Please come back. Deputy Prime Minister for Economy Ivan Mikloš is trying to patch over a botched negotiation with French auto parts firm Plastic Omnium, potentially the fourth biggest investment in Slovak history.photo: Tom Nicholson
The government is working hard to fend off the threat of an investment fiasco with French firm Plastic Omnium after the auto parts producer threatened to take what would be the fourth biggest investment in the history of Slovakia to Hungary.
On April 20 Plastic Omnium, at a meeting with Deputy Prime Minister for Economy Ivan Mikloš, was promised several incentives if it decided to build a plant in Slovakia, including 100% tax holidays for the first five years of its investment and a 50% tax holiday for the next five years. It was also to have been exempt from paying customs for import of technologies and from the tax due when a company turns agricultural land into industrial area. The government had also promised subsidies for Plastic Omnium's future employees.
However, the French side was disappointed with the results of the meeting, and when contacted three weeks ago by The Slovak Spectator, were "95% decided" on building the plant near the Hungarian city of Györ.
Mikloš then told the paper he had been surprised by Plastic Omnium's reaction, and that he hadn't been aware of any mistakes that his office had made in negotiations with the company. He said May 2: "We [the government] gave them all possible exemptions, so their reaction is a surprise for me."
But Mikloš added that Plastic Omnium had made additional requests before the April meetings, and that while he had discussed the firm's original requests with cabinet at a session just hours before meeting with Omnium officials, he had not been informed of the new requests. "During the session I presented those requests that I knew about, and they were also approved," Mikloš said.
Since the meeting between Mikloš and Omnium it has emerged that the additional requests made by Omnium were connected with the start of the plant's construction. Based on a contract which Omnium signed five months ago with VW Slovakia - the main buyer for the new plant's products - it has to start construction in July this year in order to fit into VW's own production plan centred on its new Colorado model, slated for production from autumn next year.
Plastic Omnium has made known its interest in building the site in the area near the village of Lozorno, 15 kilometres from Bratislava and situated near the main Bratislava-Prague highway. However, the government has admitted that there have been problems with finding a site big enough to accomodate the 100,000 square-metre plant, or one with sufficient infrastructure such as basic supplies of water, gas and electricity and clear ownership rights.
According to Ján Jursa, plenipotentiary for the government for negotiations with the Organisation for Economic Cooperation and Development (OECD), who has been co-ordinating the Plastic Omnium investment, the government did not have enough time to manage the purchase of the land and the set-up of the infrastructure in the Lozorno area.
"In the course of these latest developments it has been shown that the company has put a great emphasis on time. Even the price of the land isn't so important for Plastic Omnium. The most important thing is whether they can begin construction on time or not," Jursa said.
In the light of Omnium's disappointment, the government discussed the firm's grievances during its session on May 10 and now says that it has taken all steps to provide the French company with land and fundamental infrastructure on time. "I think that it is quite realistic when I say that Plastic Omnium can start construction near Lozorno in July," Jursa said.
In the meantime, the government also approved a new incentives package aimed at boosting foreign investment. The package, which is expected to take effect in September, prolongs the 100% tax holiday during the first five years of an investment to ten years, removes the condition that an investor must export 60% of its production in order to get incentives, and offers subsidies of between 40,000 and 160,000 crowns according to the unemployment rate in a region if jobs are created for previously unemployed people - all of which are terms previously offered to Plastic Omnium, but without a guarantee of when they may have been approved.
As The Slovak Spectator went to print, Plastic Omnium representatives said that they had not received any official notification concerning the government's promise to provide the land by the beginning of July. "Without that [official] letter nothing has changed for us," said Michael Lacombe, Plastic Omnium's consultant for the Slovak investment.
However, he added that if there were any changes Plastic Omnium might reconsider its position on investing in Slovakia. "If the Slovak government is willing to provide us with incentives and land with infrastructure by that time it may change things," Lacombe said.
Government representatives now believe that the potential disaster story may turn into an FDI fairy-tale. "I now think that the investment is 50% in favour of Slovakia, but we really want this company to come to Slovakia," Jursa said.
The Omnium case, according to Jursa, further highlights the fact that the government is still not able to meet foreign investors' needs fully - a deficiency that he said had to improve.
"This is a typical example of requests that different investors have for the government. It is quite clear that to have only one agency which cooperates with investors and helps them [currently SNAZIR, the Slovak Agency for Supporting Foreign Investment, which is soon to be absorbed into a new agency called SARIO - Ed. note] is not enough to fulfil these requests."
Lacombe suggested that government officials in neighbouring countries are more successful in dealing with similar requests. "It takes only two weeks to get files and a reaction from the Hungarian government to requests set by investors, in Poland and the Czech Republic it is one month, and in Slovakia it is impossible to say at the moment," Lacombe said.
