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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: 069 - (28/01/03)

The Slovaks are now reaping the benefits of re-electing the Eurofriendly government of Premier Mikulas Dzurinda, eschewing the populist Vladimir Meciar, premier for 1993-98, the author of independence but a definite 'bad boy' in the eyes of Brussels. A vote for Dzurinda and his wide-ranging reform team last year was a vote for EU membership, for NATO entry and for FDI (foreign direct investment).
Slovakia has an excellent location right in the heart of Europe. It has an educated work force, with wages far lower than in adjacent Austria or the rest of the EU. Access to road, railways and waterways are good.

The automobile industry receives FDI
The key to industrial regeneration, the car industry, is opening up to FDI in a big way. It is not surprising that Volkswagen has a factory in Slovakia, where it manufactured 171,000 vehicles in the first nine months of last year. The German car giant now accounts for around 15% of exports from Slovakia, where it makes Polo and Golf cars and the Touareg sport-utility vehicle. It plans to invest a total of 1.3bn Euro in the country through 2008.
Volkswagen is now to be joined by PSA Peugeot Citroen SA, which is planning to build a 700m Euro (US$738.6m) factory in Slovakia to make 300,000 small cars per annum, starting in 2006. 
The French car giant, second only to Volkswagen in Europe, has said that it would employ 3,500 people at the plant, located at Trnava, about 45 kilometres (30 miles) east of Bratislava, the capital. The 190-hectare (420-acre) site is well positioned to connect to transport facilities. 
Peugeot is aiming to expand into Central Europe, diversifying from Western Europe where it sells 80% of its cars. It aims to increase market share in the region, which includes Poland, Hungary and the Czech Republic, to 12% from a currently modest five per cent. "Peugeot has been successful in Eastern Europe, and they need capacity there if they want to grow," says Henrik Lier of WestLB Panmure "Having a manufacturing presence helps in understanding the market and the wage costs in Slovakia will likely remain lower than in the Czech Republic."
The company was originally going to invest in Poland and Warsaw is reportedly crestfallen about being passed over for the Peugeot plant, "the investment of the decade," as Slovak economy minister Robert Nemcsics justly calls it. Poland's failure here is only the latest one in a string of failures to attract key investments. Potential investors in Poland have complained about its bureaucracy hamstringing them at every turn, its high labour costs and its generally unwelcome attitudes. Slovakia by contrast wins high praise for its wide-scale political and economic reforms, that last year won it the invitation to join NATO and enter the EU in 2004. 
The success in winning the Peugeot deal could not have come at a better time. Slovakia, for all its undoubted advantages as a sight for FDI, is still living down the Meciar years. It has so far won only US$5bn in FDI since 1993 compared with the Czech Republic's US$24bn in the last four years. Peugeot's initiative, if proved a success, is likely to change all that. Slovakia is about to arrive.

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AVIATION

State to pick another 56% of Slovenske Aerolinie


More shares of Slovenske Aerolinie, the Slovak airline company, will go to the state following a recent cabinet decision, according to New Europe. The state will obtain another 56% of the company, giving it a controlling stake of 90%. The state transferred three aircraft into basic capital that the company so far rented under poor conditions.
Following the increase in shares, the state would like to sell off the company, Transport Minister, Pavol Prokopovic, was quoted as saying.
Established in 1995, Slovenske Aerolinie ran 1,913 flights in 2001 and transported 150,000 passengers. The airliner sustained difficulties in recent years because of the political backgrounds of its shareholders, like Devin Group and Wili, believed to be close to ex-Premier, Vladimir Meciar.

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CONSTRUCTION

New industrial parks take shape across Slovakia

East Slovakia is gearing up to develop industrial park projects, which should be finalised in 2003 and 2004, and will help ease the region's unemployment rate, which stands at more than 25 per cent, the Slovak Spectator reported. Funding for these projects will come from the state, the European Union and investors.
The park that will be completed first is located near Kosice, on the Slovak-Hungarian border known as Kechnec. The US-based investor, Molex, has overseen that project since 2000 and has created 700 jobs for the people in that region. "The park could employ several thousand people after new investors enter," Kechnec Mayor, Jozef Konkoly, was quoted as saying.
Another project concerns a chemical industry park in Humenne, located near the premises of the former Chemlon group. Interest in the park has already been expressed by Rhodia Industrial Yarns, along with a Czech and a Norwegian joint venture.
Due to be finalised at the end of this year, the Humenne park will create 250 jobs for people. The Spisska Nova Ves area will house a wood processing park. "The city has already signed investment deals with four companies promising over a thousand jobs," Spisska Nova Ves Mayor, Karol Mitrik, was quoted as saying. The Roznava town will have a park nearby, which should be completed next year. Noznava is seeking government aid for this project because it has encountered financing and land ownership troubles.

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ENERGY

Czech, Slovaks may continue to build power plant in China

Chinese President Jiang Zemin and his Slovak counterpart, Rudolf Schuster, mostly discussed further development of economic relations during their meeting in Beijing. 
Schuster's spokesman Jan Fuele told CTK News Agency in a telephone interview that the Slovak company Slovenske energeticke strojarne (SES [Slovak Power Engineering Company]) Tlmace and Czech firm Skoda Plzen will continue to participate in the construction of the Shen Tou thermal power plant.
"SES Tlmace and Skoda Plzen are taking part in the construction of two blocks of the Shen Tou power plant where the construction of the fifth and sixth blocks has yet to be decided on. The Slovak and Czech firms could take part in the construction," Fuele said.
Also Slovak contractors may participate in the construction of Chinese Olympic stadiums for the 2008 summer games in Beijing and the pavilions for Expo 2010 in Shanghai. The interest of Chinese businessmen in investing in Slovakia was also discussed at the presidents' meeting, but not the sale of Slovak weapons to China, Fuele said. It cannot be ruled out, however, that Chinese pilots will train in Kosice, east Slovakia...

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FOREIGN ECONOMIC RELATIONS

Slovak president in Hong Kong urges more trade with China

Now it is high time for Slovakia to start intensifying bilateral economic relations with China, Slovak President Rudolf Schuster said in Hong Kong on 10th January, TASR web site has reported. Slovakia should do so ahead of its accession to the European Union, expected in 2004, as then it will face strong competition pressure, since the EU-member countries, such as Germany and Great Britain, are already well established in China's markets. 
"We are only slowly bestirring ourselves, but we have to hurry," he said, speaking at a news briefing after he had delivered a speech to the Hong Kong Trade Development Council (TDC) at the invitationo f the TDC Executive Director, Michael Sze. 
According to Schuster, Slovakia should develop economic cooperation not only with the EU, but it should also seek close economic contacts with eastern countries. Besides China, he named also Russia and Ukraine. 
Schuster has invited Hong Kong businessmen to visit Slovakia in order to learn more about the products and prices Slovakia can offer. Besides establishing joint ventures in agricultural machinery production and pharmaceutical industry, Schuster sees room for cooperation in tourism and science. Slovak scientists have designed many good projects but they need financially strong partners for their implementation. He also highlighted spare capacities of Bratislava airport, only 60 kilometres from Austria's Schwechat international airport. 
Schuster also gave an interview for TDC television broadcasting through the Internet at www.tdctrade.com, in which he focused mainly on the expected impact of Slovakia's entry to the EU on its economy. "Slovakia is coming home," he said, adding that Slovakia had always been part of Europe. But he stressed that Slovak-Chinese relations must not deteriorate after the accession.

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FOREIGN LOANS & DEBT

Russia reduces debt to Slovakia by almost US$800m in 2002

Last year Russia reduced its debt to Slovakia by a record US$795m (31.4bn korunas), to stand at US$317m on 31st December 2002, according to the preliminary data released by the Finance Ministry on 13th January, TASR News Agency has reported. 
The debt repayment in 2002, largely in cash, differed from that dominated by goods imports in the past years. Czech Republic's FID Group secured a write-off of US$645m, while British Greeba Development brokered a deal to bring the debt down by US$45m. 
The remaining debt was settled via goods imports worth a total of US$135.2m. Regarding goods imports, Russia's debt payment plan for 2002 included helicopters and aircraft engines for the Interior Ministry (US$30.9m); nuclear fuel, black coal, electricity and equipment for power producer Slovenske elektrarne; weapons for defence sector (US$18.9m); services and goods for the completion of cyclotron centre (US$18m) and goods for the Foreign Ministry (US$8.5m) and the education sector for the building of an international laser centre (US$8.5m ). 
Slovakia's Martimex Alfa received US$20.9m as part of the debt settlement. Russia's debt to Slovakia, at US$1,735m in 1994, was being largely paid off by goods, down to US$1,112m in 2001. 
Fearing the risk of repayment after the inclusion of Russia under the Paris-based creditors club (Paris Club), Slovakia sought to accelerate the settlement in cash, with the remaining US$317m considered to be repaid by goods shipments by 2006-2007 and the rest by 2021.

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FORESTRY

Slovak firm signs US$200m forestry contract with Chinese government

Slovak company Delta Line of Bratislava is to conduct afforestation in China under a US$200m contract "Green China" signed in Beijing on 6th January, TASR web site has reported. 
The contract was signed by Slovak Agriculture Minister, Zsolt Simon, and Chinese State Forest Administration Director, Zhou Shengxian. 
China will provide annually 300,000 hectares for afforestion, while Delta Line, which has a business office in China, will import technology and seeds, the company director general, Milos Lukacik, informed. 
The seeds will be cultivated in China by the Jiffy method, developed in Slovakia, which gives fourfold faster growth of seedlings. 
Afforestion is due to begin in the Hebei province surrounding Beijing, and in the first phase of the project, Delta Line will provide 7,000 seedlings. The trees from Slovakia will also be showcased at the Summer Olympic Games in 2008, with Delta Line planting pine trees at Langfang city where a new airport and Olympic village will be built. 
Slovak President Rudolf Schuster symbolically handed one of the seedlings to Chinese President Jiang Zemin. The president and accompanying delegation began a nine-day visit to the country on 3rd January.

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MINERALS & METALS

Largest Slovak wire works sold to Brussels-based transnational corporation

The Drotovna Droty [Wire Works -Wires] and Drotovna Kordy [Wire Works -Cords] companies will have new owners. The two companies' present owners - Penta Investments and Majetkovy Holding [Property Holding] - are selling them to the transnational Bekaert corporation, Sme News Agency has reported. Penta has until now controlled 50 per cent of the two companies' shares and Majetkovy Holding owned exactly the same stake. The contract concerns the sale of both firms' entire stakes.
The shareholders did not disclose the selling price. 
As the Penta company announced, the foreign investor's entry into Drotovna is yet to be approved by the Slovak Antimonopoly Office. The Bekaert corporation is the world leader in the progressive transformation of metals and coating technologies and focuses on market segments with high added value. It is based in Brussels and has annual sales of 2.8bn euros. The firm is selling its products in more than 120 countries... 
Drotovna Kordy specializes in the production of cords and pneumatic wire for tyre manufacturers. Drotovna Droty manufacturers steel wire and products for the needs of the construction industry in the region of Central Europe.

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PRIVATISATION

Slovak ruling coalition leaders agree to sell off remaining state-owned firms

On 9th January, the ruling coalition partners [the Coalition Council, comprising coalition parties' leaders] agreed to privatise remaining government-controlled companies, SITA News Agency has reported. 
Party of the Hungarian Coalition (SMK) boss, Bela Bugar, told the press that the economy ministry is expected to elaborate on an analysis, which would evaluate what a revision to the large-scale privatisation law would bring. According to Mr Bugar, the completion of privatisation should not bring many negatives. It still remains open whether the companies will be sold this year or later. 

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