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New investment trends: What lies ahead

Between 2002 and 2007, the pace of added-value investment growth kept going up compared to the pace of investment growth in general. This fact is also reflected in the smaller share of expenditures on creating gross fixed capital compared to the total gross added value.

Between 2002 and 2007, the pace of added-value investment growth kept going up compared to the pace of investment growth in general. This fact is also reflected in the smaller share of expenditures on creating gross fixed capital compared to the total gross added value.

This development can be considered a good trend and analysts say it can only be sustained if the influx of foreign investment to Slovakia continues at the same pace.

Towards the end of September 2007, the SARIO agency had a total of 184 registered investment projects amounting to Sk3.6 billion, which are in different phases of development. According to these figures, the country can anticipate a considerable influx of direct foreign investments to Slovakia.

By country of origin, SARIO has the most projects in progress from: Great Britain (19), the U.S. (19), Germany (18), Italy (14), South Korea (11), Austria (nine), Belgium (nine), Spain (eight), Slovakia (eight), Netherlands (six), and Taiwan (six).

As for the industrial branches, the most projects in progress are in the engineering industry (43), car industry (26), chemistry, plastics and rubber-making industry (21), electronics (14), logistics centres, shared service centres and IT services (16), metal mining and metallurgy (nine), construction (eight), wood-processing and furniture production (eight), food (five), biotechnologies (two), and others.

For the first to third quarters of 2007, SARIO assisted in implementing 48 investment projects, and in doing so, secured a total of €1.062 billion in direct foreign investments for the next period. These investments will create 11,247 new jobs, with a planned expansion to 12,631 jobs in the future.

The most projects were created in the Košice Region (13), Nitra Region (nine), Trnava Region (seven), Bratislava Region (six), Žilina Region (five), Banská Bystrica Region (three), Trenèín Region (three), and Prešov Region (two).

By industrial branches, 12 projects were made in engineering, 10 in electronics, six in the chemistry, plastics and rubber industry, six in the car industry, three in the construction industry, two in IT services, two in the metal-working industry, and one each in the metallurgy and foundry industry, the food industry, business, logistics, transportation, and services.

The most important trend in the influx of direct foreign investments to

Slovakia has been the shift from the car industry to the engineering and electronic industries. The arrival of the South Korean Samsung investment to Voderady, near Trnava, meant the start of a new branch in Slovakia, as this huge investment will bring several other interesting investments with it. The new Samsung plant should be the biggest in Central Europe, and the technologies in it will be 100 percent new.

In connection with the concentration of car plants in western Slovakia (Bratislava’s Volkswagen, Trnava’s Peugeot Citroen, Žilina’s Kia), rumours started about the first Slovak manufacturing cluster in automotives. Later, the triangle of Nitra (Sony), Galanta (Samsung) and Trnava (Samsung in Voderady) created a second cluster in electronics. The development of clusters is a new area that should receive support in the future. Clusters aim to ensure that innovations and competition in crucial industrial branches are strengthened by comprehensive supports, and by creating development partnerships between two mutually connected production plants and service providers. When research and development clusters are created from production clusters, the cooperation with educational institutions is inevitable. Slovakia has already begun to create major niches in the field of educating new labour, and particularly highly-qualified labour that is accessible to research and development activities. The Education Ministry has so far offered no consistent plan for matching the demand from employers for educating new experts in certain industrial fields with the offerings of secondary schools and colleges. So cooperation between investors and the school system has so far remained solely directed by investors, who offer their experts for lecturers, scout talent, pay student workers during their studies, or supply necessary technologies and equipment to schools. The development in foreign investments to Slovakia will also be influenced to a certain extent by the new law on investment support designed by the Economy Ministry. The fundamental change, according to the proposal, will be the diversification of eligible projects, and improving the investment environment for investments with a high added value. A very good signal for investors is a bigger use of fixed deadlines, which increases the legal security during the application approval process. Just as important, the structure of individual forms of investment support is being simplified. A substantial change of the bill is that it doesn’t just support production and the services connected to it, but it also separately supports production and technological centres (research and development, design), strategic service centres (IT services, technical and customer support, software development), and major tourism centres. A different minimum amount of investment is required for each of them, but in production and tourism, this amount changes depending on the unemployment rate. So the state indirectly supports the establishment of technological centres and strategic service centres in developed regions.

On this note, we must add that when applying for investment support for technological centres and strategic service centres, it is necessary to employ a certain number of people with a university education (60 people or 30 percent). It will be interesting to see how these opportunities will show up in the dynamics of direct foreign investments.

In the production facilities and tourist centres, it is essential to invest hundreds of millions of crowns so that the investor can apply for regional investment support. For the technological centres and strategic service centres, the amount of capital required is markedly smaller. Small and medium businesses in the manufacturing sphere and tourism can also draw on other kinds of public support that local legislation considers compatible with the shared market.

The question of support for creating intellectual property, especially

patents and licenses, also remains open. The experiences of other EU states show that partially covering the costs for patent proceedings and licenses is a significant incentive for applied research and industrial development, as it reduces the risks inherently connected with these

activities.

(Jana Murínová is the spokeswoman of SARIO)

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