NINE companies which had asked for state aid in the form of tax relief will have to wait for the money they are seeking. At a cabinet session on September 19, ministers postponed a final decision on giving out around €101 million to corporate claimants, saying that information is missing from the requests.
“It is necessary to add some numbers,” Prime Minister Robert Fico said, as quoted by the TASR newswire. “It seems that some proposals also contained small legislative mistakes which need to be removed.”
Nonetheless, he said he was still willing to give the money to the companies.
The cabinet also advised Economy Minister Tomáš Malatinský to find other approaches to delivering aid in order not to place so much strain on the already straitened public finances. One reported alternative was a proposal to spread tax relief over more years in order to reduce its annual fiscal impact.
“I am not pleased by any stimuli, but on the other hand we need to realise that at a time of predicted slowdown in economic growth the government only has a few tools to stimulate growth,” said Finance Minister Peter Kažimír, as quoted by the SITA newswire.
He added that one government session was not enough to make a final decision.
Labour Minister Ján Richter also expressed reservations about the state incentives. He said that the government also discussed whether the companies should receive money even if they do not propose to create new jobs. If they do not create jobs but still get aid, Richter warned, “this might create a chain of requests from other companies”, TASR reported.
The Economy Ministry submitted proposals to provide state aid to nine companies: Bekaert Slovakia in Hlohovec, Trnava Region; Continental Automotive Systems Slovakia in Zvolen, Banská Bystrica Region; Delta Electronics in Dubnica nad Váhom, Trenčín Region; Elkotech in Fiľakovo, Banská Bystrica Region; Fagor Ederlan Slovensko in Žiar nad Hronom, Banská Bystrica Region; Magneti Morelli based in Kechnec, Košice Region; Mondi SCP in Ružomberok, Žilina Region; Muehlbauer Technologies in Nitra; and Samsung Electronics Slovakia based in Galanta, Trnava Region.
Altogether the companies have asked for more than €101 million in the form of tax relief. In return they promise to create about 2,000 new jobs by the end of 2017, SITA reported.
Paper mill Mondi SCP and TV producer Samsung Electronics Slovakia are not promising to create new jobs, but say they want to use the money to modernise their production processes and secure more than 1,500 existing jobs.
Malatinský said that state aid should be given to companies which are established on the market, which are successful and have proved they can fulfil their promises.
“We [the ministry] consider these companies trustworthy,” he said, as quoted by SITA.
Opposition MP Miroslav Beblavý, of the Slovak Democratic and Christian Union (SDKÚ), criticised the proposed help, especially for companies which have not undertaken to create new jobs.
“It is the road to hell,” he said, as quoted by the Sme daily.
Samsung to get less
Samsung originally filed its request under the previous government. In February 2012 then economy minister Juraj Miškov submitted a proposal to provide the company, which makes TV sets in Slovakia, with €28 million in the form of tax relief. The company said it intended to use the money to modernise production and secure 950 existing jobs.
However, a decision over whether to grant the aid was postponed by then prime minister Iveta Radičová, who said that Samsung’s request did not comply with the criteria for such aid since applicable Slovak and EU regulations allow such assistance to be provided only if it is designed to create jobs or is provided to regions with high unemployment, TASR wrote on February 23.
The jobless rate in the Galanta district, where Samsung’s Slovak operations are based, is not among the highest in Slovakia. In July 2012 the unemployment rate in the area stood at 6.51 percent, according to official data from the Centre of Labour, Social Affairs and Family. By contrast Rimavská Sobota, in southern Slovakia, reported 33.59-percent joblessness in the same month.
Malatinský now proposes giving Samsung €19.8 million. In return, Samsung has promised to secure 760 jobs over the next five years, 190 jobs less than it had originally agreed to safeguard. Moreover, the company will invest €70 million in modernisation, instead of the €90 million originally planned.
“It is a compromise solution,” said Economy Ministry spokesperson Stanislav Jurikovič, as quoted by the Hospodárske Noviny daily, adding that the previous proposal was “inappropriate”.
More companies seek state aid
Meanwhile, at least one other company is also now looking for an investment stimulus.
Oil Production and Trade OPT, which plans to build an oil refinery near Rimavská Sobota, reportedly intends to seek state aid for its project. The firm has set out plans to spend $1 billion (about €772 million) and create 500 jobs during the first phase of construction and operation, SITA reported.
Conversely, Taiwanese company AU Optronics, based in Trenčín, will probably not receive €38 million that the government promised it when it signed an agreement in December 2009.
At the beginning of September this year, however, the company announced that it was considering halting production and transforming the plant into a service workplace, Hospodárske Noviny reported.
“AU Optronics is carefully watching the difficult macroeconomic situation and assessing [its] position on the market,” said Katie Chen from the company's communications department, as quoted by the daily.
She added that the company would make changes in “a corresponding way”.