Reforms will keep Slovakia appealing

GERMANY is Slovakia’s strategic investor. It is also Slovakia’s strategic business partner as the EU country to which it exports and from which it imports the largest volume of goods.

GERMANY is Slovakia’s strategic investor. It is also Slovakia’s strategic business partner as the EU country to which it exports and from which it imports the largest volume of goods.

German companies are particularly active in the Slovak automotive industry, machinery and metallurgy sectors, said Markus Halt, an economist with the German-Slovak Chamber of Commerce. German companies are also active in the transport and logistics industries.

As electronics is one of the fastest growing industries in Slovakia, the country is also attractive for German electronic engineering companies, with a lot of potential for future cooperation. Another area in which German-Slovak cooperation will gain importance is renewable energy, according to the chamber.

“German companies are the world’s leading producers of technologies for using renewable energy,” Halt said. “This chamber’s efforts have already resulted in some renewable energy projects in Slovakia. The same can be said about technologies for increasing energy efficiency.”

Slovakia is an attractive location for German investment because it lies in the heart of Europe, Halt said. This gives it access to a huge market of more than 100 million consumers that can be accessed through its neighbouring countries.

In addition, the country’s flat tax is low, the tax system is transparent and labour costs are still relatively moderate, he said.

The labour force is well educated and productive, but is becoming increasingly difficult to find, Halt observed.

“The lack of qualified labour force has become a major concern for German investors,” he said.

Unlike in the past, Slovakia has become more attractive for German companies as a sales market than a production market, Halt said.

In 2007, the bilateral trade volume amounted to €17.5 billion, which makes up more than one fifth of Slovakia’s foreign trade. Slovak exports to Germany are usually higher than imports from there, but the latter has grown stronger since 2004. Nowadays, the bilateral trade balance is steadily approaching zero. The commonly-traded goods include cars and car components, as well as machines and electronic devices, according to the chamber.

“However, as a whole, knowledge about Slovakia is still low in Germany,” Halt told The Slovak Spectator. “It is therefore vital for Slovakia to promote itself abroad more intensively.”

Industries and companies

A majority of German global players are also active on the Slovak market, according to the German-Slovak Chamber of Commerce. But as well as the big names there are also more than 400 medium-sized companies. Altogether, German companies employ around 80,000 people in Slovakia. Their share of Slovakia’s GDP is around 20 percent, Halt said.

“Considering the 8 to 10 percent rate of increase, together with the resource of well educated Slovaks often having great language skills in English, German and others, investing in Slovakia is highly attractive,” said Rüdiger J. Schulz, senior executive vice-president for marketing, sales and technology at the Slovak Telekom Group, where Deutsche Telekom is a majority shareholder.

However, the price of goods is already relatively high compared with countries such as Austria or Germany, he added.

“Lower labour costs is still a major argument for coming to Slovakia, but this must be maintained and supported by future political decisions,” Schulz said.

Torsten Leue, the chairman of the board of directors at Allianz-Slovenská Poisťovňa, emphasises the need for further reforms.

Slovakia’s reforms in pensions, taxes and health were very positive, though they are still not finished, and set a positive trend for the region, he told The Slovak Spectator.

Carrying out further reforms will actually help Slovakia respond to the current global financial crisis, he said.

“Neighbouring countries are catching up and Slovakia is in competition with them,” Leue noted.

He foresees major changes across global markets in the near future. And only the adaptable economies will thrive, he said. “I expect an increasing awareness of the need to continue with reforms, as all competitors are preparing for this.”

Allianz has been operating in Slovakia since 1993, when it was set up under the name Allianz Poisťovňa. It acquired the formerly state-run, largest insurance company Slovenská Poisťovňa in July 2002.

Deutsche Telekom is the majority shareholder in telecom operator Slovak Telekom, a.s., controlling 51 percent.

Volkswagen Slovakia was launched as a joint project of BAZ, a.s., and German car producer Volkswagen in 1991. It currently runs three production units in Slovakia. VW Slovakia is one of the biggest foreign employers in Slovakia.

German firm Ruhrgas and French company Gas de France have jointly held a 49-percent stake in SPP since 2006. German firm E.ON Energie has been a minority shareholder in regional electricity distributor ZSE since September 2002. It bought 49 percent of the company shares for €329.5 million in 2002. In November 2003, it sold 9 percent of ZSE shares to the European Bank for Reconstruction and Development (EBRD). Since 2003, the German energy company RWE Energy has held 49 percent in regional electricity distributor VSE.

Siemens Group in Slovakia clusters 14 companies. Siemens IT Solutions and Services employed 462 people in eight Slovak cities.

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