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SECURITIES - INVESTORS ARE POSITIVE BUT PUSH FOR GREATER REFORMS

Germans praise Slovak economy

BUSINESSES from Germany, the foreign country with the most investors in Slovakia, believe Slovakia's economy will develop favourably and want to keep investing here, reported a survey carried out by the German-Slovak Chamber of Industry and Commerce (DSIHK).

BUSINESSES from Germany, the foreign country with the most investors in Slovakia, believe Slovakia's economy will develop favourably and want to keep investing here, reported a survey carried out by the German-Slovak Chamber of Industry and Commerce (DSIHK).

Almost half of the German investors feel that Slovakia is less attractive for foreign investors after the change of the government last year, but they are generally satisfied with the current economic situation.

The results of the survey, which polled 90 businesses with German capital in Slovakia, could show more good news in the year ahead. Almost half of the surveyed firms plan to increase investments in 2007 while 36 percent plan to invest the same volume as in 2006.

Also, 46 percent of the companies plan to increase the number of employees.

An economist with the DSIHK, Markus Halt, does not expect any big companies to enter the Slovak market because the most important players are already in the country. However, there are still several medium-sized entrepreneurs interested in investing in Slovakia, he said.

These are mainly firms from the automotive and metallurgy sectors, which have been attracted by the positive economic results Slovakia has had since joining the EU, Halt added.

German investors in Slovakia find the country attractive because of its low tax burden, transparent and simple tax system and low labour costs, the survey found.

Slovakia received the highest marks compared to Germany, China and other central and eastern European countries. The survey, which rated different facets of a country's business environment on a scale from one at the top and five at the bottom, gave Slovakia an average score of 2.01 followed by the Czech Republic at 2.17, Slovenia at 2.29, Poland at 2.67 and Hungary at 2.74. Moreover, 88 percent of the companies said they would choose to invest in Slovakia again.

Nevertheless, the German companies said it is crucial that reforms continue to be carried out in various areas and that the country focuses on infrastructure and euro adoption. They also want to see improvements in law enforcement and the fight against corruption, as well as much less bureaucracy.

German investors also said they oppose the Slovak government's current plans to change the Labour Code, arguing that these reforms will lead to the loss of flexibility and an increase in costs, Halt told The Slovak Spectator.

Almost half of the respondents (46 percent) thought that the new government and its policies made Slovakia less attractive for foreign investors, while 39 percent said the country's attractiveness has not changed by having a different government.

Another factor that could reduce Slovakia's attractiveness in the eyes of foreign investors is the strengthening Slovak crown. However, the firming crown is not bad news for all German investors, Halt said.

"There are two kinds of investors," he said. "Distribution companies profit from the strong currency as they can now import their products at a cheaper price. On the other hand, German companies exporting their products from Slovakia have to face increasing prices on foreign markets."

There are around 400 German companies operating in Slovakia, mainly in the automotive and metallurgy sectors. The most important are Volkswagen Slovakia, Slovenský Plynárenský Priemysel (RWE), Slovak Telekom, Leoni, Allianz and Siemens said Halt.

"Germany is a strategic source of investments," Jana Murínová, spokeswoman for the Slovak Agency for Investment and Trade Development (SARIO), told The Slovak Spectator.

Of the 65 SARIO projects concluded in 2006, 10 were German, said Murínová. These investments amounted to €140 million, and included three projects in the mechanical engineering sector, two in the auto manufacturing industry, two in plastic production and one each in metallurgy, wood processing, and IT technologies.

Three investments each headed into the Trenčín, Košice and Prešov regions, and one went to the Nitra and Banská Bystrica region each, creating 2,531 jobs.

Because German investors invested in various sectors and their investments were scattered all over Slovakia, it proves that they are very interested in a range of possibilities in Slovakia, said Murínová.

In 2005, SARIO completed seven German projects worth €75 million, while in 2004 there were 11 German projects worth €75 million. German investors created 1,251 jobs in 2005 and 2,782 jobs in 2004.

German investors are generally optimistic about the development of the country's economy, as 39 percent expect even better prospects than in 2006 while 52 percent predict equally good conditions, the survey said.

Almost 60 percent of firms assume that their economic situation will improve this year while only four percent of companies expect their economic situation to deteriorate. Only eight percent of the firms saw their turnover dropping while more than three quarters recorded growth in 2006.

Last year, 58 percent of companies managed to increase their profit, however a quarter of companies registered losses, the survey said.

The DSIHK assists German entrepreneurs who want to enter the Slovak market by providing contacts, market analyses and legal support. In Germany it attends information events and presents business opportunities in Slovakia. The chamber also personally provides information to interested firms with round tables or individual talks.

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