Czechs forced to fight hard for South Korean tyre plant

By bne IntelliNews June 18, 2014

Tim Gosling in Prague -

 

The Czech Republic was forced to hand over a generous package of incentives to win the favours of South Korean tyremaker Nexen, a government minister admitted late on June 16. The effort illustrates a remarkable turnaround in the country's fortunes over the last decade.

Around a month after the announcement that Nexen would build its plant in the east of the country, the Czech cabinet approved the package to the Asian tyremaker on June 16. It puts to bed a long-running saga that has seen Prague beat off competition from Visegrad rivals Poland, Hungary and Slovakia; a saga that illustrates the deep impact of the crisis over the past few years.

"To win this new major investment, the Czech side has had to fight until the last moment against a competing Polish offer," Czech Industry Ministry Jan Mladek told The Wall Street Journal. "Therefore we have chosen a mix of several incentives such as subsidies for creating new jobs, subsidies for strategic investments, tax breaks and a partial compensation for the local (Czech) administration to buy [an] additional building plot [to be used by Nexen]."

Czech and Nexen officials declined to provide specific details on the value of the investment incentives. Additional information will be released on June 25 at the signing ceremony, Mladek added.

Before picking its Czech site near the city of Zatec, 90km west of Prague, the South Korean company also considered the Polish town of Ujazd, 300km south-east of Warsaw. Both are close to auto plants run by Hyundai, Kia and Skoda in the Czech Republic and Slovakia that Nexen will supply.

The tussle in Visegrad for the investment is reminiscent of the 2005 race to land another South Korean tyre producer, Hankook. However, back then Prague said it refused to offer investment incentives, insisting it was only interested in high value-added projects. Yet with the crisis having pulled the rug from under the country's formerly successful drive for investment, the new government has made foreign investment a top priority.

Hungary eventually fought off Poland and Slovakia for the Hankook plant. On March 12, the European Commission gave approval to €57.9m in investment aid to the company, which is planning a third phase expansion of its Hungarian facilities.

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