Samsung chooses Slovakia

THE KOREAN electronics firm Samsung is to build a new € 400 million factory in Slovakia as part of the first large foreign investment the Robert Fico government has attracted since taking power last year, and the third-largest that the country has ever won.

THE KOREAN electronics firm Samsung is to build a new € 400 million factory in Slovakia as part of the first large foreign investment the Robert Fico government has attracted since taking power last year, and the third-largest that the country has ever won.

The Slovak cabinet approved a package of investment stimuli for Samsung's proposed LCD module factory in Voderady in western Slovakia on March 7. The government did not say how much it had offered Samsung to choose Slovakia over its regional neighbours, but Economy Ministry spokesman Branislav Zvara pegged the figure at about Sk2 billion in the form of tax relief and direct subsidies.

The government said the stimuli package met the investor's last requirement for going ahead with the roughly Sk14 billion complex.

"By approving the investment contract the government completed the last of the tasks that the investor had required," said Economy Minister Ľubomír Jahnátek. "Now it's basically up to the investor to sign the contract."

Samsung also announced that it had chosen Slovakia on March 7 in a regulatory filing as reported by the Korean media, and said the LCD module plant would provide it with a foothold in European markets for its flat panel business. Further details were not available at the time The Slovak Spectator went to print.

Economists see the Samsung investment as benefitting the Slovak economy by creating much-needed added value, and by providing greater manufacturing diversity. With three major auto plants now dominating its industrial output and exports, Slovakia has been dubbed 'the Detroit of Central Europe'.

"The advantage of this new investment is that it will be bringing new technology with it," said Tatra Banka analyst Juraj Valachy. "The production of LCD monitors has a higher value added that car manufacturing."

"From the viewpoint of added value, the Samsung investment will be tops in the electro-tech sector, because Samsung will be placing a large portion of its supplier manufacturing in Slovakia," agreed ING Bank analyst Lucia Štekláčová, noting that in this case the total value of the investment could reach 600 million euros by 2010.

Construction is expected to begin on the main plant this year, with production to begin in March 2008.

"The investment could add several tenths of a percent to Slovakia's GDP growth rate, perhaps starting in 2008 in the form of the first investments, and a year later in the form of exports," Štekláčová said.

In 2006, according to Statistics Bureau data, Slovakia's GDP growth rate was 8.3 percent, the highest in the region and the second highest in the EU behind Estonia. The Finance Ministry expects growth of 9 percent in 2007.

Samsung, which already has an operation in Slovakia at Galanta, would create 1,500 new jobs with the new factory project, while the seven Korean suppliers that intend to follow it to Slovakia would create another 4,500 jobs.

With unemployment in Slovakia already at its lowest level since 1998, the jobs created by the new investment promise to further improve employment figures.

However, given that the Korean firm is settling in low-unemployment western Slovakia close to another major employer, the new PSA Peugeot Citroen plant, labour market analysts say it could experience problems finding sufficient skilled labour.

Although some 900,000 people live within a radius of 50 kilometres of the proposed plant, employers in the area are already complaining of problems finding employees.

"Finding enough people in the Trnava region could be a problem given the current situation," said economist Pavol Kárász.

"Samsung will have to look at alternatives and motivate employees in order to find any at all," agreed Valachy.

Samsung's first investment in Slovakia, in a former furniture factory in Galanta in western Slovakia, was worth 100 million euros and now employs 3,150 people. The firm has added the production of plasma and LCD TVs and monitors, home theatres, MP3 players and DVD units to its original computer monitor lineup.

One of the main reasons that Samsung chose Slovakia over other countries in the region was logistics, as the new plant will be close to the D1 freeway and the Senec logistics park, which it could use as a distribution centre.

Trnava Mayor Pavol Tomašovič said he already foresaw transport problems in the region. "We welcome the arrival of Samsung, of that there is no doubt, but we see problems with putting a further burden on the Bratislava to Trnava stretch of the freeway," he said.

The government approved Sk332 million in subsidies on March 7 for the purchase of land for the new plant. Five of Samsung's suppliers will settle within the grounds of its factory site, and Slovak state offices are already studying the environmental impact of the project. Of those five suppliers, the largest is Hansol, which will create 1,800 jobs on its own.

The Hanil Foam Chemical firm will be building a Sk120 million factory outside the Samsung facility, employing 70 people in Šaľa near the Hungarian border.

Samsung also received Sk1.05 billion in incentives from the state four months ago to help finance a planned expansion of its Galanta operation over the next three years. In 2006, Samsung also opened a distribution centre in Galanta for Central and Eastern Europe.

In the first half of last year, output from its Galanta facility made Samsung Slovakia's fourth-largest exporter. In 2006 the factory had a turnover of Sk86 billion.

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