Jake Slegers (source: Courtesy of AmCham)
He added that unfortunately these ongoing investments are somehow not fully recognised and publicised very much as the significant investments they are.
The Slovak Spectator spoke to Slegers about negotiating the Transatlantic Trade and Investment Partnership (TTIP) free trade agreement, shared service centres, the energy union, AmCham’s plans, and more.
The Slovak Spectator (TSS): A number of companies from the US but also other countries have launched their business service and shared service centres in Slovakia. What reasons do you see behind this development? What are the prospects for further expansion of such centres in Slovakia?
Jake Slegers (JS): Basically, we have seen the emergence and rise of these business service centres in the last 10 years. Companies like IBM, AT&T and Dell originally established themselves here with relatively small numbers of people. Over time, they organically grew to employ thousands of people because they came to appreciate the great level of Slovakia’s talent pool – quality of university education as well as the available language skills. I think Slovaks not only have an excellent educational background – and a ‘language gene’ – but they also have a good work ethic, which makes an attractive package. Slovakia’s central location and stable political situation also play an important role. On average these centres are growing by 10 percent every year, adding hundreds of new jobs annually.
Thus these investors have come to realise that Slovakia has been a very good place to establish their business service centres (BSCs) for all these reasons. In order to sustain these favourable conditions and improve them further, AmCham Slovakia formed the Business Service Center Forum (BSCF) last year. By representing the voice of all major BSCs we can highlight the contribution of these centres to the Slovak economy in terms of employment and taxes, especially payroll taxes, and advocate for good business conditions on behalf of this promising industry sector.
But we also would like to see companies branching out into doing R&D and innovative development here as well.
TSS: The European Union and the United States are negotiating the Transatlantic Trade and Investment Partnership (TTIP) agreement. The original plan was to complete negotiations by the end of 2014. How do you see current prospects for clinching an agreement? What are the most challenging points in the discussion?
JS: The original plan to have the agreement signed so quickly – by the end of 2014 – was completely unrealistic even though there were reasons behind it, such as the European parliamentary elections. The assertion was that, if the agreement was not signed by the time the European parliamentary elections took place, the potential for the agreement would be gone and there would be no hope for it to become reality. It was proven untrue.
There are now several scenarios, one of which is that we could see the agreement signed two, three or four years from now. Another scenario is that, over a period of many years, we will see it coming to a rather non-climactic conclusion, some areas being finalised and implemented, but with a slow-signing process. There is also a big push for a complete, comprehensive agreement. There is a fear that if we do not include everything in it from the beginning, it will never be finalised. I’ve asked this question of one of the people keenly involved in the process in Washington DC just about three weeks ago and his response was basically that there are several scenarios and we probably will see a signing ceremony but not everything included at the same time.
So I do feel that we will eventually see an agreement signed – because of the urgency of the matter. If we do not do this now, other countries will step up and work to set global standards. We absolutely must be out front in setting the global standards. I think that the urgency of that will hopefully prevail on both sides.
What is the most challenging and most frustrating to see is the disturbing amount of brazen disinformation being disseminated and people just believing things that are untrue.
This is possibly due to external sources of funding for the opposition to the potential agreement. These opposing interest groups are trying to disrupt the negotiations in any way they can. But it is absolutely imperative for both sides to come to a certain agreement.
TSS: What can be done in this respect?
JS: We must continue to publicly counter the strong disinformation campaign, which we have done so far. We must openly and forcefully counter this campaign at every opportunity. We have to prove them wrong, to prove that they really do not have facts to back them up and really do not know what they are talking about. We must highlight the advantages of the agreement, especially, in our case for Slovakia, as this agreement is very important for the automotive industry. Slovakia is currently manufacturing just under one million automobiles a year. If – through setting global standards and removing tariffs and trade barriers – Slovakia’s net exports can be increased even by a small amount, this agreement could have a major impact on Slovakia, its economy and its production output.
TSS: The United States is a hotbed of innovation while the Slovak government also wants to boost support for start-ups and innovation. What measures, in your opinion, may help start-ups in Slovakia?
JS: One important development that we’ve seen in the last year is the very public and personal support of Slovak President Andrej Kiska for start-ups. I think this type of public support has been very important for raising awareness and for motivation for start-ups. The term start-up is very much in vogue and popular at the moment, but I also believe that what really would help and enhance the start-up atmosphere would be to incorporate the teaching of entrepreneurship in the curriculums at all educational levels in Slovakia. Our experience is that many universities are not open to change. We very much need to see the fostering of the entrepreneurial spirit and entrepreneurial approach to business. I do know that many companies have actually developed particular programmes with schools and are giving lectures on this issue. AmCham Slovakia has also been encouraging cooperation between companies and universities for many years.
In terms of governmental support, I am not a big fan of just throwing money at something. But I do think that some types of programmes and support to help start-ups in their early stages when they need funding, through what is called the Valley of Death, can help.
TSS: How do you perceive the plans for the EU’s Energy Union?
JS: We support the concept of the energy union. We have consulted fairly frequently with the European Commission Vice President for Energy Union, Maroš Šefčovič, about this issue. We had a roundtable with him last November about this very important issue and we hope to have another one in the future.
In addition, AmCham welcomed the recent strategy of the European Commission (EC) on Energy Union as a necessary step to better balance the EU’s energy security and industrial challenges. The EC can play a positive role in political agreements concerning cooperation with third countries, especially to eliminate risks of crisis situations and the use of energy as a political tool, but also in support of new infrastructure projects, harmonising market rules, etc. The creation of a smoothly functioning single EU energy market brings not only major gains in social and efficiency terms to European consumers and industries. It is also the best instrument to strengthen Europe’s security of supply, competitiveness and the high level of standards of energy services when applied via market mechanisms. Regardless of the many significant positive outcomes already achieved, there is still a number of challenges left to the creation of a fully unified internal energy market. Market openness and integration are key pillars for boosting market competition and bringing innovative energy approaches and services. We also support the objective to ensure the EU as global leader in renewable energy. But the necessary measures have to respect competition rules, be market driven and avoid increasing end user prices of energy – rather they should aim for lowering end user costs. We have always been committed to enhancing EU’s and Slovakia’s competitiveness in the global market by calling for a stable, predictable and pro-investment oriented research and innovation.
TSS: Could you describe the current state of economic cooperation between the US and Slovakia? Have you registered any changes, either positive or negative, within the two countries’ bilateral economic cooperation? What factors affect this cooperation the most?
JS: A recent phenomenon we were seeing is a rather dramatic increase in the interest of Slovak companies to establish themselves in the US market. Moreover, while we cannot point to major investments by new companies here, what we do see is a significant across-the-board expansion of the vast majority of investors who are already established in Slovakia. Unfortunately, these ongoing investments are somehow not fully recognised and publicised very much as the significant investments they are. These involve, for example, the already mentioned expansion of business service centres like Dell, Johnson Controls, AT&T, IBM, but also companies like Honeywell and many others.
TSS: How do US businesses and investors active in Slovakia perceive the current setting of the business environment in Slovakia? Which recent legislative changes have had the biggest impact on the business environment in Slovakia, either positive or negative?
JS: The business environment generally is perceived to be fairly positive and quite stable, but there are always areas where we would like to see some improvement, like payroll taxes, electricity prices, labour code issues, especially in terms of flexibility of working times and agency employment. We have encouraging signals that in the next year we will see some changes in labour code legislation that would be advantageous for our member companies.
TSS: Last year AmCham criticised Slovakia for what it called unpredictable rises in electricity prices. Has this question been addressed in Slovakia since that time?
JS: As far as I know this matter has not been addressed by the authorities yet. But we continue to beat the drum on the whole issue of high energy prices for industries here in Slovakia. We feel it is a hindrance to foreign investments and a major factor in the small number of data centres here in Slovakia, as they consume a lot of energy. We would see more data centres established here if energy costs weren’t so high for industry. We know that there were companies that would invest in that, but have not done so because of the unrealistically high energy prices.
TSS: Is there any untapped potential in the bilateral cooperation between the US and Slovakia? Which segments of Slovakia’s economy do you see as having potential for US investors?
JS: We would love to see US automobile manufacturers here. There is a very attractive network of existing infrastructure available for manufacturers. However, we don’t see value in Slovakia just in manufacturing but also would like to see increasing R&D and innovation development in high tech and future tech. Business opportunities are also in energy, more specifically nuclear energy and natural gas as well.
TSS: What are the plans of AmCham for this or next year? What issues or problems would you like to address?
JS: First of all, along with our coalition partners in the initiative, we are continuing with our Rule of Law Initiative. We are patiently working with the Slovak government on the implementation of our proposals and seeing them incorporated into the government action plan.
This year is officially the AmCham Year of Trade, basically in support of TTIP, investment and trade in general. As part of this plan, we held the first Business Service Center Forum conference in May and had an e-commerce panel at our annual AmCham/EU Commission conference in June. We will be benchmarking with our FDI survey of foreign investors and FDI conference at the end of the year. We will have a major TTIP event in mid-October, just to mention some of the events for 2015.
Next year, 2016, will be a hugely important year for Slovakia as it will for the first time hold the Presidency of the Council of the European Union. We hope to be intimately involved by hosting a number of events and helping to create the necessary platform to support the government in any way we can. Slovakia has an opportunity to really establish itself in Europe. It is very encouraging to see the advance preparations already under way.
