Can you enlighten us on the role of your Association in Slovakia and its main achievements since its creation?
After our Association was established in 1990 we immediately established contacts with our neighbour associations in Austria and Germany. In 1991 with their support, we became an observing member of the European Federation of Construction Entrepreneurs, FIEC. FIEC will very shortly celebrate its 100th anniversary.
However, for the past seven years we have been an full member. So we were building our association based on the experience of our neighbour associations and we have received excellent support from Austria and Germany. After we became an observing member we started establishing contacts all around Europe. The Association here is voluntary and its main task is to influence the business environment of Slovakia for the benefit of its members.
How many members do you have and how do you attract them?
We have three hundred companies. We established contacts abroad and of course organise events for our members that are beneficial to them, for example if it concerns new technologies or getting to know new partners. We have already introduced many new technologies through our Association.
Which are the main countries that you work with?
Currently we have contacts with all European countries with the help of FIEC. Of course, we co-operate with them on different levels some of our relations are more formal then others. Our participation in this organisation is very active and that is why in 1994 we were accepted as a full member of the European Federation along with Hungary. Other countries, for example the Czech Republic and Poland, entered the Federation 5 years later. Just to proove our contacts with this Federation I should mention that the first construction congress of FIEC in Central and Eastern European Countries was held here in Bratislava in 1999.
What was the impact of that congress?
It had a great impact, all European countries apart from Iceland participated in this event. It is a four day event which is organised in a different country every year. In 2001 it was held in Turkey and this year it will be held in Rome. The development in our membership corresponds to the development in the economy. At one time we had 520 member organisations in our Association and presently we have 320. Some new companies were established, other are closed, so this is a normal development. We cover all the activities connected with the construction business, from development, architecture, production of construction materials and of course the contractors. In some Western countries there are two or three associations but FIEC has a tendency to unite them within one association. Our Association is an active member of the Employers Associations and Unions of Slovak Republic, that unite all the employers organisations here. At present exist 35 in Slovakia. Through this organisation we actively participated in the three-partite negotiations with the government-trade unions and employers. These negotiations started during the time of former Czechoslovakia in 1990, on the basis of federal republic. Of course, after the independent republic was established, it continued on the same level in the Slovak Republic. During these negotiations we can influence legislative processes, we are a member of the commenting committee and at the three-partite meeting we can express our position towards various laws, for example whether we want them to be amended or changed.
What achievement is your Association very much proud of?
We have achieved many things. The governments have changed a lot, so at times our work was quite difficult. Many things were changed in the legislation based on our recommendations and there were also many things that were not acceptable for the government. Recently, we have managed to lower the tax burden for business entities. The annual tax burden used to be 40% and last year it was lowered to 29% and next year it will be 25%. From this perspective our main interest is the tax policy. The second most important thing is the question of law enforcement. This is a big problem here and it is constantly being discussed with the government. We are not happy with the present situation.
Your members are very focused on loans and the tax system. What is the current situation in the construction market and what is your feeling about it when comparing with the neighbour and EU countries?
As far as the construction market is concerned, the development is quite unfavourable. The construction market was the first sector to be privatised. It was adjusted to compete with European standards, i.e. that big complexes with 7-8 thousand people broke into 5-10 member companies and the structure that was required by the market was created. In the past we had more than 20 companies with over 5000 people, presently we have about 6 companies with more than 1000 employees. So we are glad that restructuralization occurred but on the other hand the development of the construction market is not that positive.
In 1990 the construction market contributed cca 10% of the GDP and today contributes less than 4 %. These numbers basically tell us that the strength of the construction market used to its full potential in Slovakia. If we look at the average particpation of the construction market on GDP in European countries including the USA and Canada, it is roughly 8-12%. The cca 4 % contribution of Slovakia is very low if we compare the fact that western countries already have very developed transport networks and consider environmental issues are important so construction companies are strong within those markets. We take the construction market to be a kind of service for our partners, our capacities can of course be used only if our partner has interest and money. If the Slovak economy does not develop very favourably then there is very little interest in the construction business. At present state investment and funds regarding infrastructure and housing is very good but on the other hand we are not able to provide more housing because the purchasing power is very low.
It appears that housing construction has been the fastest growing area of the construction sector in Slovakia, is this true?
Yes, but still the housing construction volume
is very low. It should be said that our capacities,
which are not that big at present, as many
companies reduced their number of employees,
is only being used at 60%. Our opinion is
that the construction of highways should be
much quicker but this is a bit of a vicious
circle. When we had the European congress
here in 1999, Mr Roth, the Vice-President
of the European Investment Bank concluded
his lecture by saying that the businessman
must be able to get the site quickly, safely
and on time. We use the same argument in the
government meetings regarding highway construction.
Some regions in Slovakia suffer from high
unemployment; these regions are inaccessible
as highway construction is only running at
50% capacity. After privatisation the Slovak
industry is still not up on its feet yet.
Today, apart from Volkswagen existence, which
invested a lot of money, we do not have such
developing and industrial companies in Slovakia.
The Americans and Japanese built a few small
companies but these are very small. |
If we look at the 300 members of your Association, how many of them would fulfil the standard requirements of competitiveness on the regional market?
As far as our companies are concerned we permanently work abroad and around 50 companies operate on the German market. In the past our companies operated in the Middle East, Iraq, Syria, and Cyprus. We also used to have around 20,000 people in Russia working in the construction business, so our companies have a lot of experience. Presently, the access to foreign markets is very limited and there are reasons for this when you consider the eastern market, the Soviet Union and all its neighbouring countries, as it is a question of law enforcement. Of course, currently our companies are under-capitalised.
When privatisation started, we compared one of our largest companies with approximately 5-6,000 people to a similar sized German Company. We considered that both companies had the same amount of capital and the actual ratio was completely the opposite. The Slovak Company had 90% in assets and only 10% in cash and the German Company had 70% in cash and only 30% in assets and essentially you cannot do the business without money. It is one of the biggest problem for our companies and that is why it is so difficult for them to establish themselves on the market. The second problem is that in general the European construction business is experiencing a recession. Germany is less accessible to us while we have to have legal licences to work there but as we have followed the market development there and the recession has been disastrous. Today, probably with the exception of Czech Republic and Hungary, all European countries are experiencing a recession in the construction business.
Slovak companies need partnership with foreign investors that have potency for development. What would be the biggest attraction for a foreign investor to come here and invest in the construction market in Slovakia?
It is a very difficult question, I have mentioned our share of GDP and that we still need to do a lot of work regarding infrastructure and housing. We would be able to build all this using our own capacities but if there is an interested investor, either from the construction business or any other area, there is definitely space for investment in Slovakia. The Slovak government offer some incentives for these investor's for example special tax holidays which the EU does not like. I can tell you where I see the possibilities and that the reason why we do not have more foreign investors is due our political instability. Our present government is not only to blame but also the previous ones, to give you an example, when the former Czechoslovakia split, the Czech Republic took two construction workers and we took one, the ratio was two to one. Last year, the construction companies in the Czech Republic made 240 billion CK and we made 74 billion SK but out of those 240 billion CK around 50% was provided by foreign capital, out of our 74 billion only 10% was foreign capital. This is the problem of politics and we are aware of that and it is very difficult to get politicians here to agree on something sensible.
This year we expect to achieve the same result as last year, cca 70 billion SK. This is a bad situation as it forces many companies to close, especially in middle and eastern Slovakia where the development activities are almost non-existent. As far as housing construction is concerned, unfortunately the government will not fulfil its promises, the expectation nowadays is that in four years we will miss 10,000-12,000 flats. The government declared that it would provide for the construction of 4 x 14 000 flats in a period of 4 years. But, unfortunately we believe that this obligation will not be fulfilled. We built almost 34,200 flats during first three years under this government and this year we predict that we will build about 10,000. I will reiterate what I said in the beginning, there are enough possibilities for our citizens to build an apartment, there is the possibility of obtaining a mortgage, to save on construction, there is a state fund, which supports certain housing projects, and the citizens themselves have some savings. One of the problems is finding a guarantor and then in accordance to average salaries in Slovakia it is very difficult to repay the loans. These are the reasons why the number of flats that were planned will not be built.
Concerning the highways construction, the government promised a certain amount of money but we will exceed that. From our perspective we do not expect any miracles to happen next year. Members of Parliament are voting on the construction budget this December (2001). Even if we consider that supermarkets are being built and the few minor investments that are made in industry, we expect that the level for next year will remain the same. We also have to consider the forthcoming parliamentary elections and potential change of government. This should not effect a normal economy, if Italy for example would react to government changes in the same way as we do then they would be in the year 1945!
What are your objectives for the development of the construction sector? How would you assess the amount of time necessary to achieve a reasonable competitive level in the construction business?
We are currently trying to map the possible construction activities in Slovakia for 2002-2006. It is not only our model though as we have to respect government resolutions, agreements with the EU and the ideas of some of our main investment companies. We want to conclude the work on this material by the end of February 2002 and introduce this plan to our members. We also want to use this plan in the parliamentary elections this year and we want to discuss it with the potential parliamentary parties and force them to accept these ideas. This is a time frame for the development of the Association and we will be doing our best to get these ideas into the government declaration. We have had good relations with each government as well as with other employers in the preparation of the government declaration. We would like to influence the public opinion and the government officials in this way so that solutions to this can be found.
You are today the president of ZSPS, could you tell us something about your professional background?
I have lived all my life in the construction business. After 12 years I became the manager of the company with 800 people and a year and a half later I became the general manager of Priemstav with 7,500 employees. I was the general manager of this company for 23 and a half years. I was also one of the founders of this Association and since the very beginning I have been its President. By May 2000 I was in both positions, the position of President was an honorary one. Some problems occurred over the years that made it difficult for me to continue, particularly due to health problems, but after some discussions I decided to stay in this position.
Note: World Investment News Ltd cannot be held responsible for the content of unedited transcriptions. |
V.I.P. INTERVIEWS 
