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YEAR IN BUSINESS

Slovakia experienced the year of the rising tiger

January 15
SLOVAKIA was named a potential investors' paradise several times in 2003. The Slovak parliament adopted important legislative measures that aim to improve its business environment and attract foreign investments.
The flat 19 percent income and value-added tax adopted this year, together with the country's advantageous geographical location and its educated, relatively cheap labour force, could make Slovakia a favourable place for investments in the manner of southern Asian countries, the so-called tigers.


PSA president Jean Martin Folz (right), with PM Mikuláš Dzurinda (centre) at the new Trnava site.
photo: TASR

SLOVAKIA was named a potential investors' paradise several times in 2003. The Slovak parliament adopted important legislative measures that aim to improve its business environment and attract foreign investments.
The flat 19 percent income and value-added tax adopted this year, together with the country's advantageous geographical location and its educated, relatively cheap labour force, could make Slovakia a favourable place for investments in the manner of southern Asian countries, the so-called tigers.
Economic reforms, though sometimes with tough impacts on inhabitants in the form of price hikes and new payments, have begun to bring their initial healing macroeconomic effects.
Slovakia has experienced a decent economic growth compared to its neighbours and European Union countries, as well as a decreasing public finance deficit. The country was successful in attracting important new investments from companies like PSA Peugeot Citroen.
However, Slovakia still needs to finish pension and health care reforms, construct infrastructure, approve measures to make public finance more transparent, and adopt other economic and administrative reforms. This will be a task for the coming years.
Next year Slovakia enters the European Union. This will definitely be a test for its international competitiveness and for the success of the already implemented reforms.


January 15

French auto giant PSA Peugeot Citroen announced it would be building a new €700 million factory in the western Slovak town of Trnava.


January 20

American financial investor Warburg Pincus LLC took over a majority share in Slovakofarma, Slovakia's largest pharmaceuticals maker, announcing plans to bring the firm closer to its Czech holding, Léčiva.


January 24

German company RWE Plus AG took the final step for a definite takeover of a 49 percent share of Východoslovenská Energetika (eastern energy distribution company). The strategic investor paid a preliminary €130 million for the minority stake in the company.


January 29 (to early February)

Railway employees went out on what was initially to be a six-hour strike. After two days, they started an unlimited strike. After three days, a court issued a preliminary injunction ordering railway workers to resume work. The strikers were protesting the abolishment of some regional railway lines. The reduction of passenger railway transport took effect on February 2.


Beginning of February

Austria's Frantschach Pulp & Paper bought a 60 percent share in the Slovak paper plant Suprobal. Suprobal is part of the SCP Ružomberok pulp plant, which is co-owned by Slovakia's Eco-Invest and Austria's Neusiedler.


February 13

State broadcaster STV announced vast layoffs and savings measures. STV's new management deemed 1,200 job positions redundant. The measures were introduced to help resolve severe financial difficulties and reduce STV's Sk680 million (€16 million debt).


February 25

The Slovak arm of the Brazilian refrigeration equipment producer Embraco decided to invest $10 million (€8.5 million) in Spišská Nová Ves, mainly in extending storage capacities associated with a planned output increase.


February 27

The former vice governor of Eximbank, Ladislav Balko, replaced Artur Bobovnický as head of the state-run SARIO (Slovak Investment and Trade Development Agency).


March 1

Christopher Navetta became the new president of U.S. Steel Košice (USSK). Navetta replaced John Goodish, who returned to the parent firm's head office in Pittsburgh as executive vice president for international and diversified activities. Navetta has occupied the post of USSK executive vice president since December 2002.


March 6

Slovak parliament approved a health-services law introducing a number of payments for patients, including Sk20 (€0.50) per doctor visit, Sk20 per drug prescription, Sk2 (€0.04) per kilometre travelled in an ambulance, and Sk50 (€1.20) per day spent in hospital. The payments took effect in June 2003.


March 13

The Statistics Office released figures indicating strong 2002 economy growth. Growth in gross domestic product (GDP) was 4.4 percent in the previous year.


March 14

The Austrian oil and gas group OMV took over 20 Avanti petrol stations in Slovakia. As a result, the number of petrol stations controlled by OMV in Slovakia increased to 101, and OMV's market share swelled to 18 percent.


March 17

The Slovak Antitrust Office approved the takeover of Slovakia's largest dairy, Rajo Bratislava, by Meggle AG. Meggle acquired a 49 percent stake in Rajo from the previous owner, Austrian Nom AG, becoming its exclusive holder.


March 24

Hungarian oil company MOL almost doubled its stake in Slovakia's largest crude oil refiner, Slovnaft, taking control of 70.02 percent, after the Antitrust Office approved the transaction. MOL bought 31.6 percent of Slovnaft from two Slovak companies, Slovintegra and Slovbena, for a combined total of $85 million (€80 million), and a 2 percent stake from smaller shareholders.


March 31

US building-material producer Johns Manville said it would invest Sk3.8 billion (€92 million) in the Trnava-based fibreglass manufacturer Sklobal in 2004.


April 2

German gas distributor Verbundnetz Gas AG Leipzig announced that it planned to invest about Sk1.8 billion (€43.46 million) over the next four years in the transformation and modernization of heat production networks in three joint ventures in Slovakia.


April 4

Slovak J&T Finance Group increased its stake in the company CEN, which operates TA3, Slovakia's first private TV news channel, and became its majority owner. J&T had acquired a 50 percent stake in CEN from the British company Millennium Electronics Limited in November 2002.


April 7

The Financial Market Office turned down the share price submitted by the Hungarian oil company MOL in its public takeover bid for Slovnaft shares. The office rejected MOL's proposal of Sk1,200 (€28.97) per Slovnaft share because it was at odds with the Securities Act, which sets terms for the offered price of shares in a mandatory takeover bid. MOL appealed the verdict, as it believed that the March transaction involving 202,000 Slovnaft shares on the Bratislava Stock Exchange, which raised the half-year average price of Slovanft shares, was attempted price manipulation.


April 8

Belgian company Bekaert became the exclusive owner of the Hlohovec-based wire makers Drôtovňa Drôty and Drôtovňa Kordy after the previous owner, Penta Investments Limited, sold its stakes to Bekaert.


April 29

The National Bank of Slovakia gave its approval to the sale of a 60.07 percent stake in Banka Slovakia to Austrian company BASL Beteililgungverwaltungs GmbH, part of the financial group Meinl Bank Aktiengesellschaft. The preliminary purchase price for the 60.07 percent stake in Banka Slovakia was set at Sk360 million (€8.69 million).


May 6

The National Bank of Slovakia reported that Slovakia had absorbed Sk181.7 billion (€4.39 billion) of net foreign direct investment in 2002, which is almost double the previous record, set in 2000. Sk152 billion (€3.7 billion) was gained trough privatisation - the sale of gas utility SPP and regional power distributor ZSE.


May 20

State railway company ŽSR cancelled a Sk4.8 billion (€117 million) tender for reconstruction work on the track between Šenkvice and Cífer in western Slovakia. 50 percent of the project was to be financed by the European Commission. ŽSR explained that the offers of both companies involved in the tender had exceeded the money available for the work.


May 21

Parliament passed an amendment to Slovakia's Labour Code proposed by Labour Minister Ľudovít Kaník. Lawmakers applauded the inclusion of a provision preventing employers from seeking information on the sexual orientation of an employee or job applicant, an issue that had caused controversy at that time.


May 28

Bratislava-based carmaker Volkswagen Slovakia produced the millionth car in its 12-year history in Slovakia.


June 2

Spanish firm Jobels said it wanted to invest Sk240 million (€5.8 million) in a plant near Košice in eastern Slovakia. The plant will produce upholstery for the car industry.


June 4

The Confederation of Trade Unions (KOZ) protested on many of the country's main motorway routes, driving trucks at 60 km/h along the roads. The move followed a blockade of 13 border crossings by KOZ members on May 23, in an effort to persuade the government to pay more attention to their demands.


June 17

Top managers of PSA Peugeot Citroen and leading Slovak politicians laid the cornerstone for the new factory in Trnava. Construction on the plant was set to begin in October, and PSA officials said they would start recruiting up to 3,500 future employees at the end of 2003.


June 27

The Slovak parliament approved the flat value-added tax of 19 percent, which takes effect from January 2004. This cancelled the current 14-percent value-added tax on selected goods and services such as food, medicine, energy, construction works, books and periodicals, and hotel and restaurant services.


June 29

Slovak transport authorities celebrated the opening of the Branisko tunnel outside the eastern city of Prešov. The tunnel, at 4.8 kilometres, is Slovakia's longest, and is a major step towards completing a highway connection for the country's two largest cities: the capital, Bratislava, in the west and Košice in the east.


July 4

Kremnica-based company Sitno Holding bought the bankrupt engineering company PPS Detva Holding. Its new owner, Ľudovít Černák, promised to specialize in civilian production and renamed the company PPS Group. Sitno Holding sees cooperation with the Swedish carmaker Volvo in the company's future.


July 4

The director of Slovakia's Sociálna poisťovňa social security agency, Miroslav Knitl, was sacked at the urging of the Labour, Social, and Family Affairs Ministry over charges that in April he had signed a disadvantageous contract without the approval of the insurer's board of directors.


July 10

The Slovak cabinet turned down the sale of a 16.5 percent stake in ex-steelmaker VSŽ held by the National Property Fund privatisation agency. The fund had planned to sell the shares at their nominal value of Sk343 (€8.25) per share on the public market on July 23. If no buyer had been found, the fund would have settled for Sk88 (€2.12) per share on July 24. Finance Minister Ivan Mikloš said the proposed price drove the cabinet to turn down the deal.


July 18

In new administrative proceedings, the Financial Market Office refused the draft of a public bid to buy shares of oil refiner Slovnaft. MOL, which submitted the rejected bid, immediately appealed the verdict.


July 23

Financial group Penta Investments Limited obtained a 40.59 percent share of the aluminium smelter ZSNP Žiar nad Hronom from the company Žiarska Finančná Spoločnosť in a direct transaction on the Bratislava Stock Exchange.


July 24

Wüstenrot Group became the new owner of a 100 percent share of insurance company Univerzálna Banková Poisťovňa. The two are due to merge in January 2004 under the brand Wüstenrot Insurance Company.


July 29

A state investigator halted criminal prosecution in the case of the sale of shares of former steelmaker VSŽ from the portfolio of former state-owned oil pipeline operator Transpetrol. The transaction, which moved the VSŽ shares into the pockets of a group of financial speculators in the last moments of stock trading in 2001, sparked an insider trading scandal and outrage from US Steel Košice, which had offered the Economy Ministry, then Transpetrol's owner, a considerably higher price for the shares. Former Economy Minister Ľubomír Harach was suspected of leaking inside information before the trade.


July 29

In Forbes magazine, founder and billionaire media magnate Steve Forbes called Slovakia a paradise for investors. He listed tax reforms, a flexible labour code, and a surplus of educated and cheap labour as the main reasons for investors to come to Slovakia.


August 4

The Canadian company Tournigan Gold Corporation (TGC), based in Vancouver, announced that it planned to find co-investors to renew gold mining around Kremnica. TGC acquired Kremnica Gold, formerly owned by Canadian company Argosy Mining Corp Vancouver, for €327,124. Through this deal, TGC acquired potential gold deposits with an estimated yield of over 1 million ounces of gold.


August 13

The Slovak government pledged to provide an Sk800 million (€19.32 million) investment stimulus to the project of a new glass processing plant at Záhorie, in western Slovakia. The sum represents about 11 percent of the total projected investment of Sk7.5 billion (€181.1 billion) by the Swiss-German concern Glass Troesch AG.


September 9

Robert Nemcsics resigned from the post of economy minister after the New Citizen's Alliance leadership demanded his resignation, reacting to his criticism of the practices of Pavol Rusko, the party boss.


September 16

The Slovak cabinet approved a new draft agreement on the support and mutual protection of investments between Slovakia and the US. The former Czechoslovak Federal Republic signed an agreement on the support and mutual protection of investments with the US in 1991 in Washington DC.


September 16

Connector producer Molex Slovakia opened a new production hall in Kechnec, eastern Slovakia, near Košice. The new production facility has an area of 3,000 square metres. Investments in the hall reached €2.5 million.


September 24

Slovak President Rudolf Schuster appointed Pavol Rusko to replace Robert Nemcsics in the post of economy minister and deputy prime minister.


September 24

The Slovak parliament adopted the social insurance law changing the current pay-as-you-go pension insurance system of social security provider Sociálna poisťovňa as of January 2004. This was the first law of the cabinet draft bills package reforming the current social insurance system. The law gradually increases the retirement age to 62 years for men and women, while simultaneously enabling those people who feel they have personally saved enough money to survive without the ultimate level of state assistance to retire when they choose.


September 29


MOL tried to acquire a majority stake in Slovnaft this year.
photo: Ján Svrček

The Financial Market Office council turned down MOL's appeal of the rejection of a draft public bid to buy Slovnaft Bratislava shares. The council confirmed the regulator's verdict from July 18, which rejected the draft takeover bid.


October 7 - 15

The International Monetary Fund (IMF) praised the Slovak cabinet for its economic reforms and performance after a several-day mission in Slovakia. The continuing growth of the economy, narrowing macroeconomic imbalances, declining unemployment, and low core inflation were the main reasons for the optimism of the IMF.


October 10

Slovakia officially opened an international tender to privatise its dominant power producer, Slovenské Elektrárne. It invited potential investors to express their interest in buying a 49 percent share in the company and management control. The economy minister said that the ministry would preferably welcome an investor willing to complete the construction of the Mochovce nuclear power producer.


October 16

Economy Minister Rusko dismissed Ladislav Balko from the post of director general of trade development agency SARIO. He appointed to the post an expert in international relations and inter-cultural communication, Jan Bajánek.


October 18

An association of industrial manufacturers from Italy launched an industrial park project comprising 14 small and medium-sized Italian engineering and electrical-engineering companies in Šamorín, near Bratislava. In the first stage of the project the Italian association plans to invest about €13 million, while they estimate the annual turnover of the industrial park at €50 million. The industrial park should provide 500 jobs.


October 24

Slovak MPs approved numerous changes to administrative fees, a move from which the cabinet foresees Sk1.6 billion (€38 million) extra in the country's state treasury, as well as faster processing of administrative matters by state bodies. The new fees include a wide range of construction permits, entries, deletions, and changes to the business register, fees for foreigners for temporary or long-term stay applications, as well as entries and transfers in the country's real estate cadastral registry.


October 29

The Slovak parliament passed the bill introducing a flat 19 percent income tax as of next year for individuals and corporate entities. Later, President Rudolf Schuster vetoed the bill, but the parliament adopted it again in December.


October 29

The Financial Market Office approved a new draft bid presented by MOL to buy shares of the refiner Slovnaft. The new takeover price was Sk1,379 (€33.3) a share.


October 29

An industrial park near the village of Kechnec in eastern Slovakia was officially opened. Two foreign investors are already operating there: Molex Slovakia and Gilbos Slovensko.


Late October

SARIO head Ján Bajánek was accused of fraud. The Slovak daily SME wrote that, while serving as head of the administrative board of the non-profit fund Dialog in Sučany, Bajánek illegally transferred Sk580,000 (€14,000) to the account of his firm Business Communication Bratislava.


Early November

The European Commission (EC) objected that US Steel Košice produces too much steel in its eastern Slovak plant in Košice. Slovak officials had wanted the steel quotas to become valid only after Slovakia's formal entry into the European Union, but the EC claimed that the quotas should have been observed from the date the accession agreement was signed, earlier this year.


November 6

Fitch ratings changed its long-term foreign currency ratings from stable to positive in seven out of the ten EU-acceding states, including Slovakia. Slovakia currently holds a BBB rating.


November 10

The majority of pharmacies shut down, and others stopped buying any new drugs - only serving customers with their diminishing stock. Pharmacies demanded the payment of the estimated Sk7 billion (€170 million) debt that health insurance companies owed them.


November 11

The parliament approved an amendment to the law on large-scale privatisation, which will enable the state to sell off its remaining stakes in major, formerly state-owned companies.


November 11

The education and finance ministers agreed that fees ranging between Sk3,500 and Sk21,000 (€85 - 510) should be introduced for university studies as of September 2004. Education Minister Martin Fronc proposed a draft amendment to the law on universities to be discussed in parliament in January next year.


November 26

Slovakia and Poland were shortlisted as investment sites for South Korean carmaker Hyundai, which plans a new car assembly plant in central Europe. The $1.5 billion (€1.26 billion) investment could flow either to the central Slovak town of Žilina or to Radomsko in Poland. The carmaker is expected to pick the destination for its money in early 2004.


November 26

Slovak Telecom (ST), now owned by the German telecom giant Deutsche Telekom, signed a network interconnection deal with the company ConnSpec Telekom. This was the first hook-up deal ever signed in Slovakia between ST and an alternative phone operator. ST has been negotiating the interconnection of networks with 13 operators, all licensed to run fixed-line telecom networks in Slovakia. None of them has managed to sign a deal with ST.


November 28

Economic ministers agreed that an investment would be defined as strategic if it is no smaller than €100 million and creates 400 jobs. Such investors, domestic and foreign, will be able to request investment incentives from the government.


December 3

The parliament approved the amendment to the Foreign Exchange Act that would open the farmland market to foreigners three years after the country's EU entry if the potential owner has used the land for farming for at least three years and has a temporary residence in Slovakia. The market will be completely liberalised in 2010.


December 4

Parliament overruled the veto of President Schuster on the flat income tax rate, one of the key measures of the tax reform of PM Mikuláš Dzurinda's cabinet. The law will take effect as of January next year even without the approval of the president. The incomes of individuals and corporate entities will be taxed at 19 percent.


December 5

Preliminary offers for what will be at least a 49 percent stake in the Slovak power utility Slovenské elektrárne were submitted by five out of eight potential investors.


December 9

The construction of an industrial park in Spišská Nová Ves in eastern Slovakia, the first to be covered by PHARE funds, was launched after three years of preparations. The park will focus on wood processing. The investment is expected to create 700 new jobs.


December 12

The Slovak parliament approved the state budget for 2004. Total state budget revenues are projected at Sk231.958 billion (€5.6 billion) and expenditures should amount to Sk310.453 billion (€7.49 billion). The deficit is expected to be Sk78.495 billion (€1.89 billion). The deficit of public finances should account for 3.93 percent of the projected GDP.


December 16

Parliament approved the old-age-pension savings law that introduces the pension capitalization pillar. As of January 1, 2005, Slovak citizens will have the option to assign part of their pension insurance payments to their personal account in private asset management companies.


December 17

The Slovak government turned down the European Commission proposal for the reduction of tax breaks and financial compensations for US Steel Košice, which can thus continue increasing its steel production until 2009. Negotiations will continue through January. If no agreement is reached, the issue will be dragged to a court.


Compiled by Marta Ďurianová

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