Hyundai Motor Company goes ahead with a major greenfield investment in Nošovice in the Moravia-Silesia region of the Czech Republic. The company plans to open a new manufacturing plant, which should begin operations in October 2008 and employ 3,000 people. It is expected that a further 13,000 people will find work within the supply industry and in services. Both the Czech government and Hyundai will sign an agreement outlining the conditions of this investment.
After several months of negotiations with the government of the Czech Republic, Hyundai Motor Company will go ahead with a greenfield investment worth CZK 28–30 billion (€0.98–€1.06 billion) in the Moravia-Silesia region in the northeast of the Czech Republic. This represents the largest investment in the Czech Republic’s modern history. ‘The Czech Republic is the right place for our project. After commencing production, we intend to produce 300,000 cars a year’, commented the vice-president of the company, who indicated that initial works on the construction of the factory should commence by mid 2006.
Over the coming weeks, the Czech government (Vláda Ceské republiky), the committee of the region of Moravia-Silesia and Hyundai’s board of directors will finalise the wording of the agreement; specific aspects of the investment agreement will only be published once it is signed in mid May. According to the Ministry of Industry and Trade (Ministerstvo prumyslu a obchodu CR), Hyundai can expect subsidies amounting to CZK 4.3 billion (€151.5 million) as well as tax relief of CZK 1.3 billion (€45.8 million); if the company’s investment exceeds one billion euro, tax relief may be even higher.
Foreign investment expected
In addition to tax relief, the state will further support the investor by offering subsidies to acquire cheap land and create new jobs. It will also finance construction of the infrastructure for the new plant, including the costs related to the construction of roads and railways demanded by the Korean side. It is also planned to connect the site with the Czech motorway network. Furthermore, the government will fast track construction of the expressway connecting Nošovice and the Slovak border (which Hyundai needs for its cooperation with the Kia car manufacturing plant in Žilina in Slovakia).
It is expected that the economic benefits for the country and the region will exceed the costs involved in foreign investment of this scale. In 2005, the region benefited from several new investments that, despite their smaller scale, helped to reduce the level of unemployment. Indeed, the government is interested in attracting foreign investment and in providing those new companies with the best possible incentives and opportunities, which will also be available to suppliers. At this early stage, several automotive supply companies are already preparing for the arrival of Hyundai in the region. For example, Automotive Lighting, a Magneti-Marelli company, will build another manufacturing plant worth CZK 2.6 billion (€91.6 million) in Pávov u Jihlavy in central Czech Republic; it is hoped that this new plant will double the current production volume. This investment is to span over four years and should create 630 new jobs in the area. In autumn 2005, the South Korean company, Sungwoo Hitech, decided to build a new plant in Ostrava, in north Moravia, to produce automobile body parts. This investment represents a value of almost CZK 2.5 billion (€88 million), and the company plans to employ about 1,000 people in the next three years. Moreover, the UK manufacturer of automobile thermostats, Stant Manufacturing, and the German supplier of car electronics and electronic installations, Erich Jaeger, also announced business projects in north Moravia.
Economic impact
Hyundai’s investment will impact positively on the economic development of the region of Moravia-Silesia, as well as on the overall economic growth of the country. It is expected that the investment will significantly help curb unemployment – by up to 2.5% in Moravia-Silesia – and increase state revenue. The effect on the country’s gross domestic product (GDP) will be substantial: according to economic analyses, nominal GDP should grow by up to 2.5% once the manufacturing plant attains its full production volume. As a result, Hyundai’s investment could improve the Czech foreign trade balance by about CZK 54 billion (€1.9 billion).
According to company representatives, Hyundai chose the Czech Republic for several reasons, including:
- the country’s long industrial tradition;
- an already existing good technology base;
- a highly-qualified Czech workforce.
- prerequisites guarantee the company an ideal strategic base in the country.
The automobile industry is one of the main drivers of the Czech economy: today, it is one of the leading European countries with regard to the number of automobiles produced per capita. In 2005, the Czech Republic reached a peak in manufacturing by producing almost 600,000 cars (excluding industrial vehicles) for the first time in its history; in the coming years, annual production should exceed 1.2 million cars, according to some estimates.
Jaroslav Hála, Research Institute for Labour and Social Affairs, Czech Republic