Slovakia focuses on R&D for future investments

Research and development – combined with education and innovation – create a competitive package that enables enterprises to grow or remain stable in challenging economic times. Education, development of talents and human resources, along with a focus on a culture of enterprise based on knowledge and lifelong learning, are definitely priority approaches that can help enterprises to succeed in these demanding times.

Slovakia has become an investment destination for global car companies.Slovakia has become an investment destination for global car companies. (Source: TASR)

Research and development – combined with education and innovation – create a competitive package that enables enterprises to grow or remain stable in challenging economic times. Education, development of talents and human resources, along with a focus on a culture of enterprise based on knowledge and lifelong learning, are definitely priority approaches that can help enterprises to succeed in these demanding times.

Acknowledged author J. K. Liker, who has been studying the Toyota carmaker for more than 20 years, suggests that in its efforts to tackle the financial and economic crisis, the carmaker focused its attention on investments in people and as well as a return to the Japanese strategy of Kaizen, which means continuous improvement and an understanding of Toyota’s entire production system. Using this model, managers and employees focus attention on analysing all details of the car manufacturing process and seek to make improvements in these procedures. Liker believes that Toyota is coming out of the current crisis stronger than ever before.

Slovakia is ranked among countries with a significant concentration of automotive and electro-technical industries. During the country’s transformation process this growth was particularly fuelled by the arrival of major automotive and electro-technical companies, which then further attracted their suppliers and significantly improved the quality of the whole supply network in Slovakia. This development process is also visible in other industries such as ICT, mechanical engineering and energy.

Slovakia, thanks to these important industrial branches and the high-quality of its human capital, has been ranked among countries which are highly productive and able to learn new technologies and work methods while being able to access higher-level research, development and innovations.

Slovakia’s industrial environment has met the challenges in industries such as automotive, electronics, engineering as well as the ICT industry. The country has become an investment destination for global companies such as Volkswagen, PSA Peugeot Citroen, KIA Motors, Sony, Samsung, Johnson Controls, Faurecia, Getrag Ford Transmission, U.S. Steel, Valeo, Lear Corporation, Mobis, ZF Sachs, ON Semiconductor, Bosch, Hella, Continental, IBM, Dell, Ness, HP, T-Systems, Lenovo, Siemens, Leoni, Hansol, Visteon, and others.

At this stage, Slovakia is taking a new direction with a new objective: to be a research and development country, a country with new types of investment. The goal is for Slovakia to provide an appropriate and competitive environment for sustainable development and growth through a highly-qualified workforce. Currently, at SARIO, we are registering growing interest by investors in incentives for investment in research and development.

This suggests that investors are getting ready for the next phase, which is the establishment of research and development facilities. In the future, suppliers will be more integrated in the development of new technologies, systems and components. They will strongly promote innovative activities in the development of components which will enhance the value of the whole supply chain. Suppliers are under growing pressure to not only provide completed products but also services related to research, development, engineering, and innovation ability.

As a small country, Slovakia will be focused on R&D centres, regional or local-type centres to support established manufacturing or assembly facilities with a focus on applied research and development. Slovakia already has several R & D centres of companies such as Johnson Controls, ON Semiconductor, KraussMaffei, Leoni, Saufer Danfoss, Hanil E-Hwa, Muehlbauer, Siemens, Dell, Ness, Power-One, Continental, BSH, Alcatel-Lucent, Knott, Elastogran, U.S. Steel and others.

Slovakia’s main advantages as a potential destination for research and development investments can be considered to be: a developed domestic R&D network consisting of university research departments and research institutes along with institutes and departments of the Slovak Academy of Sciences; and a developing network of R&D centres and laboratories in businesses along with the growing interest of established investors in information about conditions of investing in research and development in Slovakia.

Other advantages are its good geographic location linking Western Europe to Ukraine and Russia, the presence of foreign R&D centres, the competitive cost of a highly-qualified workforce, cost-effectiveness, economic and political stability in the region, the euro currency, implementation of Lean and Kaizen principles, and the government’s support for building a knowledge-based society. As well, increasing cooperation between the scientific community and the business sector, the presence of middle-tech and high-tech industries, the availability of scientists, engineers and designers, a developed supplier base and the potential for further development could be added to the list.
The Slovak Investment and Trade Development Agency, SARIO, is now geared towards attracting new types of investments as part of a governmental strategy approved in June 2009. Our One-Stop-Shop for investors will now promote the inflow of investments in areas such as R&D, building of technology centres, investment in energy and renewable sources, medical technology, welfare and health-care projects, microelectronics and electrical engineering, logistics centres, ICT, high-tech, and innovation. Investments in the automotive industry for eco-friendly and electric cars, eco-innovation, development of new materials, biotechnology and pharmaceutical industries, the aviation industry and the revitalisation of brown field sites are also areas of interest.

To support investment into research and development, SARIO first analysed and mapped the research and development environment in Slovakia, then contacted already established investors and informed them about possible investment incentives for technology centres and research and development facilities and also directly addressed selected R&D companies abroad. The next step will be intensive marketing abroad of Slovakia as an “emerging R&D location” in central and eastern Europe.

Support for investment in research and development in Slovakia is possible in several forms such as: investment aid for building technology centres in Slovakia and investment incentives for research and development facilities under the legislation approved in 2009; the EU framework program for research and technical development; EU Structural Funds; and a national grant program provided by the Slovak Agency for Research and Development Support.

Attracting foreign direct investment in the R&D sphere is not a short-term plan. Though we are noticing increasing interest by investors in research and development projects in Slovakia, their final decisions are not easily made in these times of global financial and economic crisis.

However, building research and development, innovation and technological capacity is essential for the future and for the country’s economic sustainability. The words of the President of the German Automotive Industry Association, Matthias Wissmann, from the VDA Auto Annual Report are sage: “... innovation and investing in research and development provide the foundations for a successful future.”

Vladimír Švač and Michal Javorek work for SARIO

More information about Slovak business environment you can find in our Investment Advisory Guide.

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