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DESPITE MEDIA REPORTS, HYUNDAI INSISTS IT HAS NOT CHOSEN THE SITE OF ITS NEW PLANT

Slovakia and Poland still contend

CONTRARY to the reports of the public Slovak Television, which caused a stir by announcing Slovakia as Hyundai's choice for a new production facility in central Europe, the South Korean carmaker has not yet picked the site for its new car assembly plant.
Late last year, Slovakia and Poland were shortlisted by Hyundai for the site of a $1.5-billion (€1.18 billion) Kia Motors production unit with an estimated annual output of 300,000 cars, beating out the Czech Republic and Hungary in a battle for the major greenfield investment.

CONTRARY to the reports of the public Slovak Television, which caused a stir by announcing Slovakia as Hyundai's choice for a new production facility in central Europe, the South Korean carmaker has not yet picked the site for its new car assembly plant.

Late last year, Slovakia and Poland were shortlisted by Hyundai for the site of a $1.5-billion (€1.18 billion) Kia Motors production unit with an estimated annual output of 300,000 cars, beating out the Czech Republic and Hungary in a battle for the major greenfield investment.

Economy Minister Pavol Rusko, who has been rosy about Slovakia's chances to become the Kia Motors favourite, said that any conclusions are preliminary and the final decision is expected in February.

Poles also believe that they lead the race for the Hyundai investment and the Polish government has rejected speculation that the company has already opted for Slovakia, according to the Polish on-line daily Warsaw Business Journal.

Steve Bowen, the director for foreign public relations at Kia Motors, which belongs to the Hyundai group, has confirmed for the TASR news wire that both Slovakia and Poland are still in the competition.

On January 15, a 12-member group of Hyundai executives briefly visited the central Slovak Žilina region, Slovakia's proposed site, which has been seriously affected by the reduction of arms production during the 1990s.

Experts say that the region, which shares borders with the Czech Republic and Poland, has a favourable geographic location and a developed infrastructure. The 270-hectare site is crossed by a railway route only five kilometres from the fifth pan-European railway corridor, and lies only 13 kilometres from Dolný Hričov airport.

The construction industry is dominant in the region, while advanced metallurgy, chemical production, energy, cellulose, and paper production are other important industries, according to the Slovak Investment and Trade Development Agency (SARIO).

According to Ján Mišura, director of the Žilina branch of the Slovak Chamber of Commerce and Industry, up to 450,000 economically active people live within 50 kilometres of the proposed site.

Mišura stressed that the labour productivity in the region is higher and labour costs one-third lower than in Poland.

The local chamber of commerce branch listed 183 potential subcontractors from the Žilina region. Thanks to the location, the carmaker could take advantage of 280 subcontractors from Slovakia, as well as 106 from Poland and 80 from the Czech Republic, the news wire SITA wrote.

Žilina's regional government submitted the final list of investment stimuli, including local tax allowances, to Hyundai representatives who also held talks with Žilina mayor Ján Slota.

"We have not noticed any signs of discontent [among Hyundai officials]; quite the contrary. Our offer of land is also a big advantage," Rusko told journalists at a press conference on January 16.

Both countries will offer state aid at the maximum limit - 15 percent of the total investment - allowed by the European Union, assumes Rusko.

According to him, Slovakia will offer subsidies for the procurement of further investment assets, worker re-qualification, and employment support. The Koreans have not requested tax bonuses yet.

However, the economy minister fears that ongoing conflicts within the ruling coalition might repel the foreign investors and put Slovakia at a disadvantage in the competition with Poland.

"The inability of [some] politicians to overcome personal disputes and the fact that someone had his beloved seat swiped from under his buttocks is irresponsible [behaviour]," said Rusko, head of the coalition member New Citizen's Alliance, at a press conference.

"The current political climate is hurting Slovakia. It puzzles investors," added Rusko, who personally called on the Slovak Democratic and Christian Union and ex-Defence Minister and Free Forum head Ivan Šimko to iron the wrinkles harming the image of the government.

"Slovakia could lose out on more that Sk100 billion (€2.46 billion), if [currently] open deals fail," he added.

The ruling coalition lost its majority after Free Forum head Šimko conditioned his support for the cabinet on the departure of Prime Minister Mikuláš Dzurinda.

Players involved in the conflict insist that money is of secondary importance.

"I don't think [the political conflict] threatens any investments," said Free Forum member Branislav Opaterný on Slovak Television.

"The fact is that Slovakia needs to take care of its political problems when they arise and not when an investor decides it is appropriate. We are not a banana republic," he added.

However, during his talks with Hyundai representatives on January 16, Dzurinda assured the Korean managers of governmental support.

Finance Minister Ivan Mikloš has been positive about Slovakia's chances.

"The ongoing reforms made our business environment more attractive. Meanwhile, we offer state aid in line with EU standards," Mikloš told the media.

SARIO head Ján Bajánek also said that he had not noticed any concerns on the Korean side about the current political developments in Slovakia.

"We only had to explain the mistaken belief among the media and observers that Slovakia had already been selected as the winner of the investment," the SARIO boss told TASR.

Slovak Television reported on January 13 that Hyundai would most probably build its plant in Slovakia, referring to an anonymous source. Rusko promptly denied the information.

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.

Rusko, who has been lobbying for the Korean carmaker to come to Slovakia, visited South Korea in early October 2003, shortly after being nominated to his post and firing previous SARIO director Ladislav Balko for what he called "the deficient operation of the agency". According to Rusko, Balko failed to effectively communicate with Hyundai about its investment plans.

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

According to experts, the construction works would take about two years, giving the region 7,000 new jobs.


(Lukáš Fila contributed to this report)

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