The Czech Republic has beaten Poland to attract Nexen Tire Corp. to invest EUR 829 million ($1.1 billion) in its first plant in the European Union as the South Korean company expands outside Asia.

"To win this new major investment, the Czech side has had to fight until the last moment against a competing Polish offer," Czech Industry Ministry Jan Mladek said. The beauty contest of investment aid to attract Nexen reflects greater competition among ex-communist countries in the EU’s east, who are competing to lure large, labor-intensive manufacturing investors and create jobs. Before picking its Czech site near the city of Zatec, 90 kilometers west of Prague, the South Korean company also considered building its plant in the Polish town of Ujazd, 300 kilometers south-east of Warsaw near the Czech border. Mladek and Nexen officials declined to provide specific details on the value of total investment incentives for the South Korean company. Both parties will release additional information on the incentive package at the signing ceremony of the contract, Mladek added. Large investors like Nexen can typically qualify for tax holidays or reduced profit taxes for up to 10 years and additional subsidies of about 5 percent of their total capital investments. The South Korean company already supplies tires, manufactured in Asia, to several major car makers in the Czech Republic. Nexen also already sells its tires to the Slovak-based Hyundai’s affiliate Kia Motors, but (this most recent) move should help to cement the Czech Republic’s status as a car-making heavyweight in the EU.

"The government decision to approve the investment agreement with Nexen is a clear signal that the Czech Republic is firmly interested in attracting new investors," Prime Minister Bohuslav Sobotka said. Nexen’s Czech unit, due to open in 2016 and create more than 1,000 jobs, will be the tire maker’s fourth plant, after two sites in South Korea and one in China. Nexen, which has fought hard over the past several decades against its bigger South Korean competitors Hankook Tire Co. Ltd. and Kumho Tire Co., also operates research facilities in Germany and the U.S. Nexen has also mulled investments in tire-making plants in the U.S. and Latin America as it seeks to expand globally. Nexen produces more than 30 million tires a year and its Czech plant should help it boost its annual global output to 60 million tires by 2018.

Source: Wall Street Journal