ECONOMIC cooperation between Ireland and Slovakia was not immune to the harsh gales unleashed by he global financial and economic crisis. The volume of trade between the countries dropped ubstantially and there were no major direct investments from Ireland into Slovakia throughout 2009. However, when looking closely at the most recently published economic statistics, the picture begins to brighten. Moreover, Irish investors have not lost interest in investing in Slovakia and representatives of Irish business associations foresee opportunities for more cooperation in the areas of research and development, education, environmental projects and tourism.
“In the first quarter of 2010, Irish exports to Slovakia grew by 45 percent to €33 million and Slovak exports to Ireland by 75 percent to €13 million compared to the same period in 2009,” Ladislav Müller, the director of the Enterprise Ireland office for Bulgaria, the Czech Republic, Hungary, Romania and Slovakia told The Slovak Spectator. “Both countries also registered positive GDP growth in the first quarter – Slovakia by 4.8 percent year-on-year and Ireland by 2.7 percent quarter-on-quarter.”
The Slovak Economy Ministry confirmed a substantial decline in Slovakia’s exports to Ireland in 2009.
“The negative impact of the economic crisis acutely affected the new-car market,” Dagmar Hlavatá from the press department of the Slovak Ministry of Economy and Construction told The Slovak Spectator, adding that passenger cars, machinery and equipment have made up a significant portion of Slovakia’s past exports to Ireland. In 2008 passenger cars accounted for almost 80 percent of the Slovak exports to Ireland and in 2009 Irish demand for new passenger cars fell by 63 percent to the lowest level since 1987.
Ireland was hit hard by the financial crisis. Müller ascribed this to excessively high dependence on real estate values and a booming construction market. After the real estate sector imploded, Ireland experienced a banking crisis, falling economic output and a large drop in employment over the following two years.
“However, the Irish government took swift and coordinated action,” Müller said. “Critically, it pushed through a strong fiscal consolidation package that included cuts in nominal wages for public sector workers and cuts in welfare and other benefits; and it established a National Asset Management Agency to acquire and manage the riskiest loan portfolios and thereby made banks safer for depositors and investors. These actions helped to restore the competitiveness of the international trade sector of the Irish economy and to calm financial markets.”
At this point, according to Müller, the return to growth is being driven by exports and resumption in investments is expected to follow.
Bilateral business activities
Most of the current business activity between Ireland and Slovakia is focused on direct trade in goods and services and foreign direct investment.
A number of Irish companies either have established their own operations in Slovakia or set up joint ventures. Müller listed Silcotec Europe, which makes cable harnesses in Komárno, and CRH/Premac, a manufacturer of building products in four plants across Slovakia, as good examples of Irish manufacturing investments.
Glen Farrell, the chairman of the Irish Chamber of Commerce in Slovakia supplemented the list with two other significant Irish-based companies: Odenberg Engineering, whose food processing equipment manufactured in Pezinok ultimately produces 60 percent of the world’s french fries; and Ryanair, the Irish airline that now carries about 80 percent of all passenger traffic in and out of Slovakia.
He added that in the construction sector there are two more significant examples: the 650-unit III Veže (Three Towers) residential and commercial project in Ružinov and the newly-opened Eurovea complex on the Danube River, both of which were built by Irish development companies.
Among other successful projects, Hlavatá listed the launch of joint ventures between Hispec Carlow and VSS Košice in manufacturing and between L.C.C. and Weget Bardejov in the clothing industry. The Irish telecom company eTel has also opened a branch office in Bratislava.
In addition to the high interest of Irish real estate developers in Slovakia, Hlavatá adds that the IT sector, especially software companies focusing on key global markets, is another strategic field of interest for Irish companies as well as for multinational corporations that have Irish participation.
Irish companies have been operating in several other economic sectors in Slovakia for many years, including CPL Jobs, Grafton recruitment agency, PPI Adhesive Products and others.
Future opportunities
Müller sees opportunities for future cooperation in research and development, education, environmental projects and tourism, both inbound and outbound, adding that Irish companies have first-class experience in software development and marketing.
“In the life sciences, we are seeing successful start ups and commercialisation companies that could be attractive for Slovakia,” he said. “Our universities and third-level colleges are engaging more and more with counterparts in other countries, including through student exchanges. I would like to see involvement with Slovak institutions one day.”
Müller sees Slovakia continuing as an attractive place for Irish investments.
“Thanks to its geographical location, it is seen by Irish businesses as a gateway to eastern Europe and an ideal base from which to serve customers in the neighbouring markets,” said Müller, adding that the investment now being made by Slovakia to upgrade infrastructure, especially highways, is important to any potential foreign investor.
Adoption of the euro 18 months ago eliminated exchange rate risks with major trading partners and made business transactions easier Müller said, adding that the business environment in Slovakia is perceived as friendly. He also highlighted the work experience and good command of English and other languages which many Slovaks, especially young people, acquired while working in western Europe.
“It can be challenging for foreign trading companies to find a good indigenous trading partner in Slovakia,” said Müller. “Most of the substantial companies here are foreign-owned with the result that strategic decisions, including purchasing, are made elsewhere. Providing effective support to small and medium-sized domestic companies (SMEs) is, of course, a challenge in many other EU countries also. Ireland and Slovakia are both small, open economies and SMEs simply have to expand and trade across borders. We are making continuous effort to identify Slovak businesses with good potential and an appetite for business and then link them with Irish firms that need a base in central Europe.”
Hlavatá of the Slovak Ministry of Economy and Construction sees developing the interest of Slovak SMEs in exporting to Ireland, as well as cooperation with Irish companies to export goods to third countries, as a big challenge for the future of both countries. The establishment of the Slovak Irish Trade Association in 2007 and then the Irish Chamber of Commerce in Slovakia in 2009 has helped businesses in Slovakia to export to Ireland and both are seen as solid vehicles to develop further economic cooperation, she said.
