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CZECH REPUBLIC


 



Key Economic Data 
 
  2003 2002 2001 Ranking(2003)
GDP
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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Update No: 115 - (21/12/06)

Political crisis takes new turn
Six months into the country's political crisis, sparked by June's election draw between centre-right and left wing factions, even most political analysts are unwilling to wager what will happen next. "Everything is unpredictable," Prague's Charles University political lecturer, Petr Just, told AFP after the latest abrupt about turn by right-wing Prime Minister Mirek Topolanek in mid-December. 
Topolanek broke off talks with the centre-left Social Democrats on forming a grand coalition that would have commanded an overwhelming majority in parliament. 
Instead, he dusted off plans for a three-way centre-right coalition with the smaller Christian Democrat and Green parties, despite a first attempt collapsing in August. Topolanek's first attempt at winning a vote of confidence failed a few weeks later. 
Hurriedly convened meetings of both small parties on December 16th gave the go ahead for their leaders to re-launch coalition talks, but also exposed the rifts between them. 
The Green Party meeting roundly condemned as "unacceptable" newly-elected Christian Democrat leader Jiri Cunek's "deportation" of gypsy families from the centre of the eastern town of Vsetin, where he was mayor. "We want human rights to have a clear place in the future government programme," said Green leader Martin Bursik. 
For its part, the Christian Democrats called for the new centre-right partnership to continue trying to win some sort of support from the Social Democrats, clashing with a demand by the Greens for a clear break with them. 
The Social Democrats on Saturday ruled out any support for the new centre-right formation and tried to rally their fractious forces with an appeal for two rebel lawmakers to rejoin the party. One, Milos Melcak, has called for party members to allow Topolanek to form a government and then go into opposition. 
With the right- and left-wing evenly divided in the lower house of parliament with 100 lawmakers each, the support of at least one left-wing defector will be crucial for Topolanek's high risk bet to pay off. 
"If not, it will be the end of Topolanek's career," commented political analyst Jiri Pehe. "However successful he has been in winning elections, anyone who fails to win two votes of confidence is a lame duck." Czechs have been left baffled by the political antics. "There is a lot of disappointment and even disgust," said Pehe. 
A recent poll showed nearly two-thirds of respondents dissatisfied with the political situation, while another indicated that confidence in institutions like the cabinet and parliament has halved in the last six months. "The comedy has finished for today. But tomorrow the clowns will possibly come back on the scene with new offerings," the daily Dnes wrote on December 15th, adding that the comedy now only entertains the clowns. 
The International Monetary Fund has warned about the effect of delaying much needed economic reforms. Local councils have warned of chaos at the start of the year because government guidance about a raft of new laws has not been issued and they are worried whether they will be able to tap into hoped-for EU funds. 
The only consolation is that the end game could now be in sight and "things should move fairly quickly now," Pehe said. "Either we should get a government or we will move to early elections," he concluded.

U.S. turned to Czech Republic for R&D expertise in 2006
To turn to a more positive subject, over 60 percent of foreign direct investments (FDI) announced by United States-based companies in the Czech Republic in 2006 are research-and-development projects in innovation industries. According to data collected by CzechInvest, an agency of the Ministry of Industry & Trade of the Czech Republic, a high percentage of these projects were design projects in information technology and software. 
"In 2006 we've seen U.S. technology companies look to the Czech Republic for highly skilled infrastructure technology and software engineering talent," said Radomil Novak, Director, U.S. Operations-West and Adviser to the CEO, CzechInvest. 
Out of 16 U.S. companies announcing new investments or major expansions in the Czech Republic 12 are R&D and high value-added services projects. New projects include the following: 
-- Sun Microsystems opened a new state-of-the-art development and technology centre.
-- Microsoft opened its first worldwide centre for mobile applications.
-- Computer Sciences Corporation (CSC), a leading supplier of information technology services, opened a new centre for the development of software applications.
-- Quadbase Systems Inc., providers of Web-delivered reporting and charting tools, opened a new software R&D centre.
-- Solectron Corporation, providers of product design, supply chain management, manufacturing and aftermarket services, announced this month it is establishing a new high-tech repair centre in the Czech Republic.
-- Hewlett-Packard established a computer technology supply chain headquarters to serve Europe, the Middle East and Africa.
-- Honeywell International established a global aviation centre.
-- Rannoch Corporation acquired ERA a.s., Czech aerospace surveillance technology company, to expand Rannoch's technology capabilities and reach in Europe.
-- Procter and Gamble is expanding its production and opened a new engineering centre.
-- Ingersoll-Rand announced the company is opening a new research and training centre.

In 2006, approximately 30 per cent of new investment in the Czech Republic was R&D or services-related. International companies have opened more than 40 development, technology and distribution centres in the Czech Republic in the past two years. 
CzechInvest's Silicon Valley-based office is experiencing an increase in the number of companies in the IT and software sector considering off-shoring R&D. Out of nearly two dozen new projects and inquiries under negotiation, more than 70 percent are interested in the country's engineering R&D talent, mainly in IT and software. Approximately 30 percent of the new projects and inquiries have originated from small enterprises based in Silicon Valley seeking affordable, high-end design. 
"As an emerging technology company based in Silicon Valley, we're looking for highly skilled engineers and cost-effective solutions that will help us move our product development forward," said Fred Luk, president, Quadbase Systems. "We selected the Czech Republic for its talent pool and resources. We've got an aggressive growth strategy and timeline to market for new products." 
Over the last few years, the Czech Republic has worked to capture FDI dollars and bring high-tech jobs to its highly skilled and educated workforce through economic incentives. The Czech Republic is one of the fastest-growing nations in the European Union. 
"In our Chicago-based office, we see a similar trend in increased interest for R&D in the automotive and aerospace industries. Overall, companies are looking for world-class talent, solid infrastructure and the ability to reach key European markets," said Bohuslav Frelich, director, CzechInvest-Chicago. 

About CzechInvest 
CzechInvest, the Investment and Business Development Agency, is an agency of the Ministry of Industry & Trade of the Czech Republic. The agency is the sole organization that may submit applications for investment incentives, manage incentives and coordinate the development of investment support in the Czech Republic. CzechInvest promotes the country abroad and acts as an intermediary between the European Union and small- and medium-sized enterprises in implementing EU structural funds in the Czech Republic. For more information, please visit www.czechinvest.org. 

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AVIATION

Airline representative AVIAREPS opens office 


AVIAREPS again has spread out its international network by founding a new office in the Czech Republic, website traveldailynews.com reported on December 4th. 
The airline representative merged with BlueBird Sro, a GSA company, which has been active for many years with representations of IBERIA, American Airlines, Qatar Airways, Eva Air and TAM - Brazilian Airlines. The step was a consequence to establish financially integrated company forms into the network, the website said. The new general manager of the Prague office is Ivan Vodicka, who was general manager previously at the BlueBird company. "This merger has nothing to do with the excellent relationships we have had with our former franchisee, but it is a strategy which our group does follow worldwide," AVIAREPS CEO and Chairman Michael Gaebler said. With this step, BlueBird would be renamed into AVIAREPS. The company - with GSA clients from both sides - will establish a very strong market position, which guarantees excellent results for the airline clients, it was reported. "Through an intensively enlarged sales and marketing force AVIAREPS in the Czech market will increase substantially the market share for the airlines represented in the company," Gaebler said.

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ENERGY

Kalmykia, Falcon capital to build wind power plants 

The Russian republic of Kalmykia and the Czech company Falcon Capital plan to build three wind farms in the republic at a total cost of over 150 million Euro, Kalmykia Economics Minister, Vladimir Sengleev, said in Elista, New Europe reported.
He said Kalmykia President, Kirsan Ilyumzhinov, and Falcon Capital CEO, Jozef Cimbora, signed an agreement of intent in Prague recently to implement an investment project to produce electricity in Kalmykia at wind plants with a total capacity of 150 megawatts.
The project involves the construction of three wind farms, each of which will have a total area of about 4.5 square kilometres, with over 40 wind turbines, each with a capacity of 1.2 megawatts, the minister said. "The cost of each wind unit is about 1.3 million Euro," Sengleev said.
According to the document, on completion of payback in eight to 13 years, Falcon Capital will transfer to Kalmykia 50 per cent of shares in the company set up by the Czech company, for one Russian rouble. "The final payback period for the project is currently being discussed," the minister said.
The sides also signed an agreement to carry out work to set up a grid and an electricity sales company in the republic, to buy grid infrastructure in Elista.
Sengleev said that for this Falcon Capital would set up a subsidiary as an open joint stock company with 100 per cent participation by the Czech company. "Falcon Capital will contribute 160 million roubles to the charter capital of the subsidiary," the minister said.
He said that after the acquisition of the Elista grid infrastructure the Czech company would transfer 49 per cent of the grid company to the republic for one rouble, and would be trustee manager of these shares.
"The Czech company is taking on all the commercial risk for the construction and payback of the wind units," Sengleev said.

Stability in 3 years forecast for nuclear plant 

The head of a problem-plagued nuclear power plant that has strained Czech-Austrian relations promised on November 13th to stabilise the facility by 2009, Deutsche Presse-Agentur (dpa) reported. 
"My commission is to stabilise the operation... in three years," Temelin plant director, Vladimir Hlavinka, told the Hospodarske noviny newspaper. "I want Temelin to be, in the public's view, a boring power plant." Hlavinka's comments came less than a week after the Austrian government sent a protest letter to Prague after the Czech Authority for Nuclear Safety (SUJB) granted an operating permit for the Soviet-designed plant, located 60 kilometres from the Czech-Austrian border. The letter was written after Austria's farm and environment minister, Josef Proell, visited Prague and criticised Czech officials for failing to "clarify" safety issues at the plant. Currently, technicians are wrestling with problems tied to deformed and leaking fuel rods in one of the plant's two reactors. The fuel problem has prevented Temelin's second unit from operating since August, although technicians were preparing to restart the reactor. Pre-start testing began on November 10. Technical problems also forced the shutdown of the first unit recently, but has been restarted. Similar problems have dogged the plant since it opened in 2000, despite protests from environmentalists and Austrian political leaders. Czech officials insist that none of the glitches in the state-owned plant are serious and that public safety is not at risk. Hlavinka, who was named director in July, said his goal is to operate the plant for 280 days without interruption. 

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FOREIGN TRADE

Trade with Vietnam to top US$ 135 million 

Two-way trade between Vietnam and the Czech Republic is on track to reach about US$135 million by year's end, Viet Nam Chamber of Commerce and Industry vice president, Doan Duy Khuong, commented on November 23rd at a Czech-Vietnam Business meeting in Hanoi, New Europe reported.
The Czechs expected to ship US$35 million worth of goods to Viet Nam, including machinery, glass, plastics, electrical equipment and powdered milk. The meeting aimed to boost bilateral trade and co-operation between the two nations and drew the participation of more than 100 businesses, including 18 Czech enterprises involved in energy, oil and gas, metallurgy, manufacturing and the law. Khuong stressed that the event, following Czech President, Vaclav Klaus's, five-day trip to Viet Nam in September, was clear proof of the growth in bilateral cooperation between Viet Nam and the Czech Republic. The two countries also signed an economic cooperation agreement in September 2005, and two-way trade has grown at an annual rate of 10 per cent during the past five years, Khuong noted. 

Foreign trade at 4.4bn crowns surplus in October 

Czech foreign trade showed a 4.4 billion crowns surplus in October, a growth of 1.6 billion crowns year-on-year, the Czech Statistical Office (CSU) said, website ctk.cz reported on December 6th.
The surplus was due to car and machinery exports and to a lower gap in trade in mineral fuels, statisticians said. Analysts predicted a surplus worth 3.7 to five billion crowns. In September, the surplus reached 7.5 billion crowns. Preliminary data have shown the value of exports and imports in October was the highest in memory. The surplus for the first 10 months of the year amounted to 44.1 billion crowns, a year-on-year growth of 3.9 billion crowns. Exports rose by 14.6 per cent and imports added 14.7 per cent in the period. In October alone, exports were up 19.8 per cent year-on-year in current prices and dropped by 0.1 per cent month-on-month. Imports rose 19.2 per cent on the year and 2.8 per cent on the month. The crown's gains to the Euro and above all to the US$ raised the pace of both exports and imports in both dollars and Euro, statisticians said. In the past 12 months against the previous twelve months, exports grew 13.8 per cent and imports added 13.4 percent. Czech trade surplus in the period rose by 11.7 billion crowns to 42.5 billion crowns.

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TELECOMMUNICATIONS

Czech telecoms group target of 1.2bn Euro buy-out

Thor Bjorgolfsson, Iceland's first billionaire, has sold Ceske Radiokomunikace (CRa), a leading Czech Republic telecommunications company, to a group of private equity investors for 1.19bn Euro (US$1.54bn), in one of the largest leveraged buy-outs in central Europe, the Financial Times reported on November 24th.
The landmark deal underlines private equity's continuing appetite for telecoms and its growing ability to raise substantial debt finance for central European transactions.
The consortium purchasing CRa consists of Lehman Brothers' private equity business, Mid Europa Partners, a buy-out fund focused on central and eastern Europe, and Al Bateen, an Abu Dhabi-based company for Middle East Investors. It raised 750m Euro of senior and mezzanine debt to part-finance the deal.
Bjorgolfsson, who made his fortune through investments in the banking, pharmaceuticals and telecoms industries, confirmed that the consortium had agreed to pay 1.19bn Euro.
The consortium also gets CRa's 39.2 per cent stake in T-Mobile Czech Republic, a Czech mobile business controlled by Deutsche Telekom, Germany's biggest telecoms group.
Bjorgolfsson held a 70 per cent stake in CRa via an investment fund. Some of the remaining 30 per cent was held by a group of former Deutsche Bank bankers.
When Bjorgolfsson first bought a stake in CRa in 2001, it was his first telecoms investment. Novator, his London-based investment vehicle, holds minority stakes in several European telecoms companies.
CRa reported revenues of Kc2.3bn in 2005 and forecasts sales of Kc3bn (US$139m) this year. It is the country's second biggest alternative fixed line telecoms operator, providing retail and wholesale services to about 450,000 clients.
It also runs the Czech Republic's radio and television broadcasting infrastructure, a highly sought-after asset as digitisation looms.

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