Miroslav Strokendl: Conference on Foreign Investments 23rd November

Foreign Investments Miroslav Štrokendl, Member of the Management Board of UniCredit bank SlovakiaBratislava 23.11.2011

Why foreign investments? Their impact on the development of economy.• Generation of internal resources of the Slovak economy 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 employees),• Significantly higher average personnel costs in companies owned by foreign owners as compared to companies owned by domestic investors – faster creation of wealth of personnel in these companies,• Industrial production focused mainly on export in relation to the number of Slovak residents and partially also in relation to lower purchasing power of citizens,

Why foreign investments? Their impact on the development of economy.• Low volume of financial assets of citizens and companies owned by Slovak owners for development of Slovakia,• Foreign investments carry new resources for development of economy and extend limited possibilities of development with respect to low financial assets of citizens and companies in banks, which will represent a limiting factor for further development of the Slovak economy. The Loan/Deposit indicator of the Slovak banking sector already amounts to 90 % as compared to the end of 2006, when it amounted to 75 % only,• The present retail consumption is only 85 % of the pre-crisis level, caused mainly by purchase of citizens in surrounding countries after introduction of the strong EUR exchange rate, exporting our limited sources abroad.• Foreign investors are important for us to be included 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 employed in companies owned by foreign investors.Source: Eurostat

Comparison of average personnel costs by investor country 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 countriesSource: Eurostat

Development of liquidity of the Slovak banking sector.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 95 % 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/Deposit s Total 75% 90%

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

GDP and its structure – year-on-year growth 6% 4,7% 4,2% 3,8% 3,5% 3,5% 3,3% 4% 2% 0%-2%-4% Čistý export -3,6%-6% Domáci dopyt -5,1% -5,0% -5,4%-8% HDP-10% Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 2009 2010 2011 Source: UniCredit Bank based on SO SR data

2011 added value generation growth as compared to 2008 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 2011Rank 35 48 45 38 40 49 43 43 41 37 41 46 47 60 69Change -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 politicians •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 5.4Czech 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 ChangeEstablishment of company 76 74 -2Construction permit 50 50 0Supply of electric power 102 94 -8Registration of property 10 8 -2Obtaining loan 24 21 -3Protection of investments 111 108 -3Payment of taxes 130 126 -4Foreign business 95 91 -4Enforcement of law 71 74 3Insolvency proceedings 35 33 -2Business in total 48 43 -5Source: World Bank

Looking ahead, is the business environment going to change or not...16

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Miroslav Strokendl: Conference on Foreign Investments 23rd November

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Miroslav Strokendl: Conference on Foreign Investments 23rd November — Presentation Transcript