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                       THE SLOVAK REPUBLIC

                     Key Economic Indicators
        (Millions of U.S. dollars unless otherwise noted)

                                   1992      1993      1994 1,2/

Income, Production and Employment:

Real GDP (1984 prices) 3/         6,295      5,223     5,686
Real GDP Growth (pct.)             -7.0       -3.2       3.9
GDP (at current prices) 3/        9,554     10,212    12,062
By Sector:  4/
  Agriculture                       541        582       721
  Industry                        5,354      4,003     4,529
  Services                        3,659      5,320     7,027
  Other                             N/A        307      -215
Real Per Capita GDP (USD)         1,186        982     1,063
Labor Force (000s)                2,764      2,347     2,506
Unemployment Rate (pct.)           10.4       14.0      14.6

Money and Prices:

Money Supply (M2: pct. gwth.)      7.91       7.63      8.19
Base Interest Rate (pct.) 5/       13.4       12.0      12.0
Personal Saving Rate (pct.)         3.3        3.3       2.7
Retail Inflation (pct.)            10.0       23.2      14.2
Wholesale Inflation (pct.)          5.3       17.2       9.4
Consumer Price Index                N/A       23.2      14.2
Exchange Rate (SK/USD)
  Official                        28.26      32.97     31.46
  Parallel                        30.50        N/A       N/A

Balance of Payments and Trade:

Total Exports (FOB) 6/            3,624      5,086     6,435
  Exports to U.S.                    47         58       105
Total Imports (CIF) 6/            3,564      5,914     6,385
  Imports from U.S.                  58        106       168
Aid from U.S. 7/                  28.51        N/A       N/A
Aid from Other Countries 7/         N/A        N/A       N/A
External Public Debt              2,322      3,600     4,150
Debt Service Payment (paid)         N/A        110       390
Gold and Foreign Exch. Reserves     790      1,400     2,300
Trade Balance 6/                     60       -828        50
  Trade Balance with U.S.           -11        -49       -63

N/A--Not available.
1/ 1994 figures estimated from latest available monthly data in
October 1994.
2/ Growth rates calculated in SK before converting to dollars.
3/ In 1993 ESA replaced MPS method of measuring GDP.
4/ Industry includes energy, manufacturing, and construction;
services include rents, financial and government services;
other is a residual.
5/ Discount rate of National Bank of Slovakia.
6/ Merchandise trade; figures for 1993 and 1994 include trade
with the Czech Republic.
7/ Assistance is substantial but current figures unavailable.

1.  General Policy Framework

    On January 1, 1993, the Slovak Republic gained
independence, following the breakup of the Czech and Slovak
Federative Republic (CSFR).  The economic structure of the new
Slovak state resembles that of the former state in many
respects, and all former federal laws were adopted in Slovakia
in early 1993.  A customs union providing for free movement of
goods and services and prohibiting tariff barriers within the
former CSFR remains in existence.  In addition to the ongoing
difficulties of converting a centrally-planned economy to a
modern market economy, Slovakia has had to create new
government institutions with limited resources.  Data
collection and analysis have improved considerably but remain
occasionally insufficient (or incompletely converted to
international standards).  Most of the former CSFR's
competitive industry, foreign investment and financial
expertise were located in the Czech Republic.  The
once-powerful armaments industry now produces at less than ten
percent of its 1988 level.  In consequence, unemployment is
much higher in Slovakia than in the Czech Republic.

    After elections in Fall 1994, former Prime Minister
Vladimir Meciar's HZDS party won a large plurality and formed a
new government in December together with two small coalition
partners.  The new Meciar government replaced the coalition
government led by Jozef Moravcik that had ruled since March
1994.  The Association of Slovak Workers (ZRS), one of the
coalition partners in the new Meciar government, has voiced
concern about privatization.  An official from ZRS is the new
Privatization Minister.

    Slovakia has expressed formal interest in EU and OECD
membership.  Slovakia signed an EU association agreement in
October 1993, and the attendant trade provisions have been
implelented.  The government adheres to EU standards wherever
possible in modernizing infrastructure and legislation. 
Slovakia emphasizes its central location, skilled and low-cost
labor force, industrial tradition, and familiarity with its
eastern neighbors in advertising itself as a bridge between
East and West for business.  

    In 1993 the general government fiscal deficit fell to 7.5
percent of GDP, above the IMF target but substantially below
the underlying 13% deficit in 1992 under the Federation.  The
deficit was aggravated by insufficient tax revenues due to the
creation of a new tax system, high levels of social spending in
response to the dislocations caused by economic transformation,
and debt service obligations.  The government's deficit target
for 1994 was 4 percent of GDP; by November it appeared that
this target would be reached.  Certain large items (including
$94 million for education and health) remain off-budget.  The
government has been trying to reduce the generous levels of
social payments.  A new insurance system was established in
January 1993, intended to become self-financing (and 
off-budget) in 1994.  The deficit was primarily financed by
domestic banking sources, leading to a severe shortage of
credit available to private sector borrowers.  Borrowing from
the IMF, World Bank, EBRD, and other international lenders was
also significant.     

    A restrictive monetary policy has succeeded in increasing
foreign exchange resources and limiting inflation.  The central
bank (National Bank of Slovakia, or NBS) maintained a tight
refinancing policy.  The NBS uses mostly indirect controls as
policy instruments.  Reserve requirements remained stable; open
market operations and currency swaps are undeveloped and little
used.  Banks themselves (28 in Slovakia, of which nine are
branches of foreign banks) tended to purchase low-risk
government securities as their liquidity increased, thereby
reducing credit available to private borrowers.  

2.  Exchange Rate Policy

    After the division of Czechoslovakia, an initial monetary
union dissolved and the two currencies separated in February
1993.  Czechoslovak banknotes with Slovak stamps have been
replaced completely by newly-printed Slovak notes.  Since July
1994 the Slovak crown has been pegged to the Deutsche mark (60
percent) and the U.S. dollar (40 percent), under the
supervision of the NBS.  The crown was devalued by ten percent
in July 1993 but has since remained stable at approximately 32
crowns to the dollar.  

    The crown is internally convertible and may move toward
full convertibility by the year 2000.  The Moravcik government
committed to Article VIII status with the IMF by January 1996,
and by the end of 1995 to define a clear timetable for ending
the Czech-Slovak bilateral payments agreement.  Individuals may
maintain hard currency accounts and are entitled to purchase
9000 crowns' ($285) worth of hard currency a year, an amount
that has been rising annually.  Companies registered in
Slovakia may earn hard currency but must deposit it in crown
accounts; they may purchase hard currency for business reasons,
subject to some limitations (see section 5).  Foreign investors
may keep their initial investment in hard currency and may
repatriate 100 percent of their profits in hard currency.      

3.  Structural Policies

    Restitution:  The CSFR passed laws during 1990-92 governing
return of private property seized by the government after
February 1948.  Deadlines for filing claims have expired,
except in the case of religious community property, for which
new legislation took effect in January 1994.  The new
legislation includes provisions for restitution claims on
Jewish community properties seized after November 2, 1938. 
Laws on agricultural restitution permit claims of up to 250
hectares of land (150 hectares for arable land).  By the end of
September 1994, 156,702 hectares of land had been returned to
roughly 24,000 claimants; an additional 32,379 hectares
representing joint claims were returned to communities. 
Restrictions on land usage by existing owners have been lifted
for 461,810 hectares of arable and wooded land. 
    Privatization:  Both small- and large-scale privatization
began in 1991 (prior to the breakup of the CSFR); the former is
complete.  Approximately 9500 small enterprises, including 6500
retail shops, have been privatized; privatization of urban
housing has begun.  Large-scale privatization has been
repeatedly delayed by political and conceptual changes within
the Slovak government, along with bureaucratic bottlenecks. 
The Moravcik government pursued a mixed approach to
privatization which included standard methods and renewed
emphasis on use of the voucher method.  The first wave of
large-scale privatization ended in September 1993, with 703
enterprises valued at $5.3 billion at least partially
privatized.  The new Meciar government has decided to postpone
launching the second wave of voucher privatization, scheduled
to start in December 1994.  Government officials stated that
the second wave would be delayed by only a few months.  Prime
Minister Meciar planned to remove energy-producing companies
and certain other firms from the list of firms to be
privatized.  Originally, over two billion dollars worth of
firms were to be privatized.  Almost 3.5 million Slovaks, over
80 percent of those eligible, have registered to participate in
the second wave.  Overall, the private sector now generates
over 40 percent of GDP versus less than ten percent in 1988.

    Commercial Code:  The Code adopted in Czechoslovakia in
1992 remains valid in Slovakia.  Key points for U.S. investors
include a low level of government screening of foreign
investment, other than for privatization of certain state
enterprises; equal treatment with Slovak citizens for
conducting business; and elimination of most restrictions on
foreign investment.  The 1992 United States - Czechoslovakia
Bilateral Investment Treaty remains in force in Slovakia. 

    Taxes:  Slovakia introduced a new tax system in January
1993, with later modifications.  Taxes are measured by the
calendar year and consist of a Value Added Tax (VAT) of 25
percent on most items and 6 percent on basic foodstuffs and
essentials; an excise tax; personal income tax of 15 to 47
percent and corporate income tax of 45 percent; and taxes on
real estate, auto registration, inheritance, gifts, etc.  VAT
accounts for about 30 percent of central government revenue;
the government is considering a lowering of rates.  Measures
are also being taken to improve collection and increase
penalties for evasion.  Significant tax incentives exist for
companies (especially banks) founded in Slovakia after December
31, 1992, depending on the location and level of foreign
capital invested.  The United States and Slovakia signed a
dual-taxation treaty in October 1993 which entered into force
in early 1994.

    Price Liberalization and Subsidies:  In July 1994,
selective wage controls were implemented in loss-making
enterprises and the energy and finance sectors; most private
enterprises are exempt from these controls.  Nearly all (96
percent) price controls have been removed; controls on food,
fuels, energy, heat, etc. remain but will be phased out by
December 1995, with periodic price increases during the next
two years to bring prices to market levels.  Government-granted
monopoly rights no longer exist.  Direct subsidies to
enterprises have fallen to about five percent of GDP.  In July
1994 selective wage controls were implemented in loss-making 
enterprises and the energy and finance sectors; private
enterprises are exempt from these controls.

    Bankruptcy:  Slovakia adopted the 1991 federal law on
bankruptcy with additional amendments in June 1993.  Under the
law, a board of creditors (maximum of seven) formed upon court
recommendation may take control of enterprises in bankruptcy
proceedings; the board has three months to work out a recovery
program before liquidation occurs.  The board is elected by
domestic creditors, each of whom has one vote regardless of the
share of debt held; foreign creditors may not participate on
the board.  By January 1994 unresolved long-term claims of
Slovak companies totaled $2.3 billion, with short-term
unresolved claims at $9.1 billion.  Some claims have been
settled by a mandatory clearing system for enterprise debt
(focused on companies in "secondary insolvency," i.e. those who
could operate successfully if their debtors paid them).  This
has been an important hindrance to economic reform,
complicating efforts of efficient companies to attract
investment due to their unresolved claims, while inefficient
companies continue to receive government subsidies.    

4.  Debt Management Policies

    Slovakia has a low level of foreign debt, 80 percent of
which is medium-term and the rest long-term.  As of late 1994,
gross foreign debt was $4.1 billion (roughly one-third of GDP),
down slightly from December 1993.  Of this, about 56 percent
represented debt of the government and the NBS.  In September
the NBS estimated that 40 percent of Slovakia's foreign
exchange reserves are from foreign loans.  Debt service for
1994 represents six percent of export earnings, a figure which
will increase in 1995.  Slovakia holds claims of $2.5 billion
on various countries around the world; all bilateral repayment
agreements were canceled prior to the dissolution of the CSFR. 
The former Soviet Union is by far the largest debtor, owing
$1.7 billion, half of which is in convertible currency. 
Payments to and from the Czech Republic are handled through an
ECU-based clearing system.   

    Bad Debts:  In September 1994 the Slovak Finance Minister
characterized 25 percent ($1.6 billion) of all bank loans as
bad.  Much of the problem dates back several years to the
communist era.  In 1991 Czechoslovakia established a
Consolidation Bank to centralize part of the debts and
liabilities of the banking system, and subsequently the federal
National Property Fund issued bonds to aid debt writedowns and
bank recapitalization.  The government is considering an
extensive program to address the related problems of bad debts,
inadequate corporate governance, enterprise restructuring, and
commercial law reforms.  Foreign investors are concerned that
Slovak legislation does not permit tax deductions for bad debt
reserves and has no provision for reclaiming value-added tax on
bad debts.  Loss carry-forward provisions are also unclear. 

    Loan Guarantees:  Slovakia has increased its outlays on
government loan guarantees (on both domestic and foreign
loans), primarily for infrastructure projects; as a share of
the budget these rose to 20 percent in 1994.  Commercial banks
were slightly more active in providing loan guarantees in 1994,
providing about $95 million (up 14 percent from 1993).

    Adjustment Programs:  The IMF approved a credit under the
Systemic Transformation Facility (STF) of approximately
$89 million for Slovakia in July 1993; an IMF advisor is
resident in Bratislava.  The STF is designed to facilitate
Slovakia's adjustment to the fiscal and external imbalance
resulting largely from the end of fiscal transfers from the
federal government in Prague, and to accelerate structural
reform.  In July 1994 the IMF approved $263 million in
additional credits, including $169 million under a 20-month
standby arrangement and $94 million as a second credit under
the STF.  The World Bank approved an Economic Recovery Loan of
about $80 million in November 1993, with Japanese cofinancing
of a like amount; the purpose of the loan is balance of
payments support and broad economic reform including the social
safety net.  Talks were under way in 1994 with the World Bank
for an Enterprise and Financial Sector Adjustment Loan.  Since
1992 Slovakia has received over $200 million in technical
assistance and other aid from various donors.

5.  Significant Barriers to U.S. Exports

    In December 1993 Slovakia canceled a temporary measure
(implemented earlier in 1993) designed to check the flow of
scarce foreign exchange.  Payment conditions are now negotiated
directly between Slovak importers and their foreign suppliers.

    Import Licenses:  Import licenses are governed by the 1991
decree of the former Czechoslovak Ministry of Foreign Trade,
which remains valid under Slovak law.  The decree divides
commodity items into "general" and "specific" categories for
the purpose of licensing.  For most of the approximately 100
groups of items in the "general" category, obtaining a license
is a formality.  In the remaining ten percent of cases (in
which a favorable decision of the Ministry of Economy is
required) obtaining a license may be more difficult, for
reasons related to environmental concerns, existing quotas, etc.

    Items in the "specific" category fall into three groups: 
pharmaceuticals, weapons, and COCOM items.  In these cases a
favorable decision from the Ministry of Economy is required. 
Among its criteria for decision the Ministry includes
consideration of environmental and health factors as well as
the impact on domestic producers.  

    Services:  Permission from the NBS is required to offer
banking services.  Insurance companies must obtain a license
from the Ministry of Finance.  Permission from the Ministry of
Finance is required for stock exchange services.  Foreign
entities are welcome to join existing stock and options
exchanges, but no provisions exist under the 1992 law for
establishing new exchanges.  Lawyers may be licensed either by
the Chamber of Advocates or by the Chamber of Commercial
Lawyers.  Advocates may practice in any field, including
commercial law.  Commercial lawyers may not practice criminal
law.  Lawyers may practice as individuals, associations or
general partnerships, but not under a limited liability
(professional corporation) form.  No special permission is
required to offer travel or ticket services or air courier

    Standards, Testing, Labelling, and Certification:  Slovak
legislation in this area closely follows EU legislation.  The
Slovak Office of Standards, Metrology and Testing is the
responsible office for compulsory and voluntary testing of a
wide range of products at 20 testing centers.  Testing is
compulsory for products in the "regulated" sphere (defined as
those which may pose threats to health, life, safety, and the
environment) which mainly comprise foodstuffs, kitchen devices,
medicines, electrical equipment, engineering products,
agricultural machinery, plastics, paints, polishes, cosmetics,
and sporting goods.  Voluntary testing may be done at the
request of the producer or importer wishing to obtain a
certificate.  Slovakia intends to introduce its own system of
labelling in early 1995, replacing the old federal system.  

    Investment:  To date Slovakia has taken a positive stance
toward foreign investment, though in practice some obstacles
exist.  Foreign citizens may not own land in Slovakia, but may
form legal entities in Slovakia which in turn are permitted to
purchase land.  There are no significant barriers to
participation of foreign equity or personnel; no barrier to
repatriation of profits or capital; no restrictions on
downstream services; and no lack of national treatment. 
Investment incentives do not provide sufficient provision for
accelerated depreciation, in the view of some foreign
investors.  The government has made clear that certain sectors
(e.g., telecommunications, energy) will not be privatized in
the short run.  It is still uncertain whether considerations of
employment or development of favored industries will adversely
affect the interests of foreign investors.  

    Government Procurement Practices:  No "buy Slovak" law
exists, but the government is sensitive to the concerns of
local producers whose existence is threatened by the pace of
economic reform and the emergence of efficient competitors. 
The government has stated that in certain instances, the
potential for local job creation will weigh heavily in judging
bids for newly-privatized enterprises.

    Customs Procedures:  Procedures are not intrinsically
complicated or burdensome.  The basic form required is the
"Unified Customs Declaration" which conforms to EC standards. 
Occasional problems have arisen in individual cases, usually
due to the unfamiliarity of one or more parties with the new

    The Slovak Republic succeeded to Czechoslovakia's
membership in GATT, and bases its foreign trade policy on GATT
principles, including the GATT subsidies code.  Slovakia is a
participant in the following agreements:  Multi-Fiber
Arrangement, Technical Trade Barriers Agreement, Licensing
Procedures Agreement, and Agreements on GATT Articles VI and
VII.  Slovakia ratified the Uruguay Round agreement and joined
the World Trade Organization as a founding member.

    Tax Concerns:  Foreign investors have expressed concerns
over several tax issues in Slovakia.  Under current law there
is no provision for establishment of purely representative
(informational) offices exempt from normal tax and accounting
requirements.  Holding companies are subject to a 15 percent 
withholding tax on intra-group dividend payments.  Since
dividends are paid from after-tax profits, they are doubly
taxed.  Expatriate employees of Slovak entities are not
exempted from (relatively high) social security and health
insurance payments even when they remain covered under their
home-country system.   

6.  Export Subsidies Policies

    Slovakia is a member of the GATT subsidies code.  The
tariff schedule is inherited from the Federation; rates are low
and average about six percent.  Imports from developing
countries enjoy GSP preference.  There are currently no direct
subsidies for Slovak exports, though indirect subsidies exist
in areas such as housing, agriculture, and energy.  An import
surcharge of ten percent on consumer goods was implemented in
March 1994 and is to remain in effect into 1995. 

7.  Protection of U.S. Intellectual Property

    The Slovak Republic is a signatory to the same conventions
as the former Czechoslovakia, e.g. the Berne, Paris, Stockholm,
Madrid, Nice, Lisbon, Locarno, Washington, Strasbourg, and
Budapest conventions.  Slovak laws and regulations on
intellectual property are identical to those of the former
Czechoslovakia.  Slovak laws in this area are compatible with
western European legislation.  A new law on administrative fees
was passed in 1993; a law on trademarks is expected in 1995,
which will be harmonized with EU legislation.  Slovakia is a
successor to Czechoslovak membership in the World Intellectual
Property Organization (WIPO).  The U.S. Embassy is not aware of
disputes involving U.S. interests in the area of intellectual
property protection; however, Slovakia's trademark legislation
is based on "first to register" rather than "first to use,"
which poses potential difficulties for foreign investors.  

8.  Worker Rights

    a.  The Right of Association

    There are no government restrictions on the constitutional
right of workers to form or join unions in Slovakia, except
that the armed forces are excluded from this right.  Unions are
independent of the government and political parties; roughly 70
percent of the labor force is organized.  All workers enjoy the
right to strike, except those in sensitive positions such as
judges, prosecutors, members of the armed forces, police, and
firefighters.  At present the policy of the Confederation of
Trade Unions regarding collective bargaining excludes strikes
as a tactic, and there have been none in 1994. 

    b.  The Right to Organize and Bargain Collectively

    Collective bargaining is protected by law and freely
practiced throughout Slovakia.  Wages are set by free

    c.  Prohibition of Forced or Compulsory Labor

    Forced or compulsory labor is prohibited by law.  There is
no evidence that violations have occurred.

    d.  Minimum Age for Employment of Children

    The labor code forbids employment of children under the age
of 16.  Exceptions are made for 15-year-olds who have completed
elementary school and for 14-year-olds who have completed
courses at special schools for the disabled.  Workers under 16
may not work more than 33 hours per week and are covered by
legislation to protect their safety and well-being.

    e.  Acceptable Conditions of Work

    The Office of Labor Security issues standards on security,
and the Office of Hygiene issues standards on health at the
workplace.  The minimum monthly wage is SK 2450.  The law
mandates a standard workweek of 42.5 hours, which may be
modified by collective bargaining.  Caps exist on overtime and
workers are assured of at least 30 minutes' paid rest per work
day, and annual leave of three to four weeks per year.

    f.  Rights in Sectors with U.S. Investment

    Workers' rights in sectors with U.S. investment are the
same as in other enterprises in Slovakia.

  Extent of U.S. Investment in Selected Industries.--U.S. Direct
Investment Position Abroad on an Historical Cost Basis--1993

                    (Millions of U.S. dollars)
              Category                          Amount          

Petroleum                                               0
Total Manufacturing                                   (1)
  Food & Kindred Products                   (1)
  Chemicals and Allied Products               0
  Metals, Primary & Fabricated                0
  Machinery, except Electrical                0
  Electric & Electronic Equipment             0
  Transportation Equipment                    0
  Other Manufacturing                         0
Wholesale Trade                                         0
Banking                                                 0
Finance/Insurance/Real Estate                           0
Services                                                0
Other Industries                                        0
TOTAL ALL INDUSTRIES                                  (1)      

(1) Suppressed to avoid disclosing data of individual companies

Source: U.S. Department of Commerce, Bureau of Economic


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