2002 OECD Economic Surveys: Slovak Republic 2002

image of OECD Economic Surveys: Slovak Republic 2002

This 2002 edition of OECD's periodic reviews of the Slovak economy  examines recent economic developments, policies, and prospecdts and includes special features on addressing high unemployment and on enhancing market forces.

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Enhancing Market Forces

The policies during the 1990s aimed at establishing a market-based economy failed to generate fully the expected gains in efficiency. Two waves of privatisation of state-owned enterprises increased the private sector's share of output to 80 per cent by 1998. However, the performance of enterprises and financial institutions was disappointing, as reflected in an increased number of loss-making enterprises, mounting non-performing loans, arrears to tax authorities and declining employment. The weakness of the banking system, which was primarily stateowned and subject to political interference, was a major factor in these problems. Indeed, non-performing loans amounted to a third of their loan portfolios, implying that much of Slovakia's high level of investment was not used productively. In addition, the institutional requirements for a market-based economy, such as bankruptcy procedures, the corporate governance framework, the commercial code and the judicial system, proved to be inadequate. Furthermore, the exclusion of foreigners from the privatisation process limited inflows of management expertise and technology....

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