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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: 069 - (28/01/03)

Electoral logjam
The Czechs failed to elect a successor to Vaclav Havel, who is standing down on February 2nd. Neither of the leading candidates, Vaclav Klaus of the Civic Democrats, a leading Eurosceptic, and Petr Pithart, the Christian Democrat, secured an absolute majority on January 15th as various deputies and senators cancelled out each others' votes in elaborate tactical games.
Klaus, once dubbed the Margaret Thatcher of Czech politics, is now likely to push for a directly-elected presidency, a contest he would be very likely to win on current opinion polls. The Czechs are wary of Europe and want a Eurosceptic to conduct the conclusive negotiations, at least in the presidential seat.
But a directly-elected presidency would require a conditional change agreed by parliament, which would in effect be disenfranchising itself. In the long run no party would want to be seen to be disenfranchising the people. But, while direct elections for the presidency are likely to be on the agenda eventually, they are not likely to happen soon enough for Klaus.

Reshuffle of candidates
The ruling Social Democrats were generally unhappy with their colourless candidate, Jaroslav Bures. It is now on the cards that the ex-premier, Milos Zeman, of the Social Democrats will re-enter the field. He stood aside, waiting to see if the first three rounds of voting would collapse. In the first round Klaus obtained 92 out of 200 deputies' votes, 9 short of a majority, and 31 out of 81 senators' votes, ten short of a majority, while Pithart won 20 deputies and 35 senators. Bures, a former justice minister, dropped out as did the communist Micoslav Kriznecky, a lawyer. A second and third round produced no clear result for the two survivors. A further three rounds are expected to be held in February.
Havel will bequeath a vacant throne when he bows out. Although the president's powers are limited domestically. He has not been seen as a great success in his 13 years in the job, much as he is admired for his record as a dissident in communist days. His high moral tone now grates on the Czechs, who know that corruption became rife on his watch. Pithart, therefore, a fellow former dissident, did not necessarily benefit from being the clear favourite of Havel's.
It now looks likely that the two big bruisers of Czech politics for the last 13 years since independence, Klaus and Zeman, will battle it out in February for the vacant throne, which means either way a more activist president than Havel, although subject to constitutional restrictions.

Premier is the key
The really important job remains, therefore the premiership. If Zeman bowed out last year, it was because he must have felt that 13 years at the forefront of politics was enough. Being president is likely to remain largely a ceremonial office although one with a marvellous baroque palace and a hunting lodge thrown in to boot.

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AVIATION

NATO okays 6m Euro loan for Czech fuel storage facility

NATO has agreed to provide around €6m for the construction of an aircraft fuel storage facility in Hermanuv Mestec, east Bohemia. Referring to a decision made recently by the NATO infrastructure committee, the information was released by a Czech delegation to NATO, CTK News Agency reported. An international tender will be launched for the project, in line with NATO conditions.
The decision represents one of the most cost-intensive of several dozen projects aimed at modernising military airfields in Caslav, a town near Hermanuv Mestec, and Namest and Oslavou, south Moravia, which have the wherewithal to receive the NATO aircraft.
NATO wants the new fuel storage facility to provide kerosene used by allies' planes, which differ from the type the Czech Republic uses.
The projects include runway extensions, the upgrading of communication systems and roll-stops.
The facility will include three tanks designed for the NATO fuel - to be imported from Germany - and two tanks for the Czech type of fuel, which will be financed by the Czech Republic, CTK informed.
In the mean time, several Czech airport-related projects have yet to be given the green light. These include the construction of a new hangar in Caslav and a way of transporting fuel from Hermanuv Mestec. 

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ENERGY

Open electricity market already hurting CEZ

The Czech Republic's domestic electricity market took its first step towards liberalisation with the opening of the wholesale segment. This allows customers of more than 40 GWh annually to select their electricity supplier. As such, the liberalisation includes all regional power distribution firms and roughly 70 large end-customers. Results of the liberalisation are already visible with the average electricity price of dominant producer CEZ falling by 8.5 per cent year-on-year by the third quarter. However, the strong Czech crown also played a factor as it made electricity imports more attractive, Prague Business Journal reported.
Consequently, CEZ is faced with a more difficult environment - its share of domestic electricity sales fell by three per cent year-on-year to 63 per cent. Households have yet to see the benefits of a price war among the electricity suppliers. In fact, the regional power distributor's profits swelled - in response to which the electricity regulator decided to reduce maximum electricity prices for households for the first time in history, starting in 2003.

Czech, Slovaks may continue to build power plant in China

Chinese President Jiang Zemin and his Slovak counterpart, Rudolf Schuster, discussed further development of economic relations during their meeting in Beijing. 
Schuster's spokesman Jan Fuele told CTK News Agency in a telephone interview that the Slovak company Slovenske energeticke strojarne (SES [Slovak Power Engineering Company]) Tlmace and Czech firm, Skoda Plzen, will continue to participate in the construction of the Shen Tou thermal power plant.
"SES Tlmace and Skoda Plzen are taking part in the construction of two blocks of the Shen Tou power plant where the construction of the fifth and sixth blocks has yet to be decided on. The Slovak and Czech firms could take part in the construction," Fuele said.
Slovak contractors may also participate in the construction of Chinese Olympic stadiums for the 2008 summer games in Beijing and the pavilions for Expo 2010 in Shanghai. The interest of Chinese businessmen in investing in Slovakia was also discussed at the presidents' meeting, but not the sale of Slovak weapons to China, Fuele said. It cannot be ruled out, however, that Chinese pilots will train in Kosice, east Slovakia...

Czech cabinet approves proposal to sell petrochemical giant in one lot

The government has approved a new proposal for the sale of Unipetrol [the state-owned holding comprising six subsidiaries], Czech TV1 has reported . It was drafted by the Ministry of Finance and the Ministry of Industry and Trade. The chemical giant will be sold as one entity, as was the case of the previous failed attempt.
The government scrapped the first privatisation project in October last year. The buyer, Agrofert Holding, refused to pay 361m euros or 11bn korunas and wanted to change the conditions of the transaction.

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FINANCIAL NEWS

Czechs begin talks on joining European Economic Space

The Czech Republic started talks in Brussels on 9th January, on joining the common European Economic Space (EES) which expands the European Union internal market to include Norway, Island and Liechtenstein, CTK News Agency has reported .
The Czech Republic wants these countries to also observe the transition periods on which the Czech negotiators have agreed with the EU. On the other hand, it does not want these countries to take protectionist steps against it, which have been approved by the EU as temporary measures, such as limiting free movement of people.
Norway has already promised to open its labour market and not prevent Czechs from entering it by the time of the Czech Republic's entry to the EU, Foreign Ministry state secretary Pavel Telicka, who took part in the talks in Brussels, said.
"On the other hand, we know that within the agreement on the European Economic Space Liechtenstein also has certain restrictions, which makes the question sensitive, and we will also want to hold talks with Ireland," Telicka said.
He said that EES countries did not intend to implement any of their transition periods against the Czech Republic.
Four basic EU freedoms are valid on the territory of Norway, Liechtenstein and Ireland - free movement of people, services, goods and capital. The EU common agricultural and fishing policy is an exception as it does not apply to EES countries.
An agreement on joining the EES is to be signed simultaneously with the Accession Treaty which is expected to be signed in Athens, on 16th April.

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FOREIGN INVESTMENT

Appian Machinery gets green light for Skoda Holding purchase

The cabinet has approved the sale of Czech engineering giant Skoda Holding to US investment company Appian Machinery for an amount totalling 350m Czech crowns. Finance Minister, Bohuslav Sobotka, following the cabinet session, stated: "The proposed price corresponds to the financial situation in which Skoda Holding finds itself now."
The price was also affected by the fact that the government was selling only a minority of 48.4% in the company, while the majority share is controlled by the bankruptcy administration of Skoda Holding, which has assets worth 4.5bn crowns, CTK News Agency reported.
"The cabinet expects subsequent talks between the new owner of the share and the bankruptcy administrator on a takeover of the rest of the shares," Sobotka explained. Since the cabinet cannot interfere in the price negotiations, it is up to Appian and the administrator to haggle regarding the relevant price.
Appian will secure another Skoda development, mainly in transport engineering and the energy industry, the minister was quoted as saying. Bailout agency, CKA, recommended Appian to the cabinet.

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SCIENCE & TECHNOLOGY

Czech cabinet allocates money on updating meteorological services

The government allocated about 200m korunas from the state budget to the Czech Hydrometeorological Institute (CHMU) for modernization of its forecasting and warning services next year, Vladimir Marek from government press section told reporters, CTK News Agency has reported.
The CHMU needs about 700m [korunas] over the next five years for modernization. CHMU Director, Ivan Obrusnik, told CTK recently that the modernization of forecasting and warning services will not only touch on flood defences, but also defence in case of terrorist attacks.
Some of the planned changes include changes in the observation network so that precipitation measuring devices are able to hold more water. The amount invested is much higher than that invested after the devastating floods in Moravia in 1997. Environment Minister, Libor Ambrozek's, report on the causes of the disastrous August floods said the use of meteorological models and the cooperation of international meteorological services is a great advancement in forecasting weather.
The analyses produced in cooperation with the CHMU warned that not even these measures ensure sufficient reliability in such extreme cases as occurred in August. Special measures, such as special data processing methods or models, are necessary in extremely large floods. The August floods caused 70bn korunas of damage.

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TRANSPORT

Transport ministry to double up spending

The Czech Transport Ministry will this year see the biggest increase in spending in year-on-year terms, by 4.3bn Czech crowns to 9.2bn crowns in 2003. The figures are according to an outline of the new year's state budget expenditures, whose final very was published recently. 
The Ministry of Labour and Social Affairs, which represents the biggest chapter of the state budget, will this year receive around 16bn crowns more than in 2002, CTK News Agency reported.
Education Ministry spending will meanwhile increase by nearly nine billion crowns, those of the Interior Ministry by 4.2bn crowns, while the Defence Ministry is slated to spend 4.8bn crowns more than last year. The costs of debt service will rise by 1.5bn crowns.

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