InstitutionsInfrastructureInnovation

Competitiveness Strategy

for the Czech Republic

Back to the Top2012-2020

Status quo

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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

What is holding us back?

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Institutionsthe inefficiency and corruption of the public sector is increasing, which places a burden on the private sector, particularly entrepreneurspublic services will become more expensive, while their quality will not improve

Infrastructurethe benefits arising from the CR‘s advantageous position in Europe are slowly fading awayregional imbalances are intensifying

Innovationthe role of the CR is being reduced to that of a passive supplier to other countries, slowing economic growth and sustainable developmentfalling standards in Czech education are starting to slow the economy and the competitiveness of the Czech workforce

What is holding us back?

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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 pillarsover 50 proposals for specific projectslinks to other policy documents

Cohesion policyExport strategyEnergy PolicyNational Reform Programme

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European Commission’s Recommendations

European Commission’s 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 StabilityLabour MarketEducationInstitutionsInfrastructureInnovation

Measures outlined in the Strategy are in accordance with recommendations proposed by the Commission.

COMPETITIVENESS STRATEGYPROJECTS

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Institutions

Today: one of the CR‘s weakest points (GCI 72nd place in 2010)Tools:

Professionalization of public sector servicesManagement under the magnifying glass (transparency of management of state property, „online budgets“)Facilitating access for citizens and entrepreneurs to public sector services through computerisationReinforcing 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

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

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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    

1. „Online budgets“ of public institututions¨2. Single web portal where all dispositions of

public property are to be made public. - Both systems interconnected with the treasury system of budegetary management

3. 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 InteriorSingle web portal with on-line budgets in 2012- Ministry of FinanceSingle web portal for dispositions of public property – 2012 - Ministry of FinanceSingle Collection Agency should start functioning at the beginning of 2014 (cooperation between ministries of Finance, Health and Labour and Social AffairsNew RIA metodology and introduction of CIA – 2012 Ministry of Interior

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Infrastructure

Today– slowdown in construction and maintenance, lack of links to the European transport networks, weakening energy security, slow development of information systemsTools:

Coordinated, cost-effective development of all modes of transport – i.e. road, rail, water and air, linking them to European networksIncreasing the competitivity of rail transport in relation to road traffic and to rail transport in neighbouring statesDevelopment of logistic systems (VLCs, optimisation of distribution processes)Quality management system for the maintenance and reconstruction of transport routes and high standards in transportCreating a State Energy Plan (SEP)Improving access to high-speed internet services

Vision: The country‘s competitiveness rises alongside the quality of its infrastructure

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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

Today: economic growth dependent on public spending and rising debt. The country‘s internal savings are declining alarmingly.Tools:

Act on budgetary disciplineNumerical fiscal rulesExchequerTaxes – a single collection pointA shift from taxing labour to taxing consumptionMinimising unnecessary exemptionsCreating a tax floorEarly warning system

Vision: an economy with healthy and flexible foundations

OECD Survey & Competitiveness Strategy

OECD CZTo 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

Today: the increasing financial strain on the system, caused by an aging population, medical advances and the increasing demands of patients and staffTools:

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 insurersRestructuring inpatient care (fewer acute cases, more follow-up and long-term care cases)More precise definitions of standard/luxury, conditions for care provisionPreventive measures, incentives for prevention

Vision: financially sustainable healthcare at a European level

OECD Survey & Competitiveness Strategy

OECD CZ

Definition of basic heathcare package

In line with the Strategy (project Patient’s 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 – 2013Implementation – 2013

Diversity of insurance plansAnalysis – 2012Implementation - 2013

Long-term caseChanging beds of acute care to long-term care – start 2012Establishing concept of health+social long-term - 2013

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Education

Today: Declining literacy of Czech pupils, obsolete and rigid system.Tools:

Improving the quality and availability of kindergartensAligning apprenticeships and professional undergraduate education more to the needs of employers, their greater involvement in professional trainingImproving 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 universitiesIncreasing the proportion of undergraduate students, particularly career-oriented degrees+ reducing the proportion of students taking masters degreesTuition fees with a system of universal loans with contingency repaymentPublic information system on higher educationEnhancing literacy, mathematical and financial literacy and soft skills

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

OECD Survey & Competitiveness Strategy

OECD CZIntroduction of the tuition fees in tertiary education accompanied bypublicly 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 morebenchmarking 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

Today: rigid labour market with a range of barriers and little mobilityTools:

A significant increase in the employment of people over 55 years of ageUnifying 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 jobsSupport for rental housingMotivating the less productive workforce to take up work, reducing the grey economy

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

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 2012Project „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 2013All measures concerning social affairs are subject to evidence based policies - continuously

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Financial Markets

Today: a conservative financial sector with local higher prices for servicesTools:

Reinforcing competition in the financial markets – removing unnecessary barriers:

Legislative barriers to IPOsIn 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

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

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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

Today:Production base for subcontracting to the EU market, without direct market knowledge or direct product distributionHigh degree of specialisation of exports and importsWeaker domestic sector, low level of innovation

Tools:Uniform data on the effect of legal regulations impacting businessesEco-auditMinimum capital requirements, greater accountability of statutory bodiesDevelopment of the BusinessInfo.cz portalAmendment to the Act on investment incentivesServices for innovative businessSingle Windows – single contact point for customsThe option of calculating the tax base from statements made for the IFRS

Vision: a favourable environment and service for business and commerce

OECD Survey & Competitiveness Strategy

OECD CZExploiting 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 2011-2020Act on business corporations (if approved by the Parliament) should come into effect at the beginning of 2014Project on measuring of administrative burden will be finished in 2013 and then the recommendations will be implementedEco-audit is running project which in 2 years intervals assesses the excessive burden of environmental measures on businessesCommon commencement dates will be set in 2012 for key government measures with impact on businesses

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Innovation

Status quo:Existing sources of growth (e.g. FDI) are gradually being depletedInnovation by companies outside the Czech RepublicDomestic 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 R&D 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 R&DInstitutional reform of the innovation ecosystem – clear definition of roles + strong central authority + dialog + interactionChanges in the evaluation of R&D institutions and programmes impacting funding – support for excellenceOptimising and developing support services of the technology transfer infrastructure

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

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Implementation Plan

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

Example of project card: services for innovative business

Each card has a clearly defined

coordinator

Each card has a clearly defined

coordinator

An overview of the specific measures

An overview of the specific measures

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Examples of goodpractice from abroad

Examples of goodpractice from abroad

Concrete objectiivesand standards of its

implementation

Concrete objectiivesand standards of its

implementation

Example of project card: services for innovative business

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Timetable for individual measures

with designed deadlines

Timetable for individual measures

with designed deadlines

Example of project card: services for innovative business

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Export Strategy

Vision: the development and diversification of exports as an engine of economic growth in the Czech RepublicToday: the lack of a high quality and dynamic pro-export strategyTools:

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 tradeCR representation abroad, with respect to its economic interestsCoordination of agencies and information sharing in pro-export activities (ICC, sectoral unions, CzechTrade, MIT and MFA, ČEB, 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 useFocus on hard investment projects and grants, but opportunities for soft projects and financial tools underusedToo 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 systemMajor reduction in the number of operational programmes and priority areasMajor simplication of the implementation structureSimulatneous release of funds from multiple OPStrengthening the role of intermediary bodies, increasing the rate of participation of beneficiariesIncreasing importance of non-subside suport tools, emphasis on return on investmentThe use of direct community programmes

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Timing of implementation - non-legislative actions

Innovation

Business

Financial markets

Labour market

Education

Healthcare

Macroeconomics

Infrastructure

Institutions0

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nelegislativní

Inovace

Podnikání

Finanční trhy

Trh práce

Vzdělávání

Zdravotnictví

Makroekonomika

Infrastruktura

Instituce

63 key non-legislative actions

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Timing of implementation - legislative actions

Innovation

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Financial markets

Labour market

Education

Healthcare

Macroeconomics

Infrastructure

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nelegislativní

Inovace

Podnikání

Finanční trhy

Trh práce

Vzdělávání

Zdravotnictví

Makroekonomika

Infrastruktura

Instituce

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

www.mpo.cz

Thank you for your attention.Any questions please?

International Competitiveness Department

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Ministry of Industry and Trade of the Czech RepublicNa Františku 32, Praha 1