*Sofia Airport was opened December 2006

Romania

(Microsoft) On the 1st February, Microsoft Corp. Chairman Bill Gates opened a $16 m center in Romania to offer technical support to customers throughout Europe.

Gates inaugurated the center, which will employ 150 people. He pledged further investment in the city and announced the opening of the global support center as confirmation of the great technical skills being developed in Romania. Microsoft already employs about 100 Romanians at its office in Bucharest, which it opened 10 years ago.

(URBB) United Romanian Breweries Bereprod SRL announced a $25 million investment to expand the production line at the Tuborg brewery on the outskirts of Bucharest. The company is planning to produce 2.3 million hectoliters of beer annually by 2011, almost double the current production capacity. URBB has invested $113 million to date in the production plant.

AEGON (one of the world's largest life insurance and pension companies, and a strong provider of investment products) and Banca Transilvania have signed a memorandum of understanding to jointly develop and operate a mandatory pension company in Romania. The 50-50 joint venture company will be established during the summer of 2007 in anticipation of the mandatory pension system, which is expected to be operational in Romania by early 2008. In addition, AEGON will establish a life insurance company in Romania that will enter into a distribution agreement with Banca Transilvania to sell co-branded products through the bank's extensive network of 340 branches. The pension company will be based in Cluj-Napoca, Romania.

(LIDL) German discount network Lidl is entering the Romanian retail market, with operations opening in Bucharest, Brasov and Iasi to begin with.

Hungary

Modine announced a $12m investment to build a Greenfield manufacturing facility in Hungary to support growing product demand. Modine, US manufacturing company a global leader in designing and developing heating and cooling solutions for a diversified group of markets, announced in January that its Board of Directors has approved a $12 million (€9.28 million) investment to build a second facility in Hungary. This is to support the growing demand for aluminum heat transfer products from global customers such as Caterpillar, Volvo, Nacco and AGCO in Europe, and extending Modine's global low cost country manufacturing footprint. The new facility will be built in F?abony, in North East Hungary, very close to Modine's existing facility in Mezők?d, Hungary.

(Samsung) Korean electronics heavyweight Samsung will invest Ft 20 billion (€79.4 million/ US$ 102.6) in order to boost TV production capacity over the next year and a half, creating 1,000 new jobs, Economy Minister J?s K?announced on January 12 2007. The new investment will consolidate not only Samsung's leading position on the Hungarian market, but also Europe's LCC TV market. Samsung is poised to add 18,000 square meters of production capacity at its existing plant in J?f?szaru, near Budapest. The factory's Hungarian turnover was Ft 41.5 billion in 2005, with export sales (in a total of 34 countries) of Ft 136 billion. After opening in the middle of 2007, the new production facility will build up to full output from 2010. The existing plant currently employs 2,000.

(Suzuki) Japanese car maker Suzuki plans to raising capacity from 200,000 to 300,000 cars at its Magyar Suzuki Zrt plant in Esztergom by 2008-2010 through a local investment of Ft 40 billion (US$ 205m). The figure exceeds by far the figure of ¥8 billion (€51.9 million) announced last year.

Lite-on IT, a major manufacturer of optical disc drives, announced it will acquire a car CD and DVD drive plant in Hungary from the Dutch electronics giant Phillips.
Lite-On IT will pay $55-56 million for Philips' car CD/DVD manufacturing operations which are located in the city of Győr, and employ about 1,600 people. In addition, the Taiwanese firm will pay $7.96 million to Taiwan's BenQ for a 49% stake in a joint venture with Philips which was established to develop, market and sell the devices.

In the pipeline

Russian company, OAO KrasAir, which is bidding for the state airline, Malev, through its local investment vehicle, would immediately invest US$ 30-50 million in the carrier should it win.

KrasAir continues to raise its bid for Mal?Zrt. since its first offer in late 2005, and plans to increase passenger numbers at Mal?by about 10% over the next three years. The Russian company is competing with Lithuanian airline owner LAL Investiciju Valdymas for Mal? Hungary is trying to sell a 99.95% stake in Mal?for the seventh time. (Bloomberg)

Czech Republic

(Lonza) Swiss biotechnology firm Lonza will invest almost CZK 1 billion to upgrade and expand production in its plant in Kourim, Central Bohemia. After the completion of the project, Lonza will produce the ALTU-135 enzyme mixture for US drug maker Altus.

Lonza, with more than 350 staff, has invested over CZK 4 billion in biotechnologies in the region to date. Lonza, one of the world's biggest suppliers to the pharmaceutical industry, generated turnover worth CHF2.91 billion in 2006.

British bus operator expands on the Czech market

The British bus and rail operator Arriva acquired the Prague-based bus transport company Bos?Bus for Kč 45 million (€ 1.6 million/ ) on Jan. 30. This is Arriva's second acquisition on the Czech market in less than two months, after the Dec. 11, 2006, purchase of Transcentrum bus, for Kč 212 million (US $9.7) . In December, Transcentrum bus had 120 buses and employed 120 people.
Arriva is also considering further expansion. Arriva is the first U.K.-based company focusing on the opening Continental transportation markets. It currently operates in Denmark, Germany, Italy, the Netherlands, Portugal, Spain, Sweden, the Czech Republic and the U.K. It employs 33,000 people and transports over 1 billion passengers annually. In January, Arriva also acquired 85.12 percent of German bus and rail company Osthannoversche Eisenbahnen. The British company is also interested in rail transport in the Czech Republic.

In the pipeline

Hyundai Motor officials said Tuesday that the company has decided to delay the launch of construction of its Czech plant, which was initially slated for early March.
Hyundai plans to invest $1.4 billion to build the plant, which will have an annual production of 300,000 vehicles at full capacity, compared to the 60,000 unit-capacity of its Turkish plant.

Lithuania

PKN Orlen purchased the Mazeikiu refinery in Lithuania in largest foreign acquisition ever made by a Polish company. The purchase put the Polish firm on track to becoming the largest petrochemical holdings in Central Europe. In the deal PKN bought a 53.7 percent stake in Mazeikiu Nafta from the Russian company Jukos, and then, a few days later, paid the Lithuanian government $852m for a further 30.66 percent stake in the refinery. The total amount spent by Orlen on the refinery reached $2.34bn for a total 84.4 percent stake in Mazeikiu Nafta. The deal was agreed in December 2006 and completed recently.

Latvia

In the pipeline

Chinese businessmen are interested in investing US $ 3 bln (LVL 1.6 bln) into liquefied natural gas (LNG) factory in Latvia. According to Neatkariga Rita Avize, although a gas pipeline is being built from Russia to China the new pipeline will not be enough to cover the natural gas demand in China. Chinese entrepreneurs are considering the possibility of building a LNG factory in Latvia where natural gas delivered from Russia by pipeline would be liquefied and transported to China by sea.

The new factory would employ approx 170 high qualified employees.
Currently, Belgium, France, Greece, Italy, Portugal, Spain and the United Kingdom have LNG facilities; facilities are also planned in Germany and Poland

Poland

In the pipeline

Indesit, the Italian white-goods manufacturer, announced in autumn 2006 that it would build two plants for zł.323.5 (US $ 108) million in Radomsko. Now the company is encouraging its subcontractors to invest in Poland and asked over 20 companies to visit Poland. The enterprises, including Officina Meccanica, Galezzi, the Ostan group and VIC are planning to visit on February 22-23.

A growing number of Danish companies want to move their operations to Poland.
The number of Danish companies currently operating in Poland already exceeds 300 and may grow further, because many small and medium-sized firms in Denmark want to move not only their domestic operations, but also their operations in countries like France and Germany, to Poland. "We know of five or six Danish companies which plan to close down their production lines in Great Britain. I am yet unable to say which companies those are, since even the workers don't know the plans," says Soren Juul Jorgensen, Councillor at the Royal Embassy of Denmark in Warsaw.

The increasing number of Danish companies in Poland means further growth of trade between the two countries. Poland is currently Denmark's eleventh-largest trade partner among the EU countries. The Ministry of Economy states that in the first eleven months of 2006 Poland exported products worth some EUR 1.58 (US $ 2.05) billion to Denmark and imported goods worth EUR 1.17 (US $ 1.52) billion. These figures grew by some 16 percent compared to 2005.

Bulgaria

A new terminal was opened in Sofia Airport at the end of December 2006. The new terminal was built to the east of the current terminal, and a second runway was constructed along the existing one. The existing runway has been turned into a taxiway parallel to the newly constructed runway. Both are crossing the river Iskar on a bridge. The new runway was opened in August 2006, while the new terminal opened in December, 2006. Total cost of the project was 200 million euro. The financing was secured from the European Investment Bank (60 million euro), Kuwait Fund for Arab Economic Development (approx. 41.5 million euro), European Union's Phare programme (7.6 million euro) and an ISPA grant of 50 million euro.

Commentary

This months FDI monitor again reports the inflow of FDI into Central and Eastern Europe. Countries such as Romania and the Czech Republic are still attracting foreign investment with some very big deals having taken place since the start of the year.

Important also is the type of industry locating to these countries. Microsoft announced a US$ 16m investment in Bucharest. This follows Oracles relocation of some of its operations from Dublin to the city several years ago. Dutch pensions company AEGON has entered the market to providing financial pension products - thus signifying that increased wealth creation has created a need for new financial products country. Across the CEE, knowledge based companies are replacing heavy industry

FDI is also occurring between the countries in CEE and not just dependent on western economies. January saw the completion of the deal by Polish company PKN Orlen to purchase the petrochemical Maxeikiu refinery in Lithuania.