One of the world’s largest manufacturers of electric motors, the Japanese company Nidek, officially announced the construction of a factory near Novi Sad a few days ago, thus confirming the announcements from last year.
However, at that time, there was talk of an investment of 1.8 billion dollars, and at the presentation of Nidek’s plans, information could be heard that half of that 1.8 billion dollars, ie 1.5 billion euros, would be invested in Serbia.
But, the good news is certainly the arrival of a large company that brings somewhat more modern and sophisticated technology than previous investments in the automotive industry, which have been reduced to simple production of parts and cables.
On his corporate website, Nidek announced the construction of two factories, next to each other, in order to, as it is stated, use the synergetic effect. The first factory is being built by Nidek electric motor Serbia, a manufacturer of electric motors for cars, which will employ 1,000 people on an area of almost 60,000 square meters.
The construction of a slightly smaller plant of Nidek Elesys Europe, which produces electronic devices for controlling steering, braking and other systems in cars, is also planned at the same location. This factory should occupy 36,000 square meters and employ 200 people. The construction of both facilities is planned for September this year, and the completion for the middle of next year.
Apparently, the finances have already been provided, since at the end of March, Nidek broadcast on the European market the five-year so-called “Green” bonds that finance projects with a positive effect on the environment in the amount of 500 million euros with an annual interest rate of only 0.046 percent. For the sake of comparison, the yield on five-year bonds in euros in Serbia is one percent or some twenty times more than what the Japanese pay.
At the beginning of March, another factory from a similar area was opened. The German Continental has officially opened a previously completed plant in which work has begun on the production of advanced electronic vehicle management systems. This investment amounted to 140 million euros and will employ up to 500 people.
Such investments of large global companies are not surprising, considering the predictions that by 2030, about 30 percent of vehicles in Europe will be electrically powered due to increasingly strict regulations on the emission of harmful gases. However, the question is where those in Serbia come from. Ivan Nikolic, the editor of Macroeconomic Trends and Analysis (MAT), points out that the initial attraction of investments with pronounced manual work or colloquially “winding cables” turns into something of better quality.
“It was difficult to expect large producers to come immediately in a low-standard sub-invested country, but production of lower value-added products has already begun. This transformation is happening in Serbia, not only in the auto industry, but also in other areas of the manufacturing industry,” Nikolic explains, adding that this is shown by much higher exports in the last five years. According to Nikolic, this growth of exports is partly a consequence of the increase in the production of already present companies, partly a consequence of the arrival of new ones, and partly due to the production of higher-level products that are more valuable.
At the beginning of last year, when the corona virus was just an epidemic that closed China and when supply chains were interrupted, especially in the electronics and auto industries, analysts estimated that manufacturers would try to move production from China closer to the European market. We do not know whether Nidek’s decision is a consequence of those circumstances, but Nikolic points out that Serbia’s advantage in attracting investments has now become a good name.
“Investors follow each other and when the former has a good experience, then others come separately from the same area. For example, the auto industry completely compensated for the decline in Fiat production in Kragujevac three years ago. It is indisputable that cheap labor is a magnet for investors, because it reduces their costs. But there is now a better infrastructure. Also, there are financial incentives, but everyone in the area is more or less trying to bring investors by offering favorable conditions and financial incentives,” he said.
Both Continental and Nidek, as well as many others, point out in their announcements the qualified workforce, especially engineering, as a very important factor in the decision to come to Serbia. Nikolic says that is a limiting factor in the medium term.
“Now that other element is appearing, and that is that people from the surrounding area are coming to work in Serbia. If there was no influx of labor from outside, we would probably be left without available labor by 2025. That is why the state should send those investments with better education,” estimates Nikolic, adding that now we have a new moment for companies to start cooperating with universities, citing the example of the agreement on cooperation between Nidek and the University of Novi Sad.
Maybe the production of electronics and software is more sophisticated than winding cables, but according to Bozo Draskovic, a professor at the Faculty of Applied Ecology “Futura”, subsidies are still the main reason for attracting investments from the auto industry, which are actually the revenues of those companies.
“This is a higher technological level, assembly of electric motors and electronic devices, but it is still a screwdriver industry when there is no research and development. The question of the net effect of these investments remains unanswered, because it is known that they import a large number of components that are only assembled here and then exported. We do not know the net effect of these investments except on employment. Our economy does not have its own investments and innovations. Instead of employment, the first goal of economic policy should be to support small domestic engineering and production companies that would be suppliers to these large multinational companies,” Draskovic concludes, Danas reports.
