Investment agency image mauled again

Only months since being threatened with bankruptcy, government investment agency SARIO has been on the receiving end of more bad publicity after the Economy Ministry said it had received information that the agency's top executives had conflicts of interest.
The matter has been complicated by the insistence of the European Commission (EC) delegation in Bratislava that the situation be cleared up before the EC releases 5.5 million euros to the agency for grants and technical assistance.
"Civil servants mustn't have links with any private companies, especially when they are dealing with [other] businesses on a regular basis. We have to be careful about this, especially when they [SARIO] are to be funded by EC money," said Christian Bourgin, head of the Phare funding section at the Slovak branch of the EC in Bratislava.

Only months since being threatened with bankruptcy, government investment agency SARIO has been on the receiving end of more bad publicity after the Economy Ministry said it had received information that the agency's top executives had conflicts of interest.

The matter has been complicated by the insistence of the European Commission (EC) delegation in Bratislava that the situation be cleared up before the EC releases 5.5 million euros to the agency for grants and technical assistance.

"Civil servants mustn't have links with any private companies, especially when they are dealing with [other] businesses on a regular basis. We have to be careful about this, especially when they [SARIO] are to be funded by EC money," said Christian Bourgin, head of the Phare funding section at the Slovak branch of the EC in Bratislava.

The potential scandal surfaced July 16 after the Economy Ministry discovered from the Slovak business register (www.orsr.sk) that Alan Sitár, chairman of the board at SARIO, and Roman Minarovič, the agency's general director, were still registered as holding interests in various companies.

According to Economy Ministry spokesperson Peter Benčúrik, the two had been involved in private businesses without declaring any conflict of interest.

"SARIO officials have to devote their work only to the agency. They have to arrange their personal matters in accordance with what is demanded from them," Benčúrik said.

Both Sitár and Minarovič have denied any wrongdoing, saying that more than a year ago they dissociated themselves from any potentially conflicting interests in private businesses.

"For myself I can say that I filed a request to be crossed off all businesses which would presuppose any conflict of interest in 1999. My name can only be found in SARIO structures," Sitár told The Slovak Spectator July 23.

"It might have happened that the commercial courts haven't yet amended the information, but I can prove what I say with relevant documents," he said. "I don't understand why the issue has been opened again."

Minarovič said that he filed a request for his name to be crossed off three businesses in summer 2000, and added that he too could hand in documents to prove the process had been carried out.

"I don't understand what they [the Economy Ministry] are doing," he said.

According to the business register, Sitár is still a member of the supervisory board at bankrupted meat processor Novum and Novum Špeciál and a partner at medical firm Swisray Medical Middle and East Europe. His name was removed from the supervisory board of Capital Partners Consulting firm in November last year.

Minarovič is listed as a partner at IMCa and RGM Trade and as a legal representative at the firm POLYCO.

But despite their denials, the Economy Ministry is unconvinced that the pair's claims of innocence ring true.

"Information which we have recently received says something else," said Benčúrik, when told of Minarovič and Sitár's statements.

The Economy Ministry said July 25 that it was planning to change the management of SARIO, but that there was still a good chance that present managers would remain working at the institution. Sitár said that he did not understand the need for a change, pointing out that if the Economy Ministry goes ahead with its plans it would be the third change to the main government investment agency since the present coalition took power in October 1998.

Damaging image

The conflict between the government and its own investment agency, combined with the demands from the EC that the issue be resolved before it releases money to SARIO, could damage Slovakia's investment prospects, said some in the sector.

Slovakia last year won $2 billion in foreign investment, matching the country's entire intake between 1993 and 1999. The government plans to top that figure this year and has introduced a general package of investment incentives to lure more foreign firms to Slovakia and help raise employment. The current unemployment rate in Slovakia is just under 20%, one of the highest in Europe.

However, at a recent meeting the top 15 investors in Slovakia told the government that there was too much bureaucracy in investment processes and that SARIO did not have a wide enough mandate to be truly effective in helping investors before and after their investments.

The agency also found itself in serious financial trouble in May this year, unable to pay a 2.5 million crown rent bill for its offices when the government failed to transfer a 50 million crown ($1 million) payment onto its account.

"This [latest] case could serve as another reason for foreign investors to rethink their co-operation with SARIO. Its image has already been questioned, and this won't help at all," said Karol Balog, head of the Phare-funded Agency for Industrial Development and Revitalisation.

However, one investor The Slovak Spectator spoke to said that he was unconcerned about the recent allegations against SARIO's top management.

Errico Biondi, general director of washing machines plant Whirlpool Slovakia, said that unless he saw documents proving the conflict of interest, the agency and its people wouldn't lose the good image they had built up in his eyes.

"It's very important to avoid a conflict of interest. It's simply about honesty, but it has to be proved. It's on the business register, but that's not enough," Biondi said.

"Until now," he added, "our contact with SARIO has not aroused any doubts or suspicions."

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