Fulfilling a promise it made to raise employment levels and bring foreign investment to eastern Slovakia, US Steel - one of the largest foreign investors in the country - has lured Slovak-Luxembourg transport company Kralowetz to Košice.
The American firm says that Kralowetz's 10 million euro investment, which came because of a contract to supply US Steel, is the first fruit of its drive to promote eastern Slovakia as a lucrative FDI (foreign direct investment) destination. The investment will generate 250 new jobs over two years and help alleviate the 26% unemployment rate in the region.
Founded after its acquisition of the VSŽ steel mill in autumn last year, US Steel Košice employs over 15,000 workers and uses some of the most advanced steel-production technologies in central and eastern Europe.
The plant is viewed as the most significant industrial facility in eastern Slovakia, and the company is seen as an attractive contract partner for other foreign investors. US Steel Košice has said that it will begin a Europe-wide promotional tour to bring business to the struggling region.
As well as Kralowetz, the region will soon host American high-pressure container producer Harsco, bringing another 180 new jobs. Again, a supply contract with US Steel was at the heart of Harsco's decision to invest.
According to Peter Sabolčák, Kralowetz's legal representative, the company had already planned to set up its operations in Slovakia, but that the presence of the American firm in the region speeded its arrival.
"As our major customer, US Steel will be crucial for our existence in Slovakia, which is why we set up in eastern Slovakia. We wouldn't find a client like that in any other part of the country," Sabolčák said.
Kralowetz, a domestic and international cargo transport firm which began operations in Košice two months ago, has branch offices across Europe. As well as US Steel, the company plans to provide services to American electronic components producer Molex, which opened a plant in Kechnec, near Košice April 24, and Japanese producer of electronic goods Matsushita, which has been operating in the eastern Slovakia town of Krompachy since autumn last year.
According to corporate sector experts, Kralowetz's investment proves that having one well-known foreign firm in a given region can generate more FDI for the country than can the efforts of the investment agency SARIO.
"Kralowetz is the first company which came to eastern Slovakia directly because of US Steel's presence. [US Steel's] efforts to generate more foreign investment for eastern Slovakia have worked better than any promotion the government's representatives have carried out," said Karol Balog, director of the Phare-funded Agency for Industrial Development and Revitalisation.
"This is what the region and the whole country needs," he added.
Ambitious plan
As the first-ever foreign company in Slovakia to launch an FDI promotional campaign, US Steel plans to organise presentations of eastern Slovakia, and other Slovak regions, in European business centres such as Brussels and Berlin in cooperation with SARIO, beginning in June this year.
US Steel's management say they are committed to the promotion, but admit that they have an ulterior motive. "We want to present Slovakia as a foreign investment success story to get more investors to the region," said Anton Lukáč, US Steel Vice-President for strategic implementations.
"Kralowetz's arrival is exactly the kind of thing we rely on when talking about bringing more investors to the region - reviving it and cutting its high unemployment rate. But while want to help the region, we also want to help ourselves. If our suppliers and customers are close to us, we will profit from it," he added.
The Košice region's jobless rate, the highest in the country and well above the national average of 20%, is almost matched by the other region that forms eastern Slovakia, Prešov, at 24.84%.
Government representatives have welcomed the US giant's plans, saying that it can complement their own efforts, and help cut the soaring unemployment around Košice.
"When we meet with potential foreign investors, we stress that it's worth investing in eastern Slovakia, as there is skilled labour available. We do this because we want them to know about what the region has to offer, and because investors don't consider the needs of a region as their priority, they go where it's best for them," said Alan Sitár, chairman of the board of directors at SARIO.
Analysts say that recent examples of brownfield investments [where a company invests into an existing operation] such as Matsushita's could also have an immediate effect on employment. The Japanese firm bought into a plant belonging to eastern Slovak electronics firm SEZ (Slovenské elektrotechnické závody), creating 1,200 jobs overnight.
"This proves that the impact of foreign investors on the regional unemployment rate can be immediate. FDI is even more important for eastern Slovakia because it is the only cure for the high level of unemployment there," said Marek Jakoby analyst at economic think-tank MESA 10.
For the regional authorities in Košice, the need to create jobs in any way possible is paramount to eastern Slovakia's future. Anton Jurko, head of the regional development section at the Košice regional office, said that any campaign by US Steel would be greeted warmly if it managed to generate new jobs. "Every effort is welcome," he said.
