Slovakia's business highlights: The year in review - 2005

Slovakia got closer to euro adoption when it entered ERM II.
photo: TASR


Ivan Šramko replaces Marián Jusko as governor of the National Bank of Slovakia (NBS). In late January, the Slovak parliament approves Martin Barto as vice-governor.

Moody's ratings agency increases the foreign currency ceiling rating of Slovakia's long-term liabilities A3 to A2 and short-term liabilities from P-2 to P-1 on January 12. The rating of medium-term and long-term government bonds denominated in the local and foreign currency was also upgraded from A3 to A2. Moody's justifies this step by pointing to successful structural reforms and improvement of medium-term and long-term fiscal outlooks.

The European Commission decides to cut Slovakia's national carbon dioxide (CO2) emission quotas. The amount given to Slovakia is 14 percent lower than what it requested in its National Allocation Plan for 2005-2007.

Austrian Airlines injects €2.8 million into Slovak Airlines and increases its ownership to 61.99 percent. Critics call the deal "hidden privatization".

The Slovak crown strengthens against the euro, reaching 38.100/140 SKK/EUR. The central bank says the move is not economically justified and could harm Slovak exports.


Slovakia decides it will not appeal the verdict of inter-national arbitration ordering Slovakia to pay more than €600 million to the Czech bank ĆSOB. In December 2004, the International Centre for Settle-ment of Investment disputes wrapped up an eight-year trial with a verdict requiring Slovakia to pay ĆSOB €639 million, a debt that emerged during the division of federal property during the split of the former Czechoslovakia.

NBS lowers its key interest rates in February. Effective March 1, the one-day sterilization repo rate dropped from 2.5 percent p.a. to 2.0 percent p.a., and the one-day refinancing rate went down from 5.5 percent p.a. to 4.0 percent p.a. The two-week sterilization repo rate decreased from 4.0 percent p.a. to 3.0 percent p.a.


US Steel announces its intention to sue the Environment Ministry over restrictions on the amount of CO2 it can emit, claiming the restrictions will cost the company billions of crowns and present an "unjust economic burden".

The Slovak Supreme Court upholds a 2004 decision by the Antitrust Office to fine Slovak Telecom Sk20 million (€532,460) for monopolizing the ADSL Internet market. Slovak Telecom appealed the 2004 judgement with the Supreme Court, which ruled provider on February 28, 2005.

Interest in the new pension insurance capitalization pillar - the so-called second pillar - exceeds expectations. The state social insurer, Sociálna poisťovňa, registers 598,000 individual contracts with pension fund management companies. The Labour Ministry estimated that these numbers would only be reached by June 2006.

The government initiates the purchase of the final 56 hectares of land near Žilina for the prospective KIA car plant. Korean investors have been trying to obtain the land for months to complete the construction of a new Hyundai-/KIA manufacturing facility. The landowners finally decided sell their land for Sk350 (€9.17) per square metre - roughly three times the official evaluation price of Sk140/150 per square metre (€3.7/4).

Slovakia's main fixed-line telephone company, Slovak Telecom, signs a contract on the interconnection of telephone networks with DIAL Slovensko, following similar contracts with eTel, Amtel and Železničné telekomunikácie. The contracts mark the real start of the liberalization of the fixed-line market in Slovakia. People will have a choice of fixed-line operators starting in August, 2005.


A two-week campaign against illegal employment, codenamed Vietor (Wind), results in employers sending more than 19,300 applications to register employees with social security provider Sociálna poisťovňa. Employers also inform SP of the creation of 38,600 jobs.


Eurotel completes its re-branding to T-Mobile, becoming the ninth member of the T-mobile group. The re-branding followed Slovak Telecom's acquisition of a 49-percent stake in EuroTel.

Finance Minister Ivan Mikloš withdraws the ministry's decision to fine Slovnaft Sk1.3 billion (€33 million) and agrees to return the case to the initial controlling body. Mikloš says he still considers most of Slovnaft's objections unjustified.

The Slovak government announces a tender to privatize ŹSSK Cargo on May 31. ŹSSK Cargo was established in January 2005 when railway transport operator Železničná spoločnosť (ŹSSK) split into two companies, one for cargo and the other for passenger transport.


The antitrust authority (PMÚ) fines Slovak Telecom Sk885 million (€22.6 million) for abusing the fixed-line operator's monopoly position. This represents the highest fine the PMÚ has ever imposed on a company. According to the authority, Slovak Telecom abused its dominant position by refusing to provide its competitors access to local loops, often referred to as "the last mile", of which ST has sole ownership.

On June 21, Slovak cabinet ministers fail to agree on a plan that would liberalize the Slovak natural gas market. Economy Minister Pavol Rusko presents two unbundling models of SPP (the natural gas grid operator) but the ministers do not support either model and abstain from voting. Minister Rusko calls the cabinet's move "unfortunate". EU legislation, which requires natural gas companies to unbundle their import, transit and distribution branches, aims to dismantle state-owned monopolies and thus allow customers to choose their own supplier.

Labourer Jozef Daniš and four of his co-workers win a lower court verdict in a wrongful dismissal case against their former employer, the international paper firm Mondi Business Paper SCP of Ružomberok. The Ružomberok district court rules on June 23 that Mondi failed to prove that the five employees harmed the company's reputation by telling the media that the mill was paying low wages. Mondi was ordered to pay the employees nine months' back wages and rehire them.


Levice, once excited to welcome Hankook, now awaits a new investor.
photo: TASR

Parliament approves an amendment to the Construction Act that will enable fast track expropriation of land for motorways and major investments. The law should help avoid difficulties in purchasing land for future strategic investments.

The Slovak cabinet rejects a proposed investment agreement with Hankook Tyre on July 6, calling the stimulus package "too large". Hankook told the Slovak Economy Ministry that it would renew negotiations with other countries.

The Transportation Ministry admits that Slovakia will not keep its promise to KIA to complete the highway from Bratislava to Žilina by the end of 2006. A six- to seven-kilometre stretch between Sverepec and Vrtižer will not be ready on time.

The Finance Ministry's internal control section reduces the fine levied against Slovnaft by Sk11.4 million (€294,000) to Sk1.34 billion (€34.5 million) after Finance Minister Ivan Mikloš returns the Slovnaft case to the first level authority (the finance control section). According to the Finance Ministry, the controlling body acknowledged that some of Slovnaft's investments in science and research represented justified costs.

The foundation stone for the Getrag Ford Transmissions Slovakia plant is laid at Kechnec industrial park on July 7. GFT is investing a total of €345 million in Slovakia to build a transmissions production plant that will create around 750 jobs.

The government initiates the privatization process for the country's two largest airports by publishing an advert inviting potential investors to express an interest in the purchase of a 66-percent stake in M R Štefánik International Airport Bratislava and Košice Airport.

The Economy Ministry initiates the privatization of Slovak Airlines by inviting investors to declare interest in company shares. The Transport Ministry would like the buyer selection process complete by the end of 2005. Austrian Airlines Group says it is interested in buying the remaining shares in Slovakia's national air carrier, Slovak Airlines, since it already controls 62 percent.


President Ivan Gašparovič dismisses Pavol Rusko as economy minister on August 24 based on a formal request by Prime Minister Mikuláš Dzurinda. President Gašparovič named Finance Minister Ivan Mikloš as temporary head of the Economy Ministry.

Potential investors submit their preliminary bids for a 66 percent stake in Slovakia's main airports on August 15. Later, in September, the privatization commission creates a shortlist of investors. The top five bidders include a consortium of Spanish Abertis with British TBI and Slovak J&T Financial Group; a consortium of the Vienna International Airport, Raiffeisen Zentralbank and the Slovak company Penta; French group Vinci together with the Austrian company A-Way; Turkish investor Tepe Akfen Ventures; and a consortium called Independent Slovak Airport Partners consisting of German Cologne-Bonn Flughafen, Canadian machinery company SNC-Lavalin and Austrian firm Airport Consulting.


ŽSSK Cargo is one of many privatizations announced by the cabinet.
photo: TASR

Irish developer Ballymore Properties announces plans to invest €250 million (Sk9.7 billion) in a 230,000 square metre business centre in Bratislava's city centre. The developer aspires to make Eurovea a dominant complex in the so-called Pribinova zone near the Apollo Bridge.

The PMÚ imposes a penalty against railway freight company ŽSSK Cargo Slovakia for abusing its dominant position on the market. Small railway companies have been complaining about what they consider to be the anti-competitive practices of the current and previous Cargo Slovakia management. So far the fines amount to more than Sk100 million (€2.6 million). However, with other cases pending, that sum may increase.


The National Highway Company starts a public tender to find a supplier for the first part of the Mengusovce - Janovce highway. The NDS estimates that the construction of the eight-kilometre strip will cost between Sk4 billion (€100 million) and Sk4.7 million (€122 million).

President Ivan Gašparovič announces on October 4 that Jirko Malchárek will replace Pavol Rusko as Slovakia's new economy minister.

Slovakia introduces new clear rules regarding state-sponsored support for foreign investors. Based on the rules, Slovakia is divided into two zones. The green zone will mark poorer regions in urgent need of investments while the yellow zone will mark wealthy regions that have already absorbed a certain level of investments.

Jirko Malchárek dismisses Stanislav Vinc as general manager of the KIA project for what he calls "bad management".

The city of Žilina, Žilina Invest, Govinvest I and Govinvest II signed an agreement with landowners who sold their land to the government for the official evaluation price Sk140 per square metre on October 11. The parties agreed that the landowners would receive an additional payment equalling Sk350 per square metre, which is the amount that other landowners received for their parcels of land. The land is needed for the KIA car manufacturing facility.

International ratings agency Fitch increased the country's rating to A. Slovakia's one-notch increase, from A-minus to A, puts the country on par with the Czech Republic. Hungary stands at A-minus while Poland is at BBB plus. The A rating takes into account the 19-percent flat tax reform and the improvements to the business environment that has encouraged investment. Fitch has also affirmed Slovakia's long-term local currency rating at A-plus and raised the short-term foreign currency rating from F2 to F1. The Country Ceiling has been upgraded from A-plus to AA-minus, while the outlook on Slovakia's ratings is stable.

Roman Kuruc, the one-time head of SARIO (Slovak Investment and Trade Development Agency), joined a list of key managers asked to step down after the ignoble departure of their former boss, ex-Economy Minister Pavol Rusko. Another top manager, Ľudovít Balco, was sacked from his directorial post at the National Agency for the Development of Small and Medium-Sized Enterprises just a few days after Rusko.

Korean tyre maker Hankook Tire announces that it had decided to place its new production plant in Hungary. Slovakia was at first favourite to get the estimated €500 million investment. However, the company backed out after the cabinet refused to approve generous state incentives.


The sale of SE to Enel has taken longer than expected.
photo: Sme - Pavol Funtál

The Finance Ministry improves tax conditions for the self-employed. On October 28, the Slovak parliament had approved changes to the income tax law, allowing self-employed individuals to take a standard deduction of 40 percent off their total income. Self-employed workers who opt to itemize their deductions will be able to deduct more than 40 percent. The ministry believes that the changes will reduce the payroll tax burden on the self-employed.

The privatization of a 66-percent stake in Slovakia's dominant power producer Slovenské elektrárne will be completed early next year instead of by the end of this year as originally agreed, Economy Minister Jirko Malchárek said on November 4.

The British Daily Mail and General Trust media group buys Slovakia's most popular job server, Insiders say the Slovak-American Enterprise Fund, which owned a two-thirds stake in, gained over Sk100 million (€2.5 million) fom the deal.

The Statistics Office reports that Slovakia's gross domestic product stood at Sk365.5 billion (€9.5 billion) in the third quarter of 2005, rising by 6.2 percent year-on-year, and by 8.5 percent for common prices, the statistics office reported in its preliminary estimate.

In a public vote organized by the National Bank of Slovakia, Slovaks express their wish that the rear side of the country's euro coins should carry the motif of the Slovak Lorraine cross with a three-hill foreground.

The European Parliament decides to increase the amount of money it would pay Slovakia to decommission the V1 nuclear power plant in Jaslovské Bohunice to €400 million. Before Slovakia can receive the compensation package, however, all EU member sates must first approve the European Parliament's decision.

A consortium of French company Vinci and Austrian A-way contending to buy Bratislava's M R Štefánik Airport withdraw from the running. Experts believe that the consortium left because of A-way's links with Austrian financial group Raiffeisen Zentralbank. Raiffeisen has an indirect capital influence on A-Way; it is also bidding on the tender with the Vienna International Airport and Penta. Submitting so-called "double bids" is forbidden. Raiffeisen Zentralbank is a principle party within the TwoOne consortium, also bidding for the airports.

The Slovak Investment and Trade Development Agency managed 28 foreign investment projects in Slovakia in the January to September 2005 period. The value of the investments exceeds €139 million. The new investors will create at least 3,885 joby as 5,382.

On midnight November 25, Slovakia tied the crown to the euro and consequently entered the Exchange Rate Mechanism II (ERM II). The crown was pegged at the prevailing market exchange rate of SKK38.4550 to one euro. The Slovak crown will be allowed to fluctuate in a band of plus or minus 15 percent.

The Slovak Antitrust Office (PMÚ) launches proceedings on November 22 against oil refinery Slovnaft over a possible violation of competition law. The PMÚ will examine the company's petrol and diesel pricing policy. The office examines Slovnaft's pricing policy since March of this year.

The KIA land purchase process lags behind schedule by almost fifteen months. The Slovak Economy Ministry assumes that the whole process of the purchase of plots and preparation of the locality under the future premises will be completed during the first quarter of next year.


Four consortiums are vying for the right to buy Bratislava's airport.
photo: Courtesy of Bratislava airport

BAE Systems Information and Electronics Systems wins the international tender for a mobile communication system called MOKYS for the Slovak army, the Defence Ministry announced on December 2. In the final round of the four-round tender, BAE Systems beats off competition from Thales Communication. The ministry insists that the price is confidential information. However, the media have estimated the price at Sk7 billion (€184 million) over a five-year period.

Slovakia announces it will not try to buy back its 49-percent stake in Slovak oil distribution company Transpetrol, originally sold to the Russian oil colossus Yukos, which is currently under the control of the Russian government. Slovak Economy Minister Jirko Malchárek agreed with Russian counterpart German Gref on December 5 that Slovakia would support the sale of its shares to a Russian company.

Prime ministers of the Visegrad Four countries (the Czech Republic, Hungary, Poland and Slovakia) disagree with British Prime Minister Tony Blair's spending cut proposals that would threaten EU cohesion funds - money set aside to improve and develop the new member states.

On December 2, Dzurinda, along with Czech Prime Minister Jiří Paroubek, Polish Prime Minister Kazimierz Marcinkiewicz and Hungarian PM Ferenc Gyurcsány, meet with Tony Blair in Budapest. The draft European Union budget for 2007-13 fails to impress EU foreign ministers who gathered December 7 to discuss the matter. At the December 7 meeting of foreign ministers in Brussels, Slovak Foreign Affairs Minister Eduard Kukan said the cuts proposed by the British EU presidency were too severe.

A public tender for the privatization of 51 percent in six major central heating plants in Slovakia is launched December 7. Potential investors have until January 13, 2006 to declare their interest.

Milan Juráška is appointed the new general director of the Slovak Investment and Trade Development Agency (SARIO).

French carmaker PSA Peugeot Citroen plans to increase its investments in Slovakia by €357 million (Sk13.5 billion) from its original pledge of €700 million (Sk26.4 billion). The increase is expected to result in another 1,800 job plant in Trnava, adding to the original estimate of 3,500, and would create around 9,000 additional jobs in the supplier network.

Four consortiums submit their final bids for Bratislava and Košice airports. The privatization commission will chose the winner by the end of the year. The bidders vying for the 66-percent stakes in the Bratislava and Košice airports are Abertis, TBI and J&T Financial Group; TwoOne consortium (Vienna International Airport, Raiffeisen Zentralbank and Penta); Tepe Akfen Ventures; and Slovak Airport Partners (Flughafen Wien, SNC-Lavalin Inter-national, and Airport Consulting). Complaints about the TwoOne consortium's bid nearly resulted in its expulsion. However, the privatization committee's advisor, Austrian Meinl Bank, said that TwoOne was meeting all the legal criteria and could therefore continue competing in the privatization.

The Slovak cabinet approves the completion of the privatization of the remaining 51-percent stake in the western Slovak energy distributor, Západoslovenská energetika (ZSE). The cabinet agrees that 41 percent of the stake would go to E.ON Energie, a German company that already owns a 49-percent stake in ZSE. The remaining 10 percent will be put up for sale on the capital markets.

The parliament approves the draft state budget for 2006. State budget revenues are projected at Sk272.717 billion (€7 billion) and expenditures at Sk330.185 billion (€8.5 billion). Thus the deficit should be Sk57.468 billion (€1.5 billion). Next year's deficit of the general government calculated according to ESA 95 methodology should reach 2.9 percent of the gross domestic product (GDP) without including pension reform costs.

Compiled by Marta Durianová
from press reports

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