Slovak Republic WT/TPR/S/91
Page 13
II. DEVELOPMENTS IN TRADE AND INVESTMENT POLICY
(1) OVERVIEW
1. Accession to the EU is the main objective of Slovakia’s current trade and economic policies.
This overwhelmingly dominates its reform agenda.  Although formal accession negotiations only
commenced in early 2000, considerable achievements have already been made as the Government
strives to meet its target of being ready for EU membership by 2004.  Legislation is continuouslybeing reviewed and changed, providing an opportunity for Slovakia to reform its economic and trade
policies as well as its domestic institutions.  Slovakia also has close preferential trade arrangements
with its customs union partner, the Czech Republic; other CEFTA States; and EFTA members.  Since
its last Trade Policy Review, it has also formed bilateral free-trade agreements with Estonia, Latvia,
Lithuania, Israel, and Turkey, and is soon to sign one with Croatia.  Preferential trade, especially withthe EU, continues to dominate Slovakia’s trade patterns.
2. Investment legislation provides for equal treatment between foreign and domestic investors.
The number of sectors subject to restrictions has been reduced to only a few, and foreign investors are
no longer disadvantaged in participating in privatization sales.  Restrictions on land acquisition by
foreign businesses have also been eased.  Capital inflow restrictions have been removed or relaxed tomeet OECD commitments following Slovakia's membership in December 2000.
3. The thrust of Slovakia’s trade policies is towards liberalization, especially at the regional
level.  Slovakia is also interested in developing trade with countries from other continents.  The
Government remains fully committed to  the multilateral trading system.
(2) I
NSTITUTIONAL FRAMEWORK
(i) Institutional structure
Parliament and legislative powers
4. The Slovak Republic remains a parliamentary democracy comprising a national government
and eight administrative regions, further divided into 79 districts.  The unicameral Parliament, called
the National Council, has supreme legislative power.  It consists of 150 members (deputies) elected by
proportional representation for four-year terms.  The President is the Head of State.  Several
constitutional amendments have been made since 1995.  In 1998, the Constitution was amended tohave the President elected by popular vote, rather than by Parliament, for a five-year term.  Other
changes made in February 2001 concerned, inter alia , the application of international agreements
prior to domestic regulations, and the preliminary monitoring by the Constitutional Court of the
constitutionality of international commitments prior to adoption.  This amendment provided broader
protection of the basic rights and liberties of Slovak citizens and of the principle for power sharing inthe country’s constitutional system.  It created the framework for Slovakia to fulfil commitments
stemming from its international agreements, and for the improved operation of the Supreme Control
Office.  It also strengthened the independence of the courts and broadened the competencies of the
Constitutional Court.  The requirement for an om budsman office was also added to the Constitution.
Such constitutional changes require a three-fifths majority by the National Council.
5. The legislative process has not changed greatly since 1995.  The highest law in Slovakia is the
Constitution, adopted in 1992 (No. 460/1992 Coll.).  All laws and international treaties must be
consistent with the Constitution.  The President mu st ratify international treaties.  According to
authorities, international commitments prevail over domestic laws should conflict occur, although the
position is somewhat complicated by the constitutional provision that only international treaties onWT/TPR/S/91 Trade Policy Review
Page 14
human rights should prevail over domestic legislation. Similarly, although international agreements
adopted by Parliament, and ratified by the President, become valid domestic laws, some parts of
international law also require incorporation into domestic legislation to be implemented.  To clarify
the situation, the Constitution was amended on 1 July 2001 to specifically make international
commitments an integral part of domestic law and superior should conflict arise.  Ministries and
central authorities can issue generally binding legal measures by way of ordinances or orders.  Theseare signed by the relevant minister and issued in the Law Collection (ordinance) or in the bulletin of
the specific ministry (order).  Laws are administered and implemented by regulations and decrees
issued by ministers within the limits set by the relevant legislation.  Draft regulations are reviewed by
other ministries, agencies and the Legislative Council, and signed by the President, the Prime
Minister, and the Chairman of the Parliament.  The approved regulation becomes effective after itspublication in the Law Collection or at the date stated in the regulation.
The Executive
6. The Government, headed by the Prime Minister, is the supreme executive body.  It is
appointed, along with cabinet members, by the President on the recommendation of the Prime
Minister, who is the leader of the majority political party, or of the main coalition party.  TheGovernment is responsible to the National Council, and may be dismissed by the President on a vote
of no-confidence passed in the Council.  Legislation requires Council approval by simple majority and
must be ratified by the President.  Draft legislation is submitted, usually by the relevant minister, to
the Legislative Council, an advisory body to the Government, and then to parliament as a bill.
1  It is
checked for compatibility with other domestic regulation, EU laws, and relevant international
commitments before being presented by the Government to the National Council.  Each new piece of
legislation contains a separate clause indicating that it is compatible with EU laws.
The judiciary
7. The Constitution provides for full independence of the judiciary from the executive or
legislature.  The judicial system consists of the Constitutional Court, and a court system comprising
the Supreme Court, below which are regional and district courts.  The Constitutional Court considers
constitutional matters and makes decisions on whether domestic legislation is generally compatiblewith Slovakia’s international treaties.  Efforts have been taken to strengthen the independence of the
judiciary, such as introducing new legislation, effective 2001, giving the judiciary more power over
the appointment and dismissal of judges, and fu nding from outside the Ministry of Justice.
Nevertheless, functioning of the judiciary, in particular its professional impartiality and political
neutrality, appears to remain a problem.
2  A Code of Conduct has been adopted by judges and senior
officials, requiring declaration of property interests.
8. The number of cases considered annually by the courts has tripled since the early 1990s to
around 800,000.  This has led to large judicial delays.  Of particular concern to investors has been the
slowness of the overburdened commercial courts.  The lengths of judicial proceedings and the backlog
of cases are substantial.  A lack of judicial expertise in commercial law as well as weak enforcementare other factors impeding the business environment.  Amendments to the Commercial Code are
expected to become effective 1 January 2002 (Box II.1).  Further changes to the bankruptcy
legislation are expected to help clear the large backlog of cases, including by increasing the role of
mediators in bankruptcy proceedings so as to facilitate increased out-of-court settlements.
                                                     
1 Parliamentary committees and individual members of parliament may also introduce bills into the
Council.
2 EC (2000), p.17.Slovak Republic WT/TPR/S/91
Page 15
Box II.1:  Improvements in the legal business framework
The Government believes that improvements in the legal business framework are crucial to generating more
efficient enterprises by facilitating more effective liquida tions and restructuring of distressed enterprises, as well
as promoting greater financial discipline and access to cr edit by companies.  Thus, the Government has taken a
number of reforms to strengthen the legal framework for debt enforcement, bankruptcy, and corporate
governance.
Amendments to the Bankruptcy Law, effective August 2000, provided creditors with stronger enforcement
mechanisms for commencing bankruptcy procedures and imposed maximum administrative time limits.
Procedures were also made more flexible and transparent.  Authorities have indicated that these changes have
already promoted a more responsible credit culture and imposed greater financial disciplines on the corporate
sector.  To initiate further improvements, an inter-agency commission comprising public and private sector
representatives was recently established to examine the pr eparation of new insolvency legislation; strengthening
of the relevant institutions; and creation of a suitable regulatory framework to govern the training, qualifications,
appointment, and monitoring of trustees.  In reviewing the institutional arrangements, the Commission will
consider ways to improve the efficiency and transparency of court operations, and for better integrating the
insolvency laws into the broader legal and commercial framework.
Several laws that regulate the collateral system are being amended to incorporate the core principles of collateral
law on secured transactions prepared by the European Bank for Reconstruction and Development.  This includes
provisions covering pledges over movable assets; establis hment of a registry of such pledges; and for effective
non-judicial procedures to enforce property rights.  These amendments were approved by Cabinet in April 2001,
and are expected to become effective in early 2002.
The Commercial Code is being amended to enhance the accountability of members of statutory bodies to
shareholders and creditors.  This will improve the rights of shareholders and allow them to take legal action.
The changes are expected to become effective during 2001.
Source:  Slovak authorities.
9. The Government has taken steps to address public corruption.  The authorities are aware that
corruption can have a large negative impact on the business environment and economic efficiency
generally.  In Slovakia such governance problems seem to be the case mainly in the State
administration, including granting of subsidies, customs, tax authorities, the police, courts, and the
political sphere.3  In June 2000, it adopted a national plan to fight corruption, aimed at increasing
transparency to reduce the scope for abuse of discretionary powers by administrators.  Slovakia
ratified the Council of Europe Criminal Law Convention on Corruption, and adopted the OECD
Convention on Combating Bribery of Foreign Public Officials in International Business Transactions
in 1999.  In 2000, it  also ratified the Council of Europe Civil Law Convention on Corruption.
(ii) Policy formulation and implementation
10. The main characteristics of Slovakia's institutions have remained broadly unchanged since its
previous Trade Policy Review.  The main new government bodies created since 1995 are the Slovak
Agency for the Development of Investment and Tr ade (SARIO); the Public Procurement Office; the
Financial Market Authority; and the State Aid Office.
11. The Ministry of Economy remains the main governmental body responsible for the
formulation, coordination and implementation of trade policies within the framework of domestic and
international laws, including the establishment of safeguard measures against imports, andcountervailing actions against subsidized exports.  It is responsible for the coordination of bilateral
                                                     
3 EC (2000), p. 18.WT/TPR/S/91 Trade Policy Review
Page 16
and multilateral trade policies and negotiations, including implementation of obligations, such as
those under the WTO and the EU.  The Ministry operates the foreign trade licensing regime and
administers import quotas, except for tariff quotas, which are administered by the Customs
Directorate.  The Ministry is responsible for industrial policy and dispenses most financial assistance
to industry, including state aid, which is monitored by the State Aid Office.  The Ministry, along with
other policy departments such as the Ministry of Agriculture, assists the Ministry of Finance indetermining Slovakia’s multilateral commitments on tariffs.  In addition, the Ministry of Economy is
the central body for handling matters concerning small and medium-sized enterprises, industrial
research, technical development, and export promotion.  The linkages between the Ministry of
Economy and other relevant ministries in WTO matters is shown in Charts II.1 and II.2.
12. The Customs Directorate (under the Ministry of  Finance) is responsible for customs control
and enforcement, investigations, and the collection and development of trade data.  The Ministry of
Finance is charged with initiating and conducting investigations related to anti-dumping measures.
The Office of Standards, Metrology and Testing is the coordinating state body responsible for
approving standards and their preparation, and publication is under the responsibility of the Slovak
Institute of Standardisation.  The Slovak Accreditation Services is in charge of accreditation of testingcentres.  The responsibility for privatization policy rests with the Ministry for the Administration and
Privatisation of National Property, and the privatisation programmes are implemented by the
independent National Property Fund.  The Antimonopoly Office is trusted with the administration of
competition legislation.  The Industrial Property Office and the Ministry of Culture administer
industrial property and copyright protection, respec tively.  The Ministry of Agriculture covers
agricultural trade policy formulation, notably with regard to the price support operations of the State
Fund for Market Regulation.  The Ministry of Building and Regional Development is responsible forregional development, and the recently established Public Procurement Office monitors public
procurement.  Tourism is the responsibility of the Ministry of Economy.
13. The Ministry of Transport, Post and Telecommunications is responsible for setting transport
and telecommunication policies, with the independent Telecommunications Office taking on
regulatory and pricing functions since its formation in January 2001.  The National Bank of Slovakiasets monetary and exchange rate policies in consultation with the Government, and performs other
functions, such as supervision and regulation of the financial system.  Supervision of the securities
and insurance markets is handled by the newly created Financial Market Authority.
(iii) Transparency and openness of decision making
14. Open access to information is guaranteed by law.  All regulations – including laws, decrees,
orders, and reports of the Constitutional Court – are required to be published in the Collection of
Laws before they enter into force.  If available, non-official English translations of regulations are
also published.
15. Draft regulations must be sent to other ministries and the central bank for comment.  There is
no independent transparency body to advise the Government on industry assistance and protectionpolicies.  No formal arrangements exist for channelling economic and trade policy advice from
academia or the private sector to the relevant government bodies.  However, ministries frequently
consult interested parties, including the Slovak Chamber of Commerce and Industry, business
associations, consumer groups, and other non-governmental associations, such as the Federation of
Employers’ Associations.  The Institute of Slovak and World Economics of the Slovak Academy of
Sciences provides research and commentary on the Slovak economy.  Consultation between
government and the private sector has intensified in recent years, partly as a result of advancementstoward EU accession.  Technical regulations and standards are prepared based on public
consultations.Slovak Republic WT/TPR/S/91
Page 17
Chart II.1
Ministries responsible for trade in goods
Permanent Mission in 
GenevaMinistry of Economy of the Slovak Republic
Multilateral Trade Cooperation Sector
WTO Department
Ministry of 
Agriculture,
Central Controling an d 
Testing Institute for 
Agriculture,
State Veterinary 
AdministrationMinistry of 
Construction and 
Regional 
Development,
Public 
Procurement 
OfficeMinistry of 
EnvironmentOffice of 
Standards, 
Metrology and 
TestingMinistry of 
Finance, 
Customs 
DirectorateMinistry of Transport, 
Posts and 
Telecommunication
Agreement on 
Sanitary and 
Phytosanitary 
MeasuresAgreement 
on 
AgricultureAgreement on 
Government 
ProcurementCommittee on 
Trade and 
EnvironmentAgreement on 
Technical 
Barriers to 
TradeCommittee on 
Market Access 
Customs Valuation 
Rules of OriginAgreement on 
Trade in Civil 
Aircraft
Source : Slovak authorities.
Chart II.2
Ministries responsible for trade in services
Permanent Mission in GenevaMinistry of Economy of the Slovak Republic
Multilateral Trade Cooperation Sector
WTO Department
Ministry of 
Finance,
National Bank 
of Slovakia,
 Financial 
Market
AuthorityMinistry of Transport, 
Posts and 
Telecommunications,
Telecommunication 
OfficeMinistry of 
Construction 
and Regional 
DevelopmentMinistry of 
EnvironmentMinistry of 
CultureMinistry of 
EducationMinistry of 
Health Care,
Ministry of 
Labour, Social 
Affairs and 
Family
Insurance, 
banking and 
other financial 
servicesPostal,  
telecommunication, and 
transport servicesConstruction 
and related 
servicesEnvironmental 
servicesAudiovisual 
servicesEducation 
servicesHealth and 
social services
Source : Slovak authorities.WT/TPR/S/91 Trade Policy Review
Page 18
(iv) Main laws and regulations
16. The Slovak Republic has enacted a large number of trade and trade-related laws and
regulations and amended existing ones during the period under review, with an acceleration of the
legislative process in 2000.  Many of the changes have been made to harmonize the legal framework
with the EU’s acquis communautaire , as well as to implement, in domestic legislation, many of the
key provisions of the WTO Agreements.  The most important legislative instruments affecting tradeare the Commercial and Civil Codes, Competition Act, Customs Act, Foreign Exchange Act, Act on
National Bank of Slovakia, Act on Safeguards, Act on Anti-dumping, and Act on Subsidies and
Countervailing Measures (Table II.1).  This basic legislation is complemented by decrees and
regulations issued by relevant ministries on the basis of their legal mandate.
17. During the period under review, the Slovak Republic introduced specific legislation on
contingency measures (anti-dumping, countervailing and safeguard measures), but to date has used
such trade remedies sparingly.  Revised legislation on standards provides for simplified testing and
standardization procedures.  The Act on State Aid, effective from 2000, placed some controls on its
use and established the State Aid Office to monitor its compliance by ministries providing financial
assistance to industry.  Amendments to government procurement legislation provide for enhancedtransparency and centralized procurement monitoring by the Public Procurement Office.  Competition
and intellectual property rights legislation has been strengthened during the period under review.  The
bankruptcy law has also been amended several times with a view to facilitating enterprise
restructuring.  Nevertheless, bankruptcy procedures, coupled with a weak and overloaded judicial
system, continue to hamper industrial restructuring.
18. The pace of legislative change in Slovakia has accelerated in recent years, mainly due to
Slovakia’s priority goal of EU accession.  This is likely to continue for some time.  Some privatesector representatives see this rapid pace of change as contributing to an unstable and unpredictable
policy environment, which is generating considerable business uncertainty.
Table II.1
Main trade-related legislation
Area Main legislation
Main trade legislation on exports
and importsCustoms Act 1996 and 2001; Ministry of Finance Decree No. 251 of 2001 on Customs Law
Provisions; Ministry of Finance Decree No. 167 of 1997 on Customs Declaration and Statistics;
Government Regulation No. 480 of 2000 issuing the Customs Tariff for 2001; Ministry of Finance
Decree No. 451 of 2000 eliminating the import surcharge; Ministry of Finance Regulation No. 115of 1999 and Decree No. 191 of 2000 on tariff exemptions for certain machinery and other imports;
Act No. 487 of 2000 on export licences; Acts Nos. 379 of 1996 and 162 of 1998 on export
promotion; Acts Nos. 80 of 1997 and 33 of 1998 on the Export Import Bank
Anti-dumping action Act No. 59 of 1997 on the protection against imports of dumped products
Countervailing duties Act No. 226 of 1997 on protection against subsidised exports
Safeguard measures Act No. 214 of 1997 on import safeguard measures
Standards and technical
regulationsAct No. 264 of 1999 on technical requirements for products and compliance assessment as well as
implementing regulations
Sanitary and phytosanitary
measuresAct No. 272 of 1994 on protection of people’s health; Act No. 337 of 1998 on veterinary care; Act
No. 285 of 1995 on phytosanitary care; Ministry of Agriculture Decree No. 278 of 1998
Agriculture Act No. 240 of 1998 on agricultural policy, including food security and  amendments contained in
Act No. 361/2000 Coll. on agriculture
Government procurement Act No. 263 of 1999 on public procurement
Privatization Act No. 253 of 1999 on privatization
Competition Act No. 188 of 1994 and Act No. 136  of 2001 on protection of economic competition
Table II.1 (cont'd)Slovak Republic WT/TPR/S/91
Page 19
Area Main legislation
State aid Act No. 231 of 1999 on state aid
Intellectual property rights Acts Nos. 383 of 1997 and 234 of 2000 on copyright; Act No. 146 of 2000 on legal protection of
topographies of semi-conductor products; Act No. 55 of 1997 on trade marks; Act No. 527 of 1990
on inventions, industrial designs and rationalisation proposals; Act No. 478 of 1992 on utility
models
Price control Act No. 526 of 1990 on price controls
Foreign investment Acts Nos. 366 of 1999 and 466 of 2000 providing tax incentives
Source : Slovak authorities.
(3) DEVELOPMENTS IN INTERNATIONAL RELATIONS
(i) World Trade Organization
19. The Slovak Republic, an original member of the WTO, made extensive commitments during
the Uruguay Round, both in goods and services.  During the period under review, it has continued to
undertake obligations within the multilateral framework.  In 1997, it became a signatory to theInformation Technology Agreement (ITA), under which it agreed to eliminate tariffs by 2002 on a
range of imported information technology products covering 359 (eight-digit) tariff lines, including
computers, telecommunications equipment, semiconducto rs, software, and scientific instruments.  The
first tariff rate reductions on these products occurred in 1998.  Slovakia also made further concessions
on pharmaceutical products under the Pharmaceutical Initiative, but delayed the commencement ofthe five-year phase-out of duties on agreed pr oducts for six months, to 1 January 2000. It also
participated in the 1997 WTO negotiations on basic telecommunications and on financial services.
Slovakia has indicated its intention to join the WTO Agreement on Government Procurement by end-
2002;  it participates as an observer in that Committee.  It also intends to join the Agreement on Trade
in Civil Aircraft by the time of its accession to the EU.  The most recent WTO notifications by the
Slovak Republic are shown in Table AII.1.
20. Slovakia has not been a party to any disputes under the WTO dispute settlement mechanism.
In October 1998, Hungary requested establishment of a panel concerning the imposition by Slovakia,
in September 1998, of specific duties on Hungarian wheat, equivalent to 70% ad valorem .  According
to Hungary, the increased tariff rates, which had exceeded Slovakia’s bound rates, had been appliedonly on Hungarian wheat and were inconsistent with the Slovak Republic's obligations under
Articles I and II of GATT 1994 and Article 4 of th e Agreement on Agriculture.  The panel was never
established because Slovakia withdrew the measure in November 1998.  In July 2001, Poland made a
request for consultations concerning a Slovak safeguard measure on imports of sugar.
4
21. A small, and declining, share of Slovakia’s trade is conducted purely on an MFN basis.  This
share declined from around 18% in 1994 to 8% in 2000 for exports, and from about 31% to 26% for
imports.  Preferential trade is overwhelmingly with the EU.  The EU's share has expanded
substantially since the implementation of the Slovak Europe Agreement in 1995.  From 1994 to 2000,
the EU's share in Slovak exports rose from 35% to 59% and in imports from 33% to 49%
(Chapter I(3)).  Although results of studies are mixed, one empirical analysis concluded thatbelonging to such exclusionary trading arrangements could potentially entail significant welfare and
efficiency costs for Slovakia that are likely to increase in the long run.
5  This study emphasized the
improved economic efficiency for Slovakia associated with non-discriminatory, rather than
discriminatory or regional, liberalization.  It found that the sectors most likely to expand in Slovakia
                                                     
4 WTO document WT/DS235/1, 17 July 2001.
5 Kimakova and Rajabuin, (1998).WT/TPR/S/91 Trade Policy Review
Page 20
within preferential trade arrangements would be low-value-added products, such as fuels and crude
materials, while traditional manufactured exports, especially of chemicals, machinery, and
transportation equipment, would decline.  The study concluded that efficiency gains for Slovakia were
greatest under multilateral liberalization.
22. The Government remains committed to the multilateral system, and supports a new
comprehensive round of WTO negotiations based on mutually agreed principles.  Slovakia considersthat all products should be covered in the negotiations, including tariff reductions on industrial goods.
Implementation of commitments by developing countries needs to be addressed, and special
consideration given to Slovakia and other countries in transition.  On agriculture, Slovakia supports
the views regarding the importance of non-trade conc erns, such as multifunctionality, food safety and
rural development.
(ii) Regional agreements
(a) Relations with the Czech Republic
23. The Customs Union Agreement between the Slovak and Czech Republics entered into force
in 1993 (Table AII.2).
6  It preserved the status quo at the moment of the creation of the Slovak and
Czech Republics by providing for a common external tariff and free trade, with a few exceptions,between the two countries.  The Agreement, inter alia , also stipulates:
− no discrimination between state enterprises and monopolies in government
procurement or marketing between the two countries by the end of 1997.  National
treatment is to apply and the two parties are to "endeavour to accede" to the WTO'sAgreement on Government Procurement;
− anti-competitive practices and the abuse of monopoly positions (as defined by
national legislation) are considered to be incompatible with the Agreement;
− national and MFN treatment are established in the area of intellectual property
protection;
− conforming legal norms are to be adopted with regard to customs procedures and
statistics, import and export licensing, intellectual property, and anti-dumping and
countervailing duties;
− regulations are to be coordinated in the areas of foreign exchange, economic
competition, state aid, public procurement, and agricultural policies (including export
subsidies, prices and domestic support);
− conforming commercial policy towards third countries (including non-tariff barriers,
export policy, and action against dumping and subsidies) is to be pursued;
− free trade in services, including national treatment, is to prevail; and
− each contracting party collects customs duties for its respective budget.
24. Since 1995, the rules of origin have been amended.  In January 1997 rules based on the pan-
European system of cumulation were intro duced, and were further modified in 1999 and 2000.
                                                     
6 The text of the agreement is contained in GATT documents L/7212, 30 April 1993 and L/7212/Add.1,
12 May 1993.Slovak Republic WT/TPR/S/91
Page 21
Another important development is a new standards agreement (entered into force in September 1997)
between the respective standardization offices, which provides for enhanced cooperation in the area of
certification and state trading.7  Trade in agricultural and food products has continued to be a sensitive
bilateral issue during the period under review, and both countries have applied several formal trade
restrictions on each other’s imports.  Slovakia maintains quotas on imports of sugar, beer, and non-
alcoholic beverages, including sweetened mineral water, while the Czech Republic applies importquotas on sugar and isoglucose imported from the Slovak Republic.  According to Slovak authorities,
import quotas on beer, and non-alcoholic beverages are continually unfilled, and may be removed
from 1 January 2002.
25. Imports from each country of a number of sensitive, mainly agricultural, products are also
monitored by mutual agreement by the Customs Union Council.  The list of products covered wasrecently extended substantially, from 8 to 48 items, and includes vegetable oils, margarine, fruit
juices, jams, wheat, ketchup, alcoholic beverages, and cigarettes.
8   The Permanent Secretary of the
Customs Union Council performs the monitoring of sensitive items on the basis of statistical data
provided by the General Customs Directorate of the Czech Republic and the Customs Directorate of
the Slovak Republic. In addition, a number of informal auto-limitation agreements apply betweenrespective producers’ associations to control trade in sensitive agricultural products between the two
countries.
9   The Committee for Co-ordination of Economic Policies in Agriculture monitors
developments in bilateral trade flows and the situation regarding auto-limitation agreements.
Producer Unions conclude auto-limitation agreements, and their fulfilment is evaluated within
sessions of the Committee.  No details were provided by the Slovak authorities on the current
agreements.
26. The Customs Union does not provide for free flow between the Slovak and Czech Republics
of goods originating in third countries.  Rules of origin are applied to such imports since tariff revenue
is not shared between the two governments, but colle cted separately on imports into each country.  In
addition, import limits on products subject to non-automatic licensing (quantitative restrictions) and
tariff quotas vary between the two countries.  Im port volumes set on developing countries for GSP
eligibility also differ.  Imports from the Czech Republic were also subject to the temporary importsurcharge, until it was phased out from 1 January 2001.  The share of trade between the two countries
has declined (Chapter I).  During the period 1994 to 2000, the share of Slovakia's trade with the Czech
Republic fell from 37% to 20% (for exports) and from 30% to 19% (for imports), largely due to
increased trade with the EU.  There are no exceptions to the Common External Tariff imposed by the
Customs Union.  Both members apply the same MFN and preferential tariff levels.  MFN tariffs areset at bound levels, except on a few products where both governments have agreed to apply lower
rates.  These products are determined annually, and both members apply the same reduced rates.
27. According to authorities, discussions are continuing on dissolving the Customs Union; it will
have to be dismantled when one member (or both), accedes to the EU.  Both members would then
seek solutions within the existing agreement with the EU.
                                                     
7 WTO document WT/REG89/R/B/1, 14 March 2000.
8 The other products covered are mainly live pigs and pig meat; certain poultry meat; buttermilk,
curdled milk, cream and yoghurt; potatoes; tomatoes; cucumbers; sweet peppers; wheat and maize starch; sugarand isoglucose; bread, pastry, cakes and biscuits; prepared or preserved vegetables, such as cucumbers, onions,sweet corn and peppers; ice cream; and mineral waters.
9 Ministry of Agriculture (2000a), p.37.WT/TPR/S/91 Trade Policy Review
Page 22
(b) Relations with the European Union (EU)
28. The Slovak Republic's reform agenda is increasingly being driven by its goal of EU
membership.  The strive towards EU accession provides a fresh opportunity for implementing
important reforms to strengthen Slovakia’s institutional capacity and economic restructuring and to
rationalize its state aid policies.  EU harmonization, which requires absorption of the EU acquis
communautaire , is well advanced, and the Slovak Government’s objective is to conclude negotiations
by end-2002 and to be ready for EU accession by 2004.  The authorities are of the view that it is
important for Slovakia to accede to the EU at the same time as neighbouring countries.
Trade and related aspects of the Europe Agreement
29. The first Europe Agreement, establishing an  association between the European Communities
and their Member States, and the Czech and Slovak Federal Republic (CSFR), was signed inDecember 1991.  Some of the provisions of this Agreement (such as on trade) were implemented on
1 March 1992 in an Interim Agreement, later supplemented by an additional protocol signed in
January 1994, pending replacement by the Europe Association Agreement.  Following dissolution of
the CSFR, in January 1993, the Slovak Republic renegotiated with the European Community the
Europe Agreement.  A new agreement, signed in October 1993, came into force on 1 February 1995without affecting the trade-related elements of the former CSFR/EC Agreement.  It reaffirmed the aim
of creating a free-trade zone for manufactured goods and some agricultural products within a
transitional period of ten years, i.e. by 2002.
30. The implementation of the Europe Agreement brought the following results
10:
− phased tariff reductions on industrial products : most EU duties on Slovak products
were eliminated immediately, and the rest by end-1996; customs duties on certaintextile products (Protocol 1 to the EA) by end-1997 and on certain ECSC products
(Protocol 2 to the EA) by end-1996.  Slovak ia eliminated most duties on EU products
by end-1996, but removed more slowly some other tariffs, with duties on the last few
items (such as certain chemical products, plastics, textiles, clothing, ECSC products
and passenger cars) abolished by end-2000;
− elimination of quantitative restrictions  (on imports and exports) on industrial
products by the EU from March 1992, except on imports of certain coal products until
January 1994, and textiles and clothing until January 1998.  Import quotas by theSlovak Republic on uranium ores and concentrates, natural and enriched uranium,
waste and paper scrap were gradually phased out by end-2000;
− partial liberalization in agriculture : under an enhanced preferential regime, effective
1 July 2000, Slovak exports to the EU receive additional preferential access.  The EUgrants preferential access to Slovak products through various measures, such as:
(i) tariff quotas with constant volumes or those with pre-set annual increases; (ii)tariff preferences; (iii) minimum import prices arrangements; and (iv) tariff quotas
with variable quota enforced on a plurilateral basis.  Slovakia grants selected EU
products preferential rates of duty and tariff quotas.  Further negotiations on
processed agricultural and fishery products have concluded,  and the Additional
Protocols should enter into force by end-2001;
                                                     
10 The text of the agreement is contained in WTO document WT/REG18/7, 13 May 1996.Slovak Republic WT/TPR/S/91
Page 23
− the progressive liberalization of the supply of services , including the granting of
national treatment for rights of establishment (temporary derogation for financial
services for up to ten years in the Slovak Republic) and some general exemptions,
such as for air and inland-waterway transport.   Steps are under way to liberalize the
temporary movement of people;  and
− WTO-consistent  anti-dumping, countervailing, and safeguard measures are allowed.
31. During the period under review, agreements have been reached on standards, and the rules of
origin have been amended, with the system of pan-European cumulation of origin operating since1997.  This means that semi-finished products originating in any other partner country may always be
considered as originating products.  It also imp lies that originating products can be traded between
any member country. Negotiations for a Protocol on conformity assessment and acceptance of
industrial products started in June 2001 and is expected to enter into force for certain sectors in mid-
2002.
32. Trade preferences between the Slovak Republic and the EU have contributed to the EU
becoming its largest trading partner; the EU is Slovakia’s largest export market and import source.  As
trade between the EU and Slovakia in industrial products has already been fully liberalized, further
integration between Slovakia and the EU during the accession process may have limited effects on
trade in industrial products.  In contrast, considerable potential exists in liberalizing trade in servicesand agriculture, and closer integration into the Single Market should benefit Slovakia.
33. The precise impact of EU accession on Slovakia’s trade patterns is unclear.  While adoption
of the EU common external tariff would leave Slovak ia’s overall level of industrial tariffs about the
same, it may divert agricultural imports away from  non-preferential sources since EU membership is
likely to raise protection levels.  Thus, although Slovakia’s trade reforms will benefit third-country
traders, its emphasis on preferential trade liberalization is likely to skew these benefits in favour of
regional trading partners, especially the EU, and may distort Slovakia’s resource allocation bygenerating greater inter-sectoral disparities in domestic protection levels.
Steps towards EU accession
34. Slovakia became the fourth central and eastern European country to apply for EU
membership in 1995.
11  However, Slovakia was not invited in the "first wave" of countries to launch
EU accession negotiations in 1997 at the Luxembourg European Council.  The current Government,since taking office in 1998, has attached high priority to EU accession and has implemented many
economic and political reforms.  Slovakia was subsequently invited by the EU at the Helsinki Summit
in December 1999 to start accession negotiations.  These commenced formally February 2000.
35. An Accession Partnership was adopted in March 1998, and revised in December 1999.
Slovakia adopted a National Programme in 1998, and a revised National Programme for the Adoptionof the Acquis (NPAA) in May 1999.  This described actions Slovakia needed to take to meet the
membership criteria contained in the Accession Partnership.  Both of these documents are regularly
revised to take account of progress in accession, and to allow new priorities to be set.   The Slovak
Government approved the second revision of the NPAA in May 2000, and the third revised NPAA
was delivered to the European Commission in May 2001.
36. The negotiations focus on the transposition and implementation  of the  acquis communautaire ,
including each candidate country’s administrative capacity to implement and enforce it.  It has 31                                                     
11 Following Hungary, Romania, and Poland.WT/TPR/S/91 Trade Policy Review
Page 24
chapters, covering, for example, policies in specific sectors, social polices, external relations, and
economic and monetary union.  The bilateral negotiations work through these chapters, commencing
with the “screening process”, in which countries set out their positions, including any proposed
derogations from the acquis  or transitional periods.  The candidate countries are not expected to
become full members of the EMU, to adopt spec ific exchange rate regimes, or to meet the
convergence requirements set out in the Maastricht Treaty, as precondition for EU membership.Slovakia expects to participate in the European Exchange Rate Mechanism II following EU accession.
37. The European Commission undertakes periodic reviews of the candidates' accession progress.
The report on the Slovak Republic, which was published in October 1999, concluded that while
Slovakia fulfilled the Copenhagen political criteria for accession, continuous efforts were needed to
maintain macroeconomic stability, especially in fiscal management, and to implement structuralreforms so it could cope with competitive market pressures within the EU in the medium term.  Key
short-term policy priorities identified by the Commission were bank and financial sector restructuring,
including privatization in a transparent and market-based manner, as well as improved bankruptcy
legislation and proceedings.  The latest EC report, released in November 2000, concluded that
Slovakia still met the political criteria and had consolidated its democratic and institutional systems.It reaffirmed that Slovakia was a "functioning market economy" that should be able to cope with EU
competitive pressures provided that structural refo rms were accelerated to fully implement remaining
requirements, in particular:
− consolidation of macroeconomic stabilization by continued prudent policy mix,
especially with tighter constraints on the fiscal deficit;
− strengthening of banking supervision; and
− on-going structural reforms, including completion of the privatization programme,
especially in the financial and energy sectors.
 12
38. The analytical examination (the multilateral screening) of the acquis  was held for Slovakia
during 1998 and completed at the beginning of 1999.  Negotiations on Slovakia’s accession to the EU
were launched in March 2000. The technical consultations were held during this time and in
accordance with EU requests some screening reports were updated in 2000.  As of  27 June  2001,19 chapters of the 29 opened had been provisionally closed.
13  Slovakia's objective is to complete
accession negotiations by end-2002.  A  major challenge facing the Slovak Republic is to strengthen
its administrative capacity in order to implement and enforce the acquis communautaire .  EU member
countries are assisting this by twinning their administrations and agencies with Slovak counterparts.
(c) Central European Free Trade Agreement (CEFTA)
39. During the review period, CEFTA was enlarged to include Slovenia from 1 January 1996;
Romania from 1 July 1997; and Bulgaria from 1 January 1999, along with founding members
(Slovakia, Hungary, Poland, and the Czech Republic).14  Slovakia’s bilateral free-trade agreements
                                                     
12 EC (2000).
13 The chapters provisionally closed were free movement of goods, free movement of services,
company law, fisheries, economic and monetary union, statistics, social policy and employment, industrial
policy, small and medium-sized enterprises, science and research, education and training, telecommunication
and information technologies, culture and audio-visual po licy, consumer´s and health protection, customs union,
external relations, common foreign and security policy.
14 The CEFTA agreement is contained in GATT document L/7495/Add.1, 30 June 1994.Slovak Republic WT/TPR/S/91
Page 25
with these new members terminated on their accession to CEFTA.15  The primary objective of
CEFTA was to establish a free-trade area by the end of 2001 (Table AII.2).  It is based on a system of
bilateral liberalization schedules between members, aimed at eliminating trade barriers in a
symmetrical way.  All parties to the CEFTA Agreement had already negotiated their association
agreement with the EU prior to signing the CEFTA.  Thus, liberalization of trade under CEFTA was
primarily concerned with the prevention of mutual trade discrimination, which could have occurred ifupon their coming into force, the Europe Agreements had not been accompanied by similar
agreements concluded among the countries of central Europe.
40. The Agreement covers all goods (HS Chapters 1-97), except for a few items in the agriculture
sector.  Some 94% of Slovakia’s total tariff lines are covered by concessions under CEFTA.
16  I n
September 1996, it was decided that customs duties on most industrial products would be abolishedby 1 January 1997, instead of 1 January 2001.
17  Tariffs on some sensitive items were not abolished
until 2000, and will be removed on motor cars by 1 January 2002.18  Progress on an accelerated
liberalization timetable for agriculture is yet to be achieved.19  According to the original Agreement,
the parties negotiated tariff concessions, subject to quotas, on such goods.  Two tariff reduction
schemes have been applied on agricultural products.  In 1997, tariff preferences applied to four fifthsof trade in agriculture between the Czech Republic, Hungary, Poland, Romania, the Republic of
Slovenia, and the Slovak Republic.
41. Import quotas on industrial goods were abolished immediately, with some exceptions.  The
Slovak Republic undertook to abolish quantitative restrictions on all industrial products, except for
uranium or thorium ores, natural or enriched uranium, waste and scrap paper or paperboard, and
ferrous waste and scrap, and it met the transitional period for removing these quotas by
1 January 2001.  Slovak quantitative export restrictions (in the form of licences) on particular miningproducts, iron and steel, electrical energy, medicaments, fertilizers, hides and skins, wood, and
musical instruments were removed in January 1997.
42. Member countries have adopted new rules of origin since Slovakia's previous Review.  In
1997, new rules of origin were harmonized with the ru les applied within the EU, allowing multilateral
cumulation among the CEFTA countries and the pan-European diagonal cumulation of origin. Theserules of origin were amended in 1998, 1999, and 2000.
                                                     
15 The Slovak Republic had signed bilateral free-trade agreements with Bulgaria on 8 December 1995
(WTO document WT/REG41/3, 30 January 1998); Romania on 14 December 1995 (WTO documentWT/REG26/1, 7 June  1996); and with Slovenia on  22 December 1993 (GAT T document L/7447/Add.1,
4 May 1994).
16 WTO document WT/REG11/9/Add.3, 5 August 1998.
17 Additional Protocol No. 5, signed on 13 September 1996 [Online]. Available at:
http://www.cefta.org/agreemnt [26 September 2000].
18 These were automobiles of ten years or older and chassis and bodies thereof, utility cars of six years
and older, two-stroke engines for automobiles, and certain automobiles with two-stroke engines (WTOdocument WT/REG11/9, 16 February 1998).
19 Additional Protocol No. 3 to CEFTA covers liberalization of trade in agricultural products and
foodstuffs between the initial CEFTA member countries. The agreements on accession of Romania and Bulgaria
to CEFTA also cover liberalization of  trade in agricultural products and f oodstuffs between the initial countries
and accessing countries. Additional Protocol No. 6 provides for liberalization of trade in agricultural and foodproducts between the initial CEFTA member countrie s and the Republic of Slovenia (CEFTA online
information.  Available at:  http://www.cefta.org/agreement).WT/TPR/S/91 Trade Policy Review
Page 26
(d) European Free Trade Association (EFTA)
43. The Agreement between the EFTA States and the CSFR came into effect on 1 July 1992, and
both the Slovak and Czech Republics succeeded to the Agreement following the dissolution of the
CSFR.20  The Agreement covers mainly trade in industrial products as well as some marine and
processed agricultural products (Table AII.2).  EFTA members eliminated customs duties on most
Slovak imports in November 1993.21 Quantitative restrictions on the import and export of industrial
products were abolished from the date of entry in to force of this Agreement with the exception of
certain products listed in Annexes VI - IX.  These quantitative restrictions were abolished within the
allowed transitional period of five years following the entry into force of the Agreement, i.e. by
1 January 1998.  Under Slovakia’s transitional period, tariff duties and quantitative restrictions on
EFTA imports were gradually phased out, starting in 1993 and ending by 1 January 2001, except forsteel, petroleum products, and automobiles, to be phased out by 2002.  All export taxes were
abolished immediately. In the area of agriculture, the Slovak Republic has bilateral arrangements with
individual EFTA members that either remove or lower tariffs on certain products.  Quantitative
restrictions on bilateral imports and exports were abolished on the date of the entry into force of the
Agreement.
22
44. During the review period, EFTA members adopted the origin rules on pan-European
cumulation in 1997.  Other amendments to the agreement include enhanced concessions in the trade
of processed agricultural products.23
(iii) Bilateral agreements
45. Since its previous Trade Policy Review, the Slovak Republic has concluded free-trade
agreements with Estonia (1998), Latvia (1997), Li thuania (1997), Israel (1997), and Turkey (1998).
All agreements provide for phased reduction of tariffs on industrial products, with duty-free entry byJanuary 2001 at the latest (Table AII.2).  The agreements also provide for tariff preferences, also in
the form of tariff quotas, on some agricultural products.  All bilateral agreements have been notified
to the WTO and have been reviewed by the Committee on Regional Trade Arrangements.
 24
46. Slovakia is finalizing negotiations for a free-trade agreement with the Republic of Croatia,
expected to be signed during 2001.  It is no longer negotiating an agreement with Morocco.According to the authorities, the possibilities fo r any future negotiation of bilateral free-trade
agreements will be evaluated in the light of the EU accession process.
25  Any such agreements
negotiated would provide for the same concessions as those existing between the EU and the country
concerned.
                                                     
20  The text of the Agreement is contained in GATT document L/7041/Add.1, 3 July 1992.
21 The main exceptions were tariffs maintained by Norway on some polymer products until 1996 and,
along with quotas, on textiles and clothing until end-1997.
22 Exceptions included Slovak imports of uranium or thorium ores and concentrates; natural or enriched
uranium and its compounds, alloys, and products; waste and scrap of paper or paperboard; and ferrous waste andscrap and remelting scrap ingots of iron and steel.  These were all phased out on schedule by 1 January 2001.
23 For further details see WTO document WT/REG87/R/B/1, 6 March 2000.
24The agreements were notified to the WTO as follows: WT/REG63/N/1, 25 September 1998 (Estonia);
WT/REG47/N/1, 18 December 1997  (Latvia); WT/REG48/N/1, 18 December 1997 (Lithuania);
WT/REG57/N/1, 30 March 1998 (Israel); and WT/REG68/N/1, 24 March 1999 (Turkey).
25 Following EU accession, the Slovak Republic will be required to adopt all the EU’s preferential
agreements with third countries, and to terminate its own bilateral trade agreements.Slovak Republic WT/TPR/S/91
Page 27
(iv) Unilateral tariff preferences
47. The Slovak Republic grants Generalized System of Preferences (GSP) treatment to
developing countries.  In 2001, 98 developing countries and 48 least developed countries were
eligible for such treatment.  The corresponding numbers in 1996 were 105 and 47.  Since then, Latvia,
Lithuania, Haiti, Estonia, and Angola were removed (1997); the Federal Republic of Yugoslavia, and
Botswana were added (1998 and 1999, respectively);  and Singapore, the Republic of Korea, Cyprus,and Malta were removed (2001).  Angola and Hait i became least developed countries while Botswana
was given developing-country status.
48. All products imported from least developed countries, as defined by the United Nations, are
granted duty-free and quota-free access.  Imports from developing countries are classified into three
groups.  Products considered sensitive to domestic production receive no preferences.  These productsare equivalent to about 56% of all tariff lines, and cover mainly agricultural products, but also certain
industrial products, such as mineral products, fertilizers, wood pulp, carpets, most footwear,
umbrellas, and iron and steel.  Less sensitive products, equivalent to 29% of tariff lines, are dutiable at
a preferential tariff of 50% of the MFN rate, while non-sensitive products, equivalent to 15% of tariff
lines, enter duty-free.
26  GSP imports from developing countries are limited annually to US$2 million
per country annually.  Preferential treatment is granted on a "first-come first-served" basis;  MFN
duties are paid on imports that exceed this amount.  This limit is normally reached every year for
imports from China, Russia, and the Ukraine.
49. GSP goods are a relatively minor share of Slovak merchandise imports (less than 1%).  The
preferences may only be granted if the products can fulfil the rules of origin requirements, which have
not changed since the last Review.  According to au thorities, Slovakia plans to adopt the EU’s GSP
scheme prior to accession.
(4) DEVELOPMENTS IN FOREIGN INVESTMENT
Domestic regulatory regime
50. As part of its accession to the OECD in December 2000, the Slovak Republic agreed to meet,
with a few exceptions, OECD standards for equal treatment of foreign and domestic investors and
restrictions on special investment incentives.27  As a result, foreign and domestic investors are
basically treated identically, and are subject to the same tax codes and other laws.   Under the
Commercial Code (No. 513/1991 and amendments), fo reign investors can establish themselves in the
Slovak Republic as one of the following entities :  limited liability company, joint-stock company,
branch of a foreign company, limited or unlimited partnership, co-operative or sole proprietorship.
Foreign and domestic entities must be registered in the Commercial Registry and have a TradeLicence where required.  Foreign branches must conduct those activities stipulated in their
Commercial Register entry, and the manager must be a Slovak citizen or have long-term residency
status.  There are now no sectoral restrictions on the operation of foreign branches in Slovakia, except
in the energy sector.
51. National treatment is extended to foreign in vestors.  There are no general screening
procedures, and generally no foreign equity limits, although investment in a few service sectors
remains restricted or controlled.  Operation of lotteries and similar games is reserved entirely to
                                                     
26 In 2000, products that received no preferences covered 91.5% of all agricultural tariff lines
(HS 01-24) and 45.3% of all industrial lines (HS 25-97).
27 Slovakia is committed to remove remaining restrictions on short-term capital flows within three
years after accession, by end-2003.WT/TPR/S/91 Trade Policy Review
Page 28
Slovak entities.  Casinos may be foreign owned, but must have at least 51% government ownership.28
Foreign equity in air transportation, electricity and gas power companies is limited to 49%.29  There
are no other sectoral limitations on foreign investment, except for general private ownership
restrictions to protect a few public monopolies.30   No limitations or controls restrict participation by
foreign investors in the privatization of state-owned entities, apart from minimum state equity limits
that apply also to domestic investors (Chapter III).   State aid and other forms of government
assistance are provided based on national treatment between domestic and foreign entities.
52. Land ownership by non-residents is in principle prohibited, except in special cases, such as
inheritance and for diplomatic missions.  However, these limitations can be overcome by establishing
a domestic legal entity as a partner.  Until recently, foreign branches could not acquire land.
Amendments to the Foreign Exchange Act, effective 1 January 2000, permit foreign branches offinancial institutions to purchase real estate in a ccordance with special legislation if it is considered
"indispensable for business premises".  Restrictions on land ownership essential for business
operations by other foreign branches were removed by end-2000 for OECD investors.   Property
transfer taxes no longer discriminate against foreign investors since 1 January 2000, with the same
land valuation methods now applied to foreign and domestic investors.
31
53. The Slovak Republic has signed bilateral investment agreements for the protection and
promotion of foreign direct investment (FDI) with most of its trading partners (29 countries as at
December 2000), and is negotiating further treaties.  These treaties mainly regulate profit repatriation
and protection in case of nationalization.  It has also concluded many double taxation agreements,
drafted in accordance with the OECD guidelines.  The treaties generally eliminate double taxation by
crediting the foreign tax paid on passive income (div idends, interest, and royalties) against Slovakia’s
tax liability, and by exempting active income from Slovak taxation.
54. In 1998 and 1999, annual inward FDI was around US$2 billion, up from US$1.6 billion in
1997 and US$1.2 billion in 1996.  In 1999, 20% of inflows was invested in the finance and insurance
sector (Chart II.3).  The other major sectors attracting foreign investment in 1999 were industrial
production (49%) and wholesale and retail trade, including motor vehicle repairs (19%).  The main
sources of FDI were Germany (22%), Austria (17%), the Netherlands (15%) and the United States(13%) (Chart II.4).  Preliminary data for 2000 s howed a substantial jump in inward FDI, to
US$3.5 billion.
32
                                                     
28 This required 51% minimum government equity was introduced from 1997, and resulted in two
incumbent foreign companies being forced to divest.
29 Restrictions on foreign ownership in the Stock Exchange were abolished by the new Law on Stock
Exchange, which entered into force on 1 November 2000.
30 However, Slovakia recorded additional exceptions under the OECD Codes to allow the possibility of
reserving for domestic entities cabotage on inland waterways for freight, including chartering; for road transportof passengers and freight, including chartering; and for trading and distributing printed films and other
recordings for private or cinema ex hibition, or for television broadcasts.  The 1998 legislative requirement to
show at cinemas at least 30% of pictures of European production, of which 30% had to be Slovak, wasterminated in 2000 and replaced with a recommendation th at distributors "prefer" European and Slovak-made
movies.  However, this preference was eliminated and, in November 2000,  Slovakia introduced the EU’s 50%
European-made quota on television broadcasting of pictures.
31 Previously, property transfer taxes on foreign investors were based on German valuation techniques,
which normally gave a much higher valuation, and hence resulted in them paying higher taxes than domestic
investors whose valuation was based on the Slovak system.
32 According to this data, the major sectors attracting FDI in 2000 remained industrial production
(54%), transport and telecommunication (15%), and banking and insurance services (13%).  The main investorscontinued to be Germany (28%), the Netherlands ( 23%), Austria (15%), and the United States (9%).Slovak Republic WT/TPR/S/91
Page 29
Chart II.3
Foreign direct investment, by sector 1999
Per cent
Source :  Slovak authorities.Industry
49Wholesale and retail trade, 
incl. motor vehicle repairs
19Finance and insurance
20
Transport storage and communication
3
Real estate, research and development  4
Building and construction  2
Other  3
Total foreign direct investment: US$2 billion
Chart II.4
Foreign direct investment, by source 1999
Per cent
Source :  Slovak authorities.Austria  17Netherlands
15United States
13Czech Republic
9United Kingdom
9
France  4
Other  12
Total foreign direct investment: US$2 billionGermany
22WT/TPR/S/91 Trade Policy Review
Page 30
55. The Government’s main priority is to attract investment into industry.  The main sectors
attracting investment within the next five years are expected to be power engineering, metallurgy,
engineering, wood processing, chemical industry, el ectrical engineering, information technologies,
tourism, textiles, clothing, footwear, and glass.
Incentives
56. In an attempt to increase foreign direct investment, the Slovak Government has enhanced
financial incentives to foreign investors.  More generous tax incentives were introduced in 1999
(Act No. 366/1999), and again in 2000 (Act N o. 466/2000).  The 1999 package granted foreign
investors established before end-2001 with a full five-year tax holiday (extendable at a rate of 50% for
another five years, subject to additional investme nt levels), provided investment in the venture
exceeded € 5 million and foreign equity was above 75%.33  The incentives apply to greenfield
investments in the production of manufactured goods previously imported into Slovakia or not
produced domestically or intended for export.  For certain service industries, such as hotels and
passenger transport, a lower investment threshold of € 1.5 million applied.  The incentives for
businesses established after 2001 and up to end-2003 were changed slightly, especially by reducing
the threshold for manufacturing goods to € 4.5 million and the minimum foreign share to 60%.  Otherincentives include duty- and VAT-free imports of certain machinery and equipment, job-creation and
training benefits, and opportunities to obtain low-cost land.
57. Investment legislation is currently being reviewed and additional incentives are expected to
be introduced.  The Government approved the new legislation in May 2001 (decision No. 424/2001)
and it is currently being considered by the National Council.  This will extend the full tax holiday to
ten years, and further reduce the threshold to € 2.35 million (and € 1.65 in depressed regional areas
with unemployment above 10%).  At least 80% of the revenue must come from industrial productionor from services.
58. The Slovak Agency for the Development of Investment and Trade (SARIO), which succeeded
the Slovak National Agency for Foreign Investment and Development (SNAZIR) in May 2000, is
responsible for appraising proposed investment pl ans and recommending to the Ministry of Economy
what incentives to allow.  The State Aid Office must also appraise such incentive proposals. TheMinistry submits the incentive proposals for government approval.
59. It is unclear whether the benefits of investment incentives outweigh their costs.  These are
typically not the most effective measures for attracting investment.  While the economic rationale for
incentives is generally based on the need to correct market failures, alternative policies attacking the
cause of the problem are likely to be more efficient.  Moreover, competition from neighbouringcountries offering more generous incentives for FD I to obtain investment is likely to make their
provision counterproductive.  The revenue forgone from such incentives can be very large, and can
end up transferring tax revenue to foreign investors and their governments, with little economic gain
to the host country.  Investors tend to be influenced by other factors, such as market potential, and
political and economic stability, rather than investment incentives.
                                                     
33 For investment in regional areas with an unemployment rate exceeding 15%, the minimum level of
foreign investment is € 2.5 million.