Denso Corp will invest €95 million ($US115 million) to expand production of diesel engine common rail systems in Hungary, the firm reportedly said on Friday, adding it would receive a state subsidy for the investment.


The company told Reuters the expansion of the plant in Szekesfehervar, where Denso also produces diesel injection pumps and engine-related components, will create 1,000 new jobs and the expansion will bring annual production to 700,000 units by 2006 from 300,000 now.


The common rail system will mainly be supplied to Toyota and Ford, Denso reportedly said, though it did not give the amount of subsidy it would receive from the Hungarian government.


According to Reuters, Hungarian daily Nepszabadsag reported on Thursday that Hungary was planning to grant investment subsidies worth some 30 billion forints ($US144.2 million) to eight foreign firms to attract capital in a race with other EU states.


Hungary reportedly has already signed a contract with German automotive parts supplier Robert Bosch, to invest an additional €150 million in its Hungarian plant by 2006, and US oil giant Exxon Mobil , which plans to set up a regional service centre.


The news agency noted that new European Union entrants in Central Europe have been competing for years to attract the service and development centres of multinational firms with tax concessions, subsidies and a cheap and skilled labour pool.


Foreign direct investment is especially important for Hungary as it seeks to fill a current account deficit, which is expected to be in excess of 8% of gross domestic product this year, Reuters added.