% of GDP
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: 077 - (01/10/03)
The Slovak premier, Mikulas Dzurinda, is leading a reform government which surprised everyone by being re-elected last year. The fact that the opposition leader was Vladimir Meciar, the former premier (1993-98) renowned for his authoritarian and thuggish style, doubtless had something to do with it.
Reform at risk
Slovak President Rudolf Schuster, said his country's ruling coalition government is hampered by too much internal discord. Although he feels overall developments in Slovakia are positive, Schuster said the cabinet is divided when it comes to the reforms necessary for EU membership. "Every minister pursues his own reform without coordination with the others and without a sufficient analysis of problems," the Slovak President said.
Slovakia's ruling coalition is made up of Prime Minister Mikulas Dzurinda's Slovak Democratic and Christian Union (SDKU), the Hungarian Coalition Party (SMK), the Alliance of a New Citizen (ANO), and the Christian Democratic Movement (KDH). Schuster said too many government-sponsored bills are "ill-considered" and must be returned to parliament for re-writing. In their competition for votes, the parties put too much emphasis on unimportant issues, such as an abortion bill that has divided the coalition for months, he said. Holding an election now would be "too costly," however, and would damage the country's image as a stable democracy.
The Slovak's strictures on the internal bickering of the coalition may be justified, as also on triviality too often winning out. But his judgment that the overall balance-sheet is positive is exactly the view of Brussels and the international community generally. Pension reform is on the agenda and there are plans for a single 19% income and corporation tax next year. The idea is to simplify the system on a flat rate basis, thereby cutting red tape and complex allowance schemes. Poland is due to follow suit in 2005.
That Slovakia should now be leading the way is novel, but appropriate. As a far smaller country than Poland, without its complex agriculture or rust-belt coalmining regions, it is able to implement reforms more easily.
The state sector is less oppressive in Slovakia, with a smaller public budget deficit at 5.55 of GDP inn 2002, and prospectively about the same this year.
But there is one big test-case ahead, reform of the state railways, the largest employer in the country. Innumerable categories are eligible for exemptions or reduced fares, pensioners, students, families, hikers and civil servants. It is the last two categories which are revealing. The Slovaks by and large see themselves still as a nation of country pursuits, such as hiking. The sophisticated professional people and intellectuals in Bratislava would naturally be different. But a home-spun philosophy of healthy outdoor living fits in with a tradition of peasant ways and folksy customs. Such, indeed, was the basis of Meciar's fatal appeal.
The civil servants are privileged for less exalted and rather more prosaic reasons. There are still huge vested interests in Slovakia that need to be curbed. It will probably require a boom to enable them to be tackled. That for tiny Slovakia depends on forces outside its direct control, such as EU growth. The augurs domestically are still quite good.
Internationally the country's profile was enhanced by the visit of the Pope on September11-14. So at least the Slovak clergy believe.
The propagation of the mystique of the papacy certainly serves to give the highly devout peasantry and country folk a better object for their capacity for veneration than the likes of Meciar. Who will be the new Pope is important in Slovakia.
Drought compensation to Slovak farmers cut
The Slovak Agriculture Ministry has reduced the volume of compensation it wants for farmers hit by this year's drought, from 2.1bn korunas to 1.7bn korunas (41m Euros), it said on 17th September TASR web site has reported.
Finance Minister, Ivan Miklos ,suggested that he may provide partial compensation, but said further details would have to wait until after the release of public finance figures in October. Miklos has said that any compensation to farmers would have to be at the expense of other sectors.
The ministry puts the damage caused to agriculture this year by drought and low prices at an overall 4.36bn korunas. The government previously compensated the sector in 2000, earmarking special resources from the central bank NBS.
Economic revival luring Slovaks back home
Slovak workers in the Czech Republic are drifting back home in spite of average wages there being around a third lower than in the Czech Republic, the Prague Business News has reported.
Many Slovaks are taking advantage of Slovakia's economic revival and the influx of foreign investors who are now beginning to recruit.
Figures from the Czech Ministry of Labour and Social Affairs showed the 63,555 Slovaks registered at employment offices at the end of 2001 fell to 56,839 by the end of June this year.
The launch of new Slovak auto manufacturing plants and expansion of existing ones is one of the strongest factors pulling expatriate Slovaks home.
"We used to have over 3,000 Slovak worker here, but now there are officially fewer than 2,000," Vladimir Stava, the head of the Hodonin local labour office said.
Emil Slaby from Senice, west Slovakia, is one of Hodonin's Slovaks who has been tempted back home. "We did make good money in the Czech Republic, but we were away from our families and transportation home cost as well," Slaby said. "So when we had the chance to find work at home, I did not hesitate a minute."
Slaby said only the extra Kc2,000 a month that it is often possible to earn in the Czech Republic compared with Slovakia, is preventing some of his Slovak friends from following his example.
Slaby worked for several companies around Hodonin, Breclav as well as Brno.
As Slovak workers are leaving Hodonin, Slovak shoppers are pouring into shops and gas stations along the border to take advantage of cheaper Czech gas, cigarettes, and beer. Tax increases have raised the cost of these goods in Slovakia. "We're becoming more of a shopping centre for Slovakia," said the labour office's Stava.
An estimated 3,500 new jobs will be created by the launch of auto production by Peugeot-Citroen which will invest €700m in a new plant producing mid-size autos in Trnava. Production should be launched in 2006 with 30,000 cars manufactured a year. The existing Volkswagen Slovakia factory in Bratislava is also due to increase its production,
The new and existing plants are expected to be a magnet for component producers.
Anglo-Japanese car cable producer, Sews Slovakia, has already established a plant at Topolcany, west Slovakia and Japanese-based cable producer, Yazakia Slovakia, has built a plant in the central Slovakian town of Prievidza. French-owned plastic tube and cable accessory producer, Sofanou Slovakia, a 100 per cent subsidiary of Sofanou, has launched trial production in Zlate Moravce, west Slovakia. When production is in full swing, Sofanou Slovakia expected annual sales worth €7-8m.
Canadian envoy says flat tax might attract investment to Slovakia
Introduction of flat tax in Slovakia could significantly influence the influx of Canadian capital, according to Margaret Huber, departing Canadian Ambassador to Slovakia (based in Prague), TASR web site has reported.
The press department of the Slovak Parliament told TASR on 27th August that she met with Foreign Parliamentary Committee Chairman, Jan Figel. He noted that Slovakia was extremely interested in economic cooperation with Canada and in the entrance of investment capital. Figel also praised Canada's support in the area of development assistance.
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