Office supplies maker Imarco Slovakia, with the backing of Austrian capital, is close to finishing the first part of a potential one billion crown ($20 million) investment into the west Slovak town of Sered'.
As managers at Imarco predicted that the first of a possible seven production halls would begin turning out goods this month, the government was touting the investment as a sign that its incentives packages for investors were proving attractive.
Imarco has agreed that the incentives were key. Jozef Mihál, the firm's legal representative, said that while the decision to build in Sered' over 14 other possible sites in Europe had been influenced by the town's proximity to Austria (Sered' is less than 60 kilometres from Austria), the primary draw had been the tax breaks and other business perks the government offers investors.
"We saw the possibility to take the government's offer of tax breaks as a part of our decision on investing," Mihál told The Slovak Spectator August 6, adding that Sered' had been preferred because, under the state incentives scheme, the town's jobless rate made Imarco eligible for higher tax breaks.
Unemployment in the western Slovak region is already running at around 17%, although the capital, Bratislava, has a jobless rate of only 6%.
"We knew that to qualify for the tax breaks we had to invest in a region where unemployment was more than 15%," said Mihál. "The investment will be good for Sered', raising employment levels not only in the town but also in the surrounding region."
Imarco plans to build seven halls in total for the production of office supplies, all of which will go to Austria. From there the firm SAX, which like Imarco belongs to the Austrian Hans Hromatka group, will export the goods world-wide. Construction will take three to five years, and the investment is expected to create between 300 and 500 jobs.
A local boon
The town has been struggling with high unemployment since the Velvet Revolution in 1989. Local smelter Niklová Huta (Nickel Works), which had been the main source of work for the town and other local communities, was closed when the communist regime fell. More than 1,400 people became unemployed almost overnight. Unemployment in Sered' now matches the regional average of 17%.
Sered' Mayor Vladimír Vranovič explained that the new investment could help rejuvenate the town. "This is going to be really good for Sered'. We had a lot of people laid off when Niklová Huta closed. It was a tragedy for the town," he said.
The investment is also being welcomed by some government figures as not just a boost for regional employment, but also a raiser of corporate standards in the local economy.
"Helping unemployment is the number one reason why such investments are good for a town, but it's not the only reason," said Vladimír Tvaroška, advisor to deputy Prime Minister for the Economy Ivan Mikloš. "What such investments do, especially when they are outside Bratislava, is help change the corporate behaviour among local businesses and enterprises.
"They are a good example for local firms."
Investors knocking at the door
The incentive package which has drawn Imarco's investment to Sered' is to be superseded this fall by a new set of offers for investors, one which has been lauded by the investment community as putting Slovak tax breaks on a par with those offered by other central European countries. Parliament is expected to approve the new package in September, with cabinet having rubber-stamped it last spring.
Included in the package is a new 10-year, 100% tax break for investors sinking more than nine million euros into their projects, or 4.5 million euros in regions with unemployment over 10%. Previously it had been five million euros, or two million euros in regions with unemployment above 15%, to qualify for a five-year, 100% tax break followed by a five-year, 50% tax break.
Such ten-year, 100% tax breaks have been available to investors in the Czech Republic and Poland since the mid 1990s. Both countries' figures for foreign direct investment (FDI) far outstrip Slovakia's - FDI in Hungary and the Czech Republic last year stood at $4,853 and $5,189 per capita respectively, compared to $3,654 per capita in what was a record year for Slovakia.
However, the government and many investment observers are predicting a jump in FDI once the incentives are passed by parliament.
"The investment in Sered is one of the first signs that by this time next year we will have much more investment," said Tvaroška. "Many discussions about investment incentives are going on at the moment, and while we realise the process of [having them passed in parliament] is taking time, it is going forward.
"We expect the incentives to be approved by parliament in September, and from our discussions with investors, we know they are impressed with the new package and are just waiting until it's passed. Then they'll be coming."
Additional reporting by Kristína Havasová
