The state investment agency, Sario, is to be dissolved, cabinet has decided.
The troubled agency, created only last summer, is to be liquidated as a joint stock company and to become a part of the Economy Ministry.
The move is another step backwards in the government's efforts to attract more foreign direct investment (FDI), said key players in the Slovak investment sector.
"The government is beginning a new investment agency for the third or fourth time. It's taking a lot of time just to set up an agency or department that will help investors. They aren't focusing on the most important thing for investors: creating a one-stop shop," said Gabriel Eichler, former head of the east Slovak steel works VSŽ and an active promoter of investment into Slovakia.
One-stop shopping was a term used by Sario to describe its offer of a complete range of services required by investors.
The decision to dissolve the agency was taken at a cabinet meeting September 26 and posted on the government's website. However, the move was not announced at the usual press conference following the ministerial meeting.
Economy Ministry spokesman Peter Benčúrik said the decision to make Sario part of the Economy Ministry had been taken so funding for the agency could be secured from the government budget.
"This will benefit the country's investment activities. As part of the Economy Ministry the agency will now be able to receive state funds," he said.
"There will be no change to the activities of the agency. It will basically remain the same," he added.
Sario was transformed into a joint stock company in August this year after European Union officials announced they were concerned by its ownership structure. The EU blocked the release of funds to the agency for various projects until the government moved to make Sario 100% state owned. The National Property Fund (Fond Národneho Majetku - FNM), a non-state privatisation agency, had previously been a major shareholder in Sario.
The decision prompted the resignation of Sario head Alan Sitár, who said he felt he was "no longer needed" at the agency. He attacked the financing plan for the organisation following a delay in a $50 million government payment that forced the agency to the brink of bankruptcy in May.
He was also angered by public statements made by Economy Ministry officials that he and other managers had conflicts of interest at the agency. Sitár denied he had any conflicts of interest.
Investors present in Slovakia have in the past complained that Sario and its predecessor Snazir have had neither the mandate, structure nor resources to become a one-stop shop to help investors at all stages of their investment process and after deals have been done.
"Most other countries invest finances into launching agencies rather than departments at ministries as one-stop shops for foreign investors. To have such an agency working on the principle of a one-stop shop is often more important than any incentives given to investors. There is now no such agency working in Slovakia," said Eichler, who guided VSŽ through its $400 million buyout by US Steel.
Some investors have also complained of excessive bureaucracy in the investment process. Work and residency permits for employees and company bosses can take as much as six months to one year to obtain. Reaching agreement with municipal governments on land and infrastructure for investment projects has also sometimes proven difficult.
Sario has said in the past it lacked the remit to help investors with these problems. Some independent experts fear that problems with bureaucracy will not be eased following the cabinet decision.
Marek Jakoby, an investment analyst at the economic thinktank Mesa 10, commented: "The idea with Sario was to start a one-stop agency, but the new situation won't contribute to this goal. There will certainly not be less bureaucracy than before. As a department of the Economy Ministry it will not be able to attract new investors to Slovakia.
"Sario should be more like the Czech Republic's CzechInvest agency. It should be connected with the Economy Ministry, but owned by the whole government."