ExxonMobil chooses Prague for global support centre

15-07-2004

Central Europe has become an attractive location for multinational companies' back offices, or support centres and the Czech Republic has benefited from outsourcing by investors abroad. This week, the international energy company ExxonMobil opened a global Business Support Centre in Prague, which will employ 300 people, offering IT, accounting and other customer support services for European clients, but could create as many as 1300 jobs within a few years' time.

I went along to the official opening this week and asked the General Manager of the Business Support Centres worldwide, Marc Van Eeckhoudt, why the company chose Prague.

"We have already a large centre in Bangkok, one in Brazil. We have started a centre also in Budapest, for different activities. We have one in several locations in Canada. So there are a couple of centres doing similar activities and of similar size."

And why choose Prague and not Warsaw, for example, for these operations?

"We started the location selection almost a year and a half ago, as part of a global search for different locations. We looked at different components - infrastructure availability, technology availability - but the prime reason why Prague has been chosen is because we found the right combination of skills, in terms of education, availability of people on the market and especially the language capabilities because all our employees, usually, speak three languages."

And is there one field or area in which the Czechs, in particular, excel?

"At this stage, I would not say there is one specific area. We found that the quality of the work force actually covers a very broad range of services. And that might lead to a different composition [of the services done here] than we might have even initially considered because we find that there is a very good coverage of skills all over the range."

At the same time, this is a relatively small county; Poland has four times the labour pool, so...

"Yes, but we look not just at the total size of the labour pool, we look at the pool of people who could qualify to work in the [ExxonMobil] centre with the right combination of technical and language skills. And that's what we're looking for and that has been driving the decision so far."

In the very short-term, let's say six months to a year, what will be the main purpose of this centre?

"The centre is not really [directly] related to the oil business, so we have a complete separation between the marketing affiliate which is operation in the Czech Republic and the business support centre. So there is no connection between any of those."

"We have the payables activity here, supporting most of Europe, the lubricants and sales, customer service - that's our initial focus - and next year we will start looking at other activities that will gradually start migrating here, building on the success we are anticipating."

And what are they doing in the Budapest centre?

"In Budapest we opened a similar centre, doing accounting and IT [information technology] support. And so we have two [European] centres because we felt we needed the combined labour pool to actually recruit the appropriate number of qualified people. We actually had the official opening yesterday; we have it today in Prague. So, they were developed almost in parallel."

In the last 12 months there have been a number of high-profile relocations to the Czech Republic, for example of the consulting firm Accenture and international couriers DHL. Did that have anything to do with your decision to locate here?

"It is of course on the one hand good to see that other companies share the same opinion about the possibilities; on the other hand, that means there is competition on the labour market. So we are watching very carefully but it is not because another company is doing something we just try to copy them; we just try to monitor what's going on globally in the markets for this type of activity."

What incentives were CzechInvest, or the Ministry of Industry and Trade, able to offer ExxonMobil?

"We are still finalising the details. There will be a percentage support on the salaries and then also training support. Everything is primarily geared towards helping us set up the centre - and then covering the initial period for training the employees as we bring them up to full speed."

To bring me up to speed on some of those details, I later spoke with Martin Jahn, the director of CzechInvest, the government agency charged with attracting investment. We spoke at the reception after the official opening of the ExxonMobil centre. I began by asking Mr Jahn what investment incentives the Czech Republic could offer to a potential investors with similar projects.

"In terms of public support, we have a standard programme at the Ministry of Industry and Trade to attract investment into service and technology centres. Under this programme, a company can receive two types of support; subsidies for business support and a subsidy for training and retraining of employees."

"We obviously keep the threshold for public support within EU limits, set at 20 percent in Prague. The rest of the Czech Republic is set at about 50 percent, but Prague because of its high GDP per capita, can provide only 20 percent."

This is related to regional development programmes within the EU: how has the strategy or rules for attracting investors changed since EU entry, along these lines? You have new regulations, directives, to follow?

"Well, we have been following EU regulations since the beginning of providing investment incentives, so the conditions haven't changed much; the only big change is that the authority to set limits on public support moved from the Czech anti-monopoly office in Brno to Brussels, to DG competition. But, basically, it will be the Czech Ministry of Industry and Trade which provides the support, who will decide on these limits, but based on EU rules."

"Otherwise, we are changing the conditions according to our needs. That means we are looking at what types of investments we need, to which regions we need to bring these investments, and that is the determining factor for changing investment incentives."

"We have changed our policy more towards this type of investment with high-added value and services - because we have proved to the world that the skills and services are good enough here to attract these investments - but also because labour costs grew to the point where the Czech Republic is no longer an attractive place for simple manufacturing."

Poland has a labour pool four times as large as the Czech Republic's - how do compete with Poland, for example?

"Well, if you look at total FDI [foreign direct investment] per capita, Poland attracted about three times less than the Czech Republic. And I think the main reason is, first of all, infrastructure. The Czech Republic has much better infrastructure allowing good access to all regions. And the second is the skill base, driven by the quality of education and industrial tradition."

The Czech Republic just has the best quality and density of technical education in the region of Central and Eastern Europe.

In the case of ExxonMobil, though, it's more like a 'virtual' office; the infrastructure, in terms of transport, for example, is not a decisive factor. And Poland is very well known for its technical capacity as well - and labour pool - in that regard.

"Well, in terms of telecommunications infrastructure, that is crucial for this project, Prague can offer world-class quality. And as far as we can tell, the pool of skilled people on the higher levels is better in the Czech Republic than in any other country in the region."

Martin Jahn there, making the case for investing in the Czech Republic. Mr Jahn, by the way, is said to be under consideration to become the next Minister of Industry and Trade.

15-07-2004