Electronic Library of Scientific Literature
Volume 45 / No. 12 / 1997
The world finance market has undergone a thorough transition since 1970.
In the 1970s, problems resulting from oil shocks and the Euromarket's creation
were of major importance, while in the 1980s problems of debt crisis (starting
in 1982) were the most difficult. In both above-mentioned decades, external
factors were most important for shaping the finance market. Governments
and international finance organisations had to react to these crises without
any previously prepared financial policies. Later, the lack of serious
external shocks enabled long-term growth of the world economy and implementing
far-reaching financial policies. In the 1987-1997 decade international
finance markets were thoroughly restructured. This restructuring was closely
connected with reforms implemented on the national finance markets of major
world economic powers. The following trends were of major importance in
¨ Liberalisation of the finance sector in major economic powers. This process started with liberalisation of international capital transfers. Free movement of capital was essential for increasing international competition not only in the finance sector but in the world economy as a whole. Deregulation, transfer of state regulation powers to private sector bodies, was another major feature of finance sector liberalisation.
¨ Integration of national capital markets to the world capital market. This integration was stimulated both by loosing capital movement restrictions and implementing new finance technologies. These technologies enabled to carry out financial operations in real time on the whole of the Earth's surface.
¨ The major economic powers (EU, USA and Japan) have agreed on setting selected minimal standards for finance sector regulation, banks and securities market in particular.
¨ Since 1970s, securisation has become a major trend in the finance sector development. The traditional relation of individual debtors and creditors (typical for bank loans) has been replaced by transformation finance source of a creditor to securities. Securities are bought by numbers of investors (mostly anonymous) and risk-spreading is of better quality. While traditional bank transactions are decreasing in importance, capital market transactions are increasing in number and volume. This trend brings a better assessment of risks and returns.
¨ There has been a rapid development of new financial techniques and instruments. Financial derivates (options, futures, swaps, etc.) have become the most traded financial instruments.
¨ Institutional investors have increased in importance. Banks and insurance companies, securities traders, mutual and pension funds have become the major market players on world capital markets
¨ Globalisation of the world finance sector has had not only a sector dimension, but also a territorial one. The emerging markets quickly became important places for spreading international investments.
There was a rapid development of over-the-counter markets. Since 1993,
these markets grew by higher rates than official exchanges. This development
was caused by several factors. The OTC markets offered non-standard trades
with higher profits. The cost of trading on these markets, on the other
hand, was lower than the cost of trading on official exchanges. The OTC
markets also were more flexible and ready to offer higher trade comfort
to their customers. After 1995, the Proprietary Trading Systems, owned
by private sector, gained in importance. Their offered high comfort of
trading combined with low costs of trading and a low level of regulation.
The financial revolution has had major impacts on USA and EU economies. There has been a rather cautious approach to financial sector deregulation in Japan. There were also some differences in financial revolution impacts between the USA and EU markets, and also inside the EU market. In USA and UK, financial sector deregulation was the most rapid and far reaching. These markets are also world leaders in implementing new finance techniques and instruments. The EU, on the other hand, has manly concentrated on the harmonisation of finance sector legislation.
Since1980s, there has been a rapid growth of the emerging capital market. After an investment peak in 1993, there was a shock caused by the crash of the Mexico stock exchange, and demand by the foreign investors cooled. This crash was caused by unhealthy macroeconomic politics on the part of the Mexican government. A combination of high budget and trade deficits forced government to seek finances on international markets. Fear of failure to repay some issues generated investor reluctance to buy Mexican treasury bills. Mexico was one of the largest emerging markets in the world. Its crash heavily damaged international investor confidence in these markets. On the other hand, the crash indicated how important a solid macroeconomic base was for steady growth of the capital market. Similar difficulties were observed in countries of the South-East Pacific in late 1997. These economies, however, seem to have more healthy economies and much higher international currency reserves.
There were significant changes in the structure of capital inflows to emerging markets in the period 1980-1997. In the early 1980s, government loans were the main form of capital supply. After the debt crisis in 1982, this kind of financing was almost stopped, because many investors had lost their investments. Private sector capital, direct and portfolio investment in particular, gained in importance. The risk/profit management of these investments was much more transparent. A significant part of these inflows was concentrated into a small number of emerging markets.
In the 1990s, increasing inflows of private capital enabled the Latin America countries to generate higher international currency receipts and to repay a part of their old debts. Mexico and Argentina, in particular, returned to international capital markets and improved the structure of their government debts in terms of maturity and interest rates. Mexico, for example, was able to repay USA financial aid of US $ 10 billion as early as 1996. As for South-East Asia, bond issues were of major importance. Countries in this region tried to improve the structure of their international currency reserves. Much of these reserves were formerly derived from off-shore markets and were in the form of short-term loans.
The shift from government financing to private capital sources was visible in all regions of the world. It was generated by several factors. Many communist and developing countries stopped their dire experiments with centrally-planned economies and started to develop market economies. This shift was warmly welcomed by international investors. They considered new economies more trustworthy and assigned them higher credit ratings. Another reason for increased capital inflows to emerging markets was the search for the above-average income derived by international investors from these markets. Generally, credit ratings of emerging markets increased in the 1990s. This was reflected in lower interest rates offered by debtors and longer maturity accepted by international investors in emerging markets. Emerging market countries understood the importance of a good credit rating for better terms gained on international capital markets. They tried to get the best possible rating and improved their macroeconomic policies. In some countries, national credit rating agencies were established to evaluate assets denominated in national currencies.
As for the private capital inflows structure, there was a strong trend towards increasing shares of the stock acquisitions. By 1997, stocks accounted for 19% of all financial instruments bought by international investors on emerging markets. These purchases we-re mainly made by large insurance and pension funds from developed countries. To facilitate these purchases, many emerging markets had to significantly improve their stock markets. Among other measures, stricter requirements for quoted securities, application of international standards in audit and accounting systems, improved market regulation and supervision were of major importance. In the period 1990-1996, stock market capitalisation share of GDP increased by 3-4 times on emerging markets. Stock volatility decreased, but remained about 3 times higher than on developed markets.
Félix HUTNÍK - Ján TOMOVČÍK - Rudolf ŠTANGA
When evaluating soil productivity (and productivity of other production
factors) let us start out from the availability of 2 444,4 thousand hectares
of agricultural land in a relatively good structure. In this acreage 60,4%is
arable land. The share of arable land since 1989 has remained steadily
over 60%. Within relevant time period (1989-1996) the registered decline
of agricultural land was merely 0,3%. In the structure of agriculture relatively
larger decrease occurred in arable land by 2,2%, in hop-gardens by 11,3%,
in vineyards by 7,3% and in orchards by 7,4%.
Decline of special agricultural crop (hop-gardens, vineyards and orchards) demonstrate the extensification of Slovak agriculture, whereas higher production of these special agricultural products could enable higher share in agricultural exports.
Gross agricultural production kept decreasing continuously since 1989 till 1993, when slight increase took place. The trends of crop production and of animal production mutually differ since 1989. Within the framework of crop production the share of leguminous plants increased markedly, in the sphere of technical crops there was an increase in oil bearing plants and sugar beet, followed by wheat and maize corn. In animal production structural changes provoked by market development deepened. Marked decrease of cattle and thus the decrease of milk production has taken place. The decrease in the number of pigs and sheep has stopped. Poultry numbers increased. Present situation in agricultural production can be denoted as a result of six years of extensification caused, among other things, by inadequate and expensive inputs.
The change of exploitation intensity of production potential, which is the basic precondition of economic growth, has not yet come. There is no need to stress, what handicap presents this fact for our farmers compared to farmers from EU countries. The decrease in exploitation of modern intensification factors and of agricultural machinery coupled with weakened work and technology discipline causes fluctuations in the supply of domestic products (we do not exclude climate influence either) and opens the way for increased imports of agricultural and foodstuff commodities. Passive balance of the foreign trade in agriculture and foodstuff commodities increases.
The equipment of farms by agricultural machinery is lagging behind in terms of quality as well as in terms of technology. The wear-out of machinery in crop production exceeds 77%. Average age of machinery is almost 11 years. The equipment in animal production is younger, however outdated too. The starting point leading to the improvement can be a systemic approach to the solution from the point of view of providing necessary capital resources for machinery innovation as well as from the point of view of better exploitation of technique available, namely also by establishing and implementing technical services.
The analysis of human factor and wages in agriculture reflects resolute employment downfall in basic agricultural production and disparity increase compared to average wages in national economy. Within the general employment decrease, the share of those working in small enterprises and the number of private farmers increases. At the same time an increase of the number of small enterprises/farms and the area of land thus cove-red is taking place too. The number and share of women employed in agriculture keeps decreasing from year to year, the average age of women, however, is increasing. The share of workers in post-productive age decreases. In spite of this the average age of workers in agriculture is increasing. The average age of manpower employed in agriculture reached in the year 1994 the value of 44,2 years. The structure of qualification is deteriorating as a result of big brain drain of people with secondary and university education Similar trends in employment as registered in Slovakia are registered in the selected European countries too.
On the whole, as a result of prevalence of negative attributes (growth of average age, decrease of the share of secondary and university educated workers, increase of the share of the so called technical and economic workers etc.) performance potential of workers in basic agricultural industry decreases. This is caused by better earnings and better employment opportunities in other branches, and by an insufficient incentive of some managers in agricultural enterprises in adjusting themselves to market conditions. Vague price and subsidy policy of the government, that virtually isolates agriculture from the market, plays important part too. As a result deformed relation between added value and the worker exists in the basic agricultural industry in Slovakia.
Production restructuring, linked with intensifying perspective branches is a precondition in our agriculture for the increased generation of the added value in our agriculture and thus in our foodstuff industry too. On the long term basis one can feed economic boom by one source alone - namely by the added value. Slovak agriculture has not yet made the necessary reversal in this very important, in fact decisive aspect.
Adequate generation of added value in agriculture and foodstuff industries is the basis of inherent resources that accommodate all reproduction agents. Macro- and micro-climate of foodstuff management should be subordinated to this value added generation.
At present is this generation in the Slovak agriculture deeply in red numbers in relation to the necessary scope (volume, numbers) of manpower, land and capital reproduction.
When monitoring the added value generation in agriculture and foodstuff industries in developed countries one can see obvious high innovative activity of foodstuff industry leading toward its majority position concerning the added value generation in agriculture and foodstuff industries. This, in our view, presents a further important demonstration, that problems of agriculture can be solved successfully (also from the generation of inherent sources of reproduction point of view) only by close co-operation, even integration of agriculture and foodstuff industry.
We suggest therefore to route substantially more subsidies into technology and organisational development of foodstuff industry. This is a way how to increase the effect of all (at present modest) subsidies into the whole sector of agriculture and foodstuff industries. Foodstuff industry should increase its export performance by means of pro-duct assortment innovation. One could thus relatively quickly revive perspective branches of basic agricultural production.
This should be a starting point for agriculture and foodstuff industries' restructuring harmonised not only with domestic, but with foreign market too. This could further improve and make more real the allocation of growing crops and breeding farming animals into favourable production conditions and right concentration. In our view this is the only way how to push agricultural production restructuring forward.
We assume moreover, that relations between farmers and foodstuff industry (including foodstuff merchants) will stabilize domestic production sooner and more thoroughly than for instance the protectionist measures. We suggest to transfer part of the subsidies directly into the hands of perspective and prosperous foodstuff enterprises, who can use them efficiently to regulate farm production.
Prices of manpower, inputs and outputs act discordantly and deform the results of agricultural enterprises. There exists no market price of land and no economic land rent. Prices of agricultural products are in regulated to a great extent, whereas prices of most of inputs are market prices and are relatively high. As a result of this, manpower price can not be considered as market price either.
At this discordant price formation neither rational substitution of land by capital, nor substitution of manpower by capital can establish themselves. In both cases the incentive for economically rational substitution of production factors is lacking. This is further complicated by the lack of financial means and obstructions in financial flows, and naturally the system of subsidies. This all is carried over to the allocation of resources in the regions and impaired economy is a result. It is therefore important, that subsidies should impair optimum combination of production factors as little as possible, namely in areas which have real conditions for actual market economy.
Jaroslav NĚMEC - Ivan PRACHÁR
Till the year 1995 GDP increase was stimulated mainly by exports of
goods and services (foreign demand). Since 1995 however, passive trade
balance signals, that foreign trade started to share in the GDP creation
to a lesser extent (exports), than in its exploitation (imports). Net export
decreases, which clearly suggests that impulses for GDP growth originating
from foreign trade and based on currency devaluation (mainly in 1991 and
1993) have been gradually exhausted. In 1996 the basis of GDP growth became
only domestic market. Increments of domestic demand (households and government
consumption) activated by growth revitalization in the years 1994 and 1995
invoked greater volume of imports, than exports could cover. This orientation
of domestic demand in a way seemingly restored the situation similar to
the one at the beginning of liberalization and thus closed the space for
GDP growth created originally by devaluation.
Similarity of this situation, however, lies only in the fact, that low competitiveness necessitates again the support of domestic supply (by price preference through devaluation), or demand restriction (by restricted imports). Since the start of liberalization several changes of development conditions for the economy took place. Reorientation of foreign trade occurred, contacts widened, business ability of domestic firms increased and some more positive changes happened, which substantially improved conditions for our firms in their assertion in foreign markets. By its trade connections and legislation the country integrated itself into the world market structures. Under given terms of trade the country reached the limit of its possibilities of further extension of available exchangeable potential. Taking into account strong interconnections of foreign exchange with internal and final consumption, the country thus reached also the limit of possibilities in its aggregate GDP growth.
These possibilities were defined by the volume of production capacities in industry, agriculture, construction and services. Capacities of production branches partially adapted themselves to the needs of demand, their volume, however, was not increased (rather decreased) and their structure did not change very much either. Part of these capacities still remains available, and if exploitable at all, represents the last reserve of any GDP growth in production branches. Rapid growth of services, above all the market ones, which was linked with the initial phase of transformation, was completed and further development of services will obviously accompany the growth of aggregate GDP.
Enhancement of capacities in production branches corresponding to the demand structure at accessible markets is a precondition for further growth. The increase of such capacities in the imminent future can be the main decisive indicator also for the expected growth rates of GDP (or leastwise a limiting factor for possible growth).
The prognoses of GDP growth for 1997 still await relatively high increments, with large span, however - from 5% to over 7% (the growth rate decrease compared to previous year is included). Some governmental development concepts expect GDP growth of 5-6% even up to the year 2000. These optimistic visions are obviously based on trend extrapolation of the short development segment between the years 1994 and 1996 and express more the needs to implement investment plans and other intentions of economic policy than an estimate of real possibilities.
Considering suggested internal problem of economy and development (investments) conditioned by very limited internal resources, the expected 5% growth of GDP should be based on some assumptions that are not included in the above mentioned analysis - for instance the massive entry of foreign capital, rapid growth of demand in certain territories (that would open the market for capacities not exploited so far - Russian market is such a theoretical possibility); one can at least assume, that the means of economic policy will succeed in overcoming the trade balance deficit etc. Without these assumptions one must consider the 5% growth as rather improbable. Even if some of the above mentioned factors appears, cited GDP growth value for 1998 may be its upper limit only.
If no major decrease of GDP increments takes place as early as in the next year, then the decrease will take place in the following two years. (This, needless to say, under the condition that none of the above listed factors, such as massive inflow of foreign capital etc. has taken place). How big this retardation will be, depends on the solution of further problems listed above.
The paper is dedicated to the problem of harmonizing economic development
and environmental protection. The situation and basic tendencies that manifest
themselves in the development of the quality of environmental components
in the Slovak Republic within the context of changes that are going on
in the economy, and in the measures of national environmental policy.
The first part of the paper presents the evaluation of the results of the monitoring of basic environmental components during the transformation phase of the Slovak economy. The analysis of pollution indicators' development is accomplished from the point of view of their links with the branch structure of pollution sources, identifies some most important environ-mental problems in the quality of environmental compounds, and follows changes in environmental pollution linked to the changes in branch structure of economy. These changes represent one of the factors that influence most significantly the state of environment in future. The analysis results into the assertion, that in recent years of economic transformation the quality of individual environmental components, above all air, soil, and even water (in some partial indicators of quality) improved. This positive tendency, however, is not sufficiently stable, as this tendency is not an outcome of marked changes in the branch structure of the Slovak economy towards less energy intensive and raw material intensive industry branches. Within the analyzed time period as registered by the Statistical Office of the Slovak Republic there occurred no change in the branch structure of economic activities into a structure with higher share of environmentally less intensive branches. On the contrary, the share of production of chemical products, metals and products of metal, pulp and paper in the total gross industrial production increased. Similarly, in the structure of exports, tendencies from the past, e. g. orientation at the raw material, materials and energy intensive products (what means at the same time environmentally intensive) obviously still survives. The absence of positively acting influence (or inadequate quantity of it) to make changes in the structure of economic activities that should improve the quality of environmental compounds in the Slovak Republic, will apparently survive for some time. One should therefore even more attentively and consistently implement national environmental policy respecting its links to other branch policies.
Second part of the paper is dedicated to the national environmental policy of the Slovak Republic. The role of this policy is to create necessary legislation, economic and system frame-works vital for the successful solution of current and newly arising environmental problems. This part briefly presents strategies, principles and priorities of the national environmental policy, and analyses measures suggested to accomplish designed aims as well as expected financial demands to cover these aims.
In the conclusion, the paper summarizes information gained from the analysis, positively appreciates the overall development of the quality of environment This development manifests itself by lower absolute environmental load and lower destruction of environment caused by production and consumption activities. The contribution of national environmental policy to attain this favourable situation is mentioned as well. On the other side, the paper warns, that the survival of existing structure of economic activities furthermore acts more towards further environmental deterioration, than to its improvement. This presents a certain risk to the consistently sustainable growth of Slovakia. One points out that to abate this risk it is necessary that the national environmental policy should even more consequently materialize its aims, update suggested measures and relevant tools, and these then effectively harmonize with the aims and tools of other branch policies, taking into account conditions created by transformation process of the Slovak economy.
Given the structural changes pursued by former governments in the late
1980s, it is not quite clear whether or not work on research and development
(R&D) transformation should be devoted only to the period after 1989.
In any case, it is safe to say that the long-term process of R&D system
transformation should be divided into three different phases:
1. The reconstruction of science and technology under conditions of „real socialism" - from 1988-1989,
2. The R&D transformation under conditions of the general systemic transformation in the former Czechoslovakia from 1989-1992,
3. The R&D transformation under the conditions of the general systemic transformation in the independent Slovak Republic from 1993 up to the present.
As far as general legal preconditions of R&D activities are concerned,
the situation has not changed since 1990. Given the Constitutional Act
of the former Czechoslovak federation, this sphere was the common competence
of both federal and national authorities of both republics. Therefore,
until 1993, R&D policies were the responsibility of federation and
republic authorities, taking into account regional competencies and their
problems. The activities belonging to the competence of the Slovak central
administration were stipulated in Acts of the Slovak National Council (Slovak
parliament) No. 347/1990, 197/1991 and 298/1991, which also stated that
the leading authority in the sphere of R&D was the Ministry of Education,
Youth and Sport. Through another Act (No. 453/1992) of the Slovak National
Council, this Ministry was renamed the Ministry of Education and Science.
New laws on state support given to R&D and on the Slovak Academy of
Sciences are in the early stage of preparation. This is in contrast to
the situation in the Czech Republic, where the Czech Parliament approved
the laws mentioned above in May 1992.
After the split of the federation, in October 1993, the Act on The Agency for International Co-operation in Science and Technology was approved by the National Council of the Slovak Republic (Slovak Parliament). It may be of great importance to note that the Slovak parliament approved an amendment to the so-called "competence act" in March, 1995. According to this amendment, the "Bureau for Strategy of Development of Society, Science and Technology" is being established. This office is the central body of the state administration for the "programming of the strategy of development of society, science and technology and for regional development". Consequently, the Ministry of Education is a central body "for elementary and secondary schools, colleges, for school establishments, life-long education, for science and for youth and sports". Up to now, how-ever, the competence relations between the Slovak Academy of Sciences, grant agencies, the Ministry of Education and the new office are not governed by legal regulations.
As far as the institutional structure of the R&D system is concerned, the structure, in spite of the formal changes at the top level of the system, seems to have changed little in comparison with the previous period. Essentially, the whole R&D system was and is divided in to four subsystems: the Slovak Academy of Sciences (SAV), higher education, branch institutes, and business firm research organisations - whose innovative potential was the most important Substantial changes are under way, in the area of technical standardisation and at the same time testing and technical norms are being harmonised with international standards (first of all, those of the European Union). An important part of the R&D system is the industrial and intellectual property rights for which the Office for the Industrial Property of the Slovak Republic is responsible.
In this context, the creation in 1991 of the Grant Agency for Science (for basic re-search) and the Grant Agency for Technology (mainly for applied research) in 1992 signified an important change in the R&D system of Slovakia. Their purpose was not only to introduce new forms of funding, but also to promote a competitive environment within research institutes. They have contributed to research teams being better motivated, but due to the absence of an effective market and of government research priorities, they could not go further to a substantial restructuring of the R&D system. It is important to note that from the very beginning, this grant system has faced certain limitation because no special fund was created for its use. In the milieu of scarce resources, the grant system can only have a limited impact on the effectiveness of research activities, but it has introduced rigorous criteria in the selection of research projects. The weakness of the grant system, in its present form, is the short-term period for which funding is allocated, namely from one to three years, which is rarely enough in basic research.
In the transformation period, some important changes occurred in the micro-level as well. The number of subsidised research workplaces (mainly, in applied research) was markedly increased, joint research workplaces were established with foreign participation and the participation of Slovak scientists in international projects (such programmes include PHARE and COST) was high as well.
In late 1992, the Slovak Academy of Sciences institutes were accredited according to international evaluation criteria of the scientific research. The institutes were divided into four groups. Groups A and B consisted of institutes with very good results in their fundamental research activities; in C, institutes that were successful in applied research; and in group D, the institutes with weaker results either in fundamental or applied research. Seven institutes fell into this last category and were closed in 1993-1994. In 1992-1994, a similar process of accreditation with similar criteria was carried out in higher education institutions, although not with such drastical consequences. The aim of these selective measures was to improve the performance of the Slovak Academy of Sciences and universities, and to adapt their functions to the conditions of the emerging market economy. On the other hand, other departmental research institutes (government sector) were not accredited at all.
Furthermore, an important part of the Slovak economy's transformation became the privatisation of also research and development organisations. A central form of asset pri-vatisation of research state organisations within the Slovak industrial branches non-standard methods mediated through investment vouchers were (the first wave of privatisation in 1992).This privatisation has significantly influenced the internal structure of research institutes. It has also forced institutes in industrial branches to undertake all kinds of ad-justment procedures. The most common transformation is that of substituting production activities and other non-research activities (mainly service and commercial) for research and development activities. Such an evolved orientation caused outstanding transformation of the current research institutes into organisations with a different central activity. At the same time, a very important form of the institutes'transformation in industrial branches was to support the rise of small- and medium-sized firms. This process, with the utilisation of Western experience, was implemented through the development of technological centres.
The analysis of current trends in Slovakia describes the R&D system both in qualitative, and quantitative terms. Political, economic and institutional instabilities during the transformation process complicate any interpretation of the changes in the R&D system. Moreover, statistical methodology (so called OECD Frascati Manual), applied by the Statistical office of the Slovak Republic in 1994, brought data comparable to OECD. How-ever, these figures are not fully comparable to previous years (mainly in personnel)
Domestic analyses in the late eighties and foreign expertise in the early nineties have accordingly concluded that the R&D system in Slovakia (proxied by the research and de-velopment base) was overstuffed in the late eighties. Thus at the beginning of the trans-formation, it seemed natural and necessary to reduce the number of personnel. The reduction process, however, lacked orientation, and spontaneous elements have prevailed here. Consequently, the share of personnel with a university degree (considered a key element of the creative part of research potential) was essentially retained.
It is probably taken for granted that the „brain-drain" tended towards other sectors of the Slovak economy, rather than abroad. The „brain-drain" towards the private sector occurred from those scientific fields where there was a constant interest in cooperation with R&D (e.g. informatics, telecommunication, robotics, testing and consulting). The share of personnel with scientific degrees in the personnel total increased, although this in-crease could be explained by their higher average age and by the lower mobility connected with this age.
The reduction in R&D personnel was considered desirable and it is just the opposite in expenditures on R&D. The unfavourable trend in the finding development contains two elements in the transformation period: a declining volume in nominal terms and inflation impacts. Slovak's opening and its gradual joining the world economy brought, among other things, an outstanding devaluation of the Czecho-Slovak currency and the Slovak currency respectively. At the same time, it also caused a degradation of resources invested in R&D, including the worsening of opportunities for international co-operation. The devaluation worsened not only accessibility to this information but, most of all, to foreign scientific instruments and materials for R&D. Thus, although political obstacles to the free flow of information were removed, these economic factors have caused a situation much worse than that before 1989. To a certain extent, our participation in inter-national projects could help to improve this unfavourable situation.
In the 1980's, the share of R&D expenditures from the State budget as regards GDP (Gross domestic product) went from 1.5 per cent to 2.0 percent, peaking in 1989. However, in the first phase of transformation (1990-1992), as the consequence of a restricted fiscal policy, this share declined to under 1 per cent. In 1993, this decline continued - to 0.7 per cent, and for 1996, it could roughly be estimated at a level of only 0.4 per cent. Such an outstanding decline could be explained by the low priority given to R&D and, above all, by the financial consequences of establishing an independent Slovakia. Nevertheless, it is true to say that budget expenditures helped to moderate fluctuations in expenditures on R&D. But any estimation of this influence is made impossible by the fact that there are significant differences in the volume concerning the state budget, as reported by the Statistical Office and by data from the State budget (so called „State final account"). In any case, the drasticing decline in government support for R&D is in contrast with its above-mentioned goal of reach a level of expenditure on research and development of about 2.5 per cent of GDP. In this context, it is of great importance to present that the share of gross domestic expenditure of GDP on research and development reached 2.0 per cent in 1990, but declined to 1.7 per cent in 1993 and then dramatically to only 1.1 per cent in 1994. This trend is „however" similar to those in other transition economies.
As far as the structure of R&D activities is concerned, there is at first glance a clear picture. The declining volume of basic research could be explained as follows: the declining support of governmental and academic institutions in financial terms, due to severe budget constrains. At the same time, there were missing conditions to obtain financial means from a non-budgetary sphere, e.g. from industry. The developments in applied re-search are influenced by governmental support for those research units which are necessary for the State to function. Experimental development was characterised by a high concentration on heavy industry and military production. It is obvious that the loss of markets in the former Soviet Union and conversion of military production caused the decline in business ventures of this type. With regard to other innovative activities, it is not quite clear from statistical guidelines what the real content of activities included under the heading „other" is. This fact is a very important one, as the share of these activities made up nearly 30% of total R&D activities in 1993, for example.
The institutes of the Slovak Academy of Sciences and higher education institutions have been foremost in carrying out basic research. In the Slovak Academy of Sciences, medical and pharmaceutical sciences, biological and ecological sciences, molecular and cellular biology, electrotechnical and mechanical engineering sciences and mathematical and physical sciences are prevalent. Universities are dominated by medical and pharmaceutical sciences, agriculture and forestry, veterinary sciences, electrotechnical and mechanical engineering sciences, and chemical and chemical engineering sciences. However, the social sciences, in spite of their importance for knowledge transformation, are insufficiently supported.
With respect to areas of applied research and experimental development, the work-places of ministries are more prevalent than the business enterprise sector. Research is oriented towards the field of sophisticated chemistry and the chemistry of new materials, agriculture and foodstuff production, mechanical engineering and electrotechnology and geological research.
As far as interdisciplinary research is concerned, it should be noted that difficulties still exist. There are three reasons for this. Firstly, as mentioned above, a coherent science and technology policy is still missing. Secondly, due to State budget constraints, it is not possible to fund new projects. Thirdly, it is very complicated to choose, at the national level, experts who are capable of interdisciplinary research evaluation. The acquisition of foreign experts is failing due to the lack of funds available.