Foreign Investments

Bratislava 23.11.2011

Miroslav Štrokendl,Member of the Management Board of UniCredit bank Sl ovakia

Why foreign investments? Their impact on the develo pment of economy .

• Generation of internal resources of the Slovak econ omy is limited by the size of Slovakia and its historical development,

• Companies with foreign owners provide employment to a significant part of Slovak citizens (one third of all Slovak employe es),

• Significantly higher average personnel costs in com panies owned by foreign owners as compared to companies owned by do mestic investors – faster creation of wealth of personnel in these co mpanies,

• Industrial production focused mainly on export in r elation to the number of Slovak residents and partially also in relation to lower purchasing power of citizens,

Why foreign investments? Their impact on the develo pment of economy .

• Low volume of financial assets of citizens and comp anies owned by Slovak owners for development of Slovakia,

• Foreign investments carry new resources for develop ment of economy and extend limited possibilities of development wit h respect to low financial assets of citizens and companies in banks , which will represent a limiting factor for further development of the Sl ovak economy. The Loan/Deposit indicator of the Slovak banking sector already amounts to 90 % as compared to the end of 2006, when it amount ed to 75 % only,

• The present retail consumption is only 85 % of the pre-crisis level, caused mainly by purchase of citizens in surrounding count ries after introduction of the strong EUR exchange rate, exporting our limi ted sources abroad.

• Foreign investors are important for us to be includ ed by the structure of Slovak GDP generation in the „healthy“ core – with a lower proportion of cumulative domestic demand below 100 % ,

Proportion of personnel in individual countries emp loyed in companies owned by foreign investors .

Source: Eurostat

Comparison of average personnel costs by investor c ountry to 100% of companies owned by Slovak investors. On average, personnel costs in Slovakia are higher by 11.4 % on the aggregate than in

companies owned by Slovak investors.

Source: Eurostat

Retail sale - �May 2011 as compared to the pre-crisis level (1H 2008=100)

Proportion of companies owned by foreign investors in added value within individual countries

Source: Eurostat

Development of liquidity of the Slovak banking sect or .As for the volume of deposits as of 30.9.2011, EUR 2 bn is located with companies by

non-residents; without them, the L/D indicator is 9 5 %

MEUR 31.12.2006 30.9.2011Growth

Loans Companies 15 012 19 857 132%

Residents 7 433 16 275 219%

Total 22 445 36 132 161%

Deposits Companies 15 591 17 063 109%

Residents 14 445 23 142 160%

Total 30 036 40 205 134%Loans/Deposits Total 75% 90%

Domestic consumption (households, government and gross investments) to GDP ratio .

Source: Eurostat

GDP and its structure – year-on-year growth

Source: UniCredit Bank based on SO SR data

-5,1%-3,6%

-5,4%

3,3%

-5,0%

4,7% 4,2% 3,8% 3,5% 3,5%

-10%

-8%

-6%

-4%

-2%

0%

2%

4%

6%

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2

2009 2010 2011

Čistý export

Domáci dopyt

HDP

2011 added value generation growth as compared to 2 008 by sectors.

Pharmaceutical industry 131%Leather industry 131%

Financial services 131%Rubber and plastic industry 126%

Production of means of transport 120%Engineering industry 121%

Real estate 121%Furnishing industry 121%

Network sectors 117%Healthcare sector 119%Chemical industry 112%

Posts and telecommunications 111%Metallurgical industry 110%

Food industry 109%Hotels and restaurants 100%

Wood-processing industry 101%Paper industry 100%

Transport and storage 100%Production of electrical devices 97%

Retail and wholesale 95%Construction 94%

Textile industry 93%Mining and extraction 95%

Agriculture 86%Insurance sector 83%

Coking and refinery industry 69%

Global Competitiveness Index (World Economic Forum ).

142 countries of the world evaluated.

1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

Rank 35 48 45 38 40 49 43 43 41 37 41 46 47 60 69

Change -13 3 7 -2 -9 6 0 2 4 -4 -5 -1 -13 -9

Competition disadvantages of Slovakia:•139 enforcement of law•135 high rate of patronage•132 extraordinarily low trust of public in politici ans•130 high deficit of public finance

Competition advantages of Slovakia•4 openness towards foreign ownership of companies•4 low customs barriers•6 openness towards foreign investments bringing new technologies•12 low spread of interest rates of loans

Source: WEF

Public debt in EU countries (% of GDP, 2010).

Global Competitiveness Index (WEF).

Rank ScoreSwitzerland 1 5.7Singapore 2 5.6Sweden 3 5.6Finland 4 5.5USA 5 5.4Germany 6 5.4Netherlands 7 5.4Denmark 8 5.4Japan 9 5.4Great Britain 10 5.4

Czech Republic 38 4.5Poland 41 4.5Hungary 48 4.4Slovakia 69 4.2

Source: WEF

Doing Business Conditions Analysis of World Bank.183 countries of the world evaluated.

Ranking 2012 Ranking 2011 Change

Establishment of company 76 74 -2

Construction permit 50 50 0

Supply of electric power 102 94 -8

Registration of property 10 8 -2

Obtaining loan 24 21 -3

Protection of investments 111 108 -3

Payment of taxes 130 126 -4

Foreign business 95 91 -4

Enforcement of law 71 74 3

Insolvency proceedings 35 33 -2

Business in total 48 43 -5

Source: World Bank

Looking ahead, is the business environment going to change or not...

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