Books on Slovakia
% 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: 085 - (01/06/04)
The Slovaks did an unusual thing in the spring - they repudiated a fanatical pretender to the leadership of their country, Vladimir Meciar, only to embrace his substitute, Ivan Gasparovic, who has been described as the 'lesser of two evils.'
Gasparovic, the former parliamentary speaker, won with 60 % of the vote. He is a former close ally of Meciar's and is steeped in the same autocratic political culture. One observer put the matter as follows; "this is a bad result for Slovakia. In the West, Meciar is regarded as the devil. But everyone in Slovakia knows that Gasparovic was the devil's right hand man."
Fortunately the job does not have much power the real weight lies with the premier.
Dzurinda buckles to his task
The key figure in Slovakian politics is the premier, Mikulas Dzurinda, who is leading a fragile coalition that only narrowly squeaked in last year in parliamentary elections, in which Meciar's party won 19% of the vote, the largest for an individual party. He is the darling of Brussels and the West, the very antithesis of Meciar, or for that matter, Gasparovic.
He will continue with reforms as Slovakia joins the EU, a fact as of May 1st. His government faces innumerable difficulties.
The Gypsy problem
For instance, the Slovaks have one big ethnic problem at the moment. There is growing unrest among the Roma, also known as Gypsies. They comprise 8% of the total population, but predominate in the eastern part of the country. There is widespread looting and petty crime going on. Roma are poorer than most Slovaks and far less likely to have jobs. The rate of unemployment is 16%, but 30% in the eastern provinces and even higher amongst the Roma.
There has been centuries of discrimination against the Roma and a failure to integrate them into the wider society in not just Slovakia, but a score of European countries, denying them the same opportunities for education and jobs as other citizens in the mainstream of society.
The government has just introduced cuts in unemployment relief and social benefits. They are aimed at breaking a cycle of dependency on welfare, inherited from communism, in which everyone was guaranteed a job. This is what has sparked off Roma protests. At least 2,000 police and army troops have been sent to the area, the largest deployment since the end of communism.
Roma protests have only intensified anti-Gypsy feeling in the country. Their critics have always alleged that they are a people apart, more prone to lawlessness and violence. Their protests for these opponents are further proof that their charges are right.
The widespread disdain for the Gypsies throughout the Europe of their habitation bears out the saying of Dr Johnson: "The world will never be long to find good reasons to hate the unhappy."
Problems with EU membership
The problem of the Gypsy protests and looting debouches onto the issue of Slovakia's imminent entry into the EU on May 1st, The EU is worried that an influx of Gypsies could arise, seeking benefits in their countries, as would be the case if the principle of the free mobility of people were maintained. All of them are imposing restrictions, new rules on work and welfare for immigrants. The UK, an exception hitherto, joined them in early March.
The problem is just one of the difficulties of integrating countries at very different stages of development. The core EU countries will be a magnet for not just Gypsies, but also people of talents, wanting a wider world in which to exercise them, a brain drain that could enervate their economies. There are traditional lines of economic activity in Central European entrant countries that are likely to be squeezed by a flood of Western goods, more than competitive with them.
Plusses and minuses for the economy
Those sectors that are taken over by foreign capital have the best chance of long-term survival. Slovakia is a good venue for such investment, close to the core of the EU and with a low wage, highly-educated work-force.
Slovakia has mastered much of the difficult transition from a centrally planned economy to a modern market economy. The DZURINDA government, re-elected last year, has made excellent progress in the last three years in macroeconomic stabilization and structural reform. Major privatisations are nearly complete, the banking sector is almost completely in foreign hands, and foreign investment has picked up. Slovakia's economy exceeded expectations in 2001-03, despite the general European slowdown.
Unemployment at 16% remains the economy's Achilles heel. The government faces other strong challenges in 2004, especially the cutting of budget and current account deficits and the prevention of a revival of inflation.
Kia breaks ground for plant
Kia Motors Corp recently began construction if its first European manufacturing plant in Zilina in a strategic step to help the Hyundai Motor Group achieve its goal of becoming a leading global automaker, New Europe reported recently.
Speaking at a groundbreaking ceremony in this northern Slovakian town, Yoon Kook-jin, Kia chief executive officer and president, said the plant marks the company's commitment to business in Europe and to its European customers.
"At the same time, the project clearly illustrates our initiative to become a leading global carmaker," said Yoon. Slovakia Deputy Prime Minister Pavol Rusco said his east European nation has "done its utmost" to support the Kia project and would continue its efforts. "I hope that the Kia plant in Zilina will become a great stimulus to our country's economy," Rusco added.
Kia plans to invest more than 1.1bn into the plant, which will create 2,800 jobs. With a 300,000 unit annual capacity, the plant will mainly roll out mini car and compact car models, Kia's flagship products for the European market. Production is scheduled to start in 2006.
Kia chose Slovakia over Poland mainly because of lower labour costs and better highway conditions. The Slovakian government also offered tax incentives and free property to the automaker. Industry experts say that the new facility here clearly points to Kia's intention to expand in Europe. "While Hyundai Motor has mainly concentrated on the US, Kia has put its priority on the European market. Its new plant in Slovakia offers a good example," said Kang Sang-min, analyst at TongYang Investment Bank.
Slovakia and nine other countries in the Eastern Europe joined the European Union in May. The opening of the new facility here will allow Kia to sell its vehicles to the European market at a lower tariff rate, from the current 17.1% to 10%, officials said.
Hyundai Mobis Co, the nation's largest auto parts supplier will also build a plant in Zilina, along with six other Korean part makers. Collectively, the suppliers are expected to provide up to 70% of the parts needed by the Kia plant. "Localisation of the auto part supply is very important in cutting down the production costs. When Hyundai and Kia build overseas plant, they always take their part suppliers with them and quickly establish a local supply line. Obviously, prompt localisation is one of their strengths," TongYang's Kang said.
As of last year, Kia sold 157,428 vehicles to Europe, 60% up over the 2002 figure. The carmaker's sales target this year calls for a 63% increase to 250,000 units. Europe currently accounts for 30% of the company's total exports. This year in Europe, Kia plans to introduce a smaller sports utility vehicle as a follow-up to its larger SUVs, Sorento and Carence, and increased its distributorships from 1,100 to 1,300 units. Overseas performance has become more important to Kia and parent company Hyundai Motor.
Recently, Kia's domestic sales fell 24% but exports rose 53% to 75,153 units. Hyundai Motor's home sales fell 28% in March but exports surged 45% to record 140,230 units for the month.
As of last year, Kia Motors reported 12.84tn won in revenue from about 842,000 vehicles. During the same period, net income rose 9.98% over the 2002 figure to 705bn. Hyundai Motor reported 24.96tn won in sales and sold about 1.64m vehicles in 2003.
GGB unveils plans to build 12m plant in Sucany
Glacier Garlock Bearings (GGB), a US-based global producer, will build a new plant at total investment costs of 12m in the industrial park in Sucany (Zilina region), New Europe reported recently.
According to company spokesman John Russell, in charge of managing the new plant, it will be producing components for bearings and seals.
GGB is the world's largest producer of metal-polymer bearings, including components for the automotive industry. The production should be launched at the end of 2004, with the volume expected to reach 500m Slovak crowns by the end of 2005. 90% of production will be exported.
The plant should employ some 200 people, but available land in the industrial zone provides for further expansion and an increase in the number of employees to 400. GGB is part of EnPro Industries, which employs 5,000 people in five divisions. If GGB has a good experience in Sucany it may be the site for expansion of other EnPro divisions, creating an "EnPro Campus."
GGB plans to move part of its production from Scotland, France as well as from another Zilina region company Tribometal Slovakia, of Dolny Kubin. Russell refuted the idea that GGB was in Zilina, home to a 1bn KIA/Hyundai plant scheduled to be producing cars by 2006, to take advantage of the cheaper labour. He said GGB considers Sucany to be a flagship in its focus on the central and eastern Europe region as a whole. "GGB, in its strategy, counts on two key European plants - in Annecy (France) and Sucany," Russell concluded.
EuroTel long-term corporate credit rating rises
Standard & Poor's ratings services recently said it raised its long-term corporate credit rating on Slovakia-based mobile telecommunications operator EuroTel Bratislava AS to BB from BB-, following the group's refinancing of its debt in Slovak crown. The outlook is stable, New Europe reported.
At the same time, Standard & Poor's assigned its BB long-term senior unsecured bank loan rating to EuroTel's 5bn Slovak crown (US$149m) syndicated credit facility. In addition, Standard & Poor's withdrew its BB- senior unsecured debt rating on guaranteed subsidiary Slovak Wireless Finance Co BV, following redemption of Slovak Wireless' 175m of debt with the proceeds from the new bank facility.
At December 31st, 2003, EuroTel has total lease-adjusted debt of 7.9bn crowns. "The rating action primarily reflects the reduction of foreign exchange risk on EuroTel's debt given that the new bank facility is denominated in the local currency of Slovak crown," said Standard & Poor's credit analyst Michael O'Brien. "Furthermore, the upgrade reflects incremental improvements in the group's market and operational performance and EuroTel's success in protecting its solid market position and improving its subscriber market share."
Standard & Poor's expects EuroTel to maintain its strong market position and high level of operating efficiency in an environment where competition will be rational. EuroTel is also expected to ensure sustainable free operating cash flow generation, maintain acceptable levels of liquidity, and keep a moderate financial policy, in particular with regard to future dividends.
Slovak Telecom selects Alcatel for 25m deal
Slovakia's dominant fixed-line telecoms firm Slovak Telecom (ST) has selected French company Alcatel as the supplier of its next-generation multimedia/VoIP services, Alcatel announced at the Wi-FI Technology Forum in Paris recently, New Europe reported.
The contract, which is worth some 25m, is the largest of its kind to date in Eastern Europe. Alcatel's IP-based Next Generation Network (NGN) solution will allow ST to replace its Class 5 voice network infrastructure and begin offering new broadband services such as Voice over IP, multimedia conferencing, unified messaging including gaming and music downloads, improved Internet service and integrated personal computer and phone applications.
"We chose the Alcatel solution because we feel that an NGN infrastructure is the basis for future efficiency leading to a decrease OPEX in operation and maintenance costs. In addition, by essentially skipping the digitalisation stage, we are able to very quickly begin introducing high-value broadband multimedia services - far more quickly than we had anticipated," said Herbert Muller, chief operating officer of Slovak Telecom.
The Slovak government allowed Deutsche Telecom (DT) to acquire a majority stake in ST in 2001 on the condition that the entire network undergo digitalisation by the end of 2004. DT has a 51% stake in ST. The ministry of transport, posts and telecommunications has a 34% stake and the National Property Fund (FNM) holds 15%.
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