The Financial Express [FRONT PAGE][ECONOMY]

Wednesday, July 30 1997

Skoda optimistic about Belarus deal

Ryan Tutak

Budapest, July 29: Volkswagen AG's Czech auto-maker Skoda Automobilova AS said that it could close a deal in September to assemble cars in Belarus, confirming comments last week from the Belarus government.

"Details could be fixed and published in autumn," a Skoda public relations official, Jiri Hrabovsky, told Reuters by telephone from Prague.

"The earliest possibility is the end of September."

The Belarus minister for foreign economic relations, Mikhail Marinich, said last week that Skoda is negotiating plans to build up to 5,000 vehicles a year in a $20-million project in Belarus.

But Hrabovsky declined to confirm the size of the project.

"I am not able to say whether this is correct," he said. "It is too early to speak about details. Nothing is finalised."

But Skoda is optimistic about reaching a deal, Hrabovsky said, noting that the company started talks in Belarus roughly 18 months ago.

"Everything is in a good way to be resolved," he said.

Skoda also is considering assembling cars in Russia, probably in Smolensk, about 70 km east of northern Belarus.

"We are going through all the possibilities in the region," Hrabovsky said. "We are checking all circumstances, but maybe we are closer to finding a solution in Belarus than in Russia."

Marinich had said only two issues had to be settled to close a deal - the Belarus government must determine the package of investment incentives for Skoda, and Skoda must select a production site.

"I think we will solve these questions by September," he had said. "And the size of the possible investment could be $20 million with the aim to build 5,000 Skoda Felicia cars a year."

The government is considering granting Skoda similar concessions to those Ford Motor Co received for a $19.2-million project to assemble Escort cars and Transit commercial vehicles. The plant will officially start operations on July 30.

Ford has said it received a five-year exemption on corporate profit tax. It was also granted an indefinite allowance for duty-free imports of plant equipment and kits of car bodies and parts that Ford will assemble in Belarus.

Skoda has been examining a possible production site in Dzjarzynsk, roughly 40 km southwest of Minsk.

The government also has invited the Czech auto-maker to consider investing in the customs-free zone in Brest, southwest Belarus, near the Polish border.Belarus's market for new light vehicles is only a few thousand per year, but Skoda has said it would export most of the cars it assembles to Russia.

Copyright © 1997 Indian Express Newspapers (Bombay) Ltd.





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