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CZECH REPUBLIC


 

 
Key Economic Data 
 
  2002 2001 2000 Ranking(2002)
GDP
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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REPUBLICAN REFERENCE

Area (sq.km) 
78,866

Population 
10,249,216 

Density 
(per sq.km) 
132.2

Capital 
Prague 

Currency 
Koruna 

President 
Vaclav Klaus

Private sector 
% of GDP 
80%

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Background:
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: 085 - (01/06/04)

The turning-point
The Czechs have need of forbearance. They were dastardly betrayed by the West in 1938. They are none too sure that they are not being betrayed in a more subtle way now, as they enter the EU.
At Hitler's mercy in 1938, the Western powers, the UK and France, preferred peace to fighting for the right cause at that juncture. The Sudetenland was ceded to Germany; and much else: When the Germans marched in, the Czechs in Sudetenland has just two days to clear out. After 1945 that was reversed and the Germans were in turn, summarily erected. No love was lost on either side!
What is the EU all about. It is excusable for a Czech to be highly sceptical. Another ruse of the Germans to dominate their country?
The creation of the EU and Czech membership thereof is a historical inevitability; a kind of historical denoumement, as far as they are concerned. For three centuries after the Battle of White Mountain in 1620, when an Austrian Catholic army routed the Bohemian Protestants in what turned out to be the first major conflict in the Thirty Years' War, the Czechs felt threatened by the Germans, who were always expanding eastwards. Is that not still the case, some feel?

Europe is to come 
There is still hope that a genuine democracy can emerge and develop in Europe, transcending the bipartisan passions of the past. The Czechs are among the most honoured of the Europeans. So are the Slovaks, from whom they have recently split.
Slovakia is 90% in favour of Europe, according to opinion polls. As one of our correspondents said; 'Life was hard for us in the Austro-Hungarian Empire, was better in Czechoslovakia, and we believe will be better still in the EU. For us it is a journey into a world of normality.' 

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AGRICULTURE

Czechs set condition for purchase of farm land by EU nationals


EU nationals who want to buy Czech farmland will have to prove that they had permanently resided in the country for three years. The market with [agricultural] land should be fully liberalized in 2011 at the earliest that is after the seven-year Transitional period, Czech TV1 reported. 
The three-year permanent residence condition was stipulated by the Chamber of Deputies [lower house of parliament] when - with an overwhelming majority - it voted against the proposals tabled by the Senate and approved the amendment to the foreign currency law. The law is now to be signed by the president.
An overwhelming majority of 122 MPs [of the total of 200] passed the foreign currency law. The law was supported by a majority of MPs from the government parties and by the Communists.
"We protect our farmers against attacks from outside, because there is a clear imbalance - an imbalance in prices," Agriculture Minister, Jaroslav Palas, said.

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AVIATION

More CSA passengers

New Europe reported recently that National air carrier, Czech Airlines (CSA), saw a record increase of 30% in the number of passengers transported in the first quarter of 2004, CSA spokeswoman Dana Dvorakova announced in a recent statement. In the first quarter the development of transport indicators proves the viability of CSA expansion plans approved for 2004, Dvorakova said. Between January and March 2004, CSA transported a total of 821,092 passengers, a year-on-year rise of 188,000. The volume of freight and mail transported increased by 19.3% year-on-year or 886 tonnes in the monitored period. In the first quarter of 2004 CSA realised a total of 6,651 flights, a year-on-year increase of 15%, from 5,782 in the same period last year.

Transport aircraft project under way

A consortium of 17 Czech companies, led by Evektor, is preparing a project with the small transport aircraft EV 55 to seat 9 to 14 passengers, in an effort to improve the situation in the Czech aviation industry, Hospodarske noviny (HN) reported recently.
The Czech aviation industry has been in crisis for a couple of years because of problems of large producers, such as Aero Vodochody and Letecke zavody Kunovice. Evektor head, Jaroslav Ruzicka, said the firms have done market research which showed there is demand but only older machines are being sold, with no new plane prepared. The EV 55 should be a rival to the older types Cessna and Piper, HN said, adding that its price of some US$2m should be competitive. The project has been supported by the industry and trade ministry which will contribute more than 300m Czech crowns.

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CREDIT RATINGS

Moody's upgrades Komercni rating

Moody's Investors Service on April 30th upgraded to C- from D the financial strength rating of the Czech bank, Komercni Banka as (Komercni). This concludes the rating review for possible upgrade of the bank's financial strength rating, initiated by Moody's in February 2004. Komercni Banka's A1/P-1 deposit ratings remain unchanged, underpinned by the bank's ownership and control by Societe Generale (rated Aa3/P-1/B). The outlook is stable, New Europe reported.

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ENERGY

FNM signs contract on sale of mining firm

The Czech state-owned National Property Fund (FNM) and its 100% subsidiary PAL recently signed a contract with the Sokolovska tezebni company on the sale of a 50% stake in the Sokolovska uhelna (SU) brown coal mining company. Sokolovska tezebni won a tender for the stake with a bid of 2.6bn Czech crowns. The deal has yet to be approved by the Anti-Monopoly Office (UOHS), FNM spokeswoman Petra Krainova said, Interfax News Agency reported.
Sokolovska tezebni originally offered 2.1bn crowns, but raised its bid after several weeks of talks with the government officials. Six domestic and foreign investors showed interest in the privatisation tender, launched last October. Only two bidders, Sokolovska tezebni and the Czech black-coal mining company OKD, made it to the pre-qualifying round. OKD, however, pulled out of the tender in mid-December 2003. The FNM is selling a 48.7% stake in SU, while PAL will transfer a 1.3% stake in the mining company. Metalimex of the Karbon Invest group will remain the owner of 36.3% of SU shares. SU is the third largest brown-coal mining firm in the Czech Republic with 20% market share. The firm netted 482m crowns on total revenues of 6.7bn crowns in 2003; SU employs 5,400 people.

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FOREIGN INVESTMENT

Skoda Holding sells 3 units

The largest Czech engineering group, Skoda Holding (SH), has sold three subsidiaries - Skoda Jaderne systemy (Skoda JS), Skoda Hute and Skoda Kovarny - to the Russian group OMZ - Power Machinery, SH spokesman, Karel Samec, announced recently. The value of the transaction was not announced. OMZ - Power Machinery reportedly offered €40m for the firms. According to Samec, the acquisition of the three SH subsidiaries represents the biggest post-1989 Russian investment in the Czech Republic to date. OMZ-Power Machinery Director General, Jevgenij Jakovlev, said the acquisition is a logical step, as it gives all the firms the opportunity to enter the respective national markets. As soon as the acquisition is completed, Skoda JS will become part of OMZ - Power Machinery's nuclear power division, and Skoda Steel will be incorporated into the steelworks group in Yekaterinburg, said Jakovlev. Skoda Steel, which comprises Skoda Hute and Skoda Kovarny, is one of the most indebted subsidiaries of the SH engineering group, and ranks last in terms of profitability among all SH units. By contrast, Skoda JS, which specialises in nuclear energy and the petrochemical industry, posts annual profits worth tens of millions of crowns and has contracts worth billions of crowns, the daily Hospodarske noviny (HN) reported

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MINERALS & METALS

Finitrading buys Moravia Steel

New Europe reported recently that Finitrading will take over 50% of Moravia Steel from the Nusppa company which is about to go into liquidation, Moravia Steel spokeswoman, Dusana Chrenekova, announced recently. Moravia Steel controls 69.04% of the major Czech steel maker, Trinecke zelezarny (TZ) and 80% of the AB Barrandov film studios. Finitrading controls 50% stake of RFG, which owns the other half of Moravia Steel. 
The decision on Nusppa's liquidation was made at the company's general meeting and the move is aimed at simplifying Moravia Steel's ownership structure, Chrenekova said.

Prague approves plan to back Trinecke zelezarny

The Czech government recently approved a plan to provide state support to the privately owned steelworks Trinecke zelezarny (TZ), New Europe reported. 
Recent attempts by the Czech cabinet to grant state support to TZ failed as they were rejected by the European Commission (EC). The government's latest plan was drafted by the trade and industry ministry and centres around a proposal that would see the Czech bailout agency, Ceska konsolidacni agentura (CKA), buy a 10.54% stake in the Ispat Nova hut (INH) steelworks, which is controlled by TZ, for 1,250 Czech crowns per share. TZ shares are currently trading at 615 crowns apiece on the off-bourse RM-System. In the plan's second phase, TZ would pay only 100m crowns for its 1.0bn crown bond issue. The difference, worth 900m crowns, would be transferred to the CKA. In total, the plan would see the state transfer up to 2bn crowns in aid to TZ.
Premier Vladimir Spidla said that the government had agreed to buy INH shares from TZ for this maximum price, but added that this form of state support must still be approved by the Czech Anti-Monopoly Office (UOHS) and the EC. State support to the steel sector is banned in the European Union (EU). After years of negotiations, the EC made an exception to the ban on public support for the Nova hut and Vitkovice steelworks. In light of that, TZ sought compensation for a breach of fair competition rules, mainly based on state aid to LNM, the owner of Ispat Nova hut, and to Vitkovice. TZ employs some 5,000 people and is one of the biggest employers in the North Moravia region.

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TELECOMMUNICATIONS

Telecom see consolidated net profit up 40% in Q1

The Czech dominant fixed-line operator Cesky Telecom (CT) showed a consolidated net profit of 1.4bn Czech crowns in the first quarter pf 2004, up 44.1% year-on-year, CT announced recently, New Europe reported.
CT's results improved largely thanks to the full consolidation of mobile operator Eurotel, of which CT became 100% owner last December. In the first quarter, Eurotel revenues grew 4% year-on-year to 1.7bn crowns. Operating costs stood at 3.5bn, up 7% year-on-year, resulting in earnings before taxes, interest, depreciation and amortisation (EBITDA) of 3.6bn crowns, up 1% year-on-year. Its net profit reached 2bn crowns, a year-on-year increase of 22%.
CT's consolidated revenues increased 18.2% to 15bn crowns. Total consolidated operating costs, excluding depreciation and amortisation, reached 7.5bn crowns. As a result, consolidated EBITDA totalled 7.6bn crowns in the monitored period.
The total volume of consolidated debt as of end-March 2004 was 41.6bn crowns, 88% more than a year earlier. The significant increase was mainly the result of acquisition financing worth 850m Euro for the purchase of the 49% stake in Eurotel in November 2003, and a decrease in equity as a result of the aforementioned impairment charge of 9.9bn crowns and a 18.5bn crowns dividend payment in October 2003.
Fixed-line revenues declined 10% to 6.5bn crowns in line with preceding periods, driven mainly by declines in traditional voice services which were not fully compensated by the increase in data and value added services. On the other hand, Internet, data services, and value added services grew 16% year-on-year to 848m crowns.
Internet revenues grew 10% year-on-year to 147m crowns in the first quarter, revenues from data services went up 13% year-on-year to 393m crowns, and revenues from ADSL broadband services reached 73m crowns. Revenues from other network operators grew 24% year-on-year to 876m crowns in the first quarter, despite the Czech Telecommunications Office's (CTU) reducing interconnection rates by an average of 20%. The largest contribution to the overall reduction in operating costs was staff cuts, which trimmed costs 12% year-on-year to 1.4bn crowns.
CT reduced its staff by 20% to 10,799 as of the end of March. CT operates some 3.5m telephone lines in the Czech Republic. Through its subsidiary Eurotel, it also has a significant control over the mobile market. CT is 51% controlled by the state.

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