EASTERN EUROPE
From Site Selection magazine, January 2008
Automotives Steer
Toward Eastern Europe
Toward Eastern Europe
Germany's MAN Nutzfahrezeuge is building heavy commercial trucks at its new factory near Cracow, Poland.
A
utomotive specialist Johnson Controls has had a growing footprint in Eastern Europe since the early 1990s. The company now has 25 locations in nine nations in the region. Two of the latest facilities have opened in Slovakia and Macedonia.
Johnson Controls picked Bratislava, Slovakia, for its new Automotive Business Center due to its central location, good infrastructure and available work force, said Richard Johnson, vice president, information technology. The new facility, which will eventually employ 330 in purchasing, IT, financial services and human resources functions, is the company's seventh in Slovakia,
and gives the company a total of 3,300 employees in the country.
Bratislava is also home to new AT&T service center to serve the telecom giant's multinational client base. The new facility will house up to 350 employees performing a variety of functions to support the company's customer base in the EMEA region. AT&T expects to attain a work force of 1,000 in Slovakia during 2008.
Johnson said Bratislava is a good position for Johnson Controls to serve growth markets in Eastern and Central Europe. The company also operates production plants in Lozorno, Lucenec, Martin, Namestovo and Zilina, and an engineering center in Trencin.
A free economic zone in Bunardzik, near Skopje, Macedonia, is the site of Johnson Controls' new $20-million automotive interiors plant that will primarily supply the Slovakia market. The Bunardzik facility will employ 150 by the end of 2008. Plans call for a gradual capacity expansion.
Germany-based commercial vehicle builder MAN Nutzfahrzeuge officially opened a new truck assembly plant near Cracow, Poland, in October, following a mid-year production launch. The plant is building heavy MAN trucks with gross weights of more than 16 tons. Current employment is about 400, but MAN expects to have at least 650 workers at the facility by 2010. MAN's network of plants in Germany and Austria will supply the facility with axles, cabs and engines.
"We are assuming that the markets in Eastern Europe and the CIS will be growing at above average rates," said Lars Wrebo, production director at the MAN Nutzfahrzeuge Group.
Southeastern Surge
Bulgaria and Romania both experienced a spike in foreign direct investment during 2006, according to the United Nations Conference on Trade & Development's World Investment Report 2007. UNCTAD credits the countries' admission to the European Union on Jan. 1, 2007, as a factor in the investment surge. Most of Romania's inflows were linked to privatization. Bulgaria ranked seventh in world FDI rankings measured against GDP, and Romania was 21st.
Sweden-based telecom equipment conglomerate Ericsson opened a new Global Service Delivery Center in Bucharest, employing 200 engineers.
Ericsson supplies fixed and mobile networks and services to more than 40 customers in 11 countries in southeastern Europe and employs about 3,000.
Another Swedish firm, Cardo AB, invested nearly $5 million in a new plant in Hunedoara, Romania, for its Doors & Logistics Solution's Crawford brand of industrial doors. The move is part of an optimization process for Cardo, and also involved the closing of a plant in Wennigsen, Germany.
"This investment should be seen as helping to achieve our ambition of having the lowest production costs in the industry," said Peter Aru, Cardo's president and CEO. "What's more, there is strong growth in transport, logistics and retail in the eastern parts of Europe and with this investment in Romania we are strengthening our position in a strongly growing region.
A recent report by German consultancy Roland Berger asserts that Bulgaria will remain attractive for labor-intensive sectors in the coming years as salaries are expected to grow at a relatively low rate. One of the latest firms to open a manufacturing site in Bulgaria is the Swiss firm Oskar Ruegg, which has opened a metal assembly facility in the mid-Bulgaria city of Star Zagora. The company plans to hire 400 by 2011.
Below is a transcript of a late November e-mail interview of Dr. Slaveski by Site Selection Senior Editor John McCurry.
Site Selection: Macedonia is now a candidate to join the EU. When this happens, what will the effect be on economic development in your country? Would you anticipate an increase in foreign investment?
Dr. Slaveski: The simple answer to this is yes. Macedonia is fast approaching full EU membership in a process that is now irreversible. EU accession is an absolute top priority for the government. Still, in the process of implementing reforms in anticipation of this, we have considerably revamped the framework for doing business in the country. The business environment, treatment of property rights, contract enforcement etc., in Macedonia follow the standards of Western European countries. This is very important for serious investment projects.
At this point, we also expect the invitation to join NATO to be a big boost to Macedonia's credibility as it relates to inward FDI. We look forward to an invitation at the Summit in April 2008 in Bucharest. NATO membership implies stability and security, and that is one of the main criteria in the discussion of where to invest. We expect NATO membership to at least double the scope of FDI.
SS: What industrial sectors are best suited for Macedonia?
Slaveski: The sectors in which Macedonia has a significant competitive and comparative advantage for FDI include automotive components manufacturing, information communications technology (ICT), agribusiness and food processing, as well as pharmaceuticals and medical devices. The country is predominantly suitable for the manufacture of high value-to-weight labor-intensive products, such as safety systems, electronics, precision plastic products, and aluminum and zinc die-casting and grey iron casting components. The exceptional quality of IT education and the competitive salaries of IT engineers are a big draw for software development companies. Moreover, the unique combination of continental and sub-Mediterranean climates, sound food processing technologies, and a reputation for quality food products makes Macedonia a leading location for environmentally friendly agricultural production practices and organic foods.
SS: In your opinion, why should companies consider locating in Macedonia?
Slaveski: For over a year now we have put all our efforts into improving the country's business climate. Politically and economically stable, Macedonia is now definitely an attractive destination to do business. This has been acknowledged by numerous international ranking institutions, such as the World Bank, which has ranked Macedonia in the top five best reformers in the world in its "Doing Business 2008" report.
With Macedonia being less than a two-day drive from most of the EU countries, and less than a day's drive to the automotive assembly factories in central Europe and Turkey, investors in the country enjoy one of the lowest transportation costs for their products and product components. Three multilateral and eight bilateral free-trade agreements provide for duty-free access to a market of 650 million customers from the EU member states, the EFTA and CEFTA countries, as well as Turkey and the Ukraine.
One of Macedonia's biggest advantages is the availability of a technically skilled work force at competitive salaries. Part of the general incentives package is the most attractive tax package in Europe, with a flat tax rate of 10 percent on corporate and personal income and a zero-percent tax rate on reinvested profit.
Moreover, as a result of our regulatory guillotine process, starting a business in Macedonia can be done in just 4 hours for €42 [US$62]. [Editor's Note: According to an e-mail from Invest in Macedonia received since this interview went to print, that cost is actually even lower today, at €28.] Also, many of the investors particularly value the professionalism and supportiveness of the Macedonian government, which is enabled through a simple and direct approach to major policy decision makers.
SS: What advantages does Macedonia have over other countries in Eastern Europe?
Slaveski: Central European countries are starting to suffer from over-investment and severe labor shortages, and the economies further east struggle with maintaining the stability essential for business activity. Availability of skilled labor and low average wages put Macedonia in an excellent position to capitalize on leading manufacturers' pursuit of reliable locations to expand and relocate their business.
SS: Which areas of the country are best suited for new development?
Slaveski: For export-oriented high-tech companies we have created four Technological Industrial Development Zones (TIDZs) with a status of free economic zones offering special incentives. Companies operating in the TIDZs don't pay taxes on corporate income for 10 years. There is a 50-percent reduction of personal income tax for five years, and there is no VAT and customs duties for export production. The zones have excellent strategic location with immediate access to a main international airport, railroad, and the vital road corridors 8 and 10. There is also free connection to piped natural gas, electricity, water and sewage, as well as land lease for up to 75 years at attractive concessionary rates.
Johnson Controls picked Bratislava, Slovakia, for its new Automotive Business Center due to its central location, good infrastructure and available work force, said Richard Johnson, vice president, information technology. The new facility, which will eventually employ 330 in purchasing, IT, financial services and human resources functions, is the company's seventh in Slovakia,
Bratislava is also home to new AT&T service center to serve the telecom giant's multinational client base. The new facility will house up to 350 employees performing a variety of functions to support the company's customer base in the EMEA region. AT&T expects to attain a work force of 1,000 in Slovakia during 2008.
Johnson said Bratislava is a good position for Johnson Controls to serve growth markets in Eastern and Central Europe. The company also operates production plants in Lozorno, Lucenec, Martin, Namestovo and Zilina, and an engineering center in Trencin.
A free economic zone in Bunardzik, near Skopje, Macedonia, is the site of Johnson Controls' new $20-million automotive interiors plant that will primarily supply the Slovakia market. The Bunardzik facility will employ 150 by the end of 2008. Plans call for a gradual capacity expansion.
Germany-based commercial vehicle builder MAN Nutzfahrzeuge officially opened a new truck assembly plant near Cracow, Poland, in October, following a mid-year production launch. The plant is building heavy MAN trucks with gross weights of more than 16 tons. Current employment is about 400, but MAN expects to have at least 650 workers at the facility by 2010. MAN's network of plants in Germany and Austria will supply the facility with axles, cabs and engines.
"We are assuming that the markets in Eastern Europe and the CIS will be growing at above average rates," said Lars Wrebo, production director at the MAN Nutzfahrzeuge Group.
Southeastern Surge
Sweden-based telecom equipment conglomerate Ericsson opened a new Global Service Delivery Center in Bucharest, employing 200 engineers.
Swedish firm Cardo AB is among companies investing in Romania. It recently opened a plant in Hunedoara for its Doors & Logistics Solutions division.
Another Swedish firm, Cardo AB, invested nearly $5 million in a new plant in Hunedoara, Romania, for its Doors & Logistics Solution's Crawford brand of industrial doors. The move is part of an optimization process for Cardo, and also involved the closing of a plant in Wennigsen, Germany.
"This investment should be seen as helping to achieve our ambition of having the lowest production costs in the industry," said Peter Aru, Cardo's president and CEO. "What's more, there is strong growth in transport, logistics and retail in the eastern parts of Europe and with this investment in Romania we are strengthening our position in a strongly growing region.
A recent report by German consultancy Roland Berger asserts that Bulgaria will remain attractive for labor-intensive sectors in the coming years as salaries are expected to grow at a relatively low rate. One of the latest firms to open a manufacturing site in Bulgaria is the Swiss firm Oskar Ruegg, which has opened a metal assembly facility in the mid-Bulgaria city of Star Zagora. The company plans to hire 400 by 2011.
Dr. Trajko Slaveski, Minister of Finance, Macedonia
D
r. Trajko Slaveski was elected Macedonia's Minister of Finance in August 2006. He is an author and co-author of several books and numerous articles in scientific journals and popular press publications on privatization, economic restructuring, economic growth and development, economic and social functions of the state. He has participated in a number of international conferences on transition and development issues.
Below is a transcript of a late November e-mail interview of Dr. Slaveski by Site Selection Senior Editor John McCurry.
Site Selection: Macedonia is now a candidate to join the EU. When this happens, what will the effect be on economic development in your country? Would you anticipate an increase in foreign investment?
Dr. Slaveski: The simple answer to this is yes. Macedonia is fast approaching full EU membership in a process that is now irreversible. EU accession is an absolute top priority for the government. Still, in the process of implementing reforms in anticipation of this, we have considerably revamped the framework for doing business in the country. The business environment, treatment of property rights, contract enforcement etc., in Macedonia follow the standards of Western European countries. This is very important for serious investment projects.
At this point, we also expect the invitation to join NATO to be a big boost to Macedonia's credibility as it relates to inward FDI. We look forward to an invitation at the Summit in April 2008 in Bucharest. NATO membership implies stability and security, and that is one of the main criteria in the discussion of where to invest. We expect NATO membership to at least double the scope of FDI.
SS: What industrial sectors are best suited for Macedonia?
Slaveski: The sectors in which Macedonia has a significant competitive and comparative advantage for FDI include automotive components manufacturing, information communications technology (ICT), agribusiness and food processing, as well as pharmaceuticals and medical devices. The country is predominantly suitable for the manufacture of high value-to-weight labor-intensive products, such as safety systems, electronics, precision plastic products, and aluminum and zinc die-casting and grey iron casting components. The exceptional quality of IT education and the competitive salaries of IT engineers are a big draw for software development companies. Moreover, the unique combination of continental and sub-Mediterranean climates, sound food processing technologies, and a reputation for quality food products makes Macedonia a leading location for environmentally friendly agricultural production practices and organic foods.
SS: In your opinion, why should companies consider locating in Macedonia?
Slaveski: For over a year now we have put all our efforts into improving the country's business climate. Politically and economically stable, Macedonia is now definitely an attractive destination to do business. This has been acknowledged by numerous international ranking institutions, such as the World Bank, which has ranked Macedonia in the top five best reformers in the world in its "Doing Business 2008" report.
With Macedonia being less than a two-day drive from most of the EU countries, and less than a day's drive to the automotive assembly factories in central Europe and Turkey, investors in the country enjoy one of the lowest transportation costs for their products and product components. Three multilateral and eight bilateral free-trade agreements provide for duty-free access to a market of 650 million customers from the EU member states, the EFTA and CEFTA countries, as well as Turkey and the Ukraine.
One of Macedonia's biggest advantages is the availability of a technically skilled work force at competitive salaries. Part of the general incentives package is the most attractive tax package in Europe, with a flat tax rate of 10 percent on corporate and personal income and a zero-percent tax rate on reinvested profit.
Johnson Controls has opened a manufacturing facility in Macedonia to serve the expanding Eastern Europe auto market.
SS: What advantages does Macedonia have over other countries in Eastern Europe?
Slaveski: Central European countries are starting to suffer from over-investment and severe labor shortages, and the economies further east struggle with maintaining the stability essential for business activity. Availability of skilled labor and low average wages put Macedonia in an excellent position to capitalize on leading manufacturers' pursuit of reliable locations to expand and relocate their business.
SS: Which areas of the country are best suited for new development?
Slaveski: For export-oriented high-tech companies we have created four Technological Industrial Development Zones (TIDZs) with a status of free economic zones offering special incentives. Companies operating in the TIDZs don't pay taxes on corporate income for 10 years. There is a 50-percent reduction of personal income tax for five years, and there is no VAT and customs duties for export production. The zones have excellent strategic location with immediate access to a main international airport, railroad, and the vital road corridors 8 and 10. There is also free connection to piped natural gas, electricity, water and sewage, as well as land lease for up to 75 years at attractive concessionary rates.
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©2008 Conway Data, Inc. All rights reserved. SiteNet data is from many sources and not warranted to be accurate or current.
©2008 Conway Data, Inc. All rights reserved. SiteNet data is from many sources and not warranted to be accurate or current.