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The Business Environment
Index
Since 2001 the Business Alliance of Slovakia
(PAS) quarterly monitors and evaluates the quality of
business environment in Slovak Republic by its own Business
Environment Index (BEI).
Through BEI one can track the overall
development of the business environment in Slovakia
and also partial changes in quality of particular components
of the business environment, e.g. changes in government's
economic policy, efficiency of public institutions,
legislation, infrastructure, etc. BEI is based on results
of regular surveys among managers, who (based on their
own experience) evaluate current development in monitored
segments of business environment.
Ambition of PAS is that BEI would become
reliable barometer for monitoring business environment
in Slovakia. Its founders hope that it will be an inspiration
for policy makers to make proper decisions. In 2007,
the index's first category evaluating the quality of
regulation and legislation became one of progress indicators
in National Reform Programme of the Slovak Republic
approved by the Slovak government.
The quality of business environment
in Slovakia continues to worsen in the 2nd quarter of
2010
In the second quarter of 2010 the Business
Environment in Slovakia has worsened again. Current
value of Business Environment Index, which is prepared
by the Business Alliance of Slovakia on the basis of
results of its own survey, is 91.5 points, which represents
a decrease by 2.61% in comparison with the previous
period. Value of index is lower than the reference level
of 100 points since the last quarter of 2009. This perceived
downgrade of business conditions reflects negative effects
of crisis on business and also insufficient government
activities against crisis and against business barriers.
The biggest decrease in the second quarter
of 2010 recorded the item "Law enforcement, judicial
effectiveness". This field has been one of most
criticized over a long period of time. In this quarter
the rating decreased by significant 9.47% to current
value 23.2 points. Entrepreneurs complain mostly about
duration of judicial proceedings, performance of judicial
decisions, insufficient competency and neutrality of
judges. They would appreciate an increase in requirements
on moral behaviour of judges. Still more entrepreneurs
are concerned about low efficiency of creditor protection
which is indicated by low success in enforcement of
claims.
The second biggest fall assigned entrepreneurs
to the item "Efficiency of state economy and access
to the state aid" that dropped by 8.91% to current
value 30.0 points. Through this item entrepreneurs rate
the efficiency and fairness of the financial state aid
to private business enterprises and also effectiveness
of state expenditures. In spite of negative impact of
the crisis on tax revenue, the government has not re-evaluated
expenses of the state budget yet and has not implemented
radical expenditure cuts in all budget sections either.
The result of this inactivity is a major increase of
the state debt, which leads not only to decline of the
state credibility, but also threatens the long-term
tenability of public finances.
The third largest decrease in comparison
with the previous quarter was assigned to the "Corruption
in public institutions", with a decrease of 8.19%
to current value 31.7 points. Entrepreneurs once again
highlighted the high and growing level of corruption
in all levels of government in recent years. Entrepreneurs
fundamentally hamper lack of transparency and nepotism
at public procurement and tenders. In their view it
is almost impossible to get state contracts, respectively
EU funds without corruption.
Other chronic and still unsolved business
barriers recorded also very negative ratings. Except
the above mentioned poor law enforcement entrepreneurs
criticize payroll taxes legislation, and low comprehensibility,
applicability, stability of legislation. Affected by
crisis, entrepreneurs continue to have problems with
the deterioration of the financial discipline of business
partners. Access to financial resources is also more
difficult. All the above mentioned areas started to
decline slightly since the middle of 2008 and recorded
the major decrease at the beginning of the year 2009.
The good news is that in second quarter of 2010 entrepreneurs
reported first slight progress in profits, liquidity
and also cash flow in their companies.
The highest increase in comparison with
the previous quarter (+1.50%) achieved the item "Quality
and accessibility of primary inputs, labour force".
Rating grew up as a result of redundancy that increased
the supply of free qualified workforce. The second biggest
increase (+0.77%) achieved the item "Level of infrastructure
(transportation, telecommunications, etc)". The
third and also the last growing item (+0.36%) became
"Regulation of market entry/exit (licensing, certificates
and duties)".
The base date
for the initial BEI listing was the 1st of July 2001,
with the reference value of 100 points for each of 33
BEI components. The latest listing of BEI was the thirty-sixth
and was tracking the changes in the 2nd quarter of 2010.
Analyzing business environment gives answer to creators
of economic policy, where their effort is positive and
where it is useful to apply corrective actions. BEI's
results were used also by the OECD in Economic Surveys
about Slovakia and by the Ministry of Economy of the
Slovak Republic in its regular Business Environment
Report.
The Index consists
of three broad categories. The first category has 12
components and monitors the legislative and regulatory
developments in Slovakia, such as the business legislature,
tax-, contribution- and investment legislature, law
enforcement, market regulations and others. The second
one has 11 components and assesses the influence of
other external macroeconomic factors on businesses,
including price stability, exchange rate movement, fiscal
policy, the infrastructure standard, and so on. Finally,
the third category of the Index has 10 components and
tracks the member companies' own perception of their
immediate business prospects and relationships. Each
of the 33 items in the BEI has its own weight, so the
Index represents a weighted arithmetical average of
the changes in individual items.
This activity
is unique in the CEE countries. The BEI was inspired
by other indexes, though they mostly observe also quantitative
figures. PAS wanted to create a purely qualitative tool
to determine the changes in business environment. With
the help of BEI, now it is possible to track the changes
in business environment on a quarterly basis. It is
also easy to observe, how specific legislative initiatives
influence the Index. PAS can thus immediately evaluate
the impacts of adopted measures, and manifest the entrepreneurs'
point of view to the government actions.
Complete
results of BEI since 2001 till the 2nd quarter of 2010
(.xls format)
Archive:
Business
environment index in 4rd quarter of 2009
Business
environment index in 3rd quarter of 2009
Business
environment index in 2nd quarter of 2009
Business environment
index in 1st quarter of 2009
Business
environment index in 4th quarter of 2008
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