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SLOVAKIA


 

 
Key Economic Data 
 
  2002 2001 2000 Ranking(2002)
GDP
Millions of US $ 23,700 20,500 19,700 61
         
GNI per capita
 US $ 3,950 3,760 3,800 80
Ranking is given out of 208 nations - (data from the World Bank)

Books on Slovakia

REPUBLICAN REFERENCE

Area (sq.km) 
48,845

Population
5,430,033 

Capital 
Bratislava 

Currency 
Koruna 

President 
Ivan Gasparovic

Private sector 
% of GDP
60%

  

Background:
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: 084 - (29/04/04)

Meciar fails to become president
The Slovaks have shown remarkable good sense in refusing to elect their former hard-line nationalist leader, Vladimir Meciar, as president in run-off elections on Saturday, April 17th. They chose his former deputy, Ivan Gasparovic, who has been described as the 'lesser of two evils.'
Meciar was a rabble-rousing demagogue, who employed corruption, muzzling of the media and abuse of human rights in his rule as premier, the really important job, in 1993-98, taking Slovakia out of the union with the Czech Republic in 1993 and exerting a dominant influence over Slovak affairs for the duration. But he did allow himself to be voted out in 1998, belying the charge of being an absolute dictator. 
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."
The key question is that he is not so any longer. Can he prove himself to be a reformed character? Time will tell.

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 in most European countries, denying them the same opportunities for education and jobs as other citizens in the mainstream of society. The Nazis had a 'final solution' for them as for the Jews - their hatred fuelled by envy of the Jews and loathing of the gypsies.
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 inevitably 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, but they were pressured to live in remoter parts of the country, less likely to attract industry where anyway, they would be last on any queue to get available jobs. Like so many poor people worldwide, they have many children and without any employment the dependency on even meagre state handouts has been total. What can they do except protest?
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
Only those sectors that are taken over by foreign capital have a 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.

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AUTOMOBILES

Construction of Hyundai's plants to cost €890m

The €700m investment of the South Korean carmaker KIA motors in the construction of a plant near Zilina, central Slovakia, will be boosted by another €190m for which its sister company, Hyundai Mobis, will build a car component plant, Economy Ministry spokesman, Alexander Skurla, said recently, New Europe reported.
"The projects of KIA and Mobis have to be assessed together because they are inseparable," Skurla told CTK. According to EU criteria, Slovakia may provide the Koreans with state assistance worth up to 15% of the investment without taxes, that is €133.5m, which is 5.34bn Slovak crowns at the exchange rate of 40 crowns/€. Including income tax, VAT and contribution to education, the state assistance will amount to 6.9bn crowns. Most of this sum will be allocated for the purchase and preparation of land and the purchase of movable and immovable assets.
Slovakia will spend another 1.9bn crowns on the construction and repair of roads in the region as well as design of new water mains and sewerage. The total sum to be provided from Slovak public budgets will climb to 8.8bn crowns. The Korean firms, as well as the state, will be investing the funds in the projects gradually until 2007.
The decision to build Kia's new plant in Slovakia was announced by parent company Hyundai Motor early in March. Slovakia prepared for the plant 200 hectares of land located east of Zilina. The foundation work started recently.
Car production should be started at the end of 2006 and gradually be raised to 200,000 cars annually.
"The Zilina region has the workforce to meet the requirements of South Korean carmaker Kia Motors," Director of the regional business and industry chamber, Jan Misura, said. Misura stressed that 840,000 people live within 50km of Zilina and 425,000 are economically active. The new employment may be interesting not only to unemployed but also future graduates and even people who now commute to work in the Czech Republic, according to Misura.
The number of Slovaks who travel to work in the Czech Republic either daily or weekly has risen from around 40,000 before 1989 (at the time of Czechoslovakia) to more than 60,000 now, with most of them commuting from northern Slovakia. According to Misura, the Kia investment will breathe new life into the region and also help the situation in vocational schools oriented on mechanical and electrical engineering.

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BANKING

Slovenska sporitelna posts 120% profit surge

Slovenska sporitelna (SLSP), Slovakia's biggest bank, posted a consolidated net profit to international financial reporting standards (IFRS) of 2.73bn Slovak crowns in 2003, an increase of more than 120% over the previous year, SLSP spokesman said at a recent news conference, New Europe reported. 
The bank's total assets rose by 1.6% year-on-year to 208.34bn crowns last year. The results topped SLSP's projections. The bank attributes the growth primarily to the rise of loans granted to clients. Client loans were up 42% year-on-year to 54.69bn crowns in 2003. Loans to banks slid by 55.5% year-on-year to 27.38bn crowns. Operating profits jumped by nearly 90% year-on-year to 6.02bn crowns, thanks mainly to an increase in net interest income of almost 40% to 9.99bn crowns.
Total operating costs added 5.7% year-on-year to 6.52bn crowns. Client deposits were down 1.1% to 172.78bn crowns in 2003. Return on equity (ROE) rose to 19.22%, up from 10.15% in 2002. Return on assets grew 1.33% in 2003, up from 0.61% the previous year, while capital adequacy fell to 19.37%, down from 24.80%.

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CONSTRUCTION

Construction output growth slows to 0.9% in January

Slovak construction output rose by 0.9% year-on-year in January, down sharply from the 11.5% rise in December of 2003, according to figures released by the Slovak Statistical Office (SUSR). Construction output at current prices fell from 8.48bn Slovak crowns in December to 4.85bn crowns in January, said the SUSR. The decline was due primarily to a year-on-year drop of 4.9% in new construction and renovations. At the same time, repairs and maintenance output added 14.8% year-on-year in January, while construction work by Slovak firms abroad was up 19.1%, according to the SUSR, New Europe reported recently.

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FINANCIAL NEWS

Trade deficit falls to 25bn crowns in 2003

Slovakia's foreign trade deficit fell to 23.59bn Slovak crowns in 2003, down from 95.96bn crowns the previous year, according to figures released by the Slovak Statistical Office (SUSR). The December trade deficit stood at 5.11bn crowns, down from 8.19bn crowns in December 2002. The December 2003 figure was up from 1.30bn crowns the previous month. A 23.2% year-on-year increase in exports was behind the year-on-year decline in the trade gap. Imports were up 10.5% year-on-year, New Europe reported.
Export gains were fuelled by the transport equipment segment, where exports soared nearly 70% year-on-year to 233.22bn crowns, mainly due to Volkswagen Slovakia, the country's biggest exporter. Machinery exports were up 22.9% year-on-year to 150.94bn crowns, while imports added 13.7% to 217.82bn crowns. In December alone, Slovakia exported goods and services worth 70.71bn crowns, while imports amounted to 75.81bn crowns.

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MINERALS & METALS

Slovakia in deal over steel aid

Slovakia has agreed a compromise deal with a European Commission in a dispute over US$500m (€404m, £273m) of state aid granted to US Steel, which threatened to sour the country's entry into the European Union this May, The Financial Times reported recently.
Under the compromise, US Steel will repay US$32m to the Slovak state and the amount of tax relief available will be lowered by US$74m.
The dispute demonstrates the EU's concern over the generous state aids and investment incentives given out by the new member states of central Europe. The Commission is especially concerned about state aids in the sensitive steel sector, where there is substantial over-production in the EU.
Gunter Verheugen, European enlargement commissioner, said during a visit to Bratislava: "There is a deal and the deal is satisfactory for all parties."
The European Commission had threatened to fine Slovakia for allowing US Steel's unit in Kosice to produce more steel than was permitted under Slovakia's accession treaty signed in April 2003.
Under that treaty, the Commission had accepted the 10-year tax holiday - with a maximum relief of US$500m - granted to US Steel when it privatised a plant in Kosice in 1999, on condition that the company increase production by only 3% a year over 2001's production level of 4.05m tonnes.
However in 2002 - the first year covered by the agreement - the Kosice plant raised output 8% to 4.39 tonnes, and production last year is estimated at 5m tonnes. At the time, the US was imposing tariffs on EU steel imports.
US Steel argued that it had understood that the limits only applied from the date of accession, not the date the accession treaty was signed. A spokesman said: "We have acted in good faith but there was a misunderstanding."
Pal Csaky, Slovak deputy premier for EU integration, said: "The deal is acceptable for all parties."

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STOCK MARKET

Prague, Bratislava bourses "plotting 205 merger"

The struggling Prague stock market and its growing counterpart in Bratislava intend to merge next year, bourse officials said recently, New Europe reported. 
Negotiations for combining the Prague Stock Exchange and the Bratislava bourse are under way, PSE Secretary Pavel Hollmann and BSSE Director Maria Hurajova told Lidove noviny. The proposed merger follows a failed attempt to combine five central European exchanges in Prague, Bratislava, Warsaw, Ljubljana and Budapest. That idea, floated in 1999, proved too complicated. The Prague and Bratislava exchanges share a common past. Both grew out of the post-communist coupon privatisation programme of the former Czechoslovakia, which split into the Czech Republic and Slovakia in 1993. The Prague bourse saw its stock and bond trading value fall to US$50bn last year, down 23% from 2002, owing to lower bond market liquidity.

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TELECOMMUNICATIONS

Orange Slovakia nets 3bn crowns in 2003

New Europe reported recently that mobile phone operator Orange Slovakia posted a net profit of 3.03bn Slovak crowns in 2003, an increase of 37% over the previous year, the firm's chief, Pavol Lancaric, said. Orange's EBITDA (earnings before interest taxes, depreciation and amortisation) profit was up by 25% year-on-year to 6.19bn crowns last year. The firm's total revenues rose by 20% year-on-year to 16.26bn crowns. Orange is Slovakia's biggest mobile operator in terms of number of clients, with over two million customers. Slovakia's second mobile operator is Eurotel Slovakia. Orange Slovensko is majority owned by Orange SA, which has a 64% stake. Orange SA is owned by France Telecom. The remaining shares are held by the European Bank for Reconstruction and Development (EBRD) and individual investors.

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