To: Günter Verheugen, Member of the European Commission, Mario Monti, Member of the European Commission, Maria Kadlecikova, Deputy Prime Minister, Pal Csaky, Deputy Prime Minister, Ivan Miklos, Deputy Prime Minister, Eduard Kukan, Minister of Foreign Affairs, Jan Figel, State Secretary of Ministry of Foreign Affairs, Eneko Landaburu, Director-General, Enlargement DG, Alexander Schaub, Director-General, Competition DG
October 14, 2002
Dear commissioners, dear members of the Slovak Government, dear Directors-General Let us address you once again in relation to the negotiation between the European Commission (EC) and the Government of the Slovak Republic concerning the Competition Chapter.
Under the present circumstances, we regard this as the last attempt, before the closure of the chapter, to resolve the serious problems that we have pointed out in our „Position Paper on the Chapter Competition Policy” of February 2002 (which you have received from us). We find the behaviour of both the EC and the Slovak Government regarding the negotiations on the Chapter on Competition, one of the most important chapters in the entire pre-accession process surprising for the following reasons:
1) The negotiations have been conducted in a non-transparent manner and without any involvement of and control by the public, and
2) The Slovak Government and the EC take bureaucratic and formalistic approach to the process of harmonisation of economic legislation and policies in Slovakia with the competition principles as applied in the EU.
Being a non-governmental organisation, we have used all the previous possibilities, provided by the existing system, to eliminate all serious system deformations of the business environment, introduced into practice by the legislation which gives unfair privileges to large foreign companies to the detriment of small and medium local entrepreneurs and regional development. We have been repeatedly pointing out the deficiencies in the legislation and its practical application in the granting of state aid, and proposing measures for elimination of such deficiencies. We were not alone in our initiative, many other non-governmental organisations, as well as a significant portion of international institutions and professionals, share similar opinion. During the preparation of the draft bills related to provision of the unjustified state aid to private companies (such as Act on Support of Foundation of Industrial Zones, Act on Investment Incentives, and amendment of the Income Tax Act), we were already pointing out the need for equal treatment of all entrepreneurs as recipients of state aid. In addition, we were presenting specific proposals to prevent the non-transparent funnelling of public funds in favour of large foreign corporations and to create effective mechanisms for development of marginalized regions, transparency in provision of public subsidies and improvements in supervision instead. Our comments were ignored and the acts were adopted in the wording as drafted by the Government. After the approval of the above acts, we have been monitoring their implementation. We have been repeatedly notifying the Slovak Government and the EC of the serious violations of the state aid rules, however, the relevant institutions did not pay any attention to our notifications. After we have adverted to the surprising statements of Government representatives, who claimed that they would strive to preserve the illegal and unfair privileges, especially the tax breaks, for as long as possible, in spite of the contradiction with the Association Agreement, and that the Slovak Government will compensate the beneficiaries of these illegal and unfair privileges for eventual elimination thereof by other forms of state aid in the same amount, we were shocked by the reaction of the EC representatives, according to whom the proposal for “conversion” of tax breaks was raised by the EC. In March 2002, we have presented the Slovak Government and the EC with an analysis of the systemic and personnel deficiencies of the State Aid Office (SAO). In many cases (also confirmed by government audits) we have documented that this institutions, which should supervise the compliance of state aid with the law, suffers from serious problems, due to which it cannot fulfil its main functions – assessment, evaluation and control of state aid – and in a number of cases, SAO even became the means for approving state aid in contradiction with the law. We have pointed out these deficiencies to the Slovak Government and the EC and proposed specific solutions again. In spite of the fact that the Slovak Government has confirmed, through the Deputy Prime-Minister Maria Kadlecikova, that our objections were legitimate, it did not take any practical steps for improvement. While we were awaiting the pro-active reactions and specific steps as indicated by the EC General Director for Enlargement - E. Landaburu – in his reply to our petition, the Slovak Government and the EC, quietly and in isolation from any public discussion, have agreed that it was necessary to speedily close the negotiations on the Competition Chapter. This was ultimately confirmed by E. Landaburu, in his recent statement for the media, claiming that the Competition Chapter will be closed before 24 October 2002. This means that all previous attempts to point out the deficiencies in the legislation and its practical implementation had no effect. As non-governmental organisations, we regarded the pre-accession negotiations as an opportunity to help and guide candidate countries towards better application of the principles applied in the EU, and to actively involve opinions of the public in the discussion about possible changes and improvements in individual areas of the pre-accession negotiations. However, the reality has brought serious disillusion. During the entire process, lasting several years, neither the EC nor the Slovak Government have shown any active interest in consulting the public. All steps taken by both parties were only the business of bureaucrats and politicians, and neither concerned citizens nor experts of the non-governmental organizations have had any possibility to contribute with their suggestions to these negotiations. Such closed and non-transparent negotiations reduce the legitimacy of the results reached and undermine the confidence in the entire accession process. Please regard this letter as the last attempt of civic organisations to contribute to necessary changes in the rules and policies regulating competition and state aid. In any case, we will continue to monitor the steps of the Slovak Government and the EC in the field of state aid and we wish to believe that we will obtain explanation of the previous approach of both sides and specific steps guaranteeing higher transparency, efficiency and purposefulness of the state aid granted by the Slovak Republic.
Again, we offer our cooperation to the Slovak Government.
With the best wishes, Roman Havlicek CEPA/FoE-S project manager