Business and government representatives gathered near the western Bohemian town of Žatec on Wednesday to attend the official opening of a new Nexen Tire plant. The factory, which also features a research and development facility, is the third largest foreign investment project in the Czech Republic to be brokered by the country’s business development agency CzechInvest.
It was a major day for Žatec. Thus far mainly known for its hop production and historic centre, the town’s surroundings are now also home to a USD 1 billion tire manufacturing plant that will eventually employ more than 1,300 staff.
The investor, Nexen Tire, is South Korea’s leading tire producer and is seeking to expand into new markets. The company’s CEO Travis Kang explained why the Czech Republic was selected as the location for the company’s first European factory.
“It is also a powerhouse in the automotive industry and more than 20 percent of the country’s manufacturing is dedicated to this field. With access to Europe’s largest markets such as Germany, France and the United Kingdom, we expect the Czech Republic to serve as the gateway for our expansion into Central and Eastern European markets.
"In addition, with over 30 car makers located within 400 kilometres, the Czech Republic offers the ideal location for our business.”
Currently, 800 people are employed at the Nexen plant and the company plans to export up to three million tires by the end of 2019. Once construction is complete, the factory will produce 11 million tires per year.
The plant also includes a research and development centre, which is aimed at testing new technologies.
The vice president of the Confederation of Czech Industry Radek Špicar explains the R&D centre’s importance.
"The industrial sector is extremely important for the Czech Republic. We are one of the most industrialised economies in the EU. However, we need further modernisation of the economy. Foreign investors might be able to help us in this respect.”
The Czech economy is sometimes accused of merely being what some call a fitting shop of the EU, while research facilities are located in countries such as Germany.
Government and industry experts say, however, that boosting the presence of research and development facilities in the country will boost innovation and add value to domestically manufactured products.
This philosophy was also reiterated by the video message sent to the ceremony by Industry and Trade Minister Karel Havlíček.
“The government values investors which not only bring new jobs into the country, but also research and innovation activities as well as modern technologies. Added value, that is the objective of the Czech Republic.”
While the overall investment project now seems headed for a successful completion, not all was rosy during the six year long period since first information about Nexen’s planned investment started appearing in the headlines in 2013.
At that time, the Czech government, as well as local regional authorities went out of their way to accommodate Nexen with substantial discounts.
But then disputes appeared when the local region started haggling with the government about who should carry the financial burden for the property discounts offered to Nexen. This slowed down the property procurement process and subsequent construction.
“If you look at the current business climate and conditions for doing business in the Czech Republic, you see that there are many problems that investors face. First of all, there are more than 300,000 people missing on the labour market. Secondly, infrastructure is a big problem. We are not building enough highways, especially when you compare us with Poland. Many investors complain about it and they are right. Finally, our indirect cost of labour is one of the highest in the EU.
The government is trying to alleviate some of these problems. On Wednesday, while the Nexen factory opening event was taking place, the Czech Transport Minister Vladimír Kremlík was discussing highway construction with his Polish counterpart, tweeting that there was “a lot to learn” from the Polish example.
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