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Untapped economic potential

AUSTRALIA and Slovakia are literally on opposite sides of the world, separated by tens of thousands of kilometres. Along with the difference in the sizes of the two countries this distance has a big impact on mutual economic contacts, keeping them somewhat thin for now. As a result, there is still much untapped potential. Slovakia, which currently sends most of its exports to Europe, is looking to diversify and find new markets for its production. And a planned visit by top Australian businesspeople to Slovakia suggests that this country is within the sphere of interest of large Australian firms.

AUSTRALIA and Slovakia are literally on opposite sides of the world, separated by tens of thousands of kilometres. Along with the difference in the sizes of the two countries this distance has a big impact on mutual economic contacts, keeping them somewhat thin for now. As a result, there is still much untapped potential. Slovakia, which currently sends most of its exports to Europe, is looking to diversify and find new markets for its production. And a planned visit by top Australian businesspeople to Slovakia suggests that this country is within the sphere of interest of large Australian firms.

“The integration process in Europe has had a direct [positive] impact on the development of active cooperation between Australia and the EU,” Katarína Špitová from the Foreign Trade Department at the Slovak Economy Ministry told The Slovak Spectator. “Simultaneously, as an OECD member country Australia provides Slovakia extensive opportunities in the sphere of economic cooperation. It represents a broad market, as yet insufficiently tapped by commercial entities, a potential source of investment and a supplier of projects of modern information technologies. Bilateral trade still does not reflect the opportunities which both countries have at their disposal for mutually beneficial economic and commercial cooperation.”

Bilateral trade had been growing until 2009, when Slovak exports to Australia fell sharply due to the economic crisis. Špitová specified that Slovak exports fell by over 50 percent that year, when demand for expensive passenger cars in particular decreased by as much as 60 percent. This drop was caused, among other things, by an increase in Australia’s tax on luxury cars, which hit models produced in Slovakia such as the Volkswagen Touareg, Audi Q7 and Porsche Cayenne. Australia imposed the tax, which can be as high as 33 percent, on all passenger cars with prices above AUD59,133 (about €45,000).

Trade has improved in subsequent years and Slovakia’s exports have gradually returned to pre-crisis levels. Based on statistics from January-October 2011 and January-October 2012, Slovakia’s exports grew by 45 percent and imports from Australia by 37 percent in 2011.

On the other hand, imports from Australia to Slovakia were not significantly affected by the crisis. 2009 saw only a moderate decline, with imports not falling below their 2007 level.

Slovakia has long recorded a positive trade balance with Australia, and this is continuing to grow. Based on the volume of Slovak exports, Australia is the 36th largest trading partner of Slovakia, according to the Ministry of Economy.

Passenger cars and spare parts dominate Slovakia’s exports to Australia, accounting for 78 percent of them. Other commodities Slovakia exports include machinery, furniture, glass, and electrical appliances. Slovakia imports from Australia leather and leather products, which make up almost 60 percent of the total, plus metal ores, machinery, optical appliances, pharmaceutical products and other items.

According to Špitová, Australia actively supports business in the sectors of heavy industry, biotechnology, clean energy, information and telecommunications technologies, agricultural production, food industry, hi-tech industry, infrastructure and financial services.

“Slovakia also offers quality products and services in these sectors,” Špitová said, adding that according to Slovak companies the distance between the two countries is a particular obstacle to the deeper penetration of Slovak companies into the Australian market.

Špitová listed some examples of cooperation between Slovak and Australian companies. Ráztočno-based Unipass, which manufactures steel containers for transportation and storage of tough, liquid and loose materials, cooperates with Technosearch of Sydney. Geothermal Anywhere from Bratislava, which is active in research and geo-thermal energy, cooperates with CSIRO, Geodynamics and PIRSA. Crown Energy, active in uranium prospecting, is an affiliate of the Australian company GB Energy Limited and has an office in Bratislava. Howe Slovakia in Košice, producing leather products for the automotive industry, is an affiliate of the Australian company Howe Leather. Gratex International, one of the most successful IT companies in Slovakia, has an affiliate in Sydney. Other Slovak companies active in Australia are HP Engineering in Turčianske Teplice, Stavokov Projekt from Trenčín, GCT Glass and Crystal Trading from Trnava, Osram Slovakia from Nové Zámky, brewer Zlatý Bažant and carmaker Volkswagen.

But as Špitová explained, citing information from the Slovak Embassy in Canberra, a lot of products manufactured in Slovakia are not registered as Slovak products because they are re-exported by foreign companies.

With regards to direct investments, the insurance company QBE remains the most significant Australian investor in Slovakia, according to Špitová. Another company with Australian capital in Slovakia is Howe Slovakia in Košice. It employs about 500 people.

According to Špitová, Australian companies are interested in Slovakia and thus the preconditions exist for an inflow of Australian capital. In this respect she mentioned an Australian investor’s interest in prospecting for uranium deposits in Zemplín, and the launch of Crown Energy. The Bronx International company had expressed an interest in investing in Slovak firm Kovozink, but that project has not materialised yet due to the crisis.

“With respect to the character of the Australian economy, another inflow of direct foreign investments from Australia to Slovakia can be expected especially in the sector of services, the mining industry, but also the automotive industry,” Špitová said. But she cautioned that “When taking into consideration the current economic situation in the world, preconditions for a further inflow of Australian investors are lower and more cautious.”

Ľubomíra Mardiaková, spokesperson for SARIO, Slovakia’s state investment agency, added that biotechnology, shared-service, technological and logistics centres, the electro-technical industry, information and telecommunication technologies, and machine engineering are sectors which might be appealing for Australian companies looking to invest in Slovakia.

Špitová specified that an official business mission by the European Australian Business Council is scheduled to visit Slovakia on June 6. Its aim is to present the business environment of Slovakia. About 30 of the most influential CEOs and representatives of Australian and international companies will be part of the delegation.

Topic: Foreigners in Slovakia


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