czech republic

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Key Economic Data 
  2002 2001 2000 Ranking(2002)
Millions of US $ 69,590 56,800 51,400 43
GNI per capita
 US $ 5,560 5,250 5,310 68
Ranking is given out of 208 nations - (data from the World Bank)

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Vaclav Klaus

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After World War II, Czechoslovakia fell within the Soviet sphere of influence. In 1968, an invasion by Warsaw Pact troops ended the efforts of the country's leaders to liberalize party rule and create "socialism with a human face." Anti-Soviet demonstrations the following year ushered in a period of harsh repression. With the collapse of Soviet authority in 1989, Czechoslovakia regained its freedom through a peaceful "Velvet Revolution." On 1 January 1993, the country underwent a "velvet divorce" into its two national components, the Czech Republic and Slovakia. Now a member of NATO, the Czech Republic has moved toward integration in world markets, a development that poses both opportunities and risks. 

Update No: 087 - (27/07/04)

New government confirmed in August
Czech premier designate Stanislav Gross believes the new government could seek and win a parliamentary confidence vote in August, Czech Television said in mid-July. Gross moved a step closer to forming a coalition government with the resignation Thursday of an opposition lawmaker. For he just needs one vote to have a majority. 
Gross's ruling Social Democrats hope to reform the coalition government with the centre-right Christian Democrats and the neo-liberal Freedom Union. The three parties have governed together since general elections in 2002. Gross has been trying to recreate the three-party coalition government which came to power after them since Vladimir Spidla resigned from both the ruling Social Democrats and the premiership in late June.
However, defections from within the coalition had left it with minority support in parliament complicating efforts to form a new government.
But on July 7th the Freedom Union, one of the parties in the coalition, announced that a rebel parliamentarian had resigned from parliament. This means the Freedom Union will now be able to replace the parliamentarian who resigned with someone loyal to the party, thus allowing it to bring enough deputies into the coalition to form a government with majority support in parliament.
The current political crisis in the Czech Republic was precipitated by a disastrous showing for the Social Democrats in elections to the European Parliament in mid-June. The Social Democrats took fifth place in the elections, receiving less than nine percent of the vote.
The politically diverse nature of the coalition government has also made for some awkward compromises on policy, creating constant tension among the constituent parties.

Possible communist comeback?
There is one party that did well in the Euro-elections, the communists. The popular dailies are worried that the new government might do a deal with them to clinch a decisive majority.
Spidla's position became untenable because he was always open to political blackmail from his own side, clinging on by one vote in votes of confidence that the opposition were continually raising.
But a deal with the communists would be regarded as a regressive move by many. However, Mitterand managed to use the communists in the 1980s in France. It requires political cunning of a high order. That is exactly what people credit Gross with having. 
He has never spelled out his vision of where the country should go. But he is very good at negotiation and keeps people as allies with a gift for seeming sincere. Andrej Surnak, a public relations specialist who worked on the CSSD's 2002 campaign, said Gross has gathered a loyal following within the party because "he is one of the rare politicians who really thanks you when you do something." 
From the time he joined the CSSD in 1989, becoming general secretary of the Young Social Democrats in 1990, Gross has known how to make friends with the right people and enshrine his popularity. 
"He really has a gift from God," said Jaroslav Foldyna, head of the CSSD branch in the Ústi nad Labem region, referring to Gross' people skills. "The good thing is that he is a young, attractive man who people tend to like. Voters often concentrate on image and overlook real problems; it is therefore great if a politician can present such an image to the public." 
Gross has been rated the country's most popular politician in public polls for nearly five years. Former Prime Minister Milos Zeman, recognizing Gross' mass appeal, named him Interior Minister in 1999. Gross was the only minister who Spidla reappointed when forming the government in 2002.
Not yet 35, which he will be in October, he seems to have everything going for him. Time will tell.

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CEZ issues €400m in bonds

Czech national power company CEZ successfully launched a €400m Eurobond issue through its subsidiary CEZ Finance BV, CEZ spokesman, Ladislav Kriz, said, Interfax News Agency reported recently. 
The bonds mature in seven years and carry an interest rate of 4.625%.
Lead managers for the issue are the BNP Paribas bank and the Merrill Lynch consulting firm, senior co-lead manager is Bayerische Landesbank. The Eurobonds are quoted on the Luxembourg bourse. The issue received a BBB+ rating from the S&P rating agency, and a Baa1 rating from Moody's. Proceeds from the issue will be used for refinancing CEZ's debt and financing the company's general needs, the spokesman said.

CR launches first Eurobond issue, 1.5bn crowns worth

The Czech Republic has launched its first Eurobond issue worth 1.5bn Czech crowns, up from an originally planned 1bn crowns issue, the New Europe reported recently. 
The annual interest rate of the ten-year bond was set at 4.625%. The bonds are therefore being offered at 99.772% of their nominal value. The yield is 0.225% more than the yield of similar German Bunds.
However, the Czech state will borrow for the lowest price compared with other Central European countries. So far, the cheapest bonds - with a yield of 0.335% more than Bunds - were issued by Slovakia.
According to the local analysts' view, the government raised the volume due to high interest in Czech debt among foreign investors.
Czech Finance Minister Bofuslav Sobotka held several meetings with investors in several West European countries. Investment banks Morgan Stanley and Deutsche Bank are organisers of the issue. The issue will be traded on the bourse in Luxembourg.
Ratings agency Fitch has rated the issue at A-. The rating is in line with Fitch's long-term foreign currency rating for the Czech Republic.
The country's government decided to issue the Eurobonds despite opposition from the Czech National Bank (CNB), which fears the issue may excessively strengthen the Czech crown.
The government plans to issue bonds worth a total 124bn crowns in 2004, plus or minus 10%. The state needs proceeds from bond issues to cover state budget deficits. As a result, Czech debt has risen significantly in recent years and will exceed 500bn crowns this year.

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Construction output soars

Czech construction output jumped by 62.4% in April, fuelled by attempts to take advantage of the final month of 5% value-added tax (VAT) on construction work before it was transferred to the 19% bracket, according to the Czech Statistical Office (CSU), New Europe reported recently. 
Many firms invoiced work in order to bill under the lower VAT rate. The CSU attributes some two thirds of the April increase to such invoicing, and does not expect such growth to continue in the coming months. Planning offices issued 13,075 building permits in April, with 6,158 of those for new construction and 6,917 for renovations. The estimated value for the two categories stood at 29.2bn Czech crowns, with new projects accounting for 20.9bn crowns of the total. Planning offices granted permission for the construction of 3,450 flats in April, an increase of 480 over the previous month. The number of employees at construction firms with a staff of over 20 increased by 2.9% in April. The average monthly wage amounted to 17,600 crowns, an increase of 8.2% year-on-year. Wages in the sector were up 5.8% in real terms.

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PKN Orlen wins 63% of Unipetrol

Poland's PKN Orlen, which won a tender for the Czech state's 63% stake in the petrochemical company Unipetrol, paid a first instalment of 1.3bn Czech crowns on June 28th, National Property Fund (FNM) spokeswoman Petra Krainova said, Interfax News Agency reported.
June 28th was the deadline for payment of the instalment, one tenth of the 13.5bn crowns purchase price. The amounts was deposited in a special FNM account. "The remaining 90% is to be paid after the sale is approved by the European Commission," said Krainova. The FNM said earlier the deal could be completed by autumn. The Czech government decided to sell its 63% stake in Unipetrol to PKN Orlen in April. PKN was the only suitor to place a binding bid in the Unipetrol tender. The Unipetrol group consists of the 100%-owned subsidiaries Chemopetrol, Kaucuk, and Benzina, and the majority-owned subsidiaries Ceska rafinerska (CeRa, 51%), Paramo (74%), and Spolana (80%). The IOC consortium - Agip, Shell and ConocoPhillips - which owns 49% of the CeRa, is currently considering whether it will exercise its option to buy Unipetrol's majority stake in the refinery.

Czech company buys power distributors in Bulgaria

The Czech CEZ power company will buy three power distributors in Bulgaria - the Bulgarian government has announced that the CEZ is one of the winners of the tender organized to sell the distribution network. CEZ will pay 281.5m euros - almost 9bn Czech korunas - and this makes it the biggest Czech investment abroad, Czech TV1 reported.

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ASUSTeK builds production and repair centre in Ostrava

The Taiwan-based IT firm ASUSTeK Computer has launched construction of a €20m production and repair centre in North Moravia's Ostrava-Hrabova industrial zone, CzechInvest announced on June 30th, New Europe reported. 
The new plant will employ at least 1,300 employees, approximately 350 of whom will work at the service centre, which demands highly-qualified specialists, said CEO Martin Jahn of CzechInvest, the government agency encouraging FDI in the Czech Republic. The most decisive factors in choosing the location of the plant were the readiness of the industrial park in Ostrava-Hrabova and the proximity of the Technical University to Ostrava, with which the firm intends to cooperate closely, said ASUSTeK Computer Vice President George Wu. The production facility and the repair centre will open next spring. 
The centre will produce up to 200,00 personal computers per month and the capacity of the repair centre should reach some 50,000 computers per month. ASUSTeK Computer is the leading international producer of consumer electronics for major Japanese and American companies, but it also produces products - like laptops - under its own brand name.

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CSFB-CS to advise on Cesky Telecom sale

A consortium of Credit Suisse First Boston (CSFB) and Czech bank Ceska sporitelna has signed a contract with the National Property Fund (FNM) to serve as adviser on the privatisation of the country's dominant fixed line operator Cesky Telecom (CT), the FNM's, Petra Krainova, said, Interfax News Agency reported.
The adviser is charged with drafting the strategy, organisation, structure and timetable for the sale of the state's 51% stake in the firm, as well as the method of privatisation.
CT's privatisation is expected to get underway in the second half of this year and be completed by end 2005. In its bid, the consortium requested compensation of 0.385% of the selling price if CT is sold to one investor, and 0.78% if it is sold on the capital market. A price tag of 55bn Czech crowns for CT would generate income of 212m crowns - 429m crowns for the adviser. The CSFB/CS consortium beat Morgan Stanley/Patria Finance and Wood & Co/Merrill Lynch for the post.

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