Area: 48,845 sq km, about twice size of N. Hampshire Population: 5,430,033 (2003,est.)
Annual Inflation: 3.3% (2002 est.)
Population Growth Rate: -0.14% (2002 est.)
Gross Domestic Product (GDP): $67.34 billion (purchasing power parity, 2002 est.)
Life Expectancy: male - 70.44 years ; female - 78.64 years (2002 est.)
GDP Per Capita: $12,400 (purchasing power parity, 2002 est.)
Infant Mortality: 8.55 deaths/1,000 live births (2003 est.)
Real Annual GDP Growth: 4.4% (2002 est.)
U.S. STRATEGIC INTERESTS
Since the formation of a pro-reform coalition in 1998, the Slovak Republic has made great strides toward becoming a truly democratic society, market economy, and participant in Western structures. Slovakia lies at the center of Europe, with close ethnic and geographic ties to the Balkans and to transition countries in Central and Eastern Europe (CEE). Its strategic importance was demonstrated once again when the government of Prime Minister Dzurinda quickly lent its airspace and allowed transit of troops for Operation Iraqi Freedom, for Afghanistan, and for Kosovo. Slovakia has sent troops to Iraq and pledged $18 million for the reconstruction effort. The Slovaks also dispatched an engineering unit to Afghanistan in August 2002, and contributes to peacekeeping forces in Kosovo and Bosnia, as well as to numerous UN peacekeeping missions. Slovakia will become a full member of both NATO and the EU in May 2004.
OVERVIEW OF U.S. GOVERNMENT ASSISTANCE
In FY 2003, the U.S. Government (USG) provided an estimated $16.73 million in assistance to Slovakia.
- $0.5 million in democratic reform programs (including Public Diplomacy exchange programs)
- $16.05 million in security, regional stability and law enforcement programs;
- $170,000 in humanitarian programs; and
- Privately donated and U.S. Defense Department excess humanitarian commodities, valued at $10,000.
U.S. ASSISTANCE PRIORITIES
Democratic Reform Programs: In FY 2003, 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 FY 2003 SEED funds was allocated toward 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 in 1998, Slovakia?s business-friendly environment has attracted significant foreign direct investment (FDI), including from American firms. In the past, U.S. assistance goals focused on promoting stable, sustainable economic growth; promoting investment in Slovakia; and furthering social sector reform. In FY 2003, several anti-corruption programs that encouraged increased transparency and more consistent business practices helped improve Slovakia?s investment climate. The Embassy hosted an annual investment conference, in close cooperation with the private sector and the American Chamber of Commerce. USG-funded exchanges helped local government leaders to learn more about local economic development and increasing employment opportunities for their regions.
Security, Regional Stability, and Law Enforcement Programs: The Slovak military is an active and growing participant in several NATO and UN-led peacekeeping operations. In FY 2003,U.S. assistance encouraged Slovakia to contribute more effectively to regional stability and the fight against global terrorism. Military aid programs promoted sound defense reform, with a focus on more mobile and better-trained and equipped forces. In addition, U.S.-funded exchanges and Embassy Democracy Commission grants addressed law enforcement issues, particularly related to transnational crime. The USG continued to provide the Government of Slovakia (GOS) with export controls training and equipment.
SECTORAL ASSESSMENTS
Democratic Reform
The democratization efforts of the reform-oriented coalition that assumed power in 1998 contributed to Slovakia?s positive performance in FY 2003. In September 2002, the Slovak people voted for a dominant center-right government, which gave four coalition parties (three from the previous government) another mandate to continue pursuing their top priorities regarding democratic reform and Euro-Atlantic integration. Parliament passed legislation that advanced the decentralization of public administration and judicial reform throughout the year. As with the national elections in September, the municipal elections held in December 2002 were aided by a very active NGO sector skilled in democracy building. The U.S. Embassy?s small grants program contributed nearly $22,000 from FY 2003 funds toward voter education and minority outreach. Slovakia enjoys a free and open press, vibrant NGO community, growing respect for the rule of law, and membership in the OECD. However, the country still faces many difficult social and economic reforms, and lingering symptoms from the communist system persist.
Corruption is still a large problem in Slovakia, and the GOS is actively trying to curb it. Officials serious about creating transparent rules and prosecuting abuses have been put in key positions, a new conflict of interest law is being discussed, and a special prosecutor to fight corruption will soon be instituted. The Ministers of Justice and Interior Minister are taking action against corrupt officers in the courts and the police force. The head of the GOS anti-corruption office is a noted human rights lawyer, who pushed successfully for extending the scope for "sting" operations and has introduced a "whistle blower" statute to protect government employees who report to investigators about corruption in their offices.
The GOS remains committed to improving relations with minority groups. Ethnic Hungarian parties are 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 Rom, Kl?ra Orgov?nov?. Discrimination against Roma is still pervasive, but the GOS has initiated an action plan and operates several pilot programs to address some of the Roma communities? most pressing needs. Skinhead attacks against Roma occur with some frequency, and the police sometimes fail to protect Roma from such attacks or to investigate such crimes thoroughly. The National and Bratislava district police have taken many steps to monitor and control skinhead movements, and new officers are to be assigned to each district to monitor and investigate crimes, starting in 2004. Unfortunately, Parliament has failed to pass anti-discrimination legislation yet, even though it is a EU requirement for accession in 2004.
FY 2003 was Slovakia?s final year for new SEED funding, with the majority of the funds dedicated to the completion of the American Bar Association?s Central Europe and Eurasian Law Initiative?s (ABA/CEELI) Rule of Law programs and Transparency International Slovakia?s (TIS) anti-corruption work. ABA/CEELI received $200,000 to assist the development of the anti-corruption office at the Office of the Government and worked closely with the Ministry of Justice determining effective anti-corruption tools applicable to Slovakia. It sponsored several workshops with an American expert in the public procurement area to discuss necessary procedural reforms, which will continue into 2004. The organization was on hand with expert assistance to help draft legislation and to prepare training workshops. The final SEED installment led to a successful electronic court management project, which sought to reduce corruption by assigning court cases electronically and relieving court officials from excessive administrative loads. TIS received $50,000 to continue organizing anti-corruption seminars and workshops.
The foregoing projects and nationwide strategies to reduce corruption made a positive impact in Slovak society. ABA/CEELI brought together judicial reform leaders from other CEE countries to share the successes of the computerized court management initiative. After the former Chief Justice of the Supreme Court, who obstructed reforms and rewarded cronies with huge bonuses, failed to win reelection, the ABA/CEELI project for computerized case management was successfully installed at the Supreme Court, providing a positive example for the rest of the judiciary and the region.
The Embassy?s Democracy Commission continued to support organizations seeking to assist Roma communities and increase human rights awareness. Among numerous activities, the Democracy Commission gave grants to train Roma leaders in public policy and create employment opportunities through vocational training. The grants in this area totaled $35,674. The Democracy Commission has also contributed over $68,790 to local organizations focused on civic activities, such as training teachers in human rights and local government education. In addition, the Office of Defense Cooperation (ODC) managed several construction projects, which will give Roma children better access to primary education.
Both corruption and minority rights will continue to be a high priority for U.S. assistance in FY 2004. The last round of Democracy Commission small grants will consist of an open competition for NGOs to propose innovative projects on these themes. In FY 2004, Slovakia will enter the EU. With the limited funds still available, the Embassy intends to build public-private partnerships to sustain NGOs and sponsor exchanges to contribute to Slovakia?s continued democratization.
Economic and Social Sector Reform
The Slovak economy has shown consistently strong growth in recent years. In 2002, Slovakia had the fastest growing economy in Central Europe, with a real GDP growth rate of 4.4 percent. This trend continued through the first half of 2003, when the real GDP growth rate was 3.9 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 those neighbors that got off to a faster start after the Berlin Wall fell. The OECD projects that Slovakia?s real GDP growth rate will be 4.2 percent and 4.4 percent in 2004 and 2005, respectively.
Cumulative FDI at the end of 2002 reached $10 billion, 500 percent higher than at the beginning of 2000. In addition, during the first half of 2003, Peugeot announced it would invest over $800 million in Slovakia for a new assembly plant that will produce 300,000 cars annually, and help make the country the largest car producer per capita in the world. During the same six-month period, other foreign companies invested an additional $550 million in Slovakia. The Embassy, the American Chamber of Commerce (AmCham), and local American companies have sponsored two annual 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 high level of FDI has helped mitigate Slovakia?s economic Achilles heel -- unemployment. The country?s unemployment rate peaked at about 20 percent in early 2002, but steadily declined to about 14 percent in September 2003. Large discrepancies still exist between the Bratislava region, with a per capita income equal to 99 percent of the EU average, and an unemployment rate of under four percent, and Eastern Slovakia, which has pockets of unemployment as high as 30 percent. Due to Slovakia?s communist past, its network of social benefits for the unemployed is very generous and is regarded by many as a disincentive to employment. Therefore, theEmbassy, EU, and IMF all have encouraged the GOS to tighten eligibility criteria for receiving benefits, and also to discourage an active black market for labor.
Although deficits in the current account and the domestic budget plagued Slovakia in 2002, there was broad improvement in both of these areas in 2003. The current account deficit in 2002 was 8.2 percent of GDP (slightly better than 2001?s 8.8 percent), but thanks to strong export growth, it dropped to 1.3 percent for the first half of 2003. 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 17.2 percent against the dollar in 2002, and by about 14 percent in the first nine months of 2003.
The budget deficit ballooned to 7.5 percent in 2002, partly due to election-year sweeteners such as large pay raises for public employees. The GOS worked hard to keep on track for a 4.9 percent deficit for all of 2003, and projects it to be even lower in 2004. In 2002, election year politics also affected the inflation rate, when the GOS decided not to continue its multi-year policy of cutting subsidies for utility prices. However, 2002?s inflation rate of 3.3 percent jumped to 7.7 percent for the first half of 2003, when the GOS raised utility prices even faster than usual after the election to make up for the holiday it had offered the previous year. The GOS goal is for utility prices to reach 90 percent of market levels by 2004. Fortunately, core inflation for the first half of 2003 was only 2.8 percent.
The GOS has also undertaken important and often painful first steps to modernize its pension, education, and health care systems. Funding pay for all the planned fixes immediately remains tight, but a new and fairer pension system has been approved, and important cost-cutting and efficiency-enhancing health care system changes have been launched. Various international organizations, including the Embassy, AmCham, EU, and IMF, have worked with the GOS to improve these systems and help assure their sustainable development well into the future.
Security, Regional Stability, and Law Enforcement
The U.S. enjoys strong military-to-military relations with Slovakia. The GOS is making strenuous efforts to join NATO and has behaved as a de facto ally in the recent crises. Slovakia continues to reform its military in close consultation with NATO through the Membership Action Plan (MAP) process and participates actively in Partnership for Peace activities. Slovak military and observers take part in various peacekeeping operations, including in Bosnia, Kosovo, and Afghanistan. In addition, Slovakia has sent troops to Iraq and pledged $18 million for the reconstruction effort. The armed forces continued to meet most reform goals, established an academy for non-commissioned officers (NCOs) in the past year, and reduced the overall number of troops and officers.
In FY 2003, the USG provided the Slovak military $8 million in Foreign Military Financing (FMF) funds, $950,000 in International Military Education and Training (IMET) funds, and $500,000 in Enhanced International Peacekeeping Capabilities (EIPC) funds. A $6.5 million supplement was added to these numbers in recognition of Slovakia?s support and assistance in Afghanistan and Iraq. The total amount for FY 2003 was $16.05 million dollars. A large portion of these funds was not spent, due to the freeze placed them as of July 1, in accordance with the American Servicemembers? Protection Act (ASPA). This frozen money, combined with some funds from previous fiscal years, totals $10.5 million. A majority of these funds were released by President Bush in November 2003, and they are again being used to aid the Slovak military.
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, Inc., a U.S. military advisory firm, is an important FMF-funded effort that is advancing military reform progress. Other key FMF projects that will contribute directly to the increased interoperability and compatibility of the Slovak military include tactical radios, night vision equipment, English language training, and a National Military Command Center (NMCC).
Slovakia employs its IMET allocation prudently, sending students to courses at a number of U.S. institutions, including the Army and Air Force War Colleges. Starting in 2003, the Slovak military began to use a large part of its IMET funds to train its developing NCOs corps. Slovakia is already a leading force provider for international peacekeeping operations and utilizes its EIPC assistance funds to improve its capability to field well trained and prepared peacekeepers for both UN and NATO peacekeeping operations. FY 2003 EIPC funds were committed toward establishing and equipping Slovakia's new peacekeeping school in Martin.
During FY 2003, the Export Control and Border Security program provided equipment and numerous training opportunities for Slovak customs officers. The two most effective programs were the four weeks of joint training with Czech officers on the Czech-Slovak border and a similar program on the Slovak-Ukrainian border. The Slovaks are paying particular attention to the eastern border because, as of May 2004, it will be an external border of the EU.
Not unlike the military, police structures in Slovakia are undergoing rapid reform. Interior Minister Palko?s reorganization will improve both investigative procedures and internal communication, which will allow the police to respond more quickly. U.S. assistance provided police training throughout FY 2003. In coordination with ABA/CEELI, a trainer from the University of Louisville conducted workshops on domestic violence and the treatment of victims.
Last year the police force designated a special unit for combating trafficking in persons, and in March, over 100 police officers participated in a raid on a trafficking ring, whose members were later indicted for forcing an estimated 56 women into prostitution. In FY 2003, ABA/CEELI facilitated two workshops and conferences on combating trafficking in persons with American experts. Victim Support Slovakia, using Embassy Democracy Commission funds, created a hotline to assist trafficking victims and provide information about working abroad. In cooperation with the International Organization for Migration, it launched a public education campaign, using advertisements and special modules in school curricula, to alert young women to trafficking risks.
In FY 2004, U.S. assistance in this sector will decline significantly, due to NATO accession and the reformed police structures. However, border management will remain a challenge for Slovakia and a U.S. priority to strengthen controls as part of the war on terrorism.
Humanitarian Assistance
In Slovakia, many members of the Roma community live in isolated settlements on the outskirts of towns and villages. Many of these settlements lack clean water, are overpopulated, and have poor health conditions. Department of Defense humanitarian programs funded the construction of primary schools in several of the worst settlements. In one community, the Roma population was living over an abandoned mine that was sinking and at risk of collapse. The construction of the school enabled a portion of the inhabitants of the settlement to move to a safer location. Excess humanitarian commodities were also donated to newly constructed schools to help them to reach operational status.
COUNTRY PERFORMANCE MEASURES
Economic Policy Reforms and Democratic Freedoms in Slovakia, 1991-2002 
Ratings are based on a 1 to 5 scale, with 5 representing the most advanced.
Sources: EBRD, Transition Report 2003 (November 2003); Freedom House, Freedom in the World 2003 (2003); and (various years).
Economic Structure and Human Development in Slovakia, 1991-2002
The Human Capital Index (HCI) is based on an average rating of four variables, scored on a 1 to 10 scale: per capita income; secondary school enrollment; health, as measured by life expectancy and under-5 mortality; and public policy, as measured by public expenditure on health and education as % GDP. World Bank, World Development Indicators 2003 (2003); and UNICEF, Social Monitor 2003 (2003). Private sector share of GDP is from EBRD, Transition Report Update (May 2003).
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