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UNCLAS SECTION 01 OF 10 BRATISLAVA 000018 
 
SIPDIS 
 
STATE FOR EB/IFD/OIA 
 
E.O. 12958: N/A 
TAGS: EINV EFIN ETRD ELAB KTDB PGOV USTR OPIC LO
SUBJECT: SLOVAKIA: 2010 INVESTMENT CLIMATE STATEMENT 
 
REF: 09 STATE 124006 
 
¶1. Following is Embassy Bratislava's submission for the 2010 
Investment Climate Statement, in response to tasking reftel: 
 
 
2010 INVESTMENT CLIMATE STATEMENT 
 
OVERVIEW 
 
Following 6.4 percent GDP growth in 2008, Slovakia's economy has 
not been spared by the global recession and is expected to drop 
5.7 percent (est.) in 2009. The current account deficit, 
including the cost of the second pension pillar, reached 5.0% in 
¶2008. The general government deficit for 2009 is forecast at 
5.4%, and government debt was 27.6% of GDP in 2008, in 
comparison with 29.4% of GDP in 2007; debt is expected to rise 
to over 40% of GDP by 2012. Comprehensive structural reforms 
adopted by the Slovak government in the first several years of 
this decade led the World Bank to name the country the world's 
top reformer in improving the investment climate in its "Doing 
Business in 2005" report. Slovakia's relatively low-cost yet 
skilled labor force, low taxes, liberal labor code and favorable 
geographic location have helped it become one of Europe's 
favorite investment markets. The Financial Times described 
Slovakia as the "Detroit of the East," and Forbes magazine 
called it the world's next Hong Kong or Ireland. The election of 
the left-leaning Smer (or Direction) party in 2006 has slowed 
reform momentum and led to some less business-friendly changes 
in labor, pension, and social insurance legislation. The 
Business Alliance of Slovakia, for instance, has reported a 
continuous downward trend in the quality of the business 
environment since 2006, citing a slow and ineffective legal 
system, non-transparent and unequal treatment in the legal 
system, increasing bureaucratic burden on companies and an 
ineffective political system. The government's commitment to 
adopting the euro in 2009, however, tempered proposals to 
overhaul the previous reforms and contributed to stable 
macroeconomic policies. Slovakia joined the European Monetary 
Union on January 1, 2009. 
 
Slovakia is a member of the European Union (EU), the North 
Atlantic Treaty Organization (NATO), and the Organization for 
Economic Cooperation and Development (OECD), and it holds 
investment grade ratings from all three major rating agencies. 
The Wall Street Journal and Heritage Foundation's 2009 Index of 
Economic Freedom ranked Slovakia 36 of the 179 countries 
examined, a slight drop from the previous year, and 20th out of 
43 countries in the European region. In the Global 
Competitiveness Report 2008-9, compiled by the World Economic 
Forum, Slovakia places 47 of 133 on the global competitiveness 
index, a one-place drop from the previous year. The F.A. Hayek 
Foundation, in a ranking developed with the Swiss Institute for 
Management Development (IMD), reported a fall of three positions 
to 33 in 2009 in a ranking of 55 countries evaluated according 
to the competitiveness of their economies. 
 
In 2008, the cumulative FDI inflow to Slovakia increased to EUR 
26.8 billion since 1998 with the inflow of FDI falling to 
approximately EUR 952 million in 2008 and EUR 65.2 million in 
1Q2009 (National Bank of Slovakia est.). The largest foreign 
investments in 2008 were Czech Republic, Cyprus, Poland, 
Austria, France, South Korea, Germany and Italy. 
 
A 2008 survey by the U.S. Embassy showed U.S. investments in 
Slovakia at approximately USD 4 billion for current and future 
commitments, which would make the U.S. roughly the third largest 
source of FDI.  Official Government of Slovakia (GOS) statistics 
differ because some U.S. investments are credited to third 
countries, depending on corporate structure. 
 
 
OPENNESS TO FOREIGN INVESTMENT 
 
In the late 1990s, Slovakia had only one-sixth as much 
cumulative foreign direct investment (FDI) per capita as Hungary 
or the Czech Republic. Today, the flow of FDI per capita is 
comparable to that in neighboring countries.  Based on the 
United Nations Conference on Trade and Development's (UNCTAD) 
World Investment Report 2009, by the end of the 2008 Slovakia's 
foreign direct investment flow reached USD 3.414 billion, in 
comparison with Poland (USD 16.533 billion), Czech republic (USD 
10.731 billion) and Hungary (USD 6.514 million). 
 
Ernst & Young's "European Attractiveness Survey 2009" ranked 
Slovakia as 12th in Europe in terms of job creation (a drop from 
the 8th position last year), with 3,660 jobs created by foreign 
investors in 2008, which represents a 57 percent decrease in 
comparison with the previous year. Slovakia experienced a sharp 
decline in FDI projects, mainly in the automotive and 
 
BRATISLAVA 00000018  002 OF 010 
 
 
electrochemical industries, and did not get into the top 15 
European countries based on number of FDI projects in 2008, 
according to the survey. 
 
The biggest 2009 contracts included Kia's expansion in Zilina, 
extending its automotive production capacity and investing into 
a new motor manufacturing line worth EUR 400 million. New 
investment plans had already been announced in 2008 and will 
increase Kia Slovakia's production capacity to 300,000 new cars 
per year. Kia also added another product line, the Hyundai IX35 
SUV, to its current two product lines of Kia Cee'd and Kia 
Sportage. 
 
Another major foreign investment decision was the expansion of 
Volkswagen's manufacturing plant in Bratislava with the new Up! 
subcompact line, increasing its total investment by additional 
EUR 308 million. Volkswagen received state aid totaling EUR 14 
million in the form of a tax holiday. The new manufacturing line 
will create 1,500 new jobs and will increase the total 
production capacity of the VW plant in Slovakia to 400,000 cars 
per year. Volkswagen Slovakia decreased the number of produced 
cars to 188,000 cars in 2008 from 250,000 cars produced in 2007, 
due to the global recession's heavy impact on the luxury segment 
of the automotive market. 
 
In December 2009, a EUR 191.3 million new investment from 
Taiwan-based LCD panel screen producer AU Optronics Corporation 
was announced, creating approximately 1,300 direct and 2,000 
indirect jobs and receiving state aid of EUR 38.2 million in 
cash subsidies and tax relief. 
 
US Molex and ON Semiconductor decided to leave Slovakia in 2009 
as a result of global restructuring. Due to the recession, Sony 
postponed its plans to expand its LCD TV factory in Nitra (an 
investment reported to be worth EUR 240 million). 
 
As of January 2008, the GOS enacted a new Act on Investment 
Assistance, which provides varying levels of aid to domestic and 
foreign investors for the period 2007-2013, depending on a 
number of factors including level of unemployment in the 
proposed region of investment, business sector, size of 
investment, and the type of employment that will be provided. 
Assistance levels range from 10 percent to 50 percent of 
eligible costs. The rules also lay out what types of aid are 
available, the responsibilities and decision making processes of 
the state institutions, and the maximum amount of aid available 
to an individual investment.  In general, the new rules were 
structured to encourage investments into less-developed regions 
with high unemployment, into more sophisticated production, and 
into research and development. There are four priority areas 
identified in the new rules: industrial production, technology 
centers, centers of strategic services, and tourism. 
 
The 2008 rules provide structure and transparency to a process 
that has been much more ad hoc and opaque, but the 
interpretation of new rules continues to be unclear and is a 
source for potential non-transparency.  The legislation, which 
was prepared by the Ministry of Economy, brings Slovak law into 
compliance with the new and stricter European Commission (EC) 
guidelines and its new "aid map" for 2007-2013. The EC has 
approved a regional aid map for each member state that 
identifies the regions and sectors eligible for aid and the 
maximum aid amounts allowed. Under the new legislation, the 
Slovak government does not have to seek EC approval for each 
individual investment project up to roughly USD 4.4 million, 
which should dramatically speed up the application process. 
 
The major changes in Slovakia include a reduction in the ceiling 
of support that can be issued in western Slovakia and the 
districts of the city of Bratislava. Several forms of state aid 
are available: discounted prices for land, financial subsidies 
for acquiring tangible and intangible assets related to the 
investment, tax credits, and grants for the creation of new 
jobs. For the first time domestic investors have become eligible 
to apply for state aid as well. A provisional amendment to the 
Act on Investment Assistance, valid from April 2009 to December 
2010, re-defines some conditions for granting state aid (mostly 
decreasing direct cash subsidies for machinery and land and 
extending job creation subsidies to regions with lower than 
average unemployment). 
 
Regional governments can also provide support to companies in 
various forms, including infrastructure and training. In 
addition, Slovakia currently offers one of the most advantageous 
tax environments for corporations among all OECD and EU states. 
In 2004, the country imposed a flat income tax rate of 19 
percent, both for corporations and individuals, and eliminated 
virtually all exemptions and deductions. In addition, the GOS 
eliminated withholding taxes on dividends, thus permitting 
 
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foreign firms to pay parent companies without being taxed. 
 
Slovakia approved state aid totaling 66.3 million EUR for 6 new 
investment projects (4 foreign companies and 2 domestic 
companies) between July and December 2009, according to the 
government Report on the Status and Successes of Foreign Direct 
Investments in Slovakia. The new projects are expected to create 
2,718 new jobs in regions of Nitra, Trencin, Kosice and Presov, 
and the total investment value should reach EUR 336 million by 
¶2013. The most-used forms of state aid were direct subsidies for 
building infrastructure (58%), tax relief (39%) and cash 
subsidies for new jobs created (2 %). 
The Slovak government investment agency SARIO reported foreign 
direct investment deals worth EUR 538 million in 2008, less than 
half the EUR 1.28 billion worth of FDI contracts signed in 2007. 
SARIO said the 34 investment deals arranged in 2008 would create 
4,624 new jobs. 
The Industrial Park Law (193/2001 Z.z.) helps municipalities 
develop special industrial zones through funding assistance from 
the Slovak government. The Slovak government can fund up to 85 
percent of the overall cost related to the purchase of land and 
development of infrastructure in an industrial park. In regions 
with an unemployment rate exceeding 10 percent, state 
co-financing could cover as much as 95 percent of all eligible 
costs (in practical terms, this exemption applies to virtually 
all regions of Slovakia except the westernmost). The Slovak 
Investment and Trade Development Agency (SARIO) currently has 
registered 39 industrial parks that are capable of housing 
investors within a short period of time. The SARIO website 
(www.sario.sk) offers more detailed information. 
 
The government in Slovakia halted all large-scale privatization 
plans with the election of the current government in 2006, and a 
number of re-nationalizations of infrastructure have also been 
announced in the last year. The current law on strategic 
privatization, which was enacted by the previous government, 
permits complete privatization of most businesses and allows for 
49 percent foreign ownership (with management control) of the 
natural gas distributor, the electric power producer, 
electricity distributors, and an oil pipeline. All of these 
privatizations have been completed. The state must still retain 
ownership of railroad right of ways, postal services, water 
supplies (but not suppliers) and forestry companies. However, 
the government of Prime Minister Robert Fico, which came to 
power in mid 2006, is very reluctant to proceed with further 
sales of state assets. It cancelled a privatization tender for 
the rail cargo company, reversed the privatization process for 
the Bratislava airport, stopped privatizations of regional 
heating companies, imposed a ban on further privatization of 
designated "strategic" companies, and bought back the privatized 
share of the oil pipeline operation.   Conversion and Transfer 
Policies 
Slovakia entered the European Monetary Union and adopted the 
euro as its currency as of January 1, 2009, with the conversion 
rate set at 30.126 Slovak crowns (SKK) to 1 euro. It was 
possible to exchange Slovak crowns for euros through 2009. 
 
Foreign exchange operations are governed by the Foreign Exchange 
Act (312/2004 Z.z.), and one can easily convert or transfer 
funds associated with an investment. As a member of the OECD, 
Slovakia meets all international standards for conversion and 
transfer policy. In 2003, an amendment to the Foreign Exchange 
Act liberalized operations with financial derivatives and 
abolished the limit on the export and import of banknotes and 
coins (domestic and foreign currency). Since January 2004, an 
amendment to the Foreign Exchange Act authorized Slovak 
residents to open accounts abroad and eliminated the obligation 
to transfer financial assets acquired abroad into Slovakia. 
Non-residents may hold foreign exchange accounts. No permission 
is needed to issue foreign securities in Slovakia, and Slovaks 
are free to trade, buy and sell foreign securities. There are 
very few controls on capital transactions, except for rules 
governing commercial banking and credit institutions, which must 
abide by existing banking laws. 
 
 
EXPROPRIATION AND COMPENSATION 
 
In 2004, Slovakia witnessed one expropriation case, widely 
considered an anomaly. The GOS began an expropriation process 
for land from local farmers to use for the site of Hyundai/Kia's 
car plant - the country's largest foreign greenfield investment 
ever. An independent panel established the market value of the 
land and the GOS paid this amount; some landowners appealed. The 
constitution, as well as the commercial and civil codes, permits 
expropriation only in exceptional cases of public interest, and 
compensation must be provided. The law also provides for an 
appeal process. In December 2007, the GOS approved a new 
expropriation or eminent domain law that allows the state to 
 
BRATISLAVA 00000018  004 OF 010 
 
 
construct highways on private property without prior consent of 
the landowner if the construction parcel is considered 
"strategic" for Slovak interests. Owners would be compensated by 
the state after the fact. The legislation is aimed at speeding 
up highway construction projects to finish the connection 
between Bratislava and Kosice, and it has been challenged by 
several civil society groups.  Members of Parliament filed a 
complaint against this law in the Constitutional Court in 2008, 
but no decision has yet been handed down; in the meantime, the 
law remains in force. 
 
 
DISPUTE SETTLEMENT 
 
On December 29, 2004, the International Center for Settlement of 
Investment Disputes (ICSID) ruled in favor of the Czech bank 
Ceskoslovenska Obchodna Banka (CSOB) in its claim against 
Slovakia and ordered the GOS to pay the bank SKK 24.7 billion 
(USD 800 million). CSOB's claim dated back to 1993, when it 
provided a loan to a special state agency set up to assume 
CSOB's bad debts as part of a division of assets between 
Slovakia and the Czech Republic as the successor states of the 
former Czechoslovakia. 
 
A law passed in October 2007, with effect in 2008, banned health 
insurance companies from paying dividends to their shareholders 
and severely limited allowable overhead costs. In response, one 
of the shareholders of the health insurance company Dovera, 
Health Insurance Companies of Eastern Europe, and Eureko, BV, a 
shareholder of Union zdravotna poistovna, have filed for 
international arbitration in the amount of nearly EUR 500 
million. 
 
There have been no other major investment disputes in Slovakia 
in recent years. Slovakia is a contracting state of the ICSID, 
the World Bank's Commercial Arbitration Tribunal (established 
under the 1966 Washington Convention), and is a member of the 
1958 New York Convention on the Recognition and Enforcement of 
Foreign Arbitrage Awards. 
 
The Slovak judicial system is comprised of general courts and 
the Constitutional Court. General courts decide in civil and 
criminal matters and also review the lawfulness of decisions by 
administrative bodies. District courts (54) are the first 
instance courts, and regional courts (8) hear cases as appeals 
courts. The Supreme Court of the Slovak Republic is the final 
review court. A special court for corruption, organized crime 
and crimes of highest public officials was created in 2005, 
though it was abolished by a judgment of the Constitutional 
Court in 2009 and replaced with another, similar court that has 
a somewhat more limited scope. Judges of general courts are 
nominated by the Judicial Council of the Slovak Republic and are 
appointed for life by the President. They may only be removed 
for cause. The Constitutional Court of the Slovak Republic is an 
independent judicial body that decides on the conformity of 
legal norms, adjudicates conflicts of authority between 
government agencies, hears complaints, including complaints of 
individuals regarding their human rights, and interprets the 
Constitution or constitutional statutes. Judges of the 
Constitutional Court are appointed for 12-year terms by the 
President from a list of candidates selected by the parliament. 
 
The legal system generally enforces property and contractual 
rights, but decisions may take years, thus limiting the utility 
of the courts for dispute resolution. Slovak courts recognize 
and enforce foreign judgments, subject to the same delays. 
Although generally the commercial code appears to be applied 
consistently, the business community considers corruption and 
political influence to be significant problems in the legal 
system. Slovakia accepts binding international arbitration, and 
the Slovak Chamber of Commerce and Industry has a court of 
arbitration for alternative dispute resolution; nearly all cases 
involve disputes between Slovak and foreign parties. Slovak 
domestic companies generally do not make use of arbitration 
clauses in contracts. 
 
The current law on bankruptcy and restructuring entered into 
effect on January 1, 2006. Its main aim was to shorten the 
duration of cases and to increase the volume of revenues 
recovered. The law allows companies to undergo court-protected 
restructuring and individuals to discharge their debts through 
bankruptcy. According to the International Monetary Fund, the 
act overhauls ineffective bankruptcy procedures by speeding up 
their processing, improving creditor rights, reducing discretion 
by bankruptcy judges, and randomizing the allocation of cases to 
judges to reduce the potential for corruption. A new law on 
trustees entered into effect on July 1, 2005. Its main goal was 
to increase requirements for professional skills of trustees. 
Trustees must now graduate from accredited institutions or 
 
BRATISLAVA 00000018  005 OF 010 
 
 
private companies, receive a license from the Ministry of 
Justice, and will be subject to continued monitoring by the 
ministry and bankruptcy courts.  Still, investors have 
complained of unpredictable and corrupt bankruptcy and 
restructuring decisions, despite the new laws. 
 
Slovakia recognizes secured interests in immovable property, 
normally secured by physical possession of, or a conveyed title 
to, the property in question until the loan is repaid. There is 
a recognized procedure for foreclosures, which specifies how 
evictions are handled, debts are repaid and any remaining funds 
are returned to the titleholder. Since 2003, Slovakia has one of 
the most advanced frameworks in Europe for registering security 
interests in moveable property. 
 
 
PERFORMANCE REQUIREMENTS AND INCENTIVES 
 
Slovakia has no formal performance requirements for 
establishing, maintaining, or expanding foreign investments. 
However, such requirements may be included as conditions of 
specific negotiations for property involved in large-scale 
privatization by direct sale or public auction. (See the 
"Openness to Foreign Investment" section for details on 
incentives). There are no obstacles for foreign entities to 
participate in GOS financed and/or subsidized research and 
development programs and to receive equal treatment as domestic 
entities. There are no domestic ownership requirements for 
telecommunications and broadcast licenses. 
 
The current law regarding defense offsets has been in effect 
since January 1, 2008. The law outlines the basic principles and 
responsibilities of the supplier and the relevant state 
institutions (Ministry of Defense, Ministry of Economy, 
interdepartmental offset committee) for offset programs in 
Slovakia, based on similar legislation in other EU and NATO 
countries. The law requires offsets of 20 percent direct or 30 
percent for a combination indirect and direct offsets of the 
value for defense contracts worth over EUR 6 million. The 
offsets can be reduced by a set formula if applied in specific 
areas such as technology transfer, R&D, education, IT and direct 
investments. 
 
 
RIGHT TO PRIVATE OWNERSHIP AND ESTABLISHMENT 
 
Foreign and domestic private entities have the right to 
establish and own business enterprises and engage in all forms 
of remunerative activity in Slovakia. In theory, competitive 
equality is the standard by which private enterprises compete 
with public entities.  In addition, businesses are able to 
contract directly with foreign entities. Private enterprises are 
free to establish, acquire and dispose of business interests, 
but all Slovak obligations of liquidated companies must be paid 
before any remaining funds are transferred out of Slovakia. 
Non-residents from EU and OECD member countries can acquire real 
estate for business premises. For a transitional period of seven 
years starting May 1, 2004, foreign legal entities can buy 
agricultural and forestry land, as well as land in residential 
areas only if they establish a legally registered Slovak 
company. Since January 2004, there are no restrictions for 
Slovak residents on the purchase, exchange, and sale of real 
estate abroad. 
 
 
PROTECTION OF PROPERTY RIGHTS 
 
Secured interests in property and contractual rights are 
recognized and enforced. The mortgage market in Slovakia is 
growing, and a reliable system of recording such interests 
exists. However, titles to real property are often unclear and 
can take significant amounts of time to determine. Legal 
decisions may take years, thus limiting the utility of the 
system for dispute resolution. 
 
Slovak courts recognize and enforce foreign judgments, subject 
to the aforementioned delays, and the commercial code is applied 
consistently. A bankruptcy law adopted in 2006 has improved 
creditors' rights in bankruptcy cases. The business community 
considers corruption to be a significant factor in the court 
system and sometimes goes to extraordinary lengths to avoid 
litigation in Slovak courts.  In spite of the improved property 
rights legal regime, Slovak courts have issued a number of 
questionable decisions in this area.  Once heavily criticized 
ruling involved the property rights of citizens whose land was 
expropriated in order to build a highway. 
 
Protection of intellectual property rights (IPR) falls under the 
jurisdiction of two agencies. The Industrial Property Office is 
 
BRATISLAVA 00000018  006 OF 010 
 
 
responsible for most areas, and the Ministry of Culture is 
responsible for copyrights (including software). Slovakia is a 
member of the World Trade Organization (WTO), the European 
Patent Organization and the World Intellectual Property 
Organization (WIPO). The WTO TRIPS agreement is legally in force 
in Slovakia, but there have been no cases brought to test actual 
enforcement. Slovakia also adheres to other major intellectual 
property agreements including the Bern Convention for Protection 
of Literary and Artistic Works, the Paris Convention for 
Protection of Industrial Property, and numerous other 
international agreements on design classification, registration 
of goods, appellations of origin, patents, etc. In general, 
patents, copyrights, trademarks and service marks, trade 
secrets, and semiconductor chip design appear adequately 
protected under Slovak law and practice. 
 
In 2006, Slovakia was taken off the Watch List of the U.S. Trade 
Representative's annual interagency "Special 301" review in 
recognition of the significant progress that the GOS had  made 
in addressing concerns related to the protection of 
pharmaceutical patents in Slovakia. Slovak authorities had 
adopted legal and administrative measures to ensure that 
patent-infringing drugs are not given market authorization; some 
of those measures have since been weakened to accord with 
current EU norms. The government also built a new secure 
facility to house confidential pharmaceutical test data. 
 
 
TRANSPARENCY OF REGULATORY SYSTEM 
 
In general, transparency and predictability have been 
problematic for many investors. The process of obtaining 
residency permits for expatriate managers has been criticized 
for years as difficult and time-consuming. Legislation which 
came into effect in December 2005 addressed some but not all of 
the problematic areas. An amendment to the law governing the 
stay of foreigners, effective from January 2007, introduced EU 
Directive 562/2006 on "Schengen borders." Investors have long 
complained that purchasing land and obtaining building permits 
are time-consuming and unpredictable processes, but 
improvements, including the web portal www.katasterportal.sk 
which enables interested parties to verify information about 
land ownership online, have started to ease the process. 
Formerly, inconsistencies within the tax system had been a 
problem, but a major tax reform in 2004 improved this situation. 
Today, many observers consider Slovakia's flat rate tax system 
to be one of the simplest in Europe. 
 
The Commercial Code and the 1991 Economic Competition Act govern 
competition policy in Slovakia. The Anti-Monopoly Office is 
responsible for preventing noncompetitive situations. The 
current Law on Public Procurement, valid from 2006, harmonized 
Slovak law with all relevant EU directives on public 
procurement.  An electronic tendering system, operating by the 
Public Procurement Office and the Ministry of Finance, was 
adopted in 2007 to support the tendering cycle.  Nevertheless, 
concern about the transparency and integrity of public tenders 
is a subject of concern which has led to the recent dismissal of 
government ministers and to inquiries on the part of the 
European Commission. 
 
Foreign investors and foreign companies doing business in 
Slovakia have complained about the transparency of regulatory 
processes in several industries, and a number of regulatory 
bodies are considered by the business community to be less than 
fully independent. Political pressure on regulators in several 
offices has resulted in changes of leadership in order to 
influence the outcome in specific regulatory adjudications. 
 
In recent years, the GOS has used emergency legislative 
procedures with increasing frequency in cases affecting 
businesses.  This practice has diminished the public comment 
period for some proposed laws and regulations to practically 
nothing, a fact that various business groups have vigorously 
protested.  One example of this is the controversial "strategic 
companies" law introduced in 2009, which effected a major change 
in bankruptcy and restructuring procedures, allowing the state 
the right of first refusal in acquiring distressed companies in 
certain sectors.  The law was drafted, introduced, and passed in 
roughly a week, with no formal period for public comment. 
Another example, from 2008, changed corporate governance rules 
for companies in regulated network industries to allow the state 
to determine utility prices.  Again, this highly controversial 
legislation was brought to a vote in Parliament and signed into 
law with virtually no public comment period. 
 
 
EFFICIENT CAPITAL MARKETS AND PORTFOLIO INVESTMENT 
 
 
BRATISLAVA 00000018  007 OF 010 
 
 
After Slovakia joined the OECD, the export of capital and 
outward direct investment were liberalized to conform to 
international standards. As of January 2010, the Slovak banking 
sector was composed of 16 banks (established and with permanent 
residency in Slovakia) and 10 licensed branches of foreign 
banks. Citibank is the only U.S. bank in Slovakia. The sector is 
overwhelmingly foreign-owned. Through November 2009, the assets 
of all Slovak banks totaled about EUR 53.8 billion. 
 
Slovakia's stock market remains weak and small in an 
international context. Unless reforms in Slovakia's pension 
system boost domestic equity trading, the domestic market has 
very limited prospects.  In 2001, the Bratislava Stock Exchange 
(BSSE) opened a floor for trading foreign securities in order to 
boost market sentiment, but to date there has been little 
activity. The BSSE's trading system enables it to organize 
securities trading in any currency and to structure stock 
exchanges with few restrictions. When raising capital, Slovak 
companies usually float shares on the Vienna or Warsaw stock 
exchanges. 
 
The total number of issues in 2009 on the BSSE was 269, of which 
136 were bond issues. Total market capitalization amounted to 
USD 34 billion, up 19.58 percent from the same period in 2008. 
The total volume traded in the 2009 was USD 16.41 billion (down 
52.14 percent year on year), with 3.1 billion units of 
securities changing owners in 3,626 transactions. Over 98.9 
percent of this trading volume was bond transactions. The stock 
index, SAX, closed the year 2009 down 25.67 percent from the end 
of 2008. 
 
 
POLITICAL VIOLENCE 
 
There have been no reports of politically motivated damage to 
property, and civil disturbances are extremely rare. There has 
been no violence directed toward foreign-owned companies. 
 
 
CORRUPTION 
 
In 1998, at the beginning of its first term, the Dzurinda 
government proclaimed the fight against corruption to be a 
priority. In 2000, the GOS passed a national anti-corruption 
program. Subsequently, it appointed a corruption steering 
committee, amended the Criminal Code in attempts to strengthen 
law enforcement, approved a law modernizing public procurement, 
and enacted a strong Freedom of Information Act. A special court 
and a special prosecutor for corruption and organized crime were 
established in 2003. The Special Court was abolished in 2009 as 
a result of an action by the Constitutional Court, and in its 
stead a new Specialized Court, with more limited powers, was 
established. 
 
The current law on conflict of interest, which is generally 
viewed as weak and even more weakly enforced, came into force in 
October 2004. A special committee of Parliament supervises the 
implementation of the law, but it has not sanctioned any 
official covered by the law for violation of conflict of 
interest rules since its inception. 
 
Slovakia is also party to international treaties, among them the 
OECD Convention on Combating Bribery of Foreign Public 
Officials, UN Anti-Organized Crime Convention, UN 
Anti-Corruption Convention, Criminal Law Convention on 
Corruption and Civil Law Convention on Corruption. Slovakia is a 
member of the Group of States against Corruption (GRECO). 
 
The press has taken an active role in reporting corruption, and 
public awareness of the issue has steadily increased over the 
past several years. The Slovak chapter of Transparency 
International (TI) is active and, along with other civil society 
groups, monitors public tenders. Slovakia is a signatory to the 
OECD Convention on Battling Bribery, and to give or accept 
bribes is a criminal act. It should be noted, however, that 
Slovakia is ranked very low in the quality of its implementation 
of the Convention, according to a TI report.  Slovakia also 
ranked 56th on TI's 2009 Corruption Perception Index (CPI), down 
(i.e., more corrupt) from 52nd in 2008 and 49th in 2007.  The 
CPI index measures the perceived level of corruption in 180 
countries. 
 
Non-governmental organizations and the news media reported a 
growing number of corruption allegations during the course of 
2009, including several allegedly involving senior members of 
the Slovak government. In 2009, three government ministers were 
relieved of their posts because of concerns about 
non-transparent or inflated tenders or because of ethical 
violations. The European Commission has sought explanations or 
 
BRATISLAVA 00000018  008 OF 010 
 
 
investigated corruption in connection with several 
non-transparent tenders and regulatory decisions. 
 
 
BILATERAL INVESTMENT AGREEMENTS 
 
Slovakia has bilateral investment treaties with the following 
countries: Austria, Belgium, Bulgaria, Belarus, Canada, China, 
Croatia, Cuba, Denmark, Egypt, Finland, France, Germany, Greece, 
Hungary, Indonesia, Ireland, Israel, Italy, Lithuania, 
Luxembourg, Malta, Montenegro, the Netherlands, North Korea, 
Norway, Poland, Portugal, Romania, Russia, Serbia, Singapore, 
Slovenia, South Korea, Spain, Sweden, Switzerland, Tajikistan, 
Turkey, Turkmenistan, Ukraine, the United Kingdom, the U.S., the 
Socialist Republic of Vietnam, and Uzbekistan. Like other new EU 
members, Slovakia had to negotiate an amendment to its bilateral 
investment treaty with the U.S., because it was considered 
inconsistent with EU legislation. The amended treaty entered 
into force on May 14, 2004. In November 2007, Slovakia signed a 
bilateral Science and Technology Agreement with the US. 
 
 
OPIC AND OTHER INVESTMENT INSURANCE PROGRAMS 
 
The Overseas Private Investment Corporation (OPIC) offers U.S. 
investors in Slovakia insurance against political risk, 
expropriation of assets, damages due to political violence, and 
currency inconvertibility. OPIC can provide specialized 
insurance coverage for certain contracting, exporting, 
licensing, and leasing transactions undertaken by U.S. investors 
in Slovakia. Slovakia is a Member of the Multilateral Investment 
Guarantee Agency (MIGA). 
 
The U.S. Embassy purchases local currency at a rate generated by 
the Department of State and the current rate (January 13, 2010) 
is EUR 0.69 / USD 1.00. The Embassy expects to convert roughly 
USD 9 million during fiscal year 2010. In view of the high 
volatility of currency markets during the course of 2009, 
analysts' predictions for 2010 show some consensus for 
depreciation of the dollar. 
 
 
LABOR 
 
The government of Robert Fico delivered on its pre-election 
promises and amended the Labor Code in 2007, providing more 
protection for employees on the issues of working hours and 
safety, and strengthening the role of unions. The final 
compromise legislation did not contain many of the more 
controversial proposals from the original draft, including 
limitation of overtime hours, limits on independent contractors, 
and doubling of sick leave allowances. 
 
Slovakia's workforce of more than two million has a strong 
tradition in engineering and mechanical production. Literacy in 
Slovakia is almost universal (more than 99 percent), and most 
workers are highly educated and technically skilled. Foreign 
companies frequently praise the motivation and abilities of 
younger workers, who also often have good foreign language and 
computer skills. However, older workers often have poor foreign 
language and managerial skills. Slovaks have a reputation for 
being technically skilled, particularly in heavy industry. 
Education levels match or exceed neighboring countries; with 
nearly 86 percent of Slovaks aged 25-64 having at least a high 
school education. According to the World Bank's Student Learning 
Assessment Database, Slovaks outscored all other central and 
eastern European students in math and placed third (behind 
Hungary and the Czech Republic) in sciences.  Slovaks continue 
to have good prospects of finding a skilled job, with 85% or 
more of tertiary educated 25-34 year-olds employed in skilled 
occupations, indicating that those with higher education are in 
strong demand (OECD Education at a Glance 2009 report). 
 
 Total nominal hourly labor costs in Slovakia rose at an annual 
rate of 1.9% in the third quarter of 2008, in comparison with 
6.4% growth in the Czech Republic, 1.2% in Hungary and 4.4% in 
Austria, according to the OECD Quarterly Unit Labor Costs 2009. 
The overall nominal hourly labor costs growth among the EU 
countries was 3.1%. 
 
The unemployment rate hovered around 20 percent as recently as 
six years ago, declined to a range between 7-8 percent in 2008 
due to strong economic growth, entry to the EU, and stricter 
policies on qualifying for unemployment benefits, and reached 
around 12 percent in 2009 (Ministry of Labor est.). There are 
extensive regional variations in unemployment rates across 
country, with a pre-recession rate of less than three percent in 
Bratislava but up to 25 percent in some parts of eastern and 
southern Slovakia. Government spent approximately EUR 332 
 
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million in a package of "anti-crisis measures," with only few 
having sustainable effect on economic growth. Among the most 
criticized measures are EU financed "social enterprises," 
regional private enterprises employing low skilled workers. This 
measure has been evaluated as highly inefficient and corruption 
allegations have led to an EU investigation. 
 
After the latest amendments to Labor Code in April 2007, the 
workweek is standardized at 40 hours, and the overtime allowance 
was decreased to 100 hours per year, pending an agreement 
between employers and employees. Despite these recent 
legislative changes, Slovakia remains one of the most liberal 
economies in Europe. Since January 2010, the minimum wage is set 
to be EUR 319.5 per month, up from EUR 295.5 per month, which 
was the eighth-lowest minimum wage among the EU member states. 
Wages have been rising since 2004 following the country's 
accession to the EU and because of increasing demand for labor 
brought on by growing levels of FDI. A new law on minimum wage, 
which took effect at the beginning of 2009, introduced a more 
regular review of minimum wage, indexed to overall wage growth. 
Slovak social insurance is compulsory and includes a health 
allowance, unemployment insurance, and pension insurance. The 
ceiling on social insurance payments affecting both employers 
and employees was increased under legislation passed in 2007. 
 
Union membership has been on the decline in recent years. 
According to the Confederation of Labor Unions, 365,541 workers 
(or approximately 16.7 percent of the total Slovak workforce) 
belonged to trade unions as of January 1st, 2009. In 2007 the 
Fico government re-instituted the so-called "tripartite 
arrangement," a discussion platform consisting of state 
representatives, labor unions and the employers' association. 
The unions generally have been tolerant of the costs imposed on 
labor by economic transformation, but union leadership has 
remained politically engaged and is active among its membership. 
Before parliamentary elections in 2006, the Confederation of 
Labor Unions signed an agreement on cooperation with Smer, now 
the government's leading coalition leader, which led to changes 
to the Labor Code in 2007. Slovakia is a member of the 
International Labor Organization and adheres to its Convention 
Protecting Worker Rights. 
 
 
FOREIGN-TRADE ZONES/FREE TRADE ZONES 
 
Foreign trade zones and free ports were eliminated in Slovakia 
in 2006. 
 
 
FOREIGN DIRECT INVESTMENT STATISTICS 
 
FDI cumulatively reached $39.4 billion in 2008; the total inflow 
of FDI in 2008 was $1.39 billion (National Bank of Slovakia 
est.). 
 
Germany was Slovakia's largest trading partner, purchasing 20.2% 
of Slovakia's exports and supplying 19.7% of its imports in 
¶2008. Other major partners include the Czech Republic (13% of 
Slovakia's exports and 11.3% of Slovakia's imports), Italy (5.9% 
and 3.7%), Russia (3.8% and 10.2%), Austria (5.7% and 2.9%), 
Hungary (6.2% and 4.9%), Poland (6.6% and 3.9%) and France (6.8% 
and 4.0%). Slovakia imports more than 90% of its oil and gas 
from Russia, and its export markets are primarily OECD and EU 
countries. More than 85.1% of its trade is with EU members and 
86.2% is with OECD countries. Slovakia's exports to the United 
States made up 1.7% of its overall exports in 2008 ($1.21 
billion), while imports from the U.S. accounted for 1.2% of its 
total purchases abroad ($847.24 million). 
 
Major sources of foreign direct investments were Czech Republic 
(54.2%), Cyprus (20.4%), Poland (4.5%), Austria (4%), France 
(3.5%), South Korea (3.1%), Germany (3%), Italy (2.6%). Most of 
the foreign investments were focused in sectors of machinery, 
industrial production, electrochemical, automotive, financial 
services, information technology (IT), wholesale and retail 
trade, transportation and telecommunications. 
 
However, it should be noted that the GOS credits numerous U.S. 
investments to other countries if the investments came through 
the investors' foreign subsidiaries.  For example, the U.S. 
Steel investment came in part from its subsidiary in the 
Netherlands, and therefore the GOS considers it to be a Dutch 
investment. A 2008 survey conducted by the U.S. Embassy shows 
U.S. investment in Slovakia at about USD 4 billion in current 
and future commitments, making the U.S. approximately the third 
leading foreign investor in Slovakia. 
 
The largest U.S. investor in Slovakia is U.S. Steel, which in 
2000 acquired the core assets of the state-owned steel mill in 
 
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Kosice. Together with its future commitments, U.S. Steel will 
have invested more than USD 1.2 billion in Slovakia, and it 
employs roughly 14,000 people. Last year, US Steel Kosice used 
government sponsored anti-crisis measures and worked 4-day 
shifts, receiving government subsidies to offset the expense of 
social contributions. Whirlpool has invested over USD 100 
million in Slovakia, employs more than 1,200 people and produces 
2 million washing machines annually, making its local unit the 
largest appliance producer in Europe. Several other American 
companies have substantial investments in Slovakia, such as 
Emerson Electric, Tower Automotive, Delphi, Johnson Controls, 
Lear, Citibank, IBM, TRW, Visteon, AT&T, and Dell. The U.S. 
Commercial Service reports that there are over 120 U.S. 
companies present in Slovakia. Other large foreign investors in 
Slovakia include Volkswagen, Hyundai Kia, Peugeot Citroen, 
Samsung, Getrag Ford, Deutsche Telecom, EON, Ruhrgas, Intesa 
BCI, UniCredito, Raiffeisen Group, Enel and Siemens. 
 
 
WEB RESOURCES 
 
National Bank of Slovakia - www.nbs.sk 
Center for Economic and Social Analyses - www.mesa10.sk 
Ministry of Economy of Slovak Republic - www.economy.gov.sk 
Ing. Slovakia - www.ingfn.sk 
The Slovak Republic Government Office - www.government.gov.sk 
Ministry of Finance of Slovak Republic - www.finance.gov.sk 
OECD - www.oecd.org 
International Monetary Fund - www.imf.org 
EDDINS