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MINISTER RUSKO SAYS SLOVAKIA NEEDS TO KEEP INVESTMENTS ROLLING IN

Little country hunts for big business

ECONOMY Minister Pavol Rusko has very specific goals for Slovakia's economy as well as a vision of how he wants the country perceived. Attracting foreign investors, says Rusko, should be the country's number one priority. Only then can the country lessen its regional disparities, raise the purchasing power of the population and orient itself towards becoming a knowledge-based economy.

ECONOMY Minister Pavol Rusko faces the press.
photo: TASR

ECONOMY Minister Pavol Rusko has very specific goals for Slovakia's economy as well as a vision of how he wants the country perceived. Attracting foreign investors, says Rusko, should be the country's number one priority. Only then can the country lessen its regional disparities, raise the purchasing power of the population and orient itself towards becoming a knowledge-based economy.

The Slovak Spectator met with Rusko to talk about a few of the ministry's latest pet projects, including the campaign to promote Slovakia abroad. Rusko also spoke about a recent failure: the coalition's failure to adopt a plan to unbundle the natural gas grid operator, Slovenský plynárenský priemysel.

The minister, who is chairman of the New Citizen's Alliance party, a centre-right coalition partner, says the failure of the coalition to back his proposal for the future of SPP does not only jeopardize Slovakia's ability to meet EU market liberalization standards but also undermines the country's ability to offer investment stimuli to large investors.

The following is an excerpt from the interview.


The Slovak Spectator (TSS): Slovakia recently announced a campaign to promote the country as an attractive tourist destination abroad. Slovakia's neighbours have invested much more into such campaigns and they have done it for a longer time period. Will Slovakia be able to catch up with these countries?

Pavol Rusko (PR): If not catch up, we will at least try to minimize the lead that other countries have on us. Previous efforts to promote Slovakia abroad failed because of either professional shortcomings or the mishandling of money. Sometimes more energy was spent investigating the campaign than promoting it.

[By tapping into EU funds], we were able to generate enough money to truly help Slovakia's promotion abroad. We linked our vision to a solid financial ground, which is a first for Slovakia in this department.

We came up with a modern marketing logo, giving up on shepherd hatchets and folk symbols, because we want to present Slovakia as a modern country with a voice in Europe.

We decided to strengthen Slovakia's promotion in those countries where we saw the greatest potential for tourists: the Czech Republic, Poland and The Netherlands. The Dutch are known for their passion for travelling, and when summer comes, perhaps only a few Dutch border guards will stay at home.


TSS: Will the promotion shots be broadcast in other countries besides the three you mentioned?

PR: Yes, we plan to target two more countries. But I do have to stress that it is difficult to plan an effective campaign in the big national media of France and Germany, both of which have astronomical price lists. It would be quite tough to get a price that is acceptable for us. But keep in mind that Poland, the Czech Republic and The Netherlands were selected as the countries with the highest potential for generating tourists to Slovakia.


TSS: Do you have plans to secure the continuity of the campaign beyond the political arena, to ensure that a new government would not suddenly invent a new logo?

PR: We have offered the logo's use to other ministries and we have been encouraging its use wherever possible, even in the sphere of culture and sports. We want to use the logo when presenting Slovakia's economic results or any Slovakia-related information abroad so that the Slogan "Slovakia: Little Big Country" becomes known. We want Slovakia to be visible and distinct in people's minds, particularly so that Slovakia is no longer mistaken for Slovenia.


TSS: Western firms are slowly moving their production to the East. Today, Slovakia is benefiting. Soon, however, Bulgaria, Romania and Croatia will be similarly attractive to investors. What strategy should Slovakia put in place to stay attractive to foreign investors?

PR: First of all, we have to effectively use the time we still have, which means attracting the most possible foreign investment over the next five years. Here, I unfortunately bang my head against the absolute lack of understanding on the part of some coalition partners, namely the KDH [Christian Democratic Movement] and the SDKÚ [Slovak Democratic and Christian Union], which keep rejecting some proposals on political grounds. They are weakening our success in winning foreign investments.

By rejecting my proposal [for unbundling gas utility Slovenský plynárenský priemysel], which assumed the payment of special dividends that could have been used for investment stimuli, pushing through the biggest investment projects in Slovakia could get complicated.

We simply cannot think that the flat tax is a universal cure for all ailments and that it alone is luring foreign investors. We still have high payroll taxes. Hungary, for example, has a 15-percent tax! This is why it is important to seek other ways to offer other investment stimuli.

Slovakia's real pain is its regional disparity, and this is why we need to attract foreign investment. We need to allocate financial resources to support investment, lower the country's debt and develop industrial parks. After 2008, once every region sees unemployment sink below 10 percent and enjoys a big investor with 20 to 30 sub-suppliers; once the purchasing power of the population rises, we will no longer need investment stimuli to lure investors.


TSS: The car industry is the strongest engine driving the Slovak economy. Analysts warn that myopia has its disadvantages. Do you see any potential disadvantages of focussing exclusively on the automobile sector?

PR: No, not really. I do not know who the analysts who warn against the car industry are, but perhaps it would be good if they thought it over once more. Concentration is never dangerous by its production but rather by its sales. It is not important where I create the products but rather where I sell them. If all the car producers in Slovakia were trying to sell their products in Europe, then yes, it would be potentially dangerous. But the three carmakers are selling their products all over the world and the diversification of the products is the best. If there is a crisis in the USA, Asia will carry the business.

If there is a problem in Asia, Europe will help the industry recover. Particular markets react differently. However, if there is a world crisis, then all production spheres would feel it, not only the car industry. Tyre makers in Púchov or steel makers in Košice would be affected by the crisis too, in the same way that research and development and oil refineries would, regardless of where they are located.


TSS: The need to a switch to a knowledge-based economy has been declared several times. Do you think Slovakia is ready to make this switch? What are the prospects for information technologies in Slovakia?

PR: No one has invented anything new by declaring the need to focus on research and development. We have known for quite some time that such a shift needs to be made. The problem is not that we do not want to make it. The real problem is where to find the resources for this re-orientation toward R&D, education and developmental projects. We are back again at the need for financial resources, and that can be obtained only from the primary production sphere.

We do not have the money to suddenly support research and high-tech development. We can do it only at a developmental stage. You need to have a production base; you need to have the resources to gradually orient yourself to supporting information technology and development.


TSS: Japanese businessmen have been quite critical of the quality of Slovakia's industrial parks and the services they offer. How do you evaluate the quality of industrial parks in Slovakia?

PR: What industrial parks? We have almost none. We have hardly built two from the state budget: one in Vráble and one in Kechnec. When we came here in 2003, there were no acceptable industrial parks. If we had five or six parks, we would not have had any problems with KIA Motors. We would have offered them two or three alternatives. We have only just started building our industrial parks. Foreign businessmen can criticize that there are no industrial parks, but the question "Why not?" needs to be asked of those who were here before.


TSS: You have criticized the Slovak Investment and Trade Development Agency (SARIO) since taking up your ministerial post. Do you see any progress in their operations?

PR: I think [SARIO] has widened its capacities considerably. Today it manages several big projects like the KIA investment, Ford, Johnson Controls and Sky Media. It has been seeking ways to raise the volume of managed foreign investments. Yes, it has improved. Today SARIO handles roughly 40 to 50 projects that are in final stages, representing Sk60 billion (€1.6 billion) in investments.

SARIO seems to be catching up with the performance of the Czech investment agency, CzechInvest. Proof of that is in projects that Slovakia has won over the Czech Republic.


TSS: What are the most frequent complaints from foreigners about the Slovak business environment?

PR: Problems with land. The country lacked a programme to help different regions identify and select land as suitable for investment and development.

The challenge is not only to find suitable land, but also to obtain it in the optimal timeframe. We still have not selected or prepared 10 to 15 industrial zones that would help small- and medium-sized businesses. We also lack logistics centres and technology parks.

As for legislation, we have just adopted a revision that helps the state speed up the process to expropriate lands for strategic investment, which makes me believe that the land complications surrounding previous investments will not get repeated.


TSS: Enel has requested delaying the deadline for submitting its investment plans for the power utility Slovenské elektrárne by two or three weeks. What does the ministry expect from the investment plan?

PR: The operation is very complicated as Slovenské elektrárne is burdened with several disadvantageous contracts that increasingly push down its value. Bad state management is certainly behind these complications. We accepted the investor's request to move the deadline.

We would rather wait a little longer than get the plan at any price and then have it wrong. There were some personnel changes within the Italian company as well, so the delays are understandable and justified. The investment plan certainly must be based on the needs of the Slovak economy and how Slovenské elektrárne wants to participate in the process, what investments and resources they want to use, and how they want to tune the business plan for future development of the company.

Certainly, the plan must also treat the completion of the nuclear power plant in Mochovce. I have been clearly tasked by congress to support only a solution that includes Mochovce.


TSS: The concept of privatizing Cargo Slovakia, which assumes a 100-percent sale, has been approved. However, the Economy Ministry suggested that a lesser percentage could be privatized as well. What percentage of Cargo Slovakia should be sold, in your opinion?

PR: Sixty-six percent. It has been a proven method. Selling only 66 percent and keeping the rest for at least two or three years gives time to test the partner, see whether it operates decently and what its priorities are.


TSS: The process of unbundling SPP [Slovenský plynárenský priemysel] got complicated after some coalition partners rejected the Economy Ministry's model that assumed the payments of special dividends. What path will the ministry take now?

PR: At this point it is a political matter. However, we will support only a solution that will, in fact, lead to the payment of special dividends.

The KDH's blocking the ministry's solution was an ill-timed move and in fact political revenge for ANO's attitude towards university reform. The KDH has harmed Slovakia's citizens through their decision, especially regions with high unemployment. The KDH's refusal to accept a solution that pays dividends will certainly not accelerate the arrival of investors. On the contrary, it will slow everything down.

Projects that are reaching their final stages, which include Čadca (600 jobs), Rimavská Sobota (900 jobs) and Nitra (2900 jobs), will be affected. We do not have resources to provide the necessary investment stimulus packages. No, we simply will not support any other solution, only one that assumes the payments of special dividends.


Magdalena MacLeod
and Marta Ďurianová
contributed to this report

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