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MANAGING TO SHAKE OFF A LETHARGY THAT LASTED THROUGHOUT THE 1990S, SLOVAKIA IS TRANSFORMING ITS ECONOMY INTO A CENTRAL EUROPEAN STAR. THIS IS THE COUNTRY WHERE OPTIMISM HAS TAKEN ROOT
The Euro-optimist

DUSAN CAPLOVIC
YONG KYU PARK
DUSAN CAPLOVIC
Deputy Prime Minister
YONG KYU PARK
Ambassador of the
Republic of Korea

A winter stroll on the banks of the Danube in Bratislava can be transporting. Catch a silent bus that runs on natural gas and listen to people’s heels as they click over the cobblestones in Old Town. In the alleys behind St Martin’s Cathedral you will find echoes of Vienna, which is only 64 kilometers (40 miles) away. Such are the pleasures of life in this corner of central Europe.

But behind the serenity of its façade lies an edifying fact: income per capita here is at 138% of the EU average. It is no small accomplishment for a city in a country, the Slovak Republic, which was rudderless for much of the 1990s. Starting with its famous 19% flat tax rate and its no-nonsense reforms, Slovakia has managed a turnaround. Real GDP in 2007 grew 8.8%, with inflation set to drop to 2% this year.

“Slovaks have had their own state for only 16 years. And over that short period we have made it internationally,” says Ivan Gasparovic, the President of Slovakia. The aggressive reforms implemented as of 1998 forced companies to reorient their output and many farmers to go out of business. But by the time Slovakia joined the EU in May 2004, the economy was again buoyant.

Minister of Foreign Affairs Jan Kubis says that statistics show Slovakia is today one of the most Euro-optimistic countries in the Union. For Jake Slegers, the president of the American Chamber of Commerce, what really turned the Slovak psyche around was the Ice Hockey World Championship of 2002. “It was the one thing that totally united the country and changed the attitude of the people, from defeatist to optimist. It gave Slovaks a can-do ethos,” says Slegers.

Today, Slovakia is a member of NATO and will enter the Euro-Zone in January 2009. It is also the 36th economy in the world for ease of doing business. It is still a prime target for automotive investment – assembly lines here produce fixings and moulds for Volkswagen, KIA and Peugeot. Climbing up the value chain, local firms are now sought for their quality testing. The new left-leaning government is continuing the previous cabinet’s pro-business agenda.

Asked where the opportunities lie in 2008, officials here will counter with ‘everywhere’. Winter sports and spa tourism have taken root in the High Tatras range, bordering Poland. In the industrial self-governing region of Kosice, the focus is on mechanical engineering and high-end steel. Slide your finger in a westerly direction, past limestone fortresses and rococo castles, and you will end up in knowledge-based territory – the source of future wealth.

“The knowledge-based society is a long-term project for which the results will be visible in 10-12 years. That is why it is a challenge to sell,” says Deputy Prime Minister Dusan Caplovic. It is difficult to convince constituents about prioritizing SMEs with a knowledge component. And yet, more than a third of the 11 billion euros that Slovakia will receive through 2013 in EU structural funds will target innovative projects.

Often in the shadow of large foreign investors, SMEs in specialized niches are the real agents of transformational change for this country of 5.5 million. The synergies are already visible in the masterplan for Eurovalley, an R&D center. Recently, the government signed a deal with Samsung LCD to transfer part of its R&D facilities to the town of Trnava. This will attract new SMEs, in turn creating a multiplier effect.

“Nowadays, thanks to KIA and Samsung, there’s an increasing awareness of the tandem between Slovakia and Korea,” says Yong Kyu Park, the Ambassador of Korea. The 320 million euro investment by Samsung LCD will put Trnava on the global map for decades, enhancing Slovakia’s overall competitiveness.