Economic News SUMMARY, February 7

Economic news released by SITA on Wednesday, February 7

HPI Says Bill on Public Health Insurers at Odds with Constitution
Civic association Health Policy Institute (HPI) thinks that the draft law on public health insurance companies is incompatible with the legislation of the Slovak Republic. HPI says it infringes the basic principles of the rule of law, and violates the principle of power distribution. It not only introduces legal uncertainty but also brings retroactive regulations and discriminates against some entities on the market, suggests HPI. The Health Ministry sent the controversial bill to interdepartmental review last week. The bill transforms state-owned health insurance companies Vseobecna Zdravotna Poistovna (VsZP) and Spolocna Zdravotna Poistovna (SZP) from their current form of joint-stock companies into public institutions. It also includes a regulation according to which “a health insurance company is a joint-stock company established for a purpose other than to do business."

Motor Fuel Prices in Slovakia Moderately Down as of February 1
As of February 1, the average retail price of 95-octane petrol decreased SKK 0.06 to SKK 34.69 per liter compared with January 19, the Slovak Statistics Office informed SITA on Thursday. The average retail price of 98-octane petrol shrank by SKK 0.04 to SKK 37.48 per liter. The average retail price of one liter of diesel was SKK 35.20, down by SKK 0.04. The average retail price of LPG dropped thirteen hallers to SKK 21.34.

Slovak Arm of Banco Mais Closed 2006 with SKK 22.2 Mln. Loss
A Slovak branch of Portuguese banking house Banco Mais, S.A., closed the year 2006 with a loss of SKK 22.2 million. The bank launched its business activities in Slovakia in September 2005. Bank’s total costs achieved SKK 42.5 million last year on revenues exceeding SKK 20.3 million. The bank formed claim provisions at SKK 11.3 million, which largely contributed to the bank’s result last year.

Demand for State Housing Support Remains High
Total value of applications for housing support from the State Housing Development Fund (SFRB) as of February 5 reached almost 17.7 percent of the annual budget. While the SFRB budget for 2007 amounts to SKK 3.896 billion, the value of 257 applications totaled SKK 688.35 million. Of this, the SFRB approved 37 applications amounting to SKK 60.5 million. Financial support, which applicants have already in their bank accounts, is SKK 4 million, according to data published by the SFRB.

Deposit Protection Fund to Focus on Four Bankrupt Banks this Year
The Deposit Protection Fund (FOV) plans to focus its activity this year on bankruptcy proceedings related to assets of four bankrupt banks, where it is the biggest creditor. These are AG Banka, Slovenska Kreditna Banka (SKB), Dopravna Banka and Devin Banka. The FOV Presidium chairman Rudolf Sujan informed SITA that the fund expects total proceeds from sale of assets in bankruptcy between SKK 1.2 billion and 2.2 billion with proceeds from Dopravna Banka accounting for around SKK 780 million. FOV will use the above proceeds to repay the loan it took to pay out compensations to clients of the bankrupt banks between 2000 and 2004.

BSH Drives and Pumps with 2006 Turnover over SKK 6.2 Mln.
The company BSH Drives and Pumps, s. r. o. Michalovce reported a turnover of SKK 6.209 million in the past business year. The firm is involved in development and production of electric motors and pumps for kitchen appliances for Bosch and Siemens. Export of the company represented SKK 5.314 billion in the business year beginning in October 2005 and ending in September 2006, informed Siemens. At the end of September 2006 the company had 993 employees. In this business year the firm plans to increase output and launch production of more energy efficient electric motors for washing machines.

Kia Slovakia Struggles with Shortage of Workers
Korean carmaker Kia near Zilina has difficulties recruiting new workers. “There are vacancies at present, where there are not enough suitable candidates,” informed Kia Motors Slovakia spokesman Dusan Dvorak. The company needs around 300 people to launch a second shift. However, finding skilled and experienced workers into the paint shop, quality department, and employees experienced in operating machines in the body shop is a problem. The second shift should be launched already in March. The company is looking for workers mainly in the region around Zilina but also within the whole of Slovakia. “Potential recruitment of foreign workers will depend on development on the Slovak labor force market, whether needs of the company in the automotive industry can be covered by domestic workers. Slovak technical schools and universities and training of young people for work in automotive industry or mechanical engineering play an important role here as well,” said Mr. Dvorak.

Slovakia Met Two of Five Maastricht Criteria Last Year
Preparation for adoption of the euro in Slovakia and meeting of the tasks stipulated in the national convergence program is proceeding as scheduled so that Slovakia could join the Eurozone as of January 1, 2009. This information comes from the Finance Ministry’s report on meeting the national convergence plan in Slovakia, approved by the Slovak Cabinet at its regular meeting on Wednesday. Concerning the Maastricht criteria, Slovakia already meets the criterion for the general government debt and for long-term interest rates. According to the Finance Ministry’s estimates, the general government debt reached 33.1 percent of gross domestic product (GDP) last year, while the criterion has been set at 60 percent. The average market interest rate on long-term government or commercial bonds amounted to 4.41 percent in December 2006, while the reference rate was 6.24 percent.

Health Ministry Presents Draft Amendment to Health Insurance Act
The Health Ministry has released the text of its draft amendment to the health insurance act, according to which, people for whom the state pays health insurance will have to transfer to one of the two state-owned health insurance companies. The draft amendment submitted for interdepartmental review also simplifies the annual reconciliation of paid health care insurance premiums, and introduces a special redistribution pool for financing of very expensive medical treatment. Civil servants, soldiers of the Slovak Army, police officers, employees of the Slovak Intelligence Service, the Correctional and Courtroom Security Corps (ZVSJ), firefighters, custom officers, railway police and employees of the National Security Office should become policyholders of Spolocna Zdravotna Poistovna (SZP) by law. Children, university students, pensioners including persons with disabilities, persons serving time in prison, persons living in special facilities on the order of a court, people staying in social services facilities for the whole year, unemployed persons and foreigners detained in Slovakia will have a limited option to select a health insurance company.

Parliament Debates Amendment to Network Industries Regulation Act
The seventh session of the Slovak Parliament is continuing with a discussion about the draft amendment to the act on regulation in network industries. During the debate on Tuesday, opposition deputies criticized the draft amendment, and the Hungarian Coalition Party's (SMK) deputy, Gabor Gal, suggested returning the amendment to authors for rewriting. The amendment to the regulation act should take effect on March 1. According the Ministry of Economy, the amendment is necessary because current situation on the Slovak energy market is, considering energy, gas and water prices, unfavorable for end consumers. Economy Minister, Lubomir Jahnatek, said that the draft amendment aims to implement possible complex price regulation, separate the Regulatory Office from the Regulation Council, expand the office’s independence, and enable better control of the whole regulatory process.

Labor Ministry Presents its Draft Revision to the Labor Code
The Ministry of Labor, Social Affairs and Family has submitted for interdepartmental review a draft revision to the Labor Code. The proposed amendment should secure a higher level of protection for employees, strengthen the legal form of dependent work (work carried out by an employee for an employer for a wage) and secure protection of employees against unjustified layoffs. “The revision does not affect employment, creation of jobs, or economic performance of the business sphere,” writes the ministry in document accompanying the draft.

MONEY MARKET: Liquidity Deficit Persists after Repo Tender Settlement
The settlement of regular repo tenders of the National Bank of Slovakia (NBS) on Wednesday did not significantly influence liquidity in the market. Thus, a liquidity deficit still persists. UniBanka’s Jozef Hempfinger commented that commercial banks deposited SKK 21.77 billion in their reserve accounts in the National Bank of Slovakia (NBS) meeting the February minimum requirement on a cumulative basis at 77.93 percent. However, the banks borrowed SKK 6.963 billion from the NBS on one-day basis.

Collective Bargaining Bill to Bolster Position of Trade Unions
The purpose of the draft revision to the collective bargaining law, which the Ministry of Labor, Social Affairs, and Family submitted for interdepartmental review, is to strengthen the position of a trade union organization in a company and guarantee plurality of trade union organizations. If there are more trade union organizations active in one company, they should proceed and act in common and in mutual agreement when negotiating a collective agreement.

Creditors of Bankrupt Lovinit, a.s. to Meet on March 7
Trustee in bankruptcy of the producer of heat-resistant construction materials for metallurgic facilities Lovinit, a.s., Lovinobana, Marta Todekova has convened the first meeting of creditors for March 7. There the creditors will elect a creditor committee and decide over a proposal to replace the trustee in bankruptcy.

Investment in Ivanka pri Nitre is Allegedly not Endangered
The mayor of the village of Ivanka pri Nitre, Peter Guzmicky, does not consider the project of a spinal and rehabilitation center worth SKK 14 billion in the village to be endangered. He responded to recent statements by Slovak Economy Minister Lubomir Jahnatek, who considers the project unrealistic. The minister said that although foreign investors want to bring investments to Slovakia, their condition is that they want an agreement securing for them that if the business is not profitable for them, the government would have to settle all the debts. The Economy Ministry's spokesperson Branislav Zvara confirmed the minister's stance.

STOCK MARKET: SAX Index Share Approaches Level of 420 Points
The value of Slovakia’s official SAX share index approached the 420-point level on Wednesday. VUB bank shares helped the SAX index strengthen 0.46 percent or 1.91 points to 419.51 points. Turnover on the Bratislava Stock Exchange (BCPB) increased from SKK 1.616 billion to SKK 10.481 billion mainly because of direct transfers of government bonds. As little as SKK 836,700 fell to share trading.

Slovakia Takes European Commission to Court over CO2 Emissions
Slovakia filed its first complaint ever against the European Commission because of reduced limits on carbon dioxide emissions. Slovakia asked for permission to produce annually 41.3 million tons of carbon dioxide in the period between 2008 and 2012 but the EC changed to limit to 30.9 million tons. Slovakia filed the complained after its talks with Brussels had failed. “Yesterday, I signed it, and we filed it today. It is Slovakia’s first complaint against the European Commission ever,” Slovak Justice Minister Stefan Harabin said. He is convinced of success with the complaint. The minister claims that with filing the complaint, the government clearly acted to protect Slovakia’s economic interests. Limits on emissions that the EC set would endanger Slovakia’s economic growth and cause higher unemployment. According to the minister, this concerns two hundred Slovak companies, three of which are huge.

ING Bank in Slovakia Ends 2006 with Pretax Profit of SKK 215.1 Mln.
The preliminary pretax profit of ING Bank, a foreign branch of the Dutch bank in Slovakia, was SKK 215.1 million in 2006. Net interest income was negative at SKK 62.9 million when received interest was SKK 3.253 billion and paid interest were SKK 3.315 billion. Net income from fees and commissions was SKK 86.5 million.

FOREX MARKET: Crown Posts Moderate Gains after Initial Losses
The exchange rate of the Slovak crown against its reference currency the euro fluctuated in both directions on Wednesday. Nevertheless, the crown recovered its losses, and it even reported moderate gains. The local currency opened trading at 34.52/34.56 SKK/EUR. As Tatra Banka’s Boris Somorovsky commented, the crown lost three hallers before noon. However, foreign banks in the region later helped the Slovak currency strengthen. Thus, the crown improved to 34.43/34.47 SKK/EUR but it did not stay at that level. Before the close of trading, the crown’s exchange rate stood close to the opening level, i.e., 34.50/34.54 SKK/EUR.

Economy Minister Denies Claim he Wants an Out-of-Court Settlement
Economy Minister Lubomir Jahnatek denied claims of some opposition deputies that the government wants to reach an out-of-court settlement worth SKK 2.7 billion with companies, in the case of which the Regulatory Office for Network Industries violated their constitutional rights. “I have only to smile when the opposition deputies claim that I want to reach an out-of-court settlement,” said Mr. Jahnatek. He informed that the ministry is leading talks only about two potential alternatives. The finance minister can confirm this information, as well. “The first possibility is that we will agree with companies that they will not demand any reimbursement, which is a so-called zero alternative. The second alternative is that if the companies insist on reimbursement, they will have to turn to commercial courts,” said Mr. Jahnatek.

Bratislava Stock Exchange Turnover in January at SKK 78.03 Bln.
Monthly turnover on the Bratislava Stock Exchange (BCPB) in January reached SKK 78.03 billion. The Bratislava Stock Exchange was trading only during 18 days in January, which also was behind the 27-percent decline in turnover compared with December 2006. The BCPB registered 852 transactions, down 56.2 percent m/m. Turnover in share trading was SKK 50.2 million with 606 transactions concluded in January. Turnover in price-making transactions was SKK 31.7 million with 551 trades. As many as 55 directly negotiated transactions of SKK 18.5 million were registered in January. Seven mandatory buyout bids expired in January. They concerned SLK Rajecke Teplice, Bucina, V-Trading, Doprava a Mechanizacia, Vural, Projektink Humenne and Ingeo Zilina. No new mandatory buyout bid was announced.