PRINCIPAL INDUSTRIAL SECTORS

Mechanical and Electrical Engineering
Mechanical engineering accounts for almost a 20% of GDP and around a quarter of all exports. The range of manufactured products is very wide, from assembly items and consumer goods to large investment activities such as assembly line/hall and plant construction. The automotive industry, production of machine tools and heavy machinery sub-sectors are also well developed.

The most important divisions of electrical engineering are in telecommunications, computers, automation, instrumentation and laboratory technology, consumer electronics, cables, insulators and conductors, installation tools, light sources, electric engines, transformers, single-purpose machines with their equipment along with designing and commercial activities.

The Q2 GDP (1999) growth for Slovakia was up on the average market expectation of 1.05% courtesy of the very strong export performance from companies engaged in this sector. Companies like Volkswagen, that tripled the output of automobiles from its Bratislava plant to over 120,000 units in 1998 and Sony in Trnava which exports almost all of production of colour TVs and components for other Sony plants around Europe.

Automotive Components
The continued expansion by Volkswagen is having a calalytic effect on the growth of the automotive components sector in Slovakia. Moreover, the automotive sector is facing such ‘hypercompetition’ that the manufacturing of automotive components is rapidly becoming a commodity operation driven by the need to achieve greater cost efficiencies - cost efficiencies that can be achieved in Slovakia. These are benefiting Volkswagen and international suppliers like Yazaki who employ 2,000 people, the British company Lucus which has just built a new plant in Topolcany and the American company Johnston Controls which has selected the town of Martin as a production base.

Also, two of Siemens’ largest production facilities in Slovakia are automotive related - Siemens Automotive Michalovce - producing cable harnesses for Ford, Mitsubishi and Honda employing 1,200 and the joint venture VW Elektricke Systemy in Nitra where 2,700 are engaged in the production of cable harnesses for the Volkswagen Group. In 1998, German tyremaker, Continental, signed a $60 million joint venture with the Slovak company Matador, aimed at producing up to two million truck tyres a year by 2002.

To read the key findings of the SNAZIR / EU Phare commissioned study on the Automotive sector in the Slovak Republic click here.

Information Technology (I.T.)
Information technology represents one of the most powerful engines of economoc growth. This is a sector where Slovakia is set to excell in the future on account of the intellectual capital of the workforce and the proportionally high output of information technology graduates per annum. Currently, the software market in Central Europe is growing by around 30% annually.

Since 1991, graduate output in Slovakia has increased by 40% to circa 12,000 students per year of which 20% are I.T. related. The quality of graduate output has always been and still is consistently high - a fact underlined with Slovak students coming first in a 1997 Central and Eastern Europe programming contest sponsored by IBM. In Slovakia, according to OECD statistics, the number of R&D workers per per 1,000 of the labourforce is 47% higher than the comparable figure in the Czech Republic, 35% higher than in Hungary and 33% higher vis-à-vis Poland. The figures are even more impressive taking the number of researchers with university degrees per 1,000 of the labourforce. The Slovak figure is 70% higher than in the Czech Republic, 50% than Hungary and 34% higher than Poland.

This helps to explain the significant increase in the number of international companies, like Siemens and Alcatel, undertaking software development activities in Slovakia. The Siemens subsidiary, SWH SBS Bratislava, produces sortware mainly for the financial services sector along with communications technologies and transport networks. 300 top programmers are engaged in the developemnt of software and derive 80% of sales from export business with key customers like Deutsche Telekom and the Taiwan Subway corporation.

Fuel and Power Industries
The most significant activities in these sectors are coal mining (approximately 4,6 million tons per year), purchasing, transportation and distribution of natural gas, crude oil, and gas recovery (Nafta Gbely, Slovensky plynarensky priemysel). The power production sector provides electricity generation, distribution and sales of heat, construction and assembly works, manufacture of electric poles and armatures as well as power line fixtures. Nuclear power generates over half of electricity production and for heavy users of electricity tariffs can be the most competitive in the region.

Heavy Industry
This sector represents one seventh of total industrial production in Slovakia. Over five million tons of crude steel are produced annually and processed mainly into plates, ingots, strips, and seamless and welded tubes. The new management of the troubled steel giant, VSZ Kosice, have successfully embarked on a comprehensive restructuring programme and by the autumn of 1999 had brought the plant back up to almost full production. With 25,000 employess, the plant is still overmanned but the main priorities for the new management were to focus on the companies core business and to fully exploit additional joint venture and strategic partnership opportunities with companies like US Steel which has already invested $65 million in the plant concentrating on canning products for the food industry.

Reflecting Slovakia’s strengths in special metals and alloys, Slovalco, with its Norwegian and British partners - Hydro Aluminium and EBRD - recently resyndicated a $130 million loan to face the full rigours of increased global competition. Generating over $250 million in sales and producing around 130,000 tons of aluminium per year, Slovalko exports 85% of output of which circa 65% is for clients in EU countries.

Chemical Industry
With its long-established and rich tradition, chemical production represents another cornerstone of Slovak industry, with the majority of plants located in Bratislava. The chemical industry represents about 20% of total industrial output in Slovakia. As a result of co-operation with foreign companies, a large number of proposals for company reconstruction projects have been prepared for inorganic and organic chemistry (Novacke chemicke zavody), production of chemical fibres (Rhone-Poulenc / Chemlon), painting materials (Chemolak), plastic production and processing (Plastika Nitra), rubber industry, explosives production (Istrochem), crude oil processing and petrochemicals. Slovnaft drives the petroleum processing industry in the country generation over $2 billion in sales of which half is derived from export.

Textile, Clothing and Footwear Industries
Around 8% of total industrial output is represented by the production of textiles, clothing, leather and footwear. Knitting production has quickly adapted to enable it to embrace fashion trends. Structural changes in clothing production are concentrated on branded clothing and underwear with the use of new materials (BCT Bratislava, Makyta).

Footwear production is focused on the luxury women’s and men’s branded footwear and branded sports footwear (CEBO Partizanske; JAS Bardejov). In 1998 a world leader in footwear production and technology - the Danish company ECCO - decided to invest up to $20 million in a new facility holding out the prospects for over 1,500 new jobs. Amost all of ECCO’s production will be exported from their new plant in Martin in northwestern Slovakia.

Agriculture and Construction
Currently, Slovak agriculture accounts for approximately 10% of GDP. Some 43 % of the total land area is cultivated and most of the common field crops flourish, especially barley and hops, which are both important export items. Wheat, maize, potatoes, barley, and sugar beet production play a significant role in agricultural activities. Just to the north of the capital city, Bratislava, there are more than 1,000 hectares of vineyards and the city is in fact the largest wine producing town in the former Czechoslovakia.

The production of building material represents around 3% of total industrial output. Courtesy of the new Government’s austerity programme to improve economic performance, many of the large infrastructural programmes have been ‘put on ice’ and this has temporarily constrained development opportunities in the sector. However, the anticipated increase in the flow of foreign direct investment will help to offset this.

Tourist Sector
Slovakias numerous natural amenities form an excellent backdrop for the development and prosperity of the tourist industry. Thanks to its extensive forest, meadow and water areas, wealth of flora and fauna, and last but not least unique natural spas, Slovakia is comparable to countries meeting the highest international standards.

The outstanding tourist potential has created extensive conditions for developing associated business activities. Nowadays, several hundreds of new travel agencies offer their comprehensive services to both domestic and foreign customers.

To boost investment in tourism facilities, the Government introduces fiscal inventives in March 1999. In summary, 100% tax relief on profits can be available during the first 5 years if an enterprise, with a minimum participation of a foreign stakeholder of 75%, invests at least 1.5 million EURO in tourism related activity and where sales from tourist services exceed 60% of total sales.

Forest Products
Slovakia is a major producer of timber. 1,852,520 hectares of its landmass is planted with trees, over three-quarters of which is dedicated for industrial use. A large number of small private wood processing companies, particularly furniture producers, have sprung up in the last few years because of the associated low labour and investment costs. Some of these companies export their goods, principally to EU countries, as well as producing for the domestic market.

Forestry, along with agriculture and water management, occupies a specific position in the Slovak national economy with respect to the utilisation and recycling of renewable sources of timber and other natural resources.

The Financial services in Slovakia
There are two organised markets in Slovakia: the Bratislava Stock Exchange (BCPB) and RM - System Slovakia, a.s. - based in Bratislava, to develop the financial market and to trade the most active company shares.

The Bratislava Stock Exchange, a.s. (BCPB) was established in 1991. It began to trade securities in the spring of 1993. The legal statute of the Bratislava Stock Exchange is a share-holding company, formed by its members - Slovak based banks, investment funds, stock exchange societies and the National Property Fund of the Slovak Republic.

Its supreme body is a meeting of shareholders of the Bratislava Stock Exchange. The Stock Exchange Chamber is an executive body of the Bratislava Stock Exchange. The chamber appoints the general secretary of the Stock Exchange.

Its objectives are as follows:

1. Organisation of the securities market and related trade and investment operations
2. Publication of related information about companies and financial news
3. Administration of the turnover at the securities market
4. Assessment of the exchange rate of securities
5. Administration of capital market settlements

The Bratislava Stock Exchange offers trading with securities in three markets:

• Main market with listed securities
• Junior market with listed securities
• Market with non-listed securities

Securities are traded at the primary market on the basis of the electronic stock exchange trade system which means that agents of the Bratislava Stock Exchange members do business directly. Only the members have the right to trade at the Bratislava Stock Exchange. The amount of trade operations as well as the number and range of securities is expanding. All stock exchange information is available in both Slovak and English , printed or in files. Information can be obtained by FINSAT agency and world-wide information distributors REUTERS, EXTEL and TELERATE, as well as Slovak newspapers Hospodarske noviny and Hospodarsky denník, Narodna obroda and TREND. Information can be obtained also from the Teletext of the Slovak television station STV I and II as well as through the Internet.

RM-System Slovakia allows its clients to sell or buy stock through a periodic auction and a real-time auction. The most comfortable way of trading is represented by on-line terminals. Regular clients are allowed to use the terminals in chosen RM-S offices. RM-System Slovakia facilitates each physical and legal entity to either directly (without any intermediary between the market and final owner) offer or purchase any publicly traded security included in the RM-S market. Thus, any person can directly enter the RM-S market. Small investors register with a registration card at any trading place. Entities acquiring at least one security of a Slovak company or investment fund are registered automatically. Information about trading at RM System can be obtained in the newspapers Hospodarske noviny, Narodna obroda and Trend.