New Hyunday car factory to be built in Slovakia

25-06-2004

The Kia car company of South Korea recently chose Slovakia as the site of its new Hyundai car factory. Poland and other competitors for the lucrative investment missed out. Just why they missed out was never made clear. Some light has now been shed on why Kia chose Slovakia over other central European locations.

In April this year a leaked version of the contract signed between the South Korean car maker Hyundai/Kia and the Slovak government took analysts by surprise. Hyundai is to build a plant in the northern town of Zilina who would employ about 2,400 people and produce 300,000 cars per year. Journalists had been intrigued by the decision of the Korean company to keep the contract confidential. The leaked document showed that Slovakia allegedly undertook greater than expected obligations. It promised to invest 220 million euro while Kia was not required to invest a particular sum.

Should Kia fail to perform any of the planned investment as specified in the investment plan, it does not need to refund the state aid granted up to then or costs incurred by Slovakia in connection with the project. The Economy Minister, Pavol Rusko, did not want to comment on the leak at that time but last Wednesday he saw the government approving a proposal of Ministry of Justice saying that all contracts signed by government with strategic investors should be made public. Jan Hrubala, Head of the Government's anti corruption department took part in drafting the proposal.

"I can imagine that these contracts in many cases have a part which is protected by trade secrets. However, there are some requirements of our law on accession to information and we have to comply with them because government spends public money."

Rusko said government had promised investors to keep the contracts confidential. The French car maker Peugeot Citroen is one of the big investors that have decided to build production facilities in Slovakia. Asked to react to the Ministry of Justice's proposal the management issued a statement saying that the agreement contains some sensitive technical information that the company does not wish to make public. The statement adds that the Slovak Office of State Aids approved the bulk of subsidies provided by the Slovak authorities in October last year. Marek Jakoby, an analyst with MESA 10 a consulting company based in Bratislava says the law defines very well the trade secrets and companies shouldn't worry.

Some fear that if the level of incentives is too high, the government may be even in danger of infringing the EU norms on competition. However, Emilia Beblava, the President of Transparency International Slovakia, says there is a little chance for these contracts to hide unauthorized state aid.

"I don't think the European Commission wouldn't have access to that information. I guess they get it in case they wanted because state aid has its rules, which are centrally regulated by Commission so I would suspect the information is already available for European Commission."

Emilia Beblava concludes that the whole debate surrounding the proposal to make public the contracts with strategic investors has proved very healthy for the Slovak society as a whole.

25-06-2004

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