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‘Too early’ to assess impact of FTA

EXTENSIVE investments in Slovakia originating in the Republic of Korea have made the latter country well-known here. Most notable have been major projects by the carmaker Kia Motors Slovakia and electronics manufacturer Samsung. These account for the biggest portion of Korean foreign direct investment into Slovakia to date. The firms’ investments have boosted mutual trade: for Korea Slovakia serves as a gateway into the European Union, while the Republic of Korea is a potential market for Slovakia, which is looking to export more beyond the EU.

EXTENSIVE investments in Slovakia originating in the Republic of Korea have made the latter country well-known here. Most notable have been major projects by the carmaker Kia Motors Slovakia and electronics manufacturer Samsung. These account for the biggest portion of Korean foreign direct investment into Slovakia to date. The firms’ investments have boosted mutual trade: for Korea Slovakia serves as a gateway into the European Union, while the Republic of Korea is a potential market for Slovakia, which is looking to export more beyond the EU.

“Bilateral trade between Korea and Slovakia has increased 40 times over the past 10 years and clearly shows an upward trend, except in 2011, when our bilateral trade contracted slightly because of the negative impact of the European debt crisis,” Sewon Kim from the Embassy of the Republic of Korea in Bratislava told The Slovak Spectator. “Last year, in particular, saw bilateral trade reaching a record high of $4.8 billion, according to our statistics.”

Kia and Samsung accounted for as much as 15 percent of Slovakia’s entire exports in 2012, according to the Korean embassy.

For Slovakia, which is the sixth most open economy within the EU, exports are an important element in its economic growth.

“Since more than 80 percent of Slovakia’s exports head to the EU, it is necessary to create preconditions to enable greater diversification of our trade towards third, non-EU member, countries,” Marek Csabay of the bilateral trade department at the Slovak Economy Ministry told The Slovak Spectator, adding that this is also happening via free trade agreements, especially with strategically important partners including Korea.

The Free Trade Agreement between the Republic of Korea and the EU has been effective for two years, but according to Csabay it is still too early to assess fully all its impacts on the trade of EU member states including Slovakia. But he says that tariffs have been removed to a significant degree and that this has been reflected positively in European exports. These increased by 37 percent, compared to a moderate increase in imports from Korea of about 1 percent.

Csabay sees the transfer of production from Korea to the EU and other countries as being behind the relatively slow growth in Korea’s exports to the EU.

“Given the structure of Slovak industry, as well as Slovakia’s export prospects, it is obvious that the automotive industry is the most sensitive area for Slovakia, but also other EU member countries,” said Csabay, noting that in spite of an increase in imports of cars from Korea to the EU after the FTA became valid, they remains 37 percent below the level of four years ago.

According to Csabay, the first two years of the FTA have confirmed that the ambitious and complex trade agreement between the EU and the Republic of Korea is creating new outlets in a key Asian market for the whole of Europe and thus also for Slovakia, and that it is simultaneously stimulating investments, economic growth and the creation of new jobs.

Investments

The Republic of Korea is one of the most important investors in Slovakia, bringing projects with significant added value, Richard Dírer from the Slovak Investment and Trade Development Agency (SARIO) told The Slovak Spectator.

The number of companies with Korean capital which are currently operating in Slovakia is 121, according to the Korean Embassy. The number has continued to increase from 80 in 2008 to 100 in 2010, and again to 121 in 2013, which clearly demonstrates the growing economic exchanges between the two countries, Kim said.

Kim specified that so far, investment by Korean companies has been concentrated mainly in the automotive and electronics sectors, but that he believes there is potential for new investment by Korean companies in such promising fields as chemical production, ICT and R&D, if Slovakia maintains an attractive environment for foreign investments in these fields.

He stressed that Korean companies already established in Slovakia such as Kia and Samsung have been increasing their investments in the past three to four years, despite the economic downturn. For example, Kia Motors Slovakia expanded its investment by €110 million between 2010 and 2012, while Samsung Electronics SK is investing an additional €70 million between 2011 and 2015. Mobis Slovakia is ready to invest €46.37 million and create 189 new jobs via expansion of its facilities.

Between 2002 and 2012 SARIO helped 43 Korean companies to establish facilities in Slovakia. These investment projects had an aggregate value of €1.809 billion and created over 15,000 jobs. Currently, SARIO is working on three investment projects with firms in the Republic of Korea with a potential investment of €54 million and the possibility of creating about 320 jobs, all of them in the automotive industry.

Topic: Foreigners in Slovakia


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