Jake Slegers (source: Courtesy of AmCham)
INVESTORS do look at global competitiveness surveys when considering where to invest, says American Chamber of Commerce Executive Director Jake Slegers in reference to Slovakia’s declining performance on such lists in 2013. He said he finds the results from these “meaningful, globally supported surveys” disturbing. The Slovak Spectator spoke to Slegers about the business environment, prospects for tourism, the Transatlantic Trade and Investment Partnership (TTIP) negotiations, and AmCham’s plans for 2014.
The Slovak Spectator (TSS): Changes to the collective bargaining law, which grants powers to unions and employee representatives to enforce pay hikes even in firms which disagree with such hikes, angered foreign chambers of commerce. What are AmCham’s main objections to the measure?
Jake Slegers (JS): We are very concerned about any measures that restrict a free and fair approach to the market. We frequently oppose measures that strengthen the power of labour unions at the expense of managing a company effectively and we feel that especially this measure just goes way and above what labour unions should be doing. It is just another one of these amendments which could have a very negative impact on Slovakia’s competitiveness as well as on Slovakia’s potential as a destination for foreign investors. It could also negatively impact especially companies from the less traditional sectors with high added value, such as IT. These sectors operate on a different basis: they do not have trade unions, but as a result of this amendment, collective agreements could be created for their sector and heavily impact decision-making of these companies. Most importantly, we stress the fact that trade unions do not have the responsibility for leading the company; they don’t take any risks and therefore we simply cannot agree with the principle of them deciding about key aspects of the companies’ processes such as employees’ salaries.
TSS: International rankings seem to signal that in 2013 Slovakia’s attractiveness for investors is diminishing, but government politicians allege that businesspeople’s criticisms are political and biased. What is your take on Slovakia’s business environment? What steps should the government take to improve it?
JS: Those rankings are meaningful, globally supported surveys and they are disturbing. They are not compiled by asking Jano from Banská Bystrica what he thinks. Investors do look at these surveys and pay a lot of attention to them when considering where to invest: “How does that country rank in global standings?” The fact that Slovakia continues to decline is disturbing; but not unexpected, at all. We have seen an increase in taxes. Especially payroll and social insurance taxes are very high, the general approach to foreign investors and how the government wants to increase its revenues by squeezing companies more and more. The treatment of banks is appalling. The Labour Code is another big issue. Ever since I came to AmCham 13 years ago, the Labour Code has been changed whichever way the [governmental] pendulum swings.
TSS: The rankings indicate that the rule of law and corruption are other areas of concern.
JS: The judiciary has been a matter of concern for a long time for our AmCham members. We’ve seen various attempts to deal with these issues and actually, AmCham is considering a major initiative in this area. The business community associated in AmCham is increasingly concerned about Slovakia’s image as a country with an ineffective and inefficient judiciary, considerable corruption and lacking in transparency and predictability in the legal process. And yes, this is frequently reflected in the surveys that we run. We have just done our SME survey that will give us fresh information on this area, but I don’t suspect that has changed much from the last survey, which, when we ran three years ago reflected a 95-percent disapproval rating, especially about the judiciary.
TSS: The government claims it has declared war on tax evasion and has announced several measures, for example mandatory electronic VAT records for VAT payers and a national VAT lottery. How do you assess these efforts and what in your opinion would bring more transparency to the tax environment?
JS: We are, of course, directly opposed to tax evasion and in fact, when we met with the Prime Minister last September, he asked AmCham to help him with suggestions to address the issue. We actually made tax evasion one of the topics of our Visegrad regional tax conference in March, which the PM appreciated and actually attended and supported. We should lead by example in transparency and rule-of-law area. I do not want to say that international and foreign investors don’t participate in tax evasion, but the rates of tax evasion are probably higher amongst domestic companies than they are in international companies. In any case, we surely support the fight against tax fraud and evasion and we are ready to help the government to address these issues.
TSS: What will the Transatlantic Trade and Investment Partnership (TTIP), which is currently being negotiated by the EU and the United States, mean for the US-Slovak economic cooperation?
JS: There’s a lot of speculation about the TTIP and when it was first announced, it basically caused an earthquake among the trans-Atlantic organisations. The implications are economically huge. Even a small increase in mutual exchange results in billions of euros and dollars on the level of trade.
I would probably highlight the automotive industry as the industry which has the potential to hold out the biggest impact in Slovakia. Some people may argue that nobody can accurately predict what the actual impact of all this will be until the agreement is thoroughly negotiated, decided on and enacted, since it will depend on what measures are left in and what are taken out and what the details are. However, we can rest assured that there will be a very positive economic impact. The cars produced here could be produced for the US market as well. The access to the US market for Slovak products and Slovak entities will be made a lot easier.
But more importantly, what I hold as one of the biggest issues for the TTIP is the opportunity to set global standards; where the EU and US will end as by far the largest trading block in the world that nobody can even come close to. We’ll have the opportunity to set the global standards before China or India do, or before global standards are set by others. Yes, this creates a challenge, because the EU says it has to be EU standards, and the United States says it has to be US standards. Hopefully, we will be able to come to convenient and realistic compromises on both sides.
TSS: What are the most frequent concerns cited about the TTIP?
JS: I have been asking people since it was announced, are you aware of this? Do you know anything about it? The level of awareness is increasing slightly but still there are a lot of people who haven’t heard a bit about it. We see our role basically as raising awareness and providing information on this issue. As for the barriers, I think the biggest fear among people like Jano in Detva is that we in Slovakia will be flooded by US products and the competition it can provide. But you also have to keep in mind that even if there is an increase in US products here, there will be an increase in Slovak and other EU countries’ products in the United States. You have to see both sides of it. There are some other specific areas which the United States and the EU have quite different stands on, for instance the genetically modified products (GMOs) – but we have to be confident that the discussions will be productive and these issues will be resolved.
TSS: What segments of Slovakia’s economy remain attractive to US investors?
JS: Two or three years ago, nobody knew what a start-up was; it was an unfamiliar term to many people. Today, you hear about start-ups everywhere and start-ups, especially in IT, are being recognised and are getting support. That’s really encouraging to see. In terms of service providers, it is estimated that shared-service centres in Slovakia employ around 40,000 people. I think we should maximise that niche that we’ve been able to find here almost accidentally. The automotive industry also remains an attraction. A lot of people express fears about being too dependent on one major industry sector; but let’s maximise what we have and foster it. We’ve seen a number of US companies expand recently, quite majorly – especially in eastern Slovakia.
TSS: AmCham is organising a conference devoted to creating a brand for Slovakia to make the country an attractive destination for foreign and domestic tourists as well as foreign and domestic investors. What, in your opinion, are the biggest hurdles preventing Slovakia from becoming more attractive to tourists?
JS: Unfortunately, to make tourism political is not a very wise thing and what we have seen here is the complete lack of continuity and follow-through with initiatives that were started. I’ve seen numerous initiatives start and then fail. We long ago saw that there was a need for somebody to really draw together the stakeholders to have a meaningful, grass-roots approach to tourism with continuity. Eventually we’ve started an initiative in tourism and we will make it successful and we will follow through. At last year’s first tourism conference, it was shocking to hear some of the attitudes of the tourism boards.
As for the challenges for tourism, it is the quality of services, bad infrastructure and overall approach to tourism. I think if students of hospitality were told to smile, it would increase tourism by 50 percent. Of course, this is an exaggeration, just to illustrate the fact that the quality of services and just the basic human element is very important. Then comes the country’s presentation. Sometimes people complain that Americans don’t even know where Slovakia is, but well – why is that? What does Slovakia do to correct that? How much responsibility is it taking for getting the word out? The frustrating thing is that there are so many wonderful things to see in Slovakia. The mentality shift is happening in some ways, but that’s going to take years to change.
TSS: What were the key challenges for AmCham this year and what are your expectations for 2014?
JS: This year, we hosted the regional tax conference and also had our annual conference with the Representation of the EU Commission in Slovakia, attended by the Vice-President of the European Commission, Maroš Šefčovič. We celebrated the 10th anniversary of our office in Košice, which was a bit of a milestone for us. We also had our annual business government dialogue conference with Forbes magazine. We haven’t finalised it yet, but we have our SME survey, and we’re looking to the information that it will provide and we’ll be able to use on regular basis. This year was the first time we’ve seen after the crisis an increase in membership. We are on the course to take on 70 new members this year. Last year was our Year of Education and in 2013 it was the Year of Regional Development while there has been a focus on Banská Bystrica and Žilina, where we will pursue establishing some sort of permanent presence.
Next year will be our 20th anniversary, and we do plan a series of events. We hope to be hosting the annual conference of AmChams in Europe, after more than 16 years here. My main initiative with this is to turn it into a global conference, which, to my knowledge, has never been done outside of Washington, D.C. It will also be my 20th year here in Slovakia.
