Slovakia: Opportunities for Investors
Slovakia is an attractive location for investors due to several reasons: Since July 2003, Slovakia has a labor code, which provides greater flexibility in working time, variable job contracts and the use of temporary workers.
Moreover a flat tax was introduced in 2004. It is only 19% and this has a substantial impact on foreign investors. However, it is not only the low rate but also the simplification of the tax system, which is very encouraging for companies. Every business activity is taxed on the same rate of 19%, so firms do not need to spend their energy on optimizing their financial statements. Therefore corporations can enhance their core businesses more effectively, resulting in improved performance and a substantial boost to local productivity. To avoid double taxation (or taxing income, which was already taxed) dividend tax and inheritance tax rates are set to 0%.
Relatively low available capital allows banks to provide their services with higher margins and lower risks than in the neighboring countries. A strengthening Slovak Crown, the local currency, reinforces investment opportunities in the country.
The main reason for FDI is still the abundance of skilled and inexpensive labor that helps foreign investors to flourish. Only in Latvia, Lithuania and Estonia labor costs are lower than in Slovakia, but none of the three has the geographical and cultural proximity to Western markets which Slovakia provides. Thus in today’s economies in which speed to market and efficient sourcing provide enormous advantages, the three mentioned countries mainly service Scandinavian countries.
Slovakia is strategically positioned: it connects the former Soviet Union (Ukraine) with the West (Austria). Its capital, Bratislava, split by the Danube River is the only capital in Europe which is adjacent to two other countries (Austria and Hungary). Bratislava has its own international airport, train and bus stations, and a port on the Danube River linking Vienna and Budapest, which makes it perfectly suited for a logistics and distribution hub connecting the countries Austria, Czech Republic, Slovakia, and Hungary.
Bratislava’s strategic location and relatively small size make the city very attractive for the establishment of corporate headquarters or regional offices. For example, lower rent for luxurious offices makes Bratislava interesting. Johnson Controls already created the CEE headquarters in Bratislava and several other companies plan to do that soon. Traffic jams are almost nonexistent compared to those in larger Western cities. This allows higher quality of life and greater productivity. Bratislava’s location will become even more attractive after Slovakia joins Schengen zone in 2008. Then travelers will no longer need to stop and show their IDs or passports when crossing the border.
Slovakia is the 6th largest car producing country (per 1,000 people) worldwide. At present, we have three automotive manufacturers: Volkswagen, Hyundai/KIA and PSA and a fourth is planned to build its own factory in East of Slovakia. Until end of 2007 Slovakia will be top car producer in the world with 180 cars/1000 people.
