The former head of investment agency Sario, Alan Sitár, regrets he never got to finish what he started.photo: Ján Svrček
Prime Minister Mikuláš Dzurinda's foreign investment advisor, Alan Sitár, stepped down from his post as head of state investment agency Sario on August 8 amid increasingly open criticism of the agency's work, and of Sitár himself.
Sario's annual general meeting in late June ended with approval of a budget for this year in defiance of the Economy Ministry's own plans for Sario's future financing and operation. The ministry had already agreed to the budget plans months before, but in the end changed its mind. On August 7 the government agreed to turn Sario into a joint-stock company with the Economy Ministry in effective control.
Citing an inability to find a modus vivendi with the ministry over Sario's structure and future, Sitár resigned from his position August 8.
After taking a two-week holiday in mid-August, Sitár sat down with The Slovak Spectator August 27 to discuss Sario, the Economy Ministry and the future of investment in Slovakia.
The Slovak Spectator (TSS): Regarding your departure from Sario, the local press presented it as a dispute between two political groups, with you and Deputy Prime Minister for the Economy Ivan Mikloš on one side and people connected to Economy Minister Ľubomír Harach on the other. Do you feel that that was the case?
Alan Sitár (AS): There was a dispute, certainly. Since the creation of Sario [in 2000] there has been a difference of opinion between us and the Economy Ministry over the concept adopted [for Sario's functioning] by the government last May. The ministry has wanted to act as the main power behind the organisation from the beginning, which has led to mounting pressures during this year. There were some points that we could not agree on and overcome, such as the issue of finances. Since September last year the management of Sario has pushed very hard to get this issue resolved. The same goes for the creation of foreign branches of Sario, which we need if we are to get investors' attention. Somehow, we didn't manage to reach an agreement with the Economy Ministry on these matters.
But to answer your question, I think that it was a professional rather than a political dispute, a difference of expert opinions. That was the main problem. Throughout the past year we failed to smooth out these problems, and they somehow escalated, especially after we had to cease our cooperation with one member of the Economy Ministry [Ján Ježo, director of the ministry's Phare foreign aid section - ed. note]. After that things got a little bit out of control, and the Economy Ministry started to press for answers to questions which had been resolved many months before.
Alan Sitár was replaced on August 28 at the helm of investment agency Sario by an Economy Ministry official...photo: Ján Svrček
TSS: Some of those questions concerned your alleged conflict of interest the ministry said arose from your private sector activities. You claimed to have made it clear to the Economy Ministry that you had dealt with the situation months before, and couldn't understand why it had suddenly appeared in the press in June, especially as the problem seemed to have been that the internet version of the Slovak business register still showed that you were registered with some companies. The internet version has been available since January - why did the Economy Ministry bring up the matter in June?
AS: I can only speculate on the reasons for this. I stepped out of all the companies I was involved in as far back as December 1999, so there was no question of a conflict of interests with Sario. Also, the Economy Ministry asked us to make a sworn deposition [that Sario members had given up their private sector roles] in December last year, and submitted that information on January 10 to European Commission ambassador to Slovakia Walter Rochel. Ambassador Rochel, in a letter dated February 13, declared that the matter had been cleared up. I was therefore unpleasantly surprised when in June the Economy Ministry raised the matter again. I talked to Minister Harach several times to confirm the situation had not changed and that I had no conflict of interests, but apparently that was not enough. So in the end, I asked [top Slovak lawyer] Ernest Valko his opinion, and he confirmed that there was definitely no conflict of interest.
TSS: You mentioned some problems over the foreign branches of the agency. At the June Sario general assembly it was only the Economy Ministry which was against the creation of these branches, something to which it had apparently previously agreed. Did the ministry give you any reason as to why they had changed their minds?
AS: Unfortunately not. They just said that they were going ahead with their ideas, which were actually close to what we had been pushing for all along. I feel sorry about this, because the ministry has said that it wants to raise salaries at Sario from the state budget, which is something we had been saying we wanted to do for months, but now they feel that they want to do this because they are in charge of the organisation. I just feel sorry that Sario lost a year that could have been very productive. We had a very strong feeling from a July 9 meeting with investors that they supported not just the organisation but its concept. This agency was, first and foremost, for investors.
...after months of defending himself against public attacks on his private sector activities and his strategy for Sario.photo: Ján Svrček
TSS: Investors said after that July 9 meeting they wanted to see Sario given a wider mandate to help them both during and after their investments. Was that ever really possible for Sario?
AS: We tried our best. During our involvement with the formation of laws on industrial parks and investment incentives we tried to use the Czech model of these laws, which has its investment agency's involvement actually written into the legislation. We had intense disputes about this with the Economy Ministry and legislators, who said that it just wasn't possible.
TSS: What do you mean exactly by 'written into the law'?
AS: I mean that Sario would have a mandate clearly formulated in law. Right now, the only mandate Sario has is a vague agreement with the Economy Ministry which says that Sario runs programmes connected with support of foreign investments and exports. It doesn't give us any specific powers. This has led to duplications [of functions]. Investors have come to us and wanted to know why they have to deal with, say, both the Environment Ministry, the Finance Ministry and the Economy Ministry, and what Sario could guarantee for them. We had no clear answer for them.
TSS: So Sario needs a mandate written in law to do its job effectively?
AS: It would help greatly because it would provide stability, which is one of the crucial parameters for investment. Investors need to see that an [investment] partner [like Sario] has a mandate, and they need to understand what role that partner will play.
TSS: You are still an advisor to the PM on foreign investment. What would you say Slovakia needs, which it does not have now, to attract investment, and what can it build on that it does have?
AS: That's a very broad question, but I'll try to concentrate on the most important things. First, Slovakia needs clearer legislation, laws that are stable, understandable, and which create conditions for investment similar to those in neighbouring countries. Second, it has to keep its integration focus. Third, [it has to improve] political stability, which is extremely important for every investment. And then, of course, the broad definition of the business environment, where legislation, jurisdiction, and economic stability is of the essence. Last but not least, what we have proved is that what an investor needs from the state is a helping hand right from the start of their activities. What they want is a one-stop shop where they can come and get the answers to most of their questions, and get help dealing with administration and red tape.
TSS: Many investors keep coming back to the importance of this one-stop shop. Sario was never this one-stop shop. Did that disappoint you?
AS: We feel we only really just started to fulfil this [function]. From some points of view it was easy for us because we started from ground zero. Whatever we did was taken as positive. But I feel there are many things which can be improved, and much room for improvement compared, for example, with the Czech Republic. There is still a long way to go, but we at least had a direction, and moved in that direction, and got great support from investors. The concept was there, but its successful application was not. But as I have said, in a situation where it was unclear if we were going to be able to pay our debts [in June it was revealed that Sario was close to bankruptcy when the state failed to transfer 50 million crowns onto the agency's account - ed. note] - that's quite a hard situation in which to carry out your mission.
TSS: How did that situation with the late payments come about?
AS: I must say that the government did everything necessary to make sure the organisation was functional. But there was a decree from the government saying that the Economy Ministry was responsible for handling all those things, so we communicated with them. However, somehow, and I again can only speculate on the reasons why, since September last year we were unable to work through all the technical details [on financing] and the money was not released until May this year.
TSS: You mentioned the importance of economic and political stability in Slovakia. Great strides have been made with economic stability, but the matter is different with political stability, judging from the most recent threat by the Hungarian Coalition Party to leave the government. How much does political instability really affect investment?
AS: To put it simply, it has a huge effect. Political stability is a reflection of the stability of the country as a whole. For every investor who is committing certain funds to a certain country, it is extremely important to have a feeling of security in that country. It is one of the most crucial parameters for an investor when looking at a country. If this criteria is not fulfilled then there can be many incentives, specific laws etc. but investors might still decide to go somewhere else.
TSS: Have you had any feedback from investors on their view of the current situation regarding the Hungarians?
AS: I wouldn't like to comment. I think that every investor has their own opinion on the political situation and I wouldn't like to generalise. However, I would say that a solution to the present situation would be to the benefit of all the investors Slovakia has.
TSS: There has been some concern over investment in relation to who will be in power after the next elections. If certain political groups come to power, let's say the opposition Movement for a Democratic Slovakia (HZDS), some investors may be concerned. Have you come across any such feelings of worry?
AS: Yes. Investors want a standard, transparent political leadership recognised in Europe, one that will help speed up the positive process of integration into European structures.
TSS: Is there any way that a body of legislation that cannot later be altered, can be put in place now, before the next elections, to encourage investment? I mean laws such as those on industrial parks and investment incentives.
AS: The law on industrial parks has been approved by parliament. I have information that the law on investment incentives is in its third reading in parliament, and that discussions on it are running smoothly. I feel it has broad support in parliament, and wouldn't later be changed. The importance of the role of foreign investment for the country is understood across the political board.
TSS: Would you become involved in Sario in any way again, or have you completely cut yourself off from the agency?
AS: Life always taught me to never say never. No one knows how things will go. But right now, I have to say that I will play no active role in the organisation. However, with my position as advisor to the Prime Minister I will be cooperating with Sario and the Ministry of Economy on an external basis as I do with many other ministries, and helping in any way I can. My interest is to help investors and move forward projects which are viable because their benefit to Slovakia is very large.
TSS: Would you have any advice for whoever eventually takes over your post at Sario?
AS: A lot of patience, a good ear for investors and what they want, and a good hand in picking people. Every organisation is built on teams, and I believe that with a good team you can work miracles. I also wish my successor the best of luck.
