Competitiveness Strategy for the Czech Republic

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Competitiveness Strategy for the Czech Republic
Back to the Top 2012-2020
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Status quo
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What is holding us back?

• Slowdown in productivity growth
• Economic growth based on external debt
• Inefficient institutions, excessive regulation
  and corruption
• Large internal debt and incomplete transport
  infrastructure
• Reforms are needed simply to maintain our current
  position

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What is holding us back?

• Institutions
• the inefficiency and corruption of the public
  sector is increasing, which places a burden on
  the private sector, particularly entrepreneurs
• public services will become more expensive, while
  their quality will not improve
• Infrastructure
• the benefits arising from the CRs advantageous
  position in Europe are slowly fading away
• regional imbalances are intensifying
• Innovation
• the role of the CR is being reduced to that of a
  passive supplier to other countries, slowing
  economic growth and sustainable development
• falling standards in Czech education are starting
  to slow the economy and the competitiveness of
  the Czech workforce

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Objective of the competitiveness strategy

• By 2020, the CR will be one of the 20 most
  competitive economies in the world
• Vision
• high and sustainable standard of living based on
  a solid foundation of competitiveness

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How do we achieve this goal?

• nine key pillars
• over 50 proposals for specific projects
• links to other policy documents
• Cohesion policy
• Export strategy
• Energy Policy
• National Reform Programme

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European Commissions Recommendations

• European Commissions June 2011 evaluation of
  National Reform Programme 2011 and Convergence
  Programme of the Czech Republic.
• Deficiencies identified by the Commission are
  addressed in the pillars
• Macroeconomic Stability
• Labour Market
• Education
• Institutions
• Infrastructure
• Innovation
• Measures outlined in the Strategy are in
  accordance with recommendations proposed by the
  Commission.

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Competitiveness StrategyProjects
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Institutions

• Vision efficient and non-corrupt public
  institutions providing quality services to
  citizens and entrepreneurs

• Today one of the CRs weakest points (GCI 72nd
  place in 2010)
• Tools
• Professionalization of public sector services
• Management under the magnifying glass
  (transparency of management of state property,
  online budgets)
• Facilitating access for citizens and
  entrepreneurs to public sector services through
  computerisation
• Reinforcing the assessment of regulatory impacts
  and corruption risks including their position
  vis-a-vis European legislation, and improving
  citizens access to the law - e-Sbírka
  (e-collection of laws)
• Electronic arbitration proceedings and other
  tools to speed up law enforcement

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OECD Survey Competitiveness Strategy
OECD CZ
Further development of e-government initiatives Project Improving access to the public services contains various measures in the area of e-government.
Budgetary reforms, improvements in budgetary transparency, rigorous ex ante and ex post scrutiny       Online budgets of public institututions Single web portal where all dispositions of public property are to be made public. - Both systems interconnected with the treasury system of budegetary management Modern financial controlling, main focus on ex ante control
Overhaul of of public procurement practices Maximum possible publicity, overhaul in monitoring and control, electronization of the process
Swift implementation of the plans to integrate the collection of taxes, customs and social security contributions. Establishing the Single Collection Agency one institution dealing with all the fees into public budgets.
Obverhaul of RIA strenthening of consultations, more stringent screening   New metodology, implementation of CIA, independent screening body, extending RIA to parlamentary phase of lawmaking
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Implementation Plan

• E-government basic registers should start to
  operate in 2012 Ministry of Interior
• Single web portal with on-line budgets in 2012-
  Ministry of Finance
• Single web portal for dispositions of public
  property 2012 - Ministry of Finance
• Single Collection Agency should start functioning
  at the beginning of 2014 (cooperation between
  ministries of Finance, Health and Labour and
  Social Affairs
• New RIA metodology and introduction of CIA
  2012 Ministry of Interior

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Infrastructure

• Vision The countrys competitiveness rises
  alongside the quality of its infrastructure

• Today slowdown in construction and maintenance,
  lack of links to the European transport networks,
  weakening energy security, slow development of
  information systems
• Tools
• Coordinated, cost-effective development of all
  modes of transport i.e. road, rail, water and
  air, linking them to European networks
• Increasing the competitivity of rail transport in
  relation to road traffic and to rail transport in
  neighbouring states
• Development of logistic systems (VLCs,
  optimisation of distribution processes)
• Quality management system for the maintenance and
  reconstruction of transport routes and high
  standards in transport
• Creating a State Energy Plan (SEP)
• Improving access to high-speed internet services

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Implementation Plan

• Majority of measures proposed in the area of
  transport infrastructure will be implemented in
  medium or long time horizon. By 2025 the quality
  of road, rail, air and water transport should
  improve substantially.
• New concept of State Energy Plan (SEP) will be
  elaborated by the end of 2011.
• Better availability of broadband Internet access
  in less populated and accessible areas will be
  ensured by 2015.

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Macroeconomic Stability

• Vision an economy with healthy and flexible
  foundations

• Today economic growth dependent on public
  spending and rising debt. The countrys internal
  savings are declining alarmingly.
• Tools
• Act on budgetary discipline
• Numerical fiscal rules
• Exchequer
• Taxes a single collection point
• A shift from taxing labour to taxing consumption
• Minimising unnecessary exemptions
• Creating a tax floor
• Early warning system

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OECD Survey Competitiveness Strategy
OECD CZ
To achieve a structural balance close to zero - reforms to the budgetary process, improvements in budgetary transparency the speedy implementation of plans to shift to a treasury system of budgetary management. We propose to adopt numerical fiscal rules system of exchequer strengthening of the budgetary procedural rules.
Shifting the tax burden onto less distorting taxes focus on indirect taxes, particularly consumption and property taxes, rather than direct taxes on labour and capital income. A shift from taxing labour to taxing consumption.
The real estate tax should be increased by raising tax rates. We propose to increase the real state tax rate.
The two-tier VAT should be reviewed and VAT should be levied at a unified rate, with exceptions and exemptions reduced to a minimum. Gradual approximation of VAT rates.
Eliminating other distortions in the taxation of labour and capital corporate income tax and dividend tax should be revised to reduce the disparities between the tax treatment of different sources of investment finance. Minimising unnecessary exemptions.
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Implementation Plan

• Majority measures in the project Financial
  supervision sustainable public finance will be
  implemented by the end of 2012.
• Measures in the project Competitive tax system
  should be realized 2011-2013.

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Healthcare

• Vision financially sustainable healthcare at a
  European level

• Today the increasing financial strain on the
  system, caused by an aging population, medical
  advances and the increasing demands of patients
  and staff
• Tools
• Rationalise purchases of medical equipment and
  pharmaceuticals (bulk purchases in the form of
  electronic auctions, access to generic drugs,
  centralised prescriptions)
• Streamline financing (transition to pre-payments,
  coordination of care between providers, sharing
  health records)
• Real competition between healthcare insurers
• Restructuring inpatient care (fewer acute cases,
  more follow-up and long-term care cases)
• More precise definitions of standard/luxury,
  conditions for care provision
• Preventive measures, incentives for prevention

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OECD Survey Competitiveness Strategy
OECD CZ
Definition of basic heathcare package In line with the Strategy (project Patients Ties to Health)
Increase in the diversity of insurance products In line with the Strategy (project Increased Efficiency of the Functioning of Health Insurance Funds)
Reaction on population ageing In line with The Strategy (project Bed-care Restructuring)
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Implementation Plan

• Luxury package
• Definition 2013
• Implementation 2013
• Diversity of insurance plans
• Analysis 2012
• Implementation - 2013
• Long-term case
• Changing beds of acute care to long-term care
  start 2012
• Establishing concept of healthsocial long-term -
  2013

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Education

• Vision Education as an engine of future economic
  and social development. Schools as preparation
  for life in an environment of dynamic change

• Today Declining literacy of Czech pupils,
  obsolete and rigid system.
• Tools
• Improving the quality and availability of
  kindergartens
• Aligning apprenticeships and professional
  undergraduate education more to the needs of
  employers, their greater involvement in
  professional training
• Improving the quality of schools (introducing
  standardisation, evaluation, changing the role of
  the CSI)
• Changing the system of accreditation, the system
  of evaluating research and development at
  universities
• Increasing the proportion of undergraduate
  students, particularly career-oriented degrees
  reducing the proportion of students taking
  masters degrees
• Tuition fees with a system of universal loans
  with contingency repayment
• Public information system on higher education
• Enhancing literacy, mathematical and financial
  literacy and soft skills

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OECD Survey Competitiveness Strategy
OECD CZ
Introduction of the tuition fees in tertiary education accompanied by publicly guaranteed student loans. Part of the Strategy (project on tertiary education)
In tertiary education stronger linking of funding to output and quality indicators. Part of the Strategy (project on tertiary education)
Plans to support student jobs. Part of the Strategy (project on tertiary education - changes in legislation on employment of students in order to make it easier and cheaper for employers to employ students)
A need for more benchmarking of schools and students. Part of the Strategy (project on elementary and secondary education to introduce standards of quality result of education, define standards clearly and establish responsibility for non/fulfilment)
Avoiding elitarism in secondary education Part of the Strategy (project on elementary and secondary education to support socially disadvantaged pupils)
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Implementation Plan

• Project Increasing quality and availability of
  preschool education 2013
• Elementary and secondary education reforms 2015
• Tertiary education reforms 2020
• Project Changes in curriculum - 2016

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Labour Market

• Vision a flexible labour market to facilitate
  the efficient use of human resources.

• Today rigid labour market with a range of
  barriers and little mobility
• Tools
• A significant increase in the employment of
  people over 55 years of age
• Unifying the activities and simplifying the
  administrative agenda of public authorities
  (unifying benefits)
• Increasing the employment of women with young
  children (pre-school education)
• Significantly facilitating access to highly
  educated foreigners (basic change to the policy
  on aliens)
• Increasing the offer of part-time jobs
• Support for rental housing
• Motivating the less productive workforce to take
  up work, reducing the grey economy

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OECD Survey Competitiveness Strategy
OECD CZ
To support parents in returning to labour market Part of the strategy project Reconciliation of family life and job career (various instruments for parents "child groups" encouraging employers to offer part-time)
Encouraging the labour mobility Part of the strategy project Increasing the availability of rental housing (analysis of rental housing market and setting- up the instruments to correct the differencies between the offer and the demand)
To decrease a long-term unemployment Part of the strategy project Labour market development (changes in employment policy cooperation between Labour office and employment agencies)
Social benefits policy should be coordinated systematically. Systematic analysis of interactions due to the change of policies should be done. Part of the strategy project Establishing the point of single payments (unification of social benefits, unification af administration)
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Implementation Plan

• Majority of the measures will be implemented by
  the end of 2012
• Project Increasing the availability of rental
  housing has two main phases thorough analysis
  of the market and finding and implementing
  appropriate measures by the end of 2013
• All measures concerning social affairs are
  subject to evidence based policies - continuously

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Financial Markets

• Vision a financial sector that supports the
  competitiveness of the Czech economy

• Today a conservative financial sector with local
  higher prices for services
• Tools
• Reinforcing competition in the financial markets
  removing unnecessary barriers
• Legislative barriers to IPOs
• In the implementation of legislation
  strengthening creditor rights
• Creating seed funds to create new, progressive
  companies (key role for the CMGDB)
• The predictability of key policies and
  sustainability of the reforms adopted

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Implementation Plan

• Verification of the functioning of the existing
  regulatory environment e.g. legal procedures
  weakening the rights of creditors
• Removal of the obstacles preventing companies
  from accessing financial markets - IPOs
• The Czech-Moravian Guarantee and Development Bank
  (CMGDB) as institution for implementing
  innovative financial engineering instruments
• The Seed Fund project with a positive impact on
  the structure of the economy

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Effective market for goods and services

• Vision a favourable environment and service for
  business and commerce

• Today
• Production base for subcontracting to the EU
  market, without direct market knowledge or direct
  product distribution
• High degree of specialisation of exports and
  imports
• Weaker domestic sector, low level of innovation
• Tools
• Uniform data on the effect of legal regulations
  impacting businesses
• Eco-audit
• Minimum capital requirements, greater
  accountability of statutory bodies
• Development of the BusinessInfo.cz portal
• Amendment to the Act on investment incentives
• Services for innovative business
• Single Windows single contact point for customs
• The option of calculating the tax base from
  statements made for the IFRS

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OECD Survey Competitiveness Strategy
OECD CZ
Exploiting the opportunity created by implementation of the EU services directive to further open up entry in services Providing quality information relevant for starting up and running business (Development of BusinessInfo.cz portal)   Providing assistance and advise to entrepreneurs (Development of Single Assistance System)
Comparatively high business start-up procedures The capital requirements fot limited liability companies will be decreased and there will be a possibility of strating a company with only a symbolic amount of registered capital.
Need for reducing the regulatory burden on businesses The project on measuring and follow-up abolition of administrative burden on businesses. There will be ongoing eco-audit aimed at excessive environmental regulation. The common commencement dates of government decrees will improve the legal awareness among businesses.
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Implementation Plan

• Improvement of services for entrepreneurs (eg.
  Development of BusinessInfo.cz portal) should be
  realized by 2013.
• Services for innovative business - services for
  the commercialisation and internationalisation,
  services to support technology transfer and the
  greater use of patent protection realization
  2011-2020
• Act on business corporations (if approved by the
  Parliament) should come into effect at the
  beginning of 2014
• Project on measuring of administrative burden
  will be finished in 2013 and then the
  recommendations will be implemented
• Eco-audit is running project which in 2 years
  intervals assesses the excessive burden of
  environmental measures on businesses
• Common commencement dates will be set in 2012 for
  key government measures with impact on businesses

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Innovation

• Vision Innovation as a source of future
  prosperity for the Czech Republic

• Status quo
• Existing sources of growth (e.g. FDI) are
  gradually being depleted
• Innovation by companies outside the Czech
  Republic
• Domestic innovation is being hindered by the
  absence of non-technical skills, a low level of
  cooperation of academia with companies
  (innovations are formed in companies, not in
  institutes or academic organisations)
• The system of evaluation and financing of RD
  does not support excellence
• Tools
• Identification of the key technological areas of
  the Czech Republic on the basis of foresight
  prioritising support for innovation and RD
• Institutional reform of the innovation ecosystem
  clear definition of roles strong central
  authority dialog interaction
• Changes in the evaluation of RD institutions and
  programmes impacting funding support for
  excellence
• Optimising and developing support services of
  the technology transfer infrastructure

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Implementation Plan

• Institutional reform of the innovation ecosystem
  (strong cenral authority definition of roles)
  analysis, discussion and legislation changes,
  realization 2011-2013
• New system of evaluation of RD institutions
  impact on funding (support of excellence)
  realization 2011-2012
• Identification of key enabling technologies for
  the CZ in order to prioritize the RDI support
  (based on foresight) realization 2011-2013

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Example of project card services for innovative
business
Each card has a clearly defined coordinator
An overview of the specific measures
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Example of project card services for innovative
business
Examples of good practice from abroad
Concrete objectiives and standards of its
implementation
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Example of project card services for innovative
business
Timetable for individual measures with
designed deadlines
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Export Strategy

• Vision the development and diversification of
  exports as an engine of economic growth in the
  Czech Republic
• Today the lack of a high quality and dynamic
  pro-export strategy
• Tools
• The creation of a Pro-export strategy for the
  Czech Republic for the period from2012-20 and its
  close links to the Competitiveness Strategy of
  the Czech Republic.
• Lobbing for better conditions for international
  trade
• CR representation abroad, with respect to its
  economic interests
• Coordination of agencies and information sharing
  in pro-export activities (ICC, sectoral unions,
  CzechTrade, MIT and MFA, CEB, CMDGB and
  commercial banks, EGAP)
• Modern state services (market research, business
  and market intelligence, following trends)
• Facilitating visas for trade purposes

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Cohesion Policy

• Vision a competitiveness strategy and cohesion
  strategy going in the same direction.
• Today
• 2007-13 the most money per capita paid out by the
  EU, but the Czech Republic has little success in
  its use
• Focus on hard investment projects and grants, but
  opportunities for soft projects and financial
  tools underused
• Too many operational programmes and priorities,
  redistribution mechanism
• Tools
• Concentrating the cohesion policy on the quality
  of the business environment, on completing
  infrastructure projects, the labour market and
  the education system
• Major reduction in the number of operational
  programmes and priority areas
• Major simplication of the implementation
  structure
• Simulatneous release of funds from multiple OP
• Strengthening the role of intermediary bodies,
  increasing the rate of participation of
  beneficiaries
• Increasing importance of non-subside suport
  tools, emphasis on return on investment
• The use of direct community programmes

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Timing of implementation - non-legislative
actions
Innovation Business Financial markets Labour
market Education Healthcare Macroeconomics Inf
rastructure Institutions
63 key non-legislative actions
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Timing of implementation - legislative actions
Innovation Business Financial markets Labour
market Education Healthcare Macroeconomics Inf
rastructure Institutions
71 key legislative actions
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What is next?

• The recently restored Government Council for
  Competitiveness and an Information Society will
  oversee its implementation
• Ministry of Industry and Trade will report
  progress of the implementation to the Government
  every six month

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• International Competitiveness Department

• Ministry of Industry and Trade of the Czech
  Republic
• Na Františku 32, Praha 1