Electronic Library of Scientific Literature
Electronic Library of Scientific Literature
Volume 46 / No. 2 / 1998
Eduard MIKELKA
Nationally fragmented Europe used to be a territory producing contradictory
economic interests that were expressed by policy, and wars were defined
as continuation of policy by other means. Thus from all aspects, one can
consider integration processes in Western Europe as the most important
positive socio-economic process going on in the European continent. In
this context these processes have not only a European dimension, but their
global influence manifests itself worldwide.
In the years to come there is an outlook of the extension of the European
Union (EU) from 15 countries up to 26 countries; membership applications
arrived from the countries of Central and Eastern Europe (CEEC - Hungary,
Poland, Romania, Slovakia, Latvia, Lithuania, Estonia, Bulgaria, Czech
Republic and Slovenia) as well as Cyprus.
There is no doubt about the historic significance of the EU extension that
is being prepared. Never before, however, did the EU expect extension of
such an extent. This extension means that to the present 370 million EU
inhabitants, an additional 100 million will come from various economic
and social backgrounds. Moreover, the average per capita national income
of Central and East European countries (CEEC) is only about 30-40% of the
EU average. Thus the extension process is a complex and complicated affair,
mainly from the economic point of view.
European Union extension to the east, however, constitutes the central
column of the European architecture. Geopolitical factors from the EU point
of view present the main motivation factors and a motor driving the enhancement
of the conceptual orientation mentioned above. On the other side, economic
and financial factors present obstruction to the EU extension, as they
constitute additional and not inconsiderable economic and financial costs.
Central and East European countries under consideration for EU extension
differ economically from the fifteen countries of EU (EU 15). For instance,
the share of agriculture in EU 15, in the overall structure of created
GDP, amounts to half the percentage of the CEEC share, the economic level
of EU 15 expressed in GDP per capita is two-and-half times that achieved
in CEEC. Substantially lower GDP per capita income in CEEC reflects above
all the considerably lower level in labour productivity.
Most of this difference results also from the lower level of capital and
technology equipment of CEEC. In most of CEEC potential possibilities of
additional investments into modernization of machines and equipment, as
well as into an increased qualification level of working population, are
leading most of the professional economic public to favourable forecasts
of the dynamics of CEEC economic growth. This dynamics of GDP growth can
be twofold or threefold compared to the dynamics expected in Western Europe.
This economic growth difference can gradually narrow down also income differentials,
e.g. differences in real income level. Nevertheless, the richest CEEC will
need decades before they reach the economic level of the EU 15 average.
Budget estimates issuing from the current state of expenditure rules of
EU would in the case of CEEC 5 (Czech Republic, Slovak Republic, Hungary,
Poland, Slovenia) be as follows: 10 billion ECU per capita and 13 billion
ECU structural expenditures, e.g. 23 billion ECU altogether. From the point
of view of the additional loading of the EU budget such an expenditure
appears unreal. Extension of EU by CEEC 5 amounting to less than 5 billion
ECU per capita and 9.7 billion ECU for structural expenditures seems to
be adequate. Net costs of CEEC 5 membership should therefore amount to
about 7.5 billion ECU (e.g. incomes 14.13 billion ECU and payments into
the EU budget 6.68 billion ECU). Cited budget estimates start from the
current state of EU expenditure rules. They are, after all, reduced by
the current economic situation and assumed, or as the case maybe, defined
by the monopolistic position of the EU member countries.
Should one use rationally, e.g. for the import of machines and equipment
and for overall modernization, the 560 billion SKK volume of financial
resources for the Slovak Republic, which is the lowest realistic option
for a 10 year period, the result should positively manifest itself in an
improved technology and economic standard of Slovakia.
To these direct benefits accede further benefits approximately quantified
in the preceding analysis. The export dynamics will increase and the GDP
will grow by at least 1.5% p.a. Should there be in the next ten years GDP
growth of about 6% p.a., the influence of EU membership would raise this
figure up to 7.5% p.a. Further economic benefits are expected in the sphere
of greater inflow of foreign direct investments as a result of the decrease
of so called risk premium. A new member state of the EU is rated as fully
safe (riskless) region for the entrance of foreign capital.
Listed direct and indirect economic benefits follow from the programmed
reduction of differences in the economic level of EU member countries.
This reduction is based on the formation of optimum conditions for less
developed countries, to enable them to approach gradually the level of
economically developed countries.
Richard OUTRATA
The problem of international competitiveness of economies is currently
very frequented not only in economically developed economies, but also
in countries transforming their economies into a market system. Whereas
in the developed countries the progress in competitiveness is related to
the evolving process of globalization, in transitional economies level
and structure gaps in competitiveness are added, mainly in industry as
the main branch of economy.
At the beginning the author of the paper stresses the importance of this
problem mainly in connection with the efforts of transitional economies
of Central and Eastern Europe to integrate themselves into the European
Union (EU), and in connection with the tasks following from Agenda 2000
and which will yet follow from the documents of Partnership for
Entrance.
The paper further substantiates the validity of understanding the concept
of competitiveness not only on the enterprise level, but also on higher
layers - branch and national levels. In this context the author casts no
doubt on productivity as an indicator of compe-titiveness, stresses also
the influence of the branch structure on competitiveness and endorses an
opinion preferring a multicriteria evaluation of competitiveness.
Main attention is paid to the evaluation of competitiveness of the Slovak
industry. The author has chosen for this purpose a non-traditional methodical
apparatus that enables mea-suring quantitatively qualitative aspects of
industry's competitiveness. The competitiveness of industry is analyzed
by the branch groups defined by the character of source intensity, phases
of technological progress and courses of production use. Each group of
branches is evaluated by 7 selected indicators on the basis of comparison
with small economically developed West European countries.
The analysis disclosed important differences in the model of competitiveness
between Slovakia and these small economically developed West European countries.
Slovakia is more competitive in labour and capital intensive products,
mostly designed for production consumption, and on the other side low competitiveness
manifests itself in more sophisticated products based on research and qualified
labour intended for final use. A further important finding is that Slovak
exports are supported above all only by price competitiveness, which is
not based on comparative cost advantage, but mainly on currency devaluation.
Qualitative competitiveness is therefore less noticeable.
The author therefore stresses that an inseparable dimension of future economic
growth and the transformation process must be the growth of competitiveness
based on more consistent product and technology innovations. That will
obviously demand also reappraisal of the current industrial policy aiming
at its transformation into the policy of competitiveness.
Anton KLAS
The Slovak economy faces the strategic task of transforming its technology
structure, raising its performance and integrating itself into the international
division of labour with economically developed countries (EDCs). The problem
of structure changes is not intrinsic to transitional economies only, EDCs
meet this problem too. Know-how of this development can be instructive
along several lines to master the changes that face the current economy
of the Slovak Republic (SR).
Since the sixties EDCs have experienced gradual manpower price increase,
which especially in Western Europe proceeded faster than labour productivity
increase. That discriminated above all labour intensive branches oriented
on mass production. In the seventies this development was aggravated by
the steep price increase of raw materials and energy. These facts, accompanied
by progress in science and technology and a drive of newly industrialized
countries of south-east Asia with cheap manpower, changed the character
of the competitive advantage of EDCs. In one decade a whole range of production
branches went bankrupt, such as iron and steel metallurgy, textile production,
ship-building etc.
If price increase and limited natural resources lead on one side to seek
new economical methods, on the other side the price increase of production
factors opened the way towards more expensive investment and research intensive
technologies. Factors based on the progress of science and technology became
a moving force of a new type of competitive advantages. Unlike static factors
of comparative advantages, which are usually linked to a certain geographical
region, dynamic factors are characterized by greater mobility and are linked
more and more to regions rich in science and research potential.
The result of all this seems to be a high concentration of direct foreign
investments in EDCs. The share of EDCs in the total inflow of direct foreign
investments represented 85.4% in 1980 and till 1992 this figure rose up
to 88%. Such a development means a new polarization of the world. In the
year 1965, the seven wealthiest countries produced 20 times more than the
poorest countries. In the year 1995 this figure rose to 39 times.
All these facts influence foreign trade too. The traditional exchange of
commodities between autonomous independent firms has widened into international
exchange within multinational companies. The share of intercompany exports
in multinational companies USA reaches about 36%, in manufacturing industry
even double that figure. Such a change markedly narrows transfer channels
of modern technologies through traditional foreign trade. Under the new
conditions multinational companies try to gain advantages resulting from
the progress in science and technology by founding daughter and sister
companies of their own, and research institutes. In the year 1989 the enterprises
of USA, Japan and EU placed 40% of their research centres abroad, compared
to only 12% in the year 1982. This means that the interest of investors
is attracted not only by comparative advantages of production conditions,
but increasingly comparative advantages of the intellectual potential in
the relevant country.
The advancing process of globalization, the growing importance of innovations
and a more severe competition environment significantly increased the demand
on information volume, its acquirement and handling. The share of people
employed in information professions markedly rose. The transfer of the
centre of gravity from physical work to brainwork introduced a whole range
of new problems. Most important of these was the contradiction between
labour productivity in information professions and in physical work. Solely
in the period from 1975 to 1985 the labour productivity increment in industry
was 30 times as big as that in administration. The increase of those employed
in information activities became a great obstacle to total labour productivity
growth. This discrepancy resulted from the strategic orientation of industrial
community predominantly oriented on the increase of the physical performance
of the individual.
The start of computer technology brought a solution of this contradiction.
This technology together with telecommunication techniques provided material
base of post-industrial development now designated the information society.
In a short time it penetrated into all segments of economics and society
and accelerated the rate of production restructuring in favour of products
demanding information resources and qualified labour. Table 3 illustrates
the development of manpower allocation in the USA proportionally by sectors
and years, and Table 4 presents the share of people employed in information
activities in the total of the active population proportionally in selected
countries. The in-formation society today has ceased to be a future vision
only. It has a definite place in the economies of EDCs, creates new branches
in the sphere of production and services.
The changeover of the Slovak economy onto the development path of EDCs
will not be easy. Foreign trade exchange of SR is still characterized by
imports and exports of raw materials, fuels and intermediate products.
Their share in the last three years has even increased. The Slovak economy
registered an increasing comparative advantage against small economically
developed countries in the years 1994-1996 only in intermediate products
and short term consumer goods. The data of Table 6 show that SR is reaching
positive differences in comparative advantages in commodity groups demanding
simple labour, physical capital and raw materials. At the same time the
group of products demanding research, e.g. higher qualified labour, the
negative difference increases (from -24.8 up to -30 points). The data of
Table 7 witness the fact that SR gains comparative advantage against small
economically developed countries above all in less technology demanding
commodities. At the same time the share of university students in Slovakia
per hundred thousand inhabitants is satisfactory, in the middle between
developed and less developed countries of the EU. Due to worse technology
equipment, to provide one million USD of GDP needs 4.82 students, whereas
in economically developed countries one needs only 0.89 students. it is
clear that current technology equipment of production substantially reduces
the efficiency of university educated professionals. Slovakia achieves,
in the overall productivity measured by GDP per capita, only one third
of the productivity currently achieved in the EU countries. In the education
level SR occupies eleventh place among 15 EU countries (Table 9). This
disproportion between the education level and labour productivity can be
explained only by the fact that other production factors badly lag behind.
One can see, therefore, that the factor of education and intellectual potential
of SR is not lagging behind to such an extent as other production factors
and has therefore the best chance to become a driving force of future development.
Karol MORVAY
Slovakia has an extraordinarily open economy and consequently its economy
is easily vulnerable to changes in external economic environment. Therefore
it is necessary to concentrate attention at the anticipated development
mainly in regions where the Slovak Republic (SR) has close economic links.
This covers mainly the European Union - EU (and above all Germany, Austria
and Italy), and transitional economies, mainly the Czech Republic.
This paper tries to describe actual and expected development of the boom
in the regions linked closely to the Slovak economy and to evaluate possible
influence of this development mainly on performance and expansion abilities
of the Slovak economy.
One can provide some generalized characteristics for current and anticipated
development of basic macro-economy proportions in EU countries. In 1997
economic growth in this region was strengthened, the production rate growth
slightly overlapped the production growth potential. The expansion of economic
activities will probably proceed in 1998 and 1999 along with slightly enhanced
utilization of capacities. GDP growth should exceed 2.5%. This continuing
revival was to a great extent caused by the growth of domestic demand,
witnessed above all in accelerated dynamics of investments. The development
of final household consumption differed from country to country, in countries
with improved situation on labour market and with notable increase of disposable
incomes more distinct extension of consumption expenditure was witnessed.
It is however important that according to expectations the carrier of growth
tendencies in the near future will be to a larger extent domestic demand;
this will be so thanks to the growing volume of investments following high
capacity exploitation and favourable income expectations.
Price increase remained moderate, due both to an inconsiderable increase
of direct labour costs and by raw material price development. The consumer
price increase in the years 1998 and 1999 should vary within the range
of 2.0-2.5%.
Exports continued to provide important positive impulses in spite of the
fact that financial and currency crisis in south-east Asia reduced export
expansion to some extent. Although the export dynamics from EU countries
into south-east Asia may decrease in a near future, this factor will be
of a relatively weak influence, as the share of this region in the exports
from West European countries is modest (about 3%). The development of exports
can be unfavourably influenced rather by the predicted deceleration of
economic growth in the USA.
The development of domestic demand was influenced stimulatingly by an expansive
currency policy. A rather expansive monetary policy is expected also in
the years 1998 and 1999 - Great Britain will be an exception here. On the
other side financial policy was forced to limit demand in order to fulfil
Maastricht criteria. One expects that financial policy in the years 1998
and 1999 will be oriented neutrally; expenditures will continue to be narrowly
limited, distinct budgetary cuts or tax increases are not foreseen.
Similarly as in the case of West European countries, also in countries
of Central and Eastern Europe (CEEC) one can see some general tendencies
of macro-economic development. It is obvious that production in countries
of the former socialist bloc will develop in a less differentiated manner,
compared to the post-revolution development that has taken place so far.
Important change lies in positive economic growth, which is anticipated
after the year 1997 also in the countries of the Commonwealth of Independent
States (CIS). According to some estimates the average economic growth in
CIS countries to the horizon 2001 should approach the growth rate of Central
European transitional economies, where one anticipates an average growth
of about 5%. By the year 2001 GDP of former countries with planned economies
could on average expand by 4.5% per year. In the year 1998, respectively
1999, one assumes that each post-socialist economy will achieve positive
economic growth.
Marked growth in transitional countries is usually accompanied by high
investment rate and marked increase in labour productivity. No matter how
strong the growth process was, there appeared no apparent tendencies towards
marked unemployment decrease. In general, inflation decreased also in the
year 1997, its decrease, however, was not so profound as in the past. Similar
tendencies will probably appear in the years 1998 and 1999, although in
the Czech Republic and in Estonia one can still expect accelerated inflation
in 1998.
In some transitional economies warningly (particularly because of the coming
crisis in south-east Asia) resounded the tendency to vast current account
deficit. During the year 1997 these deficits were successfully alleviated,
also with the help of government measures constraining the import dynamics.
At the same time exports from these countries could expand thanks to the
improvement of the boom situation in Western Europe and economic revival
in Russia. By the 2001 horizon one assumes that the imports of transitive
countries should grow on average by 9.5% and exports by 9% yearly. That
means that at growth of the total world trade approximately by 8% per year,
the countries of former planned economies and developing countries not
exporting oil will achieve a higher share on export markets, while industrial
countries and oil exporting countries will lose part of their export markets
share. From the transition economies' point of view a factor of complication
can be the fact that in some markets south-east Asian countries could be
more successful, as they offer the same range of goods as transition countries
at more competitive prices thanks to the currency rate development of their
currencies.
From an evaluation of boom development of Slovakia's relevant partners
it follows that the external premises of economy performance growth will
in the years 1998 and 1999 continue to improve. This assumption is based
on the following argument groups.
As regards the performance of Slovakia's most important economic partners,
in the overwhelming majority of monitored countries accelerated growth
rate is expected. The weighted arithmetic average of the values of economic
growth in six countries followed most closely (Germany, Austria, Italy,
Czech Republic, Hungary and Poland) by preliminary estimate amounted in
1997 2.4%, in 1998 and 1999 3.3% and 3.4% are expected. One used shares
of monitored countries in exports from SR as weight in these estimates,
with about three quarters of Slovak exports routed into these six countries.
At this configuration (when there is a chance of an increased foreign demand
for Slovak products), Slovak disadvantage resting on a great export share
of low sophisticated and low processed products and intermediate products
can manifest itself as potential temporary advantage - such an export is
namely more boom dependent compared to trade in final products.
There is, however, another problem - will there be in Slovakia in these
branches enough free capacity? It is worth notice that after years of negative
GDP increments in the regions of Russia and Ukraine (about 6.6% of the
Slovak exports are headed to these regions), one can expect also here positive
GDP growth (weighted growth rate average can reach in 1998 approximately
2%). The prospects of GDP growth dynamics in the surrounding environment
can be marked as altogether favourable also for the 2001 horizon.
One does not expect any danger for Slovakia in the years 1998 and 1999
caused by considerable external inflationary influence from the EU countries;
one does not expect any marked price increase of energy and raw materials
either. In some EU countries revival will bring some inflation increase
which, however, will be mild, and the formation of inflation differential
towards the EU countries to Slovakia's disadvantage will go on. Out of
the monitored CEFTA countries inflation will increase in the Czech Republic,
while decrease is expected in other CEFTA countries. If weighted inflation
average in monitored partner countries in the year 1997 was estimated at
6.1%, in the year 1998 it could reach 7% followed by a decrease in 1999
to 5.8% level (import shares from monitored countries into SR were used
as a weight). The availability of adequate volume of liquid means is important
for a successful development of international trade too. Some experts point
out that after shocks in some world stock exchanges and massive selling
of bonds, a large volume of assets in highly liquid form appear to be in
partner countries; that may exercise a stimulating effect on trading development
and stimulate investment activities too.
One does not expect important changes in the sphere of exchange rate development
of the most important currencies. No further considerable strengthening
of the USD exchange rate against DEM is expected. As SKK is linked to DEM
(there is a majority share of DEM in SKK currency basket), it is important
that no considerable currency exchange rate of DEM against other important
currency is expected in the near future. The decision already implemented,
concerning participants of the Monetary Union and an announcement of bilateral
exchange rates adjustments of currencies of participating countries, should
bring stability into the currency sphere.
Naturally, the influence of the external environment on the national economy
depends not only on examined macro-economic quantities. These, however,
render some frameworks and offer certain opportunities for the eventual
expansion of the national economy. In this context there are assumptions
that the development of external environment so far has never been so favourable
for transition economies as it will be in the near future.
Viera HAJNOVIČOVÁ
The paper deals with the analysis of income flows within
the framework of the institutional sector of the economy of the Slovak
Republic (SR) in the period of transformation from a non-market into market
economy. The period 1989-1995 is analyzed.
For the analysis data base of matrix time line of social accounting (SAM)
for the years 1989-1995, which are designed in the Institute of Informatics
and Statistics. SAM matrixes are assembled mainly from the data base of
National Accounts (NA) of SR with some built-in adjustments or transactions
estimates. To analyze income flows we picked out the accounts describing
the formation, allocation and use of incomes within institutional sectors
of economy from a given time line of SAM matrixes
In the first part of the paper the structure of the SAM matrix and
its nominal flows are described in SAM matrix for the year 1995.
The second part is dedicated to the analysis of income generation
in the Slovak economy and its share in gross domestic product (GDP). We
start from the time line of income indicators forming GDP in the period
1989-1995; these indicators are gross wages, social insurance contributions,
operational margin and net taxes on production.
One can differentiate the evolution of these indicators into two periods:
one up to the year 1992, and the other after 1992, when a development reversal
of these indicators has taken place. The development of incomes in this
period is characterized by private sector formation, which manifests itself
by the decrease of the labour force employed in formal sector and by the
increase in numbers of entrepreneuring individuals. This trend was registered
up to the year 1992. After 1992 the increase of the number of physical
entities (tradesmen) stopped (according to the statistical data).
In a period of labour force decrease the share of wages in GDP decreases
too. After the year 1992, when the increase in numbers of entrepreneuring
individuals - tradesmen stopped, the share of wages in GDP increased to
approximately 34%. On the contrary, the share of mixed incomes in GDP increased
up to the year 1993 and after that year stabilized at 14% of GDP. The amount
of mixed incomes in the period of 1993-1995 is influenced also by estimates
of the volume of concealed economy in this sector, which has been included
by NA into estimates of the relevant indicator.
The operational margin calculated for the rest of economy, e.g. mainly
for small and big enterprises, registered an increase of share in GDP till
1992. After that year its share in GDP formation decreases approximately
to 28%.
The development of net taxes on production was influenced by changes in
the tax system. Till 1992 main tax on products was the turnover tax, since
1993 it is mainly value added tax (VAT) and consumption tax. Until 1993
one registered the decrease of tax on products share in GDP. The turning
point occurred in the years 1994-1995, when net taxes on production amounted
to about 11-12% of GDP. The increased share of taxes in 1994 was influenced
by the increased share of taxes on imports, and the transfer of tax arrears
from the year 1995 to 1994.
In the third part we analyze the structure of current incomes and
expenditures in the three sectors of the economy: households, enterprises,
state administration. We identified main changes of structure and development
tendencies of incomes and expenditures structured in detail.
Sector of households as understood in NA includes not only households
as consuming units, but also households as owners of noncorporate enterprises.
Enterprise sector includes nonfinancial and financial enterprises. The
definition of state administration in the NA system differs from state
administration as defined by financial statistics. The state administration
sector according to NA includes not only central state administration,
but also all non-budgetary state funds, funds of health and social insurance,
and local government. From this sector one excludes contributory organizations,
where the costs are covered, by more than 50%, by their own earnings. Such
contributory organizations were ranked into the enterprise sector. We included
non-profit organizations servicing households into the state administration
sector; these form an independent sector in the NA system.
In the household sector within the framework of current incomes the highest
item consists of gross wages and salaries, in spite of the fact that their
share in total incomes decreased till 1993 (in the years 1994-1995 one
registered an increase of their share). Mixed incomes e.g. incomes of tradesmen
represent a steadily growing share in households incomes. Gross wages and
salaries together with mixed incomes represent approximately 70% of the
total incomes of households. Incomes from property, e.g. interests, dividends,
ground rents etc. register a growing trend in household incomes. In the
year 1995 their share amounted to about 6% of the total household income.
The share of social benefits varied, the highest amount reached in the
years 1991-1992. Social benefits recently amounted to about 21% of household
incomes.
The highest share in current expenditures of households represent paid
income taxes, e.g. income tax of physical entities and other current taxes.
After the year 1992 a decrease in the income tax volume has taken place,
which was caused by changes in the tax and social insurance system. Till
1992 in the item "income tax" payments for social insurance of
employees were included. After the year 1993 social insurance contributions
paid by individuals, e.g. employee as well as entrepreneur - individuals
are recorded separately from current taxes. Current taxes represent about
42% of current household expenditures in the year 1995 and their share
in the household expenditures since 1993 has kept increasing. Current taxes
together with social insurance contributions paid by individuals represent
about 74% of current household expenditures in the year 1995. The amount
of paid incomes of property has been steadily increasing since 1989. In
the year 1993 these reached the highest value, which was influenced also
by the interest rate in that year.
From the quantified household savings throughout 1989-1995 one notices
constant growth of household savings after 1991. Negative savings in the
year 1990 suggest that in that year higher drawing of households savings
deposits occurred as household expenditures exceeded the current incomes
of households.
In the enterprise sector the biggest item in current incomes is
the operational margin. Its share in total income of the sector decreases
in the 1992-1993 period, after the year 1993 a reversal has taken place
- the share of operational margin in total incomes of the sector began
to increase. At the same time since 1993 an important increase of incomes
from property was recorded, the biggest item of these consisting of received
interests from financial enterprises.
Till 1993 income taxes were the biggest item of current expenditures of
enterprises. Their decrease in the year 1993 compared to 1992 is related
mainly to the tax system changes and changes to the social insurance system
in 1993. The share of income tax in the total volume of expenditures is
steadily decreasing. The share of incomes from property in the enterprise
expenditures is growing. The main increasing item here is the share of
paid interests and dividends from the entrepreneuring sphere into other
sectors.
In the sector of state administration main income resources are
net taxes on production, social insurance contributions and current taxes.
In the income structure of the sector the share of taxes on production
increased as late as in the years 1994-1995. The decrease in 1993 was caused
also by tax system changes in that year. The development of income taxes
(current taxes) can be compared since 1993 only, because till 1992 this
item covered also social contributions paid by individuals. The share of
income taxes, including the contributions into the social insurance in
current incomes of the sector, kept decreasing till 1994.
Within the framework of current expenditures of the state administration
the biggest item is represented by social benefits paid either as system
benefits from the social insurance funds, and non-system benefits paid
by the state administration, and further social subsidiaries. The share
of these social benefits in the overall expenditures of the state administration
had a decreasing tendency in the period 1992-1994, in the year 1995 this
share increased to 79% of the current expenditures of the state administration
sector. The increase of the share of incomes of property is connected with
the increase of interest payments of the state administration.
Final consumption of the state administration sector increased considerably
in the year 1993 in relation to the formation of the independent Slovak
Republic and with the establishment of independent units of state administration
and funds of health and social insurance. This increase of final consumption
was not covered by current incomes of the sector, which demonstrated itself
in the negative value of registered "savings" of the state administration
sector in the year 1993.
Main tendencies in the development of income flows and their distribution
within the framework of institutional sectors of SR economy in the period
1989-1995, or 1992-1995, as defined in the paper, can be briefly summarized
in following conclusions:
When analyzing the development of income formation in the Slovak economy
in the period of 1989-1995 we recorded following tendencies:
- the decrease of the share of wages in GDP formation, accompanied by simultaneous
increase of the share of mixed incomes;
- the increase of the share of operational margin of the formal sector
in the GDP formation in the period 1991-1992 and its decrease in the period
1993-1995;
- the decrease of the share of net taxes on production in GDP formation,
which stopped as late as in the years 1994-1995.
When analyzing the development of current incomes and expenditures of
the three institutional sectors of economy (enterprises, households, state
administration) we identified the following facts.
In the household sector:
- the decrease of the share of gross wages in the period 1989-1995
in total incomes of households;
- the increase of mixed incomes and incomes from the ownership share in
household incomes. Household incomes from economic activities and from
entrepreneuring represent altogether about 76% of household incomes, which
is approximately the same level as in 1989;
- tax burden of households consisting of income tax and social insurance
contributions of individuals represents a lower share in current household
expenditures in the year 1995 compared to 1989;
- the share of household savings in household incomes increases, and simultaneously
the share of household expenditures for final use, decreases.
In the enterprise sector the following tendencies in the years 1992-1995
were recorded:
- the share of incomes from operational margin in total incomes of the
sector decreased in the first half of the relevant period followed by a
reversal after 1993;
- the share of paid income taxes in total sector expenditure decreased;
- the share of income of property in incomes and expenditures of the sector
increased.
In the state administration sector in the period of 1992-1995 we identified
the following tendencies in the development of incomes and expenditures:
- the share of incomes from net taxes on production in the total sectoral
incomes increased in the years 1994-1995;
- the share of incomes from social insurance contributions paid by employers
and individuals increased;
- the share of expenditures for social benefits in total sectoral expenditures
in the year 1995 decreased compared to the year 1989.
Judging from the overall development of incomes and expenditures in
state administration sector one can see the decrease of the share of expenditure
for the final use in recent years and the increase of the savings share.
Concluding the paper, one can state that the changes going on in the Slovak
economy in the transformation period influence also newly distributed flows
of incomes between institutional sectors. They substantially change the
structure of individual income flows, new income flows are registered connected
with the privatization process, and on the other side, other income flows
disappear.
We consider as the decisive causes of changes the tax reform of 1993 and
social insurance reform, stabilizing of informal sector after its sharp
growth in the first transformation years, as well as the development of
interest expenditures and interest savings of individual sectors.
Jaroslav BELÁS
Savings generated by the entities playing a role in a country's economy
are considered to be an important issue, the resolution of which is posing
a permanent challenge to both the designers of economic theories and politicians.
From an economist's point of view, savings represent a deferred consumption
that under certain circumstances, if efficiently transformed into investment,
could be an important impetus for the country's economic growth.
The basic motivation for saving are determined by functions and
roles money plays in the national economy and by other reasons motivating
the individuals to keep their highly liquid assets available. Transactional
motivation, together with prudence and speculation, are potentially good
reasons for generating savings in the national economy.
Entrepreneurial subjects in pursuing their business objectives are inherently
interested not only in using their own free funds but also in efficiently
employing external funding (e. g. loans/credits).
Individuals are the only segment of the economy generating savings on a
regular and long-term basis.
Corporate savings potential is largely determined by the virtue, function
and role of financial management.
It is generally assumed that capital will preferably be allocated to
investments in tangible and intangible assets, in following a basic
entrepreneurial philosophy which is to produce goods and services with
the final objective of selling these goods and services form profit.
Influenced by some external and internal factors the entrepreneur may hesitate
over the most efficient capital allocation, deciding whether to invest
it in tangible or intangible assets, to buy securities, or to deposit the
funds.
Results of a theoretical analysis of financial management in the corporate
environment show the following specific micro-economic motivation
for savings:
a) Time synchronizing of investment and operational needs with financial
potential,
b) Capitalization of interest on savings,
c) Related risk,
d) Essence and characteristics of financial assets,
e) Legal environment.
Finally, with regard to the generation of savings in the corporate sphere,
it could be stated that the level of savings in the economy results form
many individual decisions by financial management, influenced by inter-relationships
in the reproduction process, and by the industrial sector in which it originates;
consequently, this level is not very stable. The generation of savings
is influenced by the quality of the macro-economic environment as well
as by specific subjective possibilities and expectations, which indicates
the fluctuation in level of savings could be significant.
Individual savings are regarded as and important economic category. The
economic feature of saving is characterized by the deferring of current
consumption and a gradual accumulation of financial fund for utilization
at a later time.
In quantitative terms the individual savings are defined as the difference
between disposable income and consumption. They consist of two components,
deposits and cash.
The pattern of the decision-making process of the individual shows
the following features: Human needs influenced by biological and social
factors stimulate consumers to generate an income as a means for satisfying
these needs. Upon generation of income, the individual will develop his
own spending and saving strategy which will be determined by the quantity
and quality of economic, subjective and psychological factors. As a result
of the inter-dependence and also the contradictory features of these factors
the individual will develop his own consumption and saving strategy, reflecting
his individual approach in dividing his disposable income into the part
that will be spent and the part that is intended to be saved.
The earning of an income by an individual can on one hand lead to satisfaction
of existing needs but on the other, it can arouse the emergence of new
or modified needs (e. g. new physiological requirements).
The decision-making process of the individual will therefore be
an inter-related system consisting of a great number of factors strengthening
their impact in one area, and acting in a contradictory manner in another
one. It is a variable system vulnerable to changes, influenced by time
and different environments.
Specific micro-economic motivation for generating individual savings
include:
a) Harmonization between the individual's consumption strategy and
his/her available budget,
b) Capitalization of interest on savings,
c) Related risk,
d) Basic character of financial assets.
Potential possibilities of savings created in the national economy can
be expressed by the following formal savings function:
Sx = f (E, I, Pc, Í, T, F)
where
Sx - savings
E - level of the economy expressed in terms of macro-economic variables
(GDP, State budget deficit/surplus, inflation rate, unemployment rate)
I - income (legal entities, individuals)
Pc - price level and price development dynamics
Í - interest rate
T - subjective factors - taste, preference, fashion trends, expectations,
traditions
F - other (psychological factors)
It is assumed that, with a high degree of simplification, even though
the motivation of economic entities for saving could be similar, the weight
of individual factors is different.
The purpose of definition of the formal savings function lies in summarizing
the factors determining the process of savings created in the national
economy by the economic entities and to point out the complexity of the
internal relationship of these factors.
Mária KAČÍRKOVÁ
The sector of small and medium enterprising (SME) is a young but very
dynamically developing component of the Slovak national economy. It has
become an important part of the economy in its structure adaptation process.
Advanced countries of the European Union (EU) started to prefer SME as
early as in the early eighties within the framework of structure policy;
then it was found out that SME represents a most dynamic factor of economic
growth, creates new labour opportunities and is a source of regional development.
It is only natural that the sector of small enterprises rooted itself in
the economic basis of the Slovak regions.
Socio-economic influence of the Slovak economy transformation into a market
economy manifested itself in various spheres. Regional unemployment level
is one of them. New regional and administrative organization of SR, implemented
in the year 1996, intensified disproportion in unemployment and from the
regional point of view this disproportion concentrated into smaller territorial
units.
This paper aims to demonstrate regional non-uniformity of employment in
Slovakia related to entrepreneuring activities and to the level of education
attained.
The highest entrepreneuring activity of the population (the paper defines
it in relation to physical entities not listed in business register who
carry out business on the basis of trade licence) has been in Bratislava,
the capital of SR; followed by districts Senec, Galanta, Pezinok, Dunajská
Streda, Banská Bystrica, the city of Košice, Komárno, Žilina, Poprad, Stará
Ľubovňa, Piešťany, Šaľa, Kysucké Nové Mesto, Považská Bystrica, Trenčín,
Levice, Rimavská Sobota, and Nitra. From the entrepreneuring point of view
the least successful in Slovakia are districts Revúca, Gelnica, Krupina,
Sobrance, Medzilaborce, Brezno, Sabinov, Púchov, Detva, Snina.
In selected branches of the national economy, entrepreneuring activity
is focused mainly on the sphere of trade and services; these however, cannot
in the long run influence positively unemployment in problem districts.
The exploitation of entrepreneuring activity to eliminate unemployment
can be evaluated by means of absorption capacity, e.g. the difference between
entrepreneuring activity and the unemployment rate. Private entrepreneuring
was successfully utilized for the alleviation of unemployment in Bratislava,
and in districts Senec, Pezinok, Banská Bystrica, Trenčín, Piešťany, Žilina,
Považská Bystrica, Galanta, and partially in Ma-lacky, Zvolen, the city
of Košice, Nové Mesto nad Váhom, Liptovský Mikuláš, Skalica and Myjava.
When evaluating the regions of Slovakia, best results were achieved in
Bratislava region, followed by regions Trenčín, Trnava, Žilina, Nitra,
Banská Bystrica, Košice and Prešov.
When evaluating individual regions, private sector mainly in the shape
of SME concentrated to the vicinity of town agglomerations, where in connection
with developed infrastructure foreign investments materialized to a greater
degree; this supported employment, whereas in the peripheral regions of
Slovakia discharge of employees was not compensated by more distinctive
formation of new jobs.
Unemployment is influenced also by the educational level of the population,
and a discrepancy between the economic basis of a relevant territory and
educational potential of the system of schools has a certain share in the
increase of unemployment rate.
This paper is focused on the evaluation of the secondary school system
in individual regions of the Slovak Republic and the unemployment rate
in these regions. According to indicators related to the secondary school
system (the number of secondary school students per 1000 inhabitants) and
unemployment rate the districts in Slovakia were classified into four groups:
- districts with the standard of secondary school system under the
SR average and at the same time with unemployment rate over the SR average;
- districts with the standard of secondary school system over the
SR average and at the same time with unemployment rate over the SR average;
- districts with the standard of secondary school system over the
SR average and at the same time with unemployment rate under the SR average;
- districts with the standard of secondary school system under the
SR average and at the same time with unemployment rate under the SR average.
The allocation of districts into the groups listed above is a result
of co-operation of various factors, as for instance privatisation process,
transformation of agriculture, stagnation of building industry, attenuation
of mining industry, sales problems, or the philosophy of Slovakia's industrialization
implemented in the past and the sitting criteria of services and facilities,
the presence of important town centre in the district etc.
The causes of school-leaver unemployment and unemployment on the whole
are closely connected with the economic structure of the regions. In principle,
to solve unemployment problem one can recommend certain measures focused
on a qualitative change of educational system aimed at higher versality
of education, synchronization of the needs of economic and social practice
with educational system, support of the formation of small enterprises
and trades as well as creating the housing market as a precondition for
territorial mobility of the labour force.
Mikuláš SEDLÁK
The foundations of the theory of economic structure according to economic
sectors were laid down by Colin Clark in his book "Conditions of Economics
Progress" published in the year 1940, as well as by other authors.
According to their hypothesis, the development progresses gradually starting
from the society with an overwhelming prevalence of primary sector, mainly
agriculture, through the industrial society up to the tertiary society
(society of services).
The growth of world economy is actually linked with gradual structure change
in economic sectors. This growth is accompanied by the life-cycle shortening
of other sectors. Agriculture occupied a prominent place for several thousand
years. Later, above all in the last century, rapid growth of industry took
place. Its era lasted for a shorter period. A new historical revolution,
representing the start of the third wave, began in the USA around the year
1965, and in other developed countries by the end of the sixties, and especially
in the seventies.
In the last almost three decades the deindustrialization process
represents a common trend in developed countries. As a result of this
process the share of employees in industrial production in overall employment
has fallen from 1970 till 1994, from 28% down to 18%, and on the contrary
the share of those employed in services has increased. In the EU today,
only one in five employed works in industry; in the USA less than one in
six people is employed in industry, whereas over 70% of employed people
work in services.
The richer the country, the smaller the share of workers needed in industry.
One assumes that in the industrial production of the USA in twenty years
only one out of ten present jobs will be required.
The impact of deindustrialization on the volume of industrial production
is not negative. Production is higher than before, yet its share in GDP
in current prices decreases. The share of agriculture in GDP decreases
too, on the other hand the share of services increases.
The increase of nominal value of services and their share in GDP is a result
of not only the actual increase of real services' performance, but is caused
also by a relative price increase. From an analysis of the International
Monetary Fund (IMF) it follows that the share of industrial production
in GDP in constant prices has remained, in developed countries in the last
three decades, more or less stable (in the year 1994 it represented about
22%).
Based on research of structure changes development in individual sectors,
one is offered two facts explaining fundamental alterations to structure
change in sectors - these are the development of demand and the
development of labour productivity in economic sectors and branches.
The development of demand according to economic sectors and branches differs
and is related to changes of income per capita. Along with the increase
of incomes, demand for individual commodities does not grow equally; the
income growth is accompanied by diverse demand elasticity.
The main cause of structural change in individual economic sectors seem
to be differences in labour productivity growth. The industrial revolution
significantly increased the productivity of labour in agriculture. The
information revolution stimulated a similar process in industrial production.
Labour productivity grows in industry faster than in services. The analysis
shows that in the years 1960 to 1994 performance growth in service and
industrial sectors in developed economies was approximately equal; however,
productivity of labour in industry grew about twice as fast as in services.
These tendencies manifest themselves also in the economic structure
of Slovakia; the structural changes, however, have gone on at a slower
pace compared to developed countries.
The number of employees in industry in our country exceeded the number
of people employed in agriculture no earlier than in the first half of
the sixties, e. g. in the years when in developed countries the industrial
era was terminating. In the following years, e. g. till the year 1989,
the share of persons active in secondary (to 43.9%) as well as in tertiary
(to 41.7%) sectors continued to increase, and the share of those employed
in agriculture continued to fall (down to 13.8%). In the last decades Slovakia
managed the process of industrialization, even though the structure of
industry was not satisfactory.
During the transformation process positive changes in the sector structure
of the economy came into being; these changes correspond to world trends
and manifest themselves up to the year 1996 by a decrease of the share
in employment in primary sector to 10.6%, in secondary sector to 38.3%,
and in the increase of the employment share in tertiary sector up to 51.1%.
A similar trend appeared also in the development of the share of economic
sectors in GDP.
Comparing present structural changes according to economic sectors with
deindustrialization in developed countries, one discovers at the same time
a similarity and difference between them. In developed countries the share
of industrial production decreased, with a simultaneous increase of its
total volume. On the other hand structural change of economic sectors in
Slovakia was accompanied by a rapid and vast decline of industrial production.
As a result of this, the tertiarization process was not wholly natural.
Out of the development tendencies of sector structure in the world,
the following con-clusions can be deduced for the future development of
the Slovak economy:
- Deindustrialization is an inevitable process. The decrease of the share
of the first two economic sectors in employment and GDP in favour of tertiary
sector is inevitable above all because of the growing importance of services
in the society, which, however are lagging behind the demand
- The decrease of the share of primary and secondary sectors in employment
and GDP should be accompanied by an increase in the overall volume of their
production. This, however, demands a significant increase of labour productivity.
To secure this increase in industry, radical branch restructuring and technical
development of enterprises are needed.
- Services gain a steadily more important position in the economy not only
because of their increasing role in the society and their function as the
most important job maker, but above all because of their future role as
the decisive factor of GDP growth. One needs to expand this sector, improve
its performance and at the same time seek means to raise its productivity.
Dagmar LESÁKOVÁ
In today's economic practice marketing has become a factor which distinctly
influences enterprise competitiveness. Marketing management must ensure
early observation of changes in the market, in customer's needs, sales
conditions, rival behaviour, price movements etc. and thus evolve the ability
to react quickly and efficiently to changes that could invoke dramatic
economic impacts for an entrepreneur. Marketing manifests itself also by
its ability to activate and influence demand and thus gain the customer
and his confidence, and eventually raise the entrepreneur's share in the
market for a certain commodity or service. In this positive sense marketing
has an aggressive - nevertheless always ethic - character. Successful companies
are not satisfied with passive information recording, but operate actively
to influence purchase decisions of potential customers. Their activity
manifests itself in providing the "right products" at the "right
time" and in the "right way" (e.g. efficient way in the
long run) for the "right price". Marketing's aspiration to cover
long-range time horizon is not an aim in itself - it is a precondition
of the long-term stability of an enterprise. In other words, the enterprise
must be informationally, organizationally, personally and technically managed
in such a manner that could enable quick marketing measures as a reaction
to possible changes in external market environment.
Under the condition of a high autonomy degree of enterprise functioning
in the market economy, enterprise management cannot decide and solve any
investment design, any change in production programme, any capital demanding
transaction, any change in organizational structure etc. without the co-operation
of the marketing division, e.g. without marketing information, which qualitatively
and quantitatively identifies and evaluates external market conditions
(mainly needs, demand, price development and competitive environment),
and thus enables optimum strategic decisions.
The marketing approach demands that enterprises base their strategies and
plans on exploiting their strengths and soundly explore market possibilities;
this would enable them to choose the best way to fulfill their turnover
and profit aims. Enterprises today still lack deep knowledge on what they
are able to do better than their rivals, what they possess as an "individual
advantage" - competitive advantage resting on satisfying certain customer
groups. Instead of this, they increase the total volume of sales and calculate
with minimum profitability for all products and markets, not taking into
account the magnitude of partial markets, market growth rates or the phase
of the product's life cycle. Many facts point at difficulties that many
enterprises have to face because their separate divisions or branches control
their enterprising in terms of momentary profits or losses even at the
expense of abandoning valuable and once hard acquired market shares.
In the Spring of 1997 was implemented within the framework of PHARE project
voluminous research in 74 enterprises classified by Trend magazine in the
TOP 100 (e.g. 100 most important the Slovak companies). The aim of this
research was the evaluation of the status and place of marketing in Slovak
companies. The research provided the information that training and consultant
firms as well as literature on marketing played the role of most important
intermediaries of the new marketing orientation of enterprises. In many
enterprises one could not enforce the acceptance of marketing as the management
philosophy for the whole enterprise; this manifested itself in the fact
that in most enterprises people working in marketing divisions had no control
and decision authority, but acted as managers with a consultative voice
only. Marketing divisions had their authorities limited to the spheres
of marketing as a method, such as new product development, business plans
preparation, etc.
The assumption that marketing implementation was realized under the pressure
of important problems the enterprise had to face was not confirmed. Marketing
development was accelerated as a rule by strong marketing oriented personalities,
or by the arrival of new managers with knowledge of progressive managing
methods, or - in most cases - as a result of the recommendation of consultancy
firms. Confusion in the distribution of authority between the marketing
division and sales division was identified as a serious problem. Accessory
to this confusion was then inadequate communication, deliberate retention
of information and sometimes even an open aversion between marketing and
sales divisions. This result too witnessed to the misunderstanding of benefits
which the marketing style of enterprise management could provide. The relation
between marketing status and enterprise size was confirmed.
The research proved unequivocally that Slovak enterprises continue to be
driven by production and technology only and their declaration for a marketing
orientation is more proclamatory than the implementation of concrete deeds.