Foreign investment up in 2016

The cabinet and SARIO state agency are claiming the credit, but analysts are of different opinion citing general economic growth, still relatively cheap labour and good geographic location.

Beginning in July, the Spanish company Gestamp announced it would like to invest about €100 million near the city of Nitra, while also employing 400 new people. The firm will be a supplier to the British carmaker Jaguar Land Rover, which announced last year it will build a plant there. The Spanish investment is just one of many announced in the first half of 2016.

 Hundreds of millions

The state Slovak Agency for Development of Investments and Trade (SARIO), together with Economy Ministry reported a very successful first half of this year. They agree that the volume of new investment projects in Slovakia grew almost in 190 percent year-on-year. In the first six months of this year, companies announced investments worth half a billion euros. However, these are not only new firms but also those who decided to expand.

“In the first half of 2016, SARIO agency managed to assist in 19 successful investment projects which means an increase in 36 percent against last year,” the agency wrote for the Sme daily. Implementing these projects will bring more than 2,000 direct new jobs and thousands more indirectly, SARIO claims.

They should emerge in regions where the unemployment rate is higher, meaning in the Prešov, Košice and Banská Bystrica regions, while the new jobs will be created in several sectors including the automotive industry, service centers, engineering or chemical industry, according to SARIO.

“This is the result of good work of the ministry and the SARIO agency, and also a challenge to bring crucial investments also to regions with higher unemployment,” Economy Minister Peter Žiga said.

Analysts: Economic boom

However, analysts see the situation slightly differently. Rastislav Machunka of the Association of Employers’ Unions and Associations sees behind the increase in investments global economic recovery and growth of companies.

The economic boom in the whole Europe is also the argument of analyst of the Finlord company, Boris Tomčiak. According to him, companies are expanding production and are looking for localities where they could build their production facilities.

Slovakia has still a relatively cheap labour, politics is quite stable and, moreover, the country has a good geographical location, Tomčiak adds.

“Our economy is small so it is enough if only several western-European managers decide to give us a chance, and we see a distinctive growth of investments,” Tomčiak said.

This is one of the reasons why Slovakia is still able to compete with neighbouring countries. Apart from relatively cheap labour, analyst of the Capital Markets company, Ján Jursa, speaks about good infrastructure.

 Neighbours growing too

The countries which border Slovakia need to be added to the context of increased investments in the country. The interest of foreign investors in Slovakia corresponds, according to the partner of Redbaenk company, Michal Mišun, with their interest in the whole central-European region as producers seeking an alternative in Europe because of growing wages in China.

“Countries like the Czech Republic, Hungary, Poland and Slovakia are easily accessible as for transport, and close to western-European markets with a very interesting level of salaries compared to the western Europe,” Mišun added for Sme.

Despite the fact that the number of investments is growing now, an opposite trend can occur in the future. As the unemployment rate is being reduced, the firms will have ever bigger problems finding good-quality workers.

Mišun says that already now workers are imported to the Czech Republic from Ukraine,Romania and Bulgaria. Slovakia can have a similar problem: for example, carmakers are already saying they cannot find enough quality people. Volkswagen and Peugeot alone are searching for hundreds of them.

However, the carmakers are not the only ones. In spring, the consultancy company PwC pointed out in its survey that also suppliers perceive the lack of people on the labour market. It implies that most of the 75 companies want to hire at least 10 new people, and 20 percent want to hire at least 100.

Strange investments

While mentioning the influx of foreign investments to Slovakia, one should not forget those which government announced shortly before election that amounted to nothing in the end. The company Midia Agro had big plans in Slovakia: it wanted to invest more than €97 million and process more than one-third of the annual production of milk from all over the country.

It also planned to directly employ 325 people in Slovakia; it calculated that 1,300 more will find a job with the primary milk producers. State approved a stimulus amounting to €18.5 million, of which €16.5 shall be a subsidy for the purchase of machinery and equipment and €2 million as tax holiday.

The cabinet also approved a stimulus for the RKN Global. However, this investment turned out to nothing after the election, too. Only a few weeks after the general election in March, the company scrapped its investment plan in Banská Bystrica.