WHILE Slovakia continues to be popular with Italian investors ranging from small family businesses to big corporations, emerging competitors nearby are forcing the country to improve its business environment to keep new investments coming.

“Even in a period of generally difficult economic conditions worldwide, Italian investors look with attention to Slovakia and come to invest here,” Roberto Rizzo, deputy head of the Italian Embassy in Bratislava, told The Slovak Spectator. “The job market conditions are still attractive and Italian businessmen have an interest in exploring a young and stimulating environment like the Slovak one.”
In this regard, the embassy concentrates on three targets: entrepreneurial collaboration, cooperation within the EU and strengthening collaboration in culture and tourism.

“We think that Italian and Slovak companies should undertake new joint ventures in Slovakia and in third markets, i.e. central Europe, emerging markets, etc., by putting together their respective experiences: technology, knowledge of the markets, networks and others,” said Rizzo.

The second target is cooperation within the EU, with Rizzo stressing this year’s importance for the two countries, as Slovakia celebrates its 10th anniversary of EU membership and takes on the presidency of the Visegrad Group, while Italy holds the presidency of the EU Council in the second half of 2014.

“Of course, most of the EU agenda is followed in Brussels,” said Rizzo. “But it is important to work together in Bratislava, as well as in Rome, to strengthen common Italian-Slovak action in areas like employment for young people, immigration, the banking system and others.”

As for the third target, Rizzo stressed that Slovakia has considerable potential, especially linked with its natural beauty and spa resorts.

Giorgio Dovigi, secretary general of the Italian-Slovak Chamber of Commerce, agrees that interest among Italian investors in investing in Slovakia remains high, adding that even though Slovakia offers numerous positives, other countries are becoming more attractive to Italian investors.

“We noticed that Italian companies are choosing, for example, Poland and Serbia, which have become Slovakia’s big competitors in the last two years,” said Dovigi.

According to Dovigi, most of the investors coming to Slovakia are from the retail sector or companies that are delocalising their production.

“Companies that decided to delocalise are mainly companies [which are] already internationalised and present in Slovakia with production units,” said Dovigi. “Italy has a very big market that is successfully expanding and that is why many of the investors try to find trade partners abroad. To name the most attractive industrial and economic segments, those are the energy and bank sectors, mechanics, plastics and electronics.”

When listing the positive aspects of investing in Slovakia, Dovigi said there are many when comparing Slovakia and Italy.

“From a geographical point of view, it is definitely a strategic location between east and west, with great export potential,” said Dovigi. “From a political point of view, in Slovakia there is less political interference.”

The economic aspects benefit Italian investors, according to Dovigi, pointing out the country’s positive credit ratings, the fair tax system, the relatively low costs of conducting business, the low cost of labour and a more advantageous labour code.

“There is definitely also a much more flexible labour market because of a more flexible labour code than in Italy, which attracts investors as well,” said Dovigi. “What is considered to be an advantage is also that the employees are qualified and they have solid knowledge of foreign languages.”

But while in general the business environment and legislation in Slovakia are more ‘cooperative’ and business-friendly in terms of investing, there are still some barriers that could be seen as disadvantageous to Italian investors. Dovigi specified that investors interested in investing in Slovakia are mainly small and medium-sized enterprises (SMEs).

“Their entry into the market is influenced by a number of regulatory and administrative barriers,” said Dovigi. “The regulatory framework in the last two years has been unstable. Furthermore, SMEs have difficulty getting access to state aid programmes. In Slovakia there is still corruption and poor law enforcement as well, even though this phenomenon is improving.”

The Slovak Investment and Trade Development Agency (SARIO) has not seen any significant change in Italian investors’ interest in Slovakia over the last year.

“Italian investors continue to be interested in central and eastern Europe,” Richard Dírer from SARIO told The Slovak Spectator.

SARIO closely cooperates with the Italian Embassy in Bratislava as well as the Italian-Slovak Chamber of Commerce when presenting Slovakia’s investment environment. It also participated in the regional seminar “Let’s trade with Italy”, organised by the Banská Bystrica Regional Chamber of the Slovak Chamber of Commerce and Industry in Banská Bystrica on April 8.

According to Matej Kapusta from the regional chamber, a total of 56 participants heard basic information about doing business in Italy as well as mutual Slovak-Italian economic relations, delivered by representatives of the Italian Embassy to Slovakia, the Slovak Foreign Ministry, the Italian-Slovak Chamber of Commerce, SARIO and companies Elips and Vest. The seminar was a preparatory event to a trade mission of Slovak companies into Italian regions Friuli-Venezia Giulia, Marche and Abruzzo, which the regional chamber plans to organise in cooperation with SARIO and Italian partners this autumn.

Since 2002 SARIO has helped to bring about 23 investment projects from Italy with an aggregate volume of over €200 million and the creation of over 2,650 jobs.

“For Italian investors all the sectors may be of interest,” said Dírer. “But [Slovakia’s] economy might utilise the most experiences from the banking sector, the automotive industry and electrotechnics. Within industry, the sale of automotive components especially dominates. Opportunities in tourism are unlimited.”

Zuzana Ďuďáková, spokesperson of UniCredit Bank Czech Republic and Slovakia, the branch of the foreign bank agrees that prospects in the automotive industry are high, especially given the historically strong industrial tradition in Slovakia and the presence of many international companies. With respect for companies’ size, Slovakia has good prospects as a destination for medium-sized businesses, i.e. those with up to 250 employees, and an annual turnover of up to about €50 million. Slovakia can provide a high number of young university graduates, and its labour productivity is attractive, too.

“[Labour] productivity in Italian companies in Slovakia is one of the highest; it is three times higher than the productivity of an average company in Slovakia, also thanks to a high share of sectors with high added value on Italian investments in Slovakia, i.e. energy and finance,” said Ďuďáková.

Based on data of the National Bank of Slovakia, the volume of foreign direct investments from Italy to Slovakia amounted to €3.4 billion in 2010.

According to Ďuďáková, within the region of the Visegrad Group countries (Slovakia, Hungary, Poland and the Czech Republic), Slovakia is, after Poland, the second most important destination for Italian investors. The share of Italian investments of new foreign investments made up almost 18 percent between 2008-2011, while Italian investments flow especially into the financial and energy sectors. Ďuďáková added that Italy’s share of foreign investments in Slovakia is the highest among the central and eastern European countries, almost 8 percent, when the average is about 3 percent.

SARIO’S Dírer specified that the biggest direct investors in Slovakia are major electricity producer Slovenské Elektrárne; banks Všeobecná Úverová Banka and UniCredit; insurance company Generali Slovensko; Magneti Marelli Slovakia, in the eastern Slovak town Kechnec, specialising in design and production of high-tech systems and components for the automotive sector; and Linora, in the eastern Slovak town of Hencovce, producing stockings and other products.

Dovigi estimated for The Slovak Spectator that there are about 500 companies that operate here in Slovakia, which vary from big investors to small family businesses, employing about 25,000 people. Based on the chamber’s observations, these numbers have remained more or less stable in the last two years.

According to Rizzo, Italian companies are focusing increasingly on civil and communication infrastructure, especially participating in joint-ventures with Slovak companies in public tenders.

“As for now, the Italian Salini-Impregilo Group, in a joint-venture with Slovak company Dúha, recently won a bid for the construction of a 13-km stretch of the D1 highway for an amount of around €410 million,” Rizzo told The Slovak Spectator, adding that the Lietavská Lúčka-Višňové-Dubná Skala stretch of Slovakia’s D1 includes the 7.5-km long Višňové tunnel, which will be the longest in Slovakia.

In this respect, said Rizzo, the Italian-Slovak Chamber of Commerce is doing a great job attracting Italian operators by organising specialised B2B meetings and thematic seminars.

Start-up companies are also growing in importance: small Italian companies are coming to Slovakia to develop their ideas and find new, stimulating ways to cooperate with Slovak companies.