With a population of 5.4 million, the Slovak Republic has a small, open economy. Slovakia joined the European Union (EU) in 2004 and the Eurozone in 2009. In recent years exports, which account for over 90 percent of GDP, have served as the main driver of economic growth. In 2016 the Slovak GDP grew by an estimated 3.3 percent, fueled by increased domestic consumption and strong labor market recovery (while unemployment fell to 8.8 percent). Slovakia’s banking sector is sound, and credit rating agencies emphasize the country’s deep economic and financial integration within Europe, and moderate government debt ratios.
Slovakia has been a regional FDI champion for several years, attractive due to a relatively low-cost yet skilled labor force, and a favorable geographic location in the heart of Central Europe. Among the most pressing domestic issues potentially threatening the attractiveness of the Slovak market are shortages in qualified labor force, persistent corruption issues and an inadequate judiciary, as well as a lack of innovation. The energy sector in particular is characterized by unpredictable regulatory oversight and high costs, in part driven by government interference in regulated tariffs.
The automotive industry continues to attract significant FDI. Slovakia remains the largest per capita car producer in the world (producing over one million cars last year) with three major car producers and approximately 300 auto suppliers. A fourth manufacturer, Jaguar Land Rover, is currently building a new EUR 1.5 billion (USD 1.7 billion) manufacturing facility in western Slovakia, and will produce its first cars in 2018.
Other sectors traditionally attracting investment are machinery, telecommunications, and energy. Many established companies continue to make new investments in their production facilities, and only a few major investors have exited. There are more than 125 U.S. companies present in the Slovak market. With total bilateral trade amounting to USD 2.4 billion in 2016, the U.S. is Slovakia’s 15thlargest trade partner.
Positive aspects of the Slovak investment climate include:
* Membership in the Eurozone (unique among the Visegrad Group (V4), which also includes the Czech Republic, Hungary, and Poland)
* An open, export-oriented economy close to western European markets
* A firm government commitment to EU deficit and debt targets
* A simplified one-stop shop process for starting a business
* A qualified and relatively inexpensive workforce
* Financial incentives for investors, including foreigners.
Negative aspects of the Slovak investment climate include:
* Shortages in qualified labor
* Increasing labor costs, including relatively high health and social contribution rates
* An inefficient judicial system with uneven enforcement of contracts and laws
* High electricity costs for industries
* Standard legislative procedures are occasionally bypassed to forgo the opportunity for public comment and industry input
* An incomplete national transport network and underdeveloped infrastructure
* High sensitivity to regional economic developments (such as an economic slowdown in Germany or a further escalation of the Russia-Ukraine conflict)
* Low rate of government investment in research and development (R&D)
* Heavy reliance on EU structural funds, with limited accountability in administration and allocation.
Table 1
1. Openness To, and Restrictions Upon, Foreign Investment
Policies Towards Foreign Direct Investment
Generally speaking, Slovakia does not limit or discriminate against foreign investors and is one of the most open economies in the EU. FDI plays an important role in the country’s economy and according to a recent European Commission (EC) study it will likely further intensify, especially in association with Slovakia’s large automotive industry. Recent significant agreement announcements include a 2015 EUR 1.5 billion project by Jaguar Land Rover, a 2016 EUR 60 million agreement with NMB Minebea, and a 2017 EUR 100 million investment by Amazon.
Inward FDI flow to Slovakia reached EUR 736 million in 2015, up from EUR 303 million in 2014. Inward FDI stock was EUR 40 billion in 2015, down from EUR 43 billion in 2014. The number of greenfield investments has decreased, totaling 38 investments in 2015 compared to 42 in 2014 and 83 in 2013. According to the National Bank of Slovakia, the largest foreign investors in 2015 were the Netherlands, Austria, the Czech Republic, Luxembourg, South Korea, Italy, and Germany. In 2016, there was a sharp decline in public investments, in large part due to a slowdown in allocation of EU structural funds.
The government supports foreign investors that generate employment, financing generous investment and tax incentives. Until 2015, small and middle sized enterprises (SMEs) had limited access to these incentives. However, a new Act on Supporting Least Developed Districts that came into effect in 2016 offers investment incentives for SMEs operating in the least developed regions. The Slovak government has proven less open to investment in the energy sector, which it considers sensitive to national security interests, and has sought to increase state ownership of some key assets.
Slovakia’s assets, including skilled labor, EU and Eurozone membership, and location at the crossroads of Europe, have attracted a significant U.S. commercial presence, including Hewlett-Packard, Cisco, IBM, Dell, AT&T, Whirlpool, Johnson Controls, Adient, Amazon, GlobalLogic, and U.S. Steel. Laws and practices in Slovakia do not discriminate against foreign investors and the government is often ready to provide investment incentives to foreign investors, including U.S. companies. Extensions of existing investments are also often eligible for incentives.
Foreign investors credit the government for maintaining an open dialogue regarding business concerns, while protecting Slovakia’s strategic interests. The Ministry of Economy remains active in drafting strategies and concepts to improve business environment and innovation intensity; however, implementation is occasionally a challenge.
The Economy Ministry’s Slovak Investment and Trade Development Agency (SARIO) is a specialized government agency responsible for proactively identifying potential foreign investors. SARIO counsels potential investors about the Slovak political, business, and investment climate, discusses investment incentives, assists with investment project implementation, and advises on business launch issues such as site location. SARIO’s services are available to all potential investors.
Limits on Foreign Control and 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. Theoretically, competitive equality is the standard by which private enterprises compete with public entities. Additionally, businesses can contract directly with foreign entities. Private enterprises are free to establish, acquire, and dispose of business interests, but must pay all Slovak obligations of liquidated companies before transferring any remaining funds out of Slovakia. Non-residents from EU and OECD member countries can acquire real estate for business premises.
Slovakia has no formal performance requirements for establishing, maintaining, or expanding foreign investments. However, foreign investors can specify conditions during negotiations over large-scale privatization by direct sale or public auction. Foreign entities face no impediments in participating in research and development programs financed and/or subsidized by the Slovak government, and are treated like domestic entities. There are no domestic ownership requirements for telecommunications and broadcast licenses. Operation of air transportation is limited to enterprises with a non-EU foreign equity participation not exceeding 49 percent.
The Slovak Constitution protects ownership rights. Expropriation or enforced restriction of ownership rights is admissible only if it is unavoidable and in the public interest, on the basis of law, and in return for adequate compensation.
There are no formal requirements to approve FDI besides the provision of investment incentives, which are ultimately approved by the Government. If investment incentives apply, the Economy Ministry manages the associated legislative process. Eligibility is specified in the Act on Investment Incentives (561/2007 Coll.), last amended in 2015.
Other Investment Policy Reviews
In the past three years, there have been no investment policy reviews of Slovakia conducted by the OECD, WTO or UNCTAD. In February 2017 the European Commission published its regular Annual Growth Survey, addressing various aspects of the Slovak economy. The report is available at https://ec.europa.eu/info/file/99666/download_en?token=S_VgZ1CQ.
Business Facilitation
Slovakia’s business registration process takes approximately 11 working days. The process is as follows:
* Select company name at the Commercial Register (less than a day at the District Court)
* Notarize articles of association and related documents (one day at the Notary Public)
* Apply for a trade license at the One Stop Shop and income tax registration with the District Court (three days)
* Obtain partners’ tax arrears forms at the Tax Authority Office (five days).
* Open a bank account (one day)
* Register for pension, sickness, and disability insurance and unemployment insurance at the local social insurance company (one day)
* Registered businesses (LLC) in Slovakia can be tracked at the online registry: www.orsr.sk
Outward Investment
The Slovak government does not restrict domestic investors from investing abroad.
SARIO is officially responsible for business facilitation and attracting investment. The Slovak Finance Ministry and the Deputy Prime Minister’s Office for Informatization and Investments also organize regular high level business delegations, including representatives from Slovak companies, to facilitate outward investment. Recent delegations included visits to Iran, Cuba, Russia, and China. Slovak President Andrej Kiska also regularly conducts business facilitation trips with representatives from innovative Slovak companies. His most recent trips were to Israel, Kenya, Argentina, Chile, Switzerland, and France, and he frequently leads delegations to the U.S.
Additionally, the Slovak Export-Import Bank (EXIMBANKA) supports exports and outward investments with financial instruments to reduce risks related to insurance, credit, guarantee, and financial activities. The EXIMBANKA assists both large and small (SME) companies and is the only institution in Slovakia authorized to provide export and outward investment-related government assistance.
Outward investment opportunities by Slovak companies are limited by their relatively small size.
2. Bilateral Investment Agreements and Taxation Treaties
Slovakia has signed several bilateral investment treaties in accordance with the European Outline Convention on Transfrontier Cooperation between Territorial Communities or Authorities. Some of these are legacies of the former Czechoslovakia, while others have come into force following independence in 1993. The 1992 U.S.-Slovakia Bilateral Investment Treaty specifies the basic framework for investment protection and dispute resolution. Slovakia signed a bilateral taxation treaty with the U.S. in 1993.
Like other newer EU members, when it joined the EU Slovakia had to negotiate an amendment to its bilateral investment treaty with the U.S. to address inconsistencies with EU legislation. The amended treaty entered into force on May 14, 2004.
The United States and Slovakia agreed to the Foreign Account Tax Compliance Act (FATCA) in July 2015, and Slovakia subsequently approved the Act on Automatic Exchange of Information on Financial Accounts (359/2015) in order to fully comply with FATCA. Slovak financial institutions are now required to report tax information of American account holders to the Slovak Government, which then forwards that information to the U.S. Internal Revenue Service (IRS).
The complete list of bilateral investment agreements can be found on the Finance Ministry’s website: http://www.finance.gov.sk/Default.aspx?CatID=4597.
The complete list of bilateral taxation treaties can be viewed on the Finance Ministry’s website: http://www.finance.gov.sk/Default.aspx?CatID=8688.
3. Legal Regime
Transparency of the Regulatory System
Slovakia lacks full transparency in its regulatory system, and the long-term predictability of regulation affecting the business and legal environment is weak. As of January 2016, there is a publicly accessible centralized online location for regulatory actions: https://www.slov-lex.sk/vyhladavanie-pravnych-predpisov. As a rule, regulations are not reviewed on the basis of scientific data assessments. Analytical institutes at some ministries produce data-driven assessments of state policies or big investment projects. However, those are selected by the institutes and are not publicly available for comment.
Slovakia still struggles with lack of transparency in the regulatory processes in several industries. The business community has suggested a number of regulatory bodies are not fully impartial and their decisions are unpredictable. According to a 2015 survey by the Center for the Study of Financial Innovation (CFTI), Slovak bankers cite burdensome regulations as the most serious obstacle to business growth in Slovakia.
The European Commission (EC) has criticized burdensome regulation in the energy sector, with its 2017 Slovakia Country Report calling the regulatory framework governing the energy sector “complex and opaque," and marked by “continued political and business influence." Slovakia leads the EU in terms of share of regulated fees in the final price of electricity, with network tariffs accounting for as much as 61 percent of the final price for industries, almost twice the EU average of 34 percent and the most burdensome in the Visegrad Four region. These fees support generous subsidies for both renewable energy and domestic lignite mining, weighing heavily on the competitiveness of Slovak heavy industry. The latest available OECD sectorial indicators on product market regulation in Slovakia also show high regulatory burdens in electricity, gas, telecom, post, rail and road transport.
Draft bills proposed through the standard legislative procedure are available for public comment through an online system ); however, the public is often granted little time to comment on draft legislature, and there is no obligation to react to comments prior to final government submission. Additionally, MPs or parliamentary groups on occasion propose draft bills outside the standard legislative procedure, which has no strict rules on guaranteeing opportunities for public comment, rendering the legislative process less predictable and transparent.
The Commercial Code and the Economic Competition Act govern competition policy in Slovakia. The July 2014 amendment to the Protection of Competition Act prohibits bid rigging. This also introduced a new leniency program which allows the Anti-Monopoly Office to impose or reduce fines for entrepreneurs’ participation in a cartel that would otherwise be considered illegal. The reward for cooperation is fixed at 1 percent of the total amount of fines against the cartel, capped at EUR 100,000. As of December 2016, Slovakia transposed into its domestic legislation Directive 2014/104/EU of the European Parliament and of the Council on Certain Rules Governing Actions for Damages under National Law for Infringements of the Competition Law Provisions of the Member States and of the European Union Text with EEA relevance.
The Anti-Monopoly Office, a part of the EU’s European Competition Network (ECN), is an independent state administration body responsible for ensuring competition, including in state aid. It investigates cartel cases, monopolies, the abuse of vertical agreements, and the interactions between state and local governments. It also serves to enhance competition by representing Slovakia during international negotiations or fora on competition, supporting competition principles, and implementing other protection measures.
The Office for Public Procurement supervises and administers public procurement. Public procurement remains problematic, with the Act on Public Procurement having been amended numerous times in recent years. The new Public Procurement Act (343/2015), effective as of April 2016, implements three new European directives and mandates a more centralized approach towards general government purchases, which are now administered by the Interior Ministry. The new Act also aims to increase the efficiency of public procurement through e-commerce and simplified access for SMEs. Although government officials believe the new Act will result in substantial savings in government purchases, some business stakeholders and NGOs claim the new law is less transparent, and increases the risk of potential bid-rigging agreements.
Slovakia introduced a new online platform for public procurement in February 2015. All state institutions, municipalities, districts and other entities managed by these institutions (such as hospitals and schools) must procure through this online platform. However, services and goods that public institutions can purchase via this “e-market" are capped; larger procurements are still managed through the traditional process. The Interior Ministry credits the platform with saving an average of 16 percent on purchases.
There is no regulation of lobbying in Slovakia.
Please consult the following websites for more information:
* Legislative and Information Portal Slov-Lex https://www.slov-lex.sk/domov
* Antimonopoly Office of the Slovak Republic http://www.antimon.gov.sk/antimonopoly-office-slovak-republic/
* Office for Public Procurement https://www.uvo.gov.sk/
* Act on Public Procurement http://www.vosk.sk/legislativa-zakon-o-verejnom-obstaravani
* Electronic Auctions Portal http://www.etrhovisko.sk/#
International Regulatory Considerations
Slovakia is an EU Member State, thus, EU legislation and standards fully apply in Slovakia. The national regulatory system is enforced in areas not governed by EU regulatory mechanisms. Slovakia is a WTO member and the government’s latest notification to the WTO Committee on Technical Barriers to Trade occurred in April 2010.
Legal System and Judicial Independence
Slovakia is a civil law country. The Slovak judicial system is comprised of general courts, the Supreme Court, and the Constitutional Court. General courts decide civil and criminal matters and also review the legality of decisions by administrative bodies. The 54 district courts are the courts of first instance. The eight regional courts hear appeals. The Supreme Court of the Slovak Republic is the court of final review in selected cases. The Special Criminal Court focuses on cases involving corruption, organized crime, serious crimes like premeditated murder, crimes committed by senior public officials, and crimes related to extremism, such as hate crimes. Enforcement actions are appealable and they are adjudicated in the national court system.
The Constitutional Court of the Slovak Republic is an independent judicial body that determines the conformity of legal norms, adjudicates conflicts of authority between government agencies, hears complaints - including individuals’ and legal entities’ complaints regarding constitutional rights violations, e.g. human rights violations - and interprets the Constitution or constitutional statutes. The President appoints Constitutional Court Judges from a list of candidates elected by Parliament. Judges are appointed to 12-year terms.
The Judicial Council - the highest self-governing judicial body - nominates General Court Judges. Judges receive lifetime appointments from the President of the Slovak Republic and may only be removed for cause. The judicial system remains independent of the executive branch, with the Justice Ministry exercising control of the judiciary’s budget and initiating legislation concerning the judiciary.
In practice, public confidence in the judicial system is among the lowest in the EU. Despite recent improvements, the justice system remains relatively slow and inefficient, and judges remain divided on the need for reform. Some judges are suspected of manipulating the case assignment system, and critics suggest verdicts lack predictability and are often poorly justified. As a result, investors generally prefer arbitration to resolution in the national court system.
Recent progress includes improved leadership at the Supreme Court and the Judicial Council, a new legislative proposal for selection of judges, and a new specialized court to deal with enforcement agenda. The new governing coalition, formed after the March 5 parliamentary elections, has also publically committed to further rule of law and anti-corruption reforms.
Property rights are guaranteed by the Slovak Constitution and the European Convention of Human Rights. The basic framework for investment protection and dispute resolution between Slovakia and the U.S. is outlined in the 1992 U.S.-Slovakia Bilateral Investment Treaty.
EU member state court judgments are recognized and enforced in compliance with existing EU Regulations. Third country judgments are governed by bilateral treaties or by the Act on International Private Law.
Please consult the following website for more information: http://www.state.gov/documents/organization/43587.pdf
Laws and Regulations on Foreign Direct Investment
The Economy Ministry is in charge of drafting new legislation as well as negotiating with potential and existing foreign investors, including the provision of investment incentives. The Ministry’s Slovak Investment and Trade Development Agency (SARIO) is a specialized government agency in charge of attracting foreign investments to Slovakia, and serves as a one-stop-shop for foreign investors. Detailed information about laws, regulations and incentives can be found at: http://www.sario.sk.
The Act on Investment Incentives (561/2007 Coll.) regulates the conditions in which investment incentives are made available to foreign and domestic investors, such as eligible sectors (including industry, technology centers, shared service centers, and tourism) and specific requirements per sector, such as minimum volumes of investments and underlying conditions for receiving incentives in the form of tax breaks or other forms of stimuli for both new investments and expansion. Priority is given to investments in regions with high unemployment and to higher value-added industries. A December 2015 amendment eased the preconditions for incentives in “disadvantaged regions." To learn more about investment incentives, please refer to section 5 - Industrial Policies, Investment Incentives.
In 2016, the Slovak government approved several measures with the goal of improving the investment climate. Included are provisions improving debt collection and increasing transparency in public procurement by eliminating shell companies.
Please consult the following websites for more information: https://www.economy.gov.sk/
Competition and Anti-Trust Laws
The Antimonopoly Office of the Slovak Republic is an independent body charged with the protection of economic competition. The Office intervenes in cases of cartels, abuse of a dominant position, vertical agreements, and it also controls compliance of mergers with antitrust law. The key antitrust legislation regarding fair competition is the Competition Law (136/2001 Coll.). Slovakia complies with the EU competition policy.
All of the competition cases (abuse of dominant position and other competitive cases) are published online at the Antimonopoly Office’s website http://www.antimon.gov.sk/2066-en/cases-in-slovak/ and http://www.antimon.gov.sk/2074-en/cases-in-slovak/.
Please consult the following website for more information: http://www.antimon.gov.sk/antimonopoly-office-slovak-republic/.
Expropriation and Compensation
The Constitution of Slovakia and the Commercial and Civil Codes permit expropriation only in the case of public interest, with a requirement to provide compensation. The law also provides for an appeal process. The Slovak legislation related to expropriation has been criticized for being split among many different regulations and for favoring state and private investors’ interests.
A new law on expropriation came into effect on July 1, 2016. Based on this law, expropriation must meet the following four conditions:
* Follow the law;
* Occur only to the extent necessary;
* Be in the public interest;
* Be appropriately compensated.
The most recent significant expropriation efforts date to 2012, relating to the government’s plan to revert to a single-payer healthcare system and to expropriate two private health insurance companies. The government’s plan is currently on hold, despite an international arbitrage court’s confirmation that the action falls within the rights of a sovereign state. For more details, please see the International Arbitration section.
Please consult the following website for more information: https://lt.justice.gov.sk/Material/MaterialWorkflow.aspx?instEID=1&matEID=7429&langEID=1&tStamp=20140819085822850
Dispute Settlement
ICSID Convention and New York Convention
Slovakia is a contracting state to the International Centre for Settling International Disputes (ICSID) and the World Bank’s Commercial Arbitration Tribunal (established under the 1966 Washington Convention). Slovakia is also a member of the 1958 New York Convention on the Recognition and Enforcement of Foreign Arbitrage Awards, which obligates Slovakia to accept binding international arbitration. The Finance Ministry leads on bilateral investment treaty matters, and also manages and represents Slovakia in international arbitration. Investment contracts with foreign investors in Slovakia are covered by respective ministries depending on the sector, in most cases by the Ministry of Economy.
Investor-State Dispute Settlement
The basic framework for investment protection and dispute resolution between Slovakia and the U.S. is governed by our 1992 Slovakia Bilateral Investment Treaty ).
In eleven cases of international arbitration between 2008 and 2016, the Slovak Republic won seven cases, one case ended in a settlement, one case was withdrawn, one case is currently under appeal in the German court system, and one remains open. Over the past 15 years, Slovakia has lost just one commercial arbitration case, in 2004 to CSOB bank.
Among arbitral cases involving U.S. investors, one claimant sued the Slovak Republic in 2012 for setting new, higher tariff fees on electricity production which was self-generated for the company’s internal use; this claim was withdrawn in 2014. Another ongoing ICSID arbitration case brought by EuroGas, a U.S.investor, was initiated in the summer of 2014 over a suspended mining license; proceedings started in September 2016 with claimants filing a request for provisional measures. A first hearing by the tribunal was held in Paris in September 2016, and parties each filed statements of costs in November 2016.
Another notable arbitral case involves one of Slovakia’s two private health insurance companies and a 2008 law that banned private health insurance companies from paying dividends to their shareholders, severely limited allowable overhead costs, and required companies to direct their profits from public health insurance back into the healthcare system. In December 2012 an international arbitral tribunal that had been constituted under the Slovak-Dutch BIT partially ruled in favor of the health insurer and ordered the Government of Slovakia to pay EUR 22 million in damages plus EUR 3 million in court costs. In January 2013, the government appealed the decision to the Upper Arbitration Court in Frankfurt, Germany, which upheld the original decision. The Slovak Finance Ministry has argued that dispute settlement provisions of BITs between EU member states are no longer valid following Slovakia’s accession into the EU, and that the dispute should fall under the jurisdiction of the European Court of Justice. An appeal is pending with the Supreme Federal Court of Germany.
In a separate case regarding the government’s plan to reestablish a single-payer healthcare system, an international arbitral tribunal ruled in May 2014 in favor of the Slovak government, confirming the state’s sovereign right to organize its healthcare system. The private insurer was ordered to reimburse the government over EUR 1 million in legal fees. Nevertheless, due to lack of finances, the government’s plan to move to a single-payer healthcare system remains on hold.
According to the Slovak Finance Ministry, in addition to the proceedings described above, the Slovak Republic has received seven other notices of material claims (disputes) requesting an amicable settlement under various bilateral investment treaties. The compensation sought by the relevant claimants does not exceed in aggregate EUR 71 million (excluding interest).
The legal system generally enforces property and contractual rights, but decisions may take years, thus limiting the courts’ relevance in dispute resolution. According to the World Bank Doing Business 2016 report, Slovakia ranked 63rd out of 189 countries in the “enforcing contracts" indicator, with a 538 day average for enforcing contracts. Slovak courts recognize and enforce foreign judgments, subject to the same delays. Although the commercial code appears to be generally applied consistently, the business community cites a lack of legislation protecting creditor rights, corruption, political influence, lengthy procedures, and weak enforcement of court rulings as significant problems. Instances of multi-million dollar losses that were settled out of court because of doubts about the court system’s ability to offer a credible legal remedy have been mentioned to the Embassy by both U.S.and other investors.
International Commercial Arbitration and Foreign Courts
There are two acts applicable to alternative dispute resolution in Slovakia - the Act on Mediation (420/2004 Coll.) and the Act on Arbitration (244/2002 Coll.). In addition, the Slovak Chamber of Commerce and Industry (SOPK) has a court of arbitration for alternative dispute resolution, and has a number of bilateral cooperation agreements with Chambers of Commerce or similar institutions abroad. Nearly all cases involve disputes between Slovak and foreign parties. Slovak domestic companies generally do not make use of arbitration clauses in contracts.
Local courts in Slovakia recognize and enforce foreign arbitral awards, subject to delays, thus limiting the courts’ relevance in dispute resolution.
Slovakia has not experienced any case when state-owned enterprises (SOEs) were involved in investment disputes with the government.
Bankruptcy Regulations
The current Law on Bankruptcy and Restructuring entered into effect in 2006. The law allows companies to undergo court-protected restructuring and individuals to discharge their debts through bankruptcy. The International Monetary Fund credited the Act for speeding up processing, strengthening creditor rights, reducing discretion by bankruptcy judges, and randomizing the allocation of cases to judges to reduce potential corruption. Extensive amendments to the Act became effective over 2015 and 2016 to prevent preferential treatment for creditors over company shareholders.
4. Industrial Policies
Investment Incentives
The Act on Investment Aid (561/2007 Coll.) serves to ensure that investment incentives are available to foreign and domestic investors, such as eligible sectors (including industry, technology centers, shared service centers, and tourism) and specific requirements per sector (such as minimum volumes of investments, tax breaks, or other forms of stimuli for both new investments and expansion). Other acts that influence the provision of investment incentives include: the Act on Supporting Least Developed Districts (336/2015), the Act on State Aid (231/2011), the Act on Employment Services (5/2004), the Act on Income Tax (595/2003), and a government regulation defining the maximum intensity of investment aid and the amount of investment aid (481/2011).
The Cabinet determines investment incentives and the Economy Ministry administers them. Priority is given to investments in regions with high unemployment and to higher value-added industries (industrial production, technology centers, shared service centers, tourism). Investment incentives cannot exceed 35 percent of the eligible costs of the planned investment (25 percent in Western Slovakia). Eligible costs include land, buildings, new machinery and equipment, licenses and patent rights, and costs related to wages for newly created jobs. Due to European regulations, sectors ineligible for investment incentives include agriculture and fisheries, coal industry, shipbuilding, transport, production, distribution and energy infrastructure.
One of the major requirements for providing investment incentives is the creation of at least 40 jobs (30 in the case of technology centers). However, in the least developed districts the minimum is just 10 jobs. Incentives are typically granted in the form of income tax relief for up to 10 tax periods, cash grants, and contributions for job creation (paid ex-post based on the annual costs report).
The Act on Investment Aid is regularly updated. Changes introduced last year favor high value-added investments, and account for the sustainability of created jobs and education requirements for employees. A new amendment to this Act became effective in January 2016, which eased the conditions for providing incentives in “disadvantaged regions" with an unemployment rate 1.6 times greater than the national average. The state can cover up to 50 percent of the total investments in these regions for acquiring premises, production facilities or intellectual property rights. The minimum total amount of the investment is EUR 200,000 (USD 210,800) in case of large enterprises and EUR 100,000 (USD 105,400) for SMEs. For more information on investment incentives by region, please see the table below.
Source: SARIO, 2017, http://www.sario.sk/sites/default/files/content/files/sario-investment-aid-2017.pdf
Slovakia granted investment aid amounting to EUR 1.65 billion in 2002-2016, of which 48 percent was in the form of tax relief. In the same period, the share of tax relief on the total approved investment aid represented 66 percent on average per investment project.
Please consult the following website for more information:
* Slovak Investment and Trade Development Agency http://www.sario.sk/en Act on Investment Aid http://www.zakonypreludi.sk/zz/2007-561
* Act on Support for Underdeveloped Regions http://www.zakonypreludi.sk/zz/2015-336
Foreign Trade Zones/Free Ports/Trade Facilitation
Foreign trade zones and free ports were eliminated in Slovakia in 2006.
Performance and Data Localization Requirements
Slovakia does not mandate local employment, follow “forced localization," nor impose conditions on permission to invest.
Temporary and long term residence permits, including work permits (business and employment), are issued by the Police Department, and in specific cases by the Interior Ministry. The legislative framework on residence and adjacent permits is specified in the Act on Residency of Foreign Nationals, last amended in December 2015. Foreign nationals have criticized the process of obtaining residency permits for expatriates as difficult and time-consuming, stressing in particular that authorities are not always consistent in their recommendations or application of regulations. The regulations themselves, however, do not differ significantly from those of other EU countries. The Economy Ministry evaluates business models on a case-by-case basis for individuals requesting temporary and long term residence permits wanting to start a business in Slovakia. Foreign entities may also be granted investment incentives on a case-by-case basis, if conditions defined in the Act on Investment Incentives are met.
The national authority in charge of data protection is the Office for Personal Data Protection of the Slovak Republic. As a member state of the EU, Slovakia transposes relevant directives and regulations on data protection. The framework for data protection and storage is set forth in the 122/2013 Coll. on Protection of Personal Data.
Foreign IT providers are not obliged to turn over source code and do not have to provide access to surveillance.
Please consult the following websites for more information:
* https://www.mzv.sk/web/en/consular_info/residence_of_foreigners_in_territory_of_slovakia
* http://www.zakonypreludi.sk/zz/2011-404/znenie-20140101
* http://www.dataprotection.gov.sk/uoou/sites/default/files/kcfinder/files/Act_122-2013_84-2014_en.pdf
* http://dataprotection.gov.sk/uoou/en/content/national-legal-framework
5. Protection of Property Rights
Real Property
Secured interests in property and contractual rights are recognized and enforced. The mortgage market in Slovakia is growing, and a reliable system of record keeping exists. However, real estate titles are often unclear and can take significant amounts of time to determine. Legal decisions may take years, thus limiting the utility of the court system for dispute resolution.
The commercial code is applied consistently. Amendments to the Bankruptcy and Restructuring Act (7/2005 Coll., into force as of March 2017) are intended to rapidly reduce the number of restructurings in Slovakia and address fundamental flaws permitting the abuse of restructuring procedures.
Investors have long complained that the process of purchasing land and obtaining building permits is time-consuming and unpredictable. A dedicated web portal ) makes it possible to verify information about land and property ownership.
EU citizens can acquire property in Slovakia under the same conditions as Slovak residents with the exception of agricultural and forest land. This can be purchased by obtaining a residency permit in Slovakia or farming land for at least three years. However, the government is planning to liberalize these measures in 2017 in order to adhere to EU legislation. Slovak residents own approximately 75 percent of the land in Slovakia. It is estimated that less than 10 percent of the land in Slovakia does not have a clear title.
Slovakia ranked 7th (down from 5th rank last year) out of 189 countries in the World Bank’s 2017 Doing Business “registering property" indicator, averaging 16.5 days to register property.
Intellectual Property Rights
In general, Slovak law adequately protects patents, copyrights, trademarks and service marks, trade secrets, and semiconductor chip design. The protection of intellectual property rights (IPR) falls under the jurisdiction of two agencies. The Industrial Property Office is responsible for most areas, including patents, while the Culture Ministry is responsible for copyrights, including software. A new Copyright Act (185/2015 Coll.) came into effect in January 2016, which transposes numerous EU directives that focus on copyright protection in the context of a growing internet economy and digitalization, including e-lending, one-stop-shops, and video on-demand.
Slovakia is a member of the WTO, the European Patent Organization, and the World Intellectual Property Organization (WIPO). The WTO TRIPS agreement is legally in force in Slovakia, although no cases have occurred to test 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. The Industrial Property Office of the Slovak Republic is the central government body overseeing industrial property protection. The Financial Administration (under the Finance Ministry) deals with customs and adjacent IPR, including the fight against counterfeit goods.
Slovakia was taken off the Watch List of the U.S. Trade Representative’s annual interagency “Special 301" review in 2006, thanks to significant progress that the government had made in addressing concerns related to the protection of pharmaceutical patents in Slovakia. Slovak authorities 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 comply with current EU norms. The government also built a new secure facility to house confidential pharmaceutical test data. Slovakia is not listed in the notorious market report.
According to the Financial Administration, there were 1,722 suspected breaches of intellectual property rights in 2016 (for goods imported from third countries), with a value of seized counterfeit goods reaching more than EUR 2.6 million (down 61 percent from 2015).
For additional information about treaty obligations and points of contact at local IP offices, please see WIPO’s country profiles at http://www.wipo.int/directory/en/.
Please consult the following websites for more information:
* Ministry of Culture, Act on Intellectual Property http://www.culture.gov.sk/extdoc/5831/Zakon_185_2015_Autorsky%20zakon
* Intellectual Property https://www.dusevnevlastnictvo.gov.sk/domov?p_p_id=1%26p_p_lifecycle=0
* Industrial Property Office http://www.upv.sk/?introduction
* Financial Administration https://www.financnasprava.sk/en/homepage
* Financial Administration Annual Report for 2016 https://www.financnasprava.sk/_img/pfsedit/Dokumenty_PFS/Financna_sprava/
Vyrocne_spravy/2017.05.09_VS_2016.pdf
Resources for Rights Holders
For a list of English-speaking lawyers in Slovakia, please consult the Embassy’s website:
https://sk.usembassy.gov/u-s-citizen-services/attorneys/
To contact the American Chamber of Commerce in the Slovak Republic, please see:
http://www.amcham.sk/home
6. Financial Sector
Capital Markets and Portfolio Investment
The stock market in Slovakia is growing; however, it lacks liquidity and is still underdeveloped due to the size of the country. The European Single Market and existing European policies facilitate the free flow of financial resources. Slovakia respects the IMF Article VIII by refraining from restrictions on payments and transfers for current international transactions. Credit is allocated on market terms in Slovakia and is available to foreign investors on the local market.
The Bratislava Stock Exchange (BSSE) is a joint-stock company operating in compliance with the Stock Exchange Act No 429/2002. The BSSE was admitted as an associate member of the Federation of European Securities Exchanges (FESE) in 2002, and became a full member in 2004.
In April 2014, the Slovak Government approved the national strategy for developing the Slovak capital market, prepared by the Finance Ministry in cooperation with the National Bank and the BSSE. The strategy aims to motivate private stakeholders to invest in liquid tradable securities and increase shares at the BSSE. It includes measures to support institutional investors, modernize market infrastructure, and decrease administrative and tax burdens. However, no major advances have been achieved yet. The National Central Depository of Securities was established in 2014 and is responsible for maintaining the shareholders’ register and records of dematerialized and certificated securities, as well as to settle financial instrument transactions.
At the end of 2015 the total volume of transactions on the BSSE amounted to some USD 10.1 billion. Bonds are by far the most traded instrument, accounting for nearly 99.8 percent of all operations. The market capitalization of stocks reached USD 4.5 billion and bonds USD 42.7 billion.
Slovakia’s first-ever IPO (Slovak Telecom) was planned for 2015, but was ultimately cancelled due to a more attractive offer from a private bidder.
Please consult the following websites for more information:
http://www.rokovania.sk/Rokovanie.aspx/BodRokovaniaDetail?idMaterial=23437
http://www.bsse.sk/Portals/0/Resources/statistiky/rocenky/Rocenka%202015%20-%20na%20WEB.xls
Money and Banking System
Upon its integration into the Eurozone on Jan. 1, 2009, Slovakia became part of the Eurosystem, which forms the central banking systems of the euro area within the European System of Central Banks. The National Bank of Slovakia (NBS) is the independent central bank of the Slovak Republic, with a primary objective to maintain price stability. NBS issues euro banknotes and coins, promotes the smooth operation of payment systems and clearing systems, regulates currency circulation, maintains and disposes of foreign reserve assets, and implements foreign exchange operations.
Slovakia’s financial sector felt the pinch of the Eurozone debt crisis during 2011; however, effects began to ameliorate during the first six months of 2012. No Slovak bank reported any significant, direct, adverse effects on its profitability, capital, or liquidity position as a result of the crisis.
The banking sector in Slovakia enjoys robust liquidity. While most banks operating in Slovakia are subsidiaries of foreign-owned institutions, they report minimal dependence on their mother companies for financing. Thanks to the increased lending activity, increased minimum capital requirements, and the ability of banks to generate net interest income, the Slovak banking sector remains resistant to the negative external developments in financial markets and any slowdown of the Slovak economy. Foreign nationals can open bank accounts by presenting their passport and/or residence permit, depending on the bank.
Three major banks (Tatra Banka, Vseobecna Uverova Banka, and Slovenská Sporitelna) are under direct supervision of the European Central Bank (ECB). Due to the size of the international groups they belong to, the ECB also supervises: Ceskoslovenská Obchodná Banka; CSOB Stavebná Sporitelna (belonging to the KBC Group); and Sberbank Slovensko (belonging to Sberbank Europe AG but scheduled for takeover in July 2017 by Prima Banka, owned by the private equity firm Penta). The combined total assets of the monetary financial institutions active in the Slovak market were over EUR 73 billion as of December 2016. All three major Slovak banks (Tatra Banka, Vseobecna Uverová Banka, and Slovenská Sporitelna) that participated in the last ECB “stress tests" in October 2014 assessing the quality of individual bank assets were certified as sound and stable.
Please consult the following websites for more information:
http://www.nbs.sk/en/about-the-bank
Foreign Exchange and Remittances
Foreign Exchange
Slovakia joined the Eurozone on Jan. 1, 2009. As an OECD member, Slovakia meets all international standards for conversion and transfer policy.
The Foreign Exchange Act (312/2004) governs foreign exchange operations and allows for easy conversion or transfer of funds associated with an investment. 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). The amendment passed in 2004 authorizes Slovak residents to open accounts abroad and eliminates the obligation to transfer financial assets acquired abroad to 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 strict rules governing commercial banking and credit institutions in Slovakia, which must abide by existing banking and anti-money laundering laws. As a result of the 2008 financial and economic crisis, Slovakia is among eleven EU countries that decided to introduce a tax on financial transactions, which, however, has yet to be implemented.
Remittance Policies
There are very few controls on capital transactions, except for rules governing commercial banking and credit institutions, which must abide by existing banking and anti-money laundering laws. The basic framework for investment transfers between Slovakia and the U.S. is set within the 1992 U.S.- Slovakia Bilateral Investment Treaty.
The United States and Slovakia agreed to the Foreign Account Tax Compliance Act (FATCA) in July 2015, and Slovakia subsequently approved the Act on Automatic Exchange of Information on Financial Accounts (359/2015) in order to fully comply with FATCA. Slovak financial institutions now have the obligation to report tax information of American account holders to the Slovak Government, which then forwards that information to the U.S. Internal Revenue Service (IRS).
Slovakia is not a Financial Action Task Force (FATF) member; nevertheless, Slovakia receives FATF recommendations.
Slovakia does not impose any time limitations on remittances. In 2016 Slovakia introduced a 7 percent tax on dividends and eliminated the 14 percent health insurance contribution for dividend income.
Please consult the following websites for more information:
http://www.state.gov/documents/organization/43587.pdf
http://www.coe.int/t/dghl/monitoring/moneyval/Evaluations/round4/SVK4_MER_MONEYVAL
(2011)21_en.pdf 21_en.pdf)
http://www.zakonypreludi.sk/zz/2015-359
Sovereign Wealth Funds
Slovakia does not maintain a Sovereign Wealth Fund (SWF). In 2014, Slovakia established a fund of funds - the Slovak Investment Holding (SIH), which launched operations in 2016 with a contribution to the D4/R7 Bratislava highway bypass. Further investments, including in R&D, are expected in late 2017. SIH was financed by drawing three percent of allocations from five EU 2014 - 2020 operational programs, totaling EUR 550 million in capitalization. Resources are allocated as revolving financial instruments (guarantees, risk sharing loans, equity and mezzanine instruments) mainly through financial intermediaries, i.e. commercial lenders who will leverage the funds. Resources are focused on strategic investment priorities in the following sectors - transport infrastructure, energy efficiency, waste management, energy production, small and medium-sized enterprises, and social economy. SIH is managed by SZRB Asset Management, a subsidiary of the Slovak Guarantee and Development Bank.
7. State-Owned Enterprises
State-owned enterprises (SOEs) and private companies generally compete on a level playing field, with some exceptions. SOEs are mostly active in strategic sectors, including health and social insurance and “natural monopolies" such as railways and electricity transmission networks. Slovakia is a signatory of the WTO Agreement on Government Procurement (GPA) since 2004, which also covers SOEs.
Slovak SOE ownership is exercised in accordance with the Act on State-owned Enterprises (111/1990), which is consistent with the OECD Guidelines on Corporate Governance for SOEs. However, the media often highlights examples of inefficient management practices and performance of some SOEs.
The list of companies that are fully or partially state-owned is available on the Finance Ministry’s website, and most ministries also publish a list of such companies on their web portals. SOE profits broken down by enterprise are publicly available (Attachment No. 3 of the enacted budget: http://www.mfsr.sk/Components/CategoryDocuments/s_LoadDocument.aspx?categoryId=11224&documentId=14962 ). There are more than 70 large SOEs in Slovakia, 80 percent of which are wholly-owned.
Significant SOEs are required to publish their audited financial statements in accordance with the Accounting Act. They submit their audited financial statements to the Finance Ministry’s dedicated portal - the Register of Financial Statements ).
Most SOEs are structured as joint-stock companies, governed by boards that include both private sector and government representatives. Prime Minister Fico recently criticized his predecessors for allowing private shareholders to run companies with a major state ownership, such as the energy sector companies Eustream, Východoslovenská energetika, Stredoslovenská energetika, and Západoslovenská energetika, and expressed willingness to change this in the future.
Until mid-2014, the National Property Fund managed the state shares in a number of companies, mainly those with mixed public-private ownership; however, the government decided to dismantle this institution, and the shares have been transferred to respective ministries, principally the Economy Ministry.
According to Transparency International Slovakia (TIS), Slovak SOEs perform poorly compared to foreign counterparts. TIS also reports that five of the ten biggest employers in Slovakia are SOEs and 80 of the most important public companies have a combined budget of EUR 9.5 billion, which represents half of the total state budget.
In the energy sector, combined state and private ownership is common. The state fully owns the national gas supplier Slovak Gas Industry (SPP), and it also holds 51 percent stakes in all three electricity distribution companies, and a 49 percent stake in the gas transmission system operator. Based on an MOU signed in 2015 with the Italian utility giant Enel, the Economy Ministry holds an option to increase its stake in Slovenske Elektrarne, which controls around 70 percent of the domestic electricity generation market, to a 51 percent majority.
In 2008, the government imposed strict return guarantee requirements and fee limits on private pension funds. Many industry analysts believe the government instituted these requirements to eliminate competition with the state-run “pay-as-you-go" pension system, and to encourage investors to move their savings back into the state system.
The government’s 2008 law covering private health insurers, mentioned in the Dispute Settlement section above, is seen by some as an attempt by the government to force private companies out of the insurance business in order to consolidate the government’s role. In particular, the government’s attempt to restrict health insurers’ payments of dividends to their policyholders is widely viewed as an effort to limit competition with the state-owned insurance company and its 60 percent market share.
In 2011 the Justice Ministry introduced the compulsory disclosure of contracts in the Central Registry of Contracts by public administration and state-owned companies, in order to facilitate public monitoring of SOE operations. However, issues persist, as demonstrated by several scandals regarding public procurement in the healthcare and other sectors.
Please consult the following website for more information:
https://www.finance.gov.sk/sk/
http://www.transparency.sk/wp-content/uploads/2015/12/statne_firmy_web_a5_eng.pdf
Privatization Program
Foreign investors are free to participate in privatization programs for SOEs. Privatization occurs mainly through direct sale; initial public offerings (IPOs) are not common.
Recent statements by the Prime Minister and others indicate the state’s interest in increasing its stake in so-called “strategic" sectors, particularly in the energy sector. In February 2017 the Slovak government confirmed the March 2016 new ruling coalition manifesto calling for a ban on further privatization of “strategic" SOEs. The Prime Minister declared his government will adopt the necessary measures to exercise a right of first refusal in future transactions involving previously privatized strategic companies. Under the Economy Ministry’s supervision, the government is developing an Energy Holding structure that would manage state shares in energy companies.
8. Responsible Business Conduct
Responsible business conduct (RBC) is the basis of the European Commission’s “Europe2020" strategy aimed at creating conditions for smart, sustainable, and inclusive growth, which member states ratified in 2010. However, Slovakia has no unified or comprehensive national approach towards RBC at the government level. The Ministry of Labor, Social Affairs and Family reports on RBC and its business implications. Additionally, an increasing number of NGOs, businesses, and multinational companies promote RBC and are aware of its associated expectations and standards.
Under Slovak law, corporations can contribute up to 2 percent of their corporate income taxes to non-governmental organizations (NGOs), making this program a key funding source for NGOs. Many corporations have their own corporate social responsibility (CSR) programs. Programs range from employment and education programs for marginalized groups, to environmental initiatives, to fundraising for charities and NGOs. For example, Whirlpool has a Habitat for Humanity program; U.S. Steel Kosice has a Roma employment program; and Johnson Controls has a community volunteer program. Multiple U.S. companies have been recognized by the government and civil society for excellence in their community service efforts. The Pontis Foundation - an NGO promoting corporate philanthropy, transparency, and ethics - has for the past 16 years recognized the country’s best RBC programs with its Via Bona Awards.
Labor Code updates in recent years have strengthened employee rights protections while increasing employer obligations. A number of laws and regulations address environmental protection, including waste management, air protection, nature and landscape, water management, and others. After legislative improvements in recent years, environmental impact assessments are now systematically carried out for all proposed new projects. Slovakia is also a party to the Aarhus Protocol.
Consumer protection is guaranteed and enforced through the Civil Rights Act, Act on Consumer Protection, and the Act on E-Commerce. The Acts on Environmental Impact Assessment (act nr. 24/2006), Air (act nr.137/2010), and Waste (act nr.313/2016) govern the environmental protections affecting businesses. The mandatory Environmental Impact Assessment (EIA) process applies to a number of industries, including mining, energy, steel, chemical, pharmaceutical, wood, food and agriculture, as well as infrastructure projects. The Act on Air defines legal obligations for businesses operating equipment producing emissions, including emissions limits, monitoring and reporting in line with valid national and EU legislation. The Act on Waste valid as of January 2017 establishes the obligations for companies producing packaging, as well as rules on waste recycling and recovery, and other waste management issues. The Environment Ministry and its agencies, as well as dedicated public administration structures in municipalities, share responsibility for implementing and enforcing legal obligations on environmental protection. Large industrial companies also annually report their emissions, hazardous waste, and environmental management programs.
As an OECD member, Slovakia adheres to the OECD Guidelines for Multinational Enterprises, which represent the global gold-standard on what characterizes RBC. SARIO was designated in 2000 as the National Contact Point (NCP) for the OECD Guidelines. Please see below for the NCP’s contact information:
Mr. Marcel Sládok
Slovak Investment and Trade Development Agency (SARIO)
Trnavska cesta 100, 821 01 Bratislava, Slovakia
Tel: +421 2 4854 2309
Email: sladok@mhsr.sk
Additionally, Slovakia encourages observance of related OECD voluntary guidelines, such as the Due Diligence Guidance for Responsible Supply Chains of Minerals from Conflict-Afflicted and High-Risk Areas. Slovakia has also ratified the Extractive Industry Transparency Initiative (EITI).
Some significant concerns about RBCs persist, however. Ethnic Roma face ongoing discrimination in private sector employment and services. Not all victims seek legal redress for discrimination; however, domestic courts have in a few cases ruled in favor individuals who were represented by NGOs. The government frequently faces lawsuits and/or criticism by environmental organizations for non-enforcement of domestic law, for example concerning unlawful hunting license approval or alleged abuse of public lands by private companies. Also, after several media articles were published about poor conditions for Serbs working in Slovakia, the Ministry of Labor and Social Affairs confirmed that labor agencies had circumvented domestic labor regulations by issuing falsified work permits for hundreds of Serbs working in the auto manufacturing industry.
9. Corruption
Slovakia is a signatory to the OECD Convention on Combating Bribery of Foreign Public Officials, and the giving or accepting of a bribe constitutes a criminal act. Nevertheless, corruption continues to be among the most serious issues for the business community. According to the PwC Global Economic Crime Survey 2016, one-fourth of Slovak companies believe that they have lost business opportunities due to their rivals’ willingness to engage in bribery, and eight percent of companies stated they had been asked to pay a bribe within the last two years.
Ninety percent of Slovaks perceive corruption - particularly in public procurement and the use of EU funds - as widespread. The media regularly reports on alleged corruption or malfeasance, but few high-level officials have been prosecuted. Critics suggest political influence over the police and prosecution services impedes investigations. The government has pledged to improve the situation, but implementation is slow. The government has taken some positive steps, including adopting an anti-shell company law requiring private companies to specify their ownership structure before entering into business contracts with state entities and a third National Action Plan to combat corruption under the Open Government Partnership (OGP).
Slovak law underpins an independent judiciary; however, public confidence in the judicial system is among the lowest in the EU. Experts suggest the justice system is inefficient and remains divided on the need for reform. There are concerns about case assignment system manipulation, and court verdicts are often inconsistent and poorly justified.
There has been some recent progress, however, including improved leadership at the Supreme Court and the Judicial Council, a new legislative proposal for selecting judges, and a new specialized court to deal with the enforcement agenda. The ruling coalition has also publicly committed to further rule of law and anti-corruption reforms.
In 2011 the Justice Ministry introduced the compulsory disclosure of contracts in the Central Registry of Contracts by public administration and SOEs, which is credited as having decreased corruption. However, public tenders are still frequently associated with corruption. The government was shaken by several corruption scandals linked to public procurement in the health care sector in 2014 and 2015.
While the overall EU funds absorption rate for the programming period 2007 - 2013 improved to almost 98 percent by the end of 2016, the administration and allocation of EU funds is another area where corruption and a lack of transparency and efficiency remain problematic. According to a recent EC study, while the implementation of the 2014-2020 programming period is accelerating, Slovakia has to date allocated only 6 percent of the available structural funds due to program management issues and delays in documentation preparation. According to the study, EU structural funds will comprise around 55 percent of national public investment by 2020.
The European Commission investigated corruption complaints tied to several tenders and regulatory decisions involving EU funds. The most notable cases involved the Ministries of Environment, Labor, and Transportation.
UN Anticorruption Convention, OECD Convention on Combatting Bribery
Slovakia is a party to international treaties on corruption, among them the OECD Convention on Combating Bribery of Foreign Public Officials, the UN Anti-Organized Crime Convention, the UN Anti-Corruption Convention, and the Criminal Law Convention on Corruption and Civil Law Convention on Corruption. Slovakia is a member of the Group of States against Corruption (GRECO).
Resources to Report Corruption
Contact details of government agencies responsible for combating corruption:
Dusan Kovacik
Head of the Special Prosecutor’s Office
Office of the Special Prosecution under the General Prosecutor’s Office
Sturova 2
821 02 Bratislava
Telephone:+421 33 690 3171
Dusan.Kovacik@genpro.gov.sk
Robert Krajmer
Head of the National Anti-Corruption Unit
The Ministry of Interior, National Police Headquarters
National Criminal Agency
Pribinova 2
812 72 Bratislava
Telephone: +420 9610 56371
Robert.Krajmer@minv.sk
Contact details of “watchdog" organizations:
Gabriel Sipos
Executive Director
Transparency International Slovakia
Bajkalska 25
82718 Bratislava
Telephone: +421 2 5341 7207
sipos@transparency.sk
Pavel Sibyla
Executive Director
Stop Corruption Foundation
Stare Grunty 18
841 04 Bratislava
sibyla@zastavmekorupciu.sk
Zuzana Wienk
Executive Director
Fair Play Alliance
Smrecianska 21
811 05 Bratislava
Telephone: +421 2 207 39 919
zuzana@fair-play.sk
10. Political and Security Environment
There have been no recent reports of politically motivated damage to property or violence directed toward foreign-owned companies. Civil disturbances in Slovakia are rare.
11. Labor Policies and Practices
The Slovak labor market steadily improved in 2016. The unemployment rate dropped to 8.8 percent in December 2016, down from a peak of over 14 percent in 2013, and is projected to continue to drop through 2018. This will likely drive up nominal wages. The long-term unemployment rate, one of the highest in the EU, is still a major challenge in Slovakia, with significant regional variation due to diverse regional economic development and low labor mobility. Unemployment rates are less than 5 percent in the capital city of Bratislava, but as high as 25 percent in some parts of eastern and southern Slovakia. Employers in the IT and manufacturing sectors lament a shortage of qualified labor.
Employment of vulnerable people, including Roma, youth, women returning from maternity leave, and low-skilled workers, remains an issue. The government has recently introduced expanded support measures for the long-term unemployed, although there are still few policies supporting low-skilled workers. At the same time, the government has tightened labor regulations for the long-term unemployed, reducing public expenditures on social and health contributions for those who refuse multiple job offers within three years.
Slovakia’s economically active population was 2.7 million in 2016, 73 percent of which work in services, 23 percent in industry, and the rest in agriculture. Slovakia’s engineering and mechanical production sectors remain strong. Foreign companies frequently praise younger workers’ motivation and abilities, especially in foreign language and computer skills. However, some businesses have complained about the growing gap between their labor market needs and popular areas of study, with shortages in technical education at both the high school and higher education levels. To address this issue, the Education Ministry passed a 2015 Act on Dual Education (vocational education/apprenticeship - No 61/2015 Coll.), introducing incentives for companies to partner on vocational training programs for students. The Ministry continues to adjust this program in response to student and employer feedback.
The latest amendment to the Slovak Labor Code came into force in June 2016, and increases the administrative burden for foreign employers posting their service employees to Slovakia from another EU Member State, and from Slovakia to another EU country. Foreign employers are obliged to notify the Slovak Labor Inspectorate of the assignment details.
Slovakia has a standard workweek of 40 hours, and the new Labor Code caps overtime at 400 hours annually. Wages have risen steadily since the 2004 accession to the EU as growing levels of FDI have increased labor demand. A 2016 minimum wage law indexes the minimum wage to overall wage growth in the economy. The minimum wage was increased in 2017 from EUR 405 to EUR 435 per month (EUR 2.71 per hour). The minimum living standard is fixed at EUR 198.09 per month. The average gross monthly nominal wage in 2017 is EUR 859, up 3 percent vs. 2016.
Slovak social insurance is compulsory and includes a health allowance, unemployment insurance, and pension insurance. In 2016, an obligation to pay 14 percent health contributions on dividend profits was substituted with a 7 percent tax on dividends. In order to compensate for this revenue loss, the cap to calculate social and health contributions for employees with higher wages was abolished, so their social and health contributions will grow as of 2017.
When comparing “tax wedge" labor cost rates, Slovakia is at 43 percent, higher than the Czech Republic at 42 percent and Poland at 41 percent, but ahead of Hungary at 49 percent. The corporate income tax is currently 21 percent, down from 22 percent in 2016. The rate is below the OECD average of 25 percent and in line with comparable small OECD economies; however, it is two points higher than in the other V4 countries.
According to the OECD, 91 percent of Slovak citizens aged 25-64 have earned the equivalent of a high-school degree. Based on Eurostat data, Slovakia had the highest level of labor productivity in 2015 among the V4 countries.
Union membership has declined in recent years. The latest statistics available date from 2010, when 17 percent of the workforce was associated with trade unions. In 2007, the government re-instituted the so-called “tripartite arrangement," a discussion platform including state representatives, labor unions, and the employers’ association. Slovakia is a member of the International Labor Organization and has ratified all eight core conventions.
Strikes are infrequent in Slovakia. In 2015 and 2016 there were labor actions by both teachers and nurses, with both groups complaining about insufficient budgets and low salaries. The most recent teachers’ strikes, which lasted over a year, successfully brought the issue of an under-resourced education sector to the fore, and resulted in a modest increase to teacher salaries: the Education Ministry pledged to raise their pay by 6 percent by September 2017 and continue the increases annually until 2020.
The cost to lay off employees in Slovakia is generally less expensive than in Western Europe. These costs depend mostly on the employee’s service time:
* up to 1 year - 1 month notice period, with no severance pay
* 2 to 5 years - 2 month notice period, 1 month salary severance
* 5 to 10 years - 3 month notice period, 2 month salary severance
* 10 and more years - 3 month notice period, 3 month salary severance.
Please consult the following website for more information:
SlovStat - http://www.upsvar.sk/buxus/generate_page.php?page_id=582328
http://www.zakonypreludi.sk/zz/2001-311
12. 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 through its 1990 agreement between Slovakia and the U.S. OPIC can provide specialized insurance coverage for certain contracting, exporting, licensing, and leasing transactions that U.S. investors undertake in Slovakia. Slovakia is a member of the World Bank Group’s Multilateral Investment Guarantee Agency (MIGA) that also provides political risk insurance.
13. Foreign Direct Investment and Foreign Portfolio Investment Statistics
Table 2: Key Macroeconomic Data, U.S. FDI in Host Country/Economy
* Sources:
* http://ec.europa.eu/eurostat/data/database
* http://www.nbs.sk/sk/statisticke-udaje/statistika-platobnej-bilancie/priame-zahranicne-investicie
Table 3: Sources and Destination of FDI
Table 4: Sources of Portfolio Investment
14. Contact for More Information
D.R. Seckinger
Senior Economic Officer
U.S. Embassy Bratislava
+421 (2) 5922 3412
SeckingerDR@state.gov
Tags
Bureau of Economic and Business Affairs Bureau of European and Eurasian Affairs Slovakia
Source: U.S Department of State, Bureau of European and Eurasian Affairs
