Bureaucracy, the need to upgrade public infrastructure, heavy payroll taxes and an inflexible labour code are listed by British investors or representatives of UK businesses in Slovakia as being among the hindrances to doing business here. On the other hand, the Slovak market still lacks a number of services common in a mature market and thus also offers many business opportunities even during the current economic downturn.
The Slovak Spectator spoke to Laurie Farmer, the managing director of real estate consultancy Spiller Farmer, Tatiana Hargašová, the managing director of the Slovak branch of BPP Professional Education, which provides training and development to finance professionals, and Oľga Hrnčiarová, spokesperson for retail chain Tesco Stores SR, about their experiences doing business in Slovakia so far, as well as their outlooks for the future in the market sectors in which they operate.
The Slovak Spectator (TSS): What is your experience of doing business in Slovakia so far – whether positive or negative? Are there any barriers to entrepreneurship in Slovakia? Do you have some ideas for improvement?
Laurie Farmer (LF): Our experience was positive in the growing market of the past. We now have several companies focused on real estate, which as a complex sector of the market would not work if there was extreme autocracy.
There are no barriers to doing business in Slovakia providing those doing business are qualified to do that business. Sometimes there are complaints from foreign individuals; however, these issues are often caused by their own inadequacies or not having qualified consultants to assist them.
Slovakia has a small population relatively and also low personal debt for individuals, thus Slovaks are fairly liberal and tolerant of their governments. Further investment in infrastructure is needed in the country, including motorways allowing investment for employers to work better regionally. There is basic infrastructure which also needs upgrading, such as water systems and power systems in many villages, but we anticipate this is just a matter of time.
Tatiana Hargašová (TH): BPP Professional Education is a successful business in Slovakia, slowly growing over the past 15 years so we can happily say that we have had a positive experience of Slovakia. Of course, there are difficulties as well. The level of bureaucracy, changes to legislation and lack of government customer service has always made operating in this part of Europe difficult. Entry to the EU certainly made things easier in terms of movement of employees and goods.
Barriers to entrepreneurship include the amount of bureaucracy needed to start a business, a potential lack of access to finance to fund a business during the early and risky periods, and the limited education and skills of the labour force. University graduates often leave university with good knowledge but often do not understand how to use that knowledge. Employees are sometimes narrow-minded, lack knowledge of how things may be done outside of Slovakia and can be unwilling to try different ways of doing things because they accept the status quo too easily.
To improve the situation, government needs to trust businesses more and give them more freedom. We cannot grow an economy by strangling new businesses with bureaucracy before they have a chance to establish themselves. Investment in education both by the government and by business is vital so that entrepreneurs have a wider understanding, not just knowledge, of how to succeed.
Oľga Hrnčiarová (OH): Our experiences are very good and Tesco Stores SR has been investing in new stores, distribution and trade centres, and filling stations since its entry into Slovakia. It operates various formats of outlets, from the department stores it acquired to the new outlets of various sizes it has started to build and operate across Slovakia. More than 1.8 million customers visit our stores weekly. The philosophy of Tesco Stores is to give every customer the very best and to become the store for all. Feedback shows that customers are satisfied with our services.
With regards to the barriers, we regard payroll taxes as being high. We also perceive the labour code as inflexible and miss greater support for investments into higher usage of renewable energy resources.
TSS: What is your expectation of trends and developments in the Slovak and international markets where you operate?
LF: Slovakia has proven resilient to the downturn in the economy which many other countries have suffered badly from. There has been a downturn but the fundamentals of the economy still appear to function in relation to the neighbours. Central Europe is a very young market, thus comparing even 10 years ago to today I would say that there is still positive growth in a troubled world economy.
TH: The trends in the Slovak market are that employers are looking for qualified and professional staff and are ready to pay for in-depth knowledge and practical training. One of the main reasons for non-understanding of the big picture and therefore the problems in growing a business is the lack of knowledge of non-finance managers in the financial and accounting sphere. Many big companies today are recognising this problem and are prepared to provide the relevant practical training. Internationally the perfect training for these target groups is business simulations.
OH: Our expectations are very positive. The company continues to invest in new units and focuses on investing in price programmes. Thus the price strategy, higher availability of outlets, introduction of new services, and extending the assortment of Tesco’s own-brand products – i.e. satisfying the needs of clients – continue to be amongst our priorities.
TSS: How do you see your operation in the region in the near future with regards to the economic downturn?
LF: Our business is based on real estate and must reflect our advice to clients in whatever market condition they find themselves in. Having lived through the British crisis before I came to Slovakia 20 years ago has given me better insight as to likely trends in our profession which most in this market will never have experienced. Any economic crisis is relative to which date you compare this to. Against 2007 the downturn is substantial, but compared to 10 and 20 years ago the opportunities are still positive. In Slovakia there are still many services missing and opportunities to do business, which is less so in more mature markets. Slovakia has a long way to go before it becomes a mature market, and thus offers many opportunities still.
TH: For many businesses, training expenditure is discretionary rather than mandatory and therefore we have not been immune to the current conditions where even businesses that are thriving are being cautious with their spending now because of uncertainty in the future. However, as soon as things begin to improve, developing employees to have the skills needed to obtain a competitive advantage will create more demand for our internationally-recognised professional qualifications training.
OH: Customers are more cautious and price sensitive and thus pricing policy is of key importance for us. Updating price programmes and monitoring prices not only in the outlets of our competitors but also beyond Slovakia’s borders, and then adjusting the prices of the most popular products in our outlets, has become normal for us.
TSS: When did your company begin to operate in Slovakia and why did it decide to come in Slovakia? How many employees does your company have?
LF: I first came to Slovakia in 1989. Having visited Poland and the Czech Republic (as it is now) this seemed to be the most comfortable environment, especially at a time when there was major uncertainty politically. Initially I taught as a visiting professor of architecture at the Faculty of Architecture, and then started slowly to assist foreign investors in the market, at that time Czechoslovakia. The reason for coming to Slovakia was due to the collapse of the UK economy at the time after the change of government from Margaret Thatcher.
We have several companies in Slovakia employing 35 people in total.
TH: BPP Professional Education began to provide training to assist Slovaks to gain professional qualifications in 1994. A permanent office was established in 2000, since when we have also provided training for management development skills in addition to the qualifications training. We have seven full-time employees and two part-time trainers.
OH: Tesco Stores SR entered the Slovak market in 1996. Currently it operates a network of 73 retail outlets, of which 47 are hypermarkets, 20 are supermarkets, one Tesco Express and five department stores, plus 17 petrol stations.
With over 8,300 employees Tesco Stores SR ranks among the biggest employers in Slovakia. It follows principles of corporate responsibility, for which it has already received the main prize Via Bona for the year 2008 as well as the green prize Via Bona for its ecological store in Rajec.