26.05.06 13:55 Age: 18 yrs

Faulty economic studies to serve as basis for granting investment incentives to Hyundai

Press releases, Cases, Hyundai


CzechInvest has ordered two economic studies on the potential impact of Hyundai´s planned car plant on the Czech economy. [1] According to an analysis developed by ELS lawyers working under the GARDE - Global Responsibility program in partnership with the Trust for Economy and Society ("Trust")[2], however, the document is not much of a study but rather a promo material, an essay of questionable quality lacking in content and substance. Nevertheless, the investment contract recently signed with Hyundai indicates that this very study is to be used to defend the project at the European Commission that is expected to discuss "public support" [3], i.e. the billions worth of investment incentives provided by the Czech Republic.

"Studies developed at CzechInvest´s orders contradict each other on many points, often use unsubstantiated evidence in their arguments and in no way can be seen as the urgently needed complex assessment of economic and non-economic advantages and risks associated with the investment," says Jan Drahokoupil, coordinator of the Trust´s Direct Foreign Investment program.

For example, the study written by Petr Zahradník and Jan Jedlička (Z+J) claims that the Hyundai project´s biggest benefit to the economy will be a higher VAT collected from the sale of cars in the Czech market, reportedly as much as CZK 6bln. On the other hand, a study developed by Markéta Šichtářová of Next Finance, s.r.o., (Next) addresses the VAT issue as well and concludes that there would be no or very small increase since the sale of Hyundai vehicles would squeeze out other car makes from the Czech market.

For your information, we are listing several other major differences in the two studies regarding the budget income and cost-cutting:
- annual income from health insurance and social security: Next: CZK 1.7bln; Z+J: CZK 2.4bln;
- personal income tax: Next: CZK 0.44bln; Z+J: CZK 0.6bln;
- unemployment benefits: Next: CZK 1.29bln; Z+J: almost CZK 1bln;
- corporate income tax revenue – Next: CZK 0.78bln; Z+J: CZK 3.9bln.

Jiří Nezhyba, a lawyer of the ELS´s GARDE - Global Responsibility program, says: "The controversies described above are accompanied by the Czech party´s uncritical approach to Hyundai´s investment without any sound assessment whatsoever. CzechInvest should seriously consider whether the Czech Republic can afford to present the European Commission with a project asking for approval of billions worth in subsidies supported by studies of such poor quality."

[1] both studies and the Hyundai Motor Company investment agreement are available for download at CzechInvest´s web site: www.czechinvest.org/web/mwci.nsf/pages/8184425B1540DFE5C125717000659F8C
[2] the full text of the joint analysis is attached to this press release and available for download at www.eps.cz and www.thinktank.cz
[3] see the investment agreement, page 21, Article 9.3, Public Support Approval, EC Notice on Investment Agreement


Soubor ke stažení:Analysis of economic studies on the potential impact of Hyundai’s project developed by CzechInvest