LG Philips Displays, part of the electronics giant Philips' corporate empire, said September 5 that it was to outsource some of its production activities to Slovak firm Punch Námestovo starting in June next year.
The move, which will involve the transfer of 480 employees from the Dutch city of Eindhoven over the next 18 months, has been prompted, LG Philips said, by a need "to control costs" and move production of electronic guns for colour picture tubes near to key customers in the Czech Republic.
However, as well as shifting employees from the Netherlands, Punch Námestovo said that the move would create 600 jobs in total, creating an extra 120 new jobs for Slovak workers.
"With this and other projects we have, there should be more than 2,500 people working at Punch Námestovo by the end of 2003," said Ján Firic, project engineer at the Slovak company.
The town of Námestovo, in the northwest Slovak region of Orava, has a 20% unemployment rate. Punch is the largest company in the town, providing jobs for people across the region.
"This will be great for the town and employment here," said Punch's Firic.
Investments in other similarly economically depressed towns and regions in the country have been warmly welcomed by local government officials. The recent start of a possible one billion crown investment in the western Slovak town of Sereď is expected to cut into the 17% jobless rate in the surrounding area, and help the town finally get back on its feet after the closure, a decade ago, of a local foundry.
At just under 20%, Slovakia's national unemployment rate is one of the highest in Europe. To help combat this, government investment incentives have been specifically targeted to attract investors to regions with high jobless rates.
A 10-year, 100% tax break is offered to investors sinking more than 9 million euros into their projects, or 4.5 million euros in regions with unemployment over 10%. The investors in Sereď, Imarco, said that they had come to the town as a direct result of the incentives and the breaks for investing in regions with higher unemployment.
Local government representatives in Námestovo were unavailable for comment on the investment, but talking to The Slovak Spectator last year they predicted that despite the general economic depression in the region, some of the firms there, including Punch, could attract foreign business cooperation.
"We have some companies in the region that were once very big and viable. They already have some cooperation with foreign customers, they just need to raise this cooperation. I think this will come about in the future," Elena Krausová, head of the Námestovo district office, said at the time.
Although not involved with the LG Philips move, government investment agency Sario said that the relocation was important not just for the local economy, but in attracting foreign investment in general.
"Each investment project in Slovakia directly influences local economies in regions in [raising] employment and promoting economic progress. Each project also adds to economic development [as a whole] in Slovakia, helping to build the credibility of Slovakia as an attractive investment location in central Europe, contributing to supply networks, and making our country more visible on the map of Europe," said agency spokesman Milan Horváth. "This is especially seen in cases of [investment by] big, well known companies such as Philips."
Slovakia last year took in a record $2 billion in foreign investment, outstripping the total foreign direct investment for the previous six years. The government has said it expects that figure to be topped this year.