Electronic Library of Scientific Literature - © Academic Electronic Press


Volume 51 / No. 7 / 2003




The aim of the contribution is an evaluation of the first business cycle in the post- -communist economy of Slovakia. Investigation starts from long term development of the Slovak economy and identification of the first business cycle after fall of communism. The cycle begins in 1993 and finish in 1999. Development in the years 1993 – 1995 had been identified as “transition expansion” and the period 1996 – 1999 as “transition contraction”.

The recorded business cycle was, first of all, a consequence of synergism of economic development’s internal and external factors. Interaction between accelerator and multiplier in the framework of domestic demand was less notable than interaction between exports and domestic demand. It was given, in on hand, by high openness of the economy and, in other hand, by low developed market and undercapitalization of the economy.

Cyclical development of economic activities was also very significantly influenced by turbulences of socio-political development, economic transition and the privatization process.

Behavior of economic agents was more affected by no transparency of the forming market and social environment than by imperfect information. A possible effect of technological shocks was strictly limited by huge undercapitalization, moderate inflow of foreign investments and low functionality of the market.

By broader evaluation of the first business cycle in the post-communist economy of Slovakia is necessary to state that over 6 per cent economic growth is above the recent possibilities of the country and leads to vehement increase of external disequilibrium. On other side, lowering of economic growth below 3 per cent leads to broad increase of unemployment. This development by synergism of high consumer prices recalls fast worsening of households’ income situation and leads to increase of social disequilibrium. It means that the Slovak economy achieved such stage of development where requirements on efficient macroeconomic maneuvers for seeking economic growth and stability extraordinary rise and are strongly dependent on progress made in structural changes.

Financing a Lifetime Education in the Slovak Republic



A man learns for the most of his lifetime. Learning and knowledge is one of the elementary conditions of human existence. As much as it was true in the whole history, so more it is true in the time of the oncoming information society. Knowledge creates the basis of human capital that is the major component of the information society deve-lopment. This society is based mostly on the permanent lifetime education.

On the other hand, unequal chances and different approach towards education in the present world, but personable eligibilities and ambitions as well, leads to a polarization of the society between privileged intellectuals and uneducated masses.

A prevention of further deepening of the “scissors effect” is possible mainly by ensuring the access to education in maximally sufficient extent for all spheres of the population. But this is – besides social, ethic and political problem – the problem of economy, thus the problem of financing a lifetime education.

Its solving consists in two main assumptions, namely the financing sources and related rate of participation of concerned subjects.

Considering the first assumption, it can be stated – and it is almost generally true – that the financing sources are limited. Regarding the second assumption, the willingness of the individual subjects/entities (individuals, firms, state, education institutions…) is limited by their partial interests.

A constitution of an effective model of the lifetime education system requires the consideration of all of its economic, political and social relations. Education cannot exist isolated from the economic and social changes. And it is exactly the lifetime education system, which represents an extremely complicated, expertly and financially highintensive problem and process.

A participation of the individual subjects on the financing the education is significantly determinated by particular stages of the lifecycle and related phases of educational process (school education, adult education, senior education).

In the first component, the substantial role is played by state and its educational po-licy. Scholastic education is the significant platform for the lifetime education. Thus, state is the main sponsor of the school education and state then bears the main part of its financing costs. Overall reduction of the state sector then substantially reduces the number of experts for the state administration requirements and thus also the state costs spent on the preparation of such experts decrease gradually.

With coming of the information society and technology development, the more meaningful role in education process is played by the companies. But the paradox is that exactly the companies try to eliminate the education facilities in their activities and they order the education “products” from the external suppliers more often. This trend requires a radical reevaluation of the relation company-education. All the more it refers to the foreign investors. A preparation of the experts is thus mostly realized only in domestic medium enterprises.

As the education is an element condition for the application at the labour market, the bigger pressure is transferred on the applicants themselves, so they would perform their professional and expert flexibility.

The specific status belongs to the university educational system, where the scholastic education is intersecting with an adult education, profession education. In that type of education, co-financing by more subjects (participants of the educational process, employers sphere, state, and other sources) seems to become the basic way of the solving of financing problem.

Nowadays, the solving of the unemployment problem belongs to the major state priorities. That is why the state takes the large part of responsibility for increasing of the profession flexibility and thus also its portion in financing the education.

At the same time, it can be stated that the structure of financing the lifetime education will change in this direction that the participation of the state and individual participants of the educational process will increase. The participation of the companies will gradually decrease – regarding own corporate educational activities – and will be transferred to the purchasing of the “complete products” of the educational institutions financed by other systems.

The Changing Attitude of Terence Wilmot Hutchison in His Ultra-empiricist Proclivity


With his 1938 work, Terence Wilmot Hutchison established the first link between the methodology of economics and philosophy of science. Hutchison’s aim is to found a hardcore for the economics, and with this purpose he brings to the economic analysis testability and falsifiability criterions. In the course of time, there is also a changing attitude in his ultra-empiricist proclivity and tolerance towards historical-institutional phenomenons. An example, from the Ahmed Guner Sayar’s correspondence to Hutchison, aims to shed light to the background of this intellectual change how to theorise economic analysis. It’s an important chance to appreciate Hutchison’s original ideas. Thus it’s not surprising that he had rejected Sayar’s dual-raying theory as it is not quantifiable, but he had also tolerated the existence of some analytical propositions to understand social phenomenon.

Broad Money Demand and Currency Substitution in Turkey


The aim of this paper is to investigate the empirical relationship between broader definition of money, real income, interest rates, inflation and expected exchange rate, and to examine the constancy of this relationship, especially in the light of financial reform, deregulation of financial markets and financial crises. The estimation results show that long-run demand for real balances in Turkey depends upon real income, on the its own interest rate, interest rates on government securities, inflation and expected exchange rates. Significance of the expected exchange rate variable indicates existence of currency substitution in Turkey. The dynamics of money demand are important, the inflation and income affects are much smaller in the short-run than long-run. Our results also reveal that the demand for broad money in Turkey is stable, despite the economic reforms and financial crises.

Theoretical Bases of Measuring and Managing Political Risk


Governments (in theory) exist to serve the needs of country’s citizens through the application of monetary, fiscal, social and other policies. Managers of the companies take the place interest of shareholders or interest groups including employees, custo-mers, suppliers and their goal is maximize wealth with regard to interest groups. The objectives of a host country and of a foreign companies are likely do differs and some degree of political risk is inevitable.

The possibility of such events occurring and having an influence on the economics of companies is called political risk. In economic literature we meet with different access how to define political risk.

Stephen Kobrin has classified contemporary political risk between two dimensions. The first dimension distinguished between macro risk and micro risk. Macro risk is risk that affects all foreign companies in a country. Micro risk is specific risk that is typical for industry, companies or projects.

Political risk definitions fall into two main categories. The first describe political risk in terms of government interference, the second in terms of events.

In economic literature after the Second World War politic risk in macro level is lin- ked to mind the abrupt expropriations of both domestic and foreign private business in Eastern Europe and China as those territories came under communist control.

Micro risk is second major form of contemporary political risk. It arises from cor-ruption and conflict between objectives of governments and private firms. Conflicts bet-ween objectives of companies and host country have raised on such issues as the firm impact on development on national sovereignty, foreign control of they industry, sha-ring of ownership and control with local interests, impact on a host country’s balance of payment, influence on the foreign exchange value of its currency, control over export markets.

Global specific risks are the third major form of political risk. They include terrorism, antiglobalization movement, environmental concerns, poverty in emerging markets and cyberattacks on computer systems.

Corruption defends from admission of foreign capitals and is one of the risk factors on micro level. Political corruption and blackmail contribute to the risk of managing foreign direct investment.

Macro techniques are typically country or political indices. They assessed political risk by giving each country a score and create a relative ranking of political risk within the country as a whole.

The main advantage of macro techniques is that they sum up numerous complex va-riables into meaningful quantitative indices. The experts analyzed such as political sta-bility, currency convertibility, social conditions, conflicts between countries, financial and accounting infrastructure.

Management of political risk is to come through also on macro and micro level. At the macro level, companies attempt to assess a host country’s political stability and attitude towards foreign investors. The first decision to be made once the company has undertaken a political risk assessment is whether to invest or not in the foreign country. If the companies took the decision to invest overseas, it’s in their interest to minimize the political risks, which are faces. Political risk cannot be completely eliminated.

An investment agreement spells out specific rights and responsibilities of both the foreign companies and the host country. An investment agreement include- transfer risk, access to local capital markets transfer pricing, the right to export to third country, price control, taxation, obligations to build, social and economic overhead projects, the basis on which fund flows may be remitted.

Foreign companies can sometimes transfer political risk to a home public agency through an investment insurance and guarantee program. Many developed countries ha-ve such programs to protect investments by their nationals in developing countries.

On the micro level management of political risk concentrated especially upon on operating strategies (production and logistic, marketing, financial, organization, structure of investment) after the investment decision and preparing a crises plan in case the situation deteriorates.

To managerial techniques, which eliminate political risk belong to process capital budgeting. Very popular methods are to break point probability analysis. The basic mo-del is based on efficiency of the project net present value.

Companies should plan in advance what they will do if or when the general uncer-tainty in a foreign environment turns to chaos. Management should devise and rehearse a crisis plan to anticipate potential deteriorating conditions.

Managing global-specific risk is the task of national and international governments.

Business Orientation of Production Management in Slovakia

Andrej DUPAĽ

At the moment there has been rather an intensive discussion in the world press and professional periodicals about possibilities of economic development. Within the framework of these discussions an eminent attention has been dedicated to the issues of supervising and controlling of companies – corporate governance. This issue represents a sig-nificant aspect of increasing the competitive advantage of a number of entrepreneurial units as well as macroeconomic environment. The effectiveness of corporate governance depends on the quality of institutional background. The effective development of production, belonging to the mentioned issues, brings about a great number of basic problems caused by transition to market economy. Taking into consideration the trends that prevail in the company development, the heuristic attitude aims at a more detailed analysis of interaction, collaboration and synergy of corporate governance and management of production. The reason why it is so has resulted form many unanswered questions and unsolved problems in the both mentioned fields. Company failures prove the fact that ownership and management relations were not solved and that there are difficulties with corporate governance creation. There is a rapid change in the value of different forms of capital in companies and a serious question is being asked about the limits of a organization and how the individuals in those organizations should be motivated. As far as corporate governance concerns it is necessary to respect such basic functions, trends and pre-ferences in the production management that define the scope of entrepreneurial orientation.

Even after about twelve-year transformation process of economics to market economy, Slovak companies are still no table to fulfil strategic development tasks. It is not possible to maintain development by operational plans, but strategic approach is the right answer. The principles of strategic direction in corporate governance development in Slovakia can be summarised in several basic preferences.

Within the scope of corporate governance it is necessary to deal with the problems of entrepreneurial system (approach), with expertise in production management and with respecting of social aspects. Effective corporate governance requires from the owners to be supplied with professional staff and managers who are able to act in accordance with the market principles and maintain also social aspects of management – remuneration, possibility of re-training, involvement in company property, employment rate.

Restructuring and diversification of production is a serious prerequisite. These issues have been recognized and frequently mentioned but not solved so far. To date Slovak economy has been notoriously know for its oversized and structurally unfit industry, for non-perspective production structure that was being created for and orientated at eastern markets, irrespective of its effectiveness and other economic parameters. To make foreign trade more dynamic, it is necessary to create specific conditions for a change in industrial production structure for the sake of export. Raising the export performance of industrial production requires implementation of basic development projects, change of production range structure and enhancement of sophistication effectiveness.

We have difficulties with low competitiveness of products and companies at foreign markets. If our entrepreneurial units want to be successful they must produce only high quality products and provide services of adequate quality. Those products and companies that are considered to be perspective according to the reports of Ministry of Economy of the Slovak Republic and from the point of view of strategic views, are now located in the area of structural problems. Form the point of view of competitive abilities they show their incapability to compete with either prices or quality. With lower export prices in comparison with import ones, they are not able to cover import by export.

At present the difficulty lies with “positioning” production into a passive agent carrying out the requirements of sale or other aspects of management (imperative to producer). Partly it is a reaction to previous dominant position of production in majority of our companies, and partly it is the consequence of a mechanic transfer of foreign principles into our companies, including some conceptions of marketing management, which frequently results in a dominant position of marketing at the expense of production. Lately there is a growing role of finance that is supposed to dominate everything including production. The development of production management cannot completely conform to these tendencies and fall in the same line. It is necessary to realize that the basic prerequisites of a sound company are: marketing, finance, management of human resources and what puts them together are synergy and collaboration.

Solving of the mentioned issues and problems creates a stimulus for Slovakia to the movement towards the European Union as well as joining it. Joining the EU will form important conditions and assumptions for liberalization of capital market of harmonization of taxation, for braking down technical obstacles or physical barriers. It will also enlarge our environment for further entrepreneurial activity and cooperation of our entrepreneurial units with foreign ones. It can be an important and order and cultivated economic behaviour of entrepreneurial units as well as more effective corporate governance, but generally for entire development of Slovak economy.

Strategic Management for the NONPROFIT Organizations


Strategic management in nonprofit organizations is the process of selecting an organization’s goals, determining the strategic programs necessary to achieve specific objectives in route to the goals, and establishing the methods necessary to assure that the policies and strategic programs are implemented. Strategic management is the for-malized long-range planning process used to define and achieve organizational goals.

Because strategic-planning techniques have developed out of the experiences and situations of large business organizations, they have not been easy to apply in nonprofit organizations. At the same time, the diversity among nonprofits makes it difficult to determine which formal planning experiences and problems of one type of nonprofit might prove relevant to others. The analysed method of strategic management, that the article deals with, is a universal strategic method. However its realisation in particular conditions of in a particular organisation will depend on the workers’ skills, on the length of the planning period, values of the organisation, its organisational structure, financial power, etc.

In spite of this difficulty to classify the nonprofit organizations, we proposes a ge-neric framework which includes the following steps in the nonprofit organizations:

Steps in the formulation and implementation of strategy in the nonprofit orga-nizations:

The first step to creating a successful strategic plan is defining the vision.

The vision represents the final point, a picture of the final status, and a vision of fulfilment of the values which are respected by the organisation. The vision creates the frame for mission forming. The mission of the organisation differences it from others with the same vision. The mission answers the question: What is the sense of the com-pany’s existence and what should the company deal with? Principal values are reflected by the vision of the organisation and its mission. These are also the fundamental pillars of its work and it is the part of the strategy. Creating the vision and its mission in non-profit organisations is transformed into its goals. These goals have characteristics with certain particularities: absence of top goal (in a form of profit), taking interests of many cliques into consideration, etc.

Analysis of the environment is the next step of the strategic management, which is the synthesis of analysis’ information from inner and outer surroundings. The result of the analysis gains information about opportunities, threats, and organisational strengths and weaknesses.

The information will be used by the organisation in the creation of the strategy itself. The goal of strategy creation is to look for possibilities, identify key problems, and re-evaluate strategic options based on their riskiness and utility. This is based on available resources of the organisation. Based on the creation of a strategy, the organisation can use various methods. For example: scenario determination, critical points determina-tion, goal designation, etc.

Strategic plans of nonprofit organisations should be in form of written document.

For the realisation of the strategy, all employees must be familiar with it, including volunteers, management board, donors and of course the public. The organisation must find the appropriate tools to implement and check the strategy.

Strategic-management efforts appear to be increasing in nonprofit organizations. The presence of business persons on the boards of trustees of nonprofit s is one factor which has encouraged many of these organizations to develop more formal strategies.

The major advantage of strategic management is that is provides consistent guide-lines for the organization’s activities. Managers give their organizations clearly defined objectives and methods for achieving these objectives. Thus, their organizations have a clear purpose and direction. Strategic management helps managers make decisions. Strategic management minimizes the chance of mistakes and unpleasant surprises, be-cause goals, objectives, and strategies are subjected to careful scrutiny.

The major disadvantage of strategic management is that it requires a considerable investment in time, money and people. In some organizations it may take years for the strategic-planning process to function smoothly. Sometimes organizations defer impor-tant decisions until newly established review and evaluation procedures are completed. This can result in lost opportunities.



In the last twenty years, different countries of the European Union have implemented reforms in favour of a greater decentralisation for local governments: increasing their responsibilities, a priori controls removed, tax autonomy consolidated, decreasing in the level of earmarked financial transfers in favour of general transfers, creation of new local government tiers.

A number of these reforms concerned the regional level. This general move towards a consolidation of regions was undertaken with several goals in mind, such as the improve-ment of country planning or better living standards for local inhabitants. The scope, the con-ditions and the degree of achievement of these reforms vary from one country to another.

There are three main “local governments models”, depending on the State organisation (unitary, federal or “regionalized”). However, the specific characteristics of some countries sometimes make it difficult to classify them in one of the three “models”.

The local government territorial organisation in the EU countries varies a lot, with each country finding its own balance between the need to manage local matters at local level and the necessity of having local governments large enough to be able to provide and manage local public services.

In some countries, local governments of a same level are homogenous, while in others, as the federated States and some unitary States such as Spain, Italy, Ireland or the United Kingdom, they are diverse. There are currently 74 000 local governments in Europe. Depen-ding on the country, they are broken down into a one, two or three-tier local government.

The first local government tier, known as “municipalities”, is responsible for the management of local community based services: water supply and sewerage, collection and household waste treatment, culture, urbanism, local road network, social welfare, school upkeep, etc. The countries with the highest average number of inhabitants per municipality are the United Kingdom (more then 130 000), Ireland (47 200), Portugal (36 000), the Netherlands (31 500) and Sweden (30 700). In the European Union, there is an average of 5 200 inhabitants per municipality.

In most countries the second local government tier is generally responsible for road network, education, social welfare (the disabled, child care, etc.) and for environmental protection. In countries with two-tier local government system the second local govern-ment tier is generally responsible for sectors such as local development and country planning, generally the responsibility of regional local governments in countries with a threetier local government system. In countries with a three-tier local government system, the position of the second local government tier varies from one country to another. French departments have more extensive responsibilities than Spanish provinces, which only have a li-mited number of responsibilities and which continue to lose ground to the increasingly po-werful third local government tier. The third local government tiers generally have responsibilities in country planning, economic development, vocation training, transport, education and health. In Ireland, the regional local government responsibilities are less extensive than in other countries with a three-tier local government system; Irish regional authorities are mainly responsible for the coordination of local public services and the management of the European Union structural funds. Italian and Spanish regions differ from the third-tier local governments in other countries by both having legislative powers an by being responsible for more or less extensive responsibilities, depending on the region geographical, cultural or historical particularities [ 2] .

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