Chapter 5: Slovakia
(continued)
Following the break-up of Czechoslovakia, the environment has moved down the list of governmental priorities due to pressing economic problems. However, environmental legislation, based on that of the former Czecho-Slovak Federation, is in place, and new environmental policy and regulations have been adopted. Economic transition has had a largely negative impact on the environment, reducing its political importance and lowering the budget.
Slovakia is rich in natural resources, with large national parks and conservation areas. However, extensive damage has been caused by mismanaged forests, intensive tourism, and waste and air emissions from the energy sector (including nuclear energy). Air pollution is the most serious environmental problem in Slovakia, especially with respect to SO2, toxic substances and heavy metals, particulates, and carbon dioxide emissions. There are also major problems with water quality, waste management, and agricultural and forestry practices. Environmental pollution is particularly severe in industrialized areas where chemical, petrochemical, metallurgical, steel, cement, paper, and aluminum enterprises are located.
Major environmental initiatives in the future will include better enforcement of regulations, institutional improvements, environmental training and awareness raising, introduction of clean technologies, and priority capital investments in air emission controls, and the management of waste and treatment of wastewater.
| TABLE 5.2: NATIONAL ENVIRONMENTAL PROTECTION EXPENDITURES, 1992-1995 (MLN USD) | ||||
|---|---|---|---|---|
| Area | 1992 | 1993 | 1994 | 1995 |
| Water protection | 117 | 115 | 114 | 99 |
| Air protection | 115 | 120 | 87 | 101 |
| Waste use and disposal | 23 | 40 | 29 | 31 |
| Agricultural recultivation | 0.2 | 0.3 | 0.9 | 1 |
| Limitation of physical factors | 1.3 | 9 | 3.8 | n.a. |
| Total | 256.5 | 284.3 | 234.7 | 232 |
| Share of GNP (%) | n.a. | 0.94 | 0.8 | n.a. |
| Source: Statistical Office of the SR, Bratislava '96 "Environment in the SR (Selected indicators in 1990-1995)" | ||||
As shown in Table 5.2, the level of environmental spending has declined slightly over the last three years. During the 1992-1995 period, water protection accounted for some 44 percent of total environmental spending, followed by air protection, amounting to 43 percent of the total. Expenditures on waste management totaled 12 percent of overall expenditures.
The main sources of financing for environmental projects in Slovakia include the state budget (mainly Ministry of Environment, Ministry of Agriculture, and Ministry of Economy), the State Environmental Fund, individual enterprises' resources, foreign assistance programs (e.g. PHARE, US AID, the World Bank, EBRD) and bilateral cooperative projects. The draft National Industrial Policy prepared by the Ministry of Economy estimates that, by the year 2000, the national budget will cover only 10 percent of environmental expenditures, while bank sources, foreign investments, and resources of individual enterprises and municipalities will cover approximately 30 percent each.
Table 5.3 presents the breakdown of environmental investments from the national budget for the period 1993-1994.
| TABLE 5.3: STRUCTURE OF ENVIRONMENTAL INVESTMENTS FROM THE NATIONAL BUDGET, 1993-1994 (MLN USD) | ||
|---|---|---|
| Sector | Expenditures (mln USD) | |
| 1993 | 1994 | |
| Public water supply | 17.1 | 9.4 |
| Wastewater treatment and sewage facilities | 51.7 | 14.1 |
| Other water management activity | 0.2 | 20.8 |
| Air pollution control | 12.0 | 21.2 |
| Waste management | 3.0 | 8.6 |
| Other | n.d. | 4.8 |
| Total | 84.0 | 78.9 |
| Source: "The Environment in SR", MOE SR, Bratislava, 1995 | ||
As can be seen, the bulk of environmental financing from the national budget was allocated to the construction of wastewater treatment and sewage facilities, and to public water supply projects (70 percent of the 1993-94 total), followed by air protection (20 percent), and waste management (7 percent). The low percentage in the latter two categories can be explained by the fact that air pollution control investments are largely financed by industrial enterprises (the major sources of air pollution) while waste management has been decentralized, and municipalities have become primarily responsible for financing in this field.
Another source of financing for environmental projects and investments is various state funds. The State Environmental Fund is by far the most important in this respect, followed by the State Fund for Soil Protection, the State Forestry Fund, and the State Water Management Fund. In 1995, the State Environment Fund supported 962 projects, with a total value of about USD 34 million. While official statistics for 1996 are still not available, projects with an estimated value of USD 42.8 million were supported by the Fund during that year.
Table 5.4 presents the breakdown of revenues of the State Environmental Fund for the period 1992-1995.
| TABLE 5.4: REVENUES OF THE STATE ENVIRONMENTAL FUND 1992-1995 (MLN USD) | ||||
|---|---|---|---|---|
| Source | 1992 | 1993 | 1994 | 1995 |
| Collections for discharging wastewater | 13.5 | 9.8 | 7.4 | 6.9 |
| Collections for ground water withdrawal | 1.8 | 0.7 | 0.6 | 0.6 |
| Penalties in the field of water management | 0.5 | 0.4 | 0.4 | 0.3 |
| Taxes for air pollution | 3.2 | 7.9 | 12.0 | 12.9 |
| Penalties in the field of air protection | 0.5 | 0.3 | 0.3 | 0.1 |
| Taxes for waste landfills | 0.1 | 0.6 | 1.8 | 4.9 |
| Penalties in the field of waste | 0.01 | 0.2 | 0.6 | 0.6 |
| Penalties in the field of nature protection | 0.02 | 0.02 | 0.01 | 0.04 |
| Taxes for EIA examination | - | - | - | 0.01 |
| Interest on funds and loans | 0.3 | 0.5 | 0.5 | 0.5 |
| State fee | 30.9 | 12.0 | 9.0 | 8.3 |
| Donations and other subsidies | 4.6 | - | - | 0.02 |
| Other sources | 0.6 | 0.1 | 0.01 | 0.03 |
| Total Revenues | 52.7 | 32.6 | 32.6 | 35.3 |
| Source: Slovak Statistical Office, "Environment in the Slovak Republic - Selected Indicators in the Years 1990-1995," Bratislava 1996 | ||||
During 1993-1995, the Fund's revenues were relatively stableat between USD 32 and 35 million per year. The major sources of revenue included state fees, and collections for wastewater discharge and air pollution. A decline in revenues from collections for wastewater discharge, groundwater withdrawal, and the state fee is notable. Increasing revenue is collected from air pollution taxes, and taxes for waste landfills. Interestingly, the share of penalties is marginal, which suggests that enforcement of regulations is poor.
It is necessary to note that the charges listed in Table 5.4 constitute only a part of environmental expenses in industry. Significant amounts are paid additionally as a direct expense for processing industrial waste, wastewater discharges, etc.
Table 5.5 presents the breakdown of expenditures from the State Environmental Fund for the period between 1992 and 1995.
| TABLE 5.5: EXPENDITURES OF THE STATE ENVIRONMENTAL FUND 1992-1995 (MLN USD) | ||||
|---|---|---|---|---|
| Expenditure | 1992 | 1993 | 1994 | 1995 |
| Water supply systems | 10.9 | 4.4 | 5.1 | 6.7 |
| Wastewater treatment plants and sewerage | 26.4 | 10.8 | 9.9 | 9.1 |
| Other activities in water management | - | 0.5 | 0.1 | 0.3 |
| Air protection | 5.2 | 12.0 | 8.2 | 9.2 |
| Wildlife protection | 0.02 | 0.2 | 0.3 | 0.3 |
| Waste management | 1.1 | 2.3 | 3.7 | 3.3 |
| Research and development | - | 0.2 | 0.7 | 0.4 |
| Other | - | 0.3 | 1.8 | 4.6 |
| Total Funds Used | 43.6 | 30.8 | 29.9 | 34.1 |
| Source: Slovak Statistical Office, "Environment in the Slovak Republic - Selected Indicators in theYears 1990-1995," Bratislava 1996 | ||||
During this period, expenditures on wastewater treatment plants and sewerage accounted for 41 percent of the total, followed by air protection (25 percent), water supply systems (20 percent), and waste management activities (8 percent). Support from the Fund has declined for wastewater treatment and sewerage, and air pollution, while it has increased for water supply systems and waste management.
Foreign assistance programs make up another, albeit minor, source of financing for environmental investments. An estimated USD 6 million in foreign aid was available in 1993, or approximately 3 percent of the total environmental expenditure. The main source of foreign financing is the PHARE Program. Until 1993, thirteen environmental projects were implemented with a total value of ECU 13.6 million (approx. USD 16 million) Interestingly, significant PHARE support was made available for developing the Revolving Environmental Investment Fund, which will provide long-term credits with a low interest rate for the development of the environmental infrastructure and other projects. The Revolving Fund is expected to replace the State Environmental Fund in the future.
The Global Environment Facility (GEF) Fund was created to assist in the implementation of strategic environmental goals, and GEF grants are available for environmental projects. The Slovak Republic has received a grant for the conservation of biodiversity totaling USD 2.3 million. Part of this amount has been made available to private enterprises.
According to the Strategy, Principles and Priorities of the State Governmental Environmental Policy prepared by the Ministry of Environment in 1993: "...the accumulation of environmental problems has increased so-called environmental liability, which, in line with currently applicable legislation for remediation is estimated at SK 100-130 billion (approx. USD 4.3 billion) in industry alone. This comprises absolute environmental liabilities (so-called "old stress") including old landfills, polluted water sources, damaged forests, contaminated soil and the like, and relative environmental liabilities, the latter including expenditures for replacing environmentally harmful methods of manufacturing with environmentally safe ones (e.g. elimination of pollution sources) and the construction of facilities (wastewater treatment plants, separators, filters, managed landfills, etc.) to reduce or eliminate the further release of undesirable, noxious substances into the environment. These liabilities themselves shall result in increased health care expenditures, losses resulting from high sickness rates, reduced durability of materials, erosion and contamination and the consequences of changes in the gene pool and disruption of stable ecosystems in the landscape."
With the current estimate of absolute environmental liability at SK 150 billion (approx. USD 5 billion), and relative environmental liability estimated at SK 72 billion (approx. USD 2.4 billion), total environmental liability in Slovakia amounts to approximately SK 220 billion, or USD 7.4 billion.
To give at least some indication of the size of the environmental technology market in Slovakia, one can assume that about 75 percent of environmental expenditures are allocated for environmental technologies (see Section 3.1 in the Hungarian chapter for comparison). Therefore, in 1995, the environmental technology market in Slovakia can be estimated to be worth about USD 174 million. However, the significance of the figure should not be overestimated.
Environmental products and services are a rapidly developing sector of the economy in Slovakia. Table 5.6 presents the growth in the number of environmental product and service providers since 1989.
| TABLE 5.6: GROWTH OF ENVIRONMENTAL PRODUCT AND SERVICE PROVIDERS | ||||||||
|---|---|---|---|---|---|---|---|---|
| Year | 1989 | 1990 | 1991 | 1992 | 1993 | 1994 | 1995 | 1996 |
| Number of Businesses | 40 | 100 | 160 | 240 | 350 | 450 | 690 | 1250* |
| Source: Internal materials of PB Consulting. * includes qualified (certified) individuals, companies, departments of universities, and R&D institutes |
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Since the socio-economic changes of the early '90s, and the related economic recession, many Slovak firms collapsed or lost their markets in the former eastern bloc countries. The industrial framework, built up over the years, has collapsed, and many qualified engineers and scientists have become unemployed.
Nonetheless, as shown in Table 5.6, after the initial adjustment period, business activity in the environmental market has increased significantly. The annual growth in the number of environmental companies since the early nineties averages some 50 percent. Some firms have been created through the entrepreneurial skills of individuals, others resulted from the fragmentation of larger enterprises and privatization, while many manufacturing companies completely changed their names and orientation. The competitiveness of Slovak companies is increasing, although it is largely based on lower price levels and the good knowledge of the domestic market and conditions.
It should also be noted that the growth in the number of companies has occurred during the period of flat environmental expenditures (see Table 5.2).
| TABLE 5.7: PRIORITIES OF THE STATE ENVIRONMENTAL POLICY | |
|---|---|
| I | Air protection against pollutants; improving global environmental security |
| II | Providing a sufficient amount of drinking water, and decreasing the pollution of water resources to acceptable levels |
| III | Soil conservation and protection against degradation, and securing the purity of foodstuffs and other products |
| IV | Proper disposal or utilization of waste, and minimization of waste generation |
| V | Preservation of biodiversity, conservation and rational use of natural resources, and optimization of land use. |
| Source: "The Strategy, Principles and Priorities of the State Environmental Policy", Ministry of Environment, Bratislava 1993 | |
The Slovak Policy also specifies a set of guiding principles for its implementation. The rules are presented in Table 5.8.
| TABLE 5.8: GUIDING PRINCIPLES FOR STATE ENVIRONMENTAL POLICY | |
|---|---|
| 1. | Preference to preventive measures instead of the end-of-pipe approach. |
| 2. | Application of the state environmental policy to all branches of industry. |
| 3. | Understanding the solution to environmental problems as the solution to the problems of society. |
| 4. | Recognition of the responsibility of todayŐs society for the environment of future generations. |
| 5. | Approaching environmental problems in a comprehensive way, with systematic elimination of the synergystic effect of pollutants already introduced into the environment and those currently being discharged. |
| 6. | Paying for expenses related to the removal of pollution or the remediation of the damage of the environment by those who pollute or damage it ("polluter pays principle"). |
| 7. | Evaluation of the influence and impact of environmental degradation on the populationŐs health, various sectors of the environment, living organisms, natural and cultural heritage. Study on the gradual exhaustion of non-renewable resources, and the rational use of renewable natural resources. |
| 8. | Improving the state of the environment as one of the basic steps in reversing the adverse trend in the health of the population. |
| 9. | Recognizing that forests are the main environmentally stabilizing factor in the landscape, and that soil is a crucial element for the maintenance of the biodiversity of the environment, nutrition, and the existence of life. |
| 10. | Showing respect for life in all its forms and for all natural and cultural values. |
| Source: "The Strategy, Principles and Priorities of the State Environmental Policy", Ministry of Environment, Bratislava 1993 | |
Policy guidelines referring to the preference for preventive measures instead of the end-of-pipe approach, the application of the State Environmental Policy to all branches of industry, and the "polluter pays principle" have a strong bearing on the environmental technology market.
The NEAP includes 1,356 approved measures (projects of various nature) to be implemented by the year 2010. Among those, 1236 measures (91 percent of the total number) require expenditures not exceeding SK 100 million (approx. USD 3.2 million). The key areas include:
Some of the measures are to be implemented by 1998, others by the year 2000 or 2005. An update and revision of the activities is planned for the year 2000.
The activities set out in the National Environmental Action Plan are divided into ten sectors. Table 5.9 presents the sectors and the estimates for required funding. More details regarding the sectors relevant to this survey are presented in Section 5.4 on project opportunities.
| TABLE 5.9: NATIONAL ENVIRONMENTAL ACTION PLAN - STRUCTURE AND ESTIMATED INVESTMENTS | |||
|---|---|---|---|
| Sector | Focus | Mln USD | % of Total |
| Sector A | Air and ozone layer protection | 1,410.7 | 41% |
| Sector B | Protection and rational use of water | 678.5 | 20% |
| Sector C | Waste management | 265.6 | 8% |
| Sector D | Risk factors and nuclear safety | 67.7 | 2% |
| Sector E | Nature conservation, landscape protection and use | 399.3 | 12% |
| Sector F | Protection and rational use of geological and other natural resources, soil and forests | 585.2 | 17% |
| Sector G | Economy of the environment | 1.3 | <1% |
| Sector H | Environmental informatics and monitoring | 0.5 | <1% |
| Sector E | Environmental education and promotion | 1.2 | <1% |
| Sector J | Organization and management of environmental protection | n.a. | n.a. |
| Total | 3,410.3 | 100% | |
| Source: "The National Environmental Action Plan", Ministry of Environment, Bratislava 1996 Note: The total funding requirement includes funding for measures that are already under way. |
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As shown in Table 5.9, the National Environmental Action Plan identifies several key priority areas. Of the total of USD 3.4 billion required for the implementation of the Plan, measures related to air and ozone layer protection account for 41 percent of the required financing, followed by projects focusing on the protection of water resources, and promotion of rational use of water (20 percent), protection and rational use of natural resources, soil and forests (17 percent), nature conservation and landscape protection (12 percent), and waste management (8 percent).
As regards the source of financing, the NEAP envisages that 44.3 percent will be covered by individual companies, 42.5 percent by the national budget (various Ministries), and 13.2 percent by municipalities. This does not rule out the use of funding from the State Environmental Fund for individual projects.
The Fund's support is available in the form of subsidies, grants, loans, and supplementary funding for the payment of interest. Applicants can request support for investment and non-investment projects related to the protection of the environment. Out of 22 applicable areas, grouped in nine categories (as of 1995), those specifically related to environmental technologies include the following:
The key conditions for the provision and use of the resources of the Fund are specified by Regulation No. 176/1992 Zb. The specific requirements, harmonized with State Environmental Policy, are periodically updated and published by the administrator of the Fund.
In principle, the applicant submits a request for support to the relevant District Office of the Environment. The application must contain all information and appendices specified by Regulation 176/1992. The District Office rates the applications according to the priorities and needs of their regional environmental policy, and forwards them to the State Environmental Fund (twice a year, by June 30 and Dec. 31). The Fund forwards the applications to the Ministry of Environment (i.e. the Fund's Council), which is responsible for evaluating the applications according to the priorities of the State Environmental Policy. Based on the recommendation of the Fund's Council, the Minister of Environment approves or rejects the application, or postpones the decision until any outstanding issues are clarified.
In theory, it is possible to obtain financing for up to 100 percent of the total project cost, but in practice, the Fund covers only a part of the cost, with the remainder paid for by the investor (e.g. municipality, industrial plant). The share of the Fund contribution to the total project cost varies depending on the type of the project and the applicant.
Tax exemptions apply to the income generated in the first five years of facility operation (based on Law 347/1990 Zb).
Additionally, the local tax administration (i.e. municipality where the stationary installation is located) can, depending on local conditions, provide tax incentives for new facilities which:
Finally, according to Regulation No. 261/1993 Zb. and related directives issued by the Ministry of Finance, foreign investors in the area of environmental technologies can be exempt from import duties and VAT. The non-financial contribution of a foreign person for a production activity based in Slovakia (on behalf of a Slovak legal person) is free from import duties on environmental technology products if:
