Electronics manufacturing is a prefered, strategic industry in almost all Eastern European countries. It means, when you establish here a new manufacturing plant, you can expect more "good points" from governments, which concludes higher grants.
Generally we can say, Eastern European governments' threshold stimulus is around 10 million euros investment and approx. 100 new jobs in electronics industry, under these numbers you are a very small investor. Governments normally sign an agreement with investor, so receiving a government grant is a contractual connection between the company and the government. It means, you get some money, but you also have some obligations, e.g: for job creation money you have to employ your staff for 1-2 years - and when you could't, you have to pay back the grant.
The subsidizing process always starts at the governmental investment promotion agencies: the PAIZ in Poland, The HITA in Hungary, the CzeckInvest in the Czech Republic, the Sario in Slovakia, and the RomTradeInvest in Romania. Decision making about the government subsidy requires normally 1-3 months.
There are several dues you can apply for, here we overview the most important:
#1 Real Estate development subsidies
Fundamentally there are 2 types of property grants: a) transfer of industrial land at a discount (e.g: in the Czech Republic) and b) building subsidies (e.g: in Hungary). When you think about real estate grants, do not forget: real estate business is a particular profession, and real estate costs are approx. 10% only of the total investment - it's much easier to lease a property on a subsidized fee.
 | Case study: subsidized leasing in Polgar, Hungary Polgar Industrial Park, Hungary won an EU grant in 2012 for development of a new, 7,000sq.meter (75,000 sq.feet) manufacturing hall, available from Q4 2012. The grant provides a leasing fee discount for potential investors, and in the meantime they don't have to invest in a real estate. |
#2 Machinery purchasing grant
Most countries do not separate the real estate and machinery grants - they simply subsidizes investments in "assets". The machinery can be the main "eligible cost" of investment projects, e.g in the Czech Republic, "a basic condition is a minimum investment in long-term tangible and intangible assets in the amount of CZK 50 million in Regions I, of which at least CZK 25 million must be invested in new machinery, and CZK 100 million in Regions II, of which at least CZK 50 million must be invested in machinery, whereas at least half of the minimum investment amount must by financed with the investor’s own capital." (CzechInvest's brochure 2012)
Most countries do not separate the real estate and machinery grants - they simply subsidizes investments in "assets". The machinery can be the main "eligible cost" of investment projects, e.g in the Czech Republic, "a basic condition is a minimum investment in long-term tangible and intangible assets in the amount of CZK 50 million in Regions I, of which at least CZK 25 million must be invested in new machinery, and CZK 100 million in Regions II, of which at least CZK 50 million must be invested in machinery, whereas at least half of the minimum investment amount must by financed with the investor’s own capital." (CzechInvest's brochure 2012)
#3 Job creation and other HR-related subsidies
The G-spot of Eastern European governments is job creation, this is the magic word you should build on. Many countries simply provides a "head money" for each new job created. For example, if you invest 40 million Polish Zloty (approx. 10 million EUR) in Poland, AND create 250 new jobs in electronics, the Polish government will grant you 800-3900 EUR per new jobs. The final job creation grant in Poland depends on the number of new jobs created, the percentage of employees with higher education, location, attractiveness of the products on the international markets etc. Other governments subsidize also smaller costs (e.g: employees' commuting cost in Hungary, training costs in many countries etc), but these are the typical schemes.
#4 Tax relieves
Eastern European governments are a bit shy when its about tax relieves. Before EU accession, most government provided large scale corporate income tax relieves, but the European Union doesn't like it indeed. However, most of the governments found smart, EU-compatible solutions for tax relieves. For example, the Hungarian government provides "development tax allowance", with the following scheme:
#5 Cash grants
- Amount of subsidy: exemption for 80% of the corporate tax payable for 10 years following installation. Up to HUF 500 M turnover the corporate tax rate is 10%, above HUF 500 M the tax rate is 19%.
- Conditions: investment volume min. HUF 3 B (EUR 11.3 M), min. 150 new jobs OR HUF 1 B (EUR 3.7 M) investment volume and 75 new jobs in preferred regions
- Application: depending on investment volume request or application needs to be submitted
- Provider of incentive: Ministry for National Economy
#5 Cash grants
In the love packages of Eastern European governments there is two types of cash. All the grants above have specific goals, preferences, and obligations (e.g: re-training grants have to spend for local trainings), but when you hear about "cash grants" it means in general: you get money (normally not more than 5% of total investment costs) as a bonus.
The European sandbox
Finally: the government grants ("state aid" in European jargon) are generally prohibited by European Commission (the "federal government of EU"), because government grants have a negative impact on internal market competition. However, there are some exceptions, when EU not prohibits but supports state aids: the underdeveloped regions of Eastern Europe can provide grants on this way. The understanding of EU state aid policy can help to make better investment decisions, so lets take a look at the following presentation:
of course, water is required in copious quantities and there is heavy use (aka exploitation) and pollution of all local water sources. Serious Electrical Solutions
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