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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: 098 - (01/07/05)

Czech premier's visit sparks row
A recent visit by the new Czech Prime Minister has deepened the rift between Slovak Prime Minister Mikuláš 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 7, 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 the 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 brother.

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 minister.
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. The next polls are scheduled for September 2006.
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 partner, ANO.
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 rejected 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. Voter polls show coalition members trailing behind opposition parties.
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 the Smer party, and Vladimir Meciar, a former prime minister and head of the Movement for Democratic Slovakia (HZDS).
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 wither Smer of HZDS.
Earlier reports said that the June 1st meeting of coalition bosses could resolve the dispute, or give opposition parties a reason to cheer.
Although ANO and KDH have clashed in the past over some issues such as abortion, which ANO backs and KDH opposes, the Fronc dispute has created the widest rift and, for the first time, raised the possibility of early elections.
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 Slovakia.

Visit to Far East pays off; Japan to follow the Slovak fiscal model!
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 22th-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 Marsushita, 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 were 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 Spectator.

New car!
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.

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AUTOMOBILES

Hankook to roll into Slovakia


South Korean group Hankook Tyres, the third largest investor in Slovakia, plans to open its plant and set up its European offices in Levice (southern Slovakia), New Europe reported recently. French PSA Peugeot Citroen and South Korean firm KIA are already there.
Hankook Tyres company will occupy 53 hectares of the area. The Slovak Economy Ministry advised it is an investment of 500m Euro (19.6bn Slovak crowns) and the company will initially employ 1,600 people. The government is ready to finance 100m Euro of the project. Hankook will start its production within three years. For smooth movement of goods four-lane dual carriageways and motorways will be completed by 2010 connecting from Hronsky Benadik to Levice and Nitra.

Germans invest in Nitra Visteon

A German car components producer will open its new plant in the Slovak industrial park of Nitra Visteon, the Slovak spectator reported recently.
This plant will get off the ground with the help of Slovak J&T and Belgian Immo Industry Group. The project's price tag stands at 40m Euro. The company, due to have a 400-strong staff, will supply its parts to the PSA Peugeot Citroen in Trnava and the KIA car plant near Zilina. Annual turnover is expected to reach 100m Euro by 2007.

Kia Motor's Slovak plant to be larger than expected

South Korean automaker, Kia Motors, has decided to significantly expand an assembly plant currently being built in western Slovakia, the Slovak government announced recently. Kia told the government it will invest 960m Euro, some 135m Euro above earlier estimates, said a spokesman for the Slovak Minister of Industry, which has been coordinating the project.
The company also plans to hire 3,100 workers up 700 from previous estimates, when the factor opens next year, the spokesman told Deutsche Press-Agentur (dpa).
In addition, the plant is now slated to produce about 300,000 vehicles in three different models annually, instead of the initial production target of two models and 200,000 cars a year, a spokesman said.
The news comes as Kia and the government wrap up months of debate over land prices at the factory site near Zilina.
Tough negotiations with landowners finally prompted the government to increase the payouts rather than risk losing the Kia project to Poland.
Kia is one of two foreign carmakers currently building a factory in Slovakia. The other, France's PSA Peugeot Citroen, plans to open its facility later this year.
In another development, Slovakia's Ambassador to South Korea Pavol Hrmo and Korea's foreign Affairs and Trade minister Ban Ki-mun signed an agreement on reciprocal support and protection of investment during the visit of Slovak Prime Minister Mikulas Dzurinda in Seoul on May 27th.
The contract determines the conditions of investing in both countries and thus guarantees financial security for investors.
Hrmo said this agreement should attract other South Korean investors to Slovakia. He suggested that, thanks to carmaker Hyundai/Kia, several companies plan to invest US$200m (6bn Slovak crowns) and create hundreds of jobs in Slovakia, but he refused to name them.
On the other hand, Slovak companies aren't to successful in South Korea. Slovakia exports to Korea only raw materials and semi-finished products.
"South Korea, as a highly developed country, is fully saturated with goods and technology from western Europe. Therefore, Slovakia has only limited opportunities to penetrate the market with finished products. It depends on the activities of Slovak producers," Hrmo explained.
Slovakia has a trade deficit with South Korea. In 2004, Slovakia exported goods worth 723m crowns to South Korea, while importing 16.319bn crowns worth of goods from this Asian nation.

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AVIATION

SkyEurope buys new Boeing 737-700 aircraft

SkyEurope Airlines, central Europe's first low-cost low-fare airline, is purchasing up to 32 new Boeing 737-700 series aircraft, the company said in a recent statement. The agreements signed with Boeing and GE Commercial Aviation Services (GECAS) include 16 firm orders for aircraft to be delivered in 2006 and 2007, and 16 purchase rights for aircraft to be delivered in 2008 and 2009. Out of the 16 firm orders, 12 aircraft will be financed by GECAS, the statement said, New Europe reported.
Price tag for the new airplane order is US$880m at list prices, and at US$1.76bn if the purchase rights are exercised, the company said. SkyEurope, Boeing and GECAS have already executed the final documentation of the agreements.
Out of the 16 firm orders, 12 aircraft will be leased from GECAS operations based in Shannon, Ireland, of which six of the aircraft come from the existing GECAS order book. GECAS ordered six additional Boeing 737-700 aircraft for lease to SkyEurope, headquartered in Bratislava, Slovakia.
"After an intensive competition and detailed analysis, an attractive proposal from Boeing and our own experience operating the 737, we concluded the Next-Generation 737 is the best airplane to take us along our demanding growth plan," said Christian Mandl, SkyEurope CEO and co-founder.
Alain Skowronek, SkyEurope chairman and co-founder added: "Our order of up to 32 new Boeing 737 aircraft will reinforce the predictability of our fast growing business, both in term of aircraft pricing and aircraft availability. SkyEurope will benefit from the efficiencies of the Next-Generation 737, in particular its lower fuel burn, lower maintenance costs but also high reliability allowing for increased asset utilisation."
According to Marlin Dailay, vice president of sales for Europe and Central Asia at Boeing commercial Airplanes, "With its acute business sense, proven business model and steady focus on affordable airfares, SkyEurope is very well positioned."
Said Scott Carson, vice president, Sales at Boeing Commercial Airplanes: "The 737 will will be a moneymaker for SkyEurope."
Boeing forecasts that central European countries will require about 570 new airplanes worth about US$30.6bn during the next 20 years. Single-aisle airplanes in the 100-to 150-seat market, such as 737, will account for 72%. Nine percent will be twin-aisle airplanes such as the Boeing 777 and 787, with the remainder being regional jets, the statement read.

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FOOD & DRINK

Jednota reports 3% drop in turnover for 2004

Overall turnover of the popular food retail chain COOP Jednota for the year 2004 amounted to 2.563bn Slovak crowns (70m euro), the figure was down 3.1% because of high competition from the foreign retail chains Lidl and Kaufland, the Slovak spectator reported recently.
As for the beverage sector, the producers of Budis and Fatra mineral water Stredoslovenske zriedla reported that operating revenue in the year 2004 was 55.7m crowns (1.42m Euro). The company generated more than double the revenue in 2004, against 24.2m crowns in the previous year.
Meanwhile, Novacke chemicke zavody (NCHZ) reported total sales of 1.402bn crowns in the first quarter of 2005. Compared to last year sales were up 12%. They are the largest chemical producers in Slovakia. Net profit in the first three months stood at 36.9m crowns, down five million crowns from the same period in 2004, according to the Director General of NCHZ, Lubos Beno.

Topvar brewery sale piques SABMiller

Conglomerate brewer SABMiller announced on May 9th its plans to buy the last major independent beer maker in Slovakia for an undisclosed amount. If approved by Slovak regulators, the proposed buyout of Topvar Brewery would strengthen SABMiller's position in eastern Europe. Topvar is the country's third largest brewer, behind SABMiller's Saris and market leader Heineken of the Netherlands. No comment was issued by officials at Topvar, which is owned by local shareholders and the company's hometown Topolcany.
SABMiller said it hopes to acquire at least 95% of Topvar shares over the next two years. The company pegged Topvar's net assets at US$15.2m. Last year Topvar sold 569,000 hectolitres to beer and ale drinkers in Slovakia, Croatia, Yugoslavia, the Czech Republic and as far as Australia.

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TELECOMMUNICATIONS

EuroTel joins T-mobile network

EuroTel will sell its products under the brand name of T-Mobile joining the other eight companies that make up the T-Mobile network, Sita News Agency reported recently.
T-Mobile Director, Robert Chvatal, said the company has changed EuroTel's trademark, web page, marketing visuals and 240 sale outlets for T-Mobiles official corporate design. EuroTel has become a 100% subsidiary of Slovak Telecom, whose majority holder is Deutsche Telekom. T-Mobile is a mobile division of Deutsche Telekom.

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