czech republic

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In-depth Business Intelligence 

Key Economic Data 
  2003 2002 2001 Ranking(2003)
Millions of US $ 85,438 69,590 56,800 39
GNI per capita
 US $ 6,740 5,560 5,250 66
Ranking is given out of 208 nations - (data from the World Bank)

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Vaclav Klaus

Private sector 
% of GDP 

Update No: 107 - (28/04/06)

Looming elections to parliament
Vital parliamentary elections are due next month. The governing Social Democrats are unpopular and the right-wing opposition Civic Democrats are still leading the field - they've won almost every opinion poll over the last year, and look set to become the party with the biggest share of the vote in June. However that might not necessarily mean much - the party may be incapable of forming a majority right-of-centre coalition. 
When you look more closely at the polls, it seems people are keen on the party but less keen on the party's leader, Mirek Topolanek, the man who took over from the current president Vaclav Klaus, who founded the Civic Democrats in the early 1990s. Mr Topolanek is seen as a bland, rather uninspiring leader, and political observer, Jan Hartl, the director of the country's best known polling agency, STEM, says if the Civic Democrats don't do well enough in the elections, it's almost certainly the end of his time at the top.
"It think it's very clear, that's the prevailing opinion. We can point to Vaclav Klaus. He was perceived as the most powerful leader in our political scene, the strongest personality, and it seems that Mr Topolanek stands in his shadow, and that he is not able to show much leadership. I think this is very easy to see, especially when compared to Vaclav Klaus." 


The biggest surprise in this year's elections looks like being the Green Party. Long outcasts in the political wasteland, the Greens now have a telegenic new leader - former environment minister Martin Bursik - and for the first time since the introduction of democracy in 1989 it looks like the party will enter parliament, apparently riding the crest of a wave of disillusionment with the other mainstream parties.
Some polls have put the party on 10 per cent, overtaking the Christian Democrats and even the Communists. Analysts, however, have sounded a note of caution, saying it's possible the Green vote will simply evaporate when election day comes around.
Jan Hartl says: "Our data clearly indicates that the quality of support for the Green Party is not very strong. It means that the alignment, the affiliation to the party is relatively of low intensity. A large segment of Green Party supporters are thinking about not taking part in the elections, so it might be a kind of support which will not be effective - i.e. in the end those supporters won't cast their ballot in the box." 
So it's all to play for, and the next few days will be crucial for the parties jostling for position in the polls. 

Chirac, Shroeder might arrive to support CSSD before polls -- press
French President Jacques Chirac might come to Prague to support PM Jiri Paroubek, the national election leader of the Czech Social Democrats (CSSD), ahead of the June 2nd-3rd elections, the daily Pravo writes. 
Unlike the CSSD, Chirac is a centre-right politician, but he could support Paroubek in view of their friendly relationship. His visit might be private and last a mere few hours, Pravo writes. 
Jaroslav Tvrdik, CSSD chief election manager, has neither confirmed nor refuted the information. In an interview with Pravo, Tvrdik admitted that former German Chancellor Gerhard Shroeder might also support Paroubek, along with other foreign prime ministers and party leaders. 
On the other hand, another Prague visit by British PM Tony Blair, also in support of Paroubek, is uncertain in view of Blair's busy schedule, writes the daily Mlada fronta Dnes (MfD). Tvrdik told MfD that a number of [foreign] statesmen will come to the Czech Republic to back Paroubek. 

Beer Summit
According to Pravo, Paroubek does not rule out holding a trilateral meeting with Chirac and Shroeder whom he would invite to a glass of beer in Prague. 
Blair has already visited Prague in support of Paroubek in March and his further visit is being discussed. "It is very difficult to harmonise the British PM's schedule with the Czech elections. Nevertheless, Mr Blair has already expressed support for the [Czech] PM. If his schedule allows it, he would repeat his support," Tvrdik told MfD. In March, Blair handed two London double-deckers to the CSSD for its election campaign. 
Question marks also reportedly hang over the meeting between Blair and Czech right-wing senior opposition Civic Democratic Party (ODS) chairman Mirek Topolanek, which was due to be held, according to the daily Hospodarske noviny, in Blair's office in Downing Street on April 27th. Peter Wickenden, press secretary of the British embassy in Prague, has confirmed the date and the venue of the meeting. Topolanek and Blair are reportedly to meet in London because they failed to do so during the latter's March visit to Prague. According to MfD, however, the Blair-Topolanek meeting is uncertain. 

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TPCA leads large foreign firms in creating growth 

The recent impressive performance by the Czech industry was largely buoyed by the large foreign companies led by car maker TPCA (Toyota Peugeot Citroen Car), while small Czech firms continued facing problems with the strong national currency, a recent poll of economists suggested. According to the experts polled in the survey, conducted by CTK and published in the website recently, the fast production growth should continue in the following months, New Europe reported. 
According to official figures, industrial production rose by 15.1 per cent in January, the second highest growth since 2001 and almost a 100 per cent increase against analysts' expectations. The growth was mainly contributed to the production of cars and electrical and optical instruments. Sales from industrial activities increased 16.3 per cent in real terms and the value of new orders increased 19.3 per cent. "It could seem that this is information from the Chinese statistical office instead of its Czech counterpart," said David Marek of Patria Finance, hinting at the strong expansion of the Asian economy. "The nature of the Czech industry is going through a significant change and its structure, which used to be dominated by heavy industries such as metals production, has started to adapt to the conditions of the Czech economy," he said.
The main driving force of industrial production however, remained the car industry for many months. Production of electrical instruments and the wood processing industry also fared well, unlike the production of glass, ceramics and textile. Mining was affected by a long and severe winter. Activities of foreign firms, which already account for more than three quarters of sales, are decisive for the performance of the Czech industry. Analysts mostly shared the view that foreign investment activities may accelerate this year. Analysts also mentioned the rapid increase in staff numbers amid a moderate increase in wages and fast improving productivity.
Vladimir Pikora of Next Finance warned that "a gap is still increasing" not just between Czech and foreign capital but also between small and large businesses. "Sales grow mainly at companies with more than 500 employees, as it is easier for them to cope with the strong currency. These companies also enjoy bigger support from the state," he noted.
Economists' consensus predicted full-year industrial production growth at eight to nine per cent, compared with 6.7 per cent last year. They also said that industry may again lead to rapid economic growth, to which a recovery in Western Europe may also contribute. The central bank would therefore probably forget about considering an interest rate cut and would rather resort to a rate hike, the analysts added.

Hyundai ready to build first European car plant 

The Czech Republic recently became the latest east European country to bag a bulk investment opportunity in the regionally cherished car manufacturing sector. South Korean automaker, Hyundai, edged closer to building its first European assembly plant by signing a memorandum of understanding with Czech government officials, Deutsche Presse-Agentur (dpa) reported. 
Subject to finalisation of the deal, which was expected to take a definitive turn in a few weeks, the company would launch the project in eastern Czech Republic by mid-year and start building 300,000 small cars a year for the European market by October 2008, according to Czech officials. The Czech government's recruitment agency, CzechInvest, said Hyundai would invest between 800 million and one billion Euro in a factory that creates 3,000 jobs directly and up to 10,000 indirectly. Months of negotiations preceded the signing attended by Hyundai Vice President, In-Seo Kim, Czech Minister for Industry and Trade, Milan Urban, and Evzen Tosenovsky, governor of the Moravia-Silesia Region where the plant would be built. The deal - including the government's incentive offers - was pending approvals from the Czech regional and federal governments, as well as Hyundai's board, which officials noted was "just a formality on the Czech side." 
But CzechInvest statement's said the deal would probably close in time for a groundbreaking ceremony in mid-May. The announcement ended months of speculation in the Czech Republic, which has waited nervously since September for Hyundai to cement its plans. Company executives met with Prime Minister, Jiri Paroubek, in Prague in September, but the carmaker later postponed its decision, twice. The factory in Nosovice, near the second-largest Czech city Ostrava, would inject life into a depressed, steel making and coal mining region of northeast Czech Republic, northwest Slovakia and southern Poland. In nearby Slovakia, Hyundai's sister company, Kia, has already started building an assembly plant. Hyundai would be the second Asian automaker in the Czech Republic. Toyota, after French partners Peugeot and Citroen, opened a Czech factory last year. Volkswagen's Skoda Auto also builds cars in the Czech Republic.

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Czech budget airline to fly to Brussels 

Czech budget carrier, Smart Wings, recently unveiled plans to introduce flights between Prague and Brussels. Starting June 12th, the airline will operate six flights a week between the Czech and Belgian capitals, everyday except Saturday, it said in a statement, New Europe reported.
Fare prices would start at 190 Czech crowns (6.50 Euro) one-way, excluding taxes. Earlier, Smart Wings said it would also start services between Prague and Venice, Barcelona and Copenhagen in June. Smart Wings flies regularly to a number of European cities, including Paris, Rome, and Madrid and offers flights to several Mediterranean destinations in the summer.

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Czech power giant emerges as new force in energy market 

More than 16 years after the fall of communism, competition is intensifying for a stake in Central and Eastern Europe's rapidly growing power markets with the Czech Republic's utilities giant CEZ fast emerging as a new force in region's energy sector, New Europe reported. 
In particular, with large slabs of the energy business in leading CEE states such as Poland, the Czech Republic and Hungary having already being sold off, state-controlled CEZ has been leading the charge to zero in on the privatisation of publicly owned power companies in Bulgaria and Romania. 
Romania and Bulgaria are hoping to become the European Union's 26th and 27th members in January next year. At worse, their membership ambitions could be delayed by a year. 
Having already declared its aim to become Central and South East Europe's biggest utilities group, CEZ recently emerged as the largest energy distributor in Bulgaria. CEZ paid 206 million Euro for a 100 per cent stake in the Black Sea Varna thermal power plant. 
"Varna thermal power plant will give us a better position in the future liberalised market," said CEZ manager in Bulgaria Tomas Huner, with CEZ seeing expansion in Central and South East Europe as furthering its historic links with the region. 
The Czech power giant's ambitions are also another sign of key companies from CEE states such as the Czech Republic and Hungary which signed up to the European Union in May 2004, starting to spread their wings and carve out new business empires outside their home countries. Indeed, having already forged a collection of power grids across the region, CEZ is now the biggest company among the 10 new EU member states and is one of Europe's top 10 utility companies. CEZ is also the Czech Republic's biggest remaining state- controlled company with the Czech state holding a two-third stake in the energy giant. As a result, CEZ itself is expected to eventually face moves by Prague to offload its holding in the company. 
"CEZ is a very rich company. Investors like its strategy of targeting power distributors and producers in Eastern and Southern Europe," Deutsche-Presse-Agentur (dpa) quoted Martin Zezula from the Prague investment house Conseq as saying. 
The company's share price has jumped from 341 Czech crowns at the end of 2004 to 736 crowns at the end of last year. The group's stock is currently trading at above 800 crowns with the relatively low electricity prices in the Czech Republic raising the prospects for CEZ to chalk up earnings growth. 
CEZ's expansion drive is already showing up on its balance sheet. The group's operating profit rose by 49 per cent last year to 29.4 billion crowns, helped along by the group's expansion into Bulgaria and Romania. "They will make an ever greater contribution in the future," said CEZ chief Martin Roman when releasing the results last week. 
Roman waved off predictions that a shakeout in the European energy market would reduce the number of big companies to three. "I think there will be four and the fourth will be CEZ," he said. 
That said, however, industry expectations are growing that nations such as Bulgaria and Romania will follow along the same economic path as countries that joined in the EU in 2004. 
As a consequence, CEZ is increasingly facing stiff competition in Bulgaria and Romania from power giants like France's Gaz de France and Germany's EON. 
Spain's Iberdrola, along with CEZ, Italy's Enel, Gaz de France and Germany's RWE were this month selected to join the bidding war for the majority stake in Romania's Muntenia Sud power grid. 
CEZ already has a 51 per cent in leading Romanian power distributor, Electrica Oltenia. It also owns two power plants in Poland. What is more, with Bulgaria and Romania emerging as the new frontlines in the battle for control of the Eastern Europe's power industry, CEZ is also interested in picking up a stake in Bulgaria's planned Belene nuclear power plant. 
Two years ago, CEZ bought three Bulgarian electricity distribution companies for a total of 281.5 million Euro. 
CEZ is also currently in sizing up possible takeover targets in Macedonia, Serbia, Montenegro, Slovakia and Romania and is attempting to finalise the purchase of a majority stake in up to six power distributors in Ukraine. It is also building for Bosnia's state-owned utility Elektroprivreda possibly two coal-fired plants and is buying coal mines in the small Balkans state.

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Sanofi-Aventis acquires stake in Czech drugmaker 

Sanofi-Aventis recently paid a total of 430 million Euro for 25 per cent of Zentiva, a generic drug company based in the Czech Republic. The deal made the French pharmaceutical giant the largest shareholder in the company, New Europe reported.
According to a statement from the company, the deal was a strategic move by Sanofi-Aventis designed to develop its business in Central and Eastern Europe. Zentiva, which achieved sales in 2005 of 410 million Euro, has strong positions in the Czech Republic, Slovakia and Romania, and is rapidly growing in Poland, Russia and the Baltic States.

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