Supreme Audit Office of the Slovak Republic

Analytical Report, December 2018,

Summary,

This analytical report is the first comprehensive assessment of the benefits of investment aid in the Slovak Republic (SR). Report´s aim is to provide the public with information on investment aid policy in the SR over the last ten years, to evaluate the ex-post benefits of drawn investment aid for regions and to analyze its sectoral aspect.

The first chapter of the analytical report provides basic information about investment aid policy in terms of strategic documents, legislation and the main actors in investment aid; the second one talks about specific indicators of approved and drawn investment aid in the SR. The aim of the third chapter is to analyze the impact of drawn investment aid on regional indicators and to compare the system of investment aid in the SR with the aid investment policy in the Czech Republic (CR). The result of the analytical report is the fourth chapter, which formulates conclusions and recommends topics for audit activities.

The analytical report is based on data of approved and drawn investment aid for ten years, the period of 2008 - 2017, in which 106 investment plans were approved for 100 recipients of investment aid valued at EUR 658.4 mil and 21 874 new jobs were supposed to be created in Slovakia. Most investment aid went to the Trnava and Košice regions, approved investment aid for western Slovakia and the Bratislava region represented up to 44.5% of the total volume in the SR. As much as 94% of the approved investment aid went to the area of ??industrial production. In their investment plans, investors preferred investment aid in the form of tax relief. There was the dominance of the sector Manufacture of motor vehicles, semi-trailers and trailers, where 24 investment plans were approved for EUR 182.7 mil (27.8% of the total approved investment aid) in the industrial production. On the contrary, in the Scientific Research and Development sector, only 2 investment plans for EUR 1.5 mil were approved (0.2% of the total approved investment aid).

The evaluation of investment aid impact in the regions shows that it is not possible to prove the impact of the amount of drawn investment aid per 1 inhabitant of the SR for 2008 - 2017 and it is not possible to make a conclusion that it reduced regional disparities. The paradox is that, in terms of the amount of regional GDP per capita in PPS (purchasing power standards), the two relatively least developed regions (Banská Bystrica and Prešov) drew the least investment aid per capita. These regions did not reach the level of the SR in the approved investment aid, which indicates weak investment activity in these regions.

In the CR, much more has been approved from the State budget for investment aid. In 2008 – 2017 period, the volume of approved investment aid was 6.4 times higher (EUR 4 191.7 mil in CR, EUR 658.4 mil in SR). The share of investment aid in GDP was almost 2.9 times higher (0.26% in CR, 0.09% in SR), investment aid per capita 3.2 times higher (EUR 39.93 in CR, EUR 12.16 in SR) and investment aid per newly created job 1.7 times higher (EUR 49,675 in CR, EUR 30,098 in SR). In both countries the area of industrial production had more than 90% representation (98% in CR, 94% in SR). The sectoral focus of investment aid was very similar in both countries, with a significant predominance of Motor Vehicle Production (38.05% in CR, 27.8% in SR).

In the strategic document Strategy of the Economic Policy of the Slovak Republic until 2030, in the business environment SWOT analysis is stated that investment aid distorts the natural competitive environment by favoring recipients over their natural competitors, mostly investors included in the category of large companies (93 recipients of investment aid with approved 96.2% of the total approved aid and who drew 95.4% of the total drawn aid).

This analytical report points out that it would be worthwhile consider to re-evaluate the investment aid policy focusing on small and medium-sized enterprises support with emphasis on the least developed districts and it would bring the desired greater diversity in the size structure of companies and the representation of industries in the SR and at the same time naturally will contribute to regional disparities reduction.

The full text of the analysis about this issue in Slovak language is available here.