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IdentifierCreatedClassificationOrigin
04BRATISLAVA246 2004-03-12 16:16:00 UNCLASSIFIED Embassy Bratislava
Cable title:  

FOREIGN INVESTORS DISCOVER SLOVAKIA

Tags:   ECON PGOV LO 
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1. Summary. Seemingly, hardly a day has gone by this year
without the announcement of new foreign direct investment
(FDI) in Slovakia. The Dzurinda government has transformed
Slovakia's once troubled economy into a business friendly
state that leads the region in economic growth. The
country's low-cost yet skilled labor force, low taxes,
liberal labor code and favorable geographical location have
helped it become one of Europe's favorite investment
markets. As a result, Slovakia has increased its level of
cumulative FDI by five-fold since the beginning of 2000.
American companies are represented in a wide variety of
industries in Slovakia and their investments have grown
sharply in recent years to help make the U.S. Slovakia's
third largest foreign investor. End summary.

CARS


--------------------------




2. On March 2, Hyundai, the world's seventh-largest
carmaker, selected Slovakia as the site of its first
European production plant. Hyundai will invest USD 870
million in the new facility, which will produce 200,000 cars
per year and create 2,400 jobs. Production will start by
the end of 2006. Slovakia won the deal in a long-running
contest with Poland, its second consecutive triumph over its
larger neighbor. Last year, Peugeot, Europe's second
leading car company, also selected Slovakia over Poland for
a new plant roughly the same size as Hyundai's. (NOTE:
Peugeot plant should launch production by 2006 with an
output of 300,000 vehicles a year.)



3. As a result of these automotive investments, Slovakia
has been dubbed "Little Detroit" by the foreign press. In
addition to Hyundai and Peugeot, the country is home to
Europe's largest carmaker Volkswagen, which produced 280,000
cars last year. By 2007, the combined annual production of
all three carmakers in Slovakia is projected to be at least
850,000 vehicles. At that level, Slovakia would have the
world's largest auto production per capita. In addition,
Rover MG (UK), Honda and Mazda are also considering
investments in Slovakia, as is America's specialty vehicle
manufacturer International Truck and Engine Corp.

CAR COMPONENTS


--------------------------




4. Hyundai reported that seven or eight of its component
suppliers plan to follow it to Slovakia, and American auto
parts suppliers Dura, Tower, Johnson Controls, Delphi, Lear,
and Molex are already manufacturing here. Others, such as
the U.S.-based Visteon and Arvin Meritor and the world's
largest tire maker, Bridgestone of Japan, are also
considering investments in Slovakia. Recently, German car
components maker, Hoernlein, announced an investment of an
unspecified amount in Southern Slovakia. The company, which
plans to launch production by year-end, will hire 120 people
in an area with an unemployment rate of 20 percent.

CHEMICALS


--------------------------




5. One of the world's largest plastics producers, Germany's
Mannesmann Plastics, announced it would invest USD 37.5
million for a green-field factory in Slovakia. It will
start production in 2005 and create 150 jobs. American
plastic bottle maker, Plastipak Packaging, announced plans
to build a USD 30 million facility to produce and recycle
plastic bottles in Eastern Slovakia, providing 100 jobs in
the first stage alone. Yet another investment, by the Swiss
glass company Glas Troesch AG, worth USD 230 million should
lead to an additional 300 to 400 new jobs.

ELECTRONICS


--------------------------




6. Swiss recordable media producer Sky Media selected
Slovakia over bids from Ireland and Germany as the site for
its new USD 127 million plant that will provide 1,000 jobs.
Its planned output will make it the largest CD-rom and DVD
production facility in Europe and the fourth largest
worldwide. Samsung, the world's second-largest
semiconductor maker, is closing a plant in Spain and
shifting production of TV sets to Slovakia, creating 1,000
more jobs. It is also considering building a new home
appliances factory in the country. Samsung's move has
attracted its supplier, Dong Jin Precision, to build a plant
in Southern Slovakia worth USD 8.1 million that will lead to
350 new employees.

REAL ESTATE



--------------------------




7. Heitman, a leading U.S. real estate company, has
established a joint venture with Israel's Engel General
Developers Ltd., and will spend USD 300 million on
apartments and houses in Central Europe, including Slovakia.
In addition, a consortium including the DB Real Estate
Global Opportunities Fund, a member of Deutsche Bank, and
Czech developer, Discovery Group, will invest USD 37.5
million over the next two years in a shopping and
entertainment center in Western Slovakia.

OTHER


--------------------------




8. Swedish furniture-maker Swedwood, part of the IKEA
group, will invest up to USD 60 million to expand three of
its four plants in Slovakia. Canada's Rockport Homes will
invest USD 56 million to build four factories to produce low-
cost reinforced concrete homes, and each factory will
provide 200 jobs. Finally, America's Kraft Foods recently
announced that it was closing its plant in Hungary and
shifting production to Slovakia and Austria.

COMMENT


--------------------------




9. Prospects have never been brighter for FDI in Slovakia.
The country has forged a reputation for high quality
production, low costs and enhanced profitability. On the
way, Slovakia has learned to successfully compete with its
neighboring countries that once dominated it in attracting
FDI. Furthermore, it has been able to attract business away
from Asian and Western European markets. Privatization was
the driving force of FDI in the past, but now green field
projects dominate the inflow of FDI. Economy Minister Pavol
Rusko expects FDI to reach USD 2.5 billion per year between
2004 and 2006 and we have no reason to doubt him. Slovakia
has successfully overcome a late start in attracting FDI due
to the poor business environment that existed prior to the
election of the Dzurinda government in 1998. American
companies have made important contributions to the Slovak
economy both in terms of the quantity of their investments
and their practice of good corporate citizenship. Post has
contributed to this movement by hosting two large business
conferences and is currently in the process of planning a
third.
THAYER


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