SLOVAKIA - INVESTMENT CLIMATE STATEMENT 2005

UNCLAS BRATISLAVA 000038

SIPDIS


DEPT FOR EB/IFD/OIA JHATCHER, ATBRYAN AND PBROWN
DEPT PASS TO USTR AND OPIC

E.O. 12958: N/A
TAGS: ECON KTDB LO OPIC USTR
SUBJECT: SLOVAKIA - INVESTMENT CLIMATE STATEMENT 2005

REF: 04 STATE 250356

--------------
OVERVIEW
--------------


1. SINCE 1998, SLOVAKIA'S ONCE TROUBLED ECONOMY HAS BEEN
TRANSFORMED INTO A BUSINESS FRIENDLY STATE THAT LEADS THE REGION
IN ECONOMIC GROWTH. IN ITS DOING BUSINESS IN 2005 REPORT, THE
WORLD BANK NAMED SLOVAKIA AS THE WORLD'S TOP REFORMER IN
IMPROVING ITS INVESTMENT CLIMATE OVER THE LAST YEAR, ALLOWING IT
TO JOIN THE TOP 20 ECONOMIES IN THE WORLD FOR EASE OF DOING
BUSINESS. THE COUNTRY'S LOW-COST YET SKILLED LABOR FORCE, LOW
TAXES, LIBERAL LABOR CODE AND FAVORABLE GEOGRAPHIC LOCATION HAVE
HELPED IT BECOME ONE OF EUROPE'S FAVORITE INVESTMENT MARKETS,
LEADING FORBES MAGAZINE TO CALL IT THE WORLD'S NEXT HONG KONG OR
IRELAND.


2. SLOVAKIA IS A MEMBER OF THE EU, NATO AND THE OECD, AND HOLDS
INVESTMENT GRADE RATINGS FROM ALL THREE MAJOR RATING AGENCIES.
THE WALL STREET JOURNAL'S AND HERITAGE FOUNDATION'S 2004 ECONOMIC
FREEDOM INDEX RANKED SLOVAKIA 35TH OUT OF THE 155 COUNTRIES
EXAMINED. SLOVAKIA'S LEAP FROM 67TH PLACE IN 2003 WAS THE
BIGGEST IMPROVEMENT IN EUROPE AND EIGHTH LARGEST WORLDWIDE. IN
COMPARISON, THE CZECH REPUBLIC FINISHED IN 32ND PLACE, HUNGARY
42ND AND POLAND 56TH. ACCORDING TO THE GLOBAL COMPETITIVENESS
REPORT 2004-2005 ISSUED BY THE WORLD ECONOMIC FORUM, SLOVAKIA
CLIMBED FROM 43RD TO 39TH IN THE BUSINESS COMPETITIVENESS INDEX.
IN THE POLL OF 104 NATIONS, SLOVAKIA RANKED AS THE 9TH MOST
FAVORABLE ECONOMY IN TERMS OF TAX BURDENS.


3. ACCORDING TO GOS STATISTICS, IN 1998 SLOVAKIA HAD ONLY ONE-
SIXTH AS MUCH CUMULATIVE FOREIGN DIRECT INVESTMENT (FDI) PER
CAPITA AS HUNGARY OR THE CZECH REPUBLIC. THE SITUATION CHANGED
DRAMATICALLY WITH THE ELECTION OF PRIME MINISTER MIKULAS
DZURINDA'S GOVERNMENT IN 1998. SINCE THEN, CUMULATIVE FDI HAS
INCREASED SIX FOLD TO USD 11.46 BILLION AT THE END OF THE FIRST
THREE QUARTERS IN 2004. MOREOVER, SLOVAKIA SCORED A MAJOR
VICTORY IN 2004 BY ATTRACTING A USD 1.5 BILLION INVESTMENT FROM
HYUNDAI FOR ITS FIRST EUROPEAN ASSEMBLY PLANT, AS WELL AS A USD
400 MILLION INVESTMENT FROM FORD FOR A GEARBOX PRODUCTION PLANT.
A RECENT SURVEY BY THE U.S. EMBASSY SHOWED U.S. INVESTMENT IN
SLOVAKIA AT OVER USD 3.0 BILLION FOR CURRENT AND FUTURE
COMMITMENTS. (NOTE: OFFICIAL GOS STATISTICS DIFFER BECAUSE SOME
FOREIGN INVESTMENTS ARE CREDITED TO THIRD COUNTRIES DEPENDING ON
FINANCING ARRANGEMENTS).

--------------
OPENNESS TO FOREIGN INVESTMENT
--------------


4. THE GOS INCENTIVE PROGRAM PROVIDES FOR VARYING LEVELS OF AID
DEPENDING ON THE PER CAPITA GROSS DOMESTIC PRODUCT (GDP) OF THE
REGION IN WHICH THE INVESTMENT IS LOCATED. AREAS WITH A PER
CAPITA GDP OF LESS THAN 60 PERCENT OF THE EU AVERAGE ARE ELIGIBLE
TO RECEIVE STATE AID EQUAL TO 50 PERCENT OF OVERALL COSTS OF
PROCURING AN INVESTMENT. REGIONS WITH A PER CAPITA GDP OF 60 TO
75 PERCENT OF THE EU AVERAGE CAN RECEIVE STATE AID EQUAL TO 40
PERCENT OF COSTS, AND THOSE AREAS WITH A PER CAPITA GDP EXCEEDING
75 PERCENT OF THE EU AVERAGE CAN RECEIVE 20 PERCENT. THIS MAKES
ALL REGIONS IN SLOVAKIA ELIGIBLE FOR THE MAXIMUM AMOUNT OF AID,
EXCEPT BRATISLAVA, WHERE THE RATE IS 20 PERCENT. CERTAIN
PROVISIONS APPLY TO SOME SENSITIVE INDUSTRIAL SECTORS, SUCH AS
THE AUTOMOTIVE INDUSTRY.


5. TO QUALIFY FOR AID, A COMPANY MUST INVEST A MINIMUM OF SKK
400 MILLION (USD 13.8 MILLION) IF LOCATING IN AREA WITH
UNEMPLOYMENT OF LESS THAN 10 PERCENT AND A MINIMUM OF SKK 200
MILLION (USD 6.9 MILLION) OTHERWISE. HOWEVER, THE MINISTRY OF
ECONOMY HAS RECENTLY WORKED OUT NEW RULES FOR GRANTING STATE AID,
WHICH SHOULD BE ENACTED LATER IN 2005. BESIDES STATE AID,
SLOVAKIA CURRENTLY OFFERS THE MOST ADVANTAGEOUS TAX ENVIRONMENT
FOR CORPORATIONS FROM ALL OECD AND EU STATES. IN 2004, THE
COUNTRY IMPOSED A FLAT INCOME TAX RATE OF 19 PERCENT, BOTH FOR
CORPORATIONS AND INDIVIDUALS. IN ADDITION, THE GOS STOPPED
WITHHOLDING TAXES ON DIVIDENDS, THUS PERMITTING FOREIGN FIRMS TO
PAY BACK PARENT COMPANIES WITHOUT THE STATE TAKING A CUT.


6. IN 2004, THE GOS GRANTED A TOTAL OF SKK 7.95 BILLION (USD 274
MILLION) IN STATE AID TO 18 PROJECTS, OF WHICH SKK 7.35 BILLION
(USD 253.5 MILLION) WAS PROVIDED IN THE FORM OF TAX RELIEF AND
SKK 600.4 MILLION (USD 20.5 MILLION) AS EDUCATION AND RE-
QUALIFICATION GRANTS. THE 2005 GOS BUDGET PROJECTS EXPENDITURES
FOR INVESTMENT INCENTIVES OF SKK 3.7 BILLION (USD 127.4 MILLION),
WITH A LARGE MAJORITY OF IT GOING TO THE TWO LARGEST PROJECTS IN
THE COUNTRY, THE CAR PLANTS OF HYUNDAI/KIA AND PEUGEOT (SEE
PARAGRAPH 10 FOR ADDITIONAL INFORMATION). POTENTIALLY, THE 2005
BUDGET ALLOCATION STATE AID COULD BE INCREASED AS IT WAS IN 2004.
(NOTE: SIMPLY QUALIFYING FOR STATE AID DOES NOT GUARANTEE THAT IT
WILL BE GRANTED, DISPERSAL OF FUNDS DEPENDS ON BUDGET

ALLOCATIONS).


7. THE INDUSTRIAL PARK LAW HELPS MUNICIPALITIES DEVELOP SPECIAL
INDUSTRIAL ZONES THROUGH FUNDING ASSISTANCE FROM THE GOS. THE
GOS CAN FUND UP TO 85 PERCENT OF THE OVERALL COST RELATED TO THE
PURCHASE OF LAND AND DEVELOPMENT OF INFRASTRUCTURE IN AN
INDUSTRIAL PARK. IN REGIONS WITH AN UNEMPLOYMENT RATE EXCEEDING
10 PERCENT, STATE CO-FINANCING COULD COVER AS MUCH AS 95 PERCENT
OF ALL ELIGIBLE COSTS (NOTE: THIS EXEMPTION APPLIES TO VIRTUALLY
ALL REGIONS IN SLOVAKIA, EXCEPT FOR WESTERN SLOVAKIA). THE 2005
STATE BUDGET SET ASIDE SKK 132 MILLION (USD 4.6 MILLION) FOR
CAPITAL EXPENDITURES RELATED TO THIS ACT. CURRENTLY, THERE ARE
SEVERAL WELL-DEVELOPED INDUSTRIAL PARKS IN SLOVAKIA READY FOR
INVESTMENT. A WEBSITE "HTTP://WWW.SARIO.SK", OFFERS MORE
INFORMATION.


8. THE FIRST DZURINDA ADMINISTRATION SIGNALED ITS OPENNESS TO
FDI BY RESCINDING THE PREVIOUS GOVERNMENT'S LAW ON STRATEGIC
PRIVATIZATION, WHICH PROHIBITED PRIVATIZATION OF NUMEROUS STATE-
OWNED ENTERPRISES. THE CURRENT LAW PERMITS COMPLETE
PRIVATIZATION OF MOST BUSINESSES AND ALLOWS FOR 49-PERCENT
FOREIGN OWNERSHIP AND MANAGEMENT CONTROL OF THE NATURAL GAS
COMPANY, THE ELECTRIC POWER PRODUCER, ELECTRICITY DISTRIBUTORS,
AND AN OIL PIPELINE. ALL OF THESE PRIVATIZATIONS, EXCEPT FOR
ELECTRICITY PRODUCTION, HAVE BEEN COMPLETED. THE STATE MUST
STILL RETAIN OWNERSHIP OF RAILROAD RIGHTS OF WAY, POSTAL
SERVICES, WATER SUPPLIES (BUT NOT SUPPLIERS) AND FORESTRY
COMPANIES.


9. AS A RESULT OF INVESTMENT LIBERALIZATION EFFORTS, SLOVAKIA
HAS SIGNIFICANTLY NARROWED THE INVESTMENT GAP WITH ITS NEIGHBORS.
BY THE END OF THE THIRD QUARTER OF 2004, SLOVAKIA'S PER CAPITA
FDI HAD RISEN TO USD 2,131, COMPARED TO USD 1,097 IN POLAND (END-
2003 FIGURE),USD 4,419 IN THE CZECH REPUBLIC AND USD 4,489 IN
HUNGARY. IN JANUARY 2005, THE SLOVAK INVESTMENT AND TRADE
DEVELOPMENT AGENCY (SARIO) SAID IT HAD SIGNED 47 INVESTMENT DEALS
IN 2004 VALUED AT USD 2.26 BILLION, UP FROM 22 DEALS FOR USD 1.55
BILLION IN 2003, AND IT ADDED 260 MORE WERE IN THE WORKS.


10. THE BIGGEST 2004 CONTRACTS INCLUDED A USD 140-MILLION
INVESTMENT BY SWISS RECORDABLE MEDIA PRODUCER SKY MEDIA, A USD
230 MILLION INVESTMENT BY SWISS GLASS COMPANY GLAS TROESCH AG AND
A USD 65 MILLION INVESTMENT BY U.S. SECOND LARGEST CAR SUPPLIER
VISTEON. IN THE LAST TWO YEARS, SLOVAKIA HAS ATTRACTED THREE BIG
AUTOMOTIVE PROJECTS, I.E. A USD 930 MILLION CAR PLANT BY PEUGEOT,
EUROPE'S SECOND LARGEST CARMAKER, A USD 1.5 BILLION INVESTMENT
FROM HYUNDAI/KIA, THE WORLD'S SEVENTH BIGGEST CAR PRODUCER AND A
USD 400 MILLION INVESTMENT FROM FORD, THE SECOND LARGEST CAR
COMPANY IN THE U.S. TOGETHER WITH VOLKSWAGEN, CARMAKERS IN
SLOVAKIA ARE PROJECTED TO SHIP AROUND 850,000 VEHICLES A YEAR BY

2007. AT THAT LEVEL, THE COUNTRY WOULD HAVE THE WORLD'S LARGEST
AUTO PRODUCTION PER CAPITA.

--------------
CONVERSION AND TRANSFER POLICIES
--------------


11. THE SLOVAK CROWN (SKK) IS FULLY CONVERTIBLE FOR CURRENT
ACCOUNT AND CAPITAL TRANSACTIONS. IN 1998, THE SLOVAK CENTRAL
BANK (NBS) ABANDONED THE PEG (A BASKET CONSISTING OF 60 PERCENT
GERMAN MARKS AND 40 PERCENT U.S. DOLLARS) AND PERMITTED THE CROWN
TO FLOAT. SINCE THEN (THROUGH THE END OF 2004),THE CROWN HAS
APPRECIATED 3.8 PERCENT COMPARED TO THE FORMER PARITY. THE
AVERAGE EXCHANGE RATE IN 2004 WAS SKK 32.55 TO ONE U.S. DOLLAR,
ALTHOUGH THIS RATE DROPPED TO SKK 29 IN DECEMBER. THE AVERAGE
RATE FOR 2003 WAS SKK/USD 36.77 AND IN 2002 SKK/USD 45.34.


12. THE FOREIGN EXCHANGE ACT GOVERNS FOREIGN EXCHANGE OPERATIONS
AND ONE CAN EASILY CONVERT OR TRANSFER FUNDS ASSOCIATED WITH AN
INVESTMENT INTO A FREELY CONVERTIBLE CURRENCY. AS A MEMBER OF
THE OECD, SLOVAKIA MEETS ALL INTERNATIONAL STANDARDS FOR
CONVERSION AND TRANSFER POLICY. 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). SINCE
JANUARY 2004, AN AMENDMENT TO THE FOREIGN EXCHANGE ACT AUTHORIZED
SLOVAK RESIDENTS TO OPEN ACCOUNTS ABROAD AND ELIMINATED THE
OBLIGATION TO TRANSFER FINANCIAL ASSETS ACQUIRED ABROAD INTO
SLOVAKIA. NO PERMISSION IS NEEDED TO ISSUE FOREIGN SECURITIES IN
SLOVAKIA, AND SLOVAKS ARE FREE TO TRADE, BUY AND SELL FOREIGN
SECURITIES.

--------------
EXPROPRIATION AND COMPENSATION
--------------


13. IN 2004, SLOVAKIA WITNESSED ONE EXPROPRIATION CASE, WIDELY
CONSIDERED AN ANOMALY. THE GOS BEGAN AN EXPROPRIATION PROCESS
FOR LAND FROM LOCAL FARMERS TO USE FOR THE SITE OF HYUNDAI/KIA'S
CAR PLANT - THE COUNTRY'S LARGEST FOREIGN GREENFIELD INVESTMENT

EVER. AN INDEPENDENT PANEL ESTABLISHED THE MARKET VALUE OF THE
LAND AND THE GOS PAID THIS AMOUNT; SOME LANDOWNERS HAVE APPEALED.
THE CONSTITUTION, AS WELL AS THE COMMERCIAL AND CIVIL CODES,
PERMITS EXPROPRIATION ONLY IN EXCEPTIONAL CASES OF PUBLIC
INTEREST, AND COMPENSATION MUST BE PROVIDED. THE LAW ALSO
PROVIDES FOR AN APPEAL PROCESS.

--------------
DISPUTE SETTLEMENT
--------------


14. THERE HAVE BEEN NO MAJOR INVESTMENT DISPUTES IN SLOVAKIA IN
RECENT YEARS. SLOVAKIA IS A CONTRACTING STATE OF THE
INTERNATIONAL CENTER FOR THE SETTLEMENT OF INVESTMENT DISPUTES
(ESTABLISHED UNDER THE 1966 WASHINGTON CONVENTION) AND IS A
MEMBER OF THE 1958 NEW YORK CONVENTION ON THE RECOGNITION AND
ENFORCEMENT OF FOREIGN ARBITRAGE AWARDS.


15. THE SLOVAK LEGAL SYSTEM IS COMPRISED OF 55 DISTRICT COURTS,
EIGHT REGIONAL COURTS, AND A SUPREME COURT, ALL OF WHICH ARE
UNDER THE JURISDICTION OF THE MINISTRY OF JUSTICE. JUDGES ARE
APPOINTED INITIALLY FOR A TERM OF FOUR YEARS AND SUBSEQUENTLY
EITHER RE-APPOINTED FOR LIFE OR REMOVED FROM OFFICE. ONCE
APPOINTED FOR LIFE, JUDGES MAY BE REMOVED ONLY FOR CAUSE. MOST
CRIMINAL CASES AND MINOR CIVIL CASES ARE HANDLED BY DISTRICT
COURTS, WHILE REGIONAL COURTS HEAR APPEALS AND MAJOR CRIMINAL AND
CIVIL CASES. THE SUPREME COURT IN BRATISLAVA IS THE COURT OF
FINAL REVIEW EXCEPT FOR CONSTITUTIONAL CASES, WHICH ARE UNDER THE
EXCLUSIVE JURISDICTION OF THE CONSTITUTIONAL COURT. THE FUNCTION
OF THE SLOVAK CONSTITUTIONAL COURT IS SIMILAR TO THAT OF THE U.S.
SUPREME COURT, EXCEPT THE PRESIDENT APPOINTS JUDGES TO THE
CONSTITUTIONAL COURT FOR A SINGLE TERM OF SEVEN YEARS.


16. THE LEGAL SYSTEM ENFORCES PROPERTY AND CONTRACTUAL RIGHTS,
BUT DECISIONS MAY TAKE YEARS, THUS LIMITING THE UTILITY OF THE
COURTS FOR DISPUTE RESOLUTION. SLOVAK COURTS RECOGNIZE AND
ENFORCE FOREIGN JUDGMENTS, SUBJECT TO THE SAME DELAYS. THE
COMMERCIAL CODE SEEMS TO BE APPLIED CONSISTENTLY. A BANKRUPTCY
LAW EXISTS BUT HAS NOT BEEN AS EFFECTIVE AS NEEDED AND
ENFORCEMENT REMAINS ERRATIC. SLOVAKIA ACCEPTS BINDING
INTERNATIONAL ARBITRATION, AND THE SLOVAK CHAMBER OF COMMERCE AND
INDUSTRY HAS A COURT OF ARBITRATION FOR ALTERNATIVE DISPUTE
RESOLUTION; NEARLY ALL CASES INVOLVE DISPUTES BETWEEN SLOVAK AND
FOREIGN PARTIES. SLOVAK DOMESTIC COMPANIES GENERALLY DO NOT MAKE
USE OF ARBITRATION CLAUSES IN CONTRACTS.


17. SLOVAKIA RECOGNIZES SECURED INTERESTS IN IMMOVABLE PROPERTY,
NORMALLY SECURED BY PHYSICAL POSSESSION OF, OR A CONVEYED TITLE
TO, THE PROPERTY IN QUESTION UNTIL THE LOAN IS REPAID. THERE IS
A RECOGNIZED PROCEDURE FOR FORECLOSURES, WHICH SPECIFIES HOW
EVICTIONS ARE HANDLED, DEBTS ARE REPAID AND ANY REMAINING FUNDS
ARE RETURNED TO THE TITLEHOLDER. AS OF 2003, SLOVAKIA HAS IN
PLACE ONE OF THE MOST ADVANCED FRAMEWORKS FOR REGISTERING
SECURITY INTERESTS IN MOVEABLE PROPERTY OF ANY COUNTRY IN EUROPE.

--------------
PERFORMANCE REQUIREMENTS/INCENTIVES
--------------


18. SLOVAKIA HAS NO FORMAL PERFORMANCE REQUIREMENTS FOR
ESTABLISHING, MAINTAINING, OR EXPANDING FOREIGN INVESTMENTS.
HOWEVER, SUCH REQUIREMENTS MAY BE INCLUDED AS CONDITIONS OF
SPECIFIC NEGOTIATIONS FOR PROPERTY INVOLVED IN LARGE-SCALE
PRIVATIZATION BY DIRECT SALE OR PUBLIC AUCTION. (NOTE: SEE THE
"OPENNESS TO FOREIGN INVESTMENT" SECTION FOR DETAILS ON
INCENTIVES). THERE ARE NO OBSTACLES FOR FOREIGN ENTITIES TO
PARTICIPATE IN GOS FINANCED AND/OR SUBSIDIZED RESEARCH AND
DEVELOPMENT PROGRAMS AND RECEIVE EQUAL TREATMENT AS DOMESTIC
ENTITIES. THE CURRENT GOVERNMENT ABOLISHED DOMESTIC OWNERSHIP
REQUIREMENTS FOR TELECOMMUNICATIONS AND BROADCAST LICENSES.

--------------
RIGHT TO PRIVATE OWNERSHIP AND ESTABLISHMENT
--------------


19. FOREIGN AND DOMESTIC PRIVATE ENTITIES HAVE THE RIGHT TO
ESTABLISH AND OWN BUSINESS ENTERPRISES AND ENGAGE IN ALL FORMS OF
REMUNERATIVE ACTIVITY IN SLOVAKIA. COMPETITIVE EQUALITY IS THE
STANDARD BY WHICH PRIVATE ENTERPRISES COMPETE WITH PUBLIC
ENTITIES. IN ADDITION, BUSINESSES ARE ABLE TO CONTRACT DIRECTLY
WITH FOREIGN ENTITIES. PRIVATE ENTERPRISES ARE FREE TO
ESTABLISH, ACQUIRE AND DISPOSE OF BUSINESS INTERESTS, BUT ALL
SLOVAK OBLIGATIONS OF LIQUIDATED COMPANIES MUST BE PAID BEFORE
ANY REMAINING FUNDS ARE TRANSFERRED OUT OF SLOVAKIA. NON-
RESIDENTS FROM EU AND OECD MEMBER COUNTRIES CAN ACQUIRE REAL
ESTATE FOR BUSINESS PREMISES. FOR A TRANSITIONAL PERIOD OF SEVEN
YEARS STARTING MAY 1, 2004, FOREIGN LEGAL ENTITIES CAN BUY
AGRICULTURAL AND FORESTRY LAND, AS WELL AS LAND IN RESIDENTIAL
AREAS ONLY IF THEY ESTABLISH A LEGALLY REGISTERED SLOVAK COMPANY.
FROM JANUARY 2004, THERE ARE NO RESTRICTIONS FOR SLOVAK RESIDENTS

ON THE PURCHASE, EXCHANGE AND SALE OF REAL ESTATE ABROAD.

--------------
PROTECTION OF PROPERTY RIGHTS
--------------


20. SECURED INTERESTS IN PROPERTY AND CONTRACTUAL RIGHTS ARE
RECOGNIZED AND ENFORCED. THE MORTGAGE MARKET IN SLOVAKIA IS
GROWING AND A RELIABLE SYSTEM OF RECORDING SUCH INTERESTS EXISTS.
HOWEVER, TITLES TO REAL PROPERTY ARE OFTEN UNCLEAR AND CAN TAKE
SIGNIFICANT AMOUNTS OF TIME TO DETERMINE. THE GOS RECOGNIZES
THIS PROBLEM AND IS TAKING STEPS TO RESOLVE IT. UNFORTUNATELY,
LEGAL DECISIONS MAY STILL TAKE YEARS, THUS LIMITING THE UTILITY
OF THE SYSTEM FOR DISPUTE RESOLUTION.


21. SLOVAK COURTS RECOGNIZE AND ENFORCE FOREIGN JUDGMENTS,
SUBJECT TO THE AFOREMENTIONED DELAYS, AND THE COMMERCIAL CODE IS
APPLIED CONSISTENTLY. A BANKRUPTCY LAW EXISTS, BUT HAS NOT BEEN
FULLY EFFECTIVE, DESPITE SEVERAL AMENDMENTS TO STRENGTHEN IT.
THERE IS ALSO A CONVICTION IN BUSINESS CIRCLES THAT CORRUPTION
STILL PERSISTS TO BE A SIGNIFICANT FACTOR IN THE COURT SYSTEM.


22. PROTECTION OF INTELLECTUAL PROPERTY RIGHTS FALLS UNDER THE
JURISDICTION OF TWO AGENCIES. THE INDUSTRIAL PROPERTY OFFICE IS
RESPONSIBLE FOR MOST AREAS AND THE MINISTRY OF CULTURE IS
RESPONSIBLE FOR COPYRIGHTS (INCLUDING SOFTWARE). SLOVAKIA IS A
MEMBER OF THE WORLD TRADE ORGANIZATION (WTO),THE EUROPEAN PATENT
ORGANIZATION AND THE WORLD INTELLECTUAL PROPERTY ORGANIZATION
(WIPO). SLOVAKIA ADHERES TO 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. IN GENERAL, PATENTS,
COPYRIGHTS, TRADEMARKS AND SERVICE MARKS, TRADE SECRETS, AND
SEMICONDUCTOR CHIP DESIGN APPEAR ADEQUATELY PROTECTED UNDER
SLOVAK LAW AND PRACTICE.


23. AT PRESENT, PATENT PROTECTION IS NOT ADEQUATE FOR
PHARMACEUTICALS, ALTHOUGH THE GOS HAS PLEDGED TO REMEDY THIS
SITUATION. THE WTO TRIPS AGREEMENT IS LEGALLY IN FORCE IN
SLOVAKIA, BUT THERE HAVE BEEN NO CASES BROUGHT TO TEST ACTUAL
ENFORCEMENT. IN 2004, SLOVAKIA REMAINED ON THE WATCH LIST (THE
LOWEST LEVEL OF VIOLATION) OF THE U.S. TRADE REPRESENTATIVE'S
ANNUAL INTERAGENCY "SPECIAL 301" REVIEW FOR FAILING TO ADEQUATELY
PROTECT PATENT RIGHTS WITHIN THE PHARMACEUTICAL SECTOR.

--------------
TRANSPARENCY OF THE REGULATORY SYSTEM
--------------


24. IN GENERAL, TRANSPARENCY AND PREDICTABILITY HAVE BEEN
PROBLEMATIC FOR MANY ISSUES INVOLVING INVESTORS. THE PROCESS OF
OBTAINING RESIDENCY PERMITS FOR EXPATRIATE MANAGERS HAS BEEN
WIDELY CRITICIZED AS DIFFICULT AND TIME-CONSUMING. INVESTORS
ALSO COMPLAIN THAT PURCHASING LAND AND OBTAINING BUILDING PERMITS
ARE LONG AND UNPREDICTABLE PROCESSES. FORMERLY, INCONSISTENCIES
WITHIN THE TAX SYSTEM HAD BEEN A PROBLEM, BUT A MAJOR TAX REFORM
IN 2004 HAS DRAMATICALLY IMPROVED THIS SITUATION. TODAY, MANY
OBSERVERS CONSIDER SLOVAKIA'S FLAT RATE TAX SYSTEM TO BE ONE OF
THE SIMPLEST IN EUROPE.


25. THE COMMERCIAL CODE AND THE 1991 ECONOMIC COMPETITION ACT
GOVERN COMPETITION POLICY IN SLOVAKIA. THE ANTI-MONOPOLY OFFICE
IS RESPONSIBLE FOR PREVENTING NONCOMPETITIVE SITUATIONS. THE
2003 LAW ON PUBLIC PROCUREMENT HARMONIZES SLOVAK LAW WITH ALL
RELEVANT EU DIRECTIVES ON PUBLIC PROCUREMENT. IN RECENT YEARS,
THE OFFICE OF PUBLIC PROCUREMENT, THE SUPERVISION BODY OF THE
PROCUREMENT PROCESS, HAS BEEN EMBROILED IN SEVERAL CONTROVERSIAL
PUBLIC TENDERS. MOREOVER, IN 2003, AS MUCH AS 70 PERCENT OF USD
2 BILLION OF CONTRACTS PROVIDED BY STATE ORGANS WENT TO
CONTRACTORS CHOSEN IN A NEGOTIATED PROCEDURE WITHOUT FORMAL
PUBLIC NOTICE. THE SLOVAK CHAPTER OF TRANSPARENCY INTERNATIONAL
(TI) WARNS THAT THIS METHOD LEAVES VAST SPACE FOR CORRUPTION.

-------------- --------------
EFFICIENT CAPITAL MARKETS AND PORTFOLIO INVESTMENT
-------------- --------------


26. AFTER SLOVAKIA JOINED THE OECD, THE EXPORT OF CAPITAL AND
OUTWARD DIRECT INVESTMENT WERE LIBERALIZED TO CONFORM TO
INTERNATIONAL STANDARDS. AS OF JUNE 2004, THE SLOVAK BANKING
SECTOR WAS COMPRISED OF 20 BANKS, INCLUDING TWO BRANCHES OF
FOREIGN BANKS AND THREE SPECIALIZED BANKING INSTITUTIONS.
CITIBANK IS THE ONLY U.S. BANK IN SLOVAKIA. THE ONCE-BATTERED
SECTOR IS NOW 97 PERCENT FOREIGN OWNED (WITH ONLY ONE MEDIUM-
SIZED BANK, IN TERMS OF ASSETS, FULLY CONTROLLED BY DOMESTIC
OWNERS) AND HAS WITNESSED A DRAMATIC RECOVERY. THROUGH OCTOBER
2004, THE ASSETS OF ALL SLOVAK BANKS TOTALED USD 38.2 BILLION, AN
INCREASE OF 11.5 PERCENT FROM THE PREVIOUS YEAR. THE TOTAL

VOLUME OF CLASSIFIED LOANS WAS USD 1.44 BILLION, WITH PROVISIONS
OF USD 885.6 MILLION COVERING 61.5 PERCENT.


27. DESPITE A GRADUAL RECOVERY IN THE PAST THREE YEARS,
SLOVAKIA'S STOCK MARKET REMAINS WEAK AND UNIMPORTANT IN AN
INTERNATIONAL CONTEXT. IN 2001, THE BRATISLAVA STOCK EXCHANGE
(BSSE) OPENED A FLOOR FOR TRADING FOREIGN SECURITIES IN ORDER TO
BOOST THE MARKET SENTIMENT, BUT TO DATE THERE HAS BEEN LITTLE
ACTIVITY. THE BSSE'S TRADING SYSTEM ENABLES IT TO ORGANIZE
SECURITIES TRADING IN ANY CURRENCY AND TO STRUCTURE STOCK
EXCHANGES WITH FEW RESTRICTIONS. IMPORTANTLY, ECONOMISTS BELIEVE
THAT REFORMS IN SLOVAKIA'S PENSION SYSTEM WILL PROVIDE A MAJOR
BOOST TO DOMESTIC EQUITY TRADING AS NEWLY-ESTABLISHED PENSION
ADMINISTRATION COMPANIES WILL BE OBLIGED BY THE LAW TO INVEST AT
LEAST 30 PERCENT OF THEIR ASSETS IN SLOVAKIA.


28. AT THE END OF NOVEMBER 2004, THE TOTAL NUMBER OF ISSUES ON
THE BSSE WAS 464, OF WHICH 64 WERE BOND ISSUES. TOTAL MARKET
CAPITALIZATION AMOUNTED TO USD 15.71 BILLION (UP 12.7 PERCENT
FROM NOVEMBER 2003),OF WHICH DEBT ISSUE CAPITALIZATION
REPRESENTED USD 11.58 BILLION (UP 10.3 PERCENT FROM NOVEMBER
2003). THE TOTAL VOLUME TRADED IN FIRST ELEVEN MONTHS OF 2004
WAS USD 12.16 BILLION (DOWN 56 PERCENT FROM 2003),WITH ALMOST 22
MILLION UNITS OF SECURITIES CHANGING OWNERS IN 15,668
TRANSACTIONS IN THE COURSE OF THE YEAR. THE STOCK INDEX, SAX,
CLOSED NOVEMBER 2004 WITH A 70.32 PERCENT GAIN YEAR-ON-YEAR (YOY)
AFTER RISING 26.9 PERCENT IN 2003, THE SDX INDEX COMPONENT FOR
GOVERNMENT BONDS WAS UP 8.62 PERCENT (4.2 PERCENT IN 2003) AND
THE INDEX FOR CORPORATE AND BANK BONDS INCREASED BY 8.38 PERCENT
(7.2 PERCENT IN 2003).

--------------
POLITICAL VIOLENCE
--------------


29. THERE HAVE BEEN NO REPORTS OF POLITICALLY MOTIVATED DAMAGE
TO PROPERTY, AND CIVIL DISTURBANCES ARE RARE. THERE HAS BEEN NO
VIOLENCE DIRECTED TOWARD FOREIGN-OWNED COMPANIES. WHILE NOT
AIMED AT AMERICANS, ORGANIZED CRIME IS PRESENT IN SLOVAKIA, AND
VIOLENCE BETWEEN RIVAL ORGANIZATIONS HAS RESULTED IN SEVERAL
FATALITIES.

--------------
CORRUPTION
--------------


30. IN 1998, THE DZURINDA GOVERNMENT PROCLAIMED THE FIGHT
AGAINST CORRUPTION TO BE A PRIORITY. SINCE THEN THE GOS HAS
DRAFTED A NATIONAL ANTI-CORRUPTION PROGRAM, APPOINTED A
CORRUPTION STEERING COMMITTEE, AMENDED THE CRIMINAL CODE IN
ATTEMPTS TO STRENGTHEN LAW ENFORCEMENT, APPROVED A LAW
MODERNIZING PUBLIC PROCUREMENT, AND ENACTED A STRONG FREEDOM OF
INFORMATION ACT. THE PRESS HAS TAKEN A MORE ACTIVE ROLE IN
REPORTING CORRUPTION, AND PUBLIC AWARENESS HAS INCREASED. THE
SLOVAK CHAPTER OF TI IS ACTIVE AND HAS PARTICIPATED IN PUBLIC
TENDERS. SLOVAKIA IS A SIGNATORY TO THE OECD CONVENTION ON
BATTLING BRIBERY, AND TO GIVE OR ACCEPT BRIBES IS A CRIMINAL ACT.
THE USG AWARDED A GRANT TO TI TO CARRY OUT A CAMPAIGN TO PROMOTE
PUBLIC AWARENESS OF CORRUPTION AND HAS BROUGHT ANTI-CORRUPTION
EXPERTS TO SLOVAKIA FOR CONSULTATIONS. THE PROGRAM FINANCED FROM
THE USG GRANT CLOSED IN JUNE 2004.


31. SLOVAKIA RANKED 57TH ON TI'S 2004 CORRUPTION PERCEPTION
INDEX (UP FROM 59TH IN 2003) THAT MEASURES THE LEVEL OF
CORRUPTION IN 146 COUNTRIES. ACCORDING TO A MAY 2004 SURVEY BY
THE LOCAL CHAPTER OF TI, THE SLOVAK PUBLIC PERCEIVES CORRUPTION
AS THE SOCIETY'S FOURTH MOST SERIOUS PROBLEM AFTER LIVING
CONDITIONS, UNEMPLOYMENT AND THE HEALTHCARE SYSTEM. THE MOST
COMMON FORM OF CORRUPTION IS BRIBERY, WHICH IS WIDESPREAD IN THE
HEALTHCARE SECTOR AND COURTS. INTERESTINGLY, A MID-YEAR POLL
SHOWED THAT CORRUPTION IN SLOVAKIA HAS WIDENED PRIMARILY WITHIN
LOCAL GOVERNMENTS. IN CONTRAST, IT HAD ITS LARGEST DROP AMONG THE
POLICE. THE POLL ALSO SHOWED THAT SLOVAKS FEEL THE GOS HAD FAILED
IN THE FIGHT AGAINST CORRUPTION OVER THE PAST FIVE YEARS. IN
1999, THE POLL SHOWED 40 PERCENT SLOVAKS THOUGHT THE GOS HAD
NEGLECTED THE CORRUPTION PROBLEM, WHILE IN 2004 THAT NUMBER HAD
INCREASED TO 60 PERCENT. IN ADDITION, ONE-THIRD OF THE
RESPONDENTS ADMITTED TO PAYING A BRIBE IN THE LAST THREE YEARS.

--------------
BILATERAL INVESTMENT AGREEMENTS
--------------


32. SLOVAKIA HAS BILATERAL INVESTMENT TREATIES WITH THE
FOLLOWING COUNTRIES: AUSTRALIA, AUSTRIA, BELGIUM, BELARUS,
BULGARIA, CANADA, CHINA, CROATIA, CUBA, THE CZECH REPUBLIC,
DENMARK, EGYPT, THE FEDERAL REPUBLIC OF YUGOSLAVIA, FINLAND,
FRANCE, GERMANY, GREECE, HUNGARY, INDONESIA, IRELAND, ICELAND,
ISRAEL, ITALY, KOREA, LATVIA, LITHUANIA, LUXEMBOURG, MALTA, THE
NETHERLANDS, SOUTH KOREA, NORWAY, POLAND, PORTUGAL, ROMANIA,

SLOVENIA, SOUTH AFRICA, SPAIN, SWEDEN, SWITZERLAND, TAJIKISTAN,
TURKEY, TURKMENISTAN, UKRAINE, THE UNITED KINGDOM, THE U.S., AND
UZBEKISTAN. LIKE OTHER NEW EU MEMBERS, SLOVAKIA HAD TO NEGOTIATE
AN AMENDMENT TO ITS BILATERAL INVESTMENT TREATY WITH THE U.S.,
BECAUSE IT WAS CONSIDERED INCONSISTENT WITH EU LEGISLATION. THE
AMENDED TREATY ENTERED INTO FORCE ON MAY 14, 2004.

--------------
OPIC AND OTHER INVESTMENT INSURANCE PROGRAMS
--------------


33. THE OVERSEAS PRIVATE INVESTMENT CORPORATION (OPIC) HAS BEEN
ACTIVE IN SLOVAKIA AND OFFERS U.S. INVESTORS INSURANCE AGAINST
POLITICAL RISK, EXPROPRIATION OF ASSETS, DAMAGES DUE TO POLITICAL
VIOLENCE, AND CURRENCY INCONVERTIBILITY. OPIC CAN PROVIDE
SPECIALIZED INSURANCE COVERAGE FOR CERTAIN CONTRACTING,
EXPORTING, LICENSING, AND LEASING TRANSACTIONS UNDERTAKEN BY U.S.
INVESTORS IN SLOVAKIA. SLOVAKIA IS A MEMBER OF THE MULTILATERAL
INVESTMENT GUARANTEE AGENCY (MIGA).


34. THE EMBASSY'S 2005 ANNUAL BUDGET IS APPROXIMATELY USD 6.5
MILLION. THE EMBASSY PURCHASES LOCAL CURRENCY AT RATE GENERATED
BY THE FINANCIAL SUPPORT CENTER IN CHARLESTON AND THE CURRENT
RATE (JANUARY 10) IS SKK 29.6 /USD 1. ANALYSTS FORECAST THAT THE
SLOVAK CURRENCY WILL CONTINUE TO APPRECIATE IN THE NEAR FUTURE.

--------------
LABOR
--------------


35. SLOVAKIA HAS ONE OF THE MOST LIBERAL LABOR CODES IN EUROPE,
ALLOWING LAYOFFS TO MEET ECONOMIC CYCLES. ITS WORKFORCE OF MORE
THAN TWO MILLION HAS A STRONG TRADITION IN ENGINEERING AND
MECHANICAL PRODUCTION. LITERACY IN SLOVAKIA IS ALMOST UNIVERSAL
(MORE THAN 99 PERCENT),AND MOST WORKERS ARE HIGHLY EDUCATED AND
TECHNICALLY SKILLED. FOREIGN COMPANIES FREQUENTLY PRAISE THE
MOTIVATION AND ABILITIES OF YOUNGER WORKERS, WHO ALSO OFTEN HAVE
GOOD LANGUAGE AND COMPUTER SKILLS. HOWEVER, OLDER WORKERS OFTEN
HAVE POOR LANGUAGE AND WEAK MANAGERIAL SKILLS. SLOVAKS HAVE A
REPUTATION FOR BEING TECHNICALLY SKILLED, PARTICULARLY IN HEAVY
INDUSTRY. EDUCATION LEVELS MATCH OR EXCEED NEIGHBORING
COUNTRIES; WITH NEARLY 86 PERCENT OF SLOVAKS AGED 25-64 HAVING AT
LEAST A HIGH SCHOOL EDUCATION. ACCORDING TO THE WORLD BANK'S
STUDENT LEARNING ASSESSMENT DATABASE, SLOVAKS OUTSCORED ALL OTHER
CENTRAL AND EASTERN EUROPEAN STUDENTS IN MATH AND PLACED THIRD
(BEHIND HUNGARY AND THE CZECH REPUBLIC) IN SCIENCES.


36. AT JUST USD 8,818 PER EMPLOYEE, SLOVAKIA HAD THE LOWEST
REMUNERATION COSTS IN THE EU IN 2004, ACCORDING TO A SURVEY BY
DELOITTE AND TOUCHE, THE PROFESSIONAL SERVICES FIRM. EMPLOYER
COSTS ON EMPLOYEES IN THE SLOVAK ECONOMY REPRESENTED ONLY 13.2
PERCENT OF THAT IN GERMANY, WHICH TOPPED EUROPE'S LABOR COSTS
WITH AN AVERAGE REMUNERATION PACKAGE OF USD 66,941 LAST YEAR. THE
SURVEY TAKES INTO ACCOUNT TAX AND SOCIAL SECURITY COSTS AS WELL
AS AVERAGE EARNINGS. OF THE 10 NEW EU MEMBERS, ONLY POLAND AND
ESTONIA WERE CLOSE TO SLOVAKIA WITH REMUNERATION LEVELS OF USD
9,660 AND USD 10,070, RESPECTIVELY. THE UNEMPLOYMENT RATE HAS
HOVERED AROUND 20 PERCENT IN RECENT YEARS, BUT HAS DECLINED TO
UNDER 14 PERCENT RECENTLY DUE TO STRICTER POLICIES ON QUALIFYING
FOR UNEMPLOYMENT BENEFITS AND A GROWING LEVEL OF FDI. HOWEVER,
THERE ARE EXTENSIVE REGIONAL VARIATIONS IN UNEMPLOYMENT RATES
ACROSS COUNTRY, WITH A RATE OF FOUR PERCENT IN BRATISLAVA BUT
OVER 30 PERCENT IN SOME PARTS OF EASTERN SLOVAKIA. WHILE THE
UNEMPLOYMENT RATE IS HIGHER THAN IN MOST NEIGHBORING COUNTRIES
(SECOND ONLY TO POLAND IN THE EU) THOSE WHO ARE UNEMPLOYED, ARE
COMPARATIVELY WELL EDUCATED.


37. THE WORKWEEK IS STANDARDIZED AT 42.5 HOURS, AND THE OVERTIME
ALLOWANCE IS 400 HOURS PER YEAR, PENDING AN AGREEMENT BETWEEN
EMPLOYER AND EMPLOYEE, WHICH MAKES SLOVAKIA ONE OF THE MOST
LIBERAL ECONOMIES IN THIS REGARD. SINCE OCTOBER 2004, THE
MINIMUM WAGE IS ABOUT USD 224 PER MONTH, BUT ALMOST ALL WORKERS
EARN MORE. WAGE RATES ROSE IN 2002, WERE FAIRLY STAGNANT IN 2003
(DUE TO HIGHER INFLATION AS A RESULT OF DEFERRED HIKES IN STATE-
REGULATED UTILITY PRICES AND EXCISE TAXES),AND ROSE AGAIN IN
2004 FOLLOWING THE COUNTRY'S ACCESSION TO THE EU AND BECAUSE OF
RISING DEMAND FOR LABOR BROUGHT ON BY INCREASED LEVELS OF FDI.
(NOTE: FOR THE FIRST NINE MONTHS OF 2004, THE AVERAGE NOMINAL
MONTHLY WAGE ROSE 9.8 PERCENT YOY, TO SKK 15,105 (USD 504). AT
THE SAME TIME, REAL WAGES INCREASED 1.7 PERCENT. SLOVAK SOCIAL
INSURANCE IS COMPULSORY AND INCLUDES A HEALTH ALLOWANCE,
UNEMPLOYMENT INSURANCE, AND PENSION INSURANCE.


38. ALTHOUGH NEARLY 60 PERCENT OF SLOVAK WORKERS BELONG TO LABOR
UNIONS, STRIKES ARE RARE, AND THE POPULARITY OF UNIONS IS ON THE
DECLINE. IN 2004, THE GOS ABOLISHED THE SO-CALLED "TRIPARTITE
ARRANGEMENT", A DISCUSSION PLATFORM OF THE STATE, LABOR UNIONS
AND THE EMPLOYERS' ASSOCIATION. THE UNIONS GENERALLY HAVE BEEN
TOLERANT OF THE COSTS IMPOSED ON LABOR BY ECONOMIC
TRANSFORMATION, BUT A MORE AGGRESSIVE UNION LEADERSHIP HAS

EMERGED THAT IS POLITICALLY ENGAGED AND ACTIVE AMONG ITS
MEMBERSHIP. FOLLOWING ITS RECENT LIBERALIZATION, SLOVAKIA'S
LABOR CODE NOW FOLLOWS INTERNATIONAL STANDARDS. SLOVAKIA IS A
MEMBER OF THE INTERNATIONAL LABOR ORGANIZATION AND ADHERES TO ITS
CONVENTION PROTECTING WORKER RIGHTS.

--------------
FOREIGN TRADE ZONES/FREE PORTS
--------------


39. CURRENTLY THERE ARE FOUR FREE CUSTOMS ZONES IN SLOVAKIA:
ZILINA IN THE NORTH, BANSKA BYSTRICA IN THE CENTER, TRENCIN IN
THE WEST, AND KOSICE IN THE EAST. THERE ARE NO GEOGRAPHIC
LIMITATIONS WHERE FREE CUSTOMS ZONES OR WAREHOUSES CAN BE
LOCATED. IN GENERAL, EXISTING ZONES DO NOT PLAY A SIGNIFICANT
ROLE IN SLOVAKIA'S ECONOMY AND ARE NOT AN IMPORTANT FACTOR IN
ATTRACTING FOREIGN INVESTMENT. INSTEAD OF FREE CUSTOMS ZONES OR
FREE CUSTOMS WAREHOUSES, A REGIME OF INWARD PROCESSING IS
COMMONLY EMPLOYED IN SLOVAKIA. THIS ALLOWS GOODS TO PASS THROUGH
ONE OR MORE PROCESSING OPERATIONS WITHIN A CUSTOMS TERRITORY IN
ONE OF TWO WAYS. FIRST, FOREIGN GOODS INTENDED FOR RE-EXPORT FROM
THE CUSTOMS TERRITORY IN THE FORM OF COMPENSATORY PRODUCTS
WITHOUT BEING SUBJECT TO IMPORT DUTIES OR COMMERCIAL POLICY
MEASURES (THIS IS KNOWN AS A SUSPENSION SYSTEM). SECOND, GOODS
RELEASED TO A FREE CIRCULATION REGIME WITH REPAYMENT OR REMISSION
OF THE IMPORT DUTIES CHARGEABLE ON SUCH GOODS, IF THEY ARE
EXPORTED FROM THE CUSTOMS TERRITORY IN THE FORM OF COMPENSATORY
PRODUCTS (THIS IS KNOWN AS A DRAWBACK SYSTEM).

--------------
FOREIGN DIRECT INVESTMENT
--------------


40. THE CUMULATIVE LEVEL OF FDI HAS RISEN SHARPLY FROM USD 2.1
BILLION AT THE START OF 1999 TO AROUND USD 11.46 BILLION AT THE
END OF THE THIRD QUARTER IN 2004, WITH INFLOWS OF USD 2.16
BILLION IN 2000, USD 1.27 BILLION IN 2001, USD 4.1 BILLION IN
2002 AND USD 1 BILLION IN 2003. THE MAJORITY OF FDI WAS
GENERATED THROUGH PRIVATIZATION SALES, BUT SINCE 2003 MOST FDI
HAS BEEN IN THE FORM OF NEW DEVELOPMENT. DURING A 2003 BUSINESS
CONFERENCE ORGANIZED BY THE U.S. EMBASSY, ALL 16 U.S. COMPANIES
WITH OPERATIONS IN SLOVAKIA THAT MADE PRESENTATIONS EXPRESSED
THEIR INTENTION TO EXPAND. FOR EXAMPLE, JOHNS MANVILLE, A UNIT
OF BERKSHIRE HATHAWAY, MADE A COMMITMENT TO SPEND AN ADDITIONAL
USD 100 MILLION ON ITS TRNAVA PLANT.


41. THROUGH END OF THIRD QUARTER OF 2004, APPROXIMATELY 38.2
PERCENT OF FDI WENT TO INDUSTRIAL MANUFACTURING, 22.7 PERCENT TO
THE BANKING SECTOR, 11.7 PERCENT RETAIL AND WHOLESALE SECTORS,
11.0 PERCENT TO PRODUCTION AND DISTRIBUTION OF GAS AND
ELECTRICITY AND 10.1 PERCENT TO TRANSPORT AND TELECOM. ACCORDING
TO THE SLOVAK OFFICIAL STATISTICS, GERMANY WAS THE LEADING
FOREIGN INVESTOR WITH 22.7 PERCENT OF FDI, FOLLOWED BY THE
NETHERLANDS WITH 16 PERCENT AND AUSTRIA WITH 14.3 PERCENT. THE
U.S. CAME NINTH WITH 4.5 PERCENT. HOWEVER, THE GOS CREDITS
NUMEROUS U.S. INVESTMENTS TO OTHER COUNTRIES DEPENDING ON WHETHER
THE INVESTMENTS CAME THROUGH THE INVESTORS' FOREIGN SUBSIDIARIES.
A SURVEY CONDUCTED BY THE U.S. EMBASSY SHOWS U.S. INVESTMENT IN
SLOVAKIA AT OVER USD 3.0 BILLION IN CURRENT AND FUTURE
COMMITMENTS, MAKING THE U.S. APPROXIMATELY THE THIRD LEADING
FOREIGN INVESTOR IN SLOVAKIA. THE REGION OF BRATISLAVA HAS
ABSORBED 69.8 PERCENT OF THE TOTAL FDI THROUGH 2004, FOLLOWED BY
THE CITY OF KOSICE WITH 9.2 PERCENT.


42. THE LARGEST U.S. INVESTOR IN SLOVAKIA IS U.S. STEEL, WHICH
ACQUIRED THE CORE ASSETS OF THE VSZ STEEL MILL IN KOSICE, FOR A
FINANCIAL PACKAGE THAT INCLUDED USD 325 MILLION DEBT ASSUMPTION,
USD 60 MILLION CASH PAYMENT AND BETWEEN USD 25 MILLION AND USD 75
MILLION FOR SHAREHOLDER DISTRIBUTION. ITS INVESTMENT, AND FUTURE
COMMITMENT OF MORE THAN USD 1.2 BILLION, COMES IN PART FROM ITS
SUBSIDIARY IN THE NETHERLANDS, AND THEREFORE THE GOS CONSIDERS IT
TO BE A DUTCH INVESTMENT. WHIRLPOOL HAS INVESTED OVER USD 100
MILLION IN SLOVAKIA, EMPLOYS MORE THAN 1,300 PEOPLE AND DOUBLED
ITS 2002 ANNUAL OUTPUT OF ONE MILLION WASHERS IN 2004, WHICH MADE
ITS LOCAL UNIT THE LARGEST WHITE GOODS PRODUCER IN EUROPE.
KIMBERLY-CLARK'S FACILITY IN SLOVAKIA IMPORTS A SIGNIFICANT
AMOUNT OF MATERIALS FROM THE U.S., AND THUS PROMOTES U.S.
EXPORTS. SEVERAL OTHER AMERICAN COMPANIES ALREADY HAVE
SUBSTANTIAL INVESTMENTS IN SLOVAKIA, SUCH AS EMERSON ELECTRIC,
TOWER AUTOMOTIVE, DELPHI, JOHNSON CONTROLS, ON SEMICONDUCTOR,
CITIBANK, IBM, MOLEX, AND DELL. THE FOREIGN COMMERCIAL SERVICE
REPORTS THAT THERE ARE CURRENTLY 110 U.S. COMPANIES PRESENT IN
SLOVAKIA. OTHER LARGE FOREIGN INVESTORS IN SLOVAKIA INCLUDE
VOLKSWAGEN, DEUTSCHE TELECOM, RUHRGAS, INTESA BCI AND SIEMENS.
THAYER


NNNN