Nations in Transit - Czech Republic (2004)

Capital: Prague
Population: 10,200,000
Status: Free
PPP: $5,310
Private Sector as % of GNI: na
Life Expectancy: 75
Religious Groups: Roman Catholic (39.2 percent), Protestant (4.6 percent), other (57.2 percent)
Ethnic Groups: Czech (81.2 percent), Moravian (13.2 percent), Slovak (3.1 percent), other (2.5 other)

Executive Summary

Fourteen years after the Velvet Revolution, the Czech Republic has reached an important stage in the development of its democracy. It is a member of NATO and is poised to join the European Union (EU) in May 2004. The country maintains democratic political structures, and its market economy is functioning fairly well. Although it lags behind the West, the country enjoys a relatively high standard of living. Thanks to government policies and imminent EU membership, the Czech economy has experienced a boost in direct foreign investment. Fundamental human rights and freedoms are not in question, but there are some deficiencies, especially the continued discrimination of the Roma minority. Child prostitution and human trafficking also continue despite government efforts. To become a successful EU partner, the Czech Republic needs to combat corruption more effectively and improve its inflexible civil service.

The February 2003 presidential elections produced a surprising outcome when the internally split governing coalition – consisting of the left-wing Social Democratic Party (CSSD), centrist Christian Democratic Party, and the small right-of-center Freedom Union – failed to elect one of its candidates. Vaclav Klaus (Civic Democratic Party [ODS]) – the center-right veteran of post-Communist politics and an opposition candidate – emerged victorious. In a June referendum, voters overwhelmingly approved the country's membership in the EU. On a less positive note, the protection of investment and property rights suffered a blow in March 2003. An international arbitration tribunal in Stockholm ruled that the Czech Republic failed to protect the investment of Central European Media Enterprises (CME) in the private television station TV Nova. The case dated back to the second half of the 1990s. The court ordered the Czech government to pay the American company 9.6 billion korunas (US$353 million).

In a high-profile domestic case in 2003, a former Foreign Ministry official, Karel Srba, was sentenced to eight years in prison for conspiring to kill a reporter who disclosed the official's corrupt practices. In January 2003, the government launched an unprecedented decentralization, transferring to the 14 administrative regions significant oversight powers in education, health care, territorial planning, and the environment.

Electoral Process. With no general elections, two votes attracted attention in 2003: the February presidential elections and the June referendum on accession to the EU. The president is elected indirectly in a joint session of both chambers of the Parliament. The government coalition – holding a one-vote majority in the lower house and plagued by divisions within the dominant CSSD – failed to push through its own presidential candidate. The opposition candidate Vaclav Klaus, of the ODS, was elected on the third ballot of the third vote, after a standstill that traumatized the country and opened discussions for a constitutional amendment enabling direct presidential elections. In June 2003, voters overwhelmingly approved the country's accession to the EU with 77.3 percent of the national referendum vote. The country's rating for electoral process remains unchanged at 2.00.

Civil Society. The institutional and structural development of Czech civil society is on the rise in terms of the number of civil sector institutions, but the quality of civic culture still leaves much to be desired. Two themes have emerged as key in the past few years: nongovernmental organization (NGO) viability and ethical principles governing NGO activities. NGOs have lobbied for a change in tax laws that would permit citizens to donate 1 percent of declared taxes to socially beneficial projects. Czech NGOs are still too dependent on state support (roughly two-fifths of NGO financing) as well as foreign donors. Throughout 2003, intellectuals and artists mobilized against the rise of the Communist Party, which has become the second strongest party in opinion polls. The country's rating for civil society remains unchanged at 1.50.

Independent Media. Czech media are independent, but anecdotal evidence suggests interference by business and political interests. Investigative reporting is not highly developed, and some owners quietly discourage it. Public television is plagued by institutional and financial instability. The new general director announced layoffs and the cancellation of several programs in 2003. With some exceptions, major newspapers have moved away from quality journalism toward more tabloid content. In summer 2003, Vladimir Zelezny – the controversial founder of the most successful media organization, the private TV Nova – was ousted as director. During his reign, Nova's news programming was biased in favor of the ODS and CSSD; since Zelezny's departure, the station's reporting has become more evenhanded.

After the Parliament lost in international arbitration to CME, Nova's former American investor, the government recalled the Council for Radio and Television Broadcasting. The chief TV market regulator had come to be regarded as a protector of Nova's interests rather than an effective public watchdog. The Czech Republic's rating for independent media remains 2.25.

Governance. Although the current coalition government relies on a one-vote majority in the lower house, the overall system of governance in the Czech Republic was stable in 2003. During the year, most macroeconomic indicators were good, but the continuing deterioration of public finances was worrisome. The public spending deficit for 2003 was projected at 7.6 percent of the gross domestic product, up from 6.7 percent in 2002. The government took steps in the right direction, but a deeper reform of pensions, health care, and welfare is needed. Policy-making and legislation processes continued to lack sufficient transparency, with lobbies exercising undue influence and public input remaining weak. The 14 administrative regions, created in 2001, received greater powers in 2003 in the areas of education, health care, territorial planning, and the environment. The Czech Republic's rating for governance remains 2.25.

Constitutional, Legislative, and Judicial Framework. With nine Constitutional Court mandates expiring in 2003, President Klaus submitted new judge nominees to the Senate. Four candidates were rejected, forcing Klaus to propose additional nominees. In December 2003, the Constitutional Court refused to decide a case that pitted a family-owned farm against the local government's expansion of an industrial zone. Rejecting the right to hold a referendum on the zone expansion, the Court effectively took the side of an international investor, the aluminum company Nemak, against the rights of individual citizens. Critics saw this as a departure from the previous Court's policy of protecting citizens' rights.

Despite government efforts, child prostitution continued to be a problem. Human rights groups criticized police ill-treatment of the Roma minority. Court delays worsened in 2003, and the country lost several cases at the European Court of Human Rights in Strasbourg as a result of court inefficiencies. The country's rating for constitutional, legislative, and judicial framework is unchanged at 2.50.

Corruption. Although the current level of corruption does not pose a vital threat to democracy, the Spidla government acknowledged that abuse of power and bribery were still widespread, affecting the work of the state administration, immigration police, traffic police, health care, banking, the judiciary, and politics. The necessary anticorruption structures within law enforcement agencies and the judiciary have been created, but prosecution of corruption cases is weak in practice. In November 2003, a senator was charged with accepting bribes in the privatization of energy companies. Public pessimism about government graft is still widespread, but as corruption has become a major media topic, the level of tolerance toward it has decreased. The Czech Republic's rating for corruption is unchanged at 3.50.

Outlook for 2004. The Czech Republic will enter the EU with civil service reforms in the earliest stages. This process is complicated by the weak coalition government's uncertain future. The fragile cabinet will be preoccupied with unpopular reforms in the pension, health care, and welfare systems. An initial disillusionment may occur as it becomes evident that EU membership is no cure-all for societal ills. The cabinet's success will depend on whether it is perceived as honest, serious about fighting corruption, and offering an inspiring vision for this new phase in the country's development.

Electoral Process (Score: 2.00)

The Czech Republic uses a parliamentary system. Real political power resides in the Chamber of Deputies, the 200-seat lower house, to which deputies are elected by proportional vote on party ballots. The 81-seat Senate is elected on the basis of single-mandate districts. Though serving as a check on the chamber's powers, the upper house is the weaker of the two parliamentary bodies. It can return approved bills to the lower house, but the chamber can override the Senate by a simple majority. In a joint session, both chambers elect the president by a simple majority for a five-year term.

There are no legal or cultural obstacles to political participation in the Czech Republic. Even so, membership in political parties is low, with the largest being the Communist Party (KSCM, more than 200,000 members), the Christian Democratic Party (KDU-CSL, around 50,000 members), the Civic Democratic Party and the Social Democratic Party (ODS and CSSD, both around 18,000 members), and the Freedom Union – Democratic Union (US-DEU, under 1,000 members). These are the only parties represented in the Parliament, since most of the over 100 registered parties and movements regularly fail to meet the 5 percent threshold during elections. Elections are consistently declared free and fair by monitoring organizations.

In 2003, the Czech Republic conducted presidential elections in February and the referendum on accession to the European Union (EU) in June. There were no parliamentary elections or general local elections in 2003. The parliamentary elections in 2002 ended a four-year "opposition agreement," a proviso under which the left-wing CSSD had formed a minority cabinet supported by the center-right ODS. The defeat of the ODS was interpreted as a response to this unpopular agreement, which had been widely viewed as corrupt. The new leadership of the CSSD promised not to join forces again with the ODS and won a majority in the Chamber of Deputies by only a single vote.

Subsequently, the CSSD chairman, Vladimir Spidla, formed a weak coalition government with the centrist KDU-CSL and the small right-of-center US-DEU. By the end of 2003, the government was still holding together, but its approval rating had plummeted. The governing coalition had been forced to address the whopping deficit, dispensing with its electoral promises for higher spending. Also, it failed to elect a president in 2003, so the position went to the ODS candidate, Vaclav Klaus. Prohibited by the Constitution from seeking another consecutive term, President Vaclav Havel was forced to vacate his position after 10 years in office when his second mandate expired in February. It took three elections of three ballots each for the Parliament to choose Havel's successor, a process that traumatized the country and spurred arguments supporting a constitutional amendment for direct elections.

An internal split within the CSSD prevented the government coalition from agreeing on a candidate. A platform within the party secured the nomination of former prime minister Milos Zeman, but Spidla and certain coalition partners did not vote for the candidate. According to Spidla, Zeman represented old-style politics, implying a lack of transparency and corruption. Klaus beat out philosophy professor Jan Sokol, winning votes from members of all parties, including the ODS, the KSCM, Zeman's wing of the CSSD, the right-wing KDU-CSL, and possibly members of the US-DEU. Presumably, extensive political dealing occurred behind the scenes during the campaign. Much of this process lacked transparency, so it is impossible to judge conclusively whether the election was clean.

Like the majority of candidates, Klaus courted the Communist vote, since KSCM deputies occupy 41 seats in the lower house. The democratic political parties find it increasingly difficult to isolate the sizable Communist minority, and KSCM members are playing a more significant role in parliamentary leadership. Largely considered unreformed, the KSCM was shunned by the democratic parties and President Havel for failing to renounce its past and for using rhetoric reminiscent of the Communist era. Though the party is vague about its political goals and intentions, it does not openly advocate a return to Soviet-style Communism. Its core voter base, however, makes no secret about its wish to return to the pre-1989 political system, a desire many voters and writers express in the Communist-leaning daily newspaper, Halo Noviny. In summer 2003, President Klaus invited party chairman Miroslav Grebenicek to participate in a roundtable of Czech political leaders on the country's EU policy.

Klaus did not campaign for Czech EU membership before the accession referendum in June 2003 and refused to declare his preference on the issue. The national referendum approved the country's accession by an overwhelming margin of 77.3 percent (voter turnout was 55.2 percent). The result is a success for the governing coalition, which campaigned in the media for EU membership.

The state provides generous financing for parliamentary parties. Funds are granted based on the number of seats each party holds in the Parliament, regional assemblies, and large municipal assemblies. Parties also receive a contribution for election campaign costs based on the number of votes received in previous elections. Any party receiving more than 1.5 percent of the vote in an election to the Chamber of Deputies is eligible for state support.

Civil Society (Score: 1.50)

Although the number of civil society institutions is on the rise in the Czech Republic, the development of a true civic culture based on public trust and civic association leaves much to be desired, according to political scientist Pipa Norris and other observers of this sector. Such development is hindered by "baggage from the past" as citizens slowly begin to engage in civic activities and take personal responsibility for public and community affairs.

Four kinds of nongovernmental organizations (NGOs) exist in the Czech Republic: civic associations, public benefit organizations, foundations, and foundation funds. The most common form is the civic association. By November 2003, the Ministry of the Interior had registered 54,803 associations, ranging from political think tanks to hobby groups and sports clubs. Only about two-thirds of civic associations were considered active. The total number of foundations was more than 360, about 1 percent of active Czech NGOs. Many foundations do not have paid staff, relying instead on the voluntary work of their members. There were approximately 5,000 church charities, 800 foundation funds, and 700 public benefit organizations. Eight public policy think tanks are active, and their work focuses on education, social networking, lobbying, and sociological and policy analysis.

Though the legal framework for NGOs has improved over the past decade, it does not strongly encourage citizen and corporate support through tax incentives. Several foundations that make up the Donors Forum (DF) coalition have attempted to improve the situation and note that NGO viability and the ethical principles governing their activities are two major concerns among supporters. The DF helps NGO participants invest and professionally manage their endowments, while requiring them to follow rules of ethical management as well as promote civic sector development. The DF has also lobbied for a change in tax laws that would allow individuals to give 1 percent of declared taxes to socially beneficial projects.

Despite improvements, NGOs are still too dependent on state financing. It is estimated that NGOs receive about two-fifths of their budgets from the state. Each year, the government funds certain civil society activities through NGOs and publishes a list of available contracts. The state-managed Foundation Investment Fund is endowed with proceeds from privatization. Focusing on education, health care, and social and human rights programs, the fund awarded grants totaling 1,395,000 korunas (US$51,670) in 2001 and 1,660,000 korunas (US$61,481) in 2002.

Extremist groups do not threaten Czech democracy, but they do slow its advancement and hamper the development of civic culture. They are strongest in Prague, North Moravia, South Moravia, and North Bohemia. In the past few years, laws were amended to protect citizens against hate crimes. Exceptional punishments of up to 25 years in prison and life sentences are now possible for racial hate crimes, but the Ministry of the Interior claims it is difficult to prove a crime has a racist motivation. Of 372,341 criminal acts recorded in 2002, only 473 were deemed racist or extremist, a slight rise from 2001 (452 crimes). Human rights organizations accuse prosecutors of being unwilling to prosecute violence against Roma and foreigners as hate crimes. The ministry also reports that extremist organizations have become sophisticated in legal matters and, rather than communicating their views directly, use demagoguery to manipulate the law.

By the end of 2003, the KSCM had improved its opinion poll rating, becoming the second strongest party after the center-right ODS. (The KSCM holds this second-place slot despite claiming to have more members than any other party.) In opposition since 1990, the party has benefited from overall public dissatisfaction with the democratic political parties, which are considered corrupt and out of touch by growing segments of the population. While on the fringes of power, the KSCM could not be tainted by post-Communist profiteering. Though support for the KSCM is negligible in major urban centers, rural citizens and Czechs with less education and a lower income are increasingly voting Communist as a form of protest.

Civil society has mobilized in reaction to the rise of the Communists. In summer 2003, a group of intellectuals and artists created a petition entitled "One Does Not Speak with the Communists" that gathered more than 10,000 signatures. In November, the campaign got a boost from several rock stars who held a concert in Prague supporting the petition's goals: to isolate the KSCM and prevent the democratic parties from engaging the Communists in political dialogue.

Government ministers, parliamentarians, and other politicians have improved cooperation with NGOs, occasionally consulting various groups on policy planning and legislation. But many government officials are not yet sufficiently receptive to civil society input and view activists as self-serving annoyances. On the other hand, civil society groups enjoy positive press coverage and have relatively easy access to media, which steadily enhances their political clout.

Although union membership is declining (approximately a quarter of the workforce), trade unions remain a loud and fiercely independent voice. The largest coalition, the Czech-Moravian Confederation of Trade Unions, derives its power from an ideological kinship with the CSSD. The cabinet accommodates this coalition's ideas on policy and legislation. It also meets with union and business leaders represented by the Confederation of the Employers and Entrepreneurs Unions, the Union of Industry and Transportation, the Chamber of Economy, the Agrarian Chamber, and other employer organizations in the so-called Tripartite group.

The education system is free from propaganda. Though the law allows private schools and universities, the overwhelming majority of students are educated in public schools. The unwillingness of political elites to substantially reform higher education is a major deficiency in post-1990 civil society. University education suffers from a severe lack of funding. Professors' salaries are low, forcing them to look for income outside the system, which in turn prevents them from paying sufficient attention to students and research. Except for medicine and several technical and hard science disciplines, the overall quality of Czech higher education is dismal. Universities suffer a brain drain of young talent to the West, especially in social sciences, law, the liberal arts, and humanities. As a result, an academic career is not attractive for a majority of Czech university students, who opt instead for careers in law, business, and other private sector areas.

Independent Media (Score: 2.25)

Press freedom in the Czech Republic is not in question, and no major media are state owned. Czech Television (consisting of two national channels), Czech Radio (six stations), and the Czech Press Agency are public service institutions overseen by councils appointed by the Chamber of Deputies. The broadcasters are partially financed by viewer fees set by the chamber and a limited amount of commercial advertising.

Czech TV is notoriously plagued by institutional instability and interference from politicians and the business sector. A case in point occurred in January 2004 when the new general director, Jiri Janecek, announced his intention to apologize to the lottery company Sazka, a major advertiser, for a three-year-old news story. The story said that Sazka had been under police investigation for questionable business practices. Sazka sued Czech TV but lost the case. Janecek nevertheless apologized, and his announcement resulted in public outcry over the apparent influence of the prominent advertiser.

Czech TV does not provide high-quality public service programming. Channel One is quasi-commercial and competes openly for ratings with the two private channels, TV Nova and TV Prima. Its news operations are timid and lack informed analysis. Czech TV is also in poor financial shape. In 2003, Janecek unsuccessfully lobbied the Parliament to raise viewer fees.

There are signs that TV Nova and TV Prima might be colluding in programming and ownership matters. Their ownership structures are not transparent, but individuals in related industries have indicated that the two channels are interconnected. Furthermore, they do not compete directly with each other in broadcasting content.

According to ATO-MediaResearch, TV Nova's market share has stabilized at around 44-45 percent, as compared with 22-23 percent for Czech TV Channel One, 21-22 percent for TV Prima, and 4-6 percent for Czech TV Channel Two. TV Nova, by far the most influential media organization, is nevertheless beleaguered by ownership uncertainty. It is assumed that owner PPF, a domestic financial group, plans to sell the broadcaster. In summer 2003, PPF ousted the controversial director, Vladimir Zelezny, who became a liability after the Czech Republic lost an arbitration case to Nova's former American investor, Central European Media Enterprises (CME). The case dragged on for several years and was finally decided by an international arbitration court in Stockholm in March 2003; the decision was later upheld on appeal in June.

The Czech Republic was found liable for not protecting the American company's investment from Zelezny – the actual owner of the broadcasting license, who parted ways with CME and took over Nova's parent company. The Czech government was ordered to pay CME 9.6 billion korunas (US$353 million). Zelezny had used Nova's news division to support Klaus's ODS and the opposition agreement.

Since his departure, the news content on Nova has become more balanced. Yet in January 2004, a Prague court declared that Zelezny continues to be the majority owner of the broadcasting license and is in control of the company. PPF announced it would appeal. Subsequent to the lost arbitration, the Parliament recalled the Council for Radio and Television Broadcasting. The general view was that it had failed to act as public watchdog, protecting instead the interests of the ODS, the CSSD, and TV Nova.

Czech media are editorially independent, but reporters feel pressure from media owners and politicians. This interference is mostly anecdotal and difficult to assess, as is the reportedly considerable influence of public relations and lobbying groups. Most of the country's newspapers are owned by foreign corporations. Overt political pressure is rare, but there is an unmistakable down-market pull in many previously serious-minded publications. For example, Mlada Fronta Dnes (MFD), the largest quality daily, continued its slide into infotainment in 2003, abandoning comprehensive news coverage to focus on dramatic stories, human interest features, and TV-fueled coverage of celebrities. A similar trend afflicted Pravo, the only domestic-owned national daily. HospodaYske Noviny (HN), previously focused on the economy and business, continued to improve its coverage of domestic and international affairs, culture, and sports.

According to ABC Czech Republic, MFD sold a weekly average of 307,458 copies in September 2003, as compared with the tabloid Blesk at 486,958, Pravo at 190,093, HN at 74,156, and Lidove Noviny (LN) at 73,435. By strengthening its reporting team, HN – owned jointly by the German Handelsblatt and Dow Jones – showed some promise of becoming the most relevant Czech newspaper. After rather dramatic losses in readership, LN began gradually to move back to quality journalism, which it had abandoned several years ago. MFD and LN are owned by a regional German publishing house. The string of regional dailies (a virtual monopoly) is owned by another German publisher.

The magazine market is diverse and vibrant, led by titles for women and the publication TV Guide. There is a shortage of quality policy journals and news magazines, indicated by the following average monthly circulation rates reported in October 2003 by ABC Czech Republic: Respekt, a highly valued independent weekly, suffers from low sales (16,991 copies) and operates at a loss. More successful are Tyden (60,328 copies) and Reflex (59,406 copies), both respected weeklies for culture, society, and politics. These publications, however, do not feature hard-hitting investigations, and their impact is low.

Investigative reporting is not highly developed in Czech journalism. With few exceptions (for instance, Respekt and occasionally Czech TV, TV Nova, and the MFD), media do not allocate sufficient resources for investigative work. Preferring not to "rock the boat," some media owners quietly discourage aggressive reporting, particularly in the business sphere, thus protecting their financial interests. For example, high-profile reporters left MFD in the summer of 2003 after the newspaper's management postponed publication of an article criticizing politicians who had attended the country's largest film festival. The newspaper was the so-called media partner for the festival. Though accounts differ, the departing journalists claimed that business interests manipulated coverage of the event, which MFD management denies.

Also, the case of Karel Srba continued to draw attention. The former Ministry of Foreign Affairs official was sentenced to eight years in prison in 2003 for conspiring to kill a reporter who disclosed the official's corrupt practices. Czech TV planned to conduct a live broadcast of the appellate proceedings in October following approval from a superior court in Prague, but when the trial began judges ordered the live broadcast off the air.

Major media provide Web sites, and specialized Internet magazines are widespread. Still, the country lags behind the West in Internet use (independent sources estimate it at 17 percent of the population). High connection costs and the inflexible state-owned Czech Telecom (CT) are to blame. Fall 2002 negotiations between CT and independent enterprises regarding a dial-up flat rate using CT infrastructure ended without an agreement. While independent providers accuse CT of monopolistic behavior, the state telecom says it is abandoning dial-up service to invest in broadband connections. Experts saw no opportunity for the quick introduction of a dial-up flat rate, which some independent operators estimate could boost Internet use to 40 percent by 2006. With the cost of ADSL broadband connections still high, mobile phone companies began introducing wireless Internet access for affordable flat rates of less than 1,000 korunas (US$35) a month.

Governance (Score: 2.25)

The institutions of governance in the Czech Republic are stable and democratic. There are regular rotations of power, and despite the prevalence of fragile coalition governments in recent years, there is a strong agreement about the nature and direction of democratic change. In particular, successive governments have been committed to securing the country's membership in the EU and fulfilling the requirements for accession. Nevertheless, several challenges remain, including improving transparency, continuing privatization of large-scale enterprises, and boosting fiscal autonomy at regional and local levels of government.

Czech politics is characterized by the stability of political elites, with many leading politicians experienced in the management of major ministries, agencies, and parliamentary committees. Not counting the Communists, three large democratic parties are firmly established in the Parliament. The small coalition government US-DEU is on the verge of extinction (opinion polls are consistently in the single digits).

In December 2002, the cabinet successfully concluded accession negotiations with the EU. It signed the Treaty of Accession on April 16,2003, in Athens. A national referendum vote on June 13 and 14 overwhelmingly ratified the treaty. The country is scheduled to join the EU on May 1,2004. Already, the Parliament has incorporated a majority of EU laws and regulations, the acquis communautaire, into the Czech legal system.

The Czech Republic has a functioning market economy, and in 2003 most of its macroeconomic indicators were stable and positive. However, a cause for serious concern was the continuing deterioration of public finances. According to the government's own estimates, the public spending deficit for 2003 was projected at 7.6 percent of the gross domestic product, up from 6.7 percent in 2002. This increase was fueled by a rise in mandatory spending on welfare, pensions, and health care, as well as the rescue of the banking industry and other privatization debts from the 1990s.

Although the government has taken initial steps to reform the public finance system, most independent experts consider these measures far from sufficient and call for deeper, more comprehensive reforms of social benefits, pensions, and health care. In November 2003, leaders of the government coalition parties agreed on the principles of the pension reform. Premier Spidla plans to submit the package to the Parliament by mid-2004 and have final approval by summer 2005.

Transparency continues to be a problem in the Czech Republic. After sustained international criticism, the central government has introduced some transparency measures over the past few years. But as the European Commission wrote in its 2003 monitoring report, a proper degree of openness and transparency in the public administration has still not been fully reached.

Initially, the Spidla government managed to avoid the high degree of suspicion that haunted previous cabinets. The new cabinet began 2003 with a clean image, a result of not having undertaken any major privatization initiatives and simultaneously canceling several deals from the previous cabinet that were widely suspected to be corrupt. Also, the Spidla government shelved an overpriced, no-bid contract with the Israeli company Housing & Construction to build the D 47 freeway, canceled a suspicious project aiming to introduce the Internet into schools, and recalled several members of state and quasi-state regulatory agencies who were closely connected with the unpopular opposition agreement.

However, some ministries (notably the Ministry of Agriculture) continued a pattern of awarding no-bid contracts. In addition, after Minister of Defense Jaroslav Tvrdik (CSSD) stepped down in the summer, the government gave him the lucrative job of CEO of the state Czech Airlines. The dominant telecommunications operator CT is also viewed as "politically protected" from a truly competitive business environment by the respective regulatory ministry.

The most worrisome sign of bad governance came toward the end of 2003, when the privatization of two coal-mining companies was thought to have been manipulated. The companies that were excluded from the bids claimed that the government tailored the bidding conditions to favor the companies it supported. In the case of the smaller Sokolov Coal Mining Company, its own managers were purportedly favored for privatization. In the more lucrative case of the larger North Bohemia Mines, the cabinet appeared to push for the Appian Group that already owns the Most Coal Mining Company in the region.

In early December, police detained the managers of one bidder and charged them with an unrelated fraud. The company subsequently withdrew its bid, but the timing of the police action raised eyebrows since this particular suspicion of fraud had been lingering without action for years. The coal-mining privatization is scheduled to be concluded in 2004.

The influence of economic interests on politics and policy is strong and underreported. Although the Freedom of Information Act is in force, public officials still do not readily provide information. Lobbies cooperate with legislators and cabinet members on the development of policy but do so largely out of the public eye. Citizen input into policy making is weak, as Parliament members rarely seek public opinions or meet with citizens outside of election campaigns. Deputies are provided with resources for analysis and citizen outreach but do not take sufficient advantage of these funds. Public administration is strongly hierarchical, which prevents ministries from interdepartmental cooperation in planning and policy making. Consequently, there is duplication and not enough information sharing or policy coordination.

The state administration has undergone significant changes in recent years. The 14 administrative regions, created in 2001, were given considerable oversight powers in education, health care, territorial planning, and the environment. Power was also transferred from the former 73 districts (abolished by January 1,2003) to 205 newly created municipalities.

Regions and municipalities are self-governed. They own property and maintain budgets. While enjoying some independent income from local taxes and administrative fees, they are funded largely by the central government and depend on bargaining with the government to meet their budgets. The systematic formula for this redistribution is based on community size and does not sufficiently take into account the respective wealth of communities. Overall, the lack of fiscal autonomy inhibits regional administrations from fulfilling their full range of responsibilities.

Regional assemblies are elected directly, then they elect the regional governors and regional councils that serve as executive governments. Municipal councils and mayors are elected by municipal assemblies comprising wide-ranging, nonideological coalitions that are given some latitude by central party headquarters. Municipalities now wield considerable powers over such areas as welfare, building permits, forest management, hunting, fishing, environmental protection, waste management, small entrepreneurship, and motor vehicle registry.

In some cases, the transfer of management powers to regions has merely shifted problems from one level of government to another. Case in point: Hospitals have accrued considerable debts thanks to lagging health care reform and poor management. The Finance Ministry promised the indebted hospitals 3.4 billion korunas (US$126,000) over 2003 and 2004. It is estimated that the total debt accumulated by hospitals by the end of 2002, just before their administration was transferred to regions, was 6 billion korunas (US$222,000).

By the end of 2003, there seemed to be no plan in place that would prevent further hospital debt. The prime minister announced that the cabinet would submit a long-term health care stabilization program by the end of January 2004. The left-wing-dominated cabinet is considering a controversial co-payment plan for prescription drugs, which could further alienate voters and cause political instability.

Although there has been some improvement at the central government level, civil service continues to be plagued by the same ills. Mediocre pay and low prestige drive away talent. Civil servants are seen as unresponsive, corrupt, and incompetent. The Code of Ethics for Employees of the State Administration has been in effect since 2001, but it has little clout – civil servants fail to learn the code's provisions, which aren't vigorously enforced.

The European Commission expects improvements in professional standards and pay as a result of the Law on Civil Service, adopted in 2002. Its provisions will be phased in over a period of two years, and the law itself will enter into force in 2005, a delay from the original plan explained by the floods of 2002. The unveiling of a fully professional, reformed civil service is at least several years away. Thus, the Czech Republic will enter the EU with a central administration in the earliest stages of reform, which the European Commission considers unfortunate.

Constitutional, Legislative, and Judicial Framework (Score: 2.50)

The Constitution provides sufficient checks and balances among the executive, legislative, and judicial powers and establishes the independence of the central bank. In addition to being a traditionally respected "bully pulpit," the office of president has the authority to appoint a cabinet, ambassadors, members of the Czech National Bank's council, and Constitutional Court justices.

The four-tier judicial system consists of district courts (86), regional courts (8), high courts (2), and the Supreme Court. In addition, there is the Constitutional Court, which may be addressed directly by citizens regarding infringements of fundamental rights. Judges are nominated by the Justice Ministry and appointed for life by the president.

Although the Czech judiciary is constitutionally independent, the minister of justice appoints, transfers, and terminates the tenure of the presidents and vice presidents of courts. The ministry also decides on court budgets and judge promotions. Periodically, judges voice a need for a truly autonomous judiciary. As a move toward self-government, the 2002 Law on Courts and Judges created judicial councils and consultative bodies at all levels. In January 2003, the Supreme Administrative Court was established to give citizens the right to sue government bodies regarding public actions.

Judges are prohibited from holding high political office and must refrain from any activities that would compromise their impartiality. Except for Constitutional Court justices, judges are not prevented from joining political parties. Set by the Parliament, judges' salaries improved over the last several years.

With nine Constitutional Court mandates expiring in 2003, President Klaus submitted nominations for new judges to the Senate. Four candidates were rejected, forcing the president to propose other nominees. Senators complained that Klaus failed to organize support for his nominees in advance of the approval process. Two of his approved Constitutional Court justices – the new Court chairman, Pavel Rychetsky, and Miloslav Vyborny – are experienced lawyers recruited directly from politics. Rychetsky (CSSD), most recently the deputy prime minister, is a seasoned post-1989 politician, and Vyborny (KDU-CSL) held the post of defense minister in the mid-1990s. Their approval invited media criticism that the Court might be more receptive to arguments by politicians than the Havel-appointed Court.

An incident at the end of 2003 appeared to substantiate such fears. The Constitutional Court refused to adjudicate a case involving a family-owned farm in Havran, a village in the northwest. The family was opposed to the planned expansion of the industrial zone operated by Nemak – an aluminum factory and important international investor – and collected enough signatures to call a referendum. But the newly elected local government cancelled the referendum called by the previous government. The Rajter family asked the Constitutional Court to uphold its right to have the vote, but on December 11 the Court refused to issue a decision, effectively enabling Nemak to expand. Even though the family had a legal right to hold a local referendum, the Court said it would not interfere with local self-government. Critics saw this decision as a sign that the new Constitutional Court would be more receptive to political and business interests at the expense of citizens' rights.

Media charges of political meddling were heard in another case: A lower court restituted a large property to the descendants of Czech-German noble Frantisek Oldrich Kinsky. The dispute touched on the problem of property expropriated from the Germans after World War II. Kinsky's father, a German and prominent Nazi, played an active role in the destruction of Czechoslovakia prior to the Munich Agreement of 1938. Thus, the issue might have legal consequences for the reconsideration of the so-called Benes decrees, the legal base for expulsion of the Sudeten Germans and expropriation of their property. (The restitution of property taken by the Communists after 1948 does not fall under the Benes decrees.)

After the Kinsky decision in July 2003, President Klaus convened a meeting of top elected leaders to discuss the issue. The president made vague comments that were interpreted by some as a warning to courts not to tamper with the Benes decrees, an interpretation the president denied. In another restitution case that followed, another of Kinsky's claims to property was denied by the court. However, no evidence indicated that the court succumbed to political pressure not to return the property. In fact, the courts do not seem to be affected by political pressure as Kinsky's numerous suits wind through the judiciary.

International institutions and human rights organizations continued to raise questions about human rights issues in the country's past. The Committee on the Rights of the Child welcomed the strengthened protection against trafficking and commercial sexual exploitation of children. Although the government increased the fight against child prostitution, public sites such as bus stops, gas stations, and rest areas near the German-Czech border are still plagued by this crime. According to a BBC report, children as young as eight have been seen negotiating sexual solicitations. Human rights groups continue to criticize police ill-treatment of the Roma minority as well. The government has settled out of court with Margita Cervenakova and a group of Czech Roma in an expulsion of tenants case dating back to 1993. Cervenakova and others appealed to the European Court of Human Rights, complaining about inhumane and degrading treatment and other offenses. The cabinet agreed to pay 900,000 korunas (US$33,300) for damages and expenses.

In need of a complete overhaul, the criminal code was modified over the last several years and will undergo further alterations in the process of ratifying the Rome Statute of the International Criminal Court. The ratification will require a constitutional change. The Ministry of Justice drafted a constitutional amendment, an amendment to the Bill of Fundamental Rights and Liberties, and several criminal code amendments. So far, the cabinet has failed to approve the package.

Another key area for improvement is reducing the length of court proceedings. The Ministry of Justice reports that in most cases the situation has actually worsened since 2002. The Czech Republic lost several cases before the European Court of Human Rights in 2003 regarding the right to a hearing within a reasonable time and the right to an effective remedy.

Corruption (Score: 3.50)

Although the current level of corruption does not pose a vital threat to Czech democracy, international institutions forced the issue to the forefront, often against the will of leading political forces. Such pressure compelled the government to introduce anticorruption measures and improve legal and institutional framework for combating corruption. According to the 2003 European Commission monitoring report, the legal instruments required by the acquis are for the most part in place, and the necessary structures have been created within law enforcement agencies and the judiciary.

The Zeman government initiated a program against corruption in 1999, and the Ministry of the Interior serves as the national coordinator of anticorruption policy. Several ministries have developed public awareness campaigns and access venues, such as a telephone hot line and Web site for reporting corruption. However, in May 2003 the government was forced to acknowledge that abuse of power and bribery were still widespread, affecting the state administration, immigration police, traffic police, health care, banking, the judiciary, and politics. In its annual report on corruption for 2003, the Ministry of the Interior focused on legislative and practical problems regarding public procurement. The Law on Public Tenders was amended in 2002 to limit the government's ability to bypass public bidding in order to award preselected contracts. The weakest point in the effort to root out graft is the government's record on prosecuting cases of corruption. Many Czech officials still perceive the anticorruption measures as perfunctory, and some politicians continue to deny that corruption is a serious problem. Such has been the position of President Klaus, who reacts defensively to suggestions that he should do more to fight corruption.

The Spidla government deserves credit for abandoning previously awarded government contracts that were questionable and overpriced, as well as for avoiding major corruption scandals. However, in the second half of 2003 the cabinet seemed to be sliding back into business as usual, with ministries awarding no-bid contracts, family members of ministers lobbying for companies doing business with the government, and the questionable privatization of two coal-mining companies. Preoccupied with the reform of public finances and holding a slim parliamentary majority, Prime Minister Spidla is weak in his own party and apparently unable to take on the entrenched political-economic networks that emerged after the onset of privatization in the mid-1990s.

Ministers and agency heads are barred from holding additional jobs or engaging in business activities other than the administration of their own properties. Members of Parliament are allowed to engage in business but are obliged to declare such activities and those of their spouses. They are also required to reveal potential conflicts of interest related to issues they are debating, voting on, or considering proposals for. High-ranking politicians, including ministers and parliamentarians – but excluding the president – are required to make yearly declarations of income, gifts, and real estate owned by them or their spouses. Each year, many fail to meet the June deadline. By the end of September 2003, the Senate Mandate and Immunity Committee had received declarations from only 161 out of 200 deputies. A similar lower house committee received only 66 declarations out of 81 senators. The law carries no meaningful penalties for late or false declarations.

The most widespread form of corruption concerns bribes paid by citizens to public officials in exchange for expediting services, or so-called functional corruption. This practice is encouraged by excessive government regulation in such areas as land registry, building permits, environmental regulation, and commercial registry. Czech culture does not support whistle-blowing. In a residue from the Communist period, whistle-blowing is often seen as "ratting" – or cooperating with the powerful – rather than as a cleansing mechanism. Low police credibility may also inhibit would-be whistle-blowers. But as the media increasingly spotlight corruption, the level of tolerance for graft has visibly decreased and the general climate is slowly improving.

Author

Tomas Klvana was a Shorenstein Fellow at Harvard University's Kennedy School of Government in fall 2003. He served as press secretary to the president of the Czech Republic, Vaclav Klaus, from March to September 2003.