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BMW rejects Slovak bid for car plant

The government announced January 22 that it had lost its bid for one of the biggest investments in Slovakia's history, that of a plant for German auto giant BMW. The news made official what had already been hinted in neighbouring states.
Czech media had said at the beginning of the year that Slovakia had been snubbed by BMW in the race for the $440 million investment. However, at the time the Slovak government denied rumours of the failure.
Over 120 bids from around the world, including efforts from Germany, the Czech Republic and Hungary, had been in the running as the location for the auto maker's new plant. Slovakia had put forward six sites as possible locations, but was told January 17 that the offers had been passed over.

The government announced January 22 that it had lost its bid for one of the biggest investments in Slovakia's history, that of a plant for German auto giant BMW. The news made official what had already been hinted in neighbouring states.

Czech media had said at the beginning of the year that Slovakia had been snubbed by BMW in the race for the $440 million investment. However, at the time the Slovak government denied rumours of the failure.

Over 120 bids from around the world, including efforts from Germany, the Czech Republic and Hungary, had been in the running as the location for the auto maker's new plant. Slovakia had put forward six sites as possible locations, but was told January 17 that the offers had been passed over.

The news was an immediate blow to cabinet's FDI plans for this year, with the central bank having only recently projected between 120 and 122 billion crowns ($2.7 to $2.75 billion) in direct foreign investment for 2001. But government figures moved quickly to deflect questions over whether Slovakia could successfully compete within the region for large foreign investments.

"The Economy Ministry respects BMW's decision, but we are convinced that Slovakia has achieved the biggest boom in the car industry in central and eastern Europe," said Economy Ministry spokesman Peter Benčúrik. He added that VW Slovakia, based just outside Bratislava, was continuing to thrive as one of the most successful auto manufacturers in central Europe, and that contractor links to the VW plant would be strengthened with the construction of an industrial park in Lozorno, also near Bratislava. Sources close to the deal have said that the experience was far from a crushing blow for Slovakia's FDI-chasing administration. The country's investment agency, SARIO, is thought to have prepared a good bid, they said, while the regions involved in the offers, including depressed eastern areas such as Prešov and Košice, have learnt much from the process.

"Slovakia has moved forward through this," said one source close to the deal.

Benčúrik explained that BMW has expressed an interest in cooperation with Slovakia in other projects related to the automotive industry.

Why not here?

It is thought that for logistical reasons, the auto firm was keener to have the plant closer to Germany, putting Slovak bids especially from the east of the country at a disadvantage. BMW is expected to pick a bid from within the eastern half of Germany.

Slovak economic analysts have thus been reluctant to attack their government's handling of the investment, saying that many other criteria outside Bratislava's influence could have been behind the decision.

"It's very difficult to criticise anyone without knowing the exact criteria or what BMW wanted. There are always things which a government cannot influence, and only it [the government] will know exactly what it did. If it maximised its efforts and did all it can, then fine. It would have been a good [investment] chance, but it's not a complete tragedy," said Miloš Božek, analyst at J&T Securities.

The bidding process had not been without controversy, however. In November, news of an unofficial meeting between investment agency SARIO and BMW representatives had been leaked to Slovak media, drawing immediate criticism from Slovak honorary consul to Baden-Wurtenburg, Roland Kissling.

Kissling said at the time that the leak had jeopardised the chances of Slovakia landing the investment, and was a sign of the inexperience and ineptitude of Bratislava's FDI team. However, SARIO, ministers and BMW itself denied the accusations.

The news comes at a time when the government has said it is confident of its own FDI plans. The central bank's 122 billion crown FDI prediction for 2001, if met, would double the total that has arrived over the last eight years, and ministers have pointed to an upturn in foreign investment in the latter half of last year, including the high-profile acquisition of Košice steel manufacturer VSŽ by US firm US Steel.

Vladimír Tvaroška, advisor to Deputy Prime Minister for the Economy Ivan Mikloš, said that there was an obvious disappointment in BMW's rejection but that the prospects for FDI in the coming year still looked good.

"Of course it would have been great to have BMW here, but there was very strong competition for the bid with many countries trying to get this investment. But for this coming year I think we can look to a continuation of what we saw in the last half of last year when it was obvious to everyone that FDI into Slovakia really took off," he said.

"We are looking forward to getting the official figures for 2000 soon and progressing in the same way in 2001. And by that I mean with all kinds of investment - greenfield, acquisitions and privatisation."

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