Tragic Story of Slovakian Declining Competitiveness

In the most recent ranking of the World Economic forum, which compares the competitiveness of 140 countries around the world, Slovakia ranked 67th. Since we ranked 8 places higher the year before, the media presented this as positive news. If we, however, look at the long-term evolution of the Slovak economy’s competitiveness not only in this, but in other rankings, we realize that the picture we are looking at is drastically different. What becomes apparent is a tragic story of a dramatic decline in our competitiveness.

Let us start by looking back at our previous scores: In 2000, we ranked 38th, while in 2010 we painfully fell to 60th – today we hold the aforementioned 67th place. Although the year-on change is interesting for the media, it does not provide us with almost any vital information. If we really want to know how we are doing in terms of competitiveness, we shall look at a longer-term evolution of Slovakia’s place in all available rankings.

One of the most renowned rankings is undoubtedly the World Bank’s Doing Business, which includes the Paying Taxes ranking. Furthermore, the Swiss IMD also ranks competitiveness, and indexes of economic freedom, published by the Fraser institute and the Heritage Foundation, are indicators of competitiveness as well. If we take a look at the evolution of Slovakia’s situation from the last 10 years, we come to the conclusion that there has been a significant drop in the ranking of our competitiveness. While 10 years ago we usually ranked in the top third or quarter of the ranked countries, today we usually rank in the bottom half, in most cases also last among the V4 countries – and similarly in the reduced ranking of EU countries (the most suitable sample for a comparison).

An explanation to this negative trend is twofold: Other countries have been improving while our business environment has been worsening, or stagnating at best. Even though every Slovak government in the last 10 years had improvements of the entrepreneurial environment in its program, the current government has actually claimed to have the ambition to rank among the Top 20 countries in Doing Business. Nevertheless, frankly speaking, we have witnessed rather moving further away from this “utopian” goal. The current government finds pleasure in using selective actions, but previous governments, who had also declared they were determined to cancel or refuse new measures and benefits only targeting chosen groups, had also failed to deliver any positive change.

Entrepreneurs rightfully feel that while the state only keeps raising their taxes, adding new obligations, and further empowering the endless bureaucracy, it is clearing the path to others with investment incentives (foreign investors), or saves them if they are big enough (previously banks, now Váhostav). The small businesses seem too insignificant for such measures… Is there ever going to be a government that will consider one of its top priorities to fundamentally simplify conditions for entrepreneurship, decrease the level of bureaucracy, and actually execute all this in reality? There have been numerous examples globally, which have shown that it is indeed possible to carry this out in a relatively short period of time. After all, even Slovakia did it successfully between 1999 and 2005.

Translated by Robert Cesar

Jan Oravec