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SLOVAKIA

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REPUBLICAN REFERENCE

Area (sq.km) 
48,845

Population
5,430,033 

Capital 
Bratislava 

Currency 
Koruna 

President 
Ivan Gasparovic

Private sector 
% of GDP
60%

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Update No: 089 - (30/09/04)

Economy booms 
The Slovak economy is doing well. GDP grew by 4.2% in 2003 and is growing by 4.4% in 2004. 
It has begun to attract massive foreign investment, particularly into its car industry. FDI now amounts to $9bn, impressive for a nation of only 5.4 million. Peugeot of France is the largest investor.

World Bank gives its approval
Slovakia has earned the distinction of showing the greatest progress in business reforms in the world in 2003. So says the World Bank, whose superlative endorsement reached the government of Mikuláš Dzurinda in the trickiest of times: just when it is about to reform the country's healthcare system. The Slovak Spectator were naturally jubilant about this, as reported by staff journalist, Beata Balogová.
Roger Grawe, the World Bank's Country Director for Central Europe and the Baltics said that Slovakia ranked highest among twenty leading world economies in creating the most beneficial conditions for doing business. In its analysis "Doing Business in 2005," which evaluates laws and reforms of 145 countries, the World Bank concluded that Slovakia's ambitious reforms in the tax system, labour market and social system are responsible for its success.
The time needed to establish a business in Slovakia has dropped from 89 days in 2001 to 52 days in 2003. Small-sized businesses and entrepreneurs are carrying a greater share of employment, climbing from 56 to 66 percent. According to the bank, cutting layoff expenses was the single most important factor in maintaining the health of a robust business environment.
"This result reflects the political stability that has gradually emerged since 1998, and radical reforms which we stepped up after the general election in 2002," Prime Minister Mikulás Dzurinda told news wire TASR.
Slovakia has also improved business conditions for creditors. However, the World Bank report suggests that there is room for improvement in bankruptcy proceedings.
According to Grawe, Slovakia will keep its ranking next year, when the World Bank expands its assessment to include taxation of companies, business licensing and foreign trade.
Slovakia also ranks among countries providing the highest protection to investors. Slovak Finance Minister Ivan Mikloš said it is crucial to sustain the headway the country has made and continue in its efforts to improve the business environment.
Of the ten new European Union members, only Lithuania and Slovakia have managed to rub elbows with the best-performing countries in terms of business environment.
In late May, the International Monetary Fund praised Slovakia's reforms and economic performance. Although the general Slovak public appears reform-weary and polls rarely reflect the enthusiasm of international institutions, Slovakia remains attractive to foreign direct investment. The country continues to perform well in competition with other central and eastern European countries for investors' money.
One weakness the Slovak government needs to address is its failure to communicate and explain reforms to the general public, who remain largely hostile to new reforms. The World Bank has approved a grant worth Sk11.6 million (€291,303) that will be used to improve public relations.

A counterweight to Bratislava needed
Dzurinda, has suggested that Kosice, Slovakia's second largest city, should become a counterweight to Bratislava, which is at the southernmost extremity of the country. Dzurinda made the remarks after a meeting with Kosice mayor Zdenko Trebula.
Kosice should be connected to an international highway, and be promoted as the centre of Eastern Slovakia, said Dzurinda. The Premier also cited the need to build an industrial park in the borough of Peres in an effort to combat the city's declining revenues.

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AUTOMOBILES

Kia says it won't move Slovak plant: report

South Korea's Kia Motors rejected on August 13th a Slovak government plan to find a new site for the automaker's US$1bn assembly plant, the Sita news agency said recently, cited by Deutsche Presse-Agentur (dpa). The report came a day after Minister of Economics Pavol Rusko said the government was shopping for a site to replace the designated tract near Zilina, where land-price disputes have slowed the project. Some owners of the 7,000 land plots chosen for the plant have refused to sell because they think the government's price offers are too low.
Rusko threatened to move the plant to Nitra, Banska Bystrica or Zlate Moravce. He discussed the proposal with Nitra Officials. But Sita, quoting an unnamed Kia source, said the automaker will not move because ground preparations have already begun at the Zilina site. 
Kia started the project in April and wants to start building 300,000 cars a year by late 2006. The factory, a huge foreign investment for Slovakia, would employ 2,800 people.

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BANKING

SLSP earnings climb 14% in H1

Slovakia's largest bank, Slovenska sporitelna (SLSP), an arm of Austria's Erste Bank, saw its first-half year consolidated net earnings climb 14% year-on-year to 1.6bn Slovak crowns by international accounting standards (IAS), New Europe reported recently. The bank said it maintained a positive trend for all key indicators. SLSP's operating profit fell almost 30% to 2.4bn crowns. Total assets rose 12% year-on-year to 226bn crowns.

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CREDIT RATINGS

Banks get positive outlook

Moody's Investors Service granted a positive rating outlook for Slovakia's banking system, New Europe reported recently. 
In its latest report, Moody's writes that the outlook is underpinned by the sector's growth potential and the foreign ownership of most of the country's banks. However, there are challenges associated with improvement of risk management, and asset-liability management remains a weakness, Moody's Investors Service said. The four rated banks in Slovakia are: Slovenska Sporitelna, Vseobecna uverova banka, UniBanka and EXIM Bank.

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ENERGY

Slovnaft records huge profit growth in H1

Slovnaft, Slovakia's biggest oil processor and fuel distributor, posted a net profit of 4.15bn Slovak crowns in international financial reporting standards (IFRS) in the first 6 months of 2004, up from 1.64bn crowns in the same period a year earlier, according to figures recently released by the company, New Europe reported.
The company's sales were up 9% year-on-year to 35.76bn crowns in the monitored period. The firm attributes the improved results to good management, a long-term focus on increasing efficiency and synergies resulting from integrated operations within the Hungarian oil and gas concern MOL, which owns Slovnaft.
Restructuring at the firm and higher mark-ups have also contributed to the gains. Slovnaft's operating profit reached 4.95bn crowns at the end June, up from 1.79bn crowns a year earlier. The firm's EBITDA (earnings before interest, taxes, depreciation and amortisation) rose 83% to 6.58bn crowns in the first half.
Sales of refined products added over 10% to 25.4bn crowns. Petrochemical sales were up nearly 20% year-on-year to 6.05bn crowns. The growth was driven primarily by higher demand on the Czech market in light of the planned closure of domestic refineries in Litinov and Kralupy, along with rising demand for low-sulphur diesel oil in Germany, Poland and Austria, according to Slovnaft.
The firm processed 2.79m tn of oil in the first 6 months, an increase of 4.5% year-on-year. Slovnaft invested 3.65bn crowns in January-June, or 1.8bn crowns more than in the first half of 2003, with most of that going to the construction of a new diesel oil desulphurisation unit and a polypropylene production centre. Slovnaft operates some 300 filling stations in Slovakia and 40 in the Czech Republic. Hungarian oil and gas concern MOL holds a 98.4% stake in Slovnaft. 

Rusko: No changes to SE's contracts before privatisation

Slovakia's dominant power producer, Slovenske elektrarne (SE), will not make any changes to its current contracts before the state sells its 66% stake in the firm, Economy Minister, Pavol Rusko, announced on August 25th, New Europe reported.
In its binding bid, the Italian energy giant Enel, which was short-listed for the state's stake, asked the Slovak government to cancel some of SE's contracts which it considered disadvantageous.
"They will have to adjust their bid to the option given at the beginning of the tender," Rusko said. The three bidders - Enel, the Czech power firm CEZ and Russia's RAO UES International - can only request that the government separate out some segments such as outdated nuclear plants, according to Rusko. Enel's offer of 40bn Slovak crowns was conditioned on the cancellation of some contracts.
CEZ offered 31bn crowns for SE without its nuclear power facilities, while RAO UES offered 19bn crowns for SE with all of its holdings.
The privatisation adviser said, however, that the original binding bids were not comparable and asked the parties to submit amended bids by September 3rd. Rusko said that ideally a winner should be selected by the end of September, with the contract signed before the end of the year. SE accounts for over 85% of Slovakia's power production.
The firm operates three nuclear plants, two thermal power stations and 34 hydro-electric facilities.

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INFORMATION TECHNOLOGY

Slovanet sales rise to 160m crowns in H1

Slovak Internet and communication service provider Slovanet saw its sales rise 11% year-on-year in the first 6 months of 2004 to 163m Slovak crowns, according to figures released by the firm recently, New Europe reported.
The firm's EBITDA (earnings before interest, tax, depreciation and amortisation), however, slid nearly 44% in the monitored period to 11.7m crowns. The firm attributed its record turnover to major orders from the business sector as well as the launch of new services for households and small businesses. The firm invested over 45m crowns in new technologies in the first half of 2004.
The firm is preparing to offer voice services and wants to begin offering clients cheaper calling prices by the end of this year. Slovanet is one of Slovakia's biggest providers of corporate communications services. The firm is part of an international holding company which also includes the Czech firm SkyNET.

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TELECOMMUNICATIONS

EuroTel Bratislava catching up with Orange

Slovakia's second largest mobile network operator EuroTel Bratislava is catching up with the market leader Orange, the comparison of their first-half performance statistics revealed, New Europe reported recently. The total number of clients of EuroTel grew by 27% to 1,740,082, while it was only 19% with Orange, to 2,208,000 although it is unclear how many new people the market can embrace and thus major changes can be expected only as a result of new developments.
Regarding the growth of total revenues, EuroTel again beat Orange. EuroTel increased sales of goods and services by 21.7% to 6.26bn Slovak crowns (€156.5m), while Orange (formerly Globtel) grew by 18% to 9.1bn crowns.
Net profits of EuroTel grew by 69% to 1.12bn crowns, while Orange posted 1.9bn crowns for a 47% growth.
On the other hand, Orange was faster in its EBIDTA (30%) growth while "the blue" increased its EBIDTA by only 23%.
On average, EuroTel makes 567 crowns on a single client per month (Orange 670). The difference is the result of the higher percentage of EuroTel pre-paid phone card holders, while more Orange clients go for pre-paid programmes.
Both companies were also active in seeking corporate clients: Orange managed to "sign" carmaker PSA Peugeot Citroen, Heineken Slovensko brewery, Telenor Networks telecoms company and Transpetrol oil shipper; while EuroTel attracted carmaker Kia-Hyundai, Continental-Matador tyre producer, ERGO insurer and ZSNP aluminium producer, the report said.

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TEXTILES

Makyta Puchov records 40% sales surge in H1

Makyta Puchov, Slovakia's biggest textiles producer, posted sales of 530m Slovak crowns in the first six months of 2004, an increase of nearly 42% over the same period a year earlier, the firm's Miroslav Macek told the CTK news agency recently. The firm did not release profit figures for the first half.
Macek attributes the improvement in sales to rising exports, which were up 53% year-on-year in the monitored period. Exports accounted for 90% of the firm's total sales in the first half. The firm's biggest export markets are Austria, Germany, Italy, the Czech Republic, the Netherlands, Switzerland, Russia and Japan. On the Slovak market, Makyta sells some 80% of its products through its own retail network which includes 48 branches and department stores. Makyta also produces car upholstery with Austria's Eybl Krems for Audi, Volkswagen, Honda and Peugeot. The firm is currently working on plans to expand upholstery production for Peugeot which would create some 200 new jobs. Makyta showed a profit of 8.2m crowns on sales of 1.01bn crowns in 2003.

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