Fdi Spillovers in Slovakia - Focus on the Automobile Industry
1. Introduction
Slovakia has outgrown the image of “no-name” countries. It is no longer known as a chunk of former Czechoslovakia but the biggest world car producer per capita by 2008.
It’s growth rate in the third quarter of 2007 is a record 9,4% without overheating the economy (domestic and foreign demand growth are balanced). Net export growth rate is 5,5% dominated by the car industry with more than 30% share. Is this growth rate sustainable on the long run? What is the role of the car industry in this “economic miracle” besides accounting for more than 25% of the country’s industrial output? Would Slovakia make a good example of FDI efficiency that contributes to the country’s further development?
These are the questions I am willing to find answers for in this research paper. I begin with an overview of economic conditions and other prerequisites that determined FDI coming to the car industry in Slovakia. I will introduce the three major players. Based on the theoretical background I would then demonstrate with graphs and data collected from domestic and foreign sources how these spillovers are presented in reality. I will finish with the conclusions and risk evaluation.
My attempt is to prove the existence of spillover effects based on an industry–level study and define which of the above mentioned spillover types to what measures took place in the Slovak automotive industry. Particularly, I will focus on the gains from FDI through vertical linkages, as they are more common than spillover effects within the same sector.
1. Sluggish start, big finish?
2.1.The eighties
After gaining independence from the USSR Slovakia had to face the transformation process alone hence a political decision was made on the separation of Czechoslovakia since January 1st 1993. It became clear that industrial restructuring was not possible without FDI. However the existing political conditions slowed down the process, so Slovakia was through the nineties just
Slovakia has outgrown the image of “no-name” countries. It is no longer known as a chunk of former Czechoslovakia but the biggest world car producer per capita by 2008.
It’s growth rate in the third quarter of 2007 is a record 9,4% without overheating the economy (domestic and foreign demand growth are balanced). Net export growth rate is 5,5% dominated by the car industry with more than 30% share. Is this growth rate sustainable on the long run? What is the role of the car industry in this “economic miracle” besides accounting for more than 25% of the country’s industrial output? Would Slovakia make a good example of FDI efficiency that contributes to the country’s further development?
These are the questions I am willing to find answers for in this research paper. I begin with an overview of economic conditions and other prerequisites that determined FDI coming to the car industry in Slovakia. I will introduce the three major players. Based on the theoretical background I would then demonstrate with graphs and data collected from domestic and foreign sources how these spillovers are presented in reality. I will finish with the conclusions and risk evaluation.
My attempt is to prove the existence of spillover effects based on an industry–level study and define which of the above mentioned spillover types to what measures took place in the Slovak automotive industry. Particularly, I will focus on the gains from FDI through vertical linkages, as they are more common than spillover effects within the same sector.
1. Sluggish start, big finish?
2.1.The eighties
After gaining independence from the USSR Slovakia had to face the transformation process alone hence a political decision was made on the separation of Czechoslovakia since January 1st 1993. It became clear that industrial restructuring was not possible without FDI. However the existing political conditions slowed down the process, so Slovakia was through the nineties just
References: Bellas, Carl J., Jermakowicz, Walter W., (1997), Foreign Direct Investment in Central and Eastern Europe: 1988–1993, International Journal of Commerce and Management, 7 (2) , p. 33 – 55, MCB UP Ltd Blomström, M Ferencikova S., Fifekova M.,FDI Spillovers in Slovakia: Trends from the Last Decade and Recent Evidence from Automotive Industry, Bratislava : Slovak Akademic Press, In: Ekonomickây écasopis, 54 (2006) (7) , p Hunya, G., (2004). Manufacturing FDI in the new EU member states, Wiener Institut für international Wirtschaftsvergleiche: WIIW research reports Jakubiak M., Kolesar B Washington, DC Nemcová, E., Analýza vývoja automobilového priemyslu na Slovensku, Ekonomický časopis, 53 (2005) (10) , p Oblozinsky, M., (2005), Analyze des Investitionsklimas in Osteuropa am Beispiel der Slowakei, Wien, Wirtschaftsuniversität., Diploma-Arbeit. Rodisevic. S., Roserik A. (2005): Foreign direct investment and restructuring in the automotive industry in central and eastern Europe, Centre for the Study of Economic and Social Change in Europe, University College London Tripak M Associatations and institutions: Ernst&Young :The Central and Eastern European Automotive Market, 2007, http://www.ey.com/Global/assets.nsf/International/Industry_Automotive_CEE_November2007/$file/CEE_November2007.pdf Stojaspal, J. : When A Factory Stalls , Time Magazine, Sep. 12, 2004, www.time.com/time/magazine/article/0,9171,695817,00.html Databases: