SLOVAKIA is no longer the only country that Korean tyre maker Hankook Tire considers a prospective home for its new central European plant.
Hankook notified the Slovak Economy Ministry that it would renew negotiations with other countries on placing its Sk19.4 billion (€500 million) investment, a source close to the Economy Ministry said.
Slovakia lost its exclusivity on negotiations a week after a July 6 cabinet meeting in which the cabinet refused to approve the incentives the tyre maker had asked for.
On July 8, Hankook Tire said that it was still maintaining its interest in Slovakia as an investment destination, and was considering some mild reductions in its investment incentives demands.
Hankook vice-president Young Soo Woo delivered the company's new conditions for the planned investment to Slovak Prime Minister Mikuláš Dzurinda, who meanwhile told the press that he did not consider the investment to be lost.
"I can certainly say that for the time being this is not a closed matter. The Korean side is offering certain forward steps. We will think them over and make new calculations, " Dzurinda said on July 8 after meeting the Hankook vice-president in Banská Bystrica.
However, Dzurinda was quick to add that 6 percent of the total investment, which represents approximately Sk1 million (€25,700) per created job, is the maximum the country would pay.
Economy Minister Pavol Rusko had proposed state assistance of 10 percent of the investment, which is about Sk2 million (€51,500) per created job.
Economy Ministry spokesman Maroš Havran confirmed that the ministry had received a letter from Hankook. However, he said that the Korean company wished to keep the contents of the letter confidential.
The media based its reports on Hankook's reaction primarily on information gained from an unnamed source in the Economy Ministry.
"The South Korean company said that it is willing to go down from the originally proposed 21 percent state assistance to 19 percent of the total investment, while direct financial assistance should amount to 13 percent. Hankook will make no further concessions," the source that is close to the investment project told the SITA news wire.
According to Finance Minister Ivan Mikloš, Slovakia could still reach an agreement with Hankook on placing its investment in Levice.
"Certainly, for much lower costs on investment stimuli," said Mikloš.
"Although Hankook is negotiating with other countries, not one of them is willing to provide investment stimuli equal to what was proposed by the Slovak Economy Ministry," Mikloš said.
According to Mikloš, the development of the project shows that there was unfair pressure put on the cabinet concerning the stimuli for Hankook.
The pressure came through statements that if Slovakia did not provide the volume of stimuli that the Economy Ministry proposed, Hungary would immediately offer the same stimulus package, Mikloš said, adding that the statements were false.
However, the Economy Ministry immediately denied Mikloš' statement.
"The Economy Ministry and SARIO have the official letter from the vice-president of Hankook, Mr Young Soo Woo, in which the Korean side confirms that like Poland, Hungary also offered 21.3 percent state support during the negotiations," reads the Economy Ministry's statement.
The Slovak Investment and Trade Development Agency (SARIO) said that it would not provide further information until Hankook takes a clear stance.
"In fact, nothing has really changed since last week. Representatives of Hankook handed their proposal to Prime Minister Dzurinda and they indicated how far they are willing to go with lowering the stimuli. Now it is all in the hands of the cabinet," the spokesman for SARIO, Ondrej Žember, told The Slovak Spectator.
SARIO also confirmed for the Spectator that Hankook had written a letter in which the company said Hungary had promised the volume of investment stimuli Slovakia had originally promised.
Mikloš said that the cabinet in fact turned down the agreement on investment stimuli due to different proposals put forward on just one day. He said that Economy Minister Pavol Rusko had requested Sk1 billion (€25.7 million) less at the cabinet's evening session than he did at that morning's session.
"Did he test whether the cabinet would approve it [the higher sum]? It is one of the pieces of proof that the investment was not sufficiently prepared and that the sums for investment stimuli were inflated," Mikloš said. However, the Finance Ministry has not said what the optimal volume of state support would be.
"The Finance Ministry is not looking at the Hankook investment in the sense of what is the optimal state support. It is a complex issue because there are no clear rules for the allocation of investment stimuli. The Finance Ministry has been trying to solve this issue. The proposal brought by the Economy Ministry was rejected. When another proposal comes, the cabinet will discuss it, but right now it is too early to say what would be the maximum the state would pay," Mikuláš Gera of the Finance Ministry's press department told The Slovak Spectator.
"We have compared the stimuli provided for carmaker KIA and PSA Peugeot Citroen and realized that the money that would be invested in the creation of one job in the case of Hankook would exceed greatly the stimuli that the state has provided so far," said Gera.
The Finance Minister also said he does not blame Hankook, because it is obvious that the investor's interest is to get the highest support possible. However, he added that the interest of the state is to save the taxpayers' money.
The plant Hankook Tire was planning to build in the southern Slovak town of Levice would have the capacity to produce five million tyres annually.
Meanwhile, ruling coalition parties the New Citizen's Alliance (ANO) and the Slovak Democratic and Christian Union (SDKÚ), accused each other of allowing politics to infiltrate into the Hankook case.
ANO says that the SDKÚ put its own political ambitions ahead of the interest of thousands of citizens in one of the least developed region in Slovakia.
On the other hand, the SDKÚ accused ANO (led by Economy Minister Pavol Rusko) of putting unfair pressure on members of the cabinet.
The developments around Hankook, however, left Levice, which is hungry for investment, disappointed.
Levice mayor Štefan Mišák said that he saw six months of intense negotiations fading away without result.
"It seems that we have lost 1,600 jobs. The biggest damage will be to morale, because people were looking forward to the work, mostly those with a lower level of education and those who have been jobless for a long time," Mišák told the SITA news wire.
Meanwhile, the Hungarian media speculated that Hankook is very close to deciding to build its new €500 million plant in Hungary.
Hungarian web portal T~ozsdeFórum wrote that Hankook would most probably choose the country that offers the most incentives and tax allowances.
However, the Hungarian Economy Ministry said the country was not trying to attract Hankook at the same price Slovakia attempted to.
"Certainly, we are ready to negotiate if Hankook addresses us, but only under different conditions," the spokeswoman for the Hungarian Economy Ministry, Judith Tóth, told the TASR news wire.
Hankook knows the conditions of the Hungarian offer, which still stands, she added.
Hankook originally chose Slovakia as the location for its new plant in May. The Korean tyre maker asked the Slovak government to extend an investment stimulus package worth 21 percent of its justified investment costs, which would amount to around Sk4 billion (€103 million) in incentives.
The stimulus package included tax allowances and a direct cash grant. EU regulations, however, forbid any investment stimulus package exceeding 15 percent of the total investment.
On July 11, the Slovak crown responded to uncertainties around Hankook with a mild weakening. Analysts believe that if Hankook does abandon its Slovak plans, the crown will not suffer any long-term effects.
