International International Business
LOOK WHO'S COMING BACK TO HAUNT SLOVAKIA
Cheap beer, soccer matches, hit songs, and fast waltzes. They're all part of the last-minute campaigning for Slovakian national elections on Sept. 30 and Oct. 1. And no one is running harder than Vladimir Meciar, the ex-communist-turned-populist and twice-ousted leader of Slovakia who is trying to engineer yet another comeback. Thanks to a slick campaign, a hearty, crowd-pleasing persona, and vague promises that appeal to pensioners and the unemployed, his Movement for a Democratic Slovakia
tops the polls with 24.5% of the vote in an 18-party race.
But even if he pulls off a win, the merriment may be short-lived. In 21 months of independence, Slovakia still hasn't proven which neighbor it most resembles: the reform-minded Czech Republic or the foot-dragging Ukraine. Autocratic decisions and hostility to foreign investment derailed the economy under Meciar's roller-coaster rule. In the six months since a no-confidence vote ousted him in March, a temporary centrist government led by the professorial Jozef Moravcik has managed to get Slovakia's economy moving (table). The election will determine whether it can stay on the growth track.
SEPARATION ANXIETY. The polls point to two possible scenarios. The 51-year-old Meciar, with the most votes, could form a coalition government with one or more of the other parties. Failing that, the party with the second-largest vote gets to try. In that case, the betting is that the same odd assortment of nationalists, social democrats, and rightist Christians now running the country will return. "There's a good chance the current coalition could continue," says Tatiana Rosova, director of polling agency Focus.
At any rate, the economy appears to have turned around. Gross domestic product in the first half of '94 rose an unexpected 4.4% over the same period last year. Although unemployment is at 14% and still rising as the economy shifts away from heavy industry, declining inflation and growth in industrial production looked good enough to persuade the International Monetary Fund to grant $169 million worth of standby credits in July. "The Slovakian economy is finally showing signs of overcoming the drawbacks of separation," says Zdenek Lukas, an economist with the Vienna Institute for Comparative Economic Studies.
Moravcik's government has focused on speeding up privatization and reining in the budget deficit. On Sept. 5, Slovakians began lining up to buy $35 vouchers that can be turned into stock in over 200 privatized companies. "There are a lot of very good assets at low prices," notes Jeff Silverberg of United Investments Ltd. in Bratislava.
Some multinationals have long ignored Slovakia's political volatility. Rhone Poulenc, Siemens, Alcatel, Samsung, PepsiCo, and Volkswagen are operating there. "I see no reason for anxiety," says Guter Klemp, a managing director of VW's Bratislava plant. He has added a paint and body shop, is recruiting local suppliers, and will double assembly of the Passat and Golf models to 10,000 in 1995.
Fresh investor interest is also picking up. London-based Robert Fleming Co. is raising an additional $25 million for its $30 million fund, Czech & Slovak Investment Corp. The two-year-old fund had concentrated on the Czech Republic, but these days it's negotiating a handful of large projects in Slovakia. "We think the potential payoff is now worth devoting more effort there," says William Crewdson, an adviser to the fund.
Slovakia's advantages include its workers, who are as skilled as their former compatriots, and manufacturing wages of $1 to $3 per hour. Bratislava also is less than an hour's drive from the Vienna airport, and the cobbled streets of the old town echo with cement mixers as the city strives to restore the grandeur of its classic architecture.
But there's a lot of catching up to do. Susanne Gahler, an economist with J.P. Morgan Securities Inc. in London, predicts that Slovakia will attract direct foreign investment totaling $120 million in 1995, while the Czech Republic will get $600 million.
Inflation-busting interest rates aggravate entrepreneurs such as Lubor Lipka, who owns a petrol station, two supermarkets, and a restaurant but can't borrow money to expand. Such things as tax rates, banking, and communications all need to be modernized, says Deputy Prime Minister Ivan Simko. How soon it gets done now depends on Slovakia's voters. SLOVAKIA
REAL GDP -4.1 1.5
INFLATION 23.2 14.0
PRODUCTION -15.9 3.0
*Estimates DATA: CREDITANSTALT-BANKVEREIN
Karen Lowry Miller in Bonn, with Tim Smart in Bratislava