BUSINESS FRIENDLY SLOVAKIA

Secrets Behind the Largest Business Case in Europe in Last 7 Years

Laura Nadaska, Consultant, Slovak Investment and Trade Development Agency Opportunities for trade between Luxembourg and Slovakia, October 10, 2016 Laura.Nadaska@sario.sk

2

JAGUAR LAND ROVER – INVESTMENT OF THE DECADE

1.4 BN € Amount of Investment

2,834 People employed directly

Indirect job generation 15,000

150,000 Annual production

3

SUCCESS STORIES FROM AROUND THE WORLD

CANADA MAGNA

SLOVTECA, Martinrea

Slovakia Fluid Systems, Slomatec

USA US Steel, Emerson,

DELL, Whirlpool, IBM, Hewlett Packard

Enterprise, Johnson Controls, AT&T,

Accenture, Amazon, Honeywell, Getrag Ford, Lear Corp.

UK Jaguar Land

Rover, GlaxoSmithKline, de Miclén, KMF,

Boxperfect, Tesco, Innoparma, DS

Smith

FRANCE PSA Peugeot

Citroen, Orange, Faurecia,

Bourbon, CCN, Alcatel Lucent,

Plastic Omnium, Atos, GeLiMa, Bel,

Decathlon

GERMANY Siemens, Volkswagen, Brose, KUKA, Osram, ZF, Deutsche

Telekom

AUSTRIA KROMBERG & Schubert,

MIBA, Neuman Aluminium, Michatech, ZKW

BRAZIL Embraco, CRW Slovakia, Micro

Juntas SK

SPAIN Gestamp, Jobelsa, Cikautxo, Estamp,

Fagor Ederlan, ArcelorMittal Gonvarri,

Farguell, Elastorsa, Technometal

ITALY Magneti Marelli,

Brovedani, SISME,

Z Industries SK, Bonfiglioli, MTA,

Mevis, Lombardini,

C.I.M.A.

SWITZERLAND Swiss RE, Schindler, Holcim,

Novartis, Vetropack, ABB, Nestlé, Nexis,

Enics

CHINA Lenovo, Yanfeng,

Huawei, ZTE, Mesnac, Boge Elastmetall

TAIWAN AU Optronics,

ESON, Foxconn,

Delta Electronics

JAPAN SE Bordnetze,

Panasonic, Yazaki, Akebono, U-Shin, Sanyo, Siix, Minebea,

Brother Industries

SOUTH KOREA

Kia Motors, Samsung,

Mobis, YURA, Sungwoo Hitech, Hyundai Dymos

4

Establishment:

Official name:

Area (km2):

Population:

Capital:

Official currency:

Official language:

Political system:

Election term:

Neighbours:

Time zone:

SLOVAKIA: GROWING HEART OF EUROPE

1839 (Independence)

Grand Duchy of Luxembourg

2,586

576,000

Luxembourg City

Euro

German, French, Luxembourgish

Constitutional monarchy functioning

as parliamentary democracy, 5 years

Belgium, France,

Germany

Time zone: GMT+1 hour

1 January 1993

Slovak Republic

49,035

5,400,000

Bratislava

Euro

Slovak

parliamentary democracy

4 years

Austria, Czech Republic,

Hungary, Poland, Ukraine

GMT+1 hour

5

INTEGRATED IN INTERNATIONAL ORGANIZATIONS

Source: Ministry of Foreign Affairs of the Slovak Republic (2015)

1993

INDEPENDENCE OF SLOVAKIA

2004

EUROPEAN

UNION

2007

SCHENGEN

AREA

2009

EUROZONE

*1918

CZECHOSLOVAKIA

2016

EU COUNCIL PRESIDENCY

EUROPEAN

UNION

NORTH

ATLANTIC TREATY

ORGANIZATION

UNITED

NATIONS

EURO € since 1 January 2009

6

EURO ZONE MEMBER

CREDIT RATING

AGENCY SLOVAKIA

CZECH

REPUBLIC HUNGARY POLAND BULGARIA ROMANIA

A+

stable

AA-

stable

BB+

stable

BBB+

negative

BB+

stable

BBB-

stable

A2

stable

A1

stable

Ba1

stable

A2

negative

Baa2

stable

Baa3

stable

A+

stable

A+

positive

BB+

stable

A-

positive

BB+

stable

BBB-

stable

A+

stable

A

stable

BBB

negative

A

stable

BBB

stable

BBB-

stable

A

stable

A+/AA-

stable

BBB-

stable

A-/A

stable

OECD

Country risk 0 0 4 0 4 3

Data as of January 2016

7

ONE OF BEST COUNTRY CREDIT RATINGS IN CEE

Source: S&P, Moody’s, Fitch, JCR, R&I, OECD (2016)

SURROUNDING INTERNATIONAL PORTS

8 Source: European Commission, European Economic Forecast, Spring 2016 (2016)

Hamburg, DE

Rotterdam, NL

Gdansk, PL

Koper, SI

Izmail, RO

Constanta, RO

Bratislava, SK

Road

Railway

Waterway

direction Krakow, PL 180 km

9

Flights to London,

Riga, Warsaw

direction Brno, CZ 120 km

ROAD & AEROSPACE NETWORK

Source: National Motorway Company, Slovak Airports (2016)

Regular air line to Vienna, Prague, London,

Doncaster, Bristol, Istanbul,

Warsaw

Flights to all major European

cities

direction Vienna, AT 79 km

direction Budapest, HU 200 km

KEY MACROECONOMIC INDICATORS

-3%

-1%

1%

3%

5%

7%

9%

11%

13%

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Slovakia

European Union (EU28)

11

MACROECONOMIC OVERVIEW

Source: European Commission, European Economic Forecast, Spring 2016 (2016)

2010 2011 2012 2013 2014 2015

Real GDP Growth 5.1% 2.8% 1.5% 1.4% 2.5% 3.6%

HICP Inflation 0.7% 4.1% 3.7% 1.5% -

0.1%

-

0.3%

Unemployment 14.5

%

13.7

% 14%

14.2

%

13.2

%

11.5

%

2016f 2017f

Germany 1.6% 1.6%

Slovakia 3.2% 3.3%

Poland 3.7% 3.6%

Czech Rep. 2.1% 2.6%

Hungary 2.5 % 2.8 %

Romania 4.2 % 3.7 %

Bulgaria 2.0 % 2.6 %

4,01

3,34

3,13

3,04

2,80

2,78

2,23

1,70

1,45

1,38

1,35

1,14

1,08

1,01

1,02

0,91

0,77

0,11

-0,18

-1,21

Slovakia

Lithuania

Latvia

Estonia

Luxembourg

Malta

Ireland

Slovenia

Belgium

Austria

Germany

Netherlands

France

Finland

Cyprus

Euro area

Spain

Portugal

Italy

Greece

12

FASTEST GROWTH IN EURO ZONE

Source: Eurostat, Real GDP growth rate – volume (March 2016)

Average Annual

Growth Rate 2004-2015

in Europe in the export of goods & services to GDP: 93.8% (2015)

EXPORT OF GOODS TO GDP INDEX 1st place in Europe

89.4%

in the world in the export per capita

(2013) 25th 4th

13

IN TOP 15 MOST OPEN ECONOMIES OF THE WORLD

Source: Eurostat (2014),, Intenational Chamber of Commerce (2015)

14

43,8 38,8

51,1 53,3

62,9 66

48,6

97,1

73,3

113 126,4

75,6

2010 2011 2012 2013 2014 2015

Import

Export

Balance of Trade

FOREIGN TRADE BETWEEN SLOVAKIA AND LUXEMBURG

In mil. EUR

15

1,22

1,37

1,59

1,93 1,96 2,09

0,002

0,149

0,426 0,285

0,344

2009 2010 2011 2012 2013 2014

To Slovakia

From Slovakia

FOREIGN DIRECT INVESTMENT SLOVAKIA-LUXEMBOURG

In mil. EUR

SLOVAK LABOUR FORCE

970 € 26,459 CZK

Czech Republic

934 € 3,899 PLN

Poland

799 € 247,784 HUF

Hungary

GDP (in PPS) per hour worked as compared to EU28 (100)

576 € 2,559 RON Romania

457 € 893 BGN Bulgaria

883 € Slovakia

GROSS MONTHLY SALARIES

2015

30,0

35,0

40,0

45,0

50,0

55,0

60,0

65,0

70,0

75,0

80,0

2006 2007 2008 2009 2010 2011 2012 2013 2014

SK

CZ

HU

PL

RO

BG

17 Source: National Statistical Offices of respective countries (2015); Eurostat (2014)

THE HIGHEST LABOUR PRODUCTIVITY IN CEE

SLOVAKIA REACHES THE

HIGHEST LABOUR PRODUCTIVITY

ŽILINA REGION

877 € PREŠOV REGION

771 €

KOŠICE REGION

925 €

BANSKÁ BYSTRICA REGION

845 €

TRENČÍN REGION

872 €

NITRA REGION

835 €

TRNAVA REGION

900 €

BRATISLAVA REGION

1,294 €

18 Note: Map displays only the number of job seekers registered at the unemployment office. Please note, that many job seekers are not registered. Source: Central Office of Labour, Social Affairs and Family (February 2016)

UNEMPLOYMENT & AVERAGE SALARY LEVELS

6.31%

5.10%

9.24%

7.29%

8.03%

14.45%

13.65%

14.89%

Job Seekers 274,202

Avg Unemployment Rate 10.09%

Avg Gross Salary 883 EUR

February 2016

20%

72%

8%

Tertiary Upper Secondary Below Upper Secondary

72% One of the highest proportion of secondary educated people in the EU

THE MOST COMMON FOREIGN LANGUAGES (taught at Slovak secondary schools)

92%

46%

13%

5%

English

German

Russian

French

19 Source: OECD: Education Database (2013 data as the latest available in March 2016); Eurostat (2015)

EDUCATION & LANGUAGE COMPETENCE

92% Proportion of at least upper secondary educated among the slovak population

85% OF SLOVAK

PEOPLE SPEAK AT LEAST

ONE FOREIGN LANGUAGE

DUAL EDUCATION

INSTITUTIONAL DUAL EDUCATION SCHEME

2015 New Framework For Dual Education • Shared theoretical education in schools & practical training (60-80%) in company • Tax benefits for involved companies

20

OF ALL SECONDARY VOCATIONAL

STUDY FIELDS ARE TECHNICALLY

ORIENTED

MORE THAN 50%

PREŠOV

KOŠICE

BANSKÁ BYSTRICA

Zvolen

Ružomberok

Dubnica n. Váhom

NITRA

TRENČÍN Skalica

Sládkovičovo

BRATISLAVA

Universities | 36

Students | 162,568

Graduates | 58,089

Komárno

21

UNIVERSITY STUDENTS & GRADUATES

Source: The Institute for the Information and the Prognosis in the Education for the academic year 2015/2016

TRNAVA

ŽILINA

Economics & Business

Social

IT

Technical

KEY SECTORS

6%

11,9%

19,4%

24,4%

30,3%

31,2%

32,5%

33,6%

36,2%

38%

Sweden

Luxembourg

France

EU28

Germany

Hungary

Poland

Slovakia

Romania

Czech Republic

INDUSTRY 33,6% AGRICULTURE 4,4% SERVICES 62%

SLOVAKIA

Among the most industrial countries in the EU

23

STRUCTURE OF ECONOMY

Source: Eurostat, National Accounts Aggregates by industry (2014)

AUTOMOTIVE & ENGINEERING

ELECTRICAL ENGINEERING

ICT & SSC

R&D

24

KEY SECTORS

VOLKSWAGEN SLOVAKIA Germany | 1991 | Bratislava

PSA PEUGEOT CITROËN France | 2003 | Trnava

KIA MOTORS South Korea | 2004 | Žilina

JAGUAR LAND ROVER United Kingdom | 2015 | Nitra

KIA cee’d KIA cee’d Sportswagon

KIA pro_cee’d KIA Sportage

KIA Venga + ENGINE shop for KIA

and HYUNDAI

VOLKSWAGEN Touareg VOLKSWAGEN Up! & e-Up!

AUDI Q7 ŠKODA Citigo

SEAT Mii PORSCHE Cayenne

CITROËN C3 Picasso PEUGEOT 208

new CITROËN C3 + ENGINE shop as of

2019

Medium sized luxury SUVs (specific

models yet to be determined)

The only plant in the

world producing 5 brands under

one roof

The most profitable plant in

the PSA group

KIA´s first and only factory

in Europe

The most sophisticated

production site of the JLR group

25 Source: SARIO (2016)

218 349

561 933

639 763

926 555

987 718

971 160

1 038 503

1 350 000

2005

2010

2011

2012

2013

2014

2015

2020f

Number of Cars Produced

SLOVAKIA Leader in World Car Production Per Capita (2015)

190 Vehicles | 1,000 Inhabitants

World Average = 10 Vehicles | 1,000 Inhabitants

26 bn €

Volume of industrial export generated by the

automotive industry

250,000

People employed directly & indirectly by

the automotive industry

Share of the automotive industry of the country’s

total industrial production

44%

Added value in the automotive industry

2.5 bn €

26

KEY SECTOR NR. 1 — AUTOMOTIVE

Source: Slovak Automotive Industry Association; VW; KIA; PSA-Peugeot; International Organization of Motor Vehicle Manufacturers (2016)

BRATISLAVA

Stupava

Malacky

Pezinok

Senec

Dunajská Streda

Galanta

Sereď

TRNAVA Hlohovec

NITRA

Senica

Skalica

Piešťany

Šaľa

Nové Zámky

Levice

Zlaté Moravce

Topoľčany

Komárno

Nové Mesto n. Váhom

TRENČÍN

Bánovce n. Bebravou

Dubnica n. Váhom

Púchov

Bytča

Považská Bystrica

ŽILINA

Martin

Čadca

Ružomberok

Dolný Kubín

Liptovský Mikuláš

Brezno

BANSKÁ BYSTRICA

Zvolen

Žiar n. Hronom

Lučenec

Rimavská Sobota

Revúca

Veľký Krtíš

Rožňava

KOŠICE

Trebišov

Bardejov

Stará Ľubovňa

Kežmarok

Poprad

Spišská Nová Ves

PREŠOV

Humenné Snina

Michalovce

Partizánske

Prievidza

TIER 2 SUPLLIER

TIER 1 SUPLLIER

KIA SLOVAKIA Žilina

VOLKSWAGEN Bratislava

VOLKSWAGEN Stupava (tool shop)

PSA PEUGEOT CITROËN Trnava

JAGUAR LAND ROVER

Nitra

VOLKSWAGEN Košice

(vehicles customization for Russian market)

VOLKSWAGEN Martin

(gearboxes component production)

27

NETWORK OF 316 AUTOMOTIVE SUPPLIERS

Source: SARIO; Online Matchmaking Fair for Automotive Slovakia; GLOBAL Slovakia (2016)

1.18 BN € Added value

7% Turnover and added value

growth in 2014

956 € Average salary

11% Share on total

industrial production of Slovakia

43,000+ People

employed

9.23 BN € Sales revenue in

2014

28

KEY SECTOR NR. 2 — ELECTRICAL ENGINEERING

Source: Trend Top in Industry (2014 data as the latest available in March 2016)

Nové Zámky

Nitra

Trenčín

Liptovský Hrádok

Michalovce

BRATISLAVA

Prešov

Žilina

Trnava

Galanta

Piešťany Senica

Poprad

Rimavská Sobota

Stropkov

≤ 3000

Size of Electrical

Engineering hub defined by

number of employees

≥ 8000

≤ 6000

≤ 3000

≤ 2000

29

ELECTRICAL ENGINEERING — MAJOR HUBS

IT Accounting & Finance

Other Business Services

Customer Service

HR Procurement, Purchasing,

Order Processing

Sales & Marketing

40+ SSCs & BPOs

already established in Slovakia

AREAS OF OPERATION IN SLOVAK SSCS & BPOS

• over the last 10 years, Slovakia has developed a leading reputation for quality & high value services

• more than 40 Shared Services Centers (SSCs) and Business Process Outsourcing Centers (BPOs) are established in Slovakia providing multifunctional scope of operations

30 Source: Grafton Recruitment Slovakia (2016)

KEY SECTOR NR. 3 — SHARED SERVICES CENTRES

31

Source: SARIO list of SSC, BPO, ICT companies in Slovakia (2016)

PSA France

SSCs & BPOs IN SLOVAKIA – ALREADY ESTABLISHED CENTERS

32

Source: Grafton Recruitment Slovakia (April 2016); PwC, Shared Services Centres 2014, Moving towards Centres of Excellence Czech Republic & Slovakia (October 2014)

AVERAGE ATTRITION RATE in Slovak SSCs and BPOs

11%

Below CEE average, which is around 17%

32

SSCs & BPOs - EMPLOYEMENT

25,000+ People employed by the Slovak SSC &

BPO centers

Core languages: German, French, Italian, Czech, Bulgarian, Hungarian, Polish, Romanian, Russian, Slovenian, Spanish. Non–core languages: Albanian, Arabic, Croatian, Danish, Dutch, Finnish, Flemish, Greek, Hebrew, Chinese, Japanese, Lithuanian, Macedonian, Norwegian, Portuguese, Serbian, Swedish, Turkish, Ukrainian

LANGUAGES WITHIN SLOVAK SSC & BPOS:

33

Slovak SSC can support Asia market in the early morning hours, then cover the American continent from the afternoon till late evening hours and any other time zones in between.

Source: SARIO 33

STRATEGIC TIME ZONE FOR GLOBAL FUNCTIONS

SUCCESS STORIES & INNOVATION POTENTIAL

35

EXAMPLES OF CORPORATE R&D CENTRES

Source: Spinea (2016)

36

Development, production and sales of

high precision reduction

gears

Member Of The International

Federation Of Robotics

Twin Spin

#1

Application

References

SUCCESS STORY – SPINEA The only European manufacturer of high precision gearboxes

37

Source: CEIT Group (2016)

An innovative group with a

strong focus on R&D that brings

practical solutions to improve

productivity & efficiency

Engineering Services

Industrial Automation

Biomedical Engineering

References

SUCCESS STORY CENTRAL EUROPEAN INSTITUTE OF TECHNOLOGY

38

SUCCESS STORY — ESET

Source: ESET (2016)

A pioneer of antivirus

protection, creating award winning

threat-detection software since

1987

ESET security solutions

allow businesses and consumers in more than 180 countries to make the most

of the digital world

ESET developed one of the first antivirus software in the world.

NOD 32

#1

Tackling Cyber Crime

39

SUCCESS STORY — c2i

Source: c2i (2016)

Hi-tech designer and

manufacturer of premium carbon fibre composites

components since 2015

AUTOMOTIVE INDUSTRY • structural carbon-fibre composites

AEROSPACE INDUSTRY • c2i designs and manufactures aircraft interior

structures & assemblies for Airbus A350, Airbus A320 and Boeing 787

OTHER INDUSTRIES • motorcycles, satellite communication,

defence & security, nautic

SUCCESS STORY — AEROMOBIL

40

Prototype of the world’s

most advanced flying car

Ready to take first

preliminary orders in

2016

„Finally, the flying car may

have landed“

„Little-known Slovakian start-up

has taken the wraps off of what they’ve

touted as the world’s most

advanced flying car“

„The elegant blue-and-white vehicle fits neatly in a parking space or a garage and tanks up at any filling

station. But once it reaches an airport, it can unfold its

wings within seconds, becoming a plane“

„Finally, the long-

awaited flying car is almost

here “

SUCCESS STORY INSTITUTE OF MATERIALS AND MACHINE MECHANICS

AUDI Q7 Rear impact

stiffeners

FERRARI MODENA Car frame stiffeners

RESEARCH INSTITUTION

R&D of advanced nonferrous materials, technologies of their

preparation and research in applied

mechanics

Innovative Materials

Aluminium Foam

Applied Research

41

INVESTMENT INCENTIVES

43

INVESTMENT INCENTIVES — ELIGIBLE PROJECTS

FRAMEWORK

INDUSTRIAL PRODUCTION

STRATEGIC/ SHARED SERVICES

CENTERS

TECHNOLOGY/ R&D CENTERS

TOURISM

44

INVESTMENT AID — MAXIMUM REGIONAL AID INTENSITIES

35% 35%

25%

*Districts in Bratislava region are excluded from the investment aid scheme

FORMS • Income tax relief — up to 10 tax periods • Cash grant — paid ex-post, based on annual costs report • Contributions on new jobs — paid ex-post, based on annual costs report • Transfer of public real estate for discounted price

n/a*

+ 10 to 20% for SMEs

45

MAXIMUM INTENSITIES — AVAILABLE FORMS

*Districts in Bratislava region are excluded from the investment aid scheme

MA

PK

SC BA

RS

TV

VT

KS

SO

KK SB

PO

GL

LE

BJ

SK

SP ML

HE SV PP

SN

SL

KE MI

PB

PU

IL

TN

LV

NR

ZM

TO PE

BN

NM

PN

TT

GA

DS

SE

SA

HC

SA

MY

KN

NZ

PD

RA

PT

LC

VK

BR

LM

TS

NO CA

DK

RK MT

ZA

KM BY

BB

ZV DT

ZC

BS

ZH

KA

TR

RS

Western Slovakia

Central Slovakia

Eastern Slovakia

Max. Investment Aid (in total) 25 % 35 % 35%

Max. Cash Grant 25 % 35 % 35 %

Max. Income Tax Relief 25 % 35 % 35 %

Public Real Estate for Discounted Price

25 % 35 % 35 %

INTENSITIES OF

• Cash Grant

• Income Tax Relief

• Transfer of Public Real Estate

Western Slovakia

Central Slovakia

Eastern Slovakia RV

SARIO SERVICES

The Slovak Investment and Trade Development Agency (SARIO) is a governmental investment and trade promotion agency operating under the supervision of Ministry of Economy of the Slovak Republic.

ALL OUR SERVICES

ARE FREE OF CHARGE

FOREIGN TRADE DEPARTMENT INVESTMENT PROJECTS DEPARTMENT

47

• Supports Slovak manufacturers in their export activities

• Assists foreign companies to identify potential new products for export from Slovakia

• Identifies potential suppliers and subcontractors

• Monitors free production capacities

• Manages online databases • Trade Fairs • Organizing B2B meetings

• FDI attraction • Assistance, consultancy for

investment project implementation

• Database of available real estate • Consultancy on investment aid • Preparation of starting business

related materials and analyses • Promoting Slovakia abroad via

seminars • Manages M&A database, open

projects for investments

OUR SERVICES

YOUR ONE STOP SHOP

FOR INVESTMENT AND TRADE IN

SLOVAKIA

48

• Focus - Small and Medium Enterprises

• Financing/Microfinancing • http://www.sbagency.sk/en/s

lovak-business-agency

(Researching Agency) • Managing Authority for the Operational

Programmes of Education and Research and Development

• http://www.vyskumnaagentura.sk/en/

• Focus – Innovations and • energysector • http://en.siea.sk/

• Focus – R&D development • (basic and applied research • and experimental development) • Funds provision • http://www.apvv.sk/agentura.ht

ml?lang=en

• Project by European Commission • 2015-2020 • More than 600 partners from EU • http://www.enterprise-europe-

network.sk/?en

• Support if business activities

in Slovakia • http://web.sopk.sk/view.php

?cisloclanku=10

INSTITUTIONAL NETWORK

SLOVAKIA — NOT JUST ABOUT BUSINESS...

SPA & THERMAL WATERS

CULTURAL HERITAGE & SPORT EVENTS

MOUNTAINS & HIKING

50

SARIO Slovak Investment and Trade Development Agency Trnavská cesta 100 821 01 Bratislava T: +421 2 58260 100 E: invest@sario.sk; trade@sario.sk www.sario.sk

ALL OUR SERVICES

ARE FREE OF CHARGE

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