GE investment turns political football
19. 7. 2016 | Source: BusinessInfo.cz
State cannot be a servant in a relationship with the investor, says finance minister Babiš.
Until just lately it appeared that nothing stood in the way of the construction of a new factory near Prague by US firm General Electric Aviation. But the multi-billioncrown investment has hit the bumpers thanks to a disagreement between finance minister Andrej Babiš (ANO) and trade and industry minister Jan Mládek (Social Democrat) over a financial injection required for the Czech Technical University in Prague (ČVUT).
Under the deal, ČVUT is set to develop small and medium-sized airplane turboprop engines for the Americans, as well as motors for drones. They would not only be built in this country, but would also be designed, developed and tested here.
The theory doing the rounds is that Babiš does not want Mládek to gain political capital from one of the decade’s largest foreign investments. And yet, back in January, the finance minister teamed up with PM Bohuslav Sobotka (Social Democrat) in the US to sign the very deal with GE Aviation that he is now seeking to revise. Specifically at issue is CZK 2.7bn which the government committed to providing to ČVUT for the training of hundreds of engineers and development of motors. These funds should later be reimbursed by way of EU grants.
“The ministry of finance is expressing objections against misleading claims, according to which GE Aviation fundamentally rejects subsidy support,” says the finance ministry. “The ministry supports [the project], but simply does not want it to go ahead in a manner that is beneficial on all fronts for the given company, while the Czech state – meaning taxpayers – bear the overwhelming majority of costs and risks.”
According to the ministry, GE believes that the government will provide no-strings start-up support in the order of CZK 2.7bn, which the firm will use up and only then decide whether to truly establish production in the Czech Republic.
But Mládek rejects such concerns. “I would very much like to believe that the dispute is centred around the financial participation of the state and has nothing to do with issues of ‘prestige’, because a simpler solution could be found,” he told E15.
Furthermore, the trade and industry ministry is offering to help shoulder the costs of offering subsidies to ČVUT, it says.
Originally published in E15 weekly, economic and business newsmagazine. Author: Pavel Otto