Slovakia is bordered by the Czech Republic and Austria to the west, Poland to the north, Ukraine to the east and Hungary to the south. The largest city is the capital, Bratislava, and the second largest is Kosice. Slovakia is a member state of the European Union, NATO, United Nations, OECD and WTO among others. Slovakia is a high-income advanced economy, according to the IMF. Slovakia also has one of the fastest growth rates in the European Union and the OECD, as mentioned in the CIA World Factbook.
Business in Slovakia
With the country dubbed the “Tatra Tiger”. Slovakia has transformed from a centrally planned economy to a market-driven economy. Major privatizations are nearly complete, the banking sector is almost completely in private hands, and foreign investment has risen. Slovakia is an attractive country for foreign investors mainly because of its low wages, low tax rates and well educated labour force. Although Slovakia’s GDP comes mainly from the services sector, the industrial sector also plays an important role within its economy. The main industry sectors are car manufacturing and electrical engineering. Since 2007, Slovakia has been the world’s largest producer of cars per capita, with a total of 571,071 cars manufactured in the country in 2007 alone, as reported by Industry Week. Slovakia features natural landscapes, mountains, caves, medieval castles and towns, folk architecture, spas and ski resorts. More than 1.6 million people visited Slovakia in 2006, and the most attractive destinations are the capital of Bratislava and the High Tatras. Most visitors come from the Czech Republic (about 26%), Poland (15%) and Germany (11%).
Business Growth in Slovakia
In 2007, Slovakia reached the highest economic growth among the members of OECD and the EU. The annual GDP growth was 10.4% at constant prices, with the record level of 14.3% reached in the fourth quarter, according to statistics published by the Slovakian government. In 2010, Slovakia grew by 4.0% which was the highest growth among new EU member states. In recent years, Slovakia has been pursuing a policy of encouraging foreign investment. FDI inflow grew more than 600% from 2000 and cumulatively reached an all-time high of $17.3 billion USD in 2006, or around $22,000 per capita by the end of 2008. Foreign direct investment in Slovakia has increased dramatically. Cheap and skilled labor, a 19% flat tax rate for both businesses and individuals, no dividend taxes, a weak labor code, and a favorable geographical location are Slovakia’s main advantages for foreign investors. Foreign investment sectors – industry 38.4%; banking and insurance 22.2%; wholesale and retail trade 13.1%; production of electricity, gas and water 10.5%; transport and telecommunications 9.2%. The Slovakian economy can be broken down into the following sectors, agriculture: 2.7%; industry: 35.6%;services: 61.8%, as estimated in 2010.
Does The Business Growth in Slovakia Make It Worth Investing In?
Does the business growth in Slovakia make it worth investing in? Overall, Slovakia is a decent market to invest in. It is not particularly large, with a population of only 5,445,324, as estimated by the Slovakian government in 2010. But the market is relatively rich, with a GDP per capita of $23,400 and a nominal GDP of $127.1 billion as estimated by the IMF in 2011. In addition, Slovakia was ranked 48th in the World Bank’s Doing Business study for 2012. In the same study, Slovakia was ranked 71st for Enforcing Contracts, 95th for Trading Across Borders, and 111th for Protecting Investors. So clearly their are areas, where Slovakia needs to work on in terms of attracting more foreign businesses. But overall the country did well. The Slovakia market is quite competitive since many foreign businesses already operate in that market. With one study on origin of foreign investment from 1996-2005, reporting the following numbers the Netherlands 24.3%; Germany 19.4%, Austria 14.1%; Italy 7.5%, United States 4.0%. So clearly while the market is competitive, their is enough promise in the market to drive many foreign businesses to invest in Slovakia.