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czech republic

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CZECH REPUBLIC


 

REPUBLICAN REFERENCE

Area (sq.km) 
78,600

Population 
10,264,212 

Density 
(per sq.km) 
132.2

Capital 
Prague 

Currency 
Koruna 

President 
Vaclav Havel

Private sector 
% of GDP 
80%

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Background:
After World War II, Czechoslovakia fell within the Soviet sphere of influence. In 1968, an invasion by Warsaw Pact troops ended the efforts of the country's leaders to liberalize party rule and create "socialism with a human face." Anti-Soviet demonstrations the following year ushered in a period of harsh repression. With the collapse of Soviet authority in 1989, Czechoslovakia regained its freedom through a peaceful "Velvet Revolution." On 1 January 1993, the country underwent a "velvet divorce" into its two national components, the Czech Republic and Slovakia. Now a member of NATO, the Czech Republic has moved toward integration in world markets, a development that poses both opportunities and risks. 

Update No: 071 - (27/03/03)

The Czechs have a new president, who won a third election by a whisker - one vote in parliament - over the candidate of the ruling coalition. He is Vaclav Klaus, a conservative economist and former premier, who is a self-styled Euro-realist. His political lodestar is Margaret Thatcher, an unusual choice of inspiration in Western Europe outside the UK, but not in Central or Eastern Europe.

New president to be more active
Vaclav Havel, Klaus's predecessor, who left office in February, was something of a figurehead president, a notable playwright, long a doughty dissident, but not a political operator. He was above the fray.
Klaus is pledging to be more interventionist and activist. Commentators in the country speculate that the three - party coalition could fall.
It was installed by only one vote in parliament last year and its performance has not been impressive, beset by bad luck in the shape of floods last year. The premier, Vladimir Spidla, has shown less surefootedness than his predecessor Milos Zeman. His own Social Democratic Party is riven with factions, some of whom voted for Klaus. This could bring down the government and enable Klaus to bring his own right-wing party back to power, a logical move.
Klaus is undoubtedly a tough operator with a history of winning the political tricks, although he could not keep his rival, Zeman, out of power. The presidency is likely to change its character under his tenure, becoming more populist. He intends to go walk-about instead of imitating the aloof Havel "untouchable in his beautiful Prague castle."

Implications for policy
Klaus has a conservative vision that is not, however, set in stone. He was opposed to EU entry several years ago, but has now, with reservations, come round to it. He is committed to entry in 2004.
The Czech Republic is notorious for shady dealing and corruption scandals. Klaus will want to clean the act up, as the population ardently wants. But to do that he needs power at home. A vote of no confidence in the government is on the cards, which if lost would lead to new elections that Klaus's party would likely win. The Czech Republic is swinging right again and could soon be under a new government. This would be very much the creature of Klaus, a new stronger presidency being the outcome.

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AGRICULTURE

Czech cabinet approves environment-friendly guidelines for farmers

The government today approved the guidelines of correct agricultural practices which Czech farmers will have to abide by as of next year, in handling fertilizers and manure, cabinet spokeswoman, Anna Starkova, told CTK News Agency reported on 3rd March.
Farmers will have to build new storage facilities and silos to avoid pollution of water and the environment with nitrates.
The new regulations for the use and storage of fertilizers and manure will take effect as of January to enable farmers to get prepared.
The authors of the "nitrates regulations" stressed that more than one third of Czech territory and 42.5 per cent of the entire area of farming land need special protection against nitrates.
According to last year's figures, the Agriculture Ministry estimates its investment for building storage facilities and silos to be between 28-30bn korunas in the next four years. Up to three quarters of the investments can be covered by the Ministry from EU subsidies, part of the expenses will be covered by agricultural companies and part from government's subsidies.
Due to nitrates, the Czech Republic has requested that the transition period last until 2010 to bring the quality of water in harmony with the EU levels.

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ENERGY

Energy traders seek partnerships

The head of the Czech Republic's struggling short-term market for electricity trading has admitted that it might be necessary to seek a partnership with neighbouring markets or cooperate in some way with its much larger German counterpart if it is to survive in the long term, Prague Business Journal reported.
The Czech market for electricity trading is simply not big enough or active enough, Miroslav Marvan, the general manager of the Electricity Market Operator (Operator Trhu s Elektrinou, OTE), said at the Enerkon '03 Energy Conference recently. The OTE is state-owned and funded by it and fees from traders. 
Since it was launched at the start of 2001 to accompany the first stage of the Czech electricity market opening, the short-term market for electricity trading has struggled to build enough trading volume. "The biggest problem has been the small extent of the organised short-term, spot market - less than 1% of the Czech electricity market," Marvan said. The small number of strong electricity traders, most notably electricity producer CEZ and Germany's E.ON, has also stunted the development of an active market because they exert so much influence over the market, Marvan added.
So the market operator has begun considering its options, including cooperation with the German, Slovak, Hungarian or Polish markets, Marvan said. "The Czech electricity market is not an island," he noted. No talks with any counterparts had yet been launched, he said.
Over the next few months, the OTE and high-voltage transmission grid company CEPS will work on developing a same-day market for trading electricity. At the moment, bids and offers by registered traders on the market are made a day in advance with the electricity delivered the following day.
Same-day electricity trading could be ready to be launched by July, Marvan said. However, he admitted the innovation might not do that much to boost the overall level of electricity trading carried out by the OTE. 
The three-day conference was organised by Brno-based, Business Forum.

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FOREIGN INVESTMENT

Low Czech workforce mobility remains long-standing obstacle for investors

Workforce mobility, or lack thereof, is one of the main problems facing Czech and foreign companies, according to the results of a survey released earlier this year by the CVVM research institute, the Prague Business Journal reported.
The survey showed around 80% of respondents wouldn't move to find work if made redundant; a mere 13% said they would. The problem of low workforce mobility in the Czech Republic is one that has surfaced repeatedly in recent years and, along with the rigidity of the main complaints voiced by foreign investors.
Worker immobility is partly due to the traditional desire of many Czechs to remain close to their roots and a reluctance of married couples to move if they both have careers. But other issues more open to government influence, such as regulated rents and high unemployment benefits, also pay a major role. Foreign investors and local companies also want shorter courses and a more flexible education system that meet the requirements of the market.
A major consideration for any worker offered a job that requires a move is the regulated rent market. "There is very little motivation for anyone living in subsidised housing to move to another city where they will most likely end up paying 100% of the market price for rent," said Filip Montfort, of the Euro-Czech Forum, which represents the chambers of commerce of five EU member countries.
The coalition government has thus far failed to get to grips with reform of regulated rent since it came to power last year in spite of repeated attempts to find a common policy.
Last but not least, is the high level of unemployment benefits in the Czech Republic, which even some leading trade union officials - notably former leader, Richard Falbr, - have admitted are counter-productive. "It is hard to see why many young people on generous unemployment benefits could be motivated to move for work when they can stay at home and do nothing," Subrtova said.

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INFORMATION TECHNOLOGY

IT program teams with private partners

The Ministry of Informatics launched a program recently to spread computer literacy across the country in the wake of failed attempts by other ministries to encourage Czechs to overcome their IT inadequacies, the Prague Business Journal reported.
The ministry's National Program of Computer Literacy is based on the Public-Private Partnership model. It will be administered through a newly established company, Centrum Internetu, in which the Ministry of Informatics is a shareholder, and Intel will provide backbone support.
For a fee of Kc 100, participants can attend a two-hour workshop on computer basics, a two-hour workshop on using the Internet, or both. A pilot version of the program was launched last year and some 5,000 people passed the course, Intel representatives said.
The most well-known forerunner of this computer literacy project, Internet of Schools, was launched by the Ministry of Educations and aimed to introduce all elementary and secondary school students to computers. It became the target of criticism soon after its launch in 2001, including claims that the technology supplier was selected without a public tender. A number of contracts connected with the project were cancelled last September by Education Minister, Petra Buzkova.
Autocont, the general hardware supplier, complained that the state hadn't paid the company in full, but project spokesman, Jiri Chvojka, said this problem has since been resolved.
IT Minister, Vladimir Mlynar, said the new project is different because, unlike previous projects, the state isn't providing anything for free. The Kc 100 payment to join the lectures will ensure that only those who are willing to learn will enter the program, he said. "We are not giving fish to people, we are teaching them how to catch them," Mlynar said.
He said he is convinced that in four years 50% of Czechs will be using computers and by Internet literate. Currently statistics show that only about 11% of the population uses the Internet.
Project leaders and Mlynar believe the program will help improve individuals' competitiveness on the labour market. "There is a direct link between unemployment and internet use," Mlynar said. He added that basic knowledge of e-mail and the Internet allows those without work to be more flexible in seeking jobs, and it also increases a person's marketability when applying for jobs.
Private participation gives the project a better chance of success, Mlynar added. Financing a program for 40,000 participations during the first year will cost an estimated Kc 17.2m. The ministry will provide Kc 7.1m, commercial partners Kc 6m and the remaining Kc 4.1m will come from participants themselves.
Representatives from Centrum Internetu said they're planning to set up a call centre, at a cost of Kc 2.8m per year, to handle course inquiries, enrolment and determine applicants' current computer skills. "This will save a lot of time and effort for the teachers so they can focus on their work, the teaching process," said Pavel Komarek, head of Centrum Internetu.
Komarek said spending on marketing, with Kc 3.3m now allocated, should be greater in order to attract the largest number of learners.
The project is mainly aimed at remote rural areas where owning a computer is not as common. "There seems to be a large gap between PC use in towns and rural communities. Those people have limited access to technology," Komarek said.
Teaching will take place in 134 locations across the country, mostly concentrated in northern parts of Bohemia and Moravia, but only in a few locations surrounding Prague and in western Bohemia, according to the map issued by the centre. Lectures will take place in public libraries and schools.

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STOCK MARKET

Prague holds tight while BSE makes Deutsche deal

Not for the first time recently, the Prague Stock Exchange (PSE) appeared to be sleeping while its neighbours were busy making plans, the Prague Business Journal reported recently.
The Budapest Stock Exchange (BSE) announced that it will sign a deal linking the exchange to the XETRA trading platform of Deutsche Bourse. The deal will allow Hungarian banks and brokerage houses to trade directly on the exchange in Frankfurt.
The PSE held talks with representatives from Deutsche Bourse at the end of last year, PSE's deputy secretary general and director of services, Vladimir Ezr said. However, nothing has yet been agreed upon and further talks will be held this year.
On the wider issue of closer partnership between regional exchanges - often seen as the only remedy for the survival of the different trading floors - the PSE is taking the long view. "We will probably wait to see whether the larger exchanges in the region merge in a few years' time before we decide what to do," Ezr said. There are currently 50 exchanges in Europe, he added, and when mergers eventually come, the PSE believes they will happen very quickly. "In the meantime, we're always willing to discuss cooperation," he said.
Analysts in Prague expressed doubt that the Budapest initiative would act as a stimulus for the PSE. But they said it highlights the exchanges' different approaches. "In the PSE the people are very passive, both the managers and shareholders, and are happy with the income the exchange generates," said Jan Schiesser, an analyst at brokerage Atlantik Financni Trhy. Overall, it is content with the results of cost cutting and increases in fee income over recent years.
"The BSE, on the other hand, is proactive and having failed to get other exchanges interested in a regional market, they are trying other methods to boost interest," Schiesser added.

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TELECOMMUNICATIONS

Cesky Telecom deploy messaging solutions

Telecom software developer, Comverse, recently announced that Czech phone operator, Cesky Telecom, had deployed its messaging solutions, replacing a competitor's voicemail system, New Europe reported. Comverse said it won the deal after Cesky Telecom selected Siemens to provide a Comverse system capable of integrating voicemail, unified messaging, voice control and multimedia applications, including future-ready capabilities for next generation services. "Siemens and Comverse implemented the new messaging system that can support our future plans to introduce new customised services and features that best meet the need of our subscribers," said Milos Mastnik, executive director for Product Management at Cesky Telecom. 
Comverse CEO, Zeev Bregman, said: "We are pleased to continue our ongoing partnership with Siemens, combining their network solutions with our portfolio of services - the largest in the industry - and with our open, modular IP-based platform delivering rapid deployment of applications." With nearly four million telephone lines in operation, Cesky Telecom is the number one telecommunications company in the Czech Republic. 

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TOURISM

Authority tells tourism industry to 'go local'

The Czechs Tourist Authority is attempting to change the mindset of regional tourist offices and persuade them the greatest potential for the domestic industry lies in Czechs themselves, the Prague Business Journal has reported.
"Our aim is to attract more domestic tourists to visit and spend their holidays within the borders of their own country," said authority director, David Gladis. "We want to change the belief of many Czechs that the best holidays they can have are abroad."
The first step has been to encourage regional tourist offices to cooperate in promoting each other's local attractions. "I can imagine that, for example, Klatovy would advertise their attractions in a regional paper in Olomouc and vice versa," Gladis said. The authority has set aside around Kc 1.5m for regional tourism projects.
Until now, such cross-regional promotion has been almost entirely absent on the Czech market. Where it does exist, it has sought to promote day trips rather than longer, more lucrative stays, he said. Getting Czech celebrities to promote holidays spent in their favourite parts of the country is one idea, Gladis added.
Some regions have already realised the need for higher investment in tourism, Gladis said, mentioning the 500 per cent growth in the tourist budget of the Plzen region this year, from less than Kc 1m in 2002 to more than Kc 4.3m.
The emphasis on domestic tourism comes as the Czech sector contemplates the downturn in foreign visitors that would result from a war with Iraq. "We estimate that if a war starts, incoming tourism will decrease by 15%," Gladis said. "We are already experiencing some decrease in the tourist influx, but so far it is too early to estimate the percentage of the fall."

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