Electronic Library of Scientific Literature - © Academic Electronic Press


Volume 51 / No. 6 / 2003



Book Reviews


Global Consequences of the European Union Enlargement and Convergence Position of the Slovak Economy


The objective of the presented article is to contribute to a more real approach to understanding the impact of the external environment’s development on the conditions and consequences of Slovakia’s accession into the EU. In this context, the article concentrates an analytical attention to the following areas of problems:

It has been characteristic for whole pre-globalisation development of internationalisation of the economic life that external – or international economic relations – as well as the system of the world economy, have kept the character of derivation, derived from the determining characteristics of national economies.

Globalisation represents a radical turnover in which the process of internationalisation is terminated, as its volume exceeds the critical threshold, in which the cumulating quantity of internationalisation of the state economic structures passes into a new quality – into the forming of a world-wide structure. Its formation means that the primary and determining character and the importance of economic relations and processes is moving from the inside of state entities to the global economic relations and processes, in which the key role is played by the transnational “players” – TNCs (transnational corporations). Globalisation is thus dictating the logic of the evolution not only to the state economies, but also major regional integration alignments, like the EU, have to adapt themselves to a strong pressure of the globalisation trends.

While entering the EU, it has to be taken into consideration, that the EU is also a part of the globalising world economy, where it is confronted with an extremely challenging mega-competition, most of all with the USA and Japan. The position of the EU in the competition of three centres of the world economy has and will have radical impact on the future development of the integration process, its priorities and conditions. Because of this reason, it is relevant also in the context of the interests of the candidate countries. Data about the development in the economies of the USA, the EU and Japan documents a long-term downward trend in the annual averages of real GDP growth in the decades from 1950 – 2000. Concurrently, it reveals remarkable differences in a decreasing rate of the performance of mentioned economies.

From the view of the EU, the “scissors effect” between performance of its economy and the performance of the USA economy becomes very significant. According to the projections of prestigious foreign institutions, it is expected that after the year 2000 – except for 2001 – economic growth rate in the USA will be still – until 2004 – advancing the EU of more than 1 percentage point.

Besides the remarkable and still rising technologic advance, the most important advantage of the USA in relation to the EU is represented also by political and economic compactness and unique systematic economic policy that is far in advance from this one trying to be achieved during 40 years of integration in Europe. The competition with the USA will be very challenging strategic priority for the EU. The objectives and means of its fulfilment will influence European development essentially and they will also considerably influence the character of the conditions of the new member states, Slovakia included.

Global mega-competition raises the categorical request for the advancement in the competitiveness of the European Union as a whole, of all its member states and of its companies, on the basis of the formation of the Union as a compact economic complex with an internally harmonized business environment. For its formation, the EU plans to realize variety of key reforms in taxes, banking, financial and capital market, pension systems, labor market, agricultural policy, governance and its financing, Pact of Stability’s criteria adherence and creation of the new principles and mechanisms of decision-making processes and the EU institutional structures functioning within the horizon of 2003 – 2006.

The difficulties and complications of the economic development in the EU, the problems in a realization of its reforms and in a functioning of the EMU are reflected into a modification of the conditions of the candidate countries’ entry, which could bring several risks for them. It is obvious that the conditions of the entry of present candidate countries into the EU will be considerably more serious and more complicated then during the past enlargements. The candidate countries represent – before as well as after their entry into the EU – potential and real partners as well as competitors in various directions. In this context, it is important to identify our relative position among them. In the article, the position is analyzed by 11 indicators in relation to the Czech Republic, Hungary, Poland and Slovenia. The most complex analysis of Slovakia’s relative position among the other candidate countries is provided by the Transformation Effect Indicator and by the European Convergence Indicator. In the both cases, Slovakia has relatively the weakest convergence position.

Prepared Tax Reform in the Slovak Republic According to the Criteria of Tax Theory and Practice


Tax reform is a very important step of each government because any tax change can bring about significant impacts on the economic activities and cause a lot of predictable and unpredictable reactions. Nowadays, the next tax reform in the Slovak Republic has been prepared to be introduced into a tax practice (since January 1st 2004) after 11-years running of the present tax system and many of its novelizations and amendments.

A proposal of a new radical tax reform of Slovakia comes out of the assessment of the present tax system which has many weaknesses and several controversial issues.

The main reasons of the new tax reform of Slovakia are:

a) an increasing deficit of the State Budget of Slovakia,
b) the ratio of tax burden of inhabitants and entrepreneurs,
c) a low discipline of tax payments in Slovakia (increasing amount of tax non-payments),
d) weaknesses in the tax system – weak using of the basic tax principles in the tax systems, low level of the tax legislation (complicacy, transparency, frequency of changes and amendments).

The designers of the new tax reform of Slovakia have formed following main aims:

a) more correct using and implementation of basic tax principles into the tax system (equity, neutrality, simplicity and efficiency),
b) simplifying of the Slovak tax legislation and tax structure,
c) a fiscal neutrality of tax reform,
d) a further shift of tax burden from direct taxes into indirect taxes,
e) a further shift of tax burden from income taxes into taxes on consumption and taxes on property,
f) the most radical change of tax reform – introduction of a flat tax (the same tax rate of 19 per cent of income tax of inhabitants, and 19 per cent same tax rate of corporation income tax on profit and 19 per cent same tax rate of VAT).

The author of this article has tried to evaluate positive and negative sides of the tax reform proposals according to the theoretical and practical criteria.

Introduction of the equity principle by using a flat tax (by removing the progressive taxation of inhabitants) is questionable and demagogic because this system is highly advantageous for rich taxpayers in comparison with the previous system. If we take a new taxation of consumption into account (VAT, excise duties), the principle of equity is not absolutely fulfilled because of the regressivity of consumption taxes.

The tax acts have been emended many times since 1993. The consequences of ma- ny amendments are that tax law in the Slovak republic is very complicated, the ver- bal amount of tax law more than doubled. A lot of exceptions in tax law caused non-understandability and non-lucidity of tax legislation. A number of amendments extended to 138 for the period from 1993 to 2002. A simplicity of taxation is connected with an efficiency. It is very important to focus on the efficiency of tax administration and on the way of tax collection. A low efficiency of tax administration is related to the estimated great amount of “shadow” economy, tax evasions and tax frauds. The author is sure that a simple introduction of a flat tax will not bring automatically a decrease of tax evasion and frauds in Slovakia.

The next main aim of the tax changes is to introduce a neutral fiscal tax reform. A significant weakness of tax reform is that it is concentrated only on a tax revenue and not on the public expenditures. There are none remedies for the improvement of a public sector efficiency and for decrease of public expenditures in the proposals of tax reform.

The restructure of taxation from direct taxation to indirect taxation was one of the main goals of tax reforms of governments in the western-European countries in 70’s and 80’s of the last century. In this kind of reforms, there is used a psychological effect of indirect taxes – the “hidden nature” of indirect taxes as a part of prices. The shifting of tax burden from direct to indirect taxes was one of the aims of tax reform of the Slovak Republic in 1993. The Slovak government decided to continue in this tendency in tax reform also in 2004. The question is if this aim – by introduction of one tax rate of VAT – is correctly timed and if poor people (with low income, students and retired people) can bear increasing of all prices of food, energy, medicine, shelter and other necessities of life etc. as a consequences of a cancellation of low tax rate of VAT and using one tax rate of VAT (19 per cent).

The final part of the paper is devoted to the main tax changes according to the type of taxes. In the field of individual income taxes, the radical tax change means the transfer of the progressive income taxation (from 10 per cent to 38 per cent tax rates) to the flat tax of 19 per cent-tax rate for all taxpayers. Corporate income tax is changing from 25 per cent-tax rate to the flat tax of 19 per cent-tax rate. This flat tax should help to fulfil a stimulation function of taxation much more strongly than until now and to attract fo-reign investors. At the same time this kind of tax helps to implement the requirement of neutrality inside the tax system of Slovakia. But from the international point of view, if tax rate in Slovakia will be much more lower than in the neighbouring countries, than it is an introduction of the components of a significant tax competition. Also a lot of changes in the field of property taxation have been prepared (two alternatives of base of taxation, calculation of tax base based on a new valuation of property etc.) since January 1st 2005.

The most controversial proposal of tax reform is the foregoing change of VAT (one same tax rate of 19 per cent). This is a compensation of decrease of tax revenues from income taxes by increasing of tax revenues from VAT and excise duties. In the field of excise duties (ED), the base tax structure will be not changed (mineral oils, wine, beer, alcohol and tobacco and cigarettes). The government should pay attention to introduction of a new tax administration and collection of ED by customs in order to harmonize the Slovak system to the EU system, to eliminate tax evasions. In this field of ED, Slovak government has to gradually adjust tax rates of ED in Slovakia to the minimum level of tax rates of the EU in order to fulfil the conditions of harmonization of the EU. But on the other hand, there are also “zero” tax rates used in the EU countries (for example zero tax rate of wine) to protect own wine producers. The Slovak government has to protect the Slovak producers as well. In the proposals of tax reform, the designers have to respect not only fiscal function of excise duties, but it is also important to predict an impacts of taxes according to the price elasticity of demand and supply and other reactions in production and consumption and effects of tax changes in both microeconomic as well as macroeconomic level.

Application of strategic methodS for evaluation of portfolio banking products


The transition of the Slovak as well as the Czech and Polish economy to market conditions is bringing important changes into the banking systems of these countries. The globalization of the banking sector and its privatization by foreign capital, as well as adapting to the conditions of the European Union, and the growing competition from non-banking entities, force banks to look for relatively new approaches in all fields of their activities. The evaluation of bank portfolio belongs here, too.

The aim of this article is to apply tools of strategic management for evaluation of products which are offered by commercial banks in Slovakia, in the Czech Republic and Poland. The purpose of the application of the tools of strategic management is to show the need for strategic evaluation of existing banking products and the need for changes in the structure of portfolios for banking products, emphasising on the creation of partial product strategies, as well as the creation of bank strategies from an economic viewpoint. Also when judging bank risks it is even more obvious that it is the change of portfolio and introducing new products that are relatively risky issues which require not only the creation of a corresponding volume of reserves, but also effective strategies.

Forming strategies for single products, as well as for bank institutions as a whole, is, for the present dynamic market conditions, amply justified. In today’s economy, not only is it necessary to plan strategic management for manufacturing companies, but more so to pay close attention to problems of strategic management of companies providing services, and in particular, banking. At present it is the banking sector that participates significantly in the development of the economy as a whole. Today the economy of a country depends on the banking sector, and the banking sector is influenced by the decision and work of its management, which foresees changes that the future will bring.


Jaroslav ZAJAC

Multi-agents simulation reports a project in agents-based computer simulation of pro-cesses of economics in a population of boundedly rational learning agents. The same family of models will be simulated under different assumptions about the nature of the learning process and details of the production and economics process. The purpose of this procedure is to establish a relationship between the assumptions and the simulation results.

The simulation techniques with baseline simulations of boundedly rational learning processes, and do not involve the complications of dealing with economies. Can simulation “explain” the puzzles of finance regulation and particularly the key puzzle of growth and learning processes that produce the puzzling results? And just what assumptions of the simulation are not predictable associated with puzzling results?

Typical problems are multi-agents case can also offer opportunities for inference of hidden action and agent monitoring agent. Extraordinary creativity remains a mystery, no one make dependable long term predictions of what inventions will occur and when, or what their effects will be.

Agency theory drops the assumption that most individuals treat conformity as instrumental to the achievement of their personal goals. Agents can be dependent upon to conform only when held property accountable to effective incentives.

Agents need to limit the recipients of their messages as much as possible and often need to share information across both time and space and learning this becomes a case of information sharing. Mechanism such as genetic programming can improve the behavior of a species of agents over successive generation and construct markets in the environment can enable an agent community as a whole to learn.

Global Trade, European Integration and the Restructuring of Slovak Clothing Exports

Adrian SMITH – Bob BEGG – Milan BUČEK – John PICKLES

The Slovak clothing sector seems to have a number of relative competitive strengths and limitations within this broader context of EU−ECE trade liberalisation and growth of clothing exports. In terms of strengths, three issues are key. First, like other ECE countries, Slovakia is achieving increasing access to EU markets for its relatively high-value products. These are more competitive in the EU market in terms of value than those from lower cost neighbouring states, such as Ukraine. Second, part of the competitive strength of the clothing production system in Slovakia (as elsewhere) is derived from the distinct regional agglomerations of textiles and clothing producers in two main regions, Trenčín and Prešov (see Smith, 2003). Much recent attention in economic geography has been focused on regional agglomeration and the competitive underpinnings of regional economic success (Scott, 1988, 1998; Storper, 1995, 1997). Together, the two main regional agglomerations of clothing producers in Slovakia embody many of the features of such industrial districts found in Western Europe and North America, including dense forms of local co-operation between firms. Co-operation and contracting between firms has enabled export oriented firms to respond flexibly to the uncertain and unpredictable demands from EU buyers. In addition, there is some evidence of firm upgrading in which managers have been able to develop more independent market access of their own brand clothing thus reducing their reliance on western buyers. However, as Smith (2003) has argued elsewhere, such agglomerations are also characterised by unequal power relations between Slovak manufacturers and EU buyers, between core contracting firms in such regions and other local producers who play a more marginal role, and between firms and their workers given that wage levels remain low in the clothing sector.

There are also a number of strategic limits to the continued growth of the Slovak clothing export system. First, it is clear that producers face continuous costs pressures. Pressure for wage increases in a very low pay sector is apparent. Many firms have suggested that worker retention has become an issue because of low wages. Firms have sought out ways of coping with such pressures through other mechanisms such as subsidised transportation (Smith, 2003). Elsewhere, in Bulgaria, Pickles (2002) has found that firms have also been forced to respond to the temporal flexibility required by workers also engaged in supplementing household income through seasonal agricultural employment and work. Cost pressures are also experienced in the emergence of new competitors in lower cost areas, such as Ukrainian firms, although, as we have seen, this is counterbalanced by the quality differences of clothing production between Slovakia and Ukraine. Nevertheless, if Ukrainian producers are able to upgrade quality to match (if not surpass) Slovak levels then competitive pressures will intensify. Furthermore, EU membership may increase costs for Slovak producers, through the costs of implementing otherwise desirable employment and environmental legislative requirements. The effect may be to stimulate a further off-shoring of production to newer producing regions, such as those in the former Soviet Union.

Second, it is clear that reliance on outward processing strategies has failed to develop significant design capability in Slovakia. While there are cases of design intensity in production in some firms, it is clear that being locked into outward processing forms of production has not enabled the transfer of technology and knowledge to enable many Slovak firms to develop design capability. Rather, reliance on western designs, brands and trademarks remains predominant in the Slovak clothing sector. However, the development of design capability is seen as necessary in order to upgrade production and move out of low-cost production.

Third, and finally, there is a general absence of specific regional policies to promote upgrading in the clothing sector and those policies that do exist are limited in scope. However, there is evidence from western Europe – notably from Italy – that a dense tissue of regional institutions involved in providing credit, technological support and employment training can be important in the sustenance and potential upgrading of clothing sectors. Whether, however, such policy foci would help to overcome the continual pressure for cost reduction and low wages in what, after all, is an increasingly globalised manufacturing sector remains an open question, and the experience of higher cost locations in the EU and USA suggest that cost imperatives may determine the fate of even relatively high quality production in central Europe.



The paper deals with a relatively new sphere in the theory of marketing and marketing communication that is represented by the theory of image applied to the conditions of business practise. On the concrete example we applied our own systemisation of the theoretical bases in the form of given image classification and in this form we created its interconnection to real practice of Slovak retail. The first part of the paper describes the aims and methodology, the second one focuses on the definition and classification of image describes its possible divisions in general, subsequently justifying the limits of basic factors that influence the image of a retail unit. The third part consists of basic information of survey together with description of survey sample of 934 respondents, used attitude scale methods and description of questionnaire evaluation. The core of the paper consists of information from part 3.1, where there are survey results analysed with the effort to show to interconnection of theoretical conclusions in a term of image classification.

From the point of view of object we have compared the image of two retail units from different regions. They were a part of a chosen retail firm. While we were evalua-ting the basic attributes of price, goods, services, atmosphere and communication, we found out that the image from the viewpoint of object is uniform – it means one-channel image. When we analysed the concrete object from the point of view of its internal structure of three departments, we found out significant differences in the image. The best evaluation was given to grocery department, followed by textile and clothing department and the worst evaluation was given to shoe department. And we have found out multi-channel image of particular departments in terms of a chosen retail store.

From the point of view of competence and overspreading we have come to the conclusion, based on our survey that by comparing two different retail stores in two different regions, we could speak about universal image, valid even without taking into account local special ties. From the viewpoint of further surveys it would be interesting to focus on multinational trade chains and to compare the corporate image to the image accepted in the given country as well as with the possibility of distinguishing the image of dif-ferent sale concepts. From the viewpoint of reality and demand, at the beginning we focused our attention on specification of basic factors influencing a retail unit image. Then we observed two levels. There was an ideal image on one hand, expected by res-pondents from an ideal store, on the other hand there were real evaluations of observed stores of a chosen trade firm. Based on gained results we could compare the sequence of the most important factors that are decisive in choosing a store (quality of goods, offer of goods), but also the sequence of real evaluation in terms of specified factor (time of sale, standards of cleanliness of premises). Having in mind these evaluations we compared the most significant differences reported between an ideal and real image (price, quality and offer).

From the viewpoint of bearers we have compared the internal image, created by employees of the observed firm and the external image represented by groups of respondents – general public, high school students, professionals and people employed in mass communication sphere. Again – it was possible to focus our attention on two levels, it is the ideal and real image of observed groups. From the viewpoint of demands focused on an ideal store there were consensual finding of the highest demand at the employees of the observed firm and it is some positive finding for the observed organization. On the other hand, university students were the least demanding group from the viewpoint of demand. While finding the real image, the most positive evaluation was of the employees of the trade firm, but the least positive by employees of mass communication and it should be a very unfavourable state for management of the trade firm as far as opinion creating group of respondents concerned and it has a strong tendency of negative influence of general public.

From the viewpoint of bearers we surveyed the cases of one-channel and multi-channel image, too, on the base of observing statistically important differences in evaluation of observed factors. From thirteen observed changeable there were significant differences in ten items. In these cases it is possible to speak about multi-channel real image as for as the attitudes of particular groups concerning the evaluation of the same factor were significantly different. On the other hand, statistically insignificant differences were in the evaluation of changeable quality of offered products, peed of service and customer services – when we speak about so-called uniform real image of given factors.

By quantification of image we have gained in the survey some concrete results in term of its theoretical classification. It is possible to use the findings at specification of advantages in some retail units, focusing on current and potential customers but also at correction of erratic managerial decision with the aim to improve the own position on the market in the framework of existing competition.

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