Established investors are the best salespeople to pitch Slovakia’s investment environment and they need more systematic attention, says Robert Šimončič, the director of SARIO, Slovakia’s investment development agency.
“If a new potential investor meets established investors who tell a nice story about Slovakia it has better relevance for the person than if we tell the story,” said Šimončič, adding that the country’s goal should be to wear a business-friendly suit. He believes that Slovakia has a lot of what it takes to be an attractive destination for foreign direct investments.
The Slovak Spectator spoke to Šimončič about the country’s competitiveness, a possible lack of qualified labour, on-going assistance to investors who are already here, SARIO’s recent road shows to Germany and the USA as well as the potential of the IT sector to be a good source for additional investments.
The Slovak Spectator (TSS): The interest of established investors in expansion projects has been growing according to SARIO, which has over 100 investment projects in its current portfolio. What is driving this interest?
Robert Šimončič (RŠ): If someone is doing well in business then the business bases its further growth on its existing customers and works further with them. It is only natural that we devote more systematic attention to the established investors who already know this environment. Different statistics and surveys prepared by chambers of commerce indicate high satisfaction with the business environment here by investors. If you ask them whether they are happy or whether they would make the decision to invest here once again, large numbers say yes. Where there is satisfaction, we can with systematic work achieve that established investors expand their investments and also take further steps that have higher added value. This is one of the areas we are strongly focused on. In countries where the economy is steady, most of the investment opportunities are coming only from established investors and not from new ones.
We are still interested in attracting new, large investments but we will certainly work intensively on providing the best possible services to established investors as well as assisting them in their decisions on growth while inspiring them to invest more in Slovakia. Mostly, when a firm is well-established here and has strong management, it is in the interest of the management to expand their work. Thus, they often cooperate with us in persuading their headquarters so that the HQ decides to place a new project here, not in some other country.
TSS: Slovakia has been dropping on international competitiveness charts, as recently indicated by the World Economic Forum report. What steps can improve Slovakia’s standing? Are such rankings relevant for foreign investors in your opinion?
RŠ: When investors judge an environment they look into productivity and the price of labour and Slovakia has the highest and fastest growing productivity in central and eastern Europe, which in fact is growing faster than the cost of labour. It makes Slovakia an extraordinarily advantageous environment in the region since Slovakia competes mostly with the countries of eastern and central Europe when it comes to industrial investments. Of course, investors certainly take into consideration rankings by the World Bank in its Doing Business reports, where factors such as how easy it is to establish a company and evaluations of the enforceability of the law are decisive.
Slovakia has improved its standing as well through some recently implemented changes and we expect that the country’s rating will further improve. If you look at ratings by the most respected rating agencies we are either the best or comparable to other countries in central Europe and all these factors speak in favour of Slovakia. Along with productivity, another factor is how Slovakia or any other country is able to adapt to new technologies and Slovakia ranks 5th in this category, which is a very good ranking.
Perhaps the country’s disadvantage is that the market itself in Slovakia is small, which means that we have to attract investors who want to supply Europe and not just the Slovak market. However, the geographical location, the fact that in the range of 2,000 kilometres one is able to reach 600 million people is extraordinarily important. These are factors that investors consider.
Another important factor is that we are in the eurozone. Today, when I am talking to any investor, a large share of their decision to come to Slovakia is the euro. The fact that we have the euro today is an unambiguous competitive advantage. These are those positive factors that, in my opinion, investors look at when we are talking to them.
TSS: But some investors have already voiced their concerns about a possible lack of qualified labour.
RŠ: Some investors who only recently came to Slovakia were themselves surprised by how fast they managed to fill the positions they needed. They often do not need people with language and technological skills. So in many cases Slovakia is able to cover these needs. Of course globally, when we talk about Europe, and most importantly when we talk about information and communication technologies, Europe overall lacks experts in these areas. So we will have quite intense competition in terms of human resources and we have to find the key to accelerate the number of professionals we need for the future economy if we want to push it to a knowledge-based stage.
How will we attract talents from abroad? In theory, we are able to attract people from the European Union since there is a free movement of labour and specifically we at SARIO will run some programmes where we will compete for qualified labour with other countries.
But yes, some investors have been expressing concerns by asking: will we find enough qualified labour? Nevertheless, we have not yet met anyone who has said: it wasn’t a good decision because we are unable to find the right people. This is now the right time to start dealing with it pro-actively through concrete strategic projects that could help us. We will launch a project in Ireland targeted at young Slovaks who are there, about 20,000 of them, and perhaps 40,000 Slovaks in Great Britain, trying to attract them back home to interesting positions offered by foreign investors who need skilled people with experience in a foreign environment and experience with a different culture.
TSS: Investors continually evaluate the Slovak investment environment and say Slovakia is no longer a low-wage country. Which items are on the investors’ wish list for improvement of the business environment here?
RŠ: I think it is mainly the workforce we need to start paying attention to, like better and more effective bridges between academia and business and research. Of course, today we have investors who brought along research and development but we have to push this trend further so that investors understand that Slovakia isn’t just an assembly hall but there is space for development and research and even the last stages of testing their products. It is a mental barrier we need to overcome.
TSS: Has SARIO any real chance to influence educational reform in Slovakia by building more bridges between business and academia?
RŠ: We are not sitting on any committee for educational reform but definitely within the activities that are aimed at building a knowledge-based society, we are involved and we also work with the key universities who through us and thus through the investors hear what is necessary and then they continue lobbying for moving the education sector in the direction required. So, indirectly, we do have this opportunity.
TSS: SARIO is launching a programme to provide increased attention to investors who are already operating businesses in Slovakia. What are the specifics and why is this a good time to launch such a programme?
RŠ: Overall, this agency is in charge of foreign trade, structural funds and reconstruction of brown-fields while one of its core activities is to attract investments, more importantly direct foreign investments. As I said earlier, it is unthinkable to work towards investments without providing care for the already established investors here. I think that a more systematic approach is needed in the services we provide to these investors. If we help them, they will grow and if they grow the economy will grow as well: it is a simple equation. Certain strategic and re-investment services that we can provide can open the possibility of yet another project that a particular investor might be able to start in Slovakia. This is part of our effort to create an image for the country: business-friendly Slovakia. The investors who are already here are the best sales force for the investment environment in Slovakia. If there is a new potential investor who meets established ones who tell them a nice story about Slovakia it has much better relevance than if we tell this story. For that reason we do have the ambition to assist potential investors from the germination of their idea to invest in a foreign country, directing their attention to Slovakia during the process leading up to a decision and then during the whole time when the investment is here: in short, the whole life cycle of the investment.
TSS: Recently, SARIO organised roadshows in the United States and Germany. What is their importance and what measurable results do they bring? Why did you pick Germany and the United States?
RŠ: For us it is important to pro-actively sell the assets of Slovakia as the best environment for investment, which can be done via different channels, both direct and indirect: through our representational offices, consulting firms and chambers of commerce and so forth. Another tool is visiting a country and directly presenting the value of Slovakia as an investment destination. Thus, a roadshow is one of the pro-active tools to search for investors. We are trying to reach the right audience, those with some potential we can later build on. The roadshows are quite demanding and the actual traveling is only one of the stages because then the follow-up comes with efforts to establish good contacts, working with the information we already have gathered while responding effectively to any signs of interest.
As for the destinations, one of the priorities for us is certainly going to strong and large economies. Gaining investments from large and strong economies is easier than from smaller and weaker countries and therefore the United States and Germany were a sort of natural pick. Of course, we are interested in Asian countries. In addition, our interest in Europe remains very strong and our neighbours such as Austria and the Czech Republic are also important.
TSS: SARIO’s web page is now available in English, Korean, Japanese and Arabic languages. What was the key for the selection? Do you plan other versions?
RŠ: We are now in the process of up-grading the website and the information we are providing and we certainly will also be looking at the format in which we want to provide this information. It is difficult to thoroughly maintain several versions always providing the latest information, so probably we will go for the key information in just these languages. For the further upgrades, English will remain the key language.
TSS: You personally were active in the IT sector for many years. How do you assess Slovakia’s chances to attract foreign IT investments and to eventually export know-how developed in Slovakia?
RŠ: We are very strong in the information communication technologies sector and it is one of our major strengths along with the automotive and electro-technology sectors. We also are including the service and back-office centres located here. Some firms have global financial support but technology is still needed there as well. We also have strong development centres and a number of experts along with good footing of Slovak firms. If I am not mistaken, IBM employs more people here than in Poland. Large firms such as HP also continue to grow and are investing more and more while hiring more professionals who cover European or even global needs.
Nevertheless, this is one of the sectors where there will be a fight for human resources and we will have to find the correct programmes so that we are able to fulfil future needs. We have already signed an agreement in Silicon Valley in California where we are opening incubators for Slovak firms as a way of support for them. There will be a training centre in Slovakia and the firms which will be provided an internship every year in the Silicon Valley will be picked based on special selection criteria. This programme will help create an intellectual capital in this field directly by Slovak firms, which has an immense added value for our economy.
TSS: Some foreign investments, for example Hansol Electronics in Voderady, have closed and dismissed employees. Does SARIO have any tools to help such companies?
RŠ: I am talking about care for established investors; full stop. This tells the whole story. We are not assisting firms to lay off employees. Nevertheless, if an investor needs assistance we are here to help. The economy has its cycles when people are first employed and then some people lose their jobs and with the cycles of the economy not only the quantity but also the quality of economic production is changing. That’s the cyclic economy and all these factors have their role. For us it is important to impact the factors that help Slovakia’s economic growth
TSS: How important are investment stimuli for attracting investors to Slovakia?
RŠ: It is one of the decisive factors but certainly not the sole one. If we look at the investments that are coming in through SARIO, we see that a lot of investors are not seeking any stimuli but rather need our assistance. Yet there are also investments that do seek out state stimuli. However, on the chart of factors that ultimately decide about an investment, stimuli are not the most important ones. Nevertheless, the competition with neighbouring countries is intense and it is important that we provide some special conditions for strategic investments.
TSS: Some domestic businesses have reproached the government for what they called disproportionately supporting foreign investments at the expense of domestic businesses.
RŠ: I am stressing that these conditions are there for foreign investors as well as investors in general, including domestic ones. The law on investment stimuli applies to Slovak firms in the same way it applies to international businesses.
More information about Slovak business environment you can find in our Investment Advisory Guide.
14. Nov 2011 at 0:00