the services sector. In 1998, the proportion of contributions to GDP from services, industry, and agriculture were 62 percent, 33 percent, and 5 percent, respectively. This change has not merely resulted from the 1993 separation of Czechoslovakia, since the Czech Republic has been experiencing similar dramatic shifts. Rather, it is a side effect of the transformation from the central planning of the communist system to a market-based system. The communist system created several large monopoly industries in specific sectors, such as pharmaceuticals and machine production. Once privatized, only some of these industries have been competitive in a free-market environment. While the service sector was given a low priority under the communist system, the free-market environment has demonstrated a strong demand for growth in this sector.
GDP showed generally continuous growth during the 1st decade of the transition. However, some irregularities in the privatization process were among the factors that prevented Slovakia from attaining levels of foreign direct investment (FDI) comparable to that of its neighbors. A restructuring of the government and economic policies in 1998 has brought renewed investor interest in Slovakia. The most famous Slovak industry to survive the transition process is the VSŽ Steel company in Košice, now a partnership with U.S. Steel. Volkswagen also set up operations in Slovakia in the late 1990s.
Under the communist system in Czechoslovakia, Slovakia produced 80 percent of the state's armaments, many of which were exported to eastern-bloc allies. With the end of the Cold War, these factories were shut down. This sector had at one time contributed 5 percent of total industrial production and 12 percent of exports, employing 80,000 people. The closing of the factories was highly unpopular in Slovakia, and played a contributing role to the eventual breakup of the Czechoslovak state. Some Slovak arms production has now been resumed.
The sectors that are projected to have particular growth potential are pharmaceuticals, infrastructure, information technology, equipment and equipment services, business services, and tourism.