Economic Growth Strategy: A Challenge for our Future Efficient Financial Flows and Institutional Environment: Description and Comments Petr Zahradník, EU Office, Česká spořitelna Prepared for a Seminar organized by the OECD, Paris, 11 January 2006

Review of national strategic issues Czech Republic is one of the countries currently preparing their strategic development documents that should both respect and contribute to the paradigm of the new Lisbon process. What is the possible character of our country´s national strategy based on the key European issues ?

Review of national strategic issues -It should concentrate on long term growth priorities; sound financial flows are one of the principal conditions of balanced economic development; -Another factor playing an important role in the area of economic wealth is institutional environment; -It is also impossible to achieve economic development without adequate infrastructure; -According to our past experience, education and human resources, together with research, development and innovations, create the most stable and prosperous growth environment.

Effective financial resources -In our opinion, it is possible to identify the following priorities in the areas of financial resources: -Acquisition of sufficient resources from the European Union and other international financial institutions; -Maximisation of foreign investments in the Czech Republic, including effective finalisation of privatisation of public assets;

Effective financial resources -Creation of conditions for efficient partnership between public and private sectors; -Effective allocation of commercial financial resources; -Cautious utilisation of public funds.

Acquisition of sufficient resources from the European Union and other international financial institutions Thanks to our accession to the EU, we are now able to take full advantage of its structural and cohesion policy. It is important to make sure that they are allocated to areas warranting the highest possible multiplication effect and that all available resources are fully utilised. Apart from that, we can also rely on various support instruments of international financial institutions.

Acquisition of sufficient resources from the European Union and other international financial institutions Maximisation of financial resources from Union´s funds and their allocation to the most desirable areas: The approved Union´s financial framework for 2007 – 2013 gives the Czech Republic a unique opportunity to maximise its absorption of EU funds; our position is approximately five times better than at present. All particular Operating Programmes and their priorities and measures should respect individual priority development areas of the Czech Republic. Apart from horizontal (cross-sectional) Operating Programmes focusing on further development of regions and towns, it is necessary to promote the Operating Programmes concentrating on the development areas warranting high multiplication effect, maximum added value, sectors with clear growth perspective and highly competitive sectors.

Acquisition of sufficient resources from the European Union and other international financial institutions Securing of sufficient funds to co-finance projects financed from the Union´s resources: No project may be completely funded only from the Union´s resources, co-financing from national sources is always required. Provision of resources for co-financing of individual projects from EU funds should be an absolute priority. Because its high multiplication and limited amounts of public finances, EU programmes should be given priority over domestic programmes. It is also necessary to create conditions more extensive participation of private funds in co- financing.

Acquisition of sufficient resources from the European Union and other international financial institutions Promotion of Utilisation of Funds from Community Programmes: Czech subjects can also take advantage of other funds than those related to the Union´s structural and cohesion policy. The so-called direct Community programmes offered by individual departments of the European Commission represent a smaller, yet not negligible resource of funds.

Maximisation of direct investments and effective finalisation of privatisation of public assets Maintenance of the amount of direct foreign investments: Massive influx of direct foreign investments was the main source of economic growth, new jobs and improvement of trade balance in the past years. Other positive effects include increase of qualification, skills and know-how.

Maximisation of direct investments and effective finalisation of privatisation of public assets Change of Allocation of Direct Foreign Investments to Individual Sectors. Finalisation of Privatisation of State Corporate Assets.

Creation of suitable environment for effective PPP Adoption of legislation. Provision of institutional support for PPP projects. Effective regulation of obligations resulting from PPP. Selection of suitable PPP projects. Use of PPP for co-financing purposes.

Effective allocation of commercial financial resources Development support of organised capital markets. Promotion of private equity and venture capital.

Cautious utilisation of public resources More particular allocation of public funds. Radical change of education, healthcare and pension funding. Closer correlation between public expenditures and revenues.