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LOCAL OFFICIALS ENTHUSIASTIC

Hyundai to choose Slovakia or Poland

SLOVAKIA and Poland have been shortlisted as investment sites for South Korean carmaker Hyundai, which plans a new car assembly plant in central Europe. The $1.5 billion (€1.26 billion) investment could flow either to the central Slovak town of Žilina or to Radomsko in Poland.
The carmaker is expected to pick the destination for its money in early 2004, according to the SITA news wire. Hyundai had also originally considered the Czech Republic and Hungary as potential sites.

SLOVAKIA and Poland have been shortlisted as investment sites for South Korean carmaker Hyundai, which plans a new car assembly plant in central Europe. The $1.5 billion (€1.26 billion) investment could flow either to the central Slovak town of Žilina or to Radomsko in Poland.

The carmaker is expected to pick the destination for its money in early 2004, according to the SITA news wire. Hyundai had also originally considered the Czech Republic and Hungary as potential sites.

"Žilina was selected as one of the two potential sites for the construction of the plant. We have carefully evaluated the project with consideration to several factors, including the supply of spare parts, the labour market, logistics and distribution costs, infrastructure, and certainly all the investment stimuli offered by the government," reads a letter that the Hyundai management sent to the Slovak Economy Ministry, according to the daily SME.

Experts say that Žilina, which shares borders with the Czech Republic and Poland, has a favourable geographical location and a developed infrastructure. All industrial sectors are represented in the region, with the construction industry being dominant. However, advanced metallurgy, chemical production, energy, cellulose, and paper production are also present in the region, according to the Slovak Investment and Trade Development Agency (SARIO).

Local officials are enthusiastic about the success with Hyundai so far, considering it a good signal for other foreign investors.

Hyundai aspires to become the fifth biggest carmaker in the world by 2010. The new plant would strengthen Hyundai's position in Europe.

During the first half of 2003, the company boosted its European sales by 34.5 percent year-on-year.

Economy Minister Pavol Rusko, who has been lobbying for the carmaker to come to Slovakia for several weeks, told the press he thinks that Slovakia has much better chances of succeeding against Poland than it would have had if the Czech Republic had been selected.

Rusko visited South Korea in early October shortly after being nominated to his post and firing SARIO director Ladislav Balko for what he called "the deficient operation of the agency". According to Rusko, Balko failed to effectively communicate with Hyundai over its investment plans.

"I am asking how it is possible that an agency such as SARIO did not even manage to secure a Hyundai business visit to Slovakia," Rusko told The Slovak Spectator.

Hyundai representatives made a brief visit to the proposed Žilina site on October 17, and on November 7 a Slovak government delegation, led by the new boss of SARIO, Ján Bajánek, submitted a formal offer to Hyundai in Seoul, news wire TASR reported.

According to experts, the construction works might take two years, while the planned annual production would be 300,000 cars, giving the region 7,000 new jobs.

The Slovak crown immediately reacted to the Hyundai decision, climbing to Sk40 and 95 haliers against the euro. According to bank analysts, the positive trend might continue.

Rusko says that the success of Žilina will now depend on personal contacts and the ability to refine the offer in fine detail, and suggested that the Koreans are very careful managers. He is confident that Slovakia has advantages that the Koreans will appreciate.

"The flat tax rate, if those who do not know what they are doing do not stop [the measure] in parliament, good cooperation between the regional government and the state, the well-written offer of the Žilina region, low labour price, and mainly a fine macroeconomic environment that is clearly heading towards economic growth are the benefits," Rusko told financial daily Hospodárske noviny.

On November 25, President Rudolf Schuster vetoed the law on the flat tax rate. The ruling coalition hopes to override the presidential veto in parliament.

The economy minister has been advocating investment incentives for foreign investors.

"All those who are saying we have to attract foreign investors without incentives should come and see what the real communication with an investor is about. Of course, we do not have to offer tax incentives, but all investors want to see support from the beneficiary country, especially if it is a transition economy. This way the state declares its support and makes a commitment that business conditions will not be changed, and non-legislative measures will not be taken to harm the project," Rusko told The Slovak Spectator.

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