Slovakia Capital Bratislava Currency Slovak koruna (SKK) Language Slovak Population 5.44 million EU status member GDP 2006 $96.35 billion Employment 89.8% Exports $39.64 billion f.o.b. (2006 est.) Imports $41.84 billion f.o.b. (2006 est.)

setting up business Number of days to start business 25 Cost (% of income per capita) 4.8% Nonwage labor cost (% of salary) 35.2% Total tax rate (% profits) 48.9%

Slovakia

Slovakias central location gives exporters a head start

Of all the Central European countries, it is in Slovakia where the most significant changes have taken place. Particularly in the past four years, many essential reforms have dramatically changed the character of the country’s economy. Today, we can confidently conclude that it really is the most attractive destination for investment in the region. Slovakia has the best investment risk ratings and is also ahead of its neighbors in the business attractiveness rankings (Economist Intelligence Unit).

Political & Economic stability

Slovakia had a right-wing government for eight consecutive years. Even though there has been a leftist government in place since the summer of 2006, the actions of the government and the development of the economy are exceeding all expectations. The strength of the economy and the government’s efforts to create and maintain a favorable entrepreneurship environment are strong points in Slovakia’s favor. GDP growth has exceeded all forecasts, reaching 9.8% in the third quarter of 2006. Forecasts for 2007 talk of rates over 10%. Such excellent results do not relate only to the GDP – Slovakia experienced unprecedented employment growth as the workforce increased by 85,000 (3.8%).

Pro-Business reforms

In what is probably the most internationally known of the reforms, Slovakia introduced a 19% flat tax for all types of income and cancelled the tax on dividends, avoiding any source of double taxation. The banking and finance sector has also been subject to reform – and the entire sector has undergone a dramatic recovery as a result. one hundred per cent of the sector is privatized, of which 97% is under foreign ownership.

Bratislava: The Danube offers excellent links to the east

The Labor Code has been evaluated by the World Bank as one of the most flexible and business-friendly in the EU and is one of the main attractors of investments. In addition, the Act on Commercial Registry has reduced the time required for the registering of a new company to a maximum of five days, as well as limiting the time necessary for the issuing of a trade license to a maximum of seven days. This has enabled growth of competition and significantly limited corruption. A new investment incentives program has ensured a faster and more transparent process in establishing a business. The Pension Reform has introduced individual pension savings accounts in Pension Administration Companies.

A base for exporters

Slovakia is currently exceptionally attractive for investors whose production is aimed at exports. This is most significantly demonstrated by the automotive sector, which is to become the dominant sector of the Slovak economy when the Hyundai/Kia plant begins production, following PSA Peugeot Citroen and the very successful Volkswagen factory.

According to foreign investors in Slovakia, main advantages include:

• low taxes;
• strong state incentives;
• flexible labor legislation;
• very good workforce price/ performance ratio;
• strong engineering tradition;
• large selection of industrial land;
• great geographical location;
• reliable ICT and transportation infrastructure in the region.

Given these factors and the need of European companies for shared-service centers, global outsourcers have been focusing on boosting their capabilities in the CEE region. Slovakia has become the destination of almost 30 IT centers, including HP, Dell, Accenture, T-System, Lenovo, IBM, SkyEurope, Kraft Foods, AT&T, BASF, KONE, and ON Semiconductor.

Looking forward

The future of near shoring in Slovakia will be strongly dependent on meeting the demand for educated and skilled labor. Universities are perceived as reacting slowly to the trend, and the threat of workforce shortages is becoming reality. This will be one of the biggest challenges facing the economy in the future. However, some investors are likely to move further east within the next 10-15 years, as we expect wage levels to increase and the attractiveness of the country to decrease for production focused on cheap assembly with low added value. This is why the country needs a clear strategy for creating conditions for the production of innovative products and services with high added value.

Slovakia is developing a high-tech knowledge economy

Like other EU member countries, the Slovak government has approved and submitted its Competitiveness Strategy until 2010. It includes a program called Minerva, which defines the vision and sets out a strategy for building a platform that will help Slovakia develop into a knowledge economy. The document consists of action plans that cover the main areas important for realizing this goal, including education and employment, the information society, science, R&D and innovation and the business environment.

If Slovakia follows this strategy, it certainly has the potential to maintain a highly competitive economy, not only on a regional level, but also globally.

 

Contact Information

American Chamber of Commerce in the Slovak Republic
Hotel Danube
Rybné Námestie 1
81338 Bratislava
Slovak Republic
Tel: +42 12 5934 0508
E-mail: director@amcham.sk
Website: www.amcham.sk

 

Useful websites

bratislava.usembassy.gov	US Embassy in Slovakia
www.sario.sk	Investment and Trade Development Agency
www.fpzo.sk	Slovak Foreign Trade Support Fund
www.oecd.org/slovakia	Organisation for Economic Cooperation and Development
www.nbs.sk	National Bank of Slovakia
www.statistics.sk	Statistical office of the Slovak Republic

 

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