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RIMAVSKÁ SOBOTA VOWS TO RECOUP MONEY SPENT WOOING SK700 MILLION FACTORY INVESTMENT

Town furious as car investor pulls up stakes

IN AN UNEXPECTED move, a German car components producer that was close to signing an investment contract in Slovakia announced on May 10 it was going to Romania instead.

IN AN UNEXPECTED move, a German car components producer that was close to signing an investment contract in Slovakia announced on May 10 it was going to Romania instead.

The loss of the investment by the Dräxlmaier firm, worth hundreds of millions of crowns, embittered the municipality of Rimavská Sobota in southern Slovakia, which threatened to turn to the courts to recoup its losses.

The municipality, which had spent millions of crowns to prepare the ground for the investor, is now determined to seek compensation from Dräxlmaier for material and "moral" damages.

Rimavská Sobota Mayor Štefan Cifruš was informed of the company's surprise decision by mail.

Dräxlmaier, which also informed the Slovak Agency for the Development of Investments and Trade (SARIO), said they changed their investment plans in favour of lower costs in Romania.

"The company cited internal reasons for the decision that are connected with changed supplier and logistics relationships, which made their intended investment in Slovakia unprofitable," said SARIO spokesman Michal Novota to The Slovak Spectator.

"It's bad news for the town and for us as well, but we have to respect the investor's decision," he added.

The Dräxlmaier investment, worth Sk700 million (€18.7 million), would have provided employment for roughly 1,200 people.

"We regret this decision very much, but enormous changes took place in the price structure of the contract, which we cannot ignore," Dräxlmaier wrote in a letter that the Rimavská Sobota town hall provided to The Slovak Spectator.

The company also said that it was not giving up its plans to invest in Rimavská Sobota because of its good experience of cooperation with the local authorities.

"We count on the acquired land for our future projects," reads the letter.

"Unfortunately, we cannot avoid disappointing the inhabitants of the region, who believed in the creation of jobs in this area," Dräxlmaier wrote.

Back when Dräxlmaier decided in favour of Rimavská Sobota, the municipality was delighted to have landed the investment, hoping that it would curb the region's more than 30-percent jobless rate.

However, the municipality is refusing to be bought off by promises of future investments.

While Cifruš was unavailable to comment on the issue for The Slovak Spectator, in a snap reaction to the investor's decision on May 10 he told the press that the municipality would demand that Dräxlmaier pay back the money that the town had already spent in connection with the planned investment.

For instance, the town had already bought land for Dräxlmaier at market prices and sold them to the investor for a symbolic sum.

Local officials estimated that more than Sk30 million (€800,000) had been spent on the preparatory stages.

Meanwhile, economic analysts warned that Slovakia must get used to investors seeking cheaper labour further east.

Poštová banka analyst Miroslav Šmál said that investors, operating under strict economic criteria, might start moving further east from Central Europe within three to five years.

"All carmakers are currently heading to southeastern Europe, the Ukraine, and Russia. The Chinese market is especially interesting," said Šmál, adding that he was not surprised by Dräxlmaier's decision so much as its timing.

Slovakia has experienced a similar disappointments in the past.

In 2004, Korean tire producer Hankook abandoned plans to invest in Levice after the Slovak government refused to approve the investment incentives it demanded. Hungary later landed the deal.

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