Slovensko je kvôli relatívne nízkym nákladom na
kvalifikovaných aj nekvalifikovaných pracovníkov stále krajinou, ktorá môže byť
atraktívna pre investorov, povedal dňa 3.11. 2008 pre The Slovak Spectator
Radovan Ďurana z INESS.
While Slovakia is still prominently marked on the map for
investors, the country faces a growing dilemma about how to keep the large
investors who have arrived over the past decade while attracting new ones who
are thinking about leaving the Western European countries hurt by recent
economic developments. Slovakia’s good location, affordable labour and its
imminent adoption of the euro are significant strengths in the battle for
investment.
However, observers and businesses say that in order to
maintain its appeal, the country needs to work harder to bridge the gap between
the education sector and business as well as focus on knowledge-based
industries, and that the government needs to make a more genuine effort to remove
red tape affecting businesses.
The World Bank in early September released its Doing
Business 2009 survey, which ranks 181 economies according to the overall ease
of doing business. Singapore, New Zealand, the United States, Hong Kong,
Denmark and the United Kingdom top the chart.
Slovakia came out in 36th position, ranking highest among
the post-communist economies of central Europe ahead of the Czech Republic,
Hungary and Poland. Slovakia improved its ranking by one position compared to
last year.
The country’s position improved thanks to the establishment
of unified contact centres at municipal offices, which have simplified the
process of establishing a business by centralising all the required
administrative procedures.
However, the period when Slovakia topped the chart of
business reformers is over, if not for good at least for the next couple years,
market watchers and key business players agree. Opaque economic policies, a
heavy administrative burden and deteriorating labour legislation are being
highlighted by business as the main hurdles.
Still a country of
choice for investors
Slovakia remains the most attractive investment location
among Central and Eastern European countries for German investors, a 2008
survey conducted among 95 German investors suggests.
According to a survey prepared by the Slovak-German Chamber
of Trade and Commerce, 86 percent of firms would pick Slovakia again as a
destination for their investments. Over two thirds of participants in the
survey evaluated the current state of the economy positively.
However, the majority of firms do not expect there to be
further improvement in conditions, the survey reported.
Slovakia is definitely still a very attractive place for US
investors, the executive director of the American Chamber of Commerce in
Slovakia, Jake Slegers, told The Slovak Spectator in an earlier interview.
“Slovakia seems to be increasingly appealing to investors in
the IT, telecommunications and shared-services sectors,” said Slegers.
“Offshoring to Central and Eastern Europe in particular is booming. We have
witnessed the gradual transformation of many companies who invested in Slovakia
in the past few years, from the transaction centre for Western Europe into a
knowledge hub and eventually into corporate/regional headquarters.”
Slovakia was ranked second in terms of the amount of foreign
direct investment (FDI) per million inhabitants, with almost 11 investment
projects per million population. In terms of overall numbers, Slovakia ranked
eighth in Central and Eastern Europe, with 58 foreign direct investments (FDI)
in 2007, according to the latest Ernst & Young European Investment
Attractiveness Survey.
“Relatively low wage
costs for highly qualified as well as lower-qualified workers keeps Slovakia
attractive,” Radovan Ďurana of INESS, an economic think-tank, told The Slovak
Spectator.
According to Ďurana,
the continuing influx of sub-contractors to the automotive industry shows that
there is still more room. Also, the growth of investments in the IT sector shows
the potential for development in this sector, he added.
However, Stan Jakubek, country managing partner at Ernst
& Young, warned that current trends show that there are countries with
cheaper labour costs than in Slovakia, e.g. Bulgaria or Romania, and that
investors are moving their projects to these countries.
“I believe that Slovakia should focus on knowledge-intensive
industries, rather than cheap labour,” Jakubek told The Slovak Spectator.
“Investors are calling for high-level infrastructure, innovation in education,
the supply chain, technology clustering and research and development support.”
Jakubek is confident that the arrival of the European single
currency will help Slovakia to remain attractive for investors.
“The adoption of the euro is expected to provide investors
with more confidence in the Slovak economy,” Jakubek told The Slovak Spectator.
“They can feel more comfortable about the currency’s stability and enjoy a
reduction in transactions costs, mitigation of foreign exchange risk, increased
transparency for pricing and easier access to eurozone markets.”
While Ďurana regards
the total return on investment as being the main factor influencing investors’
decisions about where to invest, he said that political and legal stability,
logistics, and telecommunications infrastructure are also weighed when
investment decisions are made.
“The Ernst & Young survey indicated that in selecting
investment destinations, political and legal stability weighed most with
potential investors (57 percent of respondents), followed by logistics (54
percent) and telecoms infrastructure (51 percent) and then labour costs (47
percent),” Jakubek told The Slovak Spectator.
No longer a top
reformer
The Business Alliance of Slovakia (PAS) surveyed 200
businesses in mid-2008 and concluded that the business environment in Slovakia
has been declining since the government of Robert Fico took power in 2006. But
the government says that it has supported the country’s commercial environment.
The PAS, which represents a range of Slovak businesses, said
that of the 30 laws passed by the Fico government which affected the business
environment, companies assessed only 13 as having a positive effect. The
businesses surveyed were critical, among other things, of what they defined as
growing uncertainty among investors in the energy, pension management and
health-care sectors.
Tougher labour legislation, an increase in the complexity of
tax legislation, labour shortages and unclear business policies also made it on
to businesses’ list of complaints.
The surveyed businesses gave the Fico government an “A” only
for its steps to sustain macroeconomic stability, for achieving a balanced
budget and for the euro changeover.
In response to the PAS survey, Fico’s spokesperson Silvia
Glendová said on June 26 that the prime minister was not surprised by the
criticism since his government’s priorities are to promote solidarity in
society and provide support to socially disadvantaged groups.
Meanwhile, the World Economic Forum in its 2008-2009 Global
Competitiveness Report ranked Slovakia 46th among 134 countries. Last year
Slovakia occupied 41st place; because one newly-included country entered the
ranking ahead of Slovakia, this represents a fall of four places compared to
2007, said the PAS, which is also the Slovak partner of the World Economic
Forum.
The report ranked the United States, Switzerland, Denmark,
Sweden and Singapore as the most competitive economies surveyed.
The World Economic Forum identified non-wage labour costs, agricultural
policy costs, favouritism in decision-making by government officials, wasteful
government spending, the burden of government regulation and the efficiency of
the legal framework as Slovakia’s main competitive disadvantages, according to
the organisation’s official website.
As for Slovakia’s competitive advantages, the World Economic
Forum listed the country’s openness to foreign investors and the new technology
which they bring, its low barriers to the import and export of goods,
flexibility in wage bargaining and a close correlation between salaries and
labour productivity, low terrorism-related risks and access to capital,
according to an official PAS release.
Which rankings to
believe?
PAS does not see any big discrepancy between the findings of
the alliance’s business survey, which detected a decline in the business
environment and the World Bank’s, which showed Slovakia climbing one rung,
suggesting that Slovakia has not made any major progress in removing barriers
from the way of business.
“Looking at the business parameters by which the World Bank
evaluates and compares economies, one can see that Slovakia has made progress
only in the area of establishing companies, thanks to the establishment of
unified contact centres,” the executive director of the PAS, Robert Kičina,
told The Slovak Spectator.
However, this was the result of an EU directive on services,
which means that unified contact centres are being set up in all EU countries.
“The other parameters show only slight improvement or even
regression,” Kičina said. “The important thing is that no changes have been
made to the most serious barriers to running a business, which are court
proceedings, the enforceability of the law and bankruptcy proceedings. Domestic
surveys indicate their decline.”
According to Kicina, it also is important to add that annual
changes to the methodology of the Doing Business survey make a year-on-year
comparison of performance complicated: last year Slovakia slipped one ranking
while this year it improved its position by one rank, “which means that we are
where we were two years ago and it is really difficult to conclude that the
government has improved the business environment in Slovakia,” he added.
As for areas which are calling for reform, Kičina listed
legal enforceability and the performance of the courts: most importantly,
speeding up decision-making by the courts.
Kičina identified payroll taxes as another problem.
“If the government is socially oriented and not interested
in reducing payroll taxes, there is certainly room to make social security more
transparent; today it is too complicated on both sides: the income and the
expense side,” Kičina said.
According to Kičina, the government should free businesses
from the burden of duplicate submission of different data, as well as making it
possible for a business to communicate with the state electronically and
revising the volume of data that the state requests from businesses. Kičina
also named reforms to bankruptcy legislation and public procurement law as
being priorities for business.
Asked to name the top three laws that imrpoved the quality
of the business environment, Kičina listed the law on the euro, the law on
banks and the law on trade registry. The three laws with the most negative
impact on the business environment, according to Kičina, were the law on social
insurance, which increased the payroll tax ceiling, changes to the law on
income taxes, seen as an attack at the flat tax, and the law on the support and
development of public health (which affects health services) along with the
labour code.
Kičina also said that government representatives have been
contributing to the worsening image of businesses in the eyes of the public, despite
the fact that the private sector generates 92 percent of Slovakia’s GDP and
employs 72 percent of its labour force.
The
Slovak Spectator, 3 Nov 2008, Beata Balogová
