IT TOOK only a few years for investors and business executives from South Korea to make their country and their companies more visible in Slovakia. The number of Korean firms operating in Slovakia now exceeds 70. About 20 of those companies are related to automotive production; about 25 companies operate in the electronics industry; and most of the others are also in industrial sectors. The most well-known firms are Kia Motors near Žilina, Samsung Electronics Slovakia in Galanta, Mobis Slovakia and Hysco Slovakia.
“I am quite certain that the more Korean companies in Slovakia succeed in their businesses here, the more Korean companies will look for their opportunity to do business in this country,” Gyu Young Kim, the counsellor at the Embassy of the Republic of Korea told The Slovak Spectator.
Kim thinks Slovakia is one of the interesting countries for conservative Korean investors and business executives because it gives them relatively low risk and provides a good business environment even though the present global economic downturn, because of its uncertainty, is making many wait and see about a new investment or expansion of business in Slovakia.
From the viewpoint of the number of existing projects, Korean entrepreneurs are second in the total number of investors who have established operations here with the help of the Slovak Investment and Trade Development Agency (SARIO), according to Lucia Guzlejová, the head of the project management and aftercare department at SARIO’s FDI section.
“Also at this time the Koreans are participating significantly in the number and volume of projects on which we are now working,” Guzlejová told The Slovak Spectator. “Similar to investors from Japan, the US or other countries, there is a visible slowdown in activities due to the crisis. Investors are taking a wait-and-see position; they consider their decisions much longer and in general are more careful.”
Guzlejová sees the presence here of several large firms from Korea as one of Slovakia’s advantages because it encourages other potential investors. Another advantage is that these large companies are constantly building a network of subcontractors, which attracts more and more companies.
“Our experience from meetings with already established companies as well as potential investors from Korea is that Slovakia is perceived as a business-friendly environment as well as a very pleasant place for living,” said Guzlejová, adding that Korean entrepreneurs put large stress on personal contacts and see it as ideal when they can communicate directly in their native language. For this reason, SARIO’s activities to attract new investors can be divided into two areas: reduction of the language barrier and participation in investment seminars and negotiations in Korea. Documents with basic information about Slovakia are available in the Korean language and SARIO’s website has a Korean version. SARIO’s representatives regularly introduce Slovakia as a potential investment destination at seminars held in Seoul, followed by individual meetings.
“These personal meetings have already generated some interesting projects that we are now working on,” said Guzlejová, adding that SARIO has also established contacts with partner organisations such as the Korean Importers Association and the European Union Chamber of Commerce in Korea.
Bilateral trade volume has increased dramatically in the past five years, following the investments of Samsung Electronics, Kia Motors and Samsung LCD between 2002 and 2007, according to Kim.
“The volume of trade was $380 million in 2004 but it became $35 billion in 2008,” he told The Slovak Spectator, adding that Slovakia sells finished cars, motors, pumps, oil products, and liquid crystal displays mainly to Korea and Korea mostly exports raw materials or parts for autos, TVs, LCDs and computers to Slovakia.
According to the National Bank of Slovakia, the aggregate investments of South Korean companies up to the end of 2008 amounted to €710 million.
Firms like the business environment
Kia Motors Slovakia has generally good experience with the business environment in Slovakia.
“Among the factors we can highlight undoubtedly are the 19 percent flat tax, qualified labour and introduction of the euro at the beginning of this year,” Dušan Dvořák, spokesperson of Kia Motors Slovakia, told The Slovak Spectator.
Kia built its plant in Slovakia, its first in Europe, as a green-field investment in Teplička nad Váhom near Žilina. It launched production in 2006 and now employs 2,800 people. At this time it manufactures the Kia cee’d and Kia Sportage models in the facility. It has also started trial production of the Hyundai ix35 and serial production of this model is planned for early 2010.
“The new Hyundai ix35 model is a significant step forward for the Hyundai car brand in Europe,” said Dvořák. “This is the first SUV designed directly at the Hyundai development centre in Germany. This model responds to requirements of European customers, which differ from those in Asia with regards to design features as well as colours.”
According to Dvořák, the automotive industry is one of the most dynamically developing industrial segments.
“Cars produced now need to attract customers not only with an attractive price and an interesting design but must also be ‘ecological,” said Dvořák. “We assume that the development of cars will follow this path and companies which are not able to offer new green solutions will experience hard times.”
Samsung Electronics Slovakia has been operating in Slovakia since 2002 and its aggregate investment in Galanta exceeds €183 million, according to Katarína Holecová from the company.
Samsung regularly assesses the investment environment of the countries in which it operates and Holecová listed several advantages for Slovakia.
“During the last six years in which Samsung has operated in Slovakia there has not been any radical change in the investment environment which would have reduced the investment rating of Slovakia,” Holecová told The Slovak Spectator, adding that other advantages are favourable developments in Slovakia and adoption of the euro. “From the viewpoint of logistics, Slovakia’s central position within Europe remains its doubtless advantage. In this area, it is necessary to complete the highway network as soon as possible with the aim to keep and strengthen this advantage compared with neighbouring countries.”
In speaking about hurdles for doing business and investing in Slovakia, Holecová mentioned the lack of qualified labour in some skills and low flexibility in the labour market. She believes that more funds and greater support for research and development, acceleration of highway construction, more effective state administration and introduction of better regulations to allow immigrants to fill job vacancies will help Slovakia to increase the attractiveness of its investment environment.