Books on Slovakia
% of GDP
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
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
However before the meeting, the parliamentary Chairman and KDH leader, Pavol
Hrusovky, endorsed a call for early elections. The next polls are scheduled for
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 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
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.
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
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.
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
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.
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.
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
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.