Books on Czech Republic
% of GDP
Update No: 097 - (26/05/05)
From borrower to lender status
An event of more than symbolic significance has taken place in the Czech
Republic. It has moved from being a recipient of World Bank finance to being a
contributor to it for other countries, so vibrant has its economy become since
joining the European Union (EU) last year in May.
Czechoslovakia was a founding member of both the World Bank and the IMF, but had
to withdraw in 1954 after the communist take-over in 1948 made life difficult
all round. It rejoined in 1990 after the Velvet Revolution of 1989 and all that.
The statistics since 2003 speak for themselves. GDP at $120bn is up 4% on 2003
and the average wage is up 3%. The reasons for the buoyancy are undoubtedly
external, with foreigners flocking to the country, the number of tourists up by
19% since 2003 and, vital to the success of the economy, FDI at $4.9bn is up a
staggering 94% on 2003, bringing the accumulative stock of FDI to around $42bn,
or $4,200 per capita, the highest in the former communist world, although the
highest FDI in toto has been into Poland at $73bn, of course a much larger
country with nearly four times the population.
Prague is a truly marvellous city, with outstanding architecture of every epoch
of European history from the last one thousand years, Romanesque, Gothic,
Renaissance, Baroque, Rococo, Classical and Art Nouveau. It unfortunately also
has some Soviet-style brutalism too, but in the suburbs. Even the communist
bosses knew that they had a jewel of a capital city in Prague and did not want
to spoil it.
One can think of few better places for a visit or for setting up office. It is
not generally realised that Prague is to the west of Vienna, right in the heart
of Europe. The UK premier in 1938, Neville Chamberlain, who called
Czechoslovakia " a faraway country about which we know nothing," was
making an ass of himself and showing how unfit he was to hold the office he did.
He was fit to be, as Lloyd George caustically said, "the mayor of
Birmingham in an off-year," instead of the steward of the British Empire at
the most critical moment in its history and of the West.
With all this history behind them, the Czechs are ambiguous in their attitudes
to Europe. They were glad to be rid of the Slovaks in 1993. They are now in two
minds about integrating with the rest of Europe.
Their experience has taught them to be wary of other Europeans. The British and
the French sold them down the river to Hitler at the infamous Munich Pact in
1938, witness Chamberlain. They and the US did nothing to stop the Russians
foisting a communist regime on them in 1948 and did not lift a finger to prevent
the Soviet invasion of 1968. A sorry record, indeed.
To most Czechs their EU attitudes are sufficient and easy to understand. But to
others they seem stuck in the past and unfriendly to foreigners, including
neighbours from EU member countries with whom the Czechs, as they say in
Brussels lingo, have been "integrating" since enlargement.
Czechs recognise there's no turning back from enlargement. Voters approved EU
entry, and they call their country "the heart of Europe."
Taxes rose to western levels, foreign retailers and manufacturers quickly moved
in, and the four-lane between Prague and Berlin is under construction.
Yet rue integration - in their minds and hearts - is another matter. Indeed,
provincial attitudes can surprise visitors to this former communist country.
Like citizens in other EU countries, Czechs have so far remained rather
Two thirds of Czechs think any foreigner who wants to live in their country
"possibly" or "certainly" should not be allowed to do so,
according to a February survey by Prague's Centre for Public Opinion Research.
Moreover "only 3 per cent surveyed think that anyone who comes to the Czech
Republic should be allowed to live there," said the centre's Gabriela
Such attitudes can be blatant in politics. President Vaclav Klaus himself is
staunchly opposed to the EU constitution. Eurosceptics are common in parliament,
and the Senate recently rejected plans to open a EU gender equality institute in
Moreover, communists still wield clout in local governments in the country's
east, while neo-Nazis hold music festivals in the west. Five years ago a Czech
publisher of Hitler's "Mein Kampf" sold 90,000 copies of the book,
dissemination of which is illegal in Germany. After being charged with promoting
extremism, the publisher was acquitted by the Czech Supreme Court in March.
Czechs scoffed at integration before EU entry. Recent court decisions shed light
on the prejudice faced by the Roma minority, who are refused jobs and restaurant
service. Unlike culturally diverse Amsterdam and Paris, dark skin is rare in
central Prague save for the African men hired to hawk for strip clubs.
Dave Jones is a black American who immigrated to the Czech Republic several
years ago. He is still amazed by the attitudes. "Even the young people have
grievances against the Germans because of the war (World War II)," Jones
said. "They have a lot of preconceived, wrong ideas. For example, if you're
an American they say you must be rolling in money."
Some attitudes stem from bitter memories of foreign occupation. Before the 1989
Velvet Revolution, the Czech Republic (then Czechoslovakia) was occupied by Nazi
Germany and later by Soviet troops. Schoolchildren were forced to learn German,
then Russian. Under communism they were told Westerners are evil.
Czechs also resent modern western misconceptions, such as the idea that East
Europe is "backward." They were particularly irked by the
post-enlargement labour restrictions imposed to prevent a supposed
"flood" of cheap workers from new EU members.
"Maybe Czech people are angry because we are not allowed to work in Western
Europe," said Petr Mach of Prague's Centre for Economics and Politics.
"In Western Europe there is negative sentiment toward people from the
east." Czechs are actually more tolerant than it seems, Mach argued, noting
that the nation's labour market has been open to Ukrainians and Poles for years.
But Jones is less forgiving. "They think that they should be able to go
somewhere else to work," such as Western Europe or the United States, he
said. "But for someone else to come here and make a living - that's a
A new moderation appears
Signs of change have appeared, however. This year, for the first time, five
Czech towns participated in a United Nations campaign against racial
discrimination. Elsewhere, courts have started prosecuting employers and
restaurants that discriminate against Roma.
More foreign workers arrived in the past year, sent by companies with Czech
branches, such as Japan's Toyota and Germanys DHL. New budget airlines are
bringing more British visitors than ever.
Mach said integration with other Europeans "has never been felt as a
serious question until now." He's confident Czechs will rise to the task,
although "there is a transition period." Jones expects attitudes to
mature alongside EU membership.
Czechs "can change," he says. "They are willing to listen, and as
more foreign people come here, they may be able to get rid of some of their
Skoda targets Czech expanision
Czech carmaker Skoda Auto (SA) will invest three billion Czech crowns to expand
its Eastern Bohemia plant, where the new Skoda Roomster will be produced,
Interfax News Agency reported.
The company has received government investment incentives to develop
infrastructure and expand production capacity, according to state agency
CzechInvest. SA's incentives will take the form of a tax relief worth 15% of the
total investment. SA can use the tax relief during the next 10 years. The
expanded Kvasiny plant will employ 2,000 extra workers. The plant currently
produces the Superb model and employs over 1,200 workers. Production is to begin
early next year; the new car will be presented to the general public for the
first time at the Geneva Motor show in March 2006. SA's product portfolio
currently includes the compact Fabia, the mid-sized Octavia and the Superb
sedan. SA is 100% owned by Germany's Volkswagen. It sold 451,675 cars on the
global market last year.
Skoda to produce cars in China
Czech car manufacturer Skoda Auto signed a deal with Shanghai Volkswagen to
start producing its Octavia model in China by 2007, said company spokesman
Jaroslav Cerny, New Europe reported recently.
German manufacturer Volkswagen AG own Skoda Auto. Skoda Auto is the country's
largest and most profitable exporter. The company is planning to produce 40,000
vehicles in the Shanghai plant by 2007 and hopes to increase the annual
production to about 80,000 cars in the following years. In China Skoda Auto
currently sells 2,000 cars each year. Cerny said, "At the beginning, the
cars will go to the Chinese market, but we hope we could later export them also
to the neighbouring countries."
Czechs welcome 6 supersonic Gripens
The first 6 supersonic Jas-39 Gripen fighters leased from Sweden by the Czech
Republic arrived at the tactical air force base in Caslav recently, New Europe
Prague leased 14 of the fighters for 10 years for 19.6bn Czech crowns with an
option to buy them after the lease period ends. The Czech Republic will use the
planes to defend its airspace and in NATO operations. Czech pilots piloted 3
planes and the other 3 had Swedes in the cockpits. The Gripens will replace
older MiG-21s, whose lifespan ends this year. The planes were accompanied by an
An-26 military transport plane and an L-39 Albatros training plane.
FOOD & DRINK
McDonald's boosts Czech sales
McDonald's, the global fast food network, raised its Czech sales 3%
year-on-year to 489m Czech crowns in the first quarter of 2005, according to
results released by the company, New Europe reported recently.
McDonald's raised its Czech sales 3% year-on-year to over 2.1bn crowns last
year. The firm predicts 5% growth for 2005. McDonald's raised prices 8% on
average last year in reaction to an increase in the value-added tax (VAT) on
restaurant services that followed the Czech Republic's admission to the EU in
May 2005. At present, the company has 71 restaurants in the Czech Republic and
expects to open one more this year. McDonald's entered the market in 1992. The
firm employs 3,600 people. Its biggest rival on the Czech fast food market is
KFC with 31 outlets.
MINERALS & METALS
Vitkovice wants iron from Mittal
Vitkovice steel plant may face an acute shortage of supply of pig iron, Eva
Kijonkova, spokeswoman for Osinek, the group that controls Vitkovice Steel, said
recently, CTK News Agency reported.
Mittal Steel group, its monopoly supplier of pig iron, has threatened to stop
its supplies to the company from May 1st, 2005. This move would cause a loss of
some 700 jobs. Pig iron is essential for Vitkovice Steel that uses some 700,000
tonnes of it every year. The two companies have been in a long-standing dispute
over the prices charged by VPO for supplies of pig iron to Vitkovice for over 2
years. The government says the supplies are overpriced and it has turned to
court demanding 1.08bn Czech crowns in compensation. According to the
anti-monopoly office UOHS, the prices charged by VPO are standard. Mittal argued
that VPO had the right to stop the supplies to Vitkovice.
BlackBerry enters Czech Rep
Research In Motion (RIM) and T-Mobile have expanded the reach of BlackBerry with
the introduction of the BlackBerry 7290 wireless Handheld ™ and BlackBerry
Enterprise Server ™ v4.0 in the Czech Republic, New Europe reported.
Research In Motion is a leading designer, manufacturer and marketer of
innovative wireless solutions for the worldwide mobile communications market.
T-Mobile International, a wholly owned subsidiary of Deutsche Telekom, was
established in December 1999. Deutsche Telekom, within the group, holds direct
or indirect investments in mobile communications companies in Europe and the US,
including T-Mobile Czech Republic Telecommunication Company Limited.