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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: 070 - (25/02/03)

The Slovaks are about to sign for NATO membership in March, having been invited to join at November's Prague summit. The re-election of a moderate centrist government and premier in September are paying off.
The survival of Vladimir Meciar as the leading opposition figure is a boon to Premier Mukulas Dzurinda and his team. The economy is in trouble, with 17% unemployed and sluggish growth. But Meciar is a bogy man against whom everyone of any liberal persuasion would rally behind the government.

International recognition
Dzurinda is regarded very well abroad. He was one of the ten signatories to a letter supporting Bush over the coming Iraq conflict, sent on February 5th. 
The Slovak embassy in Washington was the venue for this bold diplomatic initiative in which Slovakia, along with other Central and eastern European countries, finally put themselves, on the map. A communiqué was drawn up at a dimmer in the embassy, attended by diplomats from the other Vilnius-10 countries. Croatia, Albania, Macedonia, Slovenia, the three Baltic states, Romania and Bulgaria. 
They aligned themselves right behind the US over Iraq, to the fury of president Jacques Chirac of France, who said that "they had missed an excellent opportunity to shut up," One could say that he missed such an opportunity himself, for his intervention has boomeranged badly, with a spokeswoman next day backtracking on Chirac's bluster: "If they wanted to find a way to reduce their chances to enter Europe, they could not have found a better way."
What Chirac fails to understand is that the ten signatory nations know what it is like to be ruled by a totalitarian state; he doesn't or has forgotten (he was a small boy in the Second World War). One of the more compelling of the sentences in the letter says it well: "Our countries understand the dangers posed by tyranny and the special responsibility of democracies to defend our shared values." This sentence was included, as it so happens, by an American, Bruce Jackson, a lobbyist and activist, who has been an adviser to Eastern European countries for years and leads The Committee for the Liberation of Iraq.
Seven of the ten are due to join NATO in 2004 or 2007 and the three others, Albania, Macedonia and Croatia, are on the list for eventual inclusion -Jackson said: "they clearly wanted to do stuff to impress upon the US Senate the freedom - fighting credentials of these new democracies." He also said of his own role in the affair: "The Armenian influence in all this is vastly exaggerated. This was a product of the Slovaks and really the Latvians. They had the pen on this, and they coordinated the process." But others involved, and indeed his own earlier words, bely this as disingenuous. Kestutis Jankauskas, deputy chief of mission at the Lithuanian embassy in Washington, said that Jackson played "a considerable role 'and' helped initiate the text." That does not mean that it is not heart-felt all the same
Slovakia had one of the weirdest fascist regimes ever in the 1930s and 1940s, a pro-Nazi, priest's dictatorship, extolling Catholic nationalism and violent anti-Semitism. Then they had years of communism. A phenomenon like Saddam's Iraq is not likely to appeal to the Slovaks; and the march to protest the looming war which took place in London on February 15th would be inconceivable in Bratislava.

NATO referendum
There is a big push developing behind the idea of a referendum on NATO membership. More and more public figures are urging the government to carry out a referendum on Slovakia's accession into NATO, the Western military alliance. The citizens' group "The Civic Initiative for a Referendum on Slovakia's Entry into NATO" was officially launched with the backing of leading personalities. 
The president must call a referendum, if 350,000 people sign a petition demanding it, which is quite likely to happen. Opinion polls show a majority, but not a big one in favour, 47% for 39% against in one recent survey.
The reasibs fir apprehensions about NATO membership are not hard to seek. If you have lived your life being told the US is the arch-enemy and that the Germans were the villains in the early twentieth century, it is difficult to readjust one's views and see them as necessary allies. The anti-NATO lobby, like the pro-Meciar vote, consists of the old and the disenchanted. Slovakia will join NATO all right.

Presidential race looms
With presidential elections looming in Slovakia, politicians are gearing up for the race. Foreign Minister Eduard Kukan already has announced his intent to pursue the head of state job. The presidential elections, scheduled for 2004, will be a direct vote. The right-wing Slovak Democratic and Christian Union (SDKU), a member of the governing coalition, nominated Kukan. Prime Minister Dzurinda, who nominated Kukan, was quoted as saying that the foreign minister "enjoys the support of the entire party leadership." According to Dzurinda, he felt his party "had a very, very good candidate."
Asked about Kukan's communist past, the premier said he believed Kukan had been an honest man his entire life. The coalition partners of SDKU have yet to disclose if they will nominate their own candidates.
Reports suggested that incumbent President Rudolf Schuster will run again. Meciar may also join the race. 

Slovakia inches ahead of the Czechs
The beginning of 2003 saw the 10th anniversary of the split up of former Czechoslovakia. If the Czechs fared much better at first, under Vaclav Klaus, a former professor of economics, than the Slovaks under the former boxer Meciar, the roles are in many ways now reversed.
With a unified centre-right government, the Slovaks are engaged in fiscal and pensions reforms which the Czech government, with its flimsy majority and mixed composition, is shying away from; for the reforms are unpopular. The Slovaks look more likely to enter the Eurozone in 2006-07 than the Czechs, whose next election in 2006 looks like the earliest date for reforms to be resumed.
By starting sooner, the reform process will be easier for the Slovaks. Not in itself a reason for investors to go in, it nevertheless gives them the right impression. PSA has decided to build a car factory in Tirana worth €700m, an event noted across the region to the chagrin notably of the Poles. "From the point of view of the financial markets, this signals the sudden emergence of Slovakia as a competitive player in attracting FDI, and the country now looks to do some catching up with currency appreciation," said Thomas Browne, a currency analyst for emerging European Markets at Deutsche Bank in London. Analysts now expect FDI into Slovakia to increase over the next few years that will in turn fuel growth of GDP.

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AUTOMOBILES

Slovakia beats out Poland to win Peugeot plant

French auto giant PSA Peugeot Citroen has announced it will be building a new €700m factory in the west Slovakia town of Trnava, reports The Slovak Spectator. The announcement came a week after the cabinet agreed on a package of investment incentives for the carmaker.
The announcement was made on January 15th, although the decision was not due until the end of January, Peugeot officials said that Slovakia had won out over rival locations in Poland due to Trnava's central location and infrastructure, as well as the possibility to develop an industrial park for suppliers next to the plant.
Peugeot also credited the Trnava site with an established "manufacturing tradition and the availability of well-educated labour."
"The new site will bring the PSA Citroen group's manufacturing base closer to markets where it is rapidly strengthening its presence," the statement read.
Slovak state officials in Bratislava reacted warmly to the news, saying the Peugeot plant would create up to 3,500 jobs directly and another 6,000 jobs indirectly by the time the factory comes online in 2006.
"The French investment is the investment of the decade for Slovakia," said economy minister, Robert Nemcsics.
"Joining with a significant European carmaker will bring new work opportunities, will positively influence Slovakia's exports and will have a fundamental impact on the business environment.
"This investment is the result of several months of negotiations between the investor and the Slovak Economy Ministry and its sub-organisations, as well as extra support from the Slovak government, all the way up to Prime Minister, Mikulas Dzurinda," said Nemcsics.
"What I see in this decision is the great trust PSA has placed in Slovakia by deciding to invest here," said Dzurinda at a press conference following the announcement.
"The investment is and will be exceedingly important for the Slovak economy and for the country," he said.
Finance Minister, Ivan Miklos said the state would eventually have to invest Sk6.5bn (€156m) to complete the project, including Sk2.2bn (€53m) this year on construction projects, but that Peugeot's operation in Slovakia could generate up to Sk100bn (€2.5bn) per year in exports once up and running.
Miklos said the state would avoid using privatisation revenue so as not to affect Slovakia's public deficit.
"For now, we have a concrete proposal to allocate Sk1.1bn (€26m) so we can start construction work," said Miklos.
Peugeot's move comes, as automakers are increasingly looking to EU candidate states in central and Eastern Europe as cheap manufacturing bases.
At the end of 2001, automotive imports from central Europe to the EU reached €17.4bn, nearly triple the €6bn imported in 1997. Of that, motor vehicle imports grew from €3.1bn in 1997 to €8.3bn in 2001.
"The move eastward started as a trickle, but it is becoming a fast flowing river," said David Andrews, head of strategy and international relations for the European Association of Automotive Suppliers.

Volkswagen unit records 24% rise in 2002 turnover

The Slovak subsidiary of German carmaker, Volkswagen, announced a 23.5% year-on-year jump in turnover for 2002. Volkswagen Slovakia (VW Slovakia), said the overall turnover figure reached 109.62bn Slovak crowns, Interfax News Agency reported. VW Slovakia made 225,442 vehicles last year, an increase of 43,798 from the previous year, produced 301,435 gearboxes and about 18.22m gearbox components. Last year's exports amounted to 108.17bn crowns, up by almost 23%, while imports totalled 75.08bn crowns. VW Slovakia reported a surplus of 33.09bn crowns. The company had a staff of more than 9,000 workers at the end of last year, against 7,500 the year before. 
VW Slovakia, located in Bratislava, has been putting together VW Golfs, Polos, Boras and Touareg off-road vehicles. The company announced last year that it would transfer part of its Ibiza model production from Spain to Slovakia, with 20,000 units in annual production.

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CONSTRUCTION

2002 11-month construction output up 20%, SUSR says

Slovakia's Statistical Office (SUSR) said in its latest report that construction output in November 2002 increased by 7.9% year-on-year in real terms, compared with 6.9% year-on-year in the previous month, Interfax News Agency reported. Preliminary data showed that in absolute terms, construction output reached 8.2bn Slovak crowns in current prices. More new construction, renovation and reconstruction projects were instrumental in pushing up growth by 4.4%. 
Repairs and maintenance work expanded by 19.7%, while foreign projects work climbed 18.5% year-on-year. In the first 11 months of last year, construction output grew 3.4% year-on-year, while new projects work increased 2.5%.

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ENERGY

RWE Plus secures 49% of Slovak power distributor

Vychodoslovenska energetika (VSE) shareholders have approved the sale of shares to RWE Plus AG, a German power utility, Interfax News Agency has reported citing the CTK News Agency.
VSE spokeswoman, Anna Pancurova, was quoted as saying RWE Plus will secure 49 per cent of the Slovak power distributor, which is located at Kosice. The energy watchdog has green-lighted the transaction. 
The VSE board will also be restructured. Carl Ernst Giestig, former board chairman at the Hungarian power distributor, EMASZ, a member of the RWE group, is the new board chairman at VSE. Klaus Bussfeld, an RWE Plus AG board member is the new chairman of VSE's supervisory board.
VSE distributes 4.6 TWh of power to more than 600,000 consumers in central and eastern Slovakia.

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MINERALS & METALS

VSZ to sell five subsidiaries

As part of its restructuring plan, the eastern Slovak steelmaker, VSZ, announced plans to sell shares in five subsidiaries: Stylkov, Vriakov, SVSZ Strojlab, VSZ Unicorn Tornala and Seko Slovakia, the Slovak Spectator has reported.
Four of the firms for sale are involved in the production of flat rolled steel, steel structures and engineering products. The fifth, Seko Slovakia, is involved in the import and export of raw materials for the metallurgical industry.

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PHARMACEUTICALS

Pharma Holding sells Slovakofarma to Warburg


German drug maker, Pharma Holding GmbH, has inked a deal with US investment fund, Warburg Pincus, for the acquisition of a controlling stake in Slovakofarma Hlohoves, a leading drug maker in Slovakia, Interfax News Agency reported. No specifics on the deal were revealed. 
The US company must satisfy some terms of the agreement before the purchase becomes final. The deal is also pending regulatory approval from the Slovak and Czech watchdogs. Warburg Pincus has controlled a majority stake in Leciva, the number one pharmaceuticals group in the Czech Republic, for the last five years. The merger will help Leciva and Slovakofarma gain stronger footholds on the central and eastern European markets. It will also help the merged group become one of the top five pharmaceuticals groups in the region, Interfax reported. Warburg Pincus' Executive Director, Nick Lowcock, said the tentative name of the new venture is Alliance for Europe. 
Slovakofarma centres its activities on research, development, production and promotion of drugs, pharmaceutical substances, chemicals and cosmetics. With nearly half of its production exported to the Czech Republic, about 33% sold is sold to the domestic market. The other 17% is sold to 60 countries across the globe. Slovakofarma said it, and its divisions, reported sales of almost eight billion Slovak crowns in 2001, according to Interfax.

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PRIVATISATION

Slovakia unveils plans to sell remaining stakes in utilities

Slovakia's Economy Ministry announced it will publish a report on the likely sale of the state's remaining stakes in utilities, sold under the former Dzurinda government (1998-2002), New Europe reports. The potential sale would obligated the government to amend the law on strategic companies, which stipulates that the state must retain controlling interest in certain companies

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TELECOMMUNICATIONS

Telecoms monopoly ends, but market not yet open

Although the monopoly enjoyed by Slovak Telecom expired at the end of 2002, alternative telecoms providers have lashed out at the dominant operator and the state regulator, saying that market liberalisation so far exists only on paper, The Slovak Spectator reported recently.
Despite a requirement to ensure an open telecom market at the beginning of the year, say officials from the Association of Telecoms Operations (ATO), Slovakia's market-regulating Telecoms Office (TU) has done little to ensure free competition.
"The TU has not been functional for a long time," said ATO head, Vladimir Ondrovic, in a late December letter to Speaker of Parliament, Pavol Hrusovsky.
"Its inactivity, failure to use even those authorities that it has under valid legislation, and its deep lack of professionalism have seriously hindered the development of the telecom market and are a source of shame for the Slovak Republic," he said.
Telecoms operators, said Ondrovic, "are exceptionally unsatisfied with the means by which TU implemented the telecoms law in practice, especially the responsibility to create conditions for fair, transparent, and uncorrupted competitive space in the telecoms market."
According to the ATO, alternative carriers have been unable to establish operations, even after receiving fixed-line licences because they have not reached agreement with ST on the use of the operator's local loops - the final connections with end users.
Officials from the ATO also complain that while the TU received a proposed 'reference price' - the amount ST estimates service over its lines costs and the basis for charges to other operators - on January 2nd, they have not yet seen the proposal and were not invited to participate in crafting the price.
"The TU is a market regulator, not a partner of the dominant operator. If it really wants to cooperate, it should also talk with the other operators," said Ondrovic.
In early January, however, TU head, Milan Luknar, reacted angrily to the changes, saying that the problem was in the law rather than with the regulator, and that his office had done everything possible to ready the market for competition.
"The TU doesn't have any support in the law to compel ST to negotiate with other operators," said Luknar.
"The TU has not broken the law, but despite that the chairman of the ATO is continuing this incomprehensible media campaign," he said, adding that the office had begun licensing procedures in July and had granted 12 fixed-line licences by the end of the year, though they were not required by law to do so.
Luknar also said that the regulators would pass ST's reference price on to alternative operators as soon as the office had studied the proposal.
The war of words between the ATO and TU goes back to an August vote in parliament, when, after alleged heavy lobbying pressure from ST, lawmakers failed to override a presidential veto on a revised telecoms law.
That law would have obliged ST to open local loops to competition from the beginning of this year. Instead, full liberalisation has been put off until Slovakia passes an EU-required law on electronic communications, expected later this year and to take effect in 2004.
According to Luknar, that law should establish an open telecoms market, as well as take care of a number of questions at the regulator's office. Alternative operators and TU officials have long complained that the office lacks qualified personnel and budgetary independence.

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