State support of private investments

Essay by bagoUniversity, Bachelor'sA, May 2006

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Government support of several foreign investments in Slovakia without clear regulations has brought about a social discussion about fairness and profitability of such support. The Slovak republic needs new investments and therefore the government support is one of many economic tools of how they can be created or supported. However, there are certain problems regarding state support of private domestic and international companies, as for example how much should the government invest, which industry, region or company is appropriate, or whether it would be even worth to support private investments with direct cash or tax. Are there any other tools that can be used as an alternative to direct state support of private investments? The purpose of this research paper is to discuss and research all the mentioned questions.

Economic importance of new investments in Slovakia

The economic effect of foreign and domestic investments in the Slovak republic represents important source of economic development and financial and social resources.

From the economic point of view, foreign investments have influence in two stages: primary and secondary stage.

In the primary stage the influence is connected with unemployment rate, GDP, balance of trade payments, bank sector and others. The unemployment rate in Slovakia is positively influenced by the foreign investment. High unemployment rate (16 to 13 % in year 2004, SOSR 2005) represents lot of working power (in the case of Slovakia also educated working power) together with low average salary in industry production (14994, - Sk in year 2004, SOSR 2005) are one of the attracting points for foreign investors. The Balance of trade payments is even more influenced because of our small market and business area. According the forecast of the Slovak national bank, the investments of two big car producers in Slovakia in the last months will finally change...