Books on Czech Republic
% of GDP
Update No: 101 - (27/09/05)
Social Democrats capable of winning elections, says
Prime Minister Jiri Paroubek (CSSD) said in Mlada fronta Dnes on September 21st
that the Social Democrats are capable catching up with the senior opposition
Civic Democrats (ODS), who are far ahead of the CSSD in their approval rating,
and win next elections, due in June 2006. He doubtless has the surprisingly good
showing of Shroeder and the German social democrats in mind here, at the recent
elections in Germany.
Paroubek is reacting to the latest public opinion poll by the STEM polling
agency, according to which the ODS would win the parliamentary elections if they
were held now. The ODS is supported by 32.8 per cent of Czechs, while the CSSD
is only supported by 21.1 per cent.
As in Germany, people in the Czech Republic will realise that a social state
could break apart and they will not vote for the ODS, Paroubek says. "When
I took over the government, the CSSD's loss against the ODS was 20 per cent. I
said several months ago that if the Social Democrats have the support of more
than 20 per cent of voters, they will be able to eliminate the gap and win the
election," Paroubek says.
Good news for ODS chairman Mirek Topolanek is that his party would be able to
form a government with the Christian Democrats (KDU-CSL) that would have a
convenient majority of votes in the Chamber of Deputies. According to the STEM
poll, the two parties at present enjoy the support of 40 per cent of voters,
while the left-wing parties - the CSSD and the Communists (KSCM) - jointly have
six per cent votes less.
However, there is still a period of nine months before the elections and the
CSSD is gradually catching up with the ODS.
"The poll results published in September show that the new leader of the
Social Democrats, Jiri Paroubek, has managed to get the party out of the worst
and keep its approval rating permanently on a very decent level," STEM
director Jan Hartl said. "Even the scandals around the CzechTek rave or
doubts over the privatisation of the Unipetrol oil group have not influenced the
people's position," Hartl said.
Klaus criticises 'NGOism', compares it with Communism
Speaking at a conference of PepsiCo on September 12th, President Vaclav Klaus
criticized NGOs and compared them with Communists. Klaus is a well-known admirer
of Lady Thatcher and, like her, something of a Eurosceptic, although, again like
her, he baulks at the idea of withdrawal from the EU altogether.
Klaus said that some people expect democracy to make miracles, so they then turn
to the "preachers" of civic society and NGOs, and lose trust in the
parliamentary system. "I see this as dangerous. We should not underestimate
this development, neither in this country, nor elsewhere. For me NGOism is
almost at the same level as Communism," he said.
He also compared the economic conditions in the European Union, with all its
directives, limitations and bureaucracy, to the Communist model. He said that
the EU's insufficiently liberalised economy is behind the poor economic results
of the continent.
Asked by a conference participant whether he would be in favour of the Czech
Republic's withdrawal from the EU, Klaus said that the Czech Republic is in the
EU and would remain in it in the future. "We only assert that many things
can be changed, and that its institutions can be made more effective and
democratic," Klaus said.
Klaus's opinions have differed for a long time from the opinions of the
government parties, the Social Democrats (CSSD), the Christian Democrats (KDU-CSL)
and the Freedom Union-DEU. His opinions are on the other hand close to those of
the senior opposition Civic Democratic Party (ODS), of which he is honorary
Klaus spoke for the first time in public about the alleged danger of the growing
influence of NGOs, for which he introduced the term "NGOism," at the
summit of the Council of Europe in Warsaw in May. He called
"post-democracy" the NGOs' alleged effort to interfere in people's
lives without a mandate gained in elections.
NGOs then sharply criticised his opinions and wanted him to apologise. His
spokesman Jiri Hajek however said that Klaus had nothing to apologise for.
Unipetrol becomes more expensive
The Czech Republic has periodic scandals over corruption. Like in other
countries in transition, the interface between the public and private sectors
opens all sorts of opportunities for shady deals. For instance, it now
transpires that PKN Orlen, the Polish oil group, will have to pay more than it
hoped for Unipetrol, its Czech equivalent, and that it has become embroiled in
allegations over privatisation kickbacks.
Premier Paroubek recently dismissed Zdenek Dolezal, the head of his office,
after receiving a tape recording of a meeting in which a Polish lobbyist
allegedly detailed, to his aide, kickbacks from Orlen's Kc13.05bn (US$540m)
acquisition of Unipetrol.
Orlen's Czech problems may reflect the company's desperation to expand under
former chief executive Zbigniew Wrobel, who was forced out last year. His
replacement, Igor Chalupec, is focusing more on extracting value from its
dominant position in Poland and making sure that its foreign purchases make
The kickbacks scandal follows revelations by Orlen's new management that its
predecessors signed a disadvantageous secret forward agreement with Agrofert,
one of its consortium partners. Under its contract the Czech agro-chemicals
company will be allowed to buy Unipetrol's chemicals subsidiaries for just 103m
Euro (US$126m) - almost a third of their current value.
Agrofert has extensive business and ownership links with the Unipetrol group,
and its owner, Andrej Babis, has the ear of top politicians.
Agrofert won the first failed tender for Unipetrol in 2001, even though it was
not the highest bidder, and its support for Orlen in the April 2004 tender was
regarded as a significant advantage. In the event, Orlen was the only bidder in
the tender and, at Kc99 a share, offered much more than had been expected for
the state's 63 per cent stake.
Orlen's new management is now trying to withdraw from the contract with Agrofert
and has put aside a provision of 376m zlotys (US$114.4m) in its second quarter
results to pay for this. Orlen will also have to pay more than it envisaged for
buying out the state and minority shareholders because the company's performance
- and share price - dramatically improved during the long process of winning
European Commission regulatory approval. Under the privatisation contract the
price paid to the state looks set to be adjusted upwards by 15 per cent.
Moreover, recently the Czech regulator ruled that Orlen must offer minority
shareholders at least Kc 139 - compared with its initial offer of Kc 103 -
though this was still below that day's close of Kc 193.
Orlen has also run into problems with its acquisition of 500 petrol stations in
eastern Germany from BP in December 2002. Those stations have not proved a good
return and now the company is looking at buying an additional 98 Q1 stations in
Germany from Beckmann Mineraloel-handel, or else getting out of the German
"In the region every oil company is in a tough competition to be a
leader," said Andras Zekany, downstream oil and gas specialist for ING
Securities in Budapest. "Some companies have run into some investments that
have proven to be negative value."
Korean auto supplier picks Czech site
South Korean auto supplier SungWoo Hitech, has picked the Czech Republic over
Slovakia and Poland for a new, 1,000-job factory, officials said recently, New
Europe has reported.
SungWoo will build the plant in Ostrava to supply car-body parts to a Kia Motors
factory that's under construction in nearby Slovakia. SungWoo is the first major
Kia supplier to pick a Czech site for a new plant. Others are building in
Slovakia. The government agency CzechInvest said the 12.5 billion Czech crowns
(US$104 million) factory and spin-off investments should help Ostrava lower its
15 percent unemployment rate.
Japanese bank to open branch
The Bank of Tokyo-Mitsubishi will become the first Japanese bank to open a
branch in the Czech Republic, the Czech Business Weekly newspaper reported.
BTM, whose parent Mitsubishi Tokyo Financial Group is among the world's 10
largest banks, plans to open a Prague branch in October to cater for an
increasing number of Japanese manufacturers operating Czech factories. Mineo
Hiyazaki of the Japanese Export Trade Organisation in Prague told the paper that
Japanese manufacturers in auto, electronics and other sectors have invested more
than 48 billion crowns (US$1.9bn) in Czech plants in recent years.
FOOD & DRINK
Beer-loving Czechs drink less and export more
The country that proudly wears the world's beer-consumption crown is pouring
less at neighbourhood pubs and exporting more of its precious brews abroad,
Deutsche Presse-Agentur (dpa) said in a special report. It's a globalisation
strategy that Czech breweries are being forced to adapt because the country's
domestic drinkers have simply filled their mugs of famous "pivo" to
"We have reached the maximum per capita consumption - 160 litres per
capita, or 16 million hectolitres a year," said Jan Vesely, spokesman for
the Czech Beer and Malt Association. "We can't expect any increase in
consumption or revenues from the domestic market."
That maximum rate has led the world for years, with Czechs edging out even the
Germans and Irish in per capita quaffing. No wonder this country of just 10
million supports about 90 breweries and still imports brands from as far as
But soon Czechs may lose their legendary consumption crown. Reasons include an
ageing population, falling birth rate, changing diets and a growing taste for
wine, especially among young adults.
These days a stagnant domestic market is the best the Czechs can expect.
"Thank God it's flat, because in other countries (beer consumption) is
declining," Vesely said.
Actually, the per capita consumption figures are skewed by tourism, since the
millions of thirsty tourists who visit Prague and Czech spa towns every year
contribute heartily to brewery sales.
"It's the phenomenon of tourism that helps us keep up the domestic
consumption," Vesely admitted.
So breweries have responded to the trend by cranking up exports. Last year about
7 per cent of the 18 million hectolitres brewed in the Czech Republic was
shipped abroad - a 60 per cent increase in exports from the 1999 level.
The main destinations were Germany, Slovakia, Britain, United States and Sweden.
This year's exports are expected to climb another 12 per cent, topping three
million hectolitres for the first time and boosting the country's total brewery
output to the highest level since 1990 - the celebratory year after communism
fell in the 1989 Velvet Revolution.
Budejovicky Budvar is among the brewers setting the pace, with nearly half of
its beer now being shipped abroad. "Exports are very important for
us," said spokesman Petr Samec.
Budvar is the state-owned company locked in a legal battle for years with the
world's largest brewer, America's Anheuser-Busch, over the product names
Budweiser and Bud.
Although the American beer is not sold in the Czech Republic, the Czech company
recently got around the legal hurdle by renaming a product for the US market
"Czechvar" - and grabbing a new export niche.
The largest Czech brewer and exporter is Plzensky Prazdoj, owned by the
conglomerate SABMiller. Between 2003 and last year, Prazdoj's domestic sales
were flat but exports rose 13 per cent. That trend is expected to continue.
Small breweries are looking abroad, too. The Lobkowicz company in the village of
Vysoky Chlumec, for example, is now exporting 60 per cent of its annual output
of 100,000 hectolitres, mainly to Germany. "We're seeing a lot of changes,
even among the small brewers," Vesely said.
In addition, Vesely noted several Czech brewers are making or plan to make beer
abroad under foreign licensing agreements, although that output is not counted
with Czech exports.
Lobkowicz, for example, said it's interested in finding an Asian licensee, while
larger Czech firms have already gotten footholds in Poland, Russia and Slovakia.
Proud Czech breweries generally attribute their export success to quality and
flavour, but it's clear that they're also being driven by the flat domestic
The Czech Republic's status as the world's most beer-loving country helps the
foreign marketing campaigns.
Also encouraging the Czechs' global reach are the tourists who spend a weekend
or weeks enjoying local pub offers, and then return home with tales of tasty
discoveries. "Tourists are good ambassadors for us," Vesely said.
MINERALS & MINERALS
Demand for Czech steel down in H1
Czech steel production slowed in the January-June period this year due to lower
demand abroad as well as at home, the daily Hospodarske noviny reported.
Crude steel production fell by 15 per cent on the year, and steelmakers cut
their final production by 13 per cent. But sales went up, the newspaper said,
citing the most recent data from Hutnictvi zeleza association. In absolute
figures, steel production decreased by 415,000 tonnes to nearly 2.4 million
tonnes. Milos Nyvlt, chairman of the Association of Steel Distributors, said
that customers had stocked themselves up and demand dropped early in the year
and a lot of steel was imported to the country from abroad.
Eurotel chooses Finnish Nokia for UMTS deal
Mobile carrier Eurotel has chosen Finnish telecom giant Nokia as the supplier of
the infrastructure for its UMTS network, the eastern European CIA news agency
Eurotel's executive head for strategy, Tomas David, said Nokia was chosen as it
already cooperates with Eurotel in its NMT and GSM networks and because it is
the largest supplier of UMTS networks and terminals in the world. Nokia will
deliver mobile telephone exchanges and the radio network, including the HSDPA
and the Nokia IP Multimedia Subsystem, the Finnish company said. Nokia will also
provide Eurotel with a solution for the network management, services for
planning and realisation of the network, the operation, maintenance and
T-Mobile boosts client number
T-Mobile recently announced that it raised its client numbers to 4.46m at end of
June, becoming the largest Czech mobile operator based on the number of SIM
cards, Prague Monitor reported.
Eurotel registered 4.42m clients after switching to a new methodology which
slashed the number by 240,000 compared to the end of March. Oskar-Vodafone had
1.951m SIM cards at the end of June. The market evaluates mobile operators by
sales or profit and by revenues per client, where Eurotel is still number one.