French auto parts producer Plastic Omnium said that it had almost certainly decided not to expand into Slovakia.source: Plastic Omnium
The government is looking at what could potentially be a damaging lost investment after the French auto parts producer Plastic Omnium threatened to take its business to Hungary, claiming a massive communication breakdown with Deputy Prime Minister for Economy Ivan Mikloš.
After the government discussed incentives for the company during its special session on April 20, Mikloš sat with Plastic Omnium's top representatives and re-discussed incentives that were described by the French side as nothing short of a catastrophe.
"The results of the meeting were really upsetting for me. I think that Mr. Mikloš was not properly informed about our investment intentions," said Michel Lacombe, Plastic Omnium's consultant for the Slovak investment.
Lacombe charged that the government had gone back on some of its investment commitments to Omnium. He said that incentives offered to Plastic Omnium in February had included a 100% tax holiday in the first ten years and a 50% tax holiday in the next five years. Other incentives included exemption from the tax that a company has to pay when it turns a previously agricultural area into industrial land. For Plastic Omnium this would have amounted to 15 million Slovak crowns.
"All these incentives that Plastic Omnium was relying on were refused by Mr. Mikloš during the last meeting," Lacombe said.
According to the French consultant business chiefs at Plastic Omnium - which was hoping to build its plant in an area 100 kilometres from the successful Volkswagen plant near Bratislava that would be its main business partner - are 95% decided on shifting their investment to Hungary, adding that the investment incentives provided by the Hungarian government are seven-fold higher than those offered by the Slovak government.
"The Hungarian government offered Plastic Omnium about 28 million French francs in total incentives and land with all the infrastructure and the possibility of beginning construction in May this year," Lacombe said.
The government claimed that it was unaware of any disagreement with Plastic Omnium. "What we are aware of is drawbacks in legislation on the Slovak side in comparison with countries like Hungary," said Radomír Jakubec, an official at SNAZIR, the national agency for foreign investment in Slovakia who has been co-ordinating Plastic Omnium's investment in Slovakia.
"French companies have a feeling that what they get here [in Slovakia] is what they can get in other central European countries like Hungary. We don't have any chance of offering them what the Hungarians can offer them," Jakubec said.
Lacombe said that the government had given little help in another vital area - that of finding land to build its 100,000 square metre plant. "In Slovakia Plastic Omnium can hardly find land in the region of 100,000 square metres where the ownership structure is clear enough for a company to buy it. In Hungary a company can easily get it. The Slovak government was supposed to help us with this as well," Lacombe said.
Despite its apparent bungling of the deal, the government said it still wants to do what it can to get Plastic Omnium to invest in Slovakia. It has been discussing another package of incentives for foreign investors aimed at stimulating investments in Slovakia. According to analysts this package will be much better than those approved in the past and might attract a lot of foreign businesses.
Plastic Omnium representatives said there was little room left for change in terms of what was promised to the company in February this year.
"The only thing that can stop Plastic Omnium from going back on its intention to invest in Hungary is stronger pressure from VW Slovakia [for Omnium to come to Slovakia] and the ability of the Slovak government to provide Plastic Omnium with everything it needs to begin construction of its plant in July this year," Lacombe said.
According to Vladimír Tvarožka, an advisor to Mikloš, the government still has two more weeks to come up with special investment incentives to persuade Plastic Omnium to change its mind. "We hope that finally they will come," Tvarožka said.
Analysts have been dismayed at the government's handling of the deal. According to Ján Tóth, an equity analyst with Dutch investment bank ING Barings, it is vital for the government to come up with good incentives for foreign investors so it can compete on an equal footing with other Central European neighbours such as Hungary, Poland and the Czech Republic.
Slovakia's main disadvantage, Tóth said, is that Slovakia is not a member of either the OECD or NATO, like the Czech Republic, Poland and Hungary. "At the same time, Slovakia's position in terms of EU accession is different to that of these countries. If government representatives promise some incentives to a foreign investor and then step back, it is nothing short of a faux pas," Tóth said.
Plastic Omnium supplies car producers such as VW, BMW, Ford, Citroen and Mercedes with plastic components, including bumpers, body panels, exterior trims and fuel systems. The only central European production site Plastic Omnium currently runs is in the Polish town of Gliwice.
