Business Major investment projects and jobs boost in the pipeline

14-02-2014 15:24 | Chris Johnstone

Significant investment decisions are on the horizon which could bring billions of crowns worth of inward investment and thousands of jobs, but they are unlikely to be the high skill, high salary posts the Czech Republic coveted not so long ago.

Photo: CTKPhoto: CTK One bid to land a major foreign investment in the Czech Republic and boost jobs appears to be on track with the reluctant go ahead by a local council on the outskirts of Prague for e-commerce giant Amazon to construct a distribution centre. Hard on the heels of Thursday night’s vote, Brno city authorities will be faced with the same decision on Friday, with similar concerns having been raised about transport connections and disturbance.

The joint Amazon investment should bring around 3,000 permanent jobs, rising to around 10,000 in the peak pre-Christmas period. Unfortunately perhaps, the two chosen sites not in unemployment black spots but in areas with below average and average unemployment, which might well explain the lukewarm local reception.

Most of the jobs that Amazon will offer will not be the high paid, high skills, jobs that the Czech Republic has been hoping to land when some politicians prematurely declared that the era of attracting assembly plants and the like was over. Wages are likely to be average with a lot of shift work involved. But with the unemployment rate hitting a new record of over 600,000 in January and politicians scrambling for answers, something is clearly better than nothing.

A crucial decision is expected in the next month from German car maker Volkswagen. It faces a choice between Škoda Auto’s Kvasiny plant and Spanish car maker SEAT’s Martorell plant in Barcelona over a 10 billion crown investment to build a new sport utility vehicle starting in 2016 or 2017. The new car will be sold as part of both the Škoda Auto and SEAT ranges irrespective of the decision about the location.

According to local reports out of Barcelona, trade unions there admit that the Czechs can trump them on lower wages. But they highlight the extra flexibility introduced into working practices and the fact that Martorell is currently only operating at 75% capacity. They add that a similar Volkswagen head office decision that went against them in 2001, when production was shifted to Bratislava, actually proved to be a mistake because final production costs turned out to be higher in Slovakia.

Other major investment decisions are also reported to be in the pipeline. South Korea tyre producer Nexen is also looking to make a 10 billion crown investment and hire around 2,000 workers in Europe with Ostrava seeking to court the Koreans. And Czech foreign investment agency CzechInvest is targeting US electric car producer Tesla as it prospects for a European site.

Established Czech manufacturers, such as rival tyre producer Continental Barum, screw producer Kamax, and car parts producer Johnson Controls, are also expanding locally with investments ranging from around 1 billion to 2.5 billion crowns. On the other hand, central bank governor Miroslav Singer was told this week at a seminar with businessmen in Ostrava that other multi-billion crown investments are stalled because investors have no clear picture of how the market is evolving.

Some Euro-zone countries, such as Spain, which could not get an advantage like the Czech Republic through devaluing their currency, had instead witnessed real cuts in wages to regain competitiveness, they warned.

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