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FRANCE REMAINS TO BE ONE OF THE MOST IMPORTANT INVESTORS IN SLOVAKIA

Crisis brings decline in trade, new opportunities

BIG French firms like PSA Peugeot Citroën, France Telecom, Gaz de France and Electricité de France have historically been among the most significant investors in Slovakia, and though some have since sold off their Slovak assets, French business presence in Slovakia remains strong.

PSA Peugeot Citroën has invested in Trnava.(Source: SITA)

BIG French firms like PSA Peugeot Citroën, France Telecom, Gaz de France and Electricité de France have historically been among the most significant investors in Slovakia, and though some have since sold off their Slovak assets, French business presence in Slovakia remains strong.

“In the past 10 years, the size of French companies’ direct investments in Slovakia has increased manifold,” Jean-Marie Bruno, the French Ambassador to Slovakia, told The Slovak Spectator. “However, with the crisis, the trend has slowed down or has even been reversed in certain cases.”

Bruno added that while some companies wish to remain in Slovakia, others have decided to withdraw, for instance, in the banking and energy sectors. Those decisions often had more to do with a new focus on Far East markets, he said, than any reflection of the Slovak environment.

Branislav Javorek from the international trade department of the Slovak Economy Ministry specified that key fields of French-Slovak economic cooperation include, in addition to projects in nuclear and heat energy, carmaker PSA Peugeot Citroën, electronic road toll collection and the construction of a TGV rail line between Paris and Bratislava by 2016.

Economic cooperation between France and Slovakia has been on the rise over the last several years, except for the crisis years of 2008 and 2009, with French automotive group PSA Peugeot Citroën’s investment in Trnava being the biggest factor, Dušan Huszár of the French-Slovak Chamber of Commerce told The Slovak Spectator.

Investments

France is one of the most important foreign investors in Slovakia. French investors began arriving in Slovakia as early as 1990 with smaller investments into the machine engineering and food industries. More significant investments began after 1991, Richard Dírer from the Slovak Investment and Trade Development Agency (SARIO), told The Slovak Spectator. He pointed to the acquisition of Chemlon Humenné by Rhone Pullenc, arrivals of the central heating operator Dalkia in Bratislava, the mobile operator France Telecom’s Globtel, retail chain Carrefour as well as Dexia bank. Among other significant investments, he noted Plastic Omnium, Bacou-Dalloz and the entry of Natexis Banques Populaires into Ľudová Banka. From 2000, French companies invested more than €5 billion in Slovakia. These investors included Gaz de France, France Telecom, PSA Peugeot Citroën, EDF and 300 other companies. In recent years other French investors arrived in Slovakia: Valeo and Faurecia as direct sub-contractors of PSA, the metallurgical concern Arcelor and companies like Areva-Framatome, Marionnaud, Gefco, Air Liquide, Total, Hutchinson and Vinci.

“Foreign direct investments from France in Slovakia are proof of establishment of permanently sustainable relations with regard to the fact that return of [investments] of giants like PSA, Gaz de France or Faurecia is estimated at 25–30 years at least,” Dírer told The Slovak Spectator.
On the other hand Huszár said that Slovakia has never belonged among the priority destinations of small and medium-sized French companies. Despite this, the chamber currently registers in Slovakia more than 400 French companies employing more than 35,000 people.

When specifying sectors with French investments, Huszár said that 26 percent of French affiliations is in the sector of services like banking, insurance, telecom, retail trade and catering (Komerční Banka, AXA, Groupama, Orange, Alcatel-Lucent, Carrefour, Pimkie Mode, EdenRed, Le Cheque Dejeuner, Sodexo). About one-fifth comes from the energy, chemistry, plastics and pharmaceutical industries (Nafta, Dalkia, Sanofi-Aventis, Veolia, Bourbon, Faurecia). Mechanical engineering and metallurgy account for 12 percent (Arcelor Mittal, AFE Foundry, and Poclain Hydraulics). Other French companies can be found in the food industry (Liptovská mliekareň and Milex Nové Mesto nad Váhom/Bongrain, Zvolenská mliekareň/Senoble), construction (Cesty Nitra and Inžinierske stavby/Colas, Eurovia, Eiffage, Saint Gobain) and elsewhere.

The number of French companies operating in Slovakia has doubled since 2003 to some 400 firms. Huszár attributes this positive trend to several factors, especially the decision of the French car maker PSA Peugeot Citroën to invest in Slovakia in 2003 and the entry of Slovakia into the European Union in 2004.

“We registered the biggest increase in the interest of French companies in Slovakia exactly during these years and these were not only companies focusing on the automotive industry,” Huszár told The Slovak Spectator. “Alas, the global economic crisis has caused important investors such as Gaz de France (SPP), Electricité de France (SSE in Žilina) or Sanofi-Aventis (Zentiva Hlohovec) to leave Slovakia recently.”

With regard to the current interest of French investors in Slovakia, Ambassador Bruno said that it is important to remember that a company investment decision is made in the context of strong competition.

“In my opinion, the Slovak economy has reached a higher maturity, catching up compared to the European average level of prosperity,” Bruno said. “But the business environment can always be improved.”

The crisis has affected the interest of French SMEs in making investments.

“On one hand many of these companies, which contemplated investing in Slovakia, have withdrawn from their projects exactly because of the crisis,” said Huszár. “Many others decided to overcome their problems by creation of cooperation with Slovak partners or their affiliation in Slovakia. This is because Slovakia, with its production costs, the price and qualification of the labour force, but also tax conditions, is still of interest to French entrepreneurs. Nevertheless, it is necessary to say that the number of French affiliations in Slovakia has been stagnating since 2008.”

The Slovak Economy Ministry believes that Slovakia, as a country with political and economic stability which underwent significant structural changes over last 10 years, with the vision to become one of the best destinations for foreign investors in central Europe, remains an ideal place for French businesses.

Branislav Javorek from the Economy Ministry said French investors are drawn to Slovakia’s geographic position in central Europe, the political and economic stability, membership in the EU, NATO, OECD and Schengen area, advantageous tax burden compared with western European countries, qualified labour force, low labour costs in relation to relatively high labour productivity and the adoption of the euro in 2009. He also pointed out plenty of real estate from which investors can choose, improving infrastructure and a huge innovation potential for projects in research and development.

Javorek, said that the practice of outsourcing, whereby French companies subcontract Slovak partners to carry out some production operations for them, is growing.

SARIO believes that the automotive industry will remain the dominant sector for cooperation.

“We expect that other sectors of industry and services will be interesting for France,” said Dírer, adding that these include construction of the road infrastructure and that SARIO registers constant interest in trade-investment cooperation in the field of environmental protection. Slovakia offers French investors space in industrial parks and various commercial activities in the areas of treatment of drinking and sewage water and municipal waste, as well as usage of geothermal sources for industrial and medical purposes. Opportunities in tourism are unlimited, he said.

Dírer specified that between 2002 and 2012 SARIO assisted 19 French companies in establishing themselves in Slovakia. The projects involved investments worth €833.2 million and the creation of more than 5,700 jobs. At present, SARIO is working on one investment project from France.

The Slovak Economy Ministry and SARIO actively promote Slovakia as a suitable investment destination for French investors. In 2012 SARIO attended a seminar on the automotive industry in central Europe. Its aim was to introduce the car sector in Slovakia, the Czech Republic and Hungary, and especially opportunities for further cooperation in the field of supplies and investments.

“French companies are forced to reduce costs and Slovakia appears to be a natural selection,” said Dírer, adding that even though Slovakia is gradually losing its comparative advantage in labour costs it still has a huge advantage with its good location from the viewpoint of distribution, services and solid infrastructure, lower tax rates and other lower comparable costs. “When a French company wants to keep competitiveness in the world globalised economy, Slovakia in central Europe is one of the solutions.”

SARIO also promoted Slovakia during the International Forum in Lyon on April 16. Thanks to honorary consul of Slovakia in France, Christian Michel-Mestrallet and Emmanuelle Vigne from the Lyon’s chamber Slovakia enjoyed a privileged position among 33 participating countries. The event included a seminar called Business Friendly Slovakia.

SARIO will have another chance to promote Slovakia during the visit of French President Francoise Holland scheduled for this autumn as well as during the meeting of experts for the region of central and eastern Europe from chambers of commerce in France this winter.

Trade

France is one of the 10 primary destinations for Slovakia’s exports. Javorek from the Economy Ministry specified that mutual trade keeps increasing in the long run, while Slovakia enjoys a highly positive trade balance. In 2012 Slovakia’s export to France made up 5.5 percent of Slovakia’s total exports. Slovakia’s exports to France more than doubled from €1.4 billion in 2007 to €3.4 billion in 2012. The year 2011 was the strongest in the last five years when it amounted to €3.6 billion. France’s exports to Slovakia grew at a slower pace, from €1.15 billion in 2007 to €1.7 billion in 2012, with the highest level at €1.87 billion. The trade balance was positive for Slovakia, amounting to €1.66 billion in 2012, according to the Economy Ministry.

“In 2012 the trade turnover decreased by 6.4 percent; in spite of this it exceeded the level of €5 billion for the second time,” said Huszár.

France is the sixth most important trade partner for Slovakia, after Germany, the Czech Republic, Russia, Poland and Hungary. Slovak-French mutual trade makes up about 4.5 percent of the Slovakia’s total trade turnover.

Slovakia exports y passenger cars, TVs and radios and car parts to France. Slovakia imports car parts, products from basic metals and medicines.

Topic: Foreigners in Slovakia


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