Hyundai wants to begin Czech production by October 2008

The 1bn euros ($1.2bn; �700m) factory in the Moravia-Silesia region will produce about 300,000 cars a year and employ 3,000 people.

The Czech government has given about 200m euros in tax breaks and other investment incentives to draw Hyundai to the high unemployment region.

A strong car industry helped drive the Czech economy to 6% growth in 2005.

Job creation

The Hyundai deal would be one of the biggest foreign direct investments in the Czech Republic's history and economists say it could boost economic growth by up to 1.3% a year.

This location will provide an ideal strategic base for our European manufacturing operations Kim In-seo, Hyundai

Last year the Czech economy received a similar boost from the launch of a massive Toyota Peugeot Citroen car plant in Bohemia, which employs 3,000 workers.

The Hyundai plant is due to begin production in October 2008, and the government hopes it will create an extra 9,000 jobs indirectly.

The deal is expected to be signed in May, after it has been approved by Hyundai bosses, the Czech Government and local authorities.

Hyundai first mooted building a plant in the Czech Republic in 2002, as part of its strategy to increase production in overseas markets.

"This location will provide an ideal strategic base for our European manufacturing operations," said Kim In-seo, Hyundai's senior vice-president.