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GERMAN INVESTORS IN SLOVAKIA

Seeing bright prospects

GERMAN investors in Slovakia highly assess the country’s educated labour force, its simple flat-rate tax system, minimal bureaucracy and stable economic conditions. The successful introduction of the euro and Slovakia's central location are other positive features further widening business opportunities between the two countries.

VW management announced on June 2 that its New Small Family Up! car will be made in Bratislava.(Source: ČTK)

GERMAN investors in Slovakia highly assess the country’s educated labour force, its simple flat-rate tax system, minimal bureaucracy and stable economic conditions. The successful introduction of the euro and Slovakia's central location are other positive features further widening business opportunities between the two countries.

The Slovak Spectator asked six representatives of various-sized companies operating in different sectors, all with German investment, about the challenges they face in the current market as well as their experiences doing business in Slovakia. They are: Andreas Tostmann, the head of the board of directors of Volkswagen Slovakia (VW SK), Ruediger Schulz, senior executive vice–president for sales, marketing and technologies at Slovak Telekom; Jozef Ondáš, Managing Director of T-Systems Slovakia, a company providing information and communications technology (ICT) services; Flemming B. Bjoernslev, director of chemical company Lanxess CEE; Richard Hrabovský, commercial director of software solutions provider SAP Slovensko; and Juraj Lackovič, president of Henkel Slovensko.

The Slovak Spectator (TSS): What are the positive and negative experiences of your company operating in the Slovak market? Do you think there are any barriers to doing business in Slovakia?
Andreas Tostmann (AT): As the first foreign car producer in Slovakia, Volkswagen Slovakia started production of the VW Passat Variant model in 1991. Over the next 18 years VW SK became one of the biggest companies in Slovakia.

For us, as the largest exporter in the country, a stable environment is of high importance. From this point of view the introduction of the euro was very critical because it enables us to make long-term plans. For the future, support for infrastructure of subcontractors is also of high importance. Development of the educational structure for workers in the automotive industry in
Slovakia is also very cardinal.

Ruediger Schulz (RS): After the first year and a half of learning I realized that specifically here in Slovakia the personal relationship is of tremendous value, more than in other countries. After a period of a very high economic growth in the country, we now have a huge drop and this also means a serious consolidation of companies and a huge focus on efficiency increase/cost reduction. The biggest difference I can see is in behaviour concerning sustainability. There is a tendency of achieving quick money and not taking care about sustainable development of the business.

Jozef Ondáš (JO): T-Systems Slovakia has been successfully operating in Slovakia for more than three years. The company is constantly growing, not only from the viewpoint of the number of employees but also from the view of new multinational customers. As the only ICT company based in Košice, the biggest city in eastern Slovakia, we provide an extensive portfolio of services in the field of remote administration of information and communications technology (ICT) infrastructure and applications in the form of outsourcing.

Since we are a representative of the so-called high-tech industry, we are very sensitive to the educational level of university graduates and in this area there is a lot to fix and improve.
Flemming B. Bjoernslev (FBB): So far our experience has been very positive. The investment climate is favourable for foreign companies. Key aspects are the simple flat-rate tax system, minimal bureaucracy and stable economic conditions through the successful introduction of the euro.

Moreover, the country has a good supply of highly trained and motivated specialists. Looking ahead to the future, it is important for Slovakia to further extend its excellent manufacturing expertise into the other economic sectors.

Richard Hrabovský (RH): From our point of view Slovakia is a standard European market. We feel that our customers and partners have enough courage to work with technologically advanced tools.
Managers know that in order to be successful they need to have effective tools at their disposal to control processes.

We see a large potential and, simultaneously also, a lag in harmonisation of Slovakia’s legislation with the EU legislation as well as in better communications. We have to adapt many of our solutions to Slovakia’s legislation and this is often very complicated. Unified legislation would often save us a lot of work.

Juraj Lackovič (JL): Our experiences are positive. Henkel has been operating in Slovakia already for 18 years. During this period the company has been constantly growing and the turnover in the local market has almost tripled. Henkel Slovensko reached a turnover of €92.3 million in 2008. Business success enabled Henkel Slovensko to be involved in charity and social fields. So far, Henkel has funded charity projects for over €200,000 and has been helping Slovak people in urgent need during natural disasters that are becoming more and more common.

TSS: What is your company’s vision for the future in Slovakia?
AT: Currently we are preparing for production of a totally new range of cars, VW’s New Small Family, in the Bratislava plant. For us this means creation of 1,500 new jobs, investments of €308 million and intensive preparation for manufacturing these vehicles.

The first cars of this new product range will roll down the production lines in early 2011. Along with this, the production of SUV vehicles will remain in Slovakia which means a significant increase in the production capacity of the plant to 400,000 vehicles per year.

RS: How important the Slovak market is can be seen by our investments which are this year – despite the crisis – still close to €100 million. We are operating several applications and inbound call centres out of Slovakia in order to cover European demand. This will continue. In the country we will focus on strengthening the cooperation between T-Mobile and T-Com and we will come up together with interesting and fancy new products which will be launched to make our customers even more satisfied. With this attitude we want to support our claim: Let’s share this together!

JO: We see it in a very positive light. We are one of a just a few companies which have been constantly growing, getting new orders, hiring and educating new employees and increasing the productivity, quality and level of our services. We are one of the founding members of the Košice IT Valley association and a great supporter of development in education and business-making in the ICT sector in eastern Slovakia.

FBB: We have observed rising demand for innovative premium chemical products in Slovakia. That is precisely what Lanxess’s portfolio focuses on. Our aim is to offer our customers a steady stream of new product developments. That is underpinned by the patent situation: between 2006 and 2008 the number of new patents granted to Lanxess quadrupled. In view of the present economic difficulties we are therefore stepping up our focus on innovation and raising our R&D budget by 10 percent this year.

RH: Today, more than three hundred clients use SAP solutions in Slovakia. These are large companies, organisations of public administration, medium-sized companies as well as smaller companies. SAP’s philosophy focuses on processes which, in our opinion, should be effective and transparent. In this context our opportunities in Slovakia are still great in the near, as well as further, future.

We see an especially large potential in developing answers to questions about how to use public resources more effectively. In the environment of self-governments and public administration organisations, they are starting to use processes verified in business as well as control processes with the help of intelligent software instruments.

Our further heading in the Slovak market is, to a certain degree, determined by the development of our product portfolio. SAP is the leader in technologies and applications which we developed specifically for 25 various industrial branches and we want to maintain our position. Our goal is, of course, a satisfied client and that is why we develop products and services which help our clients in the fields of decision-making support, comprehensive control of business processes and control of relations with clients and sector solutions.

JL: We expect that all our business sectors will continue to participate in the future success of the company: Laundry and Home Care, Cosmetics and Toiletries, and Adhesive Technologies.
Leading market positions of our product portfolios in all three business sectors and their continuity also at this time of crisis are strong bases and investment for the future. Besides its business activity Henkel Slovensko officially launched its Shared Service Center (SSC) in autumn 2007. The centre has been carrying out financial processes for countries of western and central Europe, the USA and Canada for almost two years. It is an honour for Henkel Slovensko to enjoy the trust of the sister companies of Henkel in carrying out and operating their financial services.
The whole year of 2008 was significant for Henkel Slovensko because our SSC extended providing services to a total of 21 countries in Europe as well as the USA and Canada. Since spring of 2009 some processes of purchasing and information technologies have also been gradually moved into Slovakia. This trust confirms the quality of Henkel Slovensko’s team. Henkel Slovensko plans to continue increasing the number of its employees, particularly within the SSC.

TSS: In general, how do you see trends and development of the market in which you operate?
AT: This year of 2009 is very complicated for the automotive industry in the whole world. But coping with the crisis is a challenge for the whole economy not only for the automotive industry.

During the time being it is necessary to properly cope with the current situation. We are convinced that we will emerge from the crisis stronger. With our highly-qualified employees and our flexible production system we are prepared for the New Small Family of cars.

RS: First it will be a consolidation of the communication services, meaning an adjustment of really needed services. The voice service will be mainly mobile and the fixed-line business will concentrate on home entertainment services. Slovak Telekom is very strong in this, indeed.

JO: In Slovakia, there are great opportunities in the use of ICT services, particularly in state and public administration where Slovakia ranks among the countries with the lowest utilization of these services within the European Union.

From the global point of view the development of the ICT market is very interesting. In many sectors, for example in outsourcing, the situation is very positive. In the sector of large projects the situation is not so bright right now since these projects often lack sufficient funding.

FBB: We have noticed a significant drop in demand from key customers such as the automotive industry. It is not possible to tell at present how long this will last. However, we expect the central and eastern European markets to pick up rapidly when the crisis ends. In the longer term they should have higher growth potential than the established western European markets.

RH: Similarly to other IT companies, SAP Slovensko has also witnessed a lower demand in general. Companies are pondering individual projects and investments more carefully. They try to determine a balance between reduction of costs and investments. This is not an easy period of time and it has been more demanding for management. Software tools for managerial support known as Business Intelligence can bring answers to these questions. This segment of sales has been dynamically developing.

The current period of time is more demanding, but this also means opportunity. Those who innovate and have a pro-active attitude to their business can step out of the crisis stronger than any time before. Properly directed investments into information technologies can help a company gain control and provide an overview of all sectors of their business.

The aspects of a solution’s investment return and evaluation of projects via their added value are also entering the game more often. Organisations are looking for projects with clear and fast return of investment. This trend unambiguously speaks to the benefit of stable and established companies which are able, on the basis of their experience, to reliably offer proven similar business services and, in the end, to stand up for their results.

JL: Companies able to react immediately or even in advance will succeed during crisis. Maximal efficiency, flexibility and ability to do business with restricting budgets are attributes of success today. In this respect, Henkel is well-prepared to face the crisis on a global scale, and thus also in Slovakia. A good example is the already mentioned Shared Service Center with the main objective to standardize and optimize processes, which enhanced the efficiency, flexibility and quality of work. This shows that Henkel Slovensko is able to create new jobs also during crisis.

TSS: When did your company enter the Slovak market and why did it decide to come to Slovakia? How many employees does your company have at this time?

AT: VW SK has been operating in Slovakia since 1991. In addition to producing the Volkswagen Touareg, Audi Q7 and Škoda Octavia models and car bodies for Porsche, we also produce gearboxes in the Bratislava plant. Our plant in Martin manufactures components for Volkswagen, Audi, Škoda and Seat models.

At the end of 2008, VW SK had 7,800 employees.

RS: Deutsche Telekom AG entered Slovak Telekom on July 18, 2000. The company owns and operates a telecommunications network which covers the entire territory of Slovakia, providing national and international voice services and a wide portfolio of modern data services under the T-Com brand. It is also the largest provider of 4G broadband internet in Slovakia.

It was the first operator in Slovakia to offer the triple play Magio service, combining digital television, internet and telephony, and it is the largest triple play service provider. Slovak Telekom Group consists of the following companies: Slovak Telekom, T-Mobile Slovensko, Zoznam, and Zoznam Mobile.

Slovak Telekom has 3,628 employees.

JO: T-Systems Slovakia was founded in January 2006. Behind the arrival and a long-term investment by T-Systems Enterprise Services, which is part of Deutsche Telekom, was a very favourable background and infrastructure in Košice, universities, an international airport, support by regional politicians and many young motivated graduates of Košice-based universities.

T-Systems Slovakia is an exclusive exporter of services as it does not have any clients in Slovakia. Currently, we have more than 1,000 employees.

FBB: In January 2008 Lanxess established a subsidiary in Bratislava to serve central and eastern Europe. That has strengthened our market presence, brought us closer to our customers and enables us to make even better use of the potential in this region. The subsidiary currently has around 45 employees.

We focus principally on three segments: performance polymers, i.e. high-performance plastics and rubber, speciality chemicals and chemical intermediates. Our main customer in Slovakia is the automotive industry, followed by the construction and electrical and electronics sectors.

RH: SAP was launched in 1972 with its seat in Walldorf, Germany. SAP is a global supplier of software solutions enabling users to integrate processes inside as well as between companies and between trade centres for all types of branches and sectors.

SAP Slovensko was set up in 1998. Currently we have 170 employees and more than 300 companies of various sizes and scopes of business use the products and services of SAP.

The company uses its extensive experience to supply a comprehensive portfolio of solutions which support every side of commercial activity. By using SAP solutions, a company can significantly reduce costs, increase performance and adapt quickly to the needs of the market.

SAP’s portfolio also includes distinct solutions supporting processes in more than 25 business sectors including top technologies, health care, public administration and finance.

JL: Henkel Slovensko was launched on October 1, 1991 under the name Henkel-Palma as a joint-venture of the Austrian company Henkel Austria and the then state-owned company Palma. Currently, Henkel Slovensko is based in Bratislava and is a 100-percent subsidiary of Henkel Central Eastern Europe.

Henkel Slovensko operates in Slovakia within three business sectors: Laundry and Home Care, Cosmetics and Toiletries and Adhesive Technologies and most of our company’s products occupy prominent places in the local market.

Another milestone in our company’s Slovak operations was the opening of the Shared Service Center. Henkel, which is active in 125 countries around the world, has only two such centres: one in Manila in the Philippines and the other in Bratislava. Henkel picked Slovakia as the site for its Shared Service Center due to its strategic location and highly-qualified labour force. The investments into the centre total €7.3 million so far.

Henkel Slovensko currently employs 370 people.

Topic: Foreigners in Slovakia


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