Economic Briefs

Government to pay 33 billion crowns for Mečiar bonds
Finance Ministry against rapid interest rate fall
Engineering sector predicts loss of one billion Sk for 1999
Slovak sugar mills produce 193,950 metric tons of sugar
More emphasis needed on Slovak agriculture

Government to pay 33 billion crowns for Mečiar bonds

The chairmen of the four government coalition parties decided on January 18 that the government would repay the five-year bonds issued by the National Privatisation Agency (FNM) under the former Mečiar government in 1996 in place of the coupon privatisation scheme. The bonds, which are valued at 33 billion Slovak crowns, will be redeemed in cash by the originally set date of December 31, 2000.
The coalition council rejected the idea of using shares in so-called 'strategic' companies for the redemption of the FNM bonds. Instead, the government wants to secure the necessary funds through the privatisation of natural monopolies. However, the ruling coalition Party of the Democratic Left (SDĽ) has said it would not be willing to support a revision to the Privatisation Act that would cancel clauses blocking the privatisation of natural monopolies.

Finance Ministry against rapid interest rate fall

Finance Ministry spokesman Peter Švec said on January 18 the ministry did not want to see a rapid decline in interest rates. "We are inclined towards a gradual rather than a rapid decline in interest rates and we have behaved accordingly in the market in setting maximum yields in our state bond auctions," he said.
Švec's comments came soon after the head of the Slovak central bank's open market operations department, Peter Andresič, said the bank would step up its efforts to combat continued falls in interest rates.
"We do not want to comment on central bank decisions and we assume that they decided correctly with crown stability in mind," Švec said in view of the central bank's decision to sterilise the money market on the day of a state bond auction.
On the interbank market, rates have fallen sharply since the beginning of the year. Maturities of two weeks and above have fallen to around 7.0-9.0% from around 10.0-13.0% at the beginning of the year.

Engineering sector predicts loss of one billion Sk for 1999

Recent results for Slovakia's engineering industry indicate that better times are on the way. In 1998, the sector showed losses of 10 billion crowns, but results for the first three quarters of 1999 show losses reduced to one billion crowns, the chief negotiator of the Slovak Engineering Industry Association (ZSP), Juraj Borgula, said on January 14.
ZSP President Milan Cagala said that output in the year 2000 should reach 150 billion crowns, up 13.6% from 1999. The engineering industry boom is expected to be driven by the automotive sector, where as many as 17 foreign firms now operate in Slovakia.
The territorial structure of exports has also changed compared with the period before 1989. Before 1989, engineering industry exports were oriented mainly toward the countries of the former Soviet Union, while now 90% of total exports flow to the markets of western countries.
Information from the Slovak Statistics Bureau indicates that the average number of employees in the engineering industry dipped nearly 45% from 1990 to stand at 90,593 as of October, 1999. Through the first ten months of 1999, engineering reported the highest growth in nominal wages from the sectors under the KOVO trade union association (metallurgy, engineering, and electro-technical). The growth was 11.2% compared to the same period of 1998. The real wages of employees in the sector in October 1999 constituted 89.5% of the level of 1989.
The biggest problem for Slovak engineering is in financing production; cash flow problems threaten more than 50% of companies, stated Cagala. He sees their chance in the successful restructuring of the banking sector, which can be followed by the settlement of corporate debts.

Slovak sugar mills produce 193,950 metric tons of sugar

Slovakia's seven sugar mills produced 193,950 metric tons of sugar in the processing season of 1999/2000. The average yield of white sugar per hectare harvested was 5.4 metric tons, which is roughly one metric ton more than in the previous campaign, representatives of the Slovak Association of Sugar Producers (SCS) announced on January 14.
SCS Director Róbert Straka said that the fact that Slovak sugar producers managed to be near the European average sugar content in sugar beet is a positive indicator of the recent sugar campaign. "Compared with the previous year, when also a significant portion of sugar beet remained unharvested as a result of bad weather, this is a significant improvement," Straka said.
The sugar campaign opened at Juhocukor in Dunajská Streda on September 13 and closed at the sugar mill in Sereď on January 3. Eduard Šebo, head of the SCS Board of Directors, expected that not all sugar mills in Slovakia would join the next campaign, saying that restructuring at some sugar mills should concentrate their ownership. "It would be ideal to keep three sugar mills and to develop them, which would require investments totaling four to five billion crowns," Šebo said.

More emphasis needed on Slovak agriculture

Annual consumption of food products in Slovakia accounted for 110 billion crowns in 1999, of which 35 billion was imported food, said Agriculture Minister Pavel Koncoš on January 18 following his return from a visit to Germany. In Germany, agriculture is the third most developed sector after the automotive and engineering industries, but the Slovak government is neglecting domestic farmers, Koncoš said. The main goal of the Agriculture Ministry this year is to halt the farming recession in Slovakia and stimulate growth.
Last year, the Agriculture Ministry actually managed to reduce Slovakia's deficit in foreign trade in agro-commodities. This positive achievement, according to Koncoš, can be attributed to the government's export support policy for Slovak products as well as to cancellation of some import licenses.
"Among our priorities for the year 2000 are the settlement of property relations, elaboration of the new system of subsidies with an emphasis on direct payments as of 2001, and continuation in preparations for EU integration."

Compiled by Keith Miller
from SITA and Reuters

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