ONLY a few days after Hankook Tire announced that it would build a new tyre facility in Slovakia, concerns emerged over whether the state could keep the promises it made.
In return for investing Sk20 billion (€510 million) in a factory near Nitra, the Korean tyre manufacturer made several requests. Among them, Hankook asked the Slovak government to build a speedway between Nitra and Hronský Beňadik by 2009, and a four-lane road between Levice and Hronský Beňadik by 2010.
Economy Minister Pavol Rusko told the press that this condition was acceptable to Slovakia. However, after publicizing the state's promises regarding roads, there was some confusion at the Transportation Ministry as to whether the promises were realistic.
On May 7, the Transportation Ministry said that completing a four-lane speedway to Levice was "a new one" for the department.
Ministry spokesperson Tomáš Šarluška said that while the ministry agreed to build a speedway between Nitra and Hronský Beňadik, it had only planned to upgrade the road between Hronský Beňadik and Levice.
A four-lane road cannot be classified as a highway without crash barriers and a suitably wide shoulder.
The daily SME published parts of a letter written by Transportation Minister Pavol Prokopovič to his colleague Rusko, in which he clearly stated that his department would be able to secure the necessary works on the road between Hronský Beňadik and Levice, "including the completion of four-lanes and a bypass to improve the logistic qualities of the road by 2009."
On May 12, Šarluška told The Slovak Spectator, "Apart from a Nitra bypass, we originally planned to build a speedway, not a highway, and we planned to complete it by 2012. We said it was possible to build it more quickly with EU structural funds, which would speed up the [construction] process by three years."
Rusko said that he discussed the possibility of building a four-lane road between Levice and Hronský Beňadik with Prime Minister Mikuláš Dzurinda. Now the Transport Ministry is saying that construction of the four lanes depends on sufficient financial resources.
"We have said that we would be able to build the four-lane road only if there were available finances, which means Sk2.5 to 3.5 billion (€63 million to €88 million). We know that Rusko held talks with the Finance Ministry. We do not care where they get the money, we just need it to secure the road. If the money is not found, it will be impossible to complete the road," Šarluška told The Slovak Spectator.
According to Rusko, the Finance Ministry has agreed to gradually release Sk3.2 billion (€8 million) to complete the speedway by 2008. The Finance Ministry confirmed talking with Rusko but said that the amount of money was not known yet.
The Transportation Ministry claims that the media is inflating the problem since an official agreement has not been made with Hankook and no deal has been signed.
The road from Hronský Beňadik to Levice would, in fact, plug Hankook into the European highway network through the Hronský Beňadik-Nitra speedway.
Stimuli package raises competition's ire
Hankook Tire selected Slovakia as the site of its future investment over Hungary and Poland.
While the Hankook investment is expected to support the local economy and create jobs, the Korean tyre maker asked the Slovak government to extend an investment stimuli package worth 21 percent of its justified investment costs, which would come to around Sk4 billion (€100 million) in incentives.
The stimuli package includes tax allowances and a direct cash grant. Under EU regulations, however, an investment stimuli package should not exceed 15 percent.
Hankook, which is among the ten biggest producers of tyres worldwide, will compete with Slovak producers Matador Púchov (tyres for cars) and Continental Matador (tyres for trucks).
Klub 500, representing Slovak businesses with more than 500 employees, says that the state stimuli package is unfair towards Matador Púchov, located in the Trenčín region.
Though Matador Púchov originally said it would consider cooperating with Hankook, now the Slovak tyre maker is complaining. "Such a high amount of financial relief for Hankook is inappropriate and could have negative effects on employment at our plant," company spokesman Dušan Koblišek said.
According to Koblišek, Matador Púchov controls 30 to 40 percent of sales on the Slovak tyre market. The company has invested around Sk3 billion (€75 million) in company's development over the last few years.
"Thanks to the Korean investment [Hankook], which is expected to create 1,600 jobs, 3,000 Matador workers are afraid of losing of theirs," Klub 500 President Tibor Gregor told the news wire TASR.
Klub 500 wants to see the system of distribution for investment stimuli modified. In effect, if a foreign investor establishes itself in a sector in which Slovakia has a strong domestic producer, the relief should also be extended in commensurate volume to domestic investors as well, said Klub 500.
Economy Minister Pavol Rusko argues that it is better for Hankook to be in Slovakia rather than Poland or in Hungary, and that Hankook would toughen the competition for the Slovak company Matador in any Central European location.
Hankook is the second significant foreign investment that Poland has lost to Slovakia. The first was when Korean carmaker KIA Motors decided to build a manufacturing plant near Žilina.
Hankook Tire joins an automobile industry in Slovakia that includes PSA Peugeot Citroen, KIA Motors, Volkswagen and Getrag Ford. Slovakia has become an industry superpower in terms of produced cars per capita as well as the concentration of other car industry-related manufacturers.
Local officials expect the investment to boost employment and lower the jobless rate in the district.
Ladislav Kollár, head of the Office of Labour, Social Affairs and the Family in Levice, told the news wire TASR that the Hankook investment alone could push down joblessness from the current 16.2 percent to 14.4 percent.
The plant is expected to provide jobs to low-skilled workers, which is a good match for Levice, according to Kollár.
Analysts assume the Hankook plant will attract subcontractors, resulting in the additional creation of jobs.
With this investment, Hankook becomes the third biggest greenfield investor in Slovakia after PSA Peugeot Citroen and KIA Motors.
Hankook is expected to start construction in Levice in the first quarter of next year. Production should start in 2008.
