The Slovak Republic is a young country in the heart of Europe that peacefully separated from the Czech Republic in 1993. Since 1998, the Slovak government has focused on macroeconomic stabilization, structural reforms and integrating Slovakia into European and multilateral organizations.
As the fastest growing economy in Central Europe, and as a European Union (EU) and NATO member, Slovakia is now one of the most attractive investment locations in the region. As a result of the 2004 EU enlargement, Slovakia, with its business- and investment-oriented economic environment, is now a part of the world’s largest common market comprised of more than 450 million consumers. That is one of the reasons why U.S. – Slovak business and investment relations are currently flourishing.
Slovakia is now a truly transformed liberal democracy and functioning market economy, with legislation fully harmonized with the EU. The main sources of Slovak growth are its skilled and educated labor force, low taxation and progressive entrepreneurial and investment legislation.
Both the investment environment and the macroeconomic situation have been steadily improving since 1998, when a reform-minded government was formed. During its first term, the new cabinet succeeded in privatizing most of the previously state-owned firms, with the most prominent example being US Steel’s purchase of a large steel plant in the eastern region of the country. After winning reelection in 2002, the center-right government implemented ambitious reforms in the tax system, with a flat corporate, individual and VAT tax rate of 19%; it also abolished taxes on dividends, while maintaining a relatively low budget deficit. The government fundamentally reformed the health care, social security and pension systems. New laws for overtime and seasonal help make Slovakia’s labor code among the most flexible in Europe.
Major multinational companies are gravitating to Slovakia because of its low production and labor costs, strong government support, highly educated labor force, strategic location and rich cultural environment. The country has recently won two big investment competitions – PSA Peugeot-Citroën and Hyundai-Kia, and is ready for more. Recent IMF and OECD reports praise Slovak economic policy highly. According to the major rating agencies, Slovakia’s credit fundamentals have improved considerably over the past few years, as booming exports have slashed the current account deficit while the government has made considerable progress in implementing public finance reforms and cutting the budget deficit.
U.S. companies looking to expand their business and investment activities in Europe should consider that there are 120 U.S. companies already residing in Slovakia. Many of these companies, along with other foreign investors, have recently expanded their operations in Slovakia based on the positive results they have reached. Slovakia can also serve as a springboard for those wishing to do business with Russia, Ukraine and other markets to the east and south.
In terms of quality of life, the UN Human Development Index ranks Slovakia 39th, alongside its European neighbors, however, living costs are only 41% of the EU average. Moreover, Slovakia is a country of warm and hospitable people, historic towns and castles, beautiful forests and mountains, tasty cuisine and good beer and wine.