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8. 10. 2019 12:40

Prime Minister's speech at the conference Thirty Years of Growth

Prime Minister's speech at the conference Thirty Years of Growth, 8 October 2019.
Prime Minister's speech at the conference Thirty Years of Growth, 8 October 2019.
The conference, co-organized by the Financial Times, focused on assessing economic developments in Central and Eastern Europe after the fall of the Iron Curtain.

Excellencies, ladies and gentlemen,

I would like to thank you for the opportunity to speak at the annual conference called 30 years of growth, which is devoted like many other events these days to 30 years of our freedom, democracy, but first of all to 30 years anniversary of the beginning of our economic transformation. It was the economic and institutional transformation, which enabled private initiative, liberated and unlocked private interest, and thus enabled emergence of enterprise and entrepreneurs, markets and economic growth.

Overall, our economic transformation was successfull, we are a prosperous market economy, we are an active member of EU, one of the most integrated into the Single Market, successful globally we are members of NATO, which means that our security is guaranteed and we guarantee security of other members of NATO. More than ever are our living standards catching up with our partners in Western Europe. It is a major success given the fact, that 30 years ago we were integrated only to Comecon, our economy was too dependent on heavy industry, services were poor or non-existent, infrastructure heavily underinvested and economy almost 100 percent nationalized, which means that ownership was fully in state hands. In 1989 we were under the rule of a foreign empire. Our country, once known for its strong industry, was struggling, its landscape and nature destroyed, its political system unresponsive to the citizens.

But we managed to overcome these hurdles and re-join the community of democratic nations.

Mostly, we got back on track thanks to the efforts and good will of our citizens, small and large companies, entrepreneurs and employees.

Leaders of transformation – on the other hand - were responsible for many mistakes in the 90s. They refused advice of foreign experts, they did not realize, that we also need capital, not only change of property. We unfortunately wasted a lot of time and resources due to mistakes done by our inexperienced elite that could have learned from other countries. A lot has also been wasted because of pure incompetence and bad intentions, if not outright fraund

We can see it on an example of Skoda Auto, which was – unlike many other industrial companies – directly sold to Volkswagen. It has been a leader of our economy, directly responsible for 7 per cent of our GDP. It is a pity we did not sell more industries to foreign strategic owners like in case of Skoda.

After incompetent experimentation with the economy ended, we should have come with a proper regulation of capital markets. Governments should have started with a privatization of banks, not to end with it, because we lost hundreds of billions through fraudulent schemes and asset striping. The country should have simply translated legal system and codes servicing market economy from successful countries, apply the best practices from abroad and avoid unnecessary experiments. The country for instance implemented proper bankruptcy code seven years after it started to build a market economy.

We should not have privatized water utilities without having a chance to force the new owners to invest and maintain these networks properly.

But above all country was lacking plans for infrastructure development, our highways are still not finished, we have no bullet trains etc. The ideology that no plan is always better than a plan was bad and wrong. Lack of vision and lack of planning was to me the biggest failure of transformation.

Yet it is not to say that our transformation was not also very succesfull. The country created a whole new class of private entrepreneurs, who support themselves and their families, whole network of small and medium size entreprises and new successfull companies, which export to the rest of the world.

We have functioning institutions, such as an independent central bank, we have independent and professional courts, including the constitutional court.

When I took over like a finance minister in 2014, we had to work hard to improve our system of tax collection. We had to implement system of electronic tax surveillance; we had to fight a sophisticated system of deceits, tricks and organized crime in VAT collection. We had to introduce a whole new culture of taxpaying, which was basically non-existent in some sector of the economy like gastronomy. It was a huge, costly and uneasy political fight, I must admit, but in the end a successful one.

Main task for my government now is to send this successful economy to a whole new level , with a higher level of research and development, with higher added value, with higher level of innovation.

We a have a program and vision in this respect, it is called a Czech republic – Country for the Future, we have an ambition to become leaders of innovation in Europe very soon. We know very well that countries that support science, research and innovation – such as Finland, Switzerland and Denmark are the most successful countries globally and our ambition is to achieve the same, indeed overcome them. We have a very skilled and well educated labour force and within area of science we have a huge pool of scientists focused on artificial intelligence, nanotechnology and many others. We have successful technological companies and a global leader like Avast, so everyone can see that potential is here.

However, not everything is rosy. I am concerned for instance that our our very profitable financial sector contributes to under-investment because its huge dividends disappeach abroad every year.  We do not want to introduce sector tax and banking tax like some neighbouring countries. But the solution in my eyes is to introduce a National Investment Fund, where banks or energy companies and utilites will participate. We will introduce very soon a detailed National investment plan, which will direct investments into infrastructure, schools and start-ups.

For all of this we need a very stable fiscal environment, which my government is responsibly providing. Not only we safely fulfil the Maastricht criteria, but also our ratio of debt to GDP is decreasing. Our public finances are in perfect order and one of the best in Europe. And I am very proud of our success which will in my opinion enable the Czech economy to grow further in the next thirty years.

I wish this conference a success.

Thank you for your attention.

Andrej Babiš, Prime Minister

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