The Czech Republic signs an agreement with Korean firm Nexen on investment worth CZK 22.8 billion

27 Jun. 2014 | CzechInvest, Office of the Government of the Czech Republic | Today the Czech Republic gained the third-biggest investment in the country’s history. The investment by NEXEN TIRE, the agreement for which was officially signed today, will amount to CZK 22.8 billion. The agreement was signed on behalf of the Czech Republic by Prime Minister Bohuslav Sobotka and on behalf of NEXEN TIRE by the company’s director, Kang Byung Jung.

The acquisition of such a major investment for the Czech Republic is the result of intensive negotiations held over thirteen months between the Korean investor on one side and the Czech government, Ministry of Industry and Trade, CzechInvest, the Ústí region and the city of Žatec on the other side.

In gaining the investment, the Czech Republic succeeded in the face of strong competition from neighbouring countries that had also attempted to win the investment, with Poland at the fore.

"We are proud that our country has gained such a significant investment with value added and did so against tough competition from surrounding countries, with Poland in the lead. The fact that NEXEN TIRE chose the Czech Republic for its investment shows that our country is again becoming a safe destination for new investors and their strategic plans. The Ministry of Industry and Trade and CzechInvest played a significant role in this success. Over the past ten years, CzechInvest has helped to mediate more than 1,400 investment projects in the total value of nearly CZK 800 billion. These projects have in turn helped to create nearly a quarter of a million jobs. Since January this year, CzechInvest has registered more than 100 parties interested in investing in the Czech Republic. This strong interest in investing here is due primarily to the country's political stability brought about by the new government and its proactive steps in the area of legislation, including positive changes in the laws and measures promoted by the government," says Prime Minister Bohuslav Sobotka.

NEXEN TIRE'S INVESTMENT

the investment amount in the first phase will be CZK 22.8 billion
NEXEN's investment is the third-biggest investment in the Czech Republic's history
construction of a factory in the Triangle industrial zone near Žatec in the Ústí region
creation of more than 1,000 new jobs
the factory will occupy 35 ha
production of tires; estimated volume of six million units per year
negotiations lasted 13 months; the Czech Republic succeeded in beating out Poland for the investment
start of construction is planned for 2015
an expansion in the value of up to CZK 45 billion could comprise the next phase of the investment
NEXEN could thus employ more than 2,300 people in future
the factory would then occupy a total of 70 ha

In the agreement, the Czech government is committed to providing investment incentives in the total value of CZK 3.8 billion, tangible aid in the value of CZK 1.1 billion in connection with the strategic investment, tangible aid for job creation in the amount of CZK 300 million, corporate-tax relief in the amount of CZK 2 billion, compensation to the Ústí region for a discount on land plots from the ISPROFIN programme in the amount of CZK 302 million and tangible aid for training and retraining in the amount of CZK 92 million.

"According to qualified estimates, the expended aid will be returned to the state twofold. The benefits of the investment primarily consist in direct and indirect employment and the related income and payroll taxes, as well as the effects of the plant's construction, in which Czech companies will take part," says Minister of Industry and Trade Jan Mládek, who adds that the anticipated amount of annual income tax paid my Nexen is hundreds of millions of crowns. However, everything depends on the condition of the domestic and global automotive industry and related demand.

Nexen will begin filling management positions in the second half of 2015, followed by recruitment of production workers in 2016. "At its factory in the Triangle zone, Nexen will use state-of-the-art technology, so construction of the facility itself will be very demanding financially," adds Ondřej Votruba, acting CEO of CzechInvest. "Together with the investment incentives, or rather the conditions for obtaining them, and the investor's development plan, this is a guarantee that the company will be operating in the Czech Republic for a long time to come."