SEOUL -- Slovakia will submit a new proposal by the end of July in a bid to secure a deal for a 500 million euro ($604.3 million) factory for South Korea's Hankook Tire, a company source told Reuters on Friday.
The move came after Slovakia, the preferred candidate, rejected a proposed incentive package for the South Korean firm.
Poland and Hungary, which competed head-on with Slovakia, would be able to renegotiate for the deal after showing renewed interest, the source added, noting that Slovakia's prospects may now be "slim".
"Slovakia will submit a new proposal by the end of this month and we will review it along with those from Poland and Hungary," the source, who asked not be identified, said by telephone.
Hankook, South Korea's biggest tyre maker, had chosen Slovakia as the preferred location for its production and distribution center in Europe in May. The deal has been closely followed by foreign exchange markets as the inflow of foreign direct investment has been a key factor fuelling the rise of the crown currency over the past few years.
"We would have signed a deal today with Slovakia had it not been for the proposal rejection. The chances of Slovakia winning the deal are slim now because of a serious damage to its credibility", the source said.
"But we are open to all possibilities and will go through all options again," he said.
Slovakian Finance Minister Ivan Miklos has said that the cabinet rejected an incentive proposal of up to 21 percent of total investment, put forward by the economy ministry, because it demanded too much funding from the state budget.
Slovakia is a popular destination for foreign investment in Europe, attracting businesses with its cheaper labor costs and low taxes.
But the government has had to offer financial incentives to win large projects, such as car factories, faced with strong competition from other new EU members, notably Hungary and Poland.
The Hankook plant was to be the third-largest foreign investment project in Slovakia, which has a thriving automotive industry, the backbone of its economy.
Kia Motors Corp., South Korea's number-two carmaker, started construction last year on a 1 billion euro factory in northern Slovakia and French auto maker PSA Peugeot Citroen is building a 700 million euro assembly plant near the capital Bratislava.
German car producer Volkswagen has been operating a plant in the country for more than 10 years.