Dátum: 18.10.2005
The policy briefs summarized below cover five major reform areas that Central European countries have gone through in the last 15 years – social security, pensions, healthcare, taxes and business environment reforms. Briefs include a look at the reasons, objectives and strategies used, their advantages and disadvantages. Some of them also offer preliminary suggestions for running similar reforms in Ukraine.
What is the best way to reform social security systems and fight poverty? Miroslav Beblavy, the Slovak Labor Ministry’s state secretary starts off with two preconditions for successful poverty reduction – macroeconomic stability (resting on public finance reforms and anti-inflation measures) and sustainable economic growth. In his mind, the key objectives of any successful anti-poverty strategy should include raising the employment rate (rather than focusing only on the rate of unemployment), reducing absolute poverty (rather than relative one emphasizing inequality) and prevention of long-term poverty through increasing social mobility. The former can be helped by reforming the tax system (including strengthening the contribution-benefits link in social insurance) and increasing space for entrepreneurship by reforming banking sector, labor regulations and setting up clear property rights systems. The thrust of reforms aims to reclaim incentives to work for many people on social assistance, yet securing basic needs for the truly vulnerable – low-income children and middle- to old-age segments with little chance of reentering labor force due to poor skills.
Eugen Jurzyca and Peter Golias from Slovakia’s Institute for Economic and Social Reforms INEKO describe the latest pension system reforms in Slovakia. The country’s reformers set up the three-pillar system which limits state pension system and introduces both mandatory and voluntary private pension accounts. The reforms seeks to strengthen the link between what insurees pay in and what they receive in the old age by excluding solidarity from the insurance and leaving it out to subsistence support paid from general taxation. The reform of the system aims to support the sustainability of the pension scheme against the negative trends of globalization, demography and labor market. At the same time it might encourage official employment (and decrease the size of the shadow economy), boost savings and ensure higher pensions than the current system offers.
More market-based arrangements need to be introduced into healthcare, and some Central European countries have already followed that path, argues in his brief on healthcare reforms the former Hungarian finance minister Lajos Bokros. The healthcare systems inherited from socialist times suffered from poor quality, unequal access and constant shortages. Although the first healthcare reforms included privatizing general practitioners’ businesses and enabling entry of private capital into medical establishments, the financing and bulk of healthcare providers remained under state control. Runaway debts and corruption have continued to plague the sector. Separating solidarity (basic minimum services) and introducing multi-pillar financing, including private insurance, as Slovakia has recently done, is a more sustainable way to manage healthcare and at the same time ensure quality services, according to Bokros. Decentralization and more competition between medical establishments are needed, too, he writes.
Unlike healthcare, Central European countries have carried out very similar reforms of their taxation systems. Maciej Grabowski from Poland’s Institute for Market Economics describes three major trends: shift from direct (income) taxes to indirect (consumption) ones, increase in some excise taxes due to EU membership obligations and increasing the range of tax exemptions and special rules. The last trend may yet be reversed, as the example of Slovakia shows. That is related to efforts to improve and simplify the tax administration. Decentralization in tax collection due to administrative reforms has also been a part of Central European reforms, with mixed results. Lowering corporate income taxes has become a main tool in competition for foreign investors. At the same time this forced the governments to start closing tax loopholes and exemptions. Ukraine may follow this example, argues Grabowski.
Jan Mladek, a member of the Czech parliament, looks at the importance of business environment reforms in putting economy on a sustainable growth path. He writes that governments need to focus on large firm privatization, attraction of foreign direct investment and creation of business-friendly environment for small and medium-sized enterprises. Mladek underlines the important role of FDI in restructuring former state-owned companies and its ability to find export markets. The governments should focus on tearing down the barriers to foreign trade, building infrastructure (telecom privatization, banking sector restructuring) for both local and foreign firms. Also, simplifying business legislation is a crucial precondition for creating a viable environment for small firms and entrepreneurs.