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Slovakia seeking to lure yet another carmaker

Rapid preparations of strategic investment park continues.

The carmaker Volkswagen Slovakia launched operations in its new body shop. (Source: Jana Liptáková)

THE SLOVAK government is intensifying its fight for another car producer that is reportedly planning to build a brand new production plant in central Europe and hopes that preparing land near Nitra for potential big investors will help beat out competition from Poland.

“For us it is a strategic investment, thus also after an agreement with the finance minister we are willing to go actually to the maximum possible extent of state assistance,” Economy Minister Vazil Hudák said on July 21, as cited by the SITA newswire. “This means that we are speaking up to 8-9 percent of the total investment.”

Hudák did not identify the potential investor but specified that it was from the automotive industry and that the investment is worth billions of euros and should create thousands of jobs.

“We are in the final phase; it is being decided between Slovakia and one more or two other localities,” Hudák said.

The final decision is expected by the end of September.

Slovakia is competing with Poland for an $1.85 billion investment from Land Rover, a division of the India’s Tata Motors, the Pravda daily reported. It plans to invest almost $3 billion into extension of production capacities while part of this plan is also construction of a new plant in central Europe. The new plant should give jobs to as many as 8,000 people in the car plant as well as supply chain.

While rankings evaluating business environment in central Europe moderately favour Poland, experts see the euro and the quality labour force as Slovakia’s advantages, Pravda wrote. Poland’s disadvantage is regarded as the weakly developed sub-contractor industry. In this respect Jaroslav Holeček, vice-president of the Slovak Automotive Industry Association (ZAP), specified that already now there are more than 320 sub-contractors of the automotive industry in Slovakia. Most of them are located in western Slovakia and their density reduces towards the east of the country.

To improve its chances to get the investment Slovakia has adopted fast track legislation to make Slovakia more attractive for large strategic investments with these investors demanding large plots of land that would also be prepared in terms of logistics and infrastructure, Hudák said in June.

“We’ve had cases in the past when large investments slipped by us, because unfortunately there are no large plots or big industrial parks in Slovakia,” said Hudák, as quoted by the TASR newswire, adding that Poland and the Czech Republic have 100-500 hectare plots ready to cater to such investments.

Lack of strategy

The Slovak cabinet also established a new function of the proxy for preparation and realisation of strategic investment parks in Slovakia who should help future investors with infrastructures and appointed Viktor Stromček, state secretary of the Transport Ministry, into the new post on July 21.

The opposition Freedom and Solidarity (SaS) political party criticised creation of the position of a special proxy seeing it as proof that the government does not have a real strategy of creation of a good business environment for all and that it cares only for chosen large companies, while to all others it offers tax licenses, fees and fines with the goal of boosting state revenues.

“In this respect we call on the government to submit a strategy of improvement of business environment for all especially via removal of barriers it has created itself – changes in depreciation, increase of taxes, tax licenses, bureaucracy,” said Jozef Rajtár of SaS, as cited by SITA.

Strategic park

Construction of the strategic park is another step by which the Slovak cabinet wants to attract the investor. The Nitra site is 733 hectares and has a direct connection with the R1 dual carriageway.

“Construction of a strategic park is one of the basic conditions for successful building of a car factory and may lead to a positive decision of the investor,” Juraj Sinay, president of ZAP, said, as cited by Pravda. “The park is located next to a big town with well built infrastructure.”

The strategic park is planned to be built in Nitra and three nearby villages of Lužianky, Čakajovce and Zbehy. The cabinet already approved purchase of land for extension of the industrial park in Nitra. The park will be built by the MH Invest company operating under the Economy Ministry and it has already received the label of a strategic investment which secures it faster settlement of land ownership and other administrative proceedings. The plan is to launch the construction of the strategic park in the middle of 2016 and complete it by 2019.

Auto-making powerhouse

Slovakia tops the list of the fastest growing car producers in the central and eastern Europe region.

While in 2008 the country produced 575,800 cars and utility vehicles, in 2014 the number rose to 993,000, which represents a 72 percent growth. No other country in the region has reported such an increase, the analysis by Coface suggests.

Slovakia manufactures cars in three companies, Volkswagen Slovakia, Kia Motors Slovakia and PSA Peugeot Citroën Slovakia. The existing carmakers are located in western part of the country, in Bratislava, Trnava and close to Žilina but as Nitra is also in this region with more developed industry and infrastructure compared to eastern part of the country, there are open questions as to whether there is enough skilled labour remaining, and historically Slovaks are reluctant to travel or move for work.

 

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