The Prešov region: undiscovered investment destination, for now

THIS YEAR, throughout the autumn, The Slovak Spectator will run a series of articles analysing the economic aspects of each of the eight regions of Slovakia: Bratislava, Nitra, Banská Bystrica, Prešov, Košice, Žilina, Trnava, and Trenčín.

photo: Tomáš Varga

THIS YEAR, throughout the autumn, The Slovak Spectator will run a series of articles analysing the economic aspects of each of the eight regions of Slovakia: Bratislava, Nitra, Banská Bystrica, Prešov, Košice, Žilina, Trnava, and Trenčín.

Each article will briefly introduce the reader to a region, giving a general description of its geographical and demographical characteristics, as well as its infrastructure and natural resources.

The focus of the articles will be an analysis of the selected region's economy, its current state of foreign direct investment, and the characteristics of its local labour force, followed by a brief description of the major competitive advantages and potential investment opportunities offered by that region.

The aim of the series is to provide more information about all of Slovakia's regions, as the majority of present-day English language business reporting keeps its focus on the Bratislava region, the most economically developed and foreign investment-satiated area of Slovakia.

General introduction

The Prešov region, Slovakia's northeastern-most region, covers 8,993 square kilometres, 18 percent of the country's area. It borders Poland and Ukraine, and is also close to Hungary.

The region has a hilly terrain, dominated by Slovakia's most famous tourist destination: the High Tatras mountains. The most significant waters are the rivers of Poprad and Topľa, and the Domaša dam.

Almost Slovakia's largest region, Prešov county is the most populated with almost 800,000 citizens, or 15 percent of the Slovak population.

Prešov region

Its population density, 88 inhabitants per square kilometre, is the second lowest in Slovakia, far behind Bratislava's average of 292. The low density is caused by its specific geographical characteristics, "as a relatively large portion of the region is unsuitable for permanent settlement", according to Slovak Rating Agency (SRA) analysis.

The region's capital and the seat of its administrative bodies is Prešov, the third largest city in Slovakia. Other large cities and important business compounds include Poprad, Stará Ľubovňa, Bardejov, Svidník, Stropkov, Vranov nad Topľou, and Snina (see map).

Natural resources

Non-metallic ores and rock salts are the most important mineral deposits in the region, according to the Slovak Investment and Trade Development Agency (SARIO). Other materials such as gravel, sand, and various types of clay are also available in the region.

The region's most significant, but least exploited natural resource is its forests, providing fundamental input material for the wood-processing industry.

Transport and infrastructure

The traffic network in the Prešov region is relatively dense, with roads of varying quality. The most important are two roads that are part of the system of European roads. The west-east direction E50 road runs through the cities of Poprad and Košice to the border with Ukraine. The north-south road 1/68, which connects state borders with Poland and Hungary, runs through the cities of Prešov and Košice. A speedway connecting the cities of Košice, Prešov, and Svidník, scheduled to become an international route connecting with the Via Baltica, is under construction.

The region's railway network is connected to all of the neighbouring countries. Main railway routes connect Košice to Hungary, Plaveč to Poland, and the Slovak cities of Poprad and Humenné. Though there is one international airport in Poprad, a more frequently used airport with regular international flights is in Košice, the capital of the neighbouring region.

Regional economy

In terms of GDP, Prešov scores lowest among all of Slovakia's regions. In the year 2000, its gross domestic product reached €1.965 billion, only 9 percent of Slovakia's total.

In terms of GDP per capita, it has also been at the bottom of the charts for years. The value of this indicator grew from €2,303 in 1997 to €2,500 in the year 2000.

USA-based Whirlpool Corporation founded a joint-venture with formerly state-run company Tatramat.
photo: File photo

According to the Slovak Statistics Office, the sector of services is the dominant part of the region's economy, exceeding 61 percent, with industry accounting for 33 percent, and agriculture for 5.5 percent.

However, though the GDP structure appears to copy healthy western trends, approximately 44 percent of the Prešov region's economically active population is employed by state-run or formerly state-run institutions, which include public administration and defence, education, and health care facilities.

Instead, the region's economy is based on agricultural and diversified industrial production, according to all the available analyses of the region.

"The most important industrial sectors in the region are chemical production, engineering, clothing, textiles, food processing, and electronics," reads the analysis of the Prešov region's business advisory and information centre (RPIC Prešov).

"Some branches have arisen from the abundance of local raw materials - for example, the food processing industry and the building industry. Others, such as the engineering, clothing, and textile industries have grown out of the abundance of skilled labour," continues RPIC Prešov's analysis.

"The engineering and electrical industries are represented in all districts of the region of Prešov. The textile and clothing industries are concentrated in the districts of Prešov and Svidník, while there are wood-processing companies in the districts of Prešov and Vranov nad Topľou," adds the SRA analysis.

The biggest chemical companies are Rhodia Industrial Yarns and Nylstar Slovakia Humenne, in the cities of Humenné and Chemosvit Svit, near Poprad.

ZVL Auto Prešov, Tatramat Poprad, and Whirlpool operate in the machinery sector, while the electro-technical industry's main representative is Tesla Stropkov.

Egotex, OZKN Prešov and Gemor Prešov operate in the clothing industry sector; the biggest wood-processing companies include Kronospan Slovakia Prešov and Bukóza Holding Vranov nad Topľou.

The salt-works company Solivary is located in Prešov, and the meat-processing company Mecom is based in Humenné, as is the biggest dairy products producer, Humenská Mliekáreň.

Foreign direct investment

In terms of foreign direct investment, the region also bottoms the chart of all the Slovak counties, being the lowest investment-satiated Slovak region. Though the amount of investment it received exceeded Sk5 billion (€119.7 million) in all of the last three years, the region's share on the country's total has been steadily falling from 4.4 percent in 1999 to 2.3 percent at the end of June 2002.

Nevertheless, more than 15 major foreign investors have started their business activities in the area.

The SAB (South Africa Breweries) Miller International Group, for example, acquired the Šariš brewery in 1997. The company has since invested more than $30 million and now controls 25 percent of the Slovak beer market, producing the top export Slovak and Czech beer brands.

Another well-known investor in the region is the USA-based Whirlpool Corporation, which founded a joint-venture company with formerly state-run company Tatramat. Its investments over the past few years exceeded Sk600 million (€14.4 million), and after moving its production from Poland, France, and Germany to Slovakia, its Poprad plant is set to become the biggest washing machine producer in Europe.

Among other foreign investors in the region are the Italy-based textile producer GFT Torino in Svidník, Finnish chemicals producer Rainplast in Svit (near Poprad), machinery producers Abital Cofezioni in Prešov, Luxembourg-based BF Investment in Prešov, and Germany-based Julius Schule Druckguss.

Labour force

Approximately 380,000 of the region's citizens are economically active, while more than 93,000 are registered as unemployed. At the end of the last calendar year, the county's unemployment rate ranged between 17 percent in Stará Ľubovňa and almost 32 percent in the Kežmarok district, resulting in an average of 20 percent. In recent years, the region's jobless rate has exceeded the national average by 3 to 5 percentage points.

(See the chart for educational structure of the unemployed.)

The high unemployment rate combined with the low level of economic development determines the region's extremely low wage level. The Prešov county's average monthly wage stood at Sk10,800 (€259), not even 80 percent of the national average, in 2002.

According to the latest available data, the average monthly wage of a worker in the industry sector, for example, reached only Sk11,279 (€270). Employees of construction companies earned only Sk10,625 (€254), the hospitality industry reached Sk9,791 (€234), and the agriculture sector bottomed out at Sk8,984 (€215).

The labour force of the Prešov region is thus the cheapest among all of Slovakia's eight regions, with its average wage lagging behind the national average by more than 20 percent for each of the last three years.

Investment opportunities

The most significant investment target in the region is the tourism sector.

"Thanks to its geographical position, the region of Prešov has all the prerequisites for the development of the tourist industry, from which the region could significantly benefit in the future," reads the analysis of the SRA.

The most significant tourist target is the High Tatras, Slovakia's highest mountain chain.

In addition, "individual regional cities have rich histories and a lot of historical and cultural monuments. A number of mineral water sources (Borkút, Popík, Malý Borkút) and health resorts (Bardejovské kúpele, Štrbské pleso, Nový Smokovec, the thermal swimming pool in Vrbov) located in the region have been much-frequented places of repose for visitors from neighbouring countries for many years," continues the SRA analysis.

Besides the development of the tourism sector, the region's cities' officials are also working on the preparation of a few industrial parks. Industrial parks in Prešov, Snina, Vranov nad Topľou, Poprad, and Bardejov are currently under construction.

Representatives of the region's cities are usually foreign-investor-friendly, and a network of consulting and advising centres is available as well (see links below the article).

Also, "there are a lot of empty production halls, the residue of bankrupt enterprises," reads the SRA analysis.

Various districts in the region have a long-term tradition of industrial production, textiles, machinery, and wood-processing, and the prevailing part of the local population has related skills.

The region has a favourable geographical location, as it is close to Poland, Hungary and Ukraine.

"In light of population and area, by which it ranks among the largest regions in Slovakia, the region of Prešov has the potential for high development," adds the SRA analysis.

Links: Regional Advisory and Information Centre Prešov,

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