The post-election Government of the Slovak Republic is developing with a new dynamism relations with the neighbouring countries and regional cooperation. This is expressed by a visit to Warsaw of the Prime Minister of the Slovak Republic, Mikuláš Dzurinda, to Warsaw and visits to Bratislava of the Prime Ministers of the Czech and Hungarian Republics. Slovakia welcomes a signal from the Prime Ministers of the Polish, Czech and Hungarian Republics from their October meeting in Budapest on the preparedness to cooperate with the Slovak Republic within the V-4. A major area for V-4 cooperation should be making a more effective use of existing potential to expand trade and economic cooperation, creating new goods channels, financial and capital flows and facilitating mutual investment, including the involvement in privatisation processes as well as for the implementation of infrastructural projects. Also the strengthening of cooperation within the framework of the CEFTA as a unification factor in the region can have a synergic effect, in the context of Europe-wide integration processes and advocating its further territorial and content enlargement. It is not, however, correct to reduce the V-4 cooperation just to an economic dimension, since the Visegrad bloc has a primary political dimension given by efforts of its members for political and economic integration into the European structures. Besides the V-4 cooperation, there are emerging revived possibilities of political, economic, cultural and social concurrence of the V-4 members outwardly. Concrete contents of the quadripartite cooperation will be set at the summit under preparation of the prime ministers of the Slovak, Polish, Czech and Hungarian Republics due to be held in the spring of 1999 in Bratislava.

The territorial pattern for foreign trade of the Slovak Republic in 1998 with the Czech Republic, Hungary and Poland

Foreign relations

In the area of bilateral relations, a certain hierachization of their levels occurred (with the SR above-standard, with the PR and Austria good, with Germany of a principal significance, with the U.S. close and friendly, with Russia, Ukraine and the Commonwealth of Independent States partner, with CE countries all-encompassing, with the PR and the HR the coordination of preparations for joining the EU and NATO is underlined). Also declared was an interest in developing all forms of Central European regional cooperation. Unlike programmes of the previous governments in relation to the Slovak Republic, the programme of the incumbent cabinet contains a strong interest of the Czech Republic in developing and deepening above-standard relations.

Economy character

As of the end of 3Q 1998, a total of 1,750,575 legal entities and natural persons were entered in the register of economic entities, out of which 1,408,718 were private entrepreneurs, the number 85,354 up from late 1997. Entrepreneurs account for a most extensive segment of the register - 80.5 % - whose majority hold a licence to do business under the trade licence law. There were 1,358 state-run enterprises, their number fell by 263 from the end of 1997. 9,060 cooperatives were registered, up 1,234 from late 1997. Cooperatives pursuing agricultural activity account for 18.4 %.

According to data from the Czech Statistical Office, the GDP fell as of Sept. 30, 1998 in already three consecutive quarters and similar unfavourable developments continued unabated even in 4Q 1998. Over the period between 1Q and 3Q 1998, a year-to-year GDP volume was in real terms 2,1 % lower and according to preliminary results the 1998 GDP dropped 1,9 to 2,0 %. A trade balance deficit of 17,6 billion Kč was chalked up in December 1998, which is the highest monthly deficit for 1998. The deficit for the whole of 1998 runs at 79,5 billion Kč, which is just over a half as compared to the preceding year.

Year-to-year net investment inflows fell 6.4 billion Kč as of Sept. 30, 1998 due to portfolio investment ouflows and from early 1998 they totaled 8,7 billion Kč. Foreign direct investment inflows over the period between 1Q and 3Q 1998 were up 13,9 billion Kč over the same period a year earlier, totaling 40,2 billion Kč. Direct investment from domestic entities abroad amounted as of Sept. 30, 1998 to 1,3 billion Kč. The gross debt stood as of the end of 3Q 1998 at U.S. $21,1 billion, i.e. 721,9 billion Kč (the same period 1997 - U.S. $21 billion, i.e. 688,6 billion Kč.)

From January through December 1998 imports and exports rose 7,9 % and 17,7 %, respectively, over 1997. A trade balance deficit for 1998 to the tune of 79,5 billion Kč was down 59,8 billion Kč from 1997. 1998 imports were 9,3 % higher than exports, so the rate of excess was by 10,0 points lower. Nevertheless, exports of higher processing degree goods markedly grew.

Bilateral relations between the Czech Republic and the Slovak Republic

More than 70 contracts or agreements have been entered into between the Slovak and Czech Republics. In 1998, goods totaling 67,036 million Kč were imported from the Slovak Republic to the Czech Republic, while exports to Slovakia totaled 90,559 million Kč. An active trade balance in favour of the Czech Republic stood at 23,523 million Kč (in 1997 it was 21,223 million Kč.) Imports were down 7 % from 1997, whereas exports grew 3 %. The Slovak Republic holds a 7.2 % share of total imports of the Czech Republic (in 1997 8,4 %), as it does a 10,6 % of total exports of the same (in 1997 12,8 %). The Slovak Republic's 1998 contribution to total foreign trade turnover of the Czech Republic is 8,9 %.

A higher degree of economic cooperation in the form of the Agreement Establishing the Customs Union between the Slovak and the Czech Republics applies in commercial-economic relations between the Slovak and Czech Republics. From political and economic perspectives, the Customs Union benefit the two parties through the application of a higher form of liberalisation of trade, the movement of goods and services, the integration of the economies and the removal of customs duties and quantity limits.

Both countries under political activities concentrate their efforts on the European Union accession process, therefore regard the Customs Union as a background basis to verify the so-called liberalisation of commercial relations. Within the EU accession process, the Slovak and Czech Republics are analysing the hitherto accession procedure and proposing together procedures to be implemented and adhered to under the Customs Union between the Slovak and the Czech Republic over the period of the EU accession process.

Authorities to support bilateral relations

Currently, in compliance with the Agreement Establishing the Customs Union between the Slovak and the Czech Republics, there exist the following authorities intended to support bilateral commercial and economic relations:

• the Council of the Customs Union between the Slovak and the Czech Republics
• the Standing Secretariat of the Council of the Customs Union
• the Arbitration Commission of the Customs Union

Important information

Telephone: country code 00420 o Prague 02 o Brno 05

Official hours: most offices work from 08.00 a.m. to 04.00 p.m., banks, post offices, stores to 06.00 p.m., supermarkets to 08.00 p.m. and are also open on Saturdays and Sundays.

Payments in banks and hotels can be made in convertible currencies, with traveller's cheques and credit cards.

National holidays - January 1, Easter Monday, May 1, July 5 and 6, October 28, December 24 through 26.

Economy character in 1998

As a result of the cumulation of unfavourable phenomena and tendencies the pace of economic growth toward the end of the year was increasingly getting slower and last year possibly failed to top 5 %, as compared to 6.6 % (average) in the years 1995-1997. The first symptoms of conjuncture weakening were manifest as early as the second half of 1997 and further continued despite an excessive limitation on internal demand. The most severe phenomena were observed in foreign trade. The aim of economy cool-down policy was to have reduced the internal demand, this resulting from a limitation on imports and forcing companies to more export. Expectations were to remarkably narrow a discrepancy between the rate of an increase in exports and imports and put a check on growth of the balance of payments current turnovers deficit. In the meantime, the high and really increasing rate of zloty had had an adverse impact on exports while boosting demands in imports. The problems of Polish exports was also a product of the Russian crisis. A general suspension of supplies to Russia occurred, which in August accounted for 57.5 % of 1997 levels, in September it was about 15.1 % and in October 22.6 %.

It is anticipated that export revenues in 1998 grew 11.5 % or so, import payments about 14 % and the goods payments deficit climbed to U.S.$13.6 billion (as opposed to U.S.$11.3 billion in 1997), it follows that the balance of payments current turnovers deficit will account for over 4 % of the GDP as opposed to 3 % in 1997 and 0.9 % in 1996.

Even in spite of a growing negative goods payments balance, foreign exchange reserves substantially increased. At the end of December, official reserves of the national bank were U.S.$27.4 billion and gained U.S.$6.7 billion, while the budget envisaged a U.S.$0.5 million reduction therein. These reserves will make up for 7.6-month worth of imports.

The year 1998 was the fifth year in which the rate of investment outstripped several times the GDP growth rate. Perceived could be advantageous changes in the cost allocation pattern, which benefits modernisation and reconstruction of the machine fleet, also an improvement in competitiveness of the economy. A threat to the upholding these trends is posed by a shrinking capacity of companies to accumulate free capital resources, as a result of a marked aggravation of the financial position. According to input estimates of the State Agency for Foreign Investment, U.S.$7.5-8.5 billion worth direct investments were sunk in Poland in 1998. When compared to1997, that is an increase of U.S.$1.8-2.8 billion. Over the period between 1990 and 1998, more than U.S.$30 billion were invested in this form.

Prognosis for 1999:

Indebtedness

The national debt in 1988 (both domestic and foreign) was up 12 billion zl (5.7 %) from the preceding year and currently is running at 225,799.4 million zl, thus U.S.$64.4 billion. The domestic debt accounts for 48.6 % of the total and stands at 109,661 million zl and foreign obligations account for 51.4 % of the total and stand at 116,138 million zl.

Major exhibition events in 1999

Documents to be requested when importing

In Poland, as in most European countries, the following international, commonly used documents are required in importing:

• SAD - uniform customs declaration,
• EUR 1 or EUR 2 - document on goods origin,
• original invoice,
• in importing agricultural and food goods appropriate phytosanitary and veterinary certificates are required.

Also required in inland transits is the set out mandatory insurance for customs debt regarding goods carriage in road transport, following the same principles as in the Slovak Republic.

Relation to regional integration blocs and international economic organisations - export promotion

Poland is the founding member of the CEFTA, championing within the framework thereof a relatively liberal approach. Trade between the Slovak and Polish Republics is therefore bound by a minimum number of limitations. Poland is making every effort to join crucial international economic organisations.

The Polish government is maintaining also in 1999 customs duties for CEFTA states as follows: metallurgical products 3 %, petrol 5 % (in 2000 3 %, in 2001 0 %), oil 11 % (in 2000 4 %, in 2001 0 %). Other duties and contingents are in the area of agricultural products.

Most important partners of Polish firms in Slovakia include VSŽ, Slovnaft, Duslo Šaľa, Chemosvit, ZŤS, Chemlon. Several Polish firms are operating in Slovakia and a number of joint ventures involving a Polish partner are being set up. Among most important are Bodimex, Elektrim, Exoud, Ciech, Centropap, Prochem, Novex, etc.

Most important partners of Slovak firms in Poland are Ciech, Oswiecim, ZA Tarnów, refinery Gorlice, Jaslo, Siarkopol, Jedlicze, Zelmer Rzeszów, Wiscord, confectionery firms, non-ferrous metal metallurgical plants and transport partners. Trade in agricultural products (fruit, vegetables) is likely to expand in 1999.

Among our strongest firm dealerships rank Petrimex, VSŽ, Tento Žilina, Grafobal, Chemosvit, Chirana, Martimex, ZVL. Tento Žilina, Matador Púchov opened their dealerships in 1998.

The Polish market is supplied with a sufficient product range of goods of both home and foreign origin. Slovak products and technology, as long as they want to make themselves felt, must be competitive in terms of quality, design, price and the observation of delivery dates. Our products and companies must be credible. In closing deals it is necessary to devote much more attention to the preparation of contracts, the method of invoicing, transport, payments and finding the partner's credibility. It is necessary to take advantage of the proximity of borders, the accessibility of languages or, as the case may be, of possible shortages on the market and place there our products.

Mutual commercial and economic relations

By signing agreements from various areas a solid basis for a qualitatively new nature of cooperation has been created. Stock-taking of the contract-legal basis was completed. Signed are fundamental contract instruments setting up a framework for cooperation in particular in the economic field: 1. Agreement on Protection of Investment, 2. Agreement on the Avoidance of Double Taxation, 3. Agreement on Transboundary Cooperation, 4. Agreement on Environmental Cooperation, 5. Agreement on Veterinary Medicine Cooperation, 6. Agreement on Quarantine Cooperation and Plant Protection, 7. Global Treaty on Transport, 8. Agreement on Rail Transport, 9. Agreement on Air Transport, 10. Agreement on Economic Cooperation and Trade. In August 1998, the Agreement on Mutual Recognition of Certificates was signed.

Transboundary cooperation with the Polish Republic under the intergovernmental Agreement on Transboundary Cooperation between the Governments of the Slovak and the Polish Republics signed on August 18, 1994. This is the only agreement of similar kind signed by the Slovak Republic with a neighbouring country.

Commercial cooperation between the Slovak and the Polish Republics

Poland ranks among traditional partners of the Slovak Republic, taking up a major position in foreign trade of the Slovak Republic. Poland holds a 3.9 % share of foreign trade turnover of the Slovak Republic for the months January through September 1998. In 1997, this share was 4.0 % and came in 6th place. As regards exports of the Slovak Republic, Poland over a longer period occupies the 5th position with a share of 5.5 %. The Polish Republic ranks among those trading partners with which Slovakia is maintaining an active trade balance. In 1997 it totaled U.S.$198 million , while in the period January - September 1998 U.S.$198.7 million.

Eports to the Polish Republic and at the same time the mutual trade turnover are dynamically increasing. Over the period January - September 1998, the following results were achieved in mutual trade with the Polish Republic:

Goods having highest shares of Slovak exports to Poland includes: flat rolled sheets of iron and steel (18.65 %), maize (5.23 %), raw (unprocessed) aluminium (4.37 %), mineral oils and bitumen mineral oils (3.35 %), man-made silk (2.97 %), malt (2.53 %), household washing machines and laundries (2.50 %), rail and tram vehicle parts (2.18 %).

The following items are making the largest contribution to imports from Poland to the Slovak Republic: black coal, briquettes and similar solid fuel (23.25 %), heterocyclic compounds (5.65 %), raw (unprocessed) zinc (3.59 %), refined copper and copper alloys (2.45 %), furniture and accessories (1.70 %), motor vehicle parts and accessories (1.49 %), tanned cattle leathers (1.45 %), food preparations (1.39 %), paper hygienic products (1.13 %), flat rolled products of iron and steel (1.11 %), electricity (1.04 %).

The mutual trade cooperation between the Slovak and the Polish Republics, in view of the results being achieved and its dynamic development, can be assessed positively. There are expectations that the trade turnover will top U.S.$1 billion in 1999.

Bilateral trade cooperation

The Hungarian Republic ranks among traditional and significant trading partners of the Slovak Republic. A contribution toward Slovakia's foreign trade turnover of the Hungarian Republic in 1998 accounted for 3.33 % (8th place), likewise in 1998. In terms of Slovakia's exports, a 4.4 % share put Hungary to number 6. Slovakia has traditionally been posting up a marked active trade balance with Hungary. Active trade balances of U.S.$185 million and U.S.$149 million were chalked up in 1997 and 1998, respectively.

Goods most contributing toward Slovak exports to Hungary include: mineral oils (14.15 %), cut and split wood (7.58 %), flat iron and steel products (9.3 %), wagons (3.71 %), wires and cables (3.03 %), household washing machines and laundries (2.27 %), motor vehicle components and accessories (2.11 %), iron tubes and hollow profiles (1.76 %), new tyres (1.45 %).

The following items are most contributing to imports to the Slovak Republic from Hungary: reversible or sprk-ignition internal combustion piston engines (13.55 %), motor vehicles to carry 10 and more passengers (5.49 %), retail medicaments (4.79 %), mineral oils and bitumen mineral oils (2.06 %), ceramic bricks, pavestone, carrying blocks (2.04 %), various aluminium products (1.91 %), paper hygienic products (1.78 %), wheat and oat (1.64 %), artificial corundum, alumina (1.64 %), mineral oils (1.99 %), ice-cream and confectionary products (1.67 %), insulated wires and cables (1.39 %), goods transport and packing products (1.61 %), video recorders and players (1.47 %).

Among the largest exporters to the Hungarian Republic are: VSŽ, a.s., Košice, Slovnaft Bratislava, Tatravagónka, a.s., Poprad, Wigrochem, a.s., Bratislava, Slov-Petrimex Bratislava, Železiarne, a.s., Podbrezová, Volkswagen Bratislava, Whirlpool Tatramat Bratislava.

Firms most contributing to imports from the Hungarian Republic include: Volkswagen Bratislava, Dopravný podnik Bratislava, Blama, s.r.o., Nové Zámky, MOL Bratislava, Procter and Gamble Spišská Belá, Siemens Automotive Michalovce, Unilever Slovensko, Wienerberger Zlaté Moravce, ZSNP Žiar n/H.

Contractual basis

A number of fundamental economic agreements necessary to support the development of bilateral commercial-economic cooperation have been concluded with Hungary. No agreement concerning cooperation on mutual recognition of certificates and product test results has been signed to date. Such agreement would expedite the introduction of new products on the market of the other contracting party and would essentially lower the cost related to certification of products in a country of destination. The signature thereof is complicated with with the fact that three ministries are involved in this relationshipon the Hungarian part, making it difficult to arrive at a uniform opinion necessary to sign the agreement.

Miscellaneous

Regional chambers of the Slovak Chamber of Commerce and Industry have an important role to play in deepening commercial-economic cooperation between the Slovak and the Hungarian Republics. The Lučenec-based Slovak-Hungarian Chamber of Commerce and the Shalgotaryan-based Hungarian-Slovak Chamber of Commerce, in addition to information and consultancy, provide jointly varied events oriented primarily toward support of small and medium-sized enterprises in the various regions of the two countries.

Bilateral commercial-economic cooperation between the Slovak and the Hungarian Republics, given the results being produced and dynamic development of mutual trade exchange, can be assessed positively. There is a prerequisiteand mutual interest in further developing foreign trade cooperation, with the Hungarian party being eminently concerned in progressively offsetting the adverse trade balance.

Slovak Trade FORUM