Are foreign companies moving further East in seek of cheaper labour?
The British Imperial Tobacco Company has decided to close their factory in Slovenia - with the loss of over 200 jobs. But it's not so much the amount of jobs cuts that is worrying some experts. Rather that the closure could be a sign of a growing trend in foreign owned companies which are closing factories in the EU accession countries - in order to move to cheaper labour markets elsewhere. But are the fears justified?
So news that the owners now want to close the factory and dismiss all its workers, has sent shockwaves through the country. According to the Imperial Tobacco - the factory will close because of Slovenia's impending entry into the European Union and not because of poor performance. Peter Uhlik, is the owner's representative and director of the Tobacco Factory in Ljubljana:
" The fact, that this factory will be closed has nothing to do with the performance which the factory showed in the past and still shows at the present"
Slovenia's Prime Minister Anton Rop disagrees with the idea that the factory has to be closed because of the country's entry into the European Union.
"The owner of the tobacco factory said that he wanted to close the factory becase of Slovenia joining the EU. This is not not consistent with the facts. The owner is closing the factory because the profit margin is too low, even though he is making a profit. He was also ignoring rules that are valid in Slovenia."
Mr. Peter Uhlik also gave other reasons for the decision:
" So, over capacity exsisted also in the past in the couple of factories of Imperial, but it would be far more expensive to import goods due to import duties"
Some experts fear Slovenia's entry into the EU may lead to some similar cases, where factory owners shift production to places where the labor force is cheaper. It's thought the textile industry will be especially hard hit - and the oppostion National Slovene Party, has already accused the government of not doing enough to protect the Slovenian economy, and especially Slovene jobs, during EU entry negotations.
But Prime Minister Anton Rop is convinced that such fears are unfounded. These and similar cases will not, according to him, threaten the Slovene national economy.
"In Slovenia, we will gain investments that will be two or three times greater than the places that are closing after EU entry."
EU entry is expected to cause some shake ups within the Slovene economy. For example - companies that have been protected until now by state subsidies will also feel the effects of a larger market. And those companies that are not able to survive in this expanded market may be forced to close. It'll be up to the state to decide how to deal with the social aspects of these problems, especially with regard to questions of economic policy, and attracting new investment to Slovenia.
