% 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: 080 - (01/01/04)
Foreign investment; the dynamo of growth
The Slovak economy is now attracting a lot of interest from foreign investors, who previously had tended to avoid it. In the 1990s Slovakia was ruled by Vladimir Meciar, an old-time thuggish nationalist, who stalled reform, except such as 'reformed' the finances of himself and his cronies. He had brought about independence from the Czechs in 1993 with just this in mind.
He had one virtue. He left office as premier when voted out in 1998. His successors have done a much better job, transforming Slovakia's international image as a result.
Foreign investment began to come in, noting the underlying advantages of the country, its central location, low wages, yet highly educated work-force.
The turning point came in the country's car industry, which is benefiting from the success in Slovakia beating Poland as the destination of a massive investment by France's PSA Peugeot Citroen. The motor industry is the motor of growth, along with transport equipment generally. An export offensive can be expected next year.
Other investors began to flock in, Austrians and Germans, who began to realise the dramatic improvements to their cost structures by relocating a few kilometres eastwards. Real wages actually keep falling in Slovakia, by 3.7% in August year-on-year.
Total industrial production is up by 7.7% on the year, and gross company (not workers') earnings are booming at 64.3bn crowns. The economy is becoming a capitalists' paradise.
Looked at from this perspective, the economy is doing well. The Slovaks have a coalition government in power, which is coping with a situation that is showing signs of macro-economic improvement, the more welcome because the EU economies next door have been so long in the doldrums. GDP growth for 2003 is expected to come in at 3.9%, while it is expected to be 4% in 2004, the year of Slovakia's accession to the EU.
Things don't look so good from a different perspective, that of the worker. Unemployment is still almost 14% of the work force, admittedly down from 17% in February, while inflation is close to double figures, being 9.6% on an annual basis in October, the latest available figure. That of course accounts for the steep contraction in real wages.
But the IMF in a recent evaluation is supportive, noting that growth is strong, macro-economic imbalances are narrowing, unemployment is declining and core inflation is low. The country's external current account deficit is projected to narrow to 4% of GDP in 2003 and 2004, based on robust export growth as Germany and other EU economies begin to pick up.
Need to address fiscal problems
The IMF also notes that, as regards fiscal policy, the 2004 budget is a welcome step towards further fiscal consolidation. This is due to the government adopting an appropriate budget deficit target of 3.9% of GDP for 2004, while implementing an ambitious tax reform.
The IMF, however, states that the government needs to get a better handle on the finances of municipalities and the health sector. It also expressed disappointment at the rise in subsidies in the 2004 budget, all of the increase going to the agricultural sector. But then the IMF does not have to bear responsibility to the electorate.
Call for new elections
The unions are calling for new elections, despite the previous ones being just last year, won by the right-wing coalition by playing up the Meciar bogy for all he is worth, which as still the leader of the opposition and the most popular and yet unpopular individual politician in the country (depending on whom you are talking to) is a lot. The Trades Union Congress needs 350,000 signatures in two months from November 15th to achieve its wish.
The government in fact in difficult circumstances is putting in a good performance. Premier, Mikulas Dzurinda, is proving an able operator and is even addressing unpopular issues, such as the Roma or gypsies, whom he visited at Letanovce recently.
He pledged to finance new homes for them in place of their slums, using EU funds for the purpose. He had with him EU Commissioner for Enlargement, Guenter Verheugen, to lend credibility to his pledge.
The government, which engineered the successful EU entry bid after Meciar's delay of it, is doing everything to associate itself with new initiatives and benefits that entry could bring. That way it might just scrape through 'til better times ahead inside the union.
Government of Slovakia to issue bonds abroad
Slovakia will issue eurobonds worth up to 250m Euro to cover state debts payable last year, Finance Minister, Ivan Miklos, said, Interfax News Agency reported.
The bonds will mature in May 2005. "We are able to issue government bonds on foreign markets under much more advantageous terms than on the Slovak domestic market at the moment," Miklos told a news conference. The Slovak market would mean interest rates at approximately 5.5%, compared to 2.3% abroad. Miklos said the move will save the country up to 500m crowns in state debt servicing over the next few years. The bonds were to be issued on November 24th. Interest will be variable at three month Euribor plus 0.05%. They follow a May 500m Euro bond issue. "We expect this issue to have even better terms than those we achieved in the spring of this year," Miklos said, adding that foreign markets appreciate Slovakia's economic development as well as past and planned reforms. The Slovak National Bank (NBS) was reserved in its judgement, as foreign bond issues raise sterilisation costs.
Slovenske elektarne bid attracts 10 potential investors
Ten international companies are bidding for a 49% stake in the state-owned utility Slovenske elektarne (SE) being privatised by the government of Slovakia, Deutsche-press Agentur (dpa) reported recently.
Quoting sources at the Slovak Economics Ministry, the Slovak News Agency TASR reported that Germany's E.OM, France's Eelctricite de France, Czech CEZ and a Russian consortium headed by Gazprom were among the bidders.
SE produces 85% of Slovakia's electricity and also operates the country's only nuclear power station. In 2002, the company had sales of 42.4bn Slovak crowns (1.02bn Euro) and a net profit 235m crowns.
New Samsung plant for Slovakia
South Korea's Samsung will invest 40m Euro in a new facility to produce appliances in Slovakia, Slovakia's SARIO agency for the development of investment and trade announced recently, Interfax News Agency reported. Samsung has not yet decided whether it will be a greenfield investment or whether it will use an already existing facility, according to SARIO head, Jan Bajanek. No decision on the location has been made yet either. The new plant should create up to 500 new jobs.
Samsung was attracted to Slovakia thanks to the success of the US appliance maker Whirlpool's facility in Poprad, which produces washing machines, according to Bajanek. The Poprad plant should become Whirlpool's biggest European production centre by the end of 2004, turning out some two million washing machines annually.
Samsung opened a plant to produce computer monitors in the western Slovak town of Galanta in July of last year. That facility employs over 700 people and produces 500,000 monitors a month.
SARIO to draw in foreign investments
SARIO, Slovakia's national trade and investment development agency, was recently given the task of attracting foreign investments and enhancing the construction of industrial parks in Slovakia, according to the Slovak Spectator. Economy Minister, Pavol Rusko, wants to operate on a more independent scale from his office and take more steps towards getting in touch with potential investors. "I expect an agency like SARIO to be active and not only elaborate strategic documents and analyses. We can order an analysis, as there are so many companies doing analyses. SARIO is supposed to go out, look for contracts and persuade people," Rusko was quoted as saying.
A new draft law on SARIO written by Rusko's team is set up to give the institution the powers it needs to support investments and Slovak exports, as well as the country's image aboard.
The legislation will also do away with the Fund for Foreign Trade Support and switch its authorities to SARIO. This will help organise the activities of the business and commercial attaches. The ministry is also hoping to make the operation of already existing delegates more effective. Calling it a deficient operation, Minister Rusko has already sacked commercial mission heads in Australia, Brazil and Argentina. He also plans to strengthen delegations in Austria, Germany, the Czech Republic, FYROM and also China.
SARIO, which took off in 2000 as a stop off for investors, bringing the resources of six ministries together and the National Property Fund (FNM), is presently working on 109 projects of investment that are approximately worth 3.3bn Euro.
The biggest alteration to the construction of the parks will be the co-financing by municipalities from 30 to five per cent.
SARIO has been in the limelight recently because of its boss, Jan Bajanek, whom Rusko appointed and was charged with fraud not too long ago.
Bajanek has reportedly transferred 14,000 Euro fraudulently to the account of his own firm, Business Communication Bratislava. Bajanek has denied the charges, accusing them of being part of the media war the SME was conjuring to ruin his image and damage Rusko.
Charges of embezzlement have been brought against Bajanek and if he is found guilty he could spend up to five years in jail. According to SME, Bajanek collaborated with communist secret police between the years of 1987 and 1989.
Nevertheless, the SARIO boss considers the information unrelated, saying that, at that time, "anyone who spoke four foreign language and worked at the US embassy was registered by the secret police."
By the year 2006, SARIO is planning to open at least nine branch offices to support foreign direct investment in the Czech Republic, Germany, Great Britain, Belgium, the United Arab Emirates, Russia, Japan, and the United States.
World Bank to lend money to Slovakia to aid health care reform
The World Bank regards Slovakia's reform of its health care system as unique within the entire Europe, Radio Slovakia has reported.
That is why it will support the implementation of the reform by offering Slovakia two loans, amounting to nearly 3bn Slovak korunas.
Richard Kwasniowsky of the radio station gave more details: Finance Minister, Ivan Miklos, has stressed that the World Bank will provide the same [financial] aid as it did regarding Slovakia's reform of its social system.
Miklos said: "It is expected to support our reforms, our reform steps, to cover the costs of the overall measures that are linked with the modernization of [Slovakia's] health sector, and to cover the costs of technical aid, also provided by World Bank experts."
The interest rate has been set at less than 3 per cent. The money is expected to be used to stop the growth of the health sector's debts, implement health care reforms and improve the quality of the country's health care:
Health Minister, Rudolf Zajac, said: "Here we have a combination of the World Bank's expertise, its experts' knowledge and our possibilities. The issue of repaying [the loans] represents a lot less serious problem than the issue of how to invest this money in order to make sure that it benefits the entire health system. This is what World Bank loans are all about."
Escalating debts keep doors shut at pharmacies
Dozens of Slovak pharmacies were closed recently in protest at the mounting debts owed them by the country's health insurers, CTK News Agency reported.
Some pharmacists also stopped buying medical supplies as part of their protest, Peter Mihalik of the Pharmacies' Association said.
"Public pharmacies all over Slovakia stopped buying and ordering medicine today. Most of the pharmacies, particularly in large cities have, however, remained open," said Mihalik. Other pharmacies are expected to join the protest, as they run out of supplies. "Most of the drugs in public pharmacies will run out and the pharmacies will have to decide between closing and operating without drugs," said Mihalik.
Health insurance companies owe Slovak pharmacies seven billion Slovak crowns.
The Slovak state wants to solve the problem by restructuring the joint stock company Veritel, but the pharmacies oppose this. It's not the state, Mihalik told reporters at a news conference, but the health insurance companies that owe money to the pharmacies.
The insurers do not want the joint stock company to settle the debts either because the conditions are disadvantageous for them.
Pharmacies had originally said they would begin selling drugs for cash at their full value, but the health ministry responded by threatening to suspend their licenses.
The General Health Insurer has the biggest debt. It has already received hundreds of millions of crowns from the state to cover it.
The opposition party Smer, is supporting the pharmacies. It says it will propose the dismissal of Health Minister, Rudolf
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