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A round-up of the year in business

THE GLOBAL financial and economic crisis and its impacts were the main influences on Slovakia's economy in 2009. The start of the year was marked by the natural gas crisis, when Slovakia found its gas supplies from Russia completely shut off, and the arrival of the euro.

Slovakia is using public-private partnership projects to expand its highway network. (Source: TASR)

THE GLOBAL financial and economic crisis and its impacts were the main influences on Slovakia's economy in 2009. The start of the year was marked by the natural gas crisis, when Slovakia found its gas supplies from Russia completely shut off, and the arrival of the euro.

Over the year Slovakia adopted a number of measures to fight the crisis in the form of changes to tax laws as well as support for employment. The government also successfully launched the first public-private partnership projects for construction of two major highways.


January


On January 1 Slovakia started using Europe’s single currency, the euro, instead of the Slovak crown. The conversion rate was €1=Sk30.1260. Slovaks could continue to use crowns until January 16. When Slovakia became a member of the eurozone it lost its independence in monetary policy which had been defined by the National Bank of Slovakia (NBS) since Slovakia became an independent and sovereign state in 1993.

Slovakia unplugged the second block of the V1 nuclear power station in Jaslovské Bohunice from the electricity grid at the beginning of the year and started its decommissioning, an obligation the country assumed when joining the European Union in 2004.

On January 6 supplies of natural gas from Russia, via Ukraine, to Slovakia were cut by 70 percent due to a price dispute between Russia and Ukraine. The next day gas supplies were completely halted. The Slovak government responded by instituting usage restrictions, requiring large commercial customers and industrial users to reduce their consumption to a minimum safe level; households were unaffected by the restrictions. Slovakia drew gas from the underground storage facilities of the Nafta company and the SPP gas utility received natural gas from its foreign shareholders, E.ON Ruhrgas and GDF Suez. The economy of gas-thirsty Slovakia started to return to its normal pulse on January 19 when the country received natural gas via the Czech Republic, a route which bypassed Ukraine, allowing restrictions to subsequently be lifted. The regular gas flow from Russia to Slovakia, via Ukraine, then resumed on January 20.

In its efforts to cope with the gas crisis, the Slovak government pondered reconnecting the second unit of the V1 nuclear power station which Slovakia had closed down on December 31. Even though JAVYS (Slovakia’s nuclear decommissioning company) started preparations to phase in the nuclear facility and the Slovak government approved its re-launch, criticism from the European Commission led to it remaining shut down.

On January 13 the National Highway Company (NDS) signed a contract with SkyToll, which was established by members of the consortium Ibertax SanToll, the winner of a tender to construct and operate a nationwide electronic road toll collection system for 13 years. Beginning in 2010 vehicles weighing over 3.5 tonnes will pay tolls based on kilometres driven on 2,435 kilometres of the country’s road network, measured electronically. The consortium won the tender with a bid of €852.1 million, including VAT. The Slovak project is unique because, in addition to limited access highways, it will also cover a large number of first class roads via satellite-based toll measurement. The system, based on GPS-GSM technology, is expected to permit maximum flexibility in handling an increase in cargo transportation volume as well as an expanding road network. Vehicles weighing less than 3.5 tonnes will continue using stickers for highway travel.

Molex Slovakia, a producer of components primarily for the car industry, announced in late January that it would close down its production in Kechnec in eastern Slovakia after nine years of operation. The company planned to lay off approximately 1,000 employees over the course of the year. The decision was the result of a rapid decrease in demand by the car industry which was the main buyer of Molex’s connector production. Molex Slovakia was the first large investor in Kechnec.

On January 28, the Slovak government agreed to allocate €332 million in state funds for various stimulus programmes to aid Slovakia’s economy and maintain employment.


February



On February 2 the Slovak government adopted its first anti-crisis package to minimise impacts of the global financial and economic crisis. The package focused on unemployment. Parliament adopted the package on February 12.

The National Bank of Slovakia revised downward its estimate of Slovakia’s annual economic growth for 2009 from 4.7 percent to 2.1 percent.

On February 17 Slovakia’s parliament adopted a second anti-crisis package to support the economy. In addition to changes in income and value added tax regulations, it also changed budgetary rules for regional governments. The amended Income Tax Act increased the non-taxable part of the tax base from the previous 19.2 times the subsistence level (€3,435.27) to 22.5 times the subsistence level (€4,025.70) from March 2009 until the end of 2010. The income limit at which the non-taxable part of the tax base starts to shrink was changed from 100 times the subsistence level to 86 times the subsistence level. The income limit for Slovakia’s so-called ‘millionaire tax’ (based on Slovak crowns) began to apply to persons earning more than €15,387 annually. The so-called employee bonus or negative income tax for low-income wage earners was also extended and can be claimed for the first time in 2010, based on 2009 earnings. Parliament also adopted an amendment to the VAT law that shortened the period for refunds of excess VAT paid by businesses from 60 to 30 days. The amendment also permits certain companies operating under one business umbrella to register as a group for VAT purposes.

Parliament on February 17 adopted revisions to several energy laws to increase the state’s control over underground natural gas storage facilities in Slovakia during a gas supply crisis. The new legislation was adopted in response to the natural gas crisis in January.

On February 18 the government allocated €1.49 million for a project to connect Russia with western Europe via a broad-gauge railway running through Slovakia.

On February 19, SPP, Slovakia’s gas utility, signed preliminary contracts for alternative supplies of natural gas with German companies E.ON Ruhrgas and VNG.


March



On March 4 the government approved a loan from the state for railway cargo company Železničná Spoločnosť Cargo Slovakia (ZSSK Cargo) as well as railway network operator Železnice Slovenskej Republiky (ŽSR) to help the firms overcome the impact of the global crisis on their economic performance. The state provided repayable financial assistance of €69.906 million to ŽSR and €165.970 million to ZSSK Cargo.

Slovakia launched its car-scrapping scheme on March 9 under which Slovaks were eligible for a bonus of up to €2,000 on the purchase of a new car if they scrapped a car at least 10 years old. This programme turned out to be very popular among Slovaks and the government launched a second wave on April 6. The government allocated a total of €55 million to support the ailing car industry in Slovakia as well as to make a gesture of solidarity with other car-producing nations in Europe which were also hit by falling car sales. In total, Slovaks delivered about 44,000 old cars to scrapyards.

On March 11 parliament adopted an amendment to the old-age pension savings law changing the fee structure for private pension fund management companies and introducing a so-called guarantee fund for pension savers so that it is not possible for their accounts to dip below the principal sums they have invested.

Pension fund management companies objected to the change, stating that it would endanger their operations as well as reduce the long-term value of future pensions for individuals participating in Slovakia’s second pension pillar. The change became effective on July 1, 2009.

On March 26, the French automaker PSA Peugeot Citroen officially launched its new C3 Picasso model on the Slovak market. It was the first entirely new model to roll off the production lines at PSA's plant in Trnava.

On March 27 Slovakia bought back a previously-held 49-percent stake in Transpetrol, a major crude oil pipeline operator, from Yukos International for $240 million. The deal was completed on April 19 and Slovakia again became the 100-percent owner of the company.


April



On April 15 Transport Minister Ľubomír Vážny signed a 30-year contract with the winner of a tender for construction and operation of five D1 highway sections between Žilina and Prešov with a total length of 75 kilometres. This was the first of three planned public-private partnership (PPP) highway projects. An international consortium led by the French company Bouygues Travaux Publics SA won the tender along with Slovak companies Doprastav Bratislava and Váhostav-SK Žilina. The first PPP project includes these D1 stretches: Dubná Skala – Turany, Turany – Hubová, Hubová – Ivachnová, Jánovce – Jablonov and Fričovce – Svinia. The winning consortium’s bid for construction and operation of the D1 highway sections reportedly amounted to €3.3 billion.

On April 16 Igor Štefanov replaced Marian Janušek as the head of the Ministry of Construction and Regional Development. Janušek was forced from his post after it came to light that the ministry had advertised a high-value tender for services using EU funds only on an internal bulletin board not accessible to the public. The winners of the tender were alleged to be associated with the head of the Slovak National Party which had nominated Janušek to the post.

On April 22 German-automaker Volkswagen decided to place the production of its New Small Family model cars in Slovakia. Total investments are expected to reach €308 million. The number of VW Slovakia employees is expected to grow by about 1,500. The first cars of the new model are planned to roll off assembly lines in early 2011. The annual production capacity in the plant will increase to 400,000 cars. The Slovak government approved an investment incentive in the form of tax allowances of over €14 million for this project.

May



President Ivan Gašparovič ousted Ján Chrbet from his post as Environment Minister because of the sale of Slovakia’s excess emission quotas to Interblue Group company at a bargain-basement price. The Environment Ministry sold 15 million tonnes of carbon dioxide emissions quotas to Interblue, an unknown American-based company, at a price of €5.05 per tonne, much less than neighbouring countries had obtained when selling their quotas. Chrbet was replaced by Viliam Turský, who was himself later sacked after details of another questionable public contract emerged.

On May 15 President Ivan Gašparovič signed into law a cabinet-tailored revision to the law on health-care providers to shelter indebted hospitals from distraint proceedings until the end of 2009. The government also promised to loan funds to these companies to help them settle their overdue obligations.

On May 17 the government approved a new €71 million programme for thermal insulation of blocks of apartments and family houses to assist the ailing construction industry as well as to reduce energy consumption in Slovakia.


June



On June 3 the Slovak Statistics Office confirmed a considerable decline in Slovakia’s economy for the first quarter of 2009. The country’s gross domestic product fell by 5.7 percent year-on-year in the first quarter.

On June 11 Paolo Ruzzini, Director General of Slovakia’s dominant power producer, Slovenské Elektrárne, signed contracts with six main suppliers for the completion of the third and fourth units of the Mochovce Nuclear Power Plant in the presence of Prime Minister Robert Fico. The prime minister underscored that this is the biggest investment of a private investor in the history of Slovakia, as €2.7 billion is expected to be spent through 2013. Work resumed on completion of the two units of the Mochovce nuclear power station in November 2008.

On June 22 Slovakia's low-cost air carrier, SkyEurope Airlines, filed for bankruptcy protection from its creditors in order to carry out restructuring of its operations and finances, which ultimately proved to be unsuccessful.

On June 29 SPP signed a 10-year gas supply contract with E.ON Ruhrgas as part of its efforts to diversify its sources of natural gas. E.ON Ruhrgas, a German firm, will deliver about 500 million cubic metres of natural gas annually to Slovakia through a swap operation.

July



On July 6 Jozef Minďáš stepped down from his post as general director of the national forestry company, Lesy SR, under the pressure of the company’s employees who had accused Mindáš and his management team of what they called complete misuse of public funds. On July 14 Agriculture Minister Stanislav Becík installed Ján Beňa as the interim general director of Lesy SR.

On July 13 President Ivan Gašparovič signed legislation supporting the use of renewable sources of energy and co-generation units. The Economy Ministry, which drafted the law, said that the law provides a comprehensive means of supporting electricity production via highly-efficient co-generation units and from renewable energy sources. It increases from one to 15 years the period for which guaranteed prices are paid to producers of renewable energy.

On July 21 carmaker Kia Motors Slovakia launched serial production of a new version of its Kia cee’d model.

On July 22 the European Commission imposed fines exceeding €61 million on nine companies for participating in a price-fixing cartel. Novácke Chemické Závody (NChZ) and its former parent company 1. garantovaná of Slovakia were required to pay the highest fine, €19.6 million. According to the EC, the firms set prices and divided markets among themselves for three specialised chemical products in a large part of the European Economic Area between 2004 and 2007. NCHZ filed for bankruptcy on September 17, arguing that paying such a fine would liquidate it.



August



On August 3 Slovakia’s social security provider, Sociálna Poisťovňa, announced that 65,172 people had left the second, so-called capitalisation, pillar of the country's old-age pension saving scheme and that 13,856 people had entered the programme. The second pillar was re-opened for people to enter or leave from mid November 2008 until the end of June 2009.

On August 10 a deadly explosion, probably caused by flammable gases, killed 20 miners in the Handlová mine of the Hornonitrianske Bane Prievidza (HNB) mining company. The explosion occurred after mine rescuers had earlier been deployed to extinguish a fire in a shaft of the mine.

On August 14 the Slovak Telecommunications Office announced that Towercom was the winner of Slovakia’s digital broadcasting tender. Towercom will be the operator of the first two multiplexes as well as the operator of the public service digital terrestrial broadcasting multiplex (DVB-T).

On August 18 Ukraine unilaterally halted railway cargo transport at the Maťovce–Užhorod border crossing after the Ukrainian railway company alleged that a scanning device used at the border crossing to detect goods smuggled in cargo trains was harmful to the health of Ukrainian locomotive engineers. Transport resumed after the x-ray device was switched off and Slovakia’s customs officers returned to manual checks of the trains. The scanning device was put back into operation on September 10 after an agreement that the engine and the next three railway cars would be inspected manually. On December 15, the complete operation of the scanner resumed after expert measurements performed by the International Atomic Energy Agency (IAEA) confirmed the safety of the device.

On August 28 Slovakia signed a contract with the Granvia consortium governing the financial terms under which a stretch of the R1 highway linking Nitra and Tekovské Nemce will be built. According to the agreement, Granvia will build 52 km of the R1 dual-carriage way under a public-private partnership (PPP) project. Construction costs are estimated at €930 million and the consortium will receive €127.4 million per year for maintenance and operation of the road over 30 years.



September



On September 1 SkyEurope Airlines suspended its operations and declared bankruptcy after its plan for restructuring failed. The Transport Ministry withdrew its licence from the carrier on September 2.

On September 3 the private equity group Penta applied to Slovakia’s Antitrust Office to merge two health insurance companies that it owns, Dôvera and Apollo.

A week after Agriculture Minister Stanislav Becík agreed with Vladimír Mečiar, head of the Movement for a Democratic Slovakia (HZDS), to submit his resignation President Ivan Gašparovič accepted it on September 16 and appointed Vladimír Chovan as the new minister.

On September 23 President Gašparovič signed into law a revision to the state debt and state guarantees law which permits the government to provide state guarantees for construction of the D1 highway which is being undertaken in the form of a public-private partnership.



October



On October 5 the SPP gas utility signed a five-year contract for natural gas supplies with GDF SUEZ which agreed to annually deliver up to 500 million cubic metres of natural gas to SPP. The gas utility signed several diversification contracts as a response to the January natural gas crisis. SPP is now able to get up to 20 percent of Slovakia's annual gas consumption from diversified sources.

On October 13 the TriGranit international development firm unveiled a multifunctional entertainment and recreation project worth €1.5 billion to be built on the outskirts of Bratislava in Jarovce, near both the Hungarian and Austrian borders. The Metropolis complex will be co-financed by Harrah’s Entertainment and will consist of a commercial area, an aqua park, conference facilities, hotels and sports arenas as well as casinos spread over 1.2 million square metres.

According to the implementation report of the National Reform Programme for 2008-10 presented on October 14, the total amount that will be spent on anti-crisis measures in Slovakia in 2009 will reach €1.462 billion or 2.3 percent of Slovakia’s GDP, with the state budget expansion representing €282 million or 0.4 percent of GDP.

On October 16 Economy Minister Ľubomír Jahnátek signed a memorandum on cooperation in the energy sector between Slovakia and Austria, including construction of a crude oil pipeline connecting oil refineries in Bratislava and the Austrian town of Schwechat.

The minimum monthly wage in Slovakia will increase by 4.1 percent at the beginning of 2010, to €307.70. The government adopted this compromise solution on October 20 after its social partners, trade unions and employers, failed to reach a joint decision after almost three months of negotiations.

On October 27 parliament approved a hike in the state budget deficit for 2009 to €3.1 billion. The budget deficit will exceed the initially-approved level threefold due to impacts from the economic crisis. Under the revised budget, expected 2009 revenues were reduced from €13.116 billion to €10.998 billion, while budgeted expenditures remained the same.



November



On November 4 parliament approved the state budget for 2010 with the aim of cutting the public-finance deficit from this year’s 6.3 percent of GDP to 5.5 percent in 2010. State revenues are projected at €12.35 billion for 2010 with expenditures of €16.28 billion, leaving a budget deficit of €3.75 billion for next year.

On November 5 parliament passed a law on strategic companies permitting the state to buy bankrupt firms which have been declared to be strategic. Economy Minister Ľubomír Jahnátek said that this was an anti-crisis measure which would be valid only until the end of 2010.

Parliament adopted a change to the law on health insurance companies, merging the two state-run health insurance companies, Všeobecná Zdravotná Poisťovňa and Spoločná Zdravotná Poisťovňa. Earlier in the year the government had allocated €65.1 million for Všeobecná Zdravotná Poisťovňa to cover merger costs. After two private health insurance companies, Dôvera and Apollo, merge as well, only three health insurance companies will remain in Slovakia in 2010.



December



On December 2 the government designated Novácke Chemické Závody (NChZ), a bankrupt chemical firm, a strategic company under the terms of the new law on strategic companies. Now, when the trustee in bankruptcy decides to sell its assets, they should be offered first to the state.

On December 2 the government endorsed a draft investment agreement with AU Optronics. The firm intends to spend over €191.3 million on the construction of a new LCD module plant near the city of Trenčín within three years. According to the agreement, the investor will obtain nearly €32 million in investment incentives. The investment should directly and indirectly create about 3,000 jobs.

On December 3 the Statistics Office again confirmed a decline in Slovakia’s GDP. Gross domestic product contracted by 4.8 percent y-o-y in the third quarter.

Slovakia’s unemployment rate continued to rise and increased by 3.5 percentage points year on year to reach 12.5 percent at the end of September, the Statistics Office reported on December 3. The number of unemployed people increased to 307,400.

The bid by Slovakia to bring the headquarters of the new European energy regulation coordination office to Bratislava failed. A vote by EU member states on December 6 decided that the Agency for Cooperation of Energy Regulators (ACER) will be based in the Slovenian capital, Ljubljana.

On December 9 the government approved the launch of Jadrová Energetická Spoločnosť Slovenska (JESS), a joint-stock company which will be charged with building a new nuclear power plant in Jaslovské Bohunice. The company will be established by Jadrová a Vyraďovacia Spoločnosť (JAVYS), the state-owned nuclear decommissioning company and the Czech energy group ČEZ. JAVYS will hold 51 percent ownership and ČEZ 49 percent in the joint venture. The construction costs of the new nuclear power plant, to be built on the premises of the former V1 nuclear power station in Jaslovské Bohunice, are estimated at between €4 billion and €6 billion. The project’s details will be known after completion of a feasibility study to be conducted in 2010.

On December 10 parliament approved Jozef Makúch as the next governor of the National Bank of Slovakia. He will replace Ivan Šramko in the post on January 1, 2010.

On December 16, airline carrier Seagle Air, which stopped operating charter flights in October due to financial difficulties, was stripped of its licence to provide air transportation services.



With SITA and TASR files


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