Foreign investments belong to decisive attributes of success in nearly all national economies in transition. Their internal restructuring aimed at the fastest possible bridging of the technology and structural backwardness, in the period of a rapid scientific and technical progress requires significant, mainly financial resources, which none of these countries have at their disposal.

In the development of the Slovak economy so far the share of foreign investments, or the number of strategic partners, or achieved results do not have very serious effect on the overall economic performance of the country. Excluding SR from the first group of candidates for the EU accession meant that investors standing outside this block had lost their motivation and potential opportunity to penetrate, by activating of their resources through Slovakia, into the EU. Similarly, also European investors lost their motivation, as the association agreement, governing temporary mutually advantageous trade relations, does not give sufficient guarantees of their effective and long-term utilization. Trading from behind "Schengen walls" does not have any special internal support, as it is for example, in the internal integration trade, or towards Asian or American markets.

A dominant role in the Slovak economy is played by the Austrian and German investors. In case of German companies a significant share is secured by Volkswagen and its associated companies, from the point of number and diversification the dominant position is taken by Austrian investors. Their merit is also that with the exception of machinery, they are entering areas which the SR considers for perspective ones. Austrian firms were most successful in intervening into privatization of the former state property, in creating joint ventures and other associated forms of cooperation.

Unofficial information confirm that there are other investments in the SR in areas which were not allowed by the legislation so far. This related to purchase of immovables which are reconstructed and immediately rented to foreign firms, etc. It is estimated that in this area another approx. SK 30-35 bn was reallocated, of which approx. SK 10-15 bn came from Austria. Austria had been for decades a refuge for Slovak political emigration and for this reason also a significant portion of restitutions from years 1948-1989 is directed to this target group. Volumes of investments into assets which are again activated through Austrian investors cannot be estimated, but in any case they are significant.

At the end of 1997 the joint Austrian-Slovak companies represented roughly 23% share on the total foreign investments in the SR, Austria was on the second place after Germany. Estimated volume as of 1.6.1998 exceeded approx. SK 14-15 bn. At the end of 1996 majority of joint ventures was realized with a minimum basic deposit of SK 100 000.-, which did not reflect either a higher volume of activities, nor their share on the overall economic development. Slovak firms are using the capital linkage for getting guarantees for loans from abroad and at home, for opening markets, etc.. From this point of view the volume of invested capital does not reflect ownership or the decision-making position in these firms.

Estimates by experts show that in other, also large companies, the Austrian capital is present in various forms (portfolio, leasing of machinery and equipment, dormant partners). A number of companies use also services of various Austrian companies (off-shore centers, banking services, etc.). Many Austrian firms participated in the privatization, especially in the field of building materials, transportation, and other. As in the period of 1992-97 it was not possible to directly participate on purchase of immovables and land, established limited liability companies served this purpose.

Austrian banks, or banks with Austrian participation (e.g. Tatrabanka) play a very important role in the entry of Austrian investors into the SR. Reasons for success of the banking sector, besides other, stem from that the relative economic stability and high interest rates (approx. 20-25%) through Austrian banks allow a better appreciation of both equity and external capital. That is visible also in that most of the banks are immediately opening their own leasing, real-estate and capital companies which achieve a fair profit. Linking knowledge of the local environment with foreign know-how allow to create certain protective mechanisms against the existing commercial and political risks. There is a significant interest in building branches and subsidiaries, and lately sale and leasing of cars and computer technology.

Reiffeisenbank and other banks are participating in arranging syndicated loans for large Slovak companies which also bring notable positive effects and strengthens position of both parties. Several banks are "curing" their losses at home and in other territories by their profitability of operations in the SR. For example, in the entire network of Reiffeisenbank for the last three years the only profitable were branches in CR, SR and Hungary.

Most of Austrian investments, more than 2/3 are allocated to the larger area of Bratislava. These are the already mentioned banks, investments into the building industry, in machinery companies and car dealers. For example, this year they opened a new AWT Bavaria Center (Creditanstalt) where only this year investments have achieved nearly USD 100 mil.

During the last year there is an enormous increase in investments into department store chains and stores (Billa, Baumax, Soravia, and other), OMV fuel sale points, etc.. Other projects are linked to the completion of the direct train connection between Bratislava - Vienna, and to building supermarkets and Business centers at the edge of Bratislava (e.g. Soravia, Petrzalka), but also renewed projects of free trade zones, and other.

Development of foreign investments in 1998 in the above-stated trends continues. Established companies, despite maybe overestimated political risks, are achieving remarkable profits, which can be fully repatriated. There is a significant complementarity between the structure and the position of Austrian investments in the SR. According to internal information there is a group of firms established in the SR "administering" purchasing ambitions of other firms. These are waiting for the so called third wave of privatization which should be realized as soon as, often anonymous owners, are able to make their ownership rights official.

In evaluating positions of the Austrian investments in the SR it is necessary to take in regard the influence of many factors resulting from the geographical position of both countries, recent position of Austria as a place of trade entry for the SR to the markets of advanced countries, personal contacts and also complementarity of both countries. That would certainly effect the development in influx of investments related to linking infrastructure, activation of the Danube water way, and further entry into the privatization process, as soon as the necessary legislative conditions are created, and an adequate political will is in existence.

Changes in the political climate evoked by the outcome of elections and a significant pressure of debt service should help, both internally and externally, to increase visibly their role and share on economic results of not only firms, but the country as a whole. This process, however, is a long-term process. After we failed to capture the strongest wave of interest from large investors we cannot expect fast positive changes.

Slovak Trade FORUM