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2001: A Slovak odyssey in bills, banks and bribes

The year 2001 in business saw continued privatisations, improved macro-economic numbers and further accusations of corruption. While foreign direct investment continued to flow in at a healthy pace, the state ivestment agency, Sario, was caught in a tug of war between the Economy Ministry and other investment forces, and was ultimately disbanded after its director resigned. Reform seemed to drift to a halt, with the government clearly reluctant to address massive inefficiency in the pension, health care and social policy sectors. And still, ratings increases arrived and the economy looked set to grow strongly in 2002.
January 1: In an effort to speed up the work of courts and improve access to business information in Slovakia, the Justice Ministry makes available on the Internet the full database of the Commercial Register of Slovak companies at www.orsr.sk. The Register allows Internet users to find information on Slovak companies literally in seconds, removing the hassle of going to courts in person and asking for a copy - a process which often takes several hours.

The year 2001 in business saw continued privatisations, improved macro-economic numbers and further accusations of corruption. While foreign direct investment continued to flow in at a healthy pace, the state ivestment agency, Sario, was caught in a tug of war between the Economy Ministry and other investment forces, and was ultimately disbanded after its director resigned. Reform seemed to drift to a halt, with the government clearly reluctant to address massive inefficiency in the pension, health care and social policy sectors. And still, ratings increases arrived and the economy looked set to grow strongly in 2002.


January 1: In an effort to speed up the work of courts and improve access to business information in Slovakia, the Justice Ministry makes available on the Internet the full database of the Commercial Register of Slovak companies at www.orsr.sk. The Register allows Internet users to find information on Slovak companies literally in seconds, removing the hassle of going to courts in person and asking for a copy - a process which often takes several hours.


January 15: Domestic investors are again overlooked when it emerges a new set of investment incentives proposed by economic ministers would include them but that one important eligibility condition would rule many of them out of receiving attractive tax breaks.
Following discussions between Finance Minister Brigita Schmögnerová, Economy Minister Ľubomír Harach and Deputy Prime Minister for the Economy Ivan Mikloš, the government recommends a new incentive package offering 10-year tax holidays to foreign and Slovak investors.
To qualify for the tax breaks firms must fulfil a series of conditions, including a minimum investment of Sk400 million ($8.69 million), or Sk200 million in areas where unemployment is above 10%, and that new production is launched.
The last condition on new production rules out many domestic investors who want to invest by building new production facilities while manufacturing the same goods.


Late January: In an attempt to pave the way for the opening of the Slovak telecoms market in 2003, senior cabinet ministers propose the formation of a new independent telecoms firm operating throughout Slovakia. The company, to be known as Energotel, will consist of the telecommunications facilities of six state-controlled power and energy companies in Slovakia.


January 30: Cabinet confirms that the European Bank for Reconstruction and Development (EBRD) and the International Finance Corporation (IFC) will definitely take a 25% stake in the second largest bank in Slovakia, Všeobecná úverová banka (VÚB). The move bolsters the government's hand just months before the bank's privatisation.


February 1: The FNM state privatisation agency should use Sk4.2 billion ($91 million) from the Sk18 billion proceeds for the privatisation of Slovakia's biggest bank Slovenská sporiteľňa (SLSP), concluded in December last year, for redemption of its 1996 privatisation bonds, a government working group says.


February 6: The World Bank approves a Country Assistance Strategy (CAS) for Slovakia until 2003. The document includes three alternatives of financial assistance, ranging in amount from $35 million to $765 million. Based on its performance so far and the future intentions of the Slovak government, the World Bank programme says the most likely value of assistance is the higher version.


Early February: Only a few months after American steel company US Steel takes over the largest industrial monolith in Slovakia, VSŽ Košice, its management discovers that a Sk145,000 ($3,100) electrical engine, weighing 7.2 tonnes, has been stolen. US Steel Košice President John Goodish offers a Sk500,000 reward for information leading to the detention of the thief.


February 9: After a meeting with her Hungarian counterpart, Mihály Varga, at which she was regaled with the success of the Hungarian tax police, Finance Minister Brigita Schmögnerovácalls for the creation of a similar body in Slovakia.


February 12: The Telecom Ministry launches a tender for FWA (Fixed Wireless Access) 26 GHz licences. The ministry will sell three nation-wide FWA licences, while the sale will be run as a so-called 'beauty contest' (where the overall advantages conferred by bids is more important than price alone). The price per licence is set at Sk70 million. Incumbent Slovak Telecom and mobile operators Globtel and EuroTel are told they may not take part in the tender.


February 12: Hungarian OTP Bank says it is interested in the acquisition of a smaller or medium-sized commercial bank in Slovakia, but is not likely to enter the Slovak banking sector this year. "We have mapped out the Slovak market very well, and we also have a concrete idea of a bank we would like to enter," says OTP managing director Gyorgy Fenyo. The bank later in the year buys Slovak finance house IRB.


February 20: The alleged holders of blank promissory notes from the state-run gas utility SPP, signed by murdered former SPP director Ján Ducký, offers the company's current management an out-of-court settlement, demanding payment of Sk2-3 billion ($40-50 million), SPP lawyer Ernest Valko says. The SPP supervisory board had tasked management to negotiate an out-of-court settlement one year before, but SPP director Pavol Kinčeš says he does not want to be seen to be legalising the fraudulent signing of the bills.


February 20: The National Labour Office reports the country's highest ever unemployment rate and one of the worst on the continent: 20.81%. The disposable unemployment rate (people available to take up work immediately), which analysts say is the most reliable guide of joblessness, stands at 19.79% for the first month of the year - a similar record high and a jump from 17.8% in December. The news comes only seven weeks after the labour office temporarily scaled down a public works programme which gave jobs to about 65,000 people and, analysts say, been responsible for cutting a soaring unemployment rate from 19.4% in July last year to 16.6% in September.


February 20: In moving Slovakia's sovereign rating of BB+ to a positive outlook, ratings agency Fitch IBCA confirms the opinions of the other two international ratings agencies, Standard & Poor's and Moody's, that the government is continuing to make impressive macro-economic headway, and is creating a positive image abroad as a potential investment destination. With both Moody's and Standard & Poor's raising their outlooks in November last year, analysts had expected a similar move by Fitch.


February 22: Deutsche Telecom-owned Slovenské telekomunikácie (Slovak Telecom - ST) has an earlier ruling of violating its monopoly status confirmed by the Anti-Monopoly Office (PMÚ), which rules that ST's continued practice of placing frequency filters on fixed lines is illegal. The filters limit data transfers for Internet access, and cost users up to five times as much as original Internet connection rates on the same lines.
In October 2000 one of the installed filters slowed and disrupted the Internet connection of the Slovak Agriculture University in Nitra, and following complaints by the university and a subsequent PMÚ investigation, the body fined ST Sk10 million ($213,000) for abusing its monopoly status.


February 27: Sony Slovakia announces, while Prime Minister Mikuláš Dzurinda pays an official visit to the company, that last year its output reached Sk3.5 billion ($76 million) and that it has plans to double its production over the year and triple it in 2003. The PM praises the Japanese firm for its role in providing jobs and career experience for many Slovaks. "Many young people have gained valuable experience not only with technology and production, but also in management," he said.


March 2: Parliament agrees with a request from a police investigator to allow the District Court judge in Vranov nad Topľou, Ružena Vašková, to face criminal prosecution for abuse of power. Vašková is suspected of making rulings which facilitated an unlawful transfer of shares in crude oil pipeline operator Transpetrol in 1998, resulting in damages of more than Sk2 billion to the company.
A 34% stake in Transpetrol was transferred from the account of the Ministry of Economy, which was the formal founder and only legal shareholder of the company, to a third party. Transpetrol was unaware of the transfer. The investigator accuses seven other suspects as well as Vašková in the case.


March 5: Management at US Steel Košice say they have nothing to fear from a police check on their company's employment procedures following media suggestions that they may be skirting Slovak work legislation.
Following an article in the regional paper Košický Korzár, the firm denied that some American managers were working illegally, having not obtained work and residency permits following the foundation of the company in late November 2000 and the $400 million acquisition of the steel mill VSŽ.
"There is nobody here working illegally," says Dave Luptak, general counsel at US Steel Košice. "We have nothing to fear [from any check by the immigration police]. We have been working with them closely to get all the required paperwork and finish this complicated process."


March 19: The director of Lyonnaise SR, Antonín Pokorný, officially declares that the Slovak arm of the French-Belgian company Lyonnaise des Eaux was interested in the privatisation of Západoslovenské Vodárne a Kanalizácie (ZsVaK) in Bratislava, one of the five water utilities making up Slovak water works Vodárne a Kanalizácie (VaK). "The Bratislava water utility has a real chance to become the first private water utility," Pokorný says.


March 21: The Finance Ministry announces that Italy's Banca Commerciale Italiana and French Societe Generale have been short-listed for the second phase of privatisation of a 67% stake in Slovakia's second largest bank, Všeobecná úverová banka (VÚB).


March 22: News that Bratislava airport could be partially privatised in the near future strikes fear into existing and potential carriers in Slovakia over the possible influence that Vienna's Schwechat airport, were it to take a stake, might have on Slovak air transport. Carriers say that Vienna's involvement in a sale, even partial, could result in the larger Schwechat using Štefánik to boost its own capacity and ignore the needs of Slovak carriers.


March 23: Parliament advances a cabinet-proposed bill on support for the establishment of industrial parks to a second reading, with several MPs saying they plan to propose an increase in the level of state financial support for municipalities establishing industrial parks from 70% to 80% of projected infrastructure costs.


April 4: The employment hopes of the north-east Slovak town of Bardejov are lifted after Labour Minister Peter Magvaši announces that two foreign firms are expected to invest close by, creating 1,500 new jobs. An unnamed Czech glass producer and a multinational shoe firm based in Austria are negotiating with the government on separate projects which will bring Sk400 million into the town. With Bardejov's jobless rate hovering around 30%, the investments are expected to be a massive boost to the community.


April 10: Repeating a threat she made only eight days earlier, Finance Minister Brigita Schmögnerová says she may resign if deep tax cuts are approved against her wishes. Her words are dismissed as a bluff by Ľudovít Kaník, head of the tiny Democratic Party (DS) in the ruling coalition, who had backed the cuts. Schmögnerová is one of the most highly-regarded members of the Slovak cabinet abroad, and was chosen by Euromoney magazine as Finance Minister of the Year for 2000.


April 19: The government approves legislation which it says will allow the sell-offs of state utilities, including the lucrative gas giant Slovenský plynárenský priemysel (SPP), to advance more quickly. Following the cabinet's decision, cadastral, land, agriculture and forest, and environmental offices will all have to give priority to work connected with privatisation projects, specifically the settlement of property transfers for state enterprises.


April 18: Telecom Minister Jozef Macejko finds himself in hot water after saying on private station TV Markíza that he had been offered a bribe of Sk3 million ($62,000) to sell a piece of state property through a mediator rather than directly. The minister said during the broadcast that he had refused the bribe, but also refused to name the person or firm which had offered him the money. He is later asked by the Attorney General's Office to explain the statement.


April 24: Molex Slovakia, daughter firm of American connectors-maker Molex, opens a new production hall in Kechnec near Košice and predicts its Slovak workforce will swell from the current 156 to between 1,000 and 1,500 within five years. The plant will be the company's largest production unit in Europe.


April 24: Czech bank Union Banka, in a legal dispute with the Slovak gas firm SPP over the settlement of promissory notes amounting to 350 million Czech crowns ($10 million), says it objects to the alleged intervention of Slovak government and parliamentary officials in its lawsuit, and asks Czech Foreign Affairs Minister Ján Kavan to intervene to ensure the law is enforced.


April 26: Swedish furniture-producer Swedwood raises hopes among Slovak lumber firms that business may improve dramatically with the opening of a furniture production plant in the western Slovak town of Malacky. Logging representatives hope that Swedwood's Sk1.5 billion ($41 million) Malacky investment - the company's largest ever into a single production plant - will solve some of their financial problems, allowing them to sell 'low-grade' wood which would otherwise be left to rot.


April 27: Slovakia reports its highest-ever first quarter trade deficit, Sk19.2 billion. The deficit has been driven by a rush of technology imports which analysts and the government say is good news for the economy in the long term.


May 2: The central bank says that the inflow of investments into Slovakia last year hit $1.99 billion, over five times the level of the year before and more than the entire total inflow since Slovakia's independence in 1993. High-profile investments such as that of US Steel into the Slovak steelworks VSŽ, and Austrian firm Neusiedler's takeover of pulp and paper mill SCP Ružomberok, were among the largest investments in 2000, along with the sale of the state telecoms firm, ST, to Germany's Deutsche Telecom.


May 2: Cabinet is told that unpaid taxes in Slovakia last year amounted to Sk64.8 billion, up Sk10.8 billion from the year before. State companies are among the largest tax debtors.


May 2: Bratislava's public transport company DPB rolls out a new, less polluting bus running on compressed natural gas, claiming that it will cut emissions from its buses in the capital by more than 60% and mean a massive saving on the costs of running its vehicles. Although more than 30 such buses run in other towns across the country, including Nitra and Trnava, the Bratislava bus is the city's first, and part of a wider project to convert all engines in the capital's 520-strong bus fleet to run on compressed gas in the next 10 years.


May 4: As Deputy Prime Minister for Integration Pavol Hamžík is dismissed over possible embezzlement of EU funds, crown developments on the forex market - a barometer of political or economic instability - surprise foreign observers. The crown reaches a record high for the year, strengthening from 43.55 to 43.20 against the euro on the day. Market watchers say that while political turmoil and government scandal dominated the forex exchange last year, the focus has now switched to the success of economic reforms and any events directly affecting foreign direct investment.


May 4: The Telecom Office says it has received five bids in a tender for three national fixed wireless access (FWA) licences, each to be issued at a pre-set price of Sk70 million ($1.4 million).


May 9: State gas giant Slovenský plynárenský priemysel (SPP) announces that it recorded a 1Q loss of Sk176.3 million ($3.6 million), a rapid fall-off from a Sk4 billion profit for 2000. The company blames the loss on rising world oil prices, domestic price caps which force it to sell gas at below purchase costs, and a weak crown.


May 14: Transport Minister Jozef Macejko says he will call for the dismissal of Andrej Egyed, the head of state railway firm ŽSR, if it is proved Egyed went against a ministry directive and was involved in what one analyst described as "Slovakia's national sport" of signing promissory notes on state-owned companies. Egyed tells local media that at the end of November 2000 he signed promissory notes worth Sk29 billion ($600 million). The rail boss' failure to inform either the Transport Ministry or the ŽSR board of control angers the minister.


May 16: The government approves a Law on Investment Stimuli, sending to parliament a measure allowing foreign and domestic investors to qualify for 10-year tax holidays. Based on EU policies stressing development of poorer regions, companies investing in Slovak regions with higher than 75% GDP of the EU average will not qualify for the incentives. The restriction would only apply in the Bratislava region, which has GDP at 99% of the EU average.


Late May: It emerges that Sario, the government's key tool for luring wealthy foreign business people to invest in Slovakia, is facing bankruptcy after the government fails to transfer its Sk50 million ($1 million) budget for 2001 onto its accounts. The ignominious position of Sario, Slovakia's national investment agency, draws criticism from investment experts and foreign businesses, who say the government's inability to solve the agency's financial troubles casts doubt on the likelihood of its bringing foreign direct investment to Slovakia.


May 28: Little-known firm Dunajservis Slovensko becomes the new owner of shipping firm Slovenská plavba a prístavy (Slovak Shipping and Ports - SPaP). The controversial decision was made by a privatisation commission after a tender in which other bidders had offered far more money than Dunajservis' Sk311 million ($6.1 million). Observers are surprised that Dunajservis has won, as the firm is less than a year old and has no name in shipping circles. Its 100% owner, the firm Gammapolis, has head offices in the tiny central Slovak village of Pohronský Ruskov, and according to the business register among other things is licensed as a "retailer for direct consumption of alcoholic and non-alcoholic beverages" - in other words, as a pub. The tender result is later challenged and overturned.



The SLKB shipyard began to break water with a contract signed for new seagoing vessels in June, and promised to increase its workforce from 700 to 1,000.
photo: TASR

June 5: SLK Bratislava (SLKB) shipyard announces that it has signed a contract for the construction of three seagoing cargo NL Rhine-type vessels worth more than Sk500 million. SLKB will need nine months to construct the vessels and will deliver them to Casus Shipping GmbH Hamburg next year. The company says that the move will increase its current workforce of 700 to 1,000 by the end of the year.


June 14: The state's 36% share in mobile telecoms operator Globtel is sold for Sk9 billion ($180 million) to a 10-member consortium led by insurance giant AIG.

The deal represents an 800% return on the original investments made by the five state energy companies whose stakes were sold.


June 15: Italy's largest bank, IntesaBci, beats France's Societe Generale in a tender for Všeobecná úverová banka (VÚB), bidding 550 million euros (Sk23.6 billion) for an eventual 95% share in Slovakia's second biggest finance house.


August 4: US Steel Košice calls its suppliers together after it is discovered that both they and US Steel Košice employees were involved in offering and receiving bribes. Two contracted partners had allegedly told the American firm that it would have to pay Sk25-40 million if it wanted to do business with them. One US Steel Košice employee has already been laid off and six more are being investigated for breaking the firm's code of ethics.



Sario 9irector Alan Sitár resigned August 8, saying he was unable to fulfill the agency's investment strategy.
photo: TASR

August 8: The head of the Sario state investment agency, Alan Sitár, resigns, citing an "inability to fully undertake the organisation's planned activities". He says that financing problems and a difference of opinion with the Economy Ministry, a key Sario shareholder, over the agency's direction had been behind the step-down.


August 24: One of Slovakia's most controversial banks, Devín banka, is put under forced administration after running into severe liquidity problems under the weight of mounting losses. The bank, which has been at the centre of a number of scandals involving Russian debt recovery and links to opposition and coalition political parties, is likely to file for bankruptcy, central bank governor Marián Jusko says, unless an investor puts Sk3 billion in cash into the bank's basic capital by August 31. "My personal guess is that it won't happen. The bank's losses are enormous," he says.


August 31: The government publishes an ad in the Financial Times launching the sale of a 49% stake in gas utility SPP, with potential investors receiving information memoranda by the end of September. The sale of the firm, the world's second largest gas distributor, will be the biggest in Slovakia's history, as the company has been valued at between $6 and $8 billion.



The collapse of Devín banka in August caught many depositors unawares, and led to allegations the central bank had known all along of Devín's troubles but had not acted for political reasons.
photo: TASR

September 28: The state investment agency, Sario, is to be dissolved, cabinet decides. 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, say key players in the Slovak investment sector.


October 30: The Standard & Poor's ratings agency raised Slovakia to a rating of A minus, returning the country to investment grade three years after it was dropped in 1998, on the basis of its progress in European Union entry negotiations, revitalisation of the bank sector, stabilisation of the economy, interest rates and inflation. Financial market players are caught off-guard by the move, saying they expected agencies would wait until September 2002 elections before taking a serious look at the country.


November 7: The sell-off of the country's three biggest banks closes with the sale of Investičná a rozvojová banka to Hungary's OTP bank. The bank will take a 92.5% stake in the Slovak finance house for Sk700 million ($14 million).


November 29: The Supreme Court rules that Slovenský plynárenský priemysel (SPP), the world's second largest gas distributor, must honour 350 million Czech crowns ($9.5 million) in promissory notes held by the Czech Union Banka. The government says the biggest privatisation in Slovak history is on track despite the ruling.


December 4: Parliament passes a bill on investment incentives, finally offering investors 10-year tax holidays. The bill had originally been passed in September but was sent back to parliament by President Rudolf Schuster after some MPs raised objections to terms in the law. Besides 10-year tax holidays the new incentive package introduces a subsidy of up to Sk10,000 for each employee at firms offering requalification courses, and other subsidies for the creation of new jobs. The law will come into effect as of January 1 2002.

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