be able to accumulate sufficient pension savings to purchase life annuity at the time of retirementIntroduction of new 2nd pillar (capitalisation/saving system) since January 1, 2005change of ownership: individual pension accounts managed by private pension funds, the contribution ratio - 9% DB : 9% DC, possibility to choose from conservative, balanced and growth saving strategies, survivors pensions (widows, widowers and orphans pensions)minimum 15 years period of savingdesigned primarily for people who will be able to contribute to their pension accounts for at least 20-25 years3rd pillar (supplementary pension saving)special-purpose saving and the life insurance with tax incentive (400 EUR annually)

  • Social system reformAim: increasing targeting of social system and motivation to work Help to working familieschildren allowances: single whole territory allowance and tax incentive (motivation for parents to work)Supporting working mobilityTargeted social benefitsdecreasing the basic social benefits and introduction of work incentive benefits (activation and motivation benefits)Changes in unemployment allowance tightening the conditions for applicants, reduction of time for supportChanges in health support allowancefirst 10 days of inoperability are paid by employer

  • Key reforms 2011-2015Deductions reform (social and health deductions) super-gross-salary only employee will pay deductions, not employer + continuously uniting deductions for employees and small entrepreneursConstitution law on government budget responsibility (limits for expenditures based on GDP growth + limit for public debt will be probably 60% of GDP) for future governments + establishing special independent Fiscal CouncilReform of the justice sector all decisions of the courts will be published at the web page; changes in procedures of elections of judges and career planning of judges and prosecutors Reform of the education system - opening market for school books (e.g. teacher/school can decide from which books they will teach); digitalization of schools; independent and regular evaluation and tests of schools quality = changing system of payments for schools better schools will receive more money; reform of the system that supports research; discussion about introduction of payments for education (students will pay for studying) Reform of the health care system: defining minimum state system of health care system (e.g. only few hospitals will receive GOV state financial support, other will bankrupt or will be privatized); independent evaluation of quality of services of hospitals and binding support for best hospitals; changing medicine policy e.g. GOV support only of the cheapest medicine Reform of pension and social system of military and police service - same conditions as other state