By Sandor Peto
BUDAPEST, July 31 (Reuters) - The Czech Republic remains the
most attractive investment destination among new European Union
(EU) members, followed by Slovenia and Slovakia, an annual
survey of German firms in the region showed on Thursday.
The poll of over 800 companies, conducted by German chambers
in the region, also showed most German companies plan to boost
investment (FDI) in several central and eastern European states
despite rising wage costs and an economic slowdown.
(Click [] for factbox).
The least attractive FDI destination among new EU members is
Bulgaria, according to the average of rankings in the poll.
Germany is one of the biggest investors in the region which
also accounts for 16 percent of Germany's foreign trade.
"The country with the biggest improvement in the region is
Poland who, among 20 states which could be chosen, rose to fifth
place, from 10th," the German-Hungarian Chamber of Industry and
Commerce said in a statement.
When the companies were asked about their actual investment
plans in 2008 compared with last year, Poland was on top, with
55 percent of firms projecting increasing investments.
However, in the Czech Republic, which has attracted the most
German investments in the region so far, only 26 percent of
companies planned increased spending.
Hungary's score was also a relatively low 28 percent, and
more than half of respondents said its economy was in bad shape.
Most firms also said they faced rising costs last year and
expect further increase in 2008.
A spike in inflation across the region, largely driven by
high global commodity prices and domestic consumption, has
helped to provoke a jump in wage demands. Western Europe's
slowdown and record strong currencies have also hit exports.
In the Czech Republic, for example, Siemens <SIEGn.DE> plans
to lay off some 1,000 workers at a railway carriage factory
partly due to high wage costs.
But in Hungary, where real wages have been falling in the
past two years due to fiscal adjustment, Daimler <DAIMGn.DE>
plans to invest 800 million euros and create 2,500 jobs at a new
Mercedes car plant.
Looking ahead, German firms expected wages to rise faster
throughout the region than general cost levels.
"This concern is the strongest in Poland, Slovakia and
Lithuania, while it is moderate in Romania, Serbia and the Czech
Republic," the statement said.
Apart from wage concerns a key risk to investments is
represented by complaints in almost all states in the region
about an increasing shortage of skilled labour.
"The situation is the most serious (in that respect) in the
Baltic states this year," the Chamber said.
(Reporting by Sandor Peto, Editing by Gerrard Raven)
