Keynote Speech — Ivan Miklos, Former Deputy PM and Finance Minister of Slovakia. 11th Annual Ukraine Investor Conference

Dragon Capital held its 11th Annual Ukraine Investor Conference on Feb. 17-18 in Kyiv. Despite the country’s tense security situation and economic challenges predictably affecting investor sentiment, the conference was attended by over 100 international investors as well as about 200 local investors and Ukrainian companies.

Below please find highlights from the keynote speech delivered by Ivan Miklos, Former Deputy PM and Finance Minister of Slovakia

Political leadership, ownership and transparency

• Political leadership and courage are the prerequisite to make reforms successful.

• The most important experience from CEE’s 25 years of transition is that countries that carried out comprehensive and radical reforms achieved the best results. In terms of convergence of GDP per capita to the EU-15 level over 2003-2013, the most successful countries were the Baltics, Poland and Slovakia — the average convergence progress in these five countries was +21%. This is much higher than 7% in Hungary and 3% in Slovenia, where reforms moved slower.

• Equally important are the ownership and transparency of reforms. Ownership means that the government should work in close cooperation with parliament and implement reforms not because of outside pressures applied by the IMF, other institutions and creditors, but because reforms are needed for the future of the country and its people. Transparency means openness in communication with people, including explaining what has to be done, why and how.

• Slovakia, Georgia, Latvia are the practical examples of proper ownership and radicalism of reforms. In 2004, Slovakia implemented a comprehensive and radical tax reform despite the IMF proposing moving forward with tax changes only gradually. This brought unexpectedly quick and positive results. Georgia had a similar experience with tax reform. Latvia opposed IMF recommendations to devalue its currency in 2008 and achieved macro stabilization through much more politically sensitive measures. It worked and Latvia has been the fastest growing economy in the EU since 2011.

Political process, implementation and other challenging issues

• The political process of reforms is one of the biggest challenges. On a positive note, Ukraine has a very competent and action-driven government including a unique mixture of young people with private sector experience. On the negative side, they lack the experience of communication and negotiation needed for a successful political process. Fighting corruption and establishing the rule of law are of key importance and priority, but one should not expect much from newly approved legislation, as implementation is crucial and is likely to be problematic. Slovakia was one of the most successful countries in many areas, but the rule of law there is still a problem.

• The most effective methods to fight corruption are deregulation, liberalization and privatization. Estonia has the lowest level of corruption among post-communist countries because it was one of the first countries to liberalize its energy market.

• The best way to strengthen the unity and sovereignty of a country is to make it successful economically. Slovakia has a substantial Hungarian minority and faced threats to its unity in 1999 due to the risk of being isolated from the EU integration process while Hungary was approaching the EU. This threat disappeared as Slovakia implemented reforms which raised the living standards of all its residents and made both Slovaks and Hungarians satisfied.

For more information please contact us at pr@dragon-capital.com

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