Page 10 - bne IntelliNews 26th May

Central Europe
May 26, 2017 www.intellinews.com I Page 10
EU opens probe over Slovak aid for JLR car plant
bne IntelliNews
The European Commission has launched a probe into investment incentives of up to €125mn hand- ed to Jaguar Land Rover by Slovakia to convince the premium carmaker to park a €1.4bn plant in the country.
The probe is likely to infuriate Bratislava. Prime Minister Robert Fico reportedly pulled out all the stops in a personally-led effort to beat off compe- tition from across the Visegrad region to land the investment from the Indian-owned iconic British marque. JLR led the region a merry dance, clearly fishing for the best deal. The likes of Daimler have copied the model since.
Slovakia is the world’s largest auto producer per capita. Bratislava said that it hopes that the JLR plant, which will start producing cars in Nitra in 2018, will help boost GDP. Numerous parts sup- pliers have piled into the area in the wake of the announced investment.
However, Margrethe Vestager, EU competition commissioner, said the investment in Nitra must be checked to see if it is in line with EU rules on regional state aid.
“It is a good thing if public investment fosters eco- nomic growth in member states,” she is quoted as saying in a statement. “However, we need to avoid harmful subsidy races. The commission will care- fully investigate if Slovakia's planned support is really necessary for Jaguar Land Rover to locate its investment in Nitra and is kept to the minimum needed, if it distorts competition or harms cohe- sion in the EU."
The plant, forecast to produce 150,000 cars per year, should start production next year.
Slovakia promised €125mn to support to build the plant forecast to produce 150,000 cars per year, which is the maximum state aid a country can provide under the EU rules. The commission has “doubts at this stage that the planned aid com- plies with all state aid rules.
“In particular, the commission has doubts at this stage whether the measure incentivises private investment,” the statement continued. “It will need to further investigate whether Jaguar Land Rover's investment decision was triggered by considerations other than the conditional public subsidy.”
The region of Nitra is an area eligible for regional aid under EU state aid rules, the EU statement noted. However, perhaps crucially, EU rules state that support must not be used to compete with another region that qualifies for development aid.
Slovakia competed for the investment with its Visegrad peers for months. The Czech Republic, Hungary and Poland, which also host thriving auto sectors that are central to their economies, all had claimed at various points throughout 2015 that they were close to striking the deal.
However, JLR announced in August that year that it had signed a letter of intent with Bratislava. Slo- vakia amended legislation on state aid for large investors, making it possible to speed up process- es such as construction permitting, as part of its successful bid to win the project.