Books on Slovakia
% of GDP
Update No: 099 - (26/07/05)
Dzurinda remains in charge
In coalition talks after the parliamentary elections of September, 2002, Mikulas
Dzurinda emerged as Slovakia's prime minister once again. He has dominated
Slovakian politics ever since, as he did in 1998-2002, but not without rumblings
of discontent. These have come not just from the opposition, but from coalition
partners too. This is Dzurinda's second consecutive term in office, and gave him
the chance of leading Slovakia into both the European Union and NATO, to which
it now belongs.
Nevertheless, agreement of a sort still holds between the coalition parties: the
Slovak Democratic and Christian Coalition (SDKU), the Christian Democratic
Movement (KDH), the Party of the Hungarian Coalition (SMK), and the new Alliance
of New Citizens (ANO).
Yet, the latter is causing ructions over a proposed investment deal with a major
South Korean firm. ANO has threatened to leave the government after an
investment contract draft with South Korean company Hankook Tire, drawn up by
ANO leader and Economy Minister, Pavol Rusko, was rejected by the Cabinet. Other
coalition partners were against the deal. The main reason was that the
incentives for the company were unacceptable to them, especially Finance
Minister Ivan Miklos.
There are other dissensions in the coalition, as we shall see. The coalition has
reflected a consolidation in Slovak politics, as the 2002 elections removed a
number of small parties. None of the four coalition parties finished first in
the popular vote. The leading party in 2002 had actually been controversial
former Prime Minister, Vladimir Meciar, who dominated Slovak politics in the
1993-98 period. Slovak President Rudolf Schuster, as required by the
constitution, asked Meciar and his Movement for Democratic Slovakia (HZDS) to
try to form a government.
However, Dzurinda benefited from rifts among the opposition. The HZDS, which
collected 19.5 per cent of the vote and has 36 seats, failed to find a coalition
partner. Meciar refused to negotiate with the Communist Party (11 seats), while
the third-strongest party-SMER-Social Democracy - (25 seats)-- refused to link
up with Meciar. Dzurinda was re-appointed premier by default.
Coalition parties control only 68 of 145 seats in parliament. Although they can
woo support from a bloc of independents, they face powerful opposition from SMER,
HZDS and the communists. Indeed, no single coalition party has more parliament
seats than either SMER or HZDS.
SMER gains ground
Voter polls show coalition members trailing behind opposition parties. Opinion
polls show SMER in June on 30.6%, with the SDKU on only 13.6%. The KDH trails on
just over 10%.
The good news for the government is that Meciar's HZDS is down to single
figures. But SMER is a new and potent threat to them.
Opposition supported the ousting of Premier Dzurinda
HZDS still commands 36 seats and remains in a powerful position so long as this
parliament lasts. The opposition has supported a potential proposal to recall
Prime Minister Mikulas Dzurinda from his post. "This cabinet does not have
our confidence," said the chairman of the HZDS parliamentary faction, Tibor
Cabaj, at a press conference on June 21st. The party itself has already
initiated similar no-confidence motions in the prime minister.
But Cabaj was not fully convinced whether the action this time of the leader of
the opposition, Robert Fico, of SMER, was prepared properly. "It is rather
an attempt to gain popularity for his party," he said. Cabaj also pointed
out his own failed attempt to shorten the current election term by three months.
After such a change, parliamentary elections would have been held in their
traditional term, in June. But it was not carried and he doubts that any efforts
for early elections will be successful. The next polls are scheduled for
The HZDS also talked about changes after the departure of Eva Antosova and
Miroslav Maxon from the party. Antosova should lose her place on the
parliamentary committee supervising the National Security Office while the
faction proposes to oust Maxon from the post of chairman of the parliamentary
committee for agriculture. The regional organization of the HZDS has ousted
Antosova accusing her of conspiracy. Her expulsion speeded up the decision of
Maxon to leave the party. Party leaders allege think that if they were real
democrats, not only theoreticians, they would return their mandates as
parliamentary deputies because they were elected to parliament as HZDS
Czech premier's visit sparks row
A recent visit by the new Czech Prime Minister deepened the rift between
Dzurinda and left-wing opposition party leader Robert Fico of SMER. Dzurinda
went so far as to accuse Fico of "unpatriotic" behaviour, claiming
that Fico was attempting to use the official visit of the Czech prime minister
for selfish political purposes.
Czech Prime Minister Jirí Paroubek, a social democrat of the ruling CSSD party,
made a series of official visits on June 7th, ending his day in Smer's
headquarters, where a joint press conference was held afterwards. At the press
conference, Fico highlighted the close relationship between the CSSD and Smer in
terms of political orientation and praised the Czech Republic's comparatively
higher living standards.
"Whatever [economic] indicators we look at, all of them are more favourable
in the Czech Republic [than in Slovakia]," said the Smer leader. Fico also
suggested that the Czech Republic's economic success is due to its left-leaning
government, implying that a similar governance model could exist in Slovakia
under Smer. "The social democratic model which Czech social democracy has
been practicing for the last seven years is successful and represents an
alternative form of government in Slovakia as well," said the Smer leader.
"We are trying to prove that the republic can be managed in a different way
than the right-wing parties do it."
Fico also took the opportunity to criticize Slovakia's right wing, pro-reform
cabinet led by Dzurinda. The Slovak prime minister was angered by the tone of
the Smer press conference and called a special press conference just one hour
later to respond. Dzurinda said that Fico attempted to "defame his own
country" and presented unpatriotic views." The activities of the Smer
chairman confirmed that this opposition party wants to dismantle the reforms and
go back to the problems the country has already overcome," the PM said.
Finance Minister Ivan Mikloš, a member of Dzurinda's Slovak Democratic and
Christian Union, attended the press conference to say that living standards in
the Czech Republic have always been higher, but that Slovakia was now
experiencing sustainable economic growth that would gradually overtake its Czech
Slovakia coalition under fire
There are also feuds within Slovakia's coalition government, however. Cracks
that could shatter the coalition appeared to be widening recently as two of its
four political parties feuded over the country's controversial education
A meeting of all coalition leaders was expected on June 1st to iron out the
dispute between the right-wing Christian Democrats (KDH) and the liberal New
Citizens alliance (ANO) over KDH Minister of Education Marin Fronc, an ANO
spokesman said. However before the meeting, the parliamentary Chairman and KDH
leader, Pavol Hrusovky, endorsed a call for early elections.
An early ballot could force a reshuffling of the right-centre coalition of
Dzurinda, which has held power since 2002, and push out the smallest coalition
Hrusovky has criticised ANO leader Pavol Rusko, the government's economy
minister, for encouraging the friction by targeting KDH member Fronc. Rusko and
other ANO leaders have spent months pressing for the resignation of Fronc, whose
recent decisions included a student testing order that sparked the country's
largest street demonstrations since the 1989 overthrow of communism. The
minister forced high school students to retake tests that had been thrown out
for clerical errors.
Another Fronc controversy climaxed this previous to parliament rejecting his
plan to begin charging university students for what is now a tuition-free
education. "All our party is doing is pointing out that the way things have
been run under Minister Fronc have basically failed, for two and a half
years," said an ANO spokesman who requested anonymity.
In a statement, Rusko faulted Hrusovky for attacking him personally to deflect
attention from the deeper conflicts between their two parties, which occupy
opposite sides of the coalition's political spectrum. "I've become
accustomed to these attacks," Rusko said. "The problem is between ANO
and KDH, not between me and KDH."
Despite the conflict, the other coalition parties remain unfazed. Leaders of
Dzurinda's ruling Slovak Democratic Movement (SDKU) and the Hungarian Coalition
party (SMK) insist there is neither a risk of a coalition collapse nor even a
government crisis. They expect to maintain the alliance with ANO and KDH at
least until the 2006 elections.
Yet the four parties were on shaky ground even before the Fronc dispute
Ideologically mismatched, many of their policy goals are at odds with one
another. In one recent poll, coalition leader Dzurinda was ranked the sixth most
trusted politician in the country. Far ahead of him were opposition leaders
Robert Fico, of SMER, and Vladimir Meciar, head of HZDS.
Visit to Far East pays off; Japan to follow the Slovak fiscal model!
The conflict also reached new heights, as Dzurinda was on a trade and
diplomacy tour of Japan and South Korea - two countries whose firms have
invested heavily in what they hope is a politically stable country.
Slovakia is opening up to foreign direct investment (FDI) in a big way, the
motor industry to the fore. Its emerging economy has attracted more than US$11bn
in foreign investments in the past decade. The Slovak finance ministry estimates
foreign investment this year could reach nearly US$3bn or more than 6% of the
country's gross domestic product (GDP).
Dzurinda returned home from his May 22nd-28th trip to South Korea and Japan
carrying some valuable souvenirs - an investment protection agreement with South
Korea, good contacts for Slovak companies, and the keys to a brand new car!
Dzurinda's trip to the Far East was to promote Slovakia as a business investment
environment, which has already attracted large investments from Japanese and
South Korean companies, most notably from South Korea's KIA Motors.
Dozens of major Japanese and Korean firms have opened or plan to open factories
in Slovakia. Germany, however, remains the country's largest foreign investor.
Since a Sony Corp television factory opened in 1996, other Japanese electronics
companies have expanded in Slovakia including Masushita, Sumitomo and Minebea.
On May 22nd, the PM flew to Japan, where he met with his Japanese counterpart,
Junichiro Koizumi, as well as Emperor Akihito and his family. While the royal
family was interested in global issues, PM Koizumi inquired about the 19-percent
flat tax, wondering what effect it has had on Slovakia's state budget. Japan
currently imposes a corporate tax rate of around 50 percent. However, it is
planning to revise its tax system along the lines that Slovakia has adopted.
Dzurinda announced that Slovakia is bidding for a large Japanese investment
earmarked for Central Europe and that Slovakia had already beaten off
competition from Poland, the Czech Republic and Romania. However, the PM did not
name the company, which is currently evaluating Slovakia as an investment site.
The company is expected to decide on the location by mid July.
But Slovakia needs to follow the Japanese hi-tech model
"We want more added value investments and we want to penetrate the
hi-tech sector," Dzurinda said, adding that Japan is one of the strongest
economies in the world. However, Japanese businesspeople are not very
enthusiastic about investments in the hi-tech sector in Slovakia.
At a Japan-Slovakia investment seminar, Panasonic manager Noriyoshi Iwamoto said
that for Slovakia to receive hi-tech investments it needs to further develop its
industrial parks and widen its network of sub-suppliers. Iwamoto believes that
Slovakia is not yet ready to produce final hi-tech products.
Japanese business is also hesitant about Slovakia because of the low level of
complex services offered by the Slovak industrial parks and the lack of road
infrastructure. Another criticism is that Slovak university graduates have too
much theoretical knowledge and too few practical life skills.
Cabinet spokesperson Martin Maruška defended Slovakia against the Japanese
criticism. "The strategy for the development of competitiveness in Slovakia
has been approved by the cabinet and is valid until 2010. It was prepared by the
Finance Ministry and also includes innovation policies. The main business
activities supported are development and innovation," he told The Slovak
In a real clash of cultures, there was a real surprise for the Slovak PM
when KIA/ HYUNDAI representatives presented Dzurinda with the keys to a brand
new KIA Opirus limousine. Such was his shock that the Prime Minister dropped the
keys to his expensive gift. Dzurinda managed to bat away any criticism by
saying: "This is a present for Slovakia, not for me."
The KIA officials said the present was a token of the company's appreciation for
Slovakia's, and especially the cabinet's, approach to investment hurdles during
their initial investment project. The Slovak PM did not take the new car back
with him, however. He left it to KIA to make the transportation arrangements.
Alongside his visit to KIA Motors, Dzurinda also visited Samsung and Sony,
companies that have already invested in Slovakia, on his Far Eastern visit.
South Korea matters too
Samsung was the first big Korean company in Slovakia, launching television
production in 2002. But Korean investment soared last year when Kia Motors, with
its partner Hyundai, began building a new US$900m auto factory. That project in
turn has attracted several Korean auto-parts makers.
Dzurinda and his team received quite a warm welcome in South Korea, where the PM
signed a contract ensuring mutual investment protection and support between
Slovakia and South Korea. The contract provides for South Korean companies to
claim for damages caused by the state through the Slovak courts. Slovakia
already has similar contracts with 38 countries, including all EU member states
and the USA.
Spokesperson for the Finance Ministry Peter Papanek explained that most
important features of these contracts are the guarantees on the free movement of
capital, profits, interests, dividends, payments, returns on expropriation of
investments or compensation on damages caused within the country of investment.
KIA jobs attract over 4,500 people
KIA Motors, the South Korean carmaker, has already registered more than 4,500
job applications, one percent of which were submitted by foreigners (Americans,
Canadians, Africans, applicants from Baltic and other European countries)
currently living in Slovakia, The Slovak Spectator reported.
KIA's spokesperson Dusan Dvorak was quoted as saying that two thirds of
applicants have a university education and speak English, which is currently the
only condition for accepting the application. Around 10% of people were
interested in line positions; however, these will be covered next year.
Currently KIA is looking for university-educated people, who will work mostly in
production, the report said. According to Dvorak, there are still vacancies for
administrators. IT specialists, recruitment agents, teachers, financial
specialists and economists also have a chance to land a job.
People with secondary education will also be required for the production line.
The company is looking for electricians, electric-technicians, car mechanics as
well as people without specialisation. These positions will be filled in
Currently, KIA Motors employs around 100 Slovaks and by the end of the year this
should rise by a further 400 employees. The company also employs 56 Korean
VW Slovakia picks up the pace
In the first quarter of 2005, the Slovak operation of German carmaker Volkswagen
produced 50,479 cars, 86,008 gearboxes and 5.2 million axles and gearbox
components worth a total value of 36.4bn Slovak crowns or 952.23m Euro, company
officials said on June 27, Tasr News Agency reported.
In the January-March period, Volkswagen Slovakia exported nearly this entire
amount (36.1bn crowns), creating a surplus of 16.6bn crowns. At the end of March
Volkswagen Slovakia was employing 8,042 people.
Bratislava, Kosice airports sales
As part of the privatisation of Bratislava and Kosice airports, the Slovak
Transport, Post and Telecommunications Ministry recommends selling 66% of the
state share to a strategic investor, the Sita News Agency reported.
The ministry's advisor, Austrian-British consortium Meinl Bank AG, SH&E Ltd,
and DLA Weiss-Tessbach Rechtsanwalte GmbH, recommends selling as much as 80% of
shares to increase attractiveness. However, Thomas Sarluska, the spokesperson
and advisor to the transport minister, said, "The ministry wants to sell
66% because it wants to keep a controlling stake of 34%."
HSBC opens Bratislava branch
The London-based bank HSBC opened its first branch in Bratislava on June 16. The
bank will provide corporate and institutional banking products to local and
foreign clients as well as those planning to invest in Slovakia, Sita News
Karel Bures is the new Bratislava branch director; he used to work as the head
of the treasury section at HSBC in Prague. "HSBC has monitored the
development in Slovakia for a long time now - especially its amazing economic
growth after the country entered the EU in May last year. We are glad to be
opening our Bratislava branch in this time of major growth of the Slovak
economy," Bures said.
FOOD & DRINK
Poland welcomes Kofola plant
Kofola, maker of Slovakia's leading soft drink of the same name, opened its new
greenfield factory in the Polish town of Kutno (near Warsaw) on June 16, Tasr
News Agency reported.
The Kutno plant, worth 575.24m Slovak crowns (15m Euro), is the first outside
the borders of Kofola's parent countries, the Czech Republic and Slovakia.
"By opening the plant we have carried out the first step of our strategy to
become a leader in the manufacturing of branded CEE non-alcoholic
beverages," said Janis Samaras, management board chairman at Kofola.
Relief aid from EU Solidarity Fund
Slovakia will receive 5.67m Euro from the EU's Solidarity Fund intended to
address damages inflicted in November 2004, when extreme winds wrought havoc in
national park forests, Slovensko.com reported on July 2.
The European Parliament still needs to approve how the financial aid to Slovakia
will be used, so the earliest date for Slovakia to receive these finances is
September this year. At least one third of the funding will be used for recovery
Unomedical to invest in Slovakia
Danish company Unomedical plans to invest 8.8m Euro (337.2m Slovak crowns) into
a disposable medical equipment plant, Slovak Economy Minister Pavol Rusko said
on June 27, The Slovak Spectator reported.
The company will create 550 new jobs at the new plant in Michalovce (Kosice
region). Production is expected to start in the first quarter of 2006.
Slovakia's government is supporting the project with investment stimuli worth
100m crowns (2.6m Euro). "We negotiated the amount of the investment
stimuli for a couple of weeks and this is acceptable for us," Rusko said.
He appreciated that investors are coming to the region where the unemployment
rate is almost 20 per cent. "These 550 jobs for Michalovce represent more
than 2,000 new jobs in Bratislava," Rusko said. The plant, spread over an
area of 17,000 square metres in Michalovce, will be Unomedical's biggest
production facility. Full-scale production should be reached a year or 18 months
after it opens.
IT services market expands
Spending on IT services in Slovakia rose by a healthy 18.5%, totalling
US$258.56m in 2004, New Europe reported.
In local currency terms, however, the market grew by a more modest 4.0%. As a
result of government initiatives to create a knowledge-based economy, recent
political reforms, and EU accession, Slovakia is now a target for greenfield
investments and multinational organisation looking to acquire local partners.
IDC expects the IT services market to expand between 11% and 12% annually over
the next few years.
Kendrion-Ferrex in Cadca
Dutch-Swedish group Kendrion-Ferrex, the producer of equipment for Volvo and
Scania trucks, officially opened its new plant in the northern Slovak town of
Cadca on June 15th, Tasr news wire reported, cited by The Slovak Spectator.
"The plant employs 25 people at the moment, but we want to give jobs to
50-70 people by the end of the year, and a further 250-300 people within the
next 2 years," Tibor Kvasnovsky, the president of the Cadca plant, was
quoted as saying.