By the publication of the English version of the article (slightly shortened) I am fulfilling my promise to the non-Czech participants of the special panel session on the functioning of institutions at the conference „The Czech Republic´s Strategy for Competitiveness 2015“, international students as well as foreign officials and businessmen who continue to ask me a question (which they fail to understand) why is the Czech political elite not working towards the improvement of the functioning of institutions if it is evident that it represents a key impediment hindering the competitiveness and development of their own country.

Last week the University of Economics in Prague hosted an important conference of the competitiveness of the Czech Republic. Mr. Nicholas Davis, head of the section for Europe of the renowned World Economic Forum (WEF) conveyed there a great message. After 5 years of sliding in the WEF country competitiveness ratings, according to the 2014-2015 competitiveness report Czech Republic went up by nine places rising from 46th to 37th place… just ahead of Azerbaijan (38th place). Fantastic, so we’ve outdone Azerbaijan - I wonder how little can sometimes make one’s day.

Any enterpreneur has to make regular analysis about issues which harm her competitiveness. Let’s do the same. Which are the weakest points of the Czech Republic according to the WEF competitiveness report? It is the functioning of institutions where the Czech Republic ranked 76th. In the WEF report the category of functioning of public institutions was divided in several subdisciplines. In most of them the Czech performance was briliant: 70th place in irregular payments and bribes, 98th place in diversion of public funds, 99th place in transparency in policy making, 106th place in favoritism in decisions of public officials and 138th place in the discipline public trust in politicians (out of 144 countries).

Frankly, these results are hardly surprising. The discussion in the dedicated conference panel focusing on institutions was gloomy, occasionally tempered by black humour. It is clear that the Czech Republic cannot improve its competitiveness without improving functioning of its public instiutions. At the same time, it is obvious that the alliance of politics, business and state administration is so robust that it prevents an effective remedy. The series of anti-corruption laws promised before the last elections is getting through in severe pains and often in the form which minimises their possible positive effects on the functioning of public institutions. Thus, by their latest efforts the Czech politicians are not saying to its citizens and to the outside world anything else than „we are intensively working against the improvement of competitiveness of our country.“

Malfunctioning institutions not only harm competitiveness, but also damage the reputation of the Czech Republic abroad. When the Czech Republic was preparing its entry into NATO, one of the conditions it had to fulfill was the creation of the National Security Bureau. The purpose of this Bureau was to scrutinise persons coming into contact with secret information. The Bureau should have prevented penetration of persons connected with organised crime to state institutions, espionnage activities etc. However, after several years of functioning it delivered exactly the opposite result. The Bureau itself got engaged in the traffic of security certificates in an organised crime environment. Only a strong pressure from NATO officials helped to bring it back on track to serve the objective for which it had originally been established.

In 2004 the Czech Republic entered the European Union. Substantial amount of funds started to flow in to the country to support its development on national as well as regional level. In this context EU demanded that the Czech Republic adopts certain measures which would prevent that the granted funds (provided by taxpayers of other EU countries) would not end up in black holes of political corruption, organised crime or financing of terrorist groups. The creation of an independent Financial Analytical Authority capable of dealing with these issues was supposed to be one of such measures. Still, the Czech Republic was the last EU country to establish such authority without guaranteeing its independence. Being subject to the Ministry of Finance this authority became an instrument which was used against political rivals and has remained under political influence which can direct its activities.

Furthermore, the Czech Republic was supposed to institute an independent audit office which would control the accuracy and effectiveness of the use of EU subsidies. Until 2012 this audit office lacked independence and, thus, was not able to exercise an effective surveillance. The remedy came only after the well-known scandals with the misuse of EU funds in northern and western Bohemia and the subsequent intervention of the European Commission which for certain time suspended disbursements of EU money to the Czech Republic.

Finally, the Czech Republic was obliged to put in place the Civil Servant Act which would professionalise its civil service and would remove it from undue political influence. The Civil Servant Act was adopted already in 2002 but has never been applied. At this moment in 2014 we are the only country which does not a Civil Servant Act in force. Under the pressure of the EU and with the knowledge that EU funds could be cut the works on the preparation of a new version of the Civil Service Act which would abolish the existing one which has never been enforced were restarted. If we add - to these complexities which are already very difficult to grasp for many outsiders - the way in which the “new” Civil Service Act was adopted – president forcing the first reading followed by a complex modification, subsequent obstructions of the opposition paralysing the Chamber of Deputies finalised by a political “agreement” to mutilate the proposal – we would have a perfect theme for a novel of Franz Kafka. As a result, instead of creation of a well-designed institution the civil service will get under the political control of the Ministry of Interior. This Ministry has been dominated by ruthless political fights – for instance, at one point of time we had two presidents of police without knowing who is the true one.

Given this kafkaesque situation it remains of course unclear whether the European Union would consider the new Civil Servant Act as satisfying the accession conditions since this new Act is substantively and substantially different from the version which was submitted to the European Commission. But the responsibility for a functioning state stays first and foremost on our shoulders. If we fail to understand that institutions have their raison d’être, that it is necessary to build them outside the reach of undue political influence and that the principle of accountability has to be set and observed, we will not move forward. Chaos, confusion and political dependence generate an environment which not only allows for misuse of public funds for private, political, criminal, terroristic purposes, but also drives down economic competitiveness. Recent global financial crisis affected most states. Yet the intensity of the damage incurred is, among others, a result of failing institutions and lacking capacities of the state to function effectively and efficiently.