Books on Czech Republic
% of GDP
Update No: 109 - (29/06/06)
President backs plan for minority conservative government
Elections to parliament in June have upset the Czech political scene. A new
government is in formation.
Czech President, Vaclav Klaus, signalled on June 14th his willingness to approve
a minority government led by the conservatives, who defeated liberal incumbents
in the June 3rd election. After meeting with conservative party leader, Mirek
Topolanek, Klaus said the "first phase" of the effort to build a new
government was "to have confidence in the strength of its 100 voices."
Topolanek wants to form a coalition backed by 100 of parliament's 200 deputies -
one vote short of a majority - and replace the liberal government of outgoing
Prime Minister, Jiri Paroubek. Klaus had summoned Topolanek to discuss the
progress of his plan to form a ruling coalition of three parties within two
"I understand that everything has its time and phase," said the
supportive Klaus, a close ally of Topolanek who is overseeing the
coalition-building. Topolanek said he would continue negotiating with Paroubek
about a possible tolerance pact between liberals and conservatives. Paroubek and
other members of his Social Democrats (CSSD), which held power in Prague for
eight years before losing the election to Topolanek's Civic Democrats (ODS),
have so far refused to tolerate an ODS-led coalition.
The two parties are long-time rivals with clashing economic and social visions.
"Clearly we have said that we will not support such an ODS
government," CSSD deputy chairman, Bohuslav Sobotka, the outgoing finance
minister, said to Deutsche Presse-Agentur (dpa) on June 14th. In addition, CSSD
and ODS leaders have flatly rejected the idea of forming a "grand
coalition" of their opposing factions. In the election ODS won 81 seats and
the right to form the next government.
The smaller Christian Democrats (KDU) and Green Party (SZ) were selected as
junior coalition partners. But by winning 74 seats in the election, CSSD
retained enough power to complicate the conservative plan. The far-left
communist party KSCM, which has 26 seats, also opposes ODS. Last week's opening
talks between Topolanek and Paroubek were friendly, with the leaders agreeing to
priorities for the next government. But they disagreed on Paroubek's demand for
a non- political caretaker government followed by early elections in two years.
Topolanek said he wants the next government in place before the new parliament
convenes June 27th. An ODS statement said Topolanek "believes that he is
able to persuade the Social Democrats to tolerate an emerging government."
ODS, KDU and SZ leaders on June 13th reached a preliminary agreement to
cooperate. Their final coalition plan is expected in the near future.
The economy matters most
Actually, there is a sense in which it no longer matters much who governs in
Prague. The country made the decisive shift to a private economy over a decade
ago. The present president, Vaclav Klaus, had a lot to do with it then as
He is an ardent Thatcherite and is decidedly lukewarm about the EU. The
conservatives are likely to be wary of joining the eurozone, especially with
like-minded conservatives in power now in Warsaw. But it is a fact of life that
they will not be able to ignore.
Eurosceptics are often the best people to carry out pro-European measures.
Thatcher after all signed up to the Single European Act in the end. The Czech
conservatives could well follow suit as regards the eurozone.
The economy in the Czech Republic is booming. A retail explosion is under way,
and shows no signs of stopping.
The following article gives a vivid account of the phenomenon:-
Malls for the masses
Kamal Sunavala, The Prague Post
In a country with a free market not even two decades old, it's stunning to
realize that there are more than 30 major shopping centres up and running. To go
from one kind of bread at the local potraviny to Tesco, Mango, Zara and Marks
& Spencer is quite a leap in shopping habits, not to mention a major boost
to the national economy.
In the first half of 2005, five new shopping centres opened: Galerie Butovice,
Eden Carrefour and Centrum Chodov in Prague, Kolonada Karlovy Vary in the famous
west Bohemian spa town and Galerie Vankovka in Brno, south Moravia. Metropole at
Zlicín in Prague and Olympia in Brno were expanded.
By the end of 2007, another 13 shopping centres are scheduled to open across the
country, adding 390,000 square meters (4.2 million square feet) of new retail
space. Letnany in Prague will be the biggest at 85,000 square meters, and at
39,000 square meters, the upcoming Palladium will completely remake the look and
feel of námestí Republiky in Prague's historic city centre.
What is fuelling such explosive growth? Fundamentally, it's a simple matter of
supply and demand.
"The Czech Republic is still catching up with Western Europe in terms of
modern shopping centre space, due to the lack of development under the old
regime, and due to the lack of historic high street locations in some cities and
suburban locations," says Martin Zizala, a retail associate and broker with
Cushman & Wakefield. "The demand is being created by [both] the
customer and by local, national and international retailers who are looking at
new opportunities to expand their operations. The developers are, of course,
listening to retail demand and constructing new space."
There's certainly been no lack of prominent retailers and developers eager to
plant a flag in the Czech Republic. To name a significant few: Tesco, Globus,
Ahold, EPD, Plaza Centres, AM Development, TK Development, Africa Israel,
Rodamco, ECE, IKEA, Somerston, Portland Trust, Discovery Group and Ballymore.
The rush to build raises a natural question: Is this a retail bubble, or are the
majority of developers and their glittery consumer palaces here to stay?
"We believe this is a continuing trend," declares Zizala. "As in
other, much more developed markets, new shopping centres are [constantly] being
built and older shopping centres are being refurbished and expanded. Retailing
is a continually changing business, and shopping centres need to change to keep
up with new trends."
Everything under one roof
The main criterion in deciding to build a shopping centre is the numbers,
starting with an area's population. The base number needed to support a shopping
centre (defined as a structure supporting more than 10 retail units) is 50,000
residents. The Czech Republic has 22 cities with that many people.
Incomes are rising, but what's just as interesting to developers and retailers
is the finding that Czechs spend an average one-fifth of their incomes on food
and beverages. So it's no accident many new malls include hypermarkets or large
Increasingly, the appeal of shopping malls is about more than just offering
consumer goods. Malls have become community centres, places people come not only
to shop for specific needs like shoes and clothing, but for entertainment and
dining with family and friends, preferably without travelling to another part of
This is why developers are paying detailed attention to what entertains the
customer - be it movies, art or fine dining or, better yet, a combination of all
these. A spokesperson for TK Development, which designed the ultra-modern Sestka
centre in Prague 6, says, "The area has tremendous growth potential, and we
think it's important to give an equal boost to an area with the potential to be
another Prague 1, 2 or 5."
Cushman's Zizala has noticed the growing multipurpose function of malls as well,
with more developers trying to put everything under one roof. "The growth
story is validated by successful shopping centres like Nový Smíchov and
Metropole," he says. "The upcoming Palladium is set to have 6,000
square meters dedicated simply to food and drink. The incorporation of leisure
elements like cinemas, restaurants and game stations is what completes the
shopping experience, as it tends to bring families in droves, relying on the
'something for everyone' cliché."
Aesthetics are also playing an increasingly important part in the mall boom.
When ING Real Estate Development did a survey studying shopping trends as it
began developing the Kosíre area in Prague 5, it found that shoppers sought not
only brand quality, but pleasant surroundings to shop in.
An innovative developer like Rodamco, which designed Cerný Most shopping centre
and the upcoming Arkady Pankrác, is also focusing on the importance of
ultra-modern design. As one promotional brochure for the company notes, "We
want the customer to feel a sense of novelty when he walks through our
Steady and upward growth
Not only do shopping centres create a certain centralized atmosphere, but
they also generate interest and demand for a high-street type of development -
upscale shopping strips like Prague's Na Príkope or, to a lesser extent, Parízská
streets. As it happens, these strips preceded mall development, but the
retailers they've attracted are typical of high-street spin-offs in other
cities: Mexx, Mango, Kenvelo, H&M, C&A, Marks and Spencer, Zara, Promod
and Leiser, to name some of the most prominent.
With disposable incomes on the rise - and tourists flocking to upscale shopping
strips - the Czech Republic already has high streets that are being compared, in
promotional literature at least, to similar locations in cities such as London,
Paris and Milan.
In short, all signs point to a spending spree that will be a long one. Beyond
the real estate figures, there are economic indicators like the 5.9 million
debit cards in circulation in the Czech Republic in 2004-05. "We issued
almost 43 per cent of the country's debit cards," says Klára Gajdusková,
a public relations officer for Ceská sporitelna, commenting on how the volume
of transactions is racing to keep up with the new spending habits.
When it comes to shopping malls, the laws of supply and demand rule - at least
for the moment - complemented by the desire for a better quality of life in more
aesthetically pleasing surroundings. With developers designing dream malls and
giving people ample space to socialize in, the growth trend remains steady and
Of course, the national economy could put a dent in the retail growth rate if it
slumps. But as long as both are riding an upward curve in tandem, the ubiquitous
shopping centre is here to stay.
For a country and indeed a whole generation that had previously been denied, it
seems only fair that now there is a chance to shop to one's heart's content
Czech, Hyundai officials ink deal for assembly plant
Hyundai and Czech Republic officials recently signed in Seoul a contract for the
South Korean automaker's first auto assembly plant in Europe, Deutsche
Presse-Agentur (dpa) reported.
After months of uncertainty, the deal for a Czech factory worth 30 billion
crowns (US$1.2 billion) was signed at the company's Seoul headquarters by Czech
Minister of Industry and Trade, Milan Urban, and Hyundai Vice Chairman, Kim Dong
Jin. Construction of the Hyundai plant in the eastern city Nosovice "will
proceed exactly according to the schedule and conditions," Czech government
spokeswoman, Lucie Orgonikova, said in Prague.
Czech Republic's CEZ buys Bulgarian coal plant
The Czech Republic's state-run energy company, CEZ, said recently it has
finalised a 306 million Euro deal to buy Bulgaria's massive Varna power station,
Deutshce Presse- Agentur (dpa) reported.
Officials from CEZ and the Bulgarian government's privatisation commission
signed the agreement in Sophia, said company spokeswoman, Eva Novakova. CEZ was
the government's second choice, but the initial winner - Russia's RAO UES -
withdrew its bid last year.
CEZ agreed to pay 206 million Euro for the plant and invest 100 million Euro for
capital improvements. The company also agreed to invest 40 million Euro in
separate energy projects around Bulgaria. The coal-fired plant near the Black
Sea will boost CEZ's total generating capacity by 10 per cent and expand the
company's growing portfolio in Eastern Europe.
In recent years, CEZ has bought power plants in Poland and distribution
companies in Romania and Bulgaria. The Varna deal fits "our vision of
becoming number one on the electricity markets in central and southeastern
Europe," company Vice Chairman, Jiri Borovec, said. With six units
generating up to 1,260 megawatts, Varna is now CEZ's largest coal plant.
Russian firm beats US rival for Czech nuclear contract
Russia's TVEL was picked over US rival Westinghouse for a contract to supply
nuclear fuel to a Czech Republic power plant, TVEL and the Czech state-run
utility CEZ said recently, New Europe reported.
The contract calls for TVEL to supply 400 tonnes of fuel between 2010 and 2020
to the Temelin nuclear plant, which has been fuelled by Westinghouse since its
launch in 2000. Financial terms were not disclosed, although TVEL said the deal
was worth "billions of koruna (crowns)" (USD millions). TVEL already
supplies fuel for the other Czech nuclear plant Dukovany and a research reactor
Morgan Stanley interested in the republic
US investment bank Morgan Stanley wants to spend more than a half-billion US
dollars for an urban redevelopment project as part of a major expansion into the
Czech Republic, New Europe reported.
The proposed Karolina housing-office-shopping complex in the Eastern Czech city
Ostrava would be the largest project in a nationwide portfolio of Morgan Stanley
investments worth about 20 billion crowns (US$906 million), the financial daily
Hospodarske noviny said.
Morgan Stanley's real estate division is working through a recently acquired
Czech company, Multi Development, to bid for a 30-hectare, former coking plant
site near the city's centre. In recent years the Czech developer built similar,
multipurpose complexes in Prague, Plzen and Olomouc. Another complex is under
construction in Usti nad Labem. The report said Morgan Stanley paid about 480
million Euro (US$616 million) for Multi Development, which has also completed
projects in Britain, France and the Netherlands.
Trade cooperation with KRG of Iraq
To promote commercial activities between the Kurdistan Region of Iraq and the
Czech Republic, the Czech government has opened a liaison office for trade and
commerce in Erbil, New Europe reported.
The Czech Republic Deputy Minister of Foreign Affairs, Jaroslav Basta, and
Ambassador, Petr Voznica, performed the opening ceremony. Participants from the
Kurdistan Regional Government (KRG) included Dr Fuad Hussein, representing
President Masoud Barzani, and Minister of the Interior, Karim Sinjari, on behalf
of KRG Prime Minister, Nechirvan Barzani.
Other participants included the Minister of Culture, Sami Shoresh, Minister of
Industry and Electricity, Yonan Marqus Hanna, Minister of the Region, Falah
Mustafa Bakir, and Erbil Governor, Nawzad Hadi. From the Czech Republic, the
Vice President of the Confederation of Industry, Stanislav Kazecky, and other
senior business leaders also participated in the event. All parties agreed that
the opening of the liaison office builds an important bridge for both government
and commercial relations, and that many useful projects will grow from this
effort in the months and years to come. This is the first foreign liaison office
to be opened in the Kurdistan region.
Additional offices are expected to open within the coming months. In keeping
with the provisions of the Constitution of Iraq, the KRG plans to open trade and
development offices in other countries, in order to let them know more about the
possibilities of Czech development and business.