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First Portuguese FDI to open doors

A landmark Portuguese investment is set to open the floodgates for more FDI from European states looking to move into Slovakia, and has government officials anticipating significant interest from more Portuguese firms.
The $5 million investment by cork-manufacturer Suberus into a plant in western Slovakia's Trenčín (which company officials said came with one eye on the Austrian wine-manufacturing industry) is the first direct Potuguese investment into Slovakia. With trade between the two states at a low level - both imports from and exports to Portugal accounted for 0.1% of Slovak trade last year - the investment is the first step on the road to boosting that figure, and, perhaps more importantly, luring more Portuguese investment.
"Of course every investment is very positive, but especially the first investment from a particular country is vital because it makes it more possible for other companies to come here from that country," Ivan Mikloš, Deputy Prime Minister for the Economy, told The Slovak Spectator on June 5.

A landmark Portuguese investment is set to open the floodgates for more FDI from European states looking to move into Slovakia, and has government officials anticipating significant interest from more Portuguese firms.

The $5 million investment by cork-manufacturer Suberus into a plant in western Slovakia's Trenčín (which company officials said came with one eye on the Austrian wine-manufacturing industry) is the first direct Potuguese investment into Slovakia. With trade between the two states at a low level - both imports from and exports to Portugal accounted for 0.1% of Slovak trade last year - the investment is the first step on the road to boosting that figure, and, perhaps more importantly, luring more Portuguese investment.

"Of course every investment is very positive, but especially the first investment from a particular country is vital because it makes it more possible for other companies to come here from that country," Ivan Mikloš, Deputy Prime Minister for the Economy, told The Slovak Spectator on June 5.

ING Bank analyst Ján Tóth said that the links between initial investments and growing trade between countries were well-proven. "This kind of relationship is the expected one," Toth said.

Karol Balog, director of the Agency for Industrial Development and Revitalisation, said Portugal had not traditionally been a large investor for the central and eastern European region. More often, due mainly to language and cultural similarities, the Portuguese focused their attention on Brazil and Latin American countries.

However, Balog said that the skilled and educated Slovak labour force may have been a primary consideration when Suberus was reaching its decision. "If you are just interested in reducing labour costs, South America is the place to go, or to eastern Europe, like Romania or Bulgaria," Balog said. "The price of labour is not the cheapest in Slovakia - although it is cheaper than many other places - but it is more the quality work force that is the main competitive advantage," he added.

Balog explained that companies producing 'higher quality' goods lean toward Slovakia, the Czech Republic and Hungary to build factories.

The Suberus investment came as Alberto Mesquite, chairman of the board of directors of the Portuguese Business Association (APB) in Lisbon, revealed that a group of Portuguese businessmen would visit Slovakia in September to explore further investment opportunities. Speaker of the Slovak Parliament Jozef Migaš, who was on an official visit to the Portuguese capital at the time, said that the move was a step towards more Portuguese investments into Slovakia.

Viera Rusková, honorary member of the Slovak-Portuguese Chamber of Cooperation, an organisation established in November last year to promote and establish links between Slovakia and Portugal, said her chamber has 13 Slovak and Portuguese members and has already begun to establish ties with more potential Portuguese investors.

"Suberus is a good point of reference for other potential Portuguese businesses," she said. "From several meetings with businessmen, I know that they are interested in investing in Slovakia in such areas as textiles, shoe-making and wood-related products," Rusková added.

The Suberus investment is expected to be the first in a wave of new FDI following the US decision to throw its weight behind the Slovak bid for membership in the Organisation for Economic Cooperation and Development (OECD), as well as shareholders' approval of the entry of Pittsburg steel giant US Steel into Košice-based steel-maker Vychodoslovenské železiarne (VSŽ).

Balog said that "all hell broke loose" after the VSŽ deal, with other American companies showing a massive increase in interest in Slovakia.

"If a major or famous investor is entering the market, it definitely has some spin-offs and side-effects. It brings with it a cumulative group of others investors - both minor and major," he said. "Every investor going into another country looks for some compatriot who has already invested and has some experience - companies want to discuss the situation with those that are already in the market."

Balog added that there was a growing trend for Slovakia to be viewed as a more attractive destination for investors in general, while improvements in tax legislation as part of competitive investment incentive packages have given an extra boost.

"I have personally seen the improving situation in both the numbers of investors and more interest shown. There are several reasons influencing this positive change, one large one being the likelihood of entry into the OECD," he said.

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