Area: 48,845 sq km, about twice the size of New Hampshire
Population: 5,423,567 (July 2004 est.)
Annual Inflation: 8.6% (2004 est.)
Population Growth Rate: 0.14% (2004 est.)
Gross Domestic Product (GDP): $72.29 billion (purchasing power parity, 2004 est.)
Life Expectancy: Male:70.21 years; Female: 78.37 years; (2004 est.)
GDP Per Capita: $13,300 (purchasing power parity, 2004)
Infant Mortality: 7.62 deaths/1,000 live births (2004 est.)
Real Annual GDP Growth: 3.9% (2004 est.)
U.S. STRATEGIC INTERESTS
Since the formation of a pro-reform coalition in 1998, the Slovak Republic has become a truly democratic society with a market economy, and a participant in Western economic and security institutions. Slovakia lies at the center of Europe, and its population includes about 500,000 people of Hungarian ethnicity, a Roma population estimated at nearly 10 percent of the total population, and small numbers of Czechs, Ukrainians and Ruthenians. The Slovaks participate in several United Nations peacekeeping missions, including those in Afghanistan, Kosovo and Bosnia. Active in the Global War on Terrorism (GWOT), Slovakia maintains a de-mining unit in Iraq and has committed to training Iraqi officials and police officers. Slovakia became a member of both NATO and the European Union (EU) in 2004.
OVERVIEW OF U.S. GOVERNMENT ASSISTANCE
In FY 2004, the U.S. Government (USG) provided an estimated $9.19 million in assistance to Slovakia:
In FY 2004, a total of 23 Slovaks traveled to the United States on International Visitor programs, and an additional 32 military students did so on International Military Education and Training (IMET) programs.
Although no new SEED funds were provided in FY 2004, program implementers continued to use SEED funding remaining from previous fiscal years, as described below.
U.S. ASSISTANCE PRIORITIES
Democratic Reform Programs: In FY 2004, the main priorities for U.S. democratic reform assistance included encouraging the growth of a stronger civil society and the rule of law. The majority of SEED funds was allocated to fighting corruption, promoting the sustainability of the NGO sector, and providing protections and increased opportunities for minorities. USG-funded exchange programs sought to introduce young Slovak policy makers and leaders to important elements of the democratic system, and U.S. Embassy Democracy Commission grants increased local organizations' capacity to influence change in these areas.
Economic and Social Sector Reform Programs: Since the formation of a pro-reform coalition government in 1998, Slovakia's business-friendly environment has attracted significant foreign direct investment (FDI), including much from American firms. In the past, U.S. assistance goals focused on promoting sustainable economic growth, investment, and further social sector reform. In FY2004, the Embassy hosted its third annual business/investment conference, in close cooperation with the private sector and the American Chamber of Commerce.
Security, Regional Stability, and Law Enforcement Programs: The Slovak military is an active participant in several NATO and United Nations peacekeeping operations. In FY 2004, U.S. assistance encouraged Slovakia to contribute more effectively to regional stability and the GWOT. Military aid programs promoted sound defense reform, with a focus on more mobile and better-trained and equipped forces. In addition, USG-funded exchanges and U.S. Embassy Democracy Commission grants addressed law enforcement issues and increased policy makers' awareness of NATO structures. The USG continued to provide the Government of Slovakia (GOS) with export control training and equipment to enhance the country's border security.
SECTORAL ASSESSMENTS
Democratic Reform
The democratization efforts of the reform-oriented coalition government that assumed power in 1998 contributed to Slovakia's positive performance in FY 2004. In September 2002, the Slovaks elected a center-right government, which gave four coalition parties (three from the previous government) another mandate to continue pursuing their top priorities regarding democratic reform. Both the national and the municipal elections were aided by a very active NGO sector skilled in democracy building and voter education, to which the Democracy Commission and USAID programs had contributed to over the past several years. Slovakia enjoys a free and open press, a vibrant non-governmental organization (NGO) community, growing respect for the rule of law, and membership in the Organization for Economic Cooperation and Development (OECD), NATO and the EU. However, the country still faces many difficult social and economic challenges in the areas of pension reform, heath care and education.
In 2004, the GOS implemented fiscal decentralization and transferred responsibility for administering schools, hospitals, and roads to local governments. The GOS reduced the number of registered municipalities by merging several communities to relieve them of substantial management burdens. Several USAID programs supported this decentralization plan.
Slovakia is a multi-ethnic state and remains committed to good relations among its minority groups. An ethnic Hungarian party is represented in the coalition government, and an ethnic Hungarian, Pal Csaky, is the Deputy Minister for Human Rights and Minorities. The GOS established the Office of the Roma Plenipotentiary, which is held by a Romani, Kl�ra Orgov�nov�. Discrimination against Roma is still pervasive, but the GOS has initiated an action plan and operates several programs to address the Roma communities' most pressing needs.
The majority of FY 2004 SEED funding was allocated through small democracy grants and visitor programs. In FY 2004, the Democracy Commission focused on supporting projects for grassroots organizations working with Roma communities in a number of different spheres. Among these activities, the Democracy Commission gave grants to support organizations that train social workers in Roma settlements, work with Roma youth, and provide legal and social services to this community. In FY 2004, the Democracy Commission supported 27 grants, averaging $7,400 each, for a total of $200,000.
In May 2003, an international NGO, Partners for Democratic Change (PDC), launched a four-year, USAID-funded Roma Integration Program in the Czech Republic, Hungary, and Slovakia, valued at $2.8 million with approximately $770,000 allocated for Slovakia. The objective of the program is to promote cooperative decision-making between Roma and non-Roma, increase leadership and advocacy skills of Roma, and expand access to public services. In 2004, the Slovak branch of PDC established the program in three different regions of the country and awarded the first series of grants.
In the past, USG assistance focused largely on helping Slovak efforts to fight corruption and improve the rule of law through the 10-year presence of the American Bar Association's Central European and Eurasian Law Initiative (ABA/CEELI), which worked closely with the Ministry of Justice and the courts. The GOS is still actively working to curb corruption and has implemented nearly 90 percent of its action plan to address this problem. Parliament passed landmark legislation this year that bolstered the fight against corruption by passing a new conflict-of-interest law and creating a special prosecutor position and court for high-level corruption cases. In 2003, ABA/CEELI hosted an international conference to introduce other Central European nations to several of Slovakia's successes, and highlighted its project to assist with the implementation of an electronic court management system that randomly assigns cases and helps improve the efficiency of courts. In addition, ABA/CEELI initiated on-going discussions to reform the public procurement process.
Now that SEED funding for Slovakia has ended, issues concerning democratic reform, such as minority relations and corruption, will continue to be addressed to a limited extent through exchange programs and other means.
Economic and Social Sector Reform
The Slovak economy has shown consistently strong growth in recent years. In 2002 and 2003, Slovakia had the fastest growing economy in Central Europe, with a real GDP growth rate of 4.4 percent and 4.2 percent, respectively. This trend continued through the first half of 2004, when the real GDP growth rate reached 5.4 percent. The pro-reform ruling coalition that has led Slovakia since 1998 has been highly successful in bringing macroeconomic stability to the country to help it catch up with neighboring countries that got off to a faster start after the fall of communism. Both the International Monetary Fund (IMF) and the OECD project that Slovakia's real GDP growth rate will remain about five percent in 2004, 2005 and 2006.
Cumulative foreign direct investment (FDI) in Slovakia has more than quintupled since 2000, to $11.2 billion in June 2004. In the past two years, the country has attracted two $1 billion-plus investments in the automotive sector (Peugeot and Hyundai/Kia) that, along with an existing Volkswagen plant, will help make Slovakia the world leader in car production per capita by 2006. A substantial number of auto suppliers are also planning to invest and as a result, Slovakia has been dubbed "Little Detroit" by the foreign press. The U.S. Embassy, the American Chamber of Commerce, and local American companies have sponsored three annual business/ investment conferences in Slovakia to help promote its advantages to foreign investors. The GOS has successfully privatized the majority of state-owned enterprises, selling 49 percent of ownership and management control. The last major privatization, that of Slovakia's leading power producer, Slovak Electricity Company, is in its final stage.
The high level of FDI has helped mitigate long-standing unemployment problem. The country's unemployment rate peaked at about 20 percent in early 2002, but steadily declined to 12.7 percent in October 2004. Large discrepancies still exist between the Bratislava region, which has a per capita income equal to 99 percent of the EU-15 average and an unemployment rate of less than four percent, and Eastern Slovakia, which has pockets of unemployment as high as 30 percent. Due to Slovakia's communist past, its social benefits for the unemployed were very generous and regarded by many as a disincentive to employment. In 2004, following suggestions offered by the U.S. Embassy, the EU, and the IMF, the GOS tightened eligibility criteria for receiving benefits, and this has helped reduce the number of fraudulent unemployment claims and discourage what was an active black market for labor.
Although deficits in the current account and the domestic budget have plagued Slovakia in recent years, there was broad improvement in both of these areas in 2003 that carried through into the first half of 2004. The current account deficit in 2002 was 8.2 percent of GDP, but thanks to strong export growth, it dropped to 0.9 percent of GDP in 2003, and was a respectable 2.6 percent for the first six months of 2004. This strength in exports is even more impressive considering that the Slovak crown has appreciated against both the Euro and the dollar, making Slovak exports comparatively more expensive. The Slovak crown appreciated 18.8 percent against the dollar in 2003, and by an additional 10.9 percent in the first six months of 2004.
The 7.5 percent budget deficit of 2002 (largely due to election-year spending) declined sharply in 2003 to only 3.6 percent of GDP, compared to a 4.97 percent target. For 2004, the public finance deficit has a ceiling of 3.93 percent of anticipated GDP. By 2006, the GOS seeks to lower this deficit to below 3 percent of GDP, the level required to adopt the Euro. In 2002, election-year politics also affected the inflation rate, when the GOS decided not to continue its multi-year policy of reducing subsidies on utility prices (the goal was for utility prices to reach 90 percent of market levels by 2004). As a result, the annual inflation rate jumped from 3.3 percent in 2002 to 8.5 percent in 2003, when the GOS had to raise utility prices even faster than usual to make up for the absence of a rate hike the previous year. For the first half of 2004, the average inflation rate reached 8.2 percent. Fortunately, core inflation (adjusted to exclude the effects of price hikes for utilities and indirect taxes) in the same period was only 2.7 percent.
The GOS has also undertaken important and often painful steps to modernize the country's pension, education, and health care systems. Funding for these remedies is tight, but a new and more equitable pension system has been approved, and important cost-cutting and efficiency-enhancing health care system changes have been launched. Various organizations, including the Embassy, the American Chamber of Commerce, the EU, and the IMF, have worked with the GOS to improve these systems and assure their sustainable development.
Security, Regional Stability, and Law Enforcement
The U.S. and Slovakia enjoy a strong defense relationship focused on shared security and interests. The GOS made tremendous efforts successfully to join NATO and has been a key coalition partner in the GWOT. Guided by their "Force 2010" Strategic Plan, the Slovak Armed Forces, through defense reform and modernization, are actively upgrading their military capabilities while downsizing their active duty personnel. Slovak military and observers take part in various peacekeeping operations, including Bosnia, Kosovo and Cyprus. The Land Forces have engineers conducting de-mining operations in Iraq and have pledged to help train Iraqi police and defense forces. The Slovak Armed Forces continue to meet reform goals, such as the consolidation of their military service academies, graduating several classes of non-commissioned officers (NCOs) from the NCO Academy, and continuing the transition to a professional, voluntary, military force. Overall troop numbers continue to decline as the last of the conscripts leave the services.
In FY 2004, the USG provided the Slovak military $6.6 million in Foreign Military Financing (FMF) funds. In addition, Slovakia received a total of $1.075 million in IMET funds. The Slovak Armed Forces have used U.S. funds effectively toward achieving their military reform goals and to increase their interoperability with NATO forces. Assistance provided by Cubic Applications, Incorporated, a leading U.S. defense and transportation firm, is an important FMF-funded effort that is advancing military reform, restructuring, and modernization of the Armed Forces. Other key FMF projects that contribute directly to the Slovak Armed Forces' increased interoperability and compatibility of the include English language training, a National Military Command Center (NMCC), training simulation upgrades, and Multiple Integrated Laser Engagement Systems (MILES) equipment for the military training center in Lest.
Slovakia is using its IMET allocation wisely, sending students to courses at a number of U.S. military and defense-related institutions, including the Army and Air Force War Colleges. The country focuses its IMET funds on superior junior and mid-career leaders, both officers and enlisted, to increase the professionalism of its military. In addition to these courses, IMET funds are used for the training and development of the Slovak military's NCO Corps. The transition to a volunteer force plus widespread international coalition and NATO peace missions will continue to drive the Slovak military to seek more IMET opportunities. In turn, this should help its public image and recruiting efforts. The Slovak military's growing professionalism and sophistication is the basis of the Slovak public's perception of it as the most trusted institution of the government.
During FY 2004, Export Control and Related Border Security (EXBS) Assistance was targeted at Slovakia's eastern border to enhance the country's capabilities for protecting its borders and promoting regional stability. The program supported international exchange programs for radiation training and trade in sensitive goods. In-country training focused on Internet investigations and strategic tracking. The donations of automobiles, enforcement kits, and portable global positioning systems (GPS) amounted to $46,900, with training programs totaling $464,000.
COUNTRY PERFORMANCE MEASURES
ECONOMIC & DEMOCRATIC REFORMS, 1991-2004
Data are drawn from EBRD, Transition Report (November 2004) & Freedom House, Nations in Transit 2004 & Freedom in the World 2004. Ratings are based on a 1 to 5 scale with 5 representing the most advanced.
Latest year observation refers to 2004 economic reform data and 2003 democratic reform data; i.e. 2004 data for democratic reforms are not yet available.
ECONOMIC STRUCTURE AND HUMAN DEVELOPMENT, 1990-2004
World Bank, World Development Indicators 2004 (2004); UNICEF, Social Monitor 2004 (2004); EBRD, Transition Report (November 2004); and UNDP, Human Development Report (2004).
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