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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)

Books on Czech Republic

 



Update No: 119 - (30/04/07)

Klaus's view prevails
Czech President Vaclav Klaus has scored a partial victory when German Chancellor Angela Merkel has quit the idea of resuscitating the European constitution, even though she still insists on the Union having a president and foreign minister. Klaus had been alone with his objections to the EU, and even the Civic Democratic Party (ODS), of which he is honorary chairman, was often more kind towards Brussels. 
He says that the latest developments must be very painful particularly for the opposition Social Democrats (CSSD), who claimed that life is impossible without a European constitution. 

Opposition seizes on health as a winning issue
Czech Social Democrat (CSSD) leader Jiri Paroubek is trying to be an opposition leader, but he is failing in his effort. When Paroubek claims that the Social Democrats will abolish fees for prescriptions, visits to surgeries, and others once they are returned to power, he is just like Slovak PM Robert Fico, chairman of the leftist Smer-Social Democracy party. 
The attempt to follow Fico's recipe whose Smer won the elections and that is even more popular in government need not be successful, however. Slovakia is not the Czech Republic, and Czech PM Mirek Topolanek (conservative ODS) is far from being Mikulas Dzurinda, former right-wing government chairman. 
Dzurinda's reformers tightened Slovaks' belts too much to win the next elections, and enough for Slovakia to live well on the reforms even under Fico for another four, maybe eight years. Paroubek can hope for nothing like this because Topolanek's reform has been drafted so that the ODS may win the next elections as well. 

Ecologists against ecology 
It was the Green movement that halted the building of further energy sources in Europe and together with pressure for the closure of nuclear power plants caused the current difficulties of the whole continent. The ecologists are acting as great friends, not of the Earth, but of its destruction by climate change. There is one honourable exception, the most original mind in the movement, James Lovelock, the author of the Gaia hypothesis and long-time advocate of nuclear power as the only realistic alternative to fossil fuels and the destruction of the planet.

The Greens destabilised the German energy network when they pushed through the building of alternative power sources in the form of wind farms that depend on blowing wind. The problems of the unstable German energy system pull prices up across Europe, and this is also true of the Czech Republic that is the only country in the region whose power output exceeds domestic consumption. The current centre-right coalition government, pressed by its junior member, the Green Party, leads the country along the tested German path to energy hell. 

Anyone will buy any quantity of power from the Czech CEZ power giant company and easily resell it to Germany, Austria, Italy and elsewhere, which consequently pushes prices up for Czech consumers as well. Energy prices for households are expected to rise by 10 percent next year in the Czech Republic. 

Stalemate is over - but only just
In early June 2006, elections resulted in a stalemate. Czech voters renewed the Chamber of Representatives. Final results gave the Civic Democratic Party (ODS) ODS 35.58 per cent of all cast ballots, followed by The Czech Social Democratic Party (CSSD) with 32.32 per cent. Czech parties require at least five per cent of the vote to earn seats under the country's proportional representation system. The final tallies give the ODS, the Christian and Democratic Union - Czech People's Party (KDU-CSL) and the Green Party (SZ) 100 seats in the lower house, with the remaining 100 seats going to the CSSD and the Communist Party of Bohemia and Moravia (KSCM).

The tie among rival factions led to a long political stalemate. In January of this year, Czech president Vaclav Klaus re-appointed ODS leader Mirek Topolanek as prime minister. Topolanek's government eventually won a confidence motion in the Chamber of Representatives after a 100-97 vote. 
The Czech Republic-a member of both the European Union (EU) and the North Atlantic Treaty Organization (NATO)-will start negotiations with the United States on building a radar base close to Prague as part of the U.S.-proposed missile defence system. Some EU officials have asked the Czech Republic to include the continental group in these discussions.

On Apr. 17, Topolanek dismissed an agreement with the EU, declaring, "At present there are negotiations and discussions, both formal and informal, within NATO and these will be continued. However, no need to communicate this issue to or on the level of the European Union has been identified."

Backing for ODS Drops in Czech Republic 
There is no doubt about the unpopularity of the decision to cooperate with the Americans over the issue. This explains the slipping ratings of the government in opinion polls.
The ruling is losing support in the Czech Republic, according to a poll by STEM. 29.2 per cent of respondents would vote for the ODS in the next legislative ballot, down 2.8 points since early March.
The CSSD is second with 24.9 per cent, followed by the SZ with 11.6 per cent, the KSCM with 10.9 per cent, and the KDU-CSL with 6.6 per cent.

The economy booms
It cannot be the economy that is making the government unpopular for it is booming. GDP growth is coming in at 5.6% on an annual basis in the first quarter, while it is reckoned to going to be 5.1% for 2007 and 4.6% in 2008. Inflation is under 3% per annum, although a recent settlement for a 1.1% rise in wages at the Skoda Works, a leader with 27,000 workers, might lead to it being breached.
The black spot is unemployment at 7.3%; but that means that 92.7% are in work!
The latest figure for industrial production showed it soaring by 15.4% in February; it is not a fluke month either.

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ENERGY

CEZ launches tenders to insure Temelin


Czech government-controlled power utility CEZ has announced two tenders worth a total of more than one billion crowns to insure its Temelin nuclear power plant, CEZ spokesman, Ladislav Kriz, said on April 2nd, Interfax News Agency reported. 
The first tender calls for insuring Temelin's assets and is estimated at 900 million crowns, while the second is to choose an insurer for plant operations and is worth about 140 million crowns, according to Kriz. The deadline for submitting bids in both tenders is April 26, 2007. Apart from Temelin, CEZ also operates the Dukovany nuclear power plant.

Govt OKs sale of 7% of CEZ

In order to patch a 31 billion crown (US$1.5 billion) hole in the budget, the Czech centre-right cabinet recently approved the sale of a seven percent stake in the CEZ power utility, Czech Finance Minister, Miroslav Kalousek, told a press conference, cited by Deutsche Presse-Agentur (dpa). 
The state plans to pick a middleman who will dispose of the shares through capital markets this year, Kalousek said, declining to reveal further details. 
According to earlier reports, the fast-growing, profitable and capital-laden utility is mulling buying the stake. The earnings of at least 31 billion crowns will be spent on already approved road construction and repairs. Analysts have criticised the government for using the sale to seal a budget gap instead of investing the income in a pension reform. 
"We will waste this money. This sale is financing our inability to save," Raiffeisenbank analyst Ales Michl told dpa. The disposal of shares has been also criticised out of worries that Russia may enter the strategic power company. "This transaction will absolutely not have any impact on energy security," said Czech Trade and Industry Minister Martin Riman, adding that the utility is in demand among investors and "no single investor would buy seven percent." 
The Social Democratic opposition has opposed the sale, arguing that the state, currently holding 67.6 percent of CEZ, will lose the two-third majority in the company. The cabinet dismissed the criticism, saying that, in practice, the company's 120,000 minority shareholders are not capable of outweighing the state at general meetings. "We are not worried at all that we would lose a qualified majority due to this operation," Kalousek said. 
The step does not cut the soaring Czech budget deficit below a three percent threshold set by the Maastricht Criteria that determine requirements for adopting the Euro. As the European Commission does not consider extraordinary privatisation revenues as budget income, the disposal of shares will cut the Czech budget deficit from 122 billion to 91 billion crowns (US$5.8 billion to US$4.3 billion) only in the country's books. The country is not expected to adopt the Euro before 2012.

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FOOD & DRINK

Kofola to acquire bankrupt Polish rival Hellena 

The second largest soft drinks maker in the Czech Republic, Kofola Holding, plans to acquire its bankrupt Polish rival Hellena SA for 125.4 million crowns, Interfax reported.
"Kofola was the only suitor (for Hellena)," spokeswoman of the Kalisz district court Ewa Glowacka-Andler told reporters, as cited by Czech news agency CTK.
Hellena has assets of some 949 million crowns, but debts are at approximately the same level, CTK added. Kofola reportedly aims to re-launch production, which was resumed in February following bankruptcy proceedings. Kofola, founded in 1993 after the privatisation of the traditional Czech drinks producer Nealko Olomouc, follows US giant Coca-Cola on the Czech market, while leading in neighbouring Slovakia's market. Kofola posted record-high sales of 3.5 billion crowns last year.
The Czech company is set to merge with Warsaw-listed Polish rival Hoop to form a new Polish company, Kofola-Hoop, with annual turnover of 8.6 billion crowns. Kofola-Hoop will list on the Polish bourse, but the company will be controlled by Kofola's Czech managers, Interfax reported. After the takeover of Hellena, emerging Kofola-Hoop could reach second position on the Polish soft drinks market after Coca-cola and ahead of PepsiCo, it was reported.

Penam bakery acquires rival KLS Klimentov

Part of the Agrofert holding and also the second-largest bakery in the Czech Republic, Penam, has bought its rival in West Bohemia, KLS Klimentov, and plans to invest more than 470 million crowns into building an automated bakery outside Prague as part of its domestic expansion strategy, Penam CEO Jaroslav Kurcik was cited by Interfax as saying last week. "The acquisition of the Klimentov bakery - and construction of our own bakery near Prague - are logical steps for increasing Penam's share of the Czech market," Kurcik was quoted as saying. The company did not disclose the price of the deal with Klimentov, which had turnover of 140 million crowns last year.
Penam is currently active mainly in the Moravia region and has a share of about 10 percent of the Czech market. Main rival United Bakeries, created from the merger this January of Odkolek and Delta Pekarny bakers, controls about 20 percent of the market, it was reported. Penam is a market leader in Slovakia with a 20 percent market share. The company's goal is to increase its Czech market share and bring the total annual turnover in the two countries to 5.5 billion crowns by 2010, according to Kurcik.
Penam's sales in the Czech Republic amounted to 2.75 billion crowns in 2006, a 3.7 percent increase year-on-year. Net profit reached 135.8 million crowns. Kurcik said the company is involved in negotiations concerning further Czech acquisitions and plans to buy an "additional two or three bakeries in a matter of one or two years."
Kurcik also said Penam would mull expansion beyond the Czech Republic and Slovakia after 2009, but said that was not on the company's current agenda.

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FOREIGN RELATIONS

Business ties to be strengthened with Czech Republic

Bulgaria offers a good investment climate that is favourable for Czech entrepreneurs, President of the Czech Senate Premysl Sobotka told Sofia News Agency. On a visit to Bulgaria, Sobotka met Parliament Speaker Georgi Pirinski on March 29. Pirinski welcomed participants in a Bulgarian- Czech business forum, which was held at the Military Club in Sofia. The Czech officials, together Bulgaria's Deputy Economy Minister Nina Radeva and Pirinski joined the business forum. Pirinski said that Bulgaria was thankful for the fast ratification process of its EU accession treaty in the Czech Republic. Bulgaria could benefit from the Czech experience in the utilisation of EU funds, Pirinski said. "Bulgaria is a perspective trade partner of the Czech Republic, and the economic collaboration between the two countries could be effective not only as far as tourism and agriculture are concerned," Sobotka added. The President of the Confederation of Industry Stanislav Kazecky, who also joined the Czech delegation, said the companies in his country are interested in long-term relations with Bulgaria. "We would like to develop joint energy, transport, environmental and building projects," Kazecky was quoted as saying.

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PHARMACEUTICALS

Zentiva takeover of Turkish pharma approved

A general shareholders' meeting of Czech generics drug producer Zentiva approved on April 2 a takeover of a 75 percent stake in the Turkish Eczacibasi Generic Pharmaceuticals for 460 million Euro, Zentiva announced, Interfax reported. 
"Eczacibasi's acquisition was approved," Zentiva's spokesperson Vera Kudynova told Interfax on April 2. Zentiva, listed in Prague and in London, has an option on the remaining 25 percent in the Turkish company in two years. In 2006, Zentiva posted a record-high net profit of 2.2 billion crowns for 2006, up 17.3 percent year-on-year on net sales up by 18.3 percent to more than 14 billion crowns.
Eczacibasi Generic Pharmaceuticals, listed on the Istanbul Stock Exchange, posted 200.9 million Euro in sales in 2006. Zentiva is also present on the Hungarian market via the world's third-largest drugmaker Sanofi-Aventis, a 24.9 percent shareholder in the Czech firm.It also has units in Romania - following the acquisition of domestic pharma Sicomed - as well as in Poland and Russia. 

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