Prague - The Czech government approved an investment agreement worth Kc22.8bn with South Korean tyre maker Nexen today, Prime Minister Bohuslav Sobotka (Social Democrats, CSSD) has said.
In the first years of the investment project, Nexen will create at least 1,000 jobs in industrial zone Triangle in the Ustecky region, north Bohemia, where it will operate.
In the future, Nexen may invest up to Kc40bn in the Triangle zone, which would be the highest investment a foreign company has ever made in the Czech Republic.
The agreement between Nexen, representatives of the Czech government and representatives of the Ustecky region will be signed on June 25 in Prague, according to information obtained by CTK.
"The decision made by the government, which approved an investment agreement with Nexen today, is a clear signal that our country in very interested in drawing new investors, and is attractive for the new investors," Sobotka said commenting on the decision.
The Czech Republic has won the investment contract in a competition with strong international rivals, he said.
The investment has been welcomed by Finance Minister Andrej Babis (ANO), who said the Czech Republic has offered a very attractive investment incentive to the investor.
Babis said he had recommended to the government's agency CzechInvest that the financial benefit of foreign investment projects, which are granted a Czech incentive, be evaluated additionally.
He also put forward a proposal to the Foreign Minister Lubomir Zaoralek (CSSD) that audits be conducted at Czech representative office, so that the Czech representation abroad corresponds more to investments made by these countries in the Czech Republic and to mutual trade in the future.
Zaoralek said at a press conference after the cabinet meeting that South Korea will become the third biggest foreign investor in the Czech Republic after Germany and Japan thanks to the investment.
He also described the details of investment incentives for Nexen.
The company will receive support for purchasing tangible and intangible assets corresponding to up to 5 percent of the total eligible costs, but to the maximum amount of Kc1.14bn, Zaoralek said.
The incentive also contains the payment of Kc200,000 for each created job and a contribution to employee training, he added.
The government of the Ustecky region has also welcomed the Czech government's stance.
"It is the last step leading towards the signing of the agreement," Ustecky region's governor Oldrich Bubenicek (Communists, KSCM) said.
The transaction will be completed still in June, according to Bubenicek.
"We are glad that the Korean investor has chosen the Ustecky region and we will give maximum support to it during implementation of the project," Bubenicek said.
The approval of the investment deal today was preceded by an approval of a contract on the sale of 60 hectares of land in the Triangle zone by the Ustecky region's government at the beginning of June.
The price Nexen paid for the land in the Triangle zone was EUR1 (about Kc27.5) per a square metre. The price normally paid for a square metre of land in the zone is Kc400.
As a compensation of the price difference, which reaches about Kc260m, the state will guarantee a sum of Kc302m to the region. The guarantee is contained in the purchasing agreement.
Nexen could launch production in the zone within roughly two years.
Nexen supplies tyres to the Hyundai and Kia car plants in the Czech Republic and Slovakia, as well as to the Skoda Auto car plant in Mlada Boleslav, central Bohemia.
Unemployment in the Ustecky region may drop by about 0.3 percentage points thanks to the 1,000 jobs which Nexen is to create, the local employment office said earlier.
Unemployment in the regions reaches 11 percent and is the highest from all the regions in the country. A total of 62,960 people were without a job there in May.
The number of jobs Nexen can offer can increase to as many as 2,300 and the amount of the investment can rise to up to Kc40bn in the future.
Nexen focuses on the production of tyres for passenger cars, light utility vehicles and sport utility vehicles. It exports tyres to 120 countries.
The company made a net profit or $120m (about Kc2.4bn) in 2013. It currently employs about 4,000 people.