The planned Saudi Landbridge is a two-phase project (blue routes) connecting Jeddah and Ryad and Ad Dammam and Al Jubayl. Existing Saudi railways are in red.

Overlay a map of Eastern Europe onto a map of ongoing European automotive investment and you'll get a very clear picture: They're practically one and the same.
       Spin-off is also rolling out across the region from logistics and materials companies eager to fill in the gaps in supply chain and construction. The most significant may be a $160-million expansion by U.S. Steel Corp. at its complex in Kosice, Slovakia, precisely to fill the construction and automotive industries' demand in the region.
       A recent look at the Conway Data New Plant Database revealed that, since the beginning of 2004, two-thirds of all European automotive sector projects were slated for Eastern European countries, led by Poland, Slovakia and the Czech Republic. European Union subsidy, regulatory and corporate taxation debate may make some "Old Europe" nations look more attractive to the corporate eye. But not that attractive, given statements like this from a recent Boston Consulting Group report:
       "Today, the difference in the average hourly compensation of production workers (including benefits) between Germany and "New EU" countries can sometimes be as high as 90 percent. With forecasted growth rates of around 2 percent in Western European countries and 5 percent to 7 percent in "New EU" countries, labor cost convergence will take several decades because the differences in growth rates are quite small."
       At press time, German officials were signaling their intent to hurry up that timetable by proposing EU-wide minimum wage standards.

        The low corporate tax rates of Eastern Europe are the best-looking thing east of the Atlantic. Take Poland, where the rate came down to 19 percent from 27 percent in 2004.

Toyota has invested more than $309 million in gearbox and engine production at this complex in Poland.

       Even before that, Poland recorded a high inflow of FDI in 2003, according to UNCTAD, attracting some $4.2 billion.
       Toyota has invested more than $309 million in engine and gearbox production in that country's Walbrzych Special Economic Zone, and will increase employment there from 1,100 to 1,800 by the end of 2005. And GM unit Opel is adding 1,000 new jobs to a 2,000-worker payroll with new production lines at its Gliwice plant.
       In December 2004, hydraulics manufacturer Eaton Automotive announced it would build a plant on 25 acres (10 hectares) in the Katowice Special Economic Zone near Bielsko-Biala that will employ 375 people. As recently as early April 2005, German vehicle maker MAN AG was reported to be picking Poland over oncoming Slovakia, Hungary and Romania for a new truck manufacturing plant, driven by the low labor costs. The final decision will depend on MAN's May board meetings.
       In February, 2005, French tire company Michelin announced it would invest more than $328 million in its Olsztyn complex, where it has purchased an additional 205 acres (83 hectares). Up to 520 new jobs will be created at the plant, which should be operating by 2006.
       It's not all automotive: Korean concern LG Electronics, known for its mammoth Asian investments in cellphone handsets and liquid crystal display technology, is looking to invest US$130 million in a Polish television plant expansion. The country also has amended its popular special economic zone program to include business process outsourcing and service centers.

Slovakia

        Everybody's Eastern Europe front-runner is Slovakia, again driven by investment from automotive OEMs PSA Peugeot Citroen and Kia. They were joined in December 2004 by GETRAG Ford Transmissions, which is investing $232 million in a 750-worker plant in eastern Slovakia. The project could receive up to $58 million in incentives from the Slovak government, which already offers a prime incentive with its 19-percent corporate tax rate.
       The spin-off is still unwinding, most recently in early April 2005 when ArvinMeritor's LVS Liberec subsidiary said it would build a $3.7-million, 200-worker plant in Kysucke Nove Mesto to support its supply work for Kia's new assembly plant near Zilina.
       Meanwhile, another Korean firm, Sewon ECS, is building a $20-million cable harness plant even closer to the Kia plant. The facility should be up and running by the end of 2005, and Sewon plans to employ as many as 600 within three years.
       In January 2005, Johnson Controls said it would invest $26.5 million in a seating system supply plant in Lucenec that will employ 340 people by 2007.
       In October 2004, Visteon announced it would invest $40 million in a new interiors and climate control systems plant in Nitra, which will employ 400. It's the 11th facility investment in eastern Europe for the company, which also operates plants in Novy Jicin, Rychvald and Hluk, Czech Republic; Praszka and Poznan, Poland; and Szekesfehervar, Hungary.
       James Glerum, Cyril Leonard's lead man in Central Europe, says the Slovakia success story traces back to Volkswagen's original investment in the country after it became independent, building on the country's automotive heritage with its purchase of its Skoda brand.
       "Slovakia by 2010 is anticipated to be able to deliver 1,100,000 new cars per annum to the market — the majority of these will go for export," he says. "The automobile manufacturing industry contributed 21.6 percent of total exports in money terms in 1998, growing to 26.9 percent in 2002 and breaking through the 30-percent barrier (30.7 percent) in 2004."
       Slovakia too is already branching out in its FDI portfolio. Bratislava was selected in October 2004 as the regional administrative hub for chemical giant BASF.

Czech That

        DENSO continues to invest in the Czech Republic, even as some worry about the country's economy being overheated: The republic reported $5 billion-plus in FDI in 2003.
       DENSO opened a $255-million plant in the popular city of Liberac in May 2004. The company's overall facilities in Liberac will eventually employ some 1,600 people. Stant Manufacturing Inc. is creating 100 jobs at a new plant in the Moravian city of Karvina. Company leaders have hinted at bringing design work to the location as well.
       Another Moravian city, Kunovice, will see an 80-worker, $8.5-million investment from Belgian mechanical component maker Meister Group. And Germany's Pierburgh GmbH will invest more than $13 million in a 50-job plant in Trmice.

Joining the Party

        Looking for "new" new places in Eastern Europe? Then Turkey, Romania, Hungary or Lithuania might fit the bill.
       In November 2004, Toyota executives were reported to be planning further investments in the company's Turkish unit, in addition to the $515 million the company has invested there in the previous four years.
       In Romania, DURA Automotive Systems is opening a 50,000-sq.-ft. (4,645-sq.-m.) factory in Timisoara, adding to a regional footprint that includes three plants in the Czech Republic and one in Slovakia. A joint venture between tire giants Pirelli and Continental is commencing steel cord production in Slatina, investing nearly $31 million and employing up to 350 people.
       In Hungary, materials is the byword, with a $2.6-million building materials complext from homegrown Frikober Engineering in Sumeg, a $10.4-million rolled steel plant from Danish firm Ib Andersen Industri.
       In Lithuania, FDI grew from $123.7 million in 2003 to $481.9 million in 2004, with more than three-quarters coming from other EU countries, led by Denmark, Sweden and Germany. The most promising harbinger for industry? A total of 34 percent of the total FDI went to manufacturing.

Demographic Shifts Coming Onto Radar?

        As Korea's Hankook Tire evaluated Hungary, Poland and Slovakia this spring to see where to build a $650-million tire plant, certainly low corporate taxes and low cost of labor were among the enticing qualities in all three nations. But another long-term factor coming into view may be low or negative population growth, according to a new report released in April 2005 from the European Commission.
       The report says overall population in the 10 new EU countries will drop by more than 11 percent by 2050, and that working age population (ages 15-64) will drop in the EU overall by a similar percentage. While such long-range projections are to be taken with a large dose of skepticism, the nearer-term projections are not any brighter: 2004 saw population decreases in the Czech Republic, Estonia, Latvia, Lithuania, Hungary, Poland and Slovakia. And by 2015, the population in the new member states is projected to have dropped by 1.5 million.

- Adam Bruns