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SLOVAKIA


 

 

In-depth Business Intelligence

Key Economic Data 
 
  2003 2002 2001 Ranking(2003)
GDP
Millions of US $ 31,868 23,700 20,500 59
         
GNI per capita
 US $ 4,920 3,950 3,760 73
Ranking is given out of 208 nations - (data from the World Bank)

Books on Slovakia

REPUBLICAN REFERENCE

Area (sq.km) 
48,845

Population
5,423,567 

Capital 
Bratislava 

Currency 
Koruna 

President 
Ivan Gasparovic

Private sector 
% of GDP
60%


 
Update No: 113 - (26/10/06)

Pragmatism tempers populism
Elections in June produced a new government, one viewed as the nightmare scenario by investors: a left-populist coalition pledging to reverse liberal reforms for which there had been little popular mandate in the first place. After early elections on June 17th, the Cabinet was appointed July 4th. 
"The government has fulfilled some of its election promises in a spectacular way by using the good state of the Slovak economy [from which] it has funds to distribute money," said Grigorij Meseznikov, director of Slovakia's Institute for Public Affairs (IVO). 
Meseznikov said that the basic touchstone of the ruling coalition of Prime Minister Robert Fico's Smer party, the Slovak National Party (SNS) and the People's Party-Movement for a Democratic Slovakia (LS-HZDS) is the halting of reforms implemented by the previous two right-wing Cabinets of Mikulás Dzurinda. The current ministers are trying hard to combine promises with pragmatism, but they lack a clear plan. "Their solutions are improvisational," Meseznikov said. 
And while a few changes, such as rolling back health care payments, have been highly touted, little of substance has really been accomplished. Petr Just, a political analyst from Prague's Charles University, said he believes that the new Slovak government's action has been quite slow so far. "For the time being, the government hasn't yet found courage to profoundly change the reforms that Smer criticized so much before the elections," Just said
In the event, it has proved to be more cautious than its campaign rhetoric suggested it would be, keen to keep investors interested in continuing to enter, with massive projects in manufacturing impending, particularly in the car industry. Slovakia and the Czech Republic are being dubbed 'The New Detroit.'

Spectacular rise in popularity at home in his first 100 days
The popularity of Slovakia's strongest parliamentary party, Smer, is on the rise. As recent public-opinion surveys indicate, even more people would cast their votes for Prime Minister Fico's party, if elections were held now than in June of this year. 
While Smer earned 29.14 per cent of the votes in the June 17 elections, according to a recent median.sk public opinion poll 45.3 per cent of those polled now support Smer. A Statistics Bureau survey, meanwhile, puts the number at 43.7 per cent. 
Sociologist Olga Gyarfásová of the Institute for Public Affairs think-tank said the rise was due to the fact that people who did not vote in the June elections now tended to support Smer. 
Political scientist Peter Ucen of the International Republican Institute (IRI) said that voters have so far seen neither real improvements nor real damage from the tenure of the new government. 
Fico has promised voters that his government will do more for them than the previous right-wing government of Mikulás Dzurinda, and that it will spend more on social welfare. According to Ucen, Fico has so far given the impression that he is moving in that direction. "This gives satisfaction to uninformed people who have no idea what this government's new legislation means," he told the SITA news wire.
The Cabinet of Slovak Prime Minister Robert Fico during its first 100 days in power has mainly benefited domestically from the popular support it won by turning back a few fiscal reforms, but its reputation has remained unfavourable abroad. This is not just among apprehensive foreign investors. It is true of those on the left too. 
Even after three months in power Fico has not managed to improve his government's image abroad. They say the government's reputation has been harmed by the participation of the right-wing SNS in the coalition, as SNS chairman Ján Slota is widely considered a nationalist, and something of a thug - his statements have been linked to several anti-Hungarian incidents.
Ms Gyarfásová said she believed the suspension of Fico's Smer party by the Party of European Socialists (PES) will not have any impact on Smer supporters, who tend to identify with Fico's view that the European socialists punished Smer for doing politics for the people. The sociologist said Smer supporters are reluctant to admit that in working with the far-right SNS, the party breached the PES rules, or that Smer's isolation could cause the isolation of Slovakia on the international scene. 
Moreover, tension with Hungary has also rallied voters to the government rather than turned them away. "It was proof for them that Smer and the Slovak National Party are parties that will defend the interests of the Slovak majority," Gyarfásová said.

Early fears unjustified
Economists, though, while upbeat, still had reservations. The fear of a worsening economy, about which economists expressed concerns after the June elections, hasn't been fulfilled since the ministers assumed their posts. 
The draft 2007 state budget, which will influence the plan to adopt the euro in 2009, will be the key factor for a further development in the economy, experts say. The draft budget was discussed by the government and scheduled to be presented to the parliament in October. The draft budget is in line with Maastricht criteria.
"The changes made so far [before the budget proposal] haven't been as radical as expected," said Peter Stanek of the Economic Institute of the Slovak Academy of Sciences (SAV). They're rather cosmetic adjustments that won't jeopardize Slovakia's reform potential for the time being, he said. 
Slovenská sporitelna chief analyst Juraj Kotian said the confirmation of the pledge to introduce the single European currency in 2009 was Fico's crucial step. 
"The initial uncertainty after the government was formed was curbed by the prime minister's statements that the Cabinet will meet a 3 percent public finance deficit in proportion to gross domestic product [GDP] next year," Kotian said. It was the first time that the government didn't have to come up with austerity measures after elections, but the Cabinet hasn't yet presented its own proposals to stabilize the economy, he added. 
The decisions that Fico's Cabinet have made so far don't hamper Slovak economic growth, and the country remains attractive to foreign investment, said Peter Havlik of the Vienna Institute for International Economic Studies (WIIW). 
But some analysts were hard pressed to find areas for praise. "I don't know if we have managed to identify any positive steps with this government. We rather feel that things are quietly and slowly going in the wrong direction," said Richard Durana, head of the Bratislava-based think tank Institute of Economic and Social Analysis (INESS). "This government definitely isn't as beneficial to the economy as the previous one was," Durana said. 

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Highlights of Fico's first 100 days 
Key events and measures of Prime Minister Robert Fico's coalition government:
July 4 President Ivan Gasparovic appoints the new government headed by Smer chairman Fico. 
July 19 The government approves the nomination of Fico's aide Jozef Magala as head of the Slovak counter-intelligence service (SIS). Gasparovic appoints Magala on July 27th. 
Aug 4 The government decides to abolish the Sk 20 (Kc 15/ 0.54 Euro) and Sk 50 fees patients had to pay for every visit to a doctor and for a day spent in hospital, respectively. This is the first reform introduced by the previous Cabinet that Fico's Cabinet scraps.
Fico's government wins the confidence of parliament. In its policy statement that the parliament approved, the government says that it would reintroduce two value-added tax (VAT) rates and introduce a millionaires' tax, draft a timetable for the Slovak troops' withdrawal from Iraq and make changes in social welfare, health and labour legislation.
Minister of the Interior Robert Kalinák (Smer) dismisses the whole Slovak police command. 
Aug 7 Ján Packa, then-director of the Office for the Protection of Constitutional Officials, is appointed new police president. 
Aug 9 The government dismisses the head of the State Material Reserves Administration and the whole management of the Slovak Land Fund. It appoints Marián Cakajda the new head of the Material Reserves Administration. 
Aug 16 The government decides to scrap the planned privatisation of the Bratislava airport by withdrawing from a contract the previous government signed with the tender's winner.
The government approves the limits for the state budget deficits for the next three years in a way enabling Slovakia to meet euro adoption conditions as of 2009. 
Sept 13 The Ministry of Finance proposes a series of tax changes aimed at increasing state revenues from taxes to cover a planned increase in social expenditures. The proposed tax bills, however, don't cancel the current 19 percent flat income tax. They only reduce tax relief for companies and people with high incomes. 

Unemployment falls
Slovakian unemployment has fallen to the lowest point since the country became independent in 1993, a government office said October 17th, reaching 9.75 per cent in September. The September 2005 unemployment rate in Slovakia stood at 11.2 per cent.
The jobless rate had fallen from 9.85 in August, according to the number of people officially registered as unemployed and looking for work, the Office of Labour, Social Affairs and the Family said. 
The figure represents Slovakia's country's lowest unemployment rate since independence after the break-up of former communist Czechoslovakia. Slovakia joined the European Union and NATO in 2004. 
Before joining EU, Slovakia undertook austere economic reforms that ultimately created tens of thousands of jobs and attracted foreign investors. 

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AUTOMOBILES

Global car industry's roadmap leads to Trnava 

The medieval Slovakian town of Trnava would seem to be an unlikely backdrop for a key hub of the global car business, Deutsche Presse-Agentur (dpa) reported. 
But, Trnava, which lies a short half-hour drive north from the capital Bratislava, is rapidly emerging as a new key part of the country's burgeoning auto industry following the opening by French carmaker PSA Peugeot Citroen of a new US$920 million state-of-the-art plant in the town. 
"Trnava has a 100-year machinery tradition," town mayor Stefan Bosnak told the dpa. "Every new factory means the creation of new chances for economic growth and gain, tax income and new jobs," he said. With the lowest labour costs in the European Union, a flat tax, a skilled workforce and perched between western and eastern Europe's auto markets, Slovakia has recently become a major new destination for investment from the world's leading car makers. 
Indeed, when Peugeot began producing cars in Trnava in June this year it joined leading auto groups such as Germany's Volkswagen AG and America's Ford Motor Company, which have already set up shop in Slovakia with the dramatic expansion of the nation's car industry helping to underpin its post-communist economic transformation. KIA Motors, an offshoot of South Korea's largest carmaker, Hyundai Motor, is also gearing up to open up a new US$870 million factory in the northern Slovakian town of Zilina in December producing cars designed specifically for the European auto market 
The plant, which is KIA's first in Europe and is one of the largest in Central Europe this year, is expected to produce 300,000 vehicles a year by 2009 and employ about 3,000 people. 
Another 10,000 associated jobs are expected to be created in the region near the KIA factory. There is also potential for growth in Slovakia's domestic car market. At about 250 cars per 1,000 inhabitants, Slovakia has one of the lowest auto ownerships in the European Union. Slovakia was one of 10 largely Central European states that joined the EU in May 2004. 
The emergence of a car industry in Slovakia reflects developments in other parts of Central and Eastern Europe with key auto makers piling into Hungary, Poland, Romania, Russia and the Czech Republic, and as a consequence helping to power economic growth across the region. 
But the recent rapid growth of Slovakia's new auto sector means that the country is set to become the world's largest car producer per capita in the next two years, rolling out about one million autos a year after it beat off rivals from bigger Central European states in a bidding war for the KIA and Peugeot car investments. Once home to Slovakia's communist-era utility vehicle maker TAZ, Trnava, like the rest of the country's economy, slipped into the Central Europe's economic slow lane in the years following independence in 1993 after the break-up of Czechoslovakia and the arrival of an authoritarian government in Bratislava. But now Trnava's 72,000 residents enjoy one of the lowest unemployment rates in Slovakia with people heading for the town in search of work and a raft of new shops and car component businesses springing up around the historic town. 
The new Peugeot factory, which is expected to produce about 500,000 vehicles by the end of the decade, should employ about 3,500 people generating another 2,000 subcontracting jobs in the Trnava region. 
Moreover, unemployment in Slovakia, a country of 5.4 million, has been falling on the back of the country's booming economy. The country's jobless rate dropped from about 20 per cent six years ago to 9.85 per cent in August, its lowest level since independence. 
According to the Slovakian central bank, the opening of both the KIA and Peugeot factories will result in the country's economic growth soaring to seven percent next year after six per cent plus in 2006. But as a sign of the intense competition that has hit the global car industry, Peugeot announced this month that it was scrapping a 350 million Euro plan to build a second plant at its Trnava sire as part of a new cost-cutting drive. 
In the meantime, as a sign of the growing strength of the Slovakian car sector, component suppliers are also moving into the country with the US car industry supplier TRW beginning the construction of a new US$27-30 million factory in Bytca in the country's northwest. To be completed in 2008, the TRW factory will produce plastic components for KIA Motors Slovakia, PSA Peugeot Citroen and the German BMW and employ up to 700 people. Meanwhile, a Ford-Getrag joint venture in Slovakia is producing all-wheel-drive systems for Ford Europe. 

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ENERGY

New Slovak government seeks energy-price controls 

Slovakia's new left-wing leaders plan to take control of the country's energy and water prices by January, Slovak Economics Minister, Lubomir Jahnatek, said, Deutsche Presse-Agentur (dpa) reported on October 6th.
The plan drafted by Jahnatek is supported by Slovak Prime Minister, Robert Fico, whose June election victory over the former conservative premier, Mikulas Dzurinda, has triggered shake-ups in economic policy.
The proposal would reverse a 2002 liberalisation of energy markets enacted by Dzurinda, who sought to cut political influence over price decisions. Since then, an independent regulatory agency has set the prices formerly controlled by government ministers. Now Jahnatek said he wants "the opinion of the (economy) ministry for price proposals to be binding" on the regulators.
Under the proposal, Jahnatek's office would have the final say over public and commercial prices for natural gas, electricity and water. Jahnatek has already discussed the plan with European Commissioner for Energy, Andris Piebalgs. 

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INFORMATION TECHNOLOGY

Sony to invest 2.7bn crowns in Nitra factory 

The Japanese company Sony electronics is due to build a TV producing factory for 2.7 billion Slovak crowns in Nitra, about 40 kilometres from its existing plant in Trnava in western Slovakia, Slovak Spectator reported.
The factory will employ about 3,800 people. Construction should begin this year, while production should start in August 2007. The facility will start with making LCD sets and gradually include the manufacture of video equipment.
The plant's production capacity will be three million television sets per year. Test production will begin in September 2007 and full operation should start in 2008. Sony has been making television sets for a decade now at its existing plant in Trnava. This plant will be shut down and its 1,500 workers will be offered new jobs at the Nitra plant. Vlado Kalina, the head of the Slovak Electro-Technical Industry, said Sony would have no problem finding employees near Nitra. "They will find plenty of available labour in the vicinity and will benefit especially from the former employees of the Tesla Vrable [bankrupt electronics plant]," Kalina said.
Sony has so far invested 1.6 billion crowns in its plant in Trnava, which it built in 1996. The Sony investment represents a success for Nitra after its failure to land major investments by Dell and LG Electronics, both of which chose Poland instead.

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