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BUSINESS FOCUS - SLOVAKIA AND HUNGARY HAVE STRONG ECONOMIC TIES, THE TRICK IS TO DIVERSIFY

Branching out

SLOVAK-Hungarian economic cooperation is developing dynamically. However, it still mainly involves large industrial companies. Officials would like to further strengthen the partnership by attending to small and medium-sized enterprises as well.
"The development of bilateral trade between Slovakia and Hungary has been very positive for the last 10 years and it has increased during that time by more than four times.

SLOVAK-Hungarian economic cooperation is developing dynamically. However, it still mainly involves large industrial companies. Officials would like to further strengthen the partnership by attending to small and medium-sized enterprises as well.

"The development of bilateral trade between Slovakia and Hungary has been very positive for the last 10 years and it has increased during that time by more than four times. Slovakia records such increases with no other country," Karol Husár, chairman of the Slovak-Hungarian Chamber of Commerce told The Slovak Spectator.

He continued: "However, I would like to say that the volume attained does not satisfy us as they are mainly related to steel, chemical, energy, and automotive companies. We see unused reserves in co-operation with small and medium-sized enterprises, and we are trying to concentrate on that."

According to the Slovak Statistics Office, Slovakia reached a surplus in foreign trade with Hungary of Sk10.7 billion (€268 million) in 2003, which means a year-on-year decrease by Sk5 billion (€125 million).

Last year, Slovakia imported goods from Hungary for Sk28 billion (€701 million) and exported goods for Sk39 billion (€976 million) to Hungary. Imports from Hungary grew by 39 percent in 2003 and they represented about 3.4 percent of overall Slovak imports. Exports rose by 10 percent and they shared 4.9 percent of overall Slovak exports.

The overall investments of Hungary in Slovakia stood at Sk17.7 billion (€443 million) as of December 2003, based on figures issued by the National Bank of Slovakia. Hungary is the seventh biggest foreign investor in Slovakia with a strong position especially in the oil and banking industries. On the other hand, the volume of Slovak investments in Hungary is quite poor, even though the economic level of both countries is similar.

This may stem from Hungary's head start in building industrial parks and special economic zones, which it began in 1995. Thus it succeeded in preparing favourable conditions for investors sooner than Slovakia and now reaps the benefits. Husár thinks that the low volume of Slovak investments in Hungary is also related to the past under-capitalised period of the Slovak economy.

He sees the automotive industry as the field with the most prospects for future cooperation, as important investors in this area have already established their businesses in both countries and closer contact is just a matter of time.

"Energy and logistics are also important areas. From the traditional industrial fields there are the wood and wood processing industries. Construction materials could also be exported to Hungary. Hungarian entrepreneurs could be interested in tourism facilities and spa and relaxation centres in Slovakia," he added.

Cross-border cooperation stemming from partnership between the regions located next to the border between the countries, often connected by traditions, could also become a source of deepening relationships.

Currently, such regional partnerships are mainly carried out through the EU, which supports cooperation between regions that cross national borders. Such cross-border cooperation is mainly focused on the cultural and social spheres, and many development agencies, work offices, planning institutions, and emergency services are interconnected.

"This creates a good basis for common business activities. However, it will be some time before our businesses discover and actually learn to use all the opportunities that opened after Slovakia and Hungary entered the EU," said Husár.

Now that the biggest barriers in development of mutual trade - duty and border procedures - have disappeared thanks to the EU, Husár considers insufficient information about supply and demand for companies from the both countries as the main obstacle to growth. "Administrative barriers were removed and now we have to manage the flow of information correctly," he added.

As Hungary and Slovakia are geographic neighbours, cooperation between businesses in both countries has always been important. It does not matter whether it comes out of our common past, tradition, or the new business environment created after both countries entered the EU.

"Businesses in the new EU countries help each other face sharp competition from Western companies in a unified market mainly through mutual cooperation and information and experience exchange," Husár summarised.

The Slovak-Hungarian Chamber of Commerce was established in the interest of deepening bilateral relationships between the two countries in 1998 under the Slovak Chamber of Commerce and Industry in its regional centre in Lučenec, in southern Slovakia. Its partnership institution is in the Hungarian town of Salgótarján.

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