% of GDP
a NEW service
a FREE service
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: 073 - (27/05/03)
The Slovaks are being included in the first wave of entry into the EU, along with the other nine countries. There is just under a year to go before it becomes a reality. A referendum on May 16th was a foregone conclusion in favour.
Qualms about EU entry
There are those with doubts about Slovakia's readiness all the same. It is probably the least qualified in many ways for EU membership yet. Not that it is not a thoroughly European country. It is certainly that having been ruled by Vienna, Budapest, Prague and then by Moscow. Now it is the turn of Brussels.
But there is a widespread apprehension about its lack of institutions firm enough to combat corruption in politics and the judiciary or to prevent shady privatisation. Economic and political networks that were rooted in the old communist power elites are still strong. According to the daily newspaper, SME, there are 13 former security guards and 23 informers among the bosses of the 100 best-known companies. The security services are rent by periodic scandals.
Entry the only option
As one EU diplomat put it to the Times of May 16th: "Slovakia is not ready for EU membership. But the only way to reunite Europe, and lift the country is to get it into the EU because that gives it a vision of how to be a European country with the rule of law." For security reasons it really has to be brought in; otherwise it would be a magnet for all sorts of criminal elements, able to operate there as a conduit between Poland and Hungary and the Czech Republic, which all have crime problems themselves. Checkpoints and controls along a Shengen border will be necessary.
The government of Premier Mikules Dzurinda is being encouraged as the makeweight to prevent the return of Vladimir Meciar, a populist Tsar of corruption and shady deals in the recent old days of 1993-1998. The US and others made it clear in last year's election that if Meciar came back then the Slovaks could forget about NATO or EU membership. The centre-right coalition, acceptable to them, duly won.
The Economy is on the mend
The Slovaks are very poor, with a GDP per capita of £3,320. But that is one reason why foreign investors are coming in. A very cheap but well-educated work-force (the one boon of communism) inhabits a country right in the very heart of Europe. Some 4.4bn Euro's worth of FDI came in last year alone.
Its economic profile in disposition of employment of various sectors is more like that of the EU average with each year. The work-force by sector is 7% for agriculture, 38% for industry and 55% for services. The EU average is 4%, 28% and 67% respectively.
Political problems abound
The politics of the country is still rife with problems. Some 10% of the population, 500,000 people, are Hungarians. Tensions with the Hungarian minority have eased with four ministers coming from among them. But ethnic relations are poor with the 2% Roma minority. In 1995 the city of Kosice, in eastern Slovakia, began to deport Roma in large numbers. The mayor at the time was Rudolf Shuster. He is now president of Slovakia.
Mr Meciar's Movement for a Democratic Slovakia has not gone away. In local elections last December it won the most seats and has 384 mayors, who really count in Slovakia. The Slovak leadership knows that there is a lot yet to do. Pal Csaky, a deputy premier, told the Times: "We are a post-communist country, and we have some problems. It is a big challenge to change the mentality of the people, to reform the judicial system. But we cannot say that we will solve all these problems in a year. EU membership will be a guarantee of stable development."
Slovakia has long had a shady side to its history. It was once a remote provincial backwater in the Austro - Hungarian Empire. Then in 1918 it became part of Czechoslovakia. During the Second World War it was ruled by Father Josip Tiso, a Roman Catholic priest who ran a Nazi puppet state that sent the Jews to the death camps. In 1944 the Slovaks rose up against the Nazis before being re-absorbed in Czechoslovakia.
The long night of communism came to an end with the Velvet Revolution of 1989; and then four years later Meciar engineered independence. Robert Frico, leader of the left-wing opposition Smer part says that the Slovaks have made progress internationally, but not much on the vital domestic front: "On corruption, social questions and the rule of law there is no difference," he said. "There are dozens of scandals over share privatisation, and government cronyism."
The augurs look good, all the same, if the government continues to court the West, which can only be by tackling these problems head-on, one-by-one.
ZVS signs arms production deal with Ceska zrbrojovka
ZVS Holding has clinched a deal with Ceska zrbrojovka (CZ), a Czech-based arms producer, for the transfer of the latter's Slavia rifle production line to the Slovak town of Dubnica nad Vahom, ZVS chief executive, Vladislav Volonec, said, Interfax News Agency reported.
ZVS expects to produce about 40,000 rifles each year. Volonec said the production's transfer should be finalised by the end of this year. Miroslav Solava, the holding's chief executive, said the agreement between CZ and ZVS Holding is a first between the Czech Republic and Slovakia in the sphere of arms production. ZVS provides ammunition to both the Slovak and Czech militaries.
Slovak SkyEurope to introduce London and Paris service
SkyEurope Airlines opens the first direct destinations from Bratislava to London and Paris with regular flights to both cities starting from 11th July and 22nd August, respectively, TASR web site has reported.
"We want to offer Slovak passengers an attractive possibility to travel directly from Bratislava airport to important European cities at advantageous prices," chairman of the company's board of directors Christian Mandl told a press conference on 14th May.
The company will use a rented airliner Boeing 737-500 with a capacity of 133 seats for this destination. The aircraft should arrive to Slovakia in June, and will fly three times a week at the beginning.
Currently there are 1,000 Slovak passengers flying to London from Vienna or Prague every week, and Mandl expects five regular flights a week to London Stansted and Paris Orly airports as of September.
Slovak company SkyEurope Airlines has been operating on the market since 2002 and offers flights to 11 destinations such as Stuttgart, Munich, Dubrovnik, Split, Milan, Prague and Kosice. Its share on the Slovak market reached 65 per cent.
In the future the company plans to fly to Brussels in which the Slovak government is very interested. SkyEurope Airlines currently flies with three Embraer 120 ER aircraft with capacity of 30 seats. As of June its fleet should enlarge by another Embraer and the aforementioned Boeing 737-500. Other services that the company offers to passengers include booking of a hotel room or a car.
Slovak government approves eurobond issue to repay state debt
The Slovak government had approved a eurobond issue worth 500m Euros towards the repayment of state debt, the Finance Ministry reported on 7th May, TASR web site has reported.
The bond will have a two-year maturity, with 3-per-cent coupon, and is callable early. It will facilitate repayment of state debt at favourable terms, said Finance Minister Ivan Miklos. The issue will be lead-managed by Credit Suisse First Boston (CSFB) and used to redeem Nomura-brokered bonds worth 1bn German marks (512m euros) in 1998 and US$300m (11bn korunas).
With current euro interest rates, the issue will allow Slovakia to refinance itself under the most favourable terms yet, Peter Papanek, spokesman of the ministry said.
Slovak branch of IBM wins Defence Ministry tender
The Slovak branch of IBM has won a tender to supply a logistics information system for the Slovak Defence Ministry, Defence Minister Ivan Simko announced on 15th May, TASR News Agency web site has reported.
The ministry must sign an agreement on the future agreement with the winner of the tender by the date specified by law, Simko added.
One of conditions for signing a final contract is an audit of IBM's industrial security, which the company can proceed with after signing the first agreement.
Originally, the tender was won by Slovak company Slovakodata, while IBM were second, but the Public Procurement Office ordered the Defence Ministry to re-evaluate the bids.
Subsequently, a new selection commission chose IBM and Slovakodata came in third. The Defence Ministry has already signed a separate agreement on a future agreement with Hewlett-Packard. It won a tender to supply a staff information system, but its industrial security audit has yet not been completed.
Consortium wants bigger stake in SPP
The consortium currently holding a 49% stake in Slovak gas distributor Slovensky plynarensky priemysel (SPP) says that if the law is changed, it will buy additional shares, reports the Slovak Spectator.
Germany's Ruhrgas and Gaz de France (GdF) agreed to purchase the 49% stake in SPP last spring, in a deal that had to be approved by both the European Union and Slovak monopoly commissions.
Ruhrgas is wholly owned by E.ON, which also holds significant stakes in Slovakia's largest electricity supplier Zapadoslovenska energetika, several local combined heat and power schemes, and has shown an interest in power generator Slovenske elektrarne.
The third member of the consortium, Russian gas giant Gazprom, backed out of the deal in July 2002, keeping an option to buy up to one-third of the minority stake - an option it may exercise by the end of this year.
Gazprom and GdF have been working together since 1976, and GdF has just extended existing agreements with Gazprom for the annual supply of 8 billion cubic metres of natural gas. The company says it would be in favour of Gazprom taking up its 16.3% stake in SPP.
"We think that the structure of the international consortium with Gazprom as a supplier of natural gas is very advantageous," sad Phillipe Boucly, its representative on the SPP board of directors.
Any further share purchase by the consortium is currently blocked by Slovak legislation, which allows the government to sell only 49% in companies deemed to be vital to the national interest.
"The sale of the remaining shares controlled by the government in strategic companies depends on a political decision. We are monitoring the situation and waiting for the sale of SPP shares held by the government," said Boucly.
The international consortium has an option to buy the remaining stake in SPP if the government decides to sell it.
No price for the remaining share of the company has yet been set, but Boucly considers that it would be higher than the original stake bought in January 2002 for US$2.8bn (€2.6bn) to reflect the value added to the company since the consortium took over.
He added that the European Bank for Reconstruction and Development might play a role in the event of the sale of the remaining stake in SPP.
Over 50% of SPP's sales of natural gas within Slovakia are to large corporate clients. However, its domestic sales are dwarfed by transit sales. In January 2003 SPP transported 7bn cubic metres of gas via its transit pipeline network, mainly form Russia to Western Europe.
Shareholders sack management of Slovak oil giant
A group of minority shareholders of the Bratislava-based refinery Slovnaft arbitrarily sacked the company's management at an extraordinary general meeting 17th May TASR web site has reported.
The move followed a dispute that arose among the majority shareholder Hungarian oil company, Mol, and a group of minority shareholders led by the J&T financial group, over the price level of compulsory buy-out offer to minority shareholders.
The incumbent management described the minority shareholders action to be invalid.
Earlier at the general meeting, shareholders voted down all proposals to distribute 2002 corporate profits via dividend payments. Most shareholders, including the strategic shareholder, Hungarian oil company Mol, rejected proposals to pay out 25 per cent or 50 per cent of 2.5bn-koruna profits in dividends of S0.80 or 61.60 korunas per share.
According to Mol, dividends payments ran counter to its further investment plans.
Slovak economy slow to grow
The European Bank for Reconstruction and Development (EBRD) increased the competitive rating for Slovakia on April 22nd, saying the country can look forward to continuing high economic growth this year.
The main risks are political difficulties in exercising fiscal changes and development of export markets, the bank said.
The Slovak economy rose by 5.4 per cent in the last quarter, 4.4 per cent year-on-year.
Bush promises US$6m
The US embassy in Bratislava says Slovakia should receive US$6m (€5.5m) of the US$74bn (€68bn) US president George Bush has requested from Congress, according to the 'Pravada' daily.
"The president's request has gone before Congress, and Congress will decide how much will be appropriate for individual countries and how it can be released," said Paul Oglesby from the US embassy.
Sk34bn expected from privatisations
The government should receive a further Sk18bn in privatisation revenue this year, and Sk16.3bn for 2004, according to Prime Minister, Mikulas Dzurinda, the Slovak Spectator reported recently.
Most of the money will be used to cover loan guarantees. Dzurinda summarised how income from privatisation between 1999 and 2002 had been used. Out of Sk242bn (€5.9bn), Sk59bn (€1.4bn) was used to pay off state loans, Sk69bn (€1.7bn) was used for pension reforms and Sk11bn (€270m) for development
A third of roads in disrepair
A third of class II and class III roads in Slovakia are in need of repair, according to the Slovak Roads Authority, and one in 20 roads is in a dangerous condition, the Slovak Spectator reported recently.
"The state has not ensured that the reconstruction of roads has been carried out correctly. Road surfaces should be replaced every 10 to 15 years, but we have cases where the surface has not been replaced for more than 20 years," said Pavel Olejar, head of the roads division for the eastern Presov region.
Slovakia may let private investors participate in highway projects
Slovak Transport Minister, Pavol Prokopovic, told a news conference the government might give private investors the right to take part in highway development projects, Interfax News Agency reported.
"The government is in talks with two financial groups, one from Italy, the other from France," Prokopovic was quoted as saying. The minister noted the conditions for the tenders will hopefully be in place by the end of this year. The first tender for a section of highway may be introduced early next year. First on the agenda is to finalise the road from Bratislava to east Slovakia via Zilina. "Progress will depend on investors' offers," he said, adding he hopes to avoid the difficulties encountered by the Czech Republic when it undertook a similar experiment. Prague annulled a deal, awarded without tender, to an Israel-based group to build a highway section. There are about 300km of highway in Slovakia. Lack of funding is the main obstacle in getting the highways ready.
INVESTMENT BACKGROUND REPORTS
Our analysts and editorial staff have many years experience in analysing and reporting events in these nations. This knowledge is available in the form of geopolitical and/or economic country reports on any individual or grouping of countries. Such reports may be bespoke to the specification of clients or by access to one of our existing specialised reports.
For further information email:
Considering an investment or a trip to any newnation? First order our Investment Pack which will give you by e-mail the last three monthly newnation reports and the complete worldaudit democracy check for the low price of
US$12. The print-out would be a good companion to take with you. Having read it, you might even decide not to go!
To order please click here: