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  SLOVAKIA

REPUBLICAN REFERENCE

Area (sq.km)
48,800

Population
5,415,000

Capital
Bratislava

Currency
Koruna

President
Rudolph Schuster

Private sector 
% of GDP

60%

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Background:
In 1918 the Slovaks joined the closely related Czechs to form Czechoslovakia. Following the chaos of World War II, Czechoslovakia became a communist nation within Soviet-ruled Eastern Europe. Soviet influence collapsed in 1989 and Czechoslovakia once more became free. The Slovaks and the Czechs agreed to separate peacefully on 1 January 1993. Historic, political, and geographic factors have caused Slovakia to experience more difficulty in developing a modern market economy than some of its Central European neighbours. 

Update No: 065 - (26/09/02)

Meciar stalled
The Slovaks have pulled back from the brink. They have not elected Vladimir Meciar, their erstwhile strongman, back to power.
Many called him a dictator in his years as premier of an independent Slovakia, largely his creation, between 1992 and 1998. But in the latter years, having misread the outcome, he at least allowed himself to be voted out. But then so did, with much less grace, Slobodan Milosevic.
The good news, indeed, is that he probably will never get in again now. His constituency is the rural and the elderly. There is a steady drift to the towns and the elderly are dying off.
The government pulled off a spectacular coup in the build-up to the polls by seizing Meciar's secret police chief in South Africa and bringing him back to put him on trial. The trial would never have been likely to go ahead if Meciar had become premier. Everyone wants to know what the former secret policeman will reveal about the dubious privatisation deals of the 1990s. Moreover, Meciar's party has split, with several of his close henchman jumping the sinking ship.

Dzurinda likely to be back
The premier of the coalition government, Mikulas Dzurinda, is likely to form a new government. In a field with 15 runners, his Democratic and Christian Union scored 15.9% of the vote, second to Meciar's Movement for a Democratic Slovakia on 19.5%. But whereas Dzurinda's party could expect to attract allies easily in a new coalition, that is not at all true for Meciar's. Meciar has a gift for making enemies that has finally finished him off.

Relief of the West
The result has been greeted with undisguised relief in Western capitals. The process of integrating Central Europe into the EU and NATO can now continue. A Meciar-run Slovakia would have been a nightmare for Brussels and Washington.
Dzurinda is highly esteemed, the more so because he has won without electioneering stunts or swerves, in stark contrast to Schroeder in Germany. He now has the aura of a European statesman. That should serve Slovakia's turn well in the years ahead.

Broad centre-right coalition
The other parties in the centre-right coalition likely to share power are the Christian Democratic Movement (with 8.2% of the vote), the Hungarian coalition party, representing Slovakia's large Hungarian minority (11.2%) and the Alliance of the New Citizen, a new party led by media tycoon Pavol Rusto (8.1%).
Altogether the four centre-right parties won 43.4% of the vote, which is likely to translate into 78 seats in the 150-member parliament. The final results are to be announced on September 30th.

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AUTOMOBILES

VW subsidiary planning Touareg model production


The Slovak subsidiary of Volkswagen, the German car making giant, plans to begin the production of the group's new off-road Touareg model, Interfax quoted VW Slovakia board member, Jozef Uhrik as telling CTK News Agency.
The Czech news agency reported that the model's public unveiling was to take place in late September. The Bratislava-based plant will also start making parts for Porsche, while helped in the design of Touareg. 

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AVIATION

SkyEurope spreading its wings across Europe


SkyEurope, a Slovakia-based airline, announced sales of more than 72m Slovak crowns in the February-June period. The company, which launched operations in February, carried out almost 1,500 flights and transported about 26,000 people in the five-month period, Interfax News Agency quoted sales manager, Pavol Mlady, as telling the Czech news group, CTK.
Mlady said SkyEurope is now the country's No.1 air carrier.

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ENERGY

German, French gas firms own major stake in Slovak gas storage company


Germany's Ruhrgas and Gaz de France (GdF) took over management control of Slovakia's Nafta Gbely gas storage company on 30th August with the full knowledge of German shareholder RWE Gas. "The (Nafta) supervisory board - which includes a representative of RWE - made the decision about the personnel changes," Juraj Horvath, a member of the SPP [Slovensky plynarensky priemysel] gas utility board of directors, told TASR News Agency. 
Ruhrgas and GdF own 56 per cent of Nafta through the SPP, while RWE Gas has 40 per cent. Horvath was answering the question whether RWE Gas, a rival of Ruhrgas in Germany, had been informed of the decision. Under the reshuffle, two Ruhrgas and two GdF representatives join the Nafta board of directors, leaving chairman Jozef Pagac as the only Slovak representative... 
RWE has a five-year contract with Nafta for storage of 250m cubic metres of Russian gas per year and a contract with SPP for related transiting. But the capacities have remained unused with RWE still to reach agreement with Russia's Gazprom on the gas supplies. 
Pagac recently told TASR News Agency that Nafta together with SPP was looking for alternative use of the capacities. RWE Gas and Ruhrgas are currently cooperating on the basis that Ruhrgas controls the transiting through Slovakia and RWE Gas through the Czech Republic. However, Ruhrgas also has the option of transiting through Austria.

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ENVIRONMENT

OECD issues environment recommendations


The Organisation for Economic Cooperation and Development (OECD) has issued more than 40 recommendations following its latest assessment of Slovakia's environmental situation, The Slovak Spectator has reported.
Among the groups' proposals are the modernisation and expansion of the country's sewer network, and special prosecutors for the environmental crimes. A survey on waste processing facilities was also recommended.

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EU ACCESSION

Slovak minister advocated speedy solution to land issues

Slovak Agriculture Minister Pavel Koncos says that although the development of Slovak agriculture is now secured, it is essential to speed up settlement of land ownership, land rent and issues of land sale and purchases, TASR News Agency has reported. 
It is also necessary to step up talks with the European Union with the aim of giving Slovak farmers and food producers a dignified position. Koncos, leader of the reformed-communist SDL [Party of the Democratic Left], was speaking during a tour of Zilina region. 
He pointed out that 72 per cent of Slovak farms made profit last year, a rise of almost 20 per cent compared to the previous year. But while investment was at an acceptable level in 2001, further spending on agricultural machinery was required, he added. 
On the growth of foreign entries in the food sector, especially dairy industry, he said it mattered less where firms come from than where they pay taxes, and that whenever foreign capital helped the production sector, it should be welcomed. 
Among the foreign investors supported in Slovakia are Danish farmers who expanded three piggeries with more than 4,000 sows and who plan to sell 150,000-200,000 pigs from each. Koncos also pointed to Italian farmers raising cattle in eastern Slovakia. 
Slovak farmers and land owners, he said, are short of capital and it would be better for them to rent the lands to those who have the finance and the knowledge to raise productivity.

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FINANCIAL NEWS

Slovakia to use funds from Russian debt settlement to pay off Slovak state debt

The National Bank of Slovakia has already received on account, money from the cash settlement of Russia's debt to Slovakia, Radio Twist in Bratislava has reported.
The cabinet did not discuss this money on 4th September, but several of its members already have an idea how to use it. 
Finance Minister Frantisek Hajnovic said: "In my view, any such money, which represents extra revenue to the state budget, should be used primarily to pay off the state debt. The governor of the National Bank of Slovakia said at the cabinet session that priority should be given to the foreign debt. I do not have any problems with that. On the other hand, we have to create a certain reserve to cover the shortfall in revenue so that we are able to refinance the budget account and so that it is not necessary to resubmit the budget to the new parliament for its approval.

Slovakia's industrial output growing

Slovakia's industrial output for July grew by 11.6 per cent year on year, compared to 4.7 per cent in June and 3.8 per cent in May, according to preliminary figures published by the Statistics Office on 9th September, TASR web site has reported. 
Mining of raw materials rose by 26.5 per cent and industrial production by 14.5 per cent. Production and distribution of electricity, gas and water was lower by 6.1 per cent. 
Production of electric and optical devices rose by 62.8 per cent, metals and metal products by 21.4 per cent, crude oil products and nuclear fuels by 19.7 per cent, and wood and related products by 14.9 per cent. Other industrial production rose by 28.1 per cent. Cellulose and paper fell by 10.2 per cent, non-metal mineral products by 0.9 per cent, and cars by 3.2 per cent. 
For the first seven months of 2002, industrial output was higher by 4.6 per cent compared to the same period last year, with mining of raw materials up by 30.4 per cent, and industrial production up by 5.9 per cent. Production and distribution of electricity, water and gas dropped by 5.5 per cent. The highest rise of 35.2 per cent was registered for durable products, compared to 5.3 per cent for non-durables and 1.1 per cent for energy. 
The Statistics Office calculates the index of industrial production from at least 80 per cent of all production.

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FOREIGN ECONOMIC RELATIONS

Slovak president wants to expand economic cooperation with Romania

Slovak businesses want to be involved in modernization of Romania's energy sector, Slovak President Rudolf Schuster said in Bucharest on 10th September, TASR web site has reported. 
Speaking at an economic forum organized for his two-day visit to Romania, the president mentioned possibilities for reconstructing old thermal power plants. He also called for greater cooperation in tourism, especially with regard to Slovakia's High Tatra mountains and Romania's Black Sea resorts. 
Romanian President Ion Iliescu urged entrepreneurs from both countries to help make bilateral economic relations at least as good as political relations. Iliescu noted that Slovakia had overcome political infighting to maintain economic continuity, whereas government changes in his country had led to economic upheaval and stagnation. Economic indices were vital for successful entry into the EU, said the Romanian president, adding that Slovakia had made good progress in the accession talks...

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FOREIGN LOANS

Slovakia hails EU ministers' decision on disaster fund, enlargement

Slovakia welcomed the conclusions of the meeting of EU foreign ministers in Helsingoer, Denmark, particularly the decision to set up a disaster relief fund and the promise to keep the timetable of EU enlargement, Slovak chief negotiator with the EU, Jan Figel, has told CTK News Agency.
"Concrete financial solidarity has always been a part of European communities and it should remain so in the future. It cements European relations, which is why we (Slovakia) welcome the establishment of the fund. It is a help to countries in need and confirmation of the policy of solidarity," Figel said.
The media has reported that Slovakia would receive flood relief aid worth 28m Euros. However, according to Figel, this issue has not been closed yet because the aid is to come in the form of projects that will be transferred from other areas to the flood-hit ones, but this is still to be discussed with the European Commission. The sum of 28m Euros is rather a rough estimation, Figel said.
Figel also welcomed the confirmation of the timetable of accession talks with EU candidates. He said he was mainly glad that the deadlines of the Brussels summit and some other affairs were not postponed.
As to calls for realism and constructive position of the candidates, Figel said that success in the talks also depended on the realism and constructive approach of the EU members in the budget issues and mainly in the agriculture chapter.
After the adoption of EU's joint positions on these most sensitive chapters at the Brussels summit on 24th-25th October, candidates will have only a limited time to reach an agreement with the EU, which will exert certain pressure on the talks, Figel said. The 10 candidates should try to reach a good result together, he added.
"A result will not be a different agricultural policy in the Baltic states and in Central Europe, but one solution for the whole group of countries. A certain level of cohesiveness among the candidates is a very rational tool. It cannot be compared with free movement of people," Figel said.
While the adopted flexible model of the movement of labour from the candidate countries will after some time change the situation on the labour market, in the agriculture and budget sectors the adopted solutions will be valid for the whole period, Figel said.
Slovakia supports a coordinated approach of the candidates, Figel said, adding that Bratislava made this clear during talks of the Visegrad Four countries (the Czech Republic, Hungary, Poland and Slovakia) and would confirm it again at the September meeting of state secretaries of the 10 candidate countries in Warsaw.
According to Figel, Slovakia has in principle the same position as the other candidates, mainly as regards the condition that new members do not contribute to the joint budget more than they will receive from it after their admission.

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INSURANCE

KBC Bank buys out 66% of Ergo insurer


The Belgium-based KBC Bank announced it has clinched more than two-thirds of Ergo, a Slovak insurance group, according to Interfax News Agency. KBC Bank bought the shares from Slovak holding company, PSIS.
When the Slovak authorities give the deal a green light, KBC Bank will control three-quarters of the Slovak insurer, Pavel Hejzlar, spokesman for CSOB, a Czech bank held by KBC Bank, was quoted as saying. Control will be direct and through CSOB's insurance arm, IPB Pojistovna, Interfax reported.
PSIS will keep a minority stake in the insurer for the next two years. It has also agreed to support the business in cooperation with the Belgian bank.
PSIS and IPB Pojistovna bought out Ergo seven years ago. Founded a decade ago, Ergo's main activity is life insurance, which accounts for 66 per cent of its premium income.
The No.7 insurance group in Slovakia and No.8 non-life insurer, Ergo respectively controls 4.0 and 1.5 per cent of the markets. 

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MINERALS & METALS

US Steel shelves plan to build tin-plating plant in Slovakia

US Steel Kosice (USSK) has decided to suspend the construction of its tin-plating production line for the car industry worth US$140-150m. "The line is not under construction. The project will be carried out within the next five years," USSK President John H Goodish said on 6th September. The project was suspended due to the current surplus of tin-plating on the market, he explained, TASR web site has reported. 
When entering Eastern Slovak Ironworks' (VSZ) steelmaking arm in 2001, USSK was obliged to invest US$700m within the next 10 years, of which US$61m has already been spent. For this year, the company plans further investments at around US$100m. USSK plans to extend its business activities also to Poland, Serbia and Hungary.

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