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CZECH REPUBLIC


 



In-depth Business Intelligence 

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

REPUBLICAN REFERENCE

Area (sq.km) 
78,866

Population 
10,246,178 

Density 
(per sq.km) 
132.2

Capital 
Prague 

Currency 
Koruna 

President 
Vaclav Klaus

Private sector 
% of GDP 
80%



Update No: 099 - (26/07/05)

Communists, Czech ruling party may edge closer 
It is dangerous to leave town in a political emergency. Czech Prime Minister Jiri Paroubek may find this out to his cost. He rated the nominal communists in China more highly than his own compatriots of the same persuasion.
An official visit by him to China has opened a door to a possible return to a measure of power for the Czech Republic's communist party, Deutsche Presse-Agentur (dpa) has said in a report. While Paroubek wrapped up his four-day junket in Beijing, Prague media described cautious steps toward cooperation between leaders of the premier's ruling Social Democrats (CSSD) and the opposition communists (KSCM) as a prelude to June 2006 elections.
"We are offering to cooperate with the CSSD in a truly leftist government," KSCM Chairman Miroslav Grebenicek was quoted as saying in the daily Mlada fronta Dnes. Meanwhile CSSD Chairman Stanislav Gross, in a talk show on Czech Television, has indicated that KSCM could play a government role if the communist party, which ran Czechoslovakia's Cold War regime, agrees to undergo reforms. Gross noted that "no one in the world was shocked" by the election of reformed communists recently in Bulgaria, a former Czech ally during the Soviet era. 
Paroubek, who held trade talks with communist China's President Hu Jintao, told Czech reporters in Beijing that a "transformation" of the KSCM would be necessary before the party would be considered as a CSSD coalition partner. But he did not rule out cooperation. Paroubek told the Pravo newspaper that Czech communists would have to end their opposition to Prague's "Euro-Atlantic orientation" - which includes Czech membership in the NATO alliance - and efforts to adopt the Euro currency in 2010.

Republic considered backward, its image abroad horrible
The Czech Republic is seen as a rather undeveloped country inhabited by simple, hard-working peasants, according to a poll ordered by the Foreign Ministry which the Mlada fronta Dnes (MfD) daily has recently published. "When we read it for the first time, we didn't want to believe it," Jana Adamcova, the communication strategy department head at the Foreign Ministry, admitted. 
The poll was carried out in Austria, Britain, France, Germany, Japan, Sweden and the USA among educated people, mainly middle class and elites. It showed that Czechs are considered poor and with strong ties to the land and landscape. Moreover, they are sad and melancholic, without initiative, backward and non-cosmopolitan, the paper writes. 
Miloslav Knepr from the Mark BBDO agency, which processed the poll's results, said they at first could not understand why foreigners said Czechs produce especially sunflower oil and tower clocks. "Then we realised this must be because of nice pictures of Czech landscapes: blues skies, green hills and yellow fields with sunflowers," Knepr said. He added that the tower clocks are connected with the famous astronomical clock of the Old Prague Town Hall. "When foreigners see it on photographs, they think it may be something typical," he told MfD. "Those people do not consider the Czech Republic a modern country," Knepr said. 
It seems that Czechs themselves are responsible for their unflattering image abroad. The country presents itself as one of castles and memorials which makes young foreigners ask what they would do there, the paper writes. 
Currently the Czech Republic has an image of a country which people visit for cheap beer and cheap girls, it adds. "Prague is a place where the British go for a cheap drinking party. We cannot understand them, but we don't offer them anything else," Knepr says. According to the poll, only 40 percent of the French were able to locate the country in Europe. Moreover, the neighbouring Austrians had similar problems. 
The worst opinion about Czechs is among their neighbours. On the other hand, they are seen very positively by the Swedes. The most popular Czechs abroad are pop singer Karel Gott, porn star Dolly Buster, star model Eva Herzigova and children's serial film figure, Mr Tau, the paper writes citing the poll. 
The image of the Czech economy has been improving, but the country is still known mainly thanks to its beer and glass, which have been exported traditionally. "I was shocked that some Americans consider [Antonin] Dvorak their favourite music composer, but they didn't know he was Czech," psychologist Slavomil Hubalek told MfD. "Well, now tell me, whose fault is greater - theirs or ours?" he added. 
Adamcova said they plan a new image strategy which would show the country as a cultivated and developed one. 

EU travails affect everyone
Actually this is all nonsense. The Czech Republic is one of the most sophisticated places on Earth, with a highly educated, multilingual population and perhaps the world's most beautiful capital city in Prague, right there in the heart of Europe (Prague is to the west of Vienna).
The Czechs are as disturbed as the other newcomers to the EU by what has happened France and Holland. But in a way they can cynically see that it might all be to their benefit. Enlargement is to slow down. There will be no Turkish plumber on their doorstep any time soon.
Bohemia, as the country was once called, was the economic powerhouse of the Austro-Hungarian Empire. It is now proving to be a frontrunner among transition economies, attracting more FDI per capita than any of them, over US$1,500 to date.

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AUTOMOBILES

EU attracting Czech cars

Most Czech car exports went to the European Union last year, said Vratislav Kulhanek, at the official opening of the Autosalon motor show in Brno on June 3rd, Prague Monitor reported.
Nearly 90% of exported cars, worth 314bn Czech crowns, were sold in the EU, Kulhanek said. "A further increase in output can be expected with the full operation of the TPCA Kolin plant," he said. Czech Republic and Trade Minister, Milan Urban, said the Czech Republic is becoming one of the world's leaders by per capita car production. In 2005, as many as 800,000 units could be turned out, almost double last year's number. The auto industry employs 90,000 people directly and supports another 40,000 through contractors.

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ENERGY

CEZ granted exclusive deal on mine sale

The Czech government recently gave CEZ, the state-owned power group, another helping hand by granting it exclusively in the re-run privatisation of Severoceske Doly, the country's largest brown coal mine, the Financial Times reported on July 14th.
If the negotiations are successful, CEZ will become a vertically-integrated group, owning coal mines, power plants and six of the country's eight distribution companies, following a similar government decision in 2002. However, the cabinet decision will be controversial with rival operators, who already complain that CEZ has a dominant position in the market, generating two-thirds of the country's power. It's a government blessing to a national champion," said one executive.
The European Commission, which voiced concerns about the first tender, could also have something to say. CEZ is emerging as a significant operator inside the EU market thanks to its surplus generating capacity. In recent years it has become the largest exporter after EDF of France.
Rival bidders for Severoceske Doly, which produced 22m tonnes of coal last year, will also be angry that they were not given another chance to compete.
The original privatisation of Severoceske Doly collapsed last year when Appian Group that was the government's favoured candidate - was outbid by a consortium of International Power of the UK and local financial groups J&T Group and PPF.
The government then called off the tender for its 55% stake, claiming the offered price of Kc6.8bn (US$270m) was too low.
CEZ, which already owns 37% of the mine, had been excluded from that tender and chief executive Jaroslav Mil was even dismissed for daring to submit a bid.
This time around CEZ has become the favoured bidder, although it will have to offer at least Kc7.5bn, the government's minimum price in the last tender.
CEZ could then go on to acquire MUS, the neighbouring brown coal mine, from Appian Group, thereby completing the government's original plan of merging the two mines by a different route. This would give CEZ control of three-quarters of the power industry's brown coal supply.
The only significant obstacle will be the competition office, which is bound to investigate such a dominant position in the mining and power markets.
However, the competition office recently went back on its original decision and allowed CEZ to keep all six, rather than five, distribution companies. Moreover, the government is poised to appoint a new chairman shortly and the deputy industry minister is a leading candidate.

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FOREIGN ECONOMIC COOPERATION

Czech, Indian firms mull cooperation in heavy engineering 

A high-power Indian business delegation visited the Czech Republic recently to explore and identify opportunities of cooperation between Indian enterprises and their Czech counterparts in the field of heavy engineering.
The delegation, which was led by A. Didar Singh, joint secretary, ministry of heavy industries of the government of India, comprised senior executives of leading public sector companies engaged in heavy industries such as Heavy Engineering Corporation (HEC), Hindustan Machine Tools (HMT) and Bharat Heavy Electricals Ltd (BHEL).
Diplomatic sources at the Indian embassy in Prague told INEP that besides the signing of a number of memorandum of understandings (MoUs) between Indian and Czech companies, it was proposed to hold the first session of the Indo-Czech Joint Working Group on Industries in October coinciding with the 47th International Engineering Fair at Brno.
The visit was also utilised to discuss preparation for the first session of the Indo-Czech Working Group on Industries established under the Indo-Czech Joint Committee for Economic and Commercial cooperation, the last session of which was held in New Delhi in December 2004.
During a visit at the Czech Association of Manufacturers and Suppliers of Engineering Technique, the Indian delegation met Jiri Bruza, deputy director general in the Czech Ministry of Industry and Trade and Karel Turecek, deputy Ministry of Industry and Trade. 
The delegation also visited the facilities at Skoda Holdings at Plzen and met officials at Skoda exports in Prague. Both sides agreed to explore and identify opportunities and possibilities of increased and diversified cooperation to strengthen economic and commercial relations in the areas of heavy engineering between India and the Czech Republic. (INEP)

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INFORMATION TECHNOLOGY

New services at Czech On Line

Czech On Line, a top telecommunication service provider for home and business clients, unveiled new services of high-speed internet, the company said in a recent statement. The move comes after the recent launch of new tariffs of high-speed internet Volny ADSL 128 for 349 crowns. The advantages of these new services lie in higher quality and speed, unlimited data transfer independent calling tariffs on telephone lines, and are now available for a third of the price, the company said. "We are continuing our strategy of offering the best package of ADSL services on the market. Until now, users have paid 599 crowns for half-megabit internet. Now we will provide the Volny ADSL 1024 Plus internet with double speed and without a data limit for the same price," said Michael Fried, director general, Czech On Line. "Ultimately, they will not have to pay the voice tariff, but only the minimum payment of 215 crowns for the ADSL."

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MINERALS & METALS

Bakala bids for Vitkovice Steel 

Charles Capital, controlled by entrepreneur Zdenek Bakala through the Cyprus-based RPG Industries, has offered the Czech government 5.215 billion Czech crowns for its 99 percent stake in Vitkovice Steel, Pravo reported recently. Pravo's unnamed source said Charles Capital had raised its bid markedly. Charles Capital controls the mining companies OKD and Ceskomoravske doly via Karbon Invest. Other bidders for Vitkovice Steel are Mastercroft, Penta Investment, System Capital Management and Trinecke zelezarny. Eight suitors offered four to seven billion crowns for the state-held stake in their preliminary bids submitted in March.

Strong gains at Mittal Steel 

Mittal Steel Ostrava (formerly Nova hut), the leading Czech steelworks, grossed 12.8 billion Czech crowns in the fiscal year 2004-2005, the best result in its 55-year history, the firm announced, cited by Interfax. The steelworks netted 9.8 billion crowns in the monitored period, making it one of the most profitable companies in the Czech Republic.
Mittal Steel's fiscal year ran from January 1, 2004 to end February 2005, or 14 months in total. In the calendar year 2003, the steelworks netted 5.4 billion crowns. The steelmaker produced 3.21 million tonnes of steel during the past fiscal year, and had sales worth 53.277 billion crowns. In 2003 sales stood at 34.76 billion crowns. The Ostrava-based firm attributes the "extraordinarily good" results to a boom on world steel markets, and a significant improvement in labour productivity. Mittal Steel Ostrava invested 524 million crowns last year, most of which went into technologies for products with higher value added and environmental protection.

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TELECOMMUNICATIONS

T-Mobile claims top spot in Czech UMTS race 

Deutsche Telekom's mobile phone unit T-Mobile has said it plans to launch the Czech Republic's first UMTS service with a wireless broadband network, beating rivals Eurotel and Oskar in the race for third-generation service in the competitive Czech market. 
The company said it will "drastically improve the way people connect and communicate at home, at the office, or on the road" by building the Czech system into the world's fastest commercial UMTS network. Using UMTS TDD technology from its supplier IPWireless, T-Mobile said network coverage with top speeds of 4.5 Mbps will begin in Prague by the end of the year. The network would be expanded to another 85 cities in later months, covering about half the country's population by summer 2006. 
"For the first time, Czech customers will be able to completely give up their fixed lines," the company said.
Broadband wireless will become T-Mobile's "second business focus area," said the company's Czech Director Roland Mahler, noting that only 2 per cent of Czechs currently have access to broadband, compared with 10 per cent across the European Union. 
T-Mobile is currently the country's second largest mobile phone operator. The largest, Eurotel, was recently bought with its fixed- line parent Cesky Telecom by Spain's Telefonica. The No. 3 operator, Oskar, is now being bought by Vodafone. T-Mobile reportedly agreed to pay the government 3.8bn Czech crowns (US$158m) for its UMTS licence, compared with Eurotel's 3.5bn crowns and Oskar's 2.0bn crowns. 
Czech regulators have given Eurotel until 2007 and Oskar until 2008 to launch UMTS. 

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TELEVISION

TV Nova reverses losses, nets 1.75bn crowns in 2004 

The group of four companies around TV Nova netted 1.75bn Czech crowns last year, against a loss of some one billion crowns the year before, TV Nova CFO Pavel Horak said on June 17, cited by Prague Monitor. Sales stood at 12 billion crowns, 500m less than in 2003, Horak was quoted as saying.
The 2003 loss was largely due to a settlement between CET 21 and CNTS, with CET 21 paying 2.68bn crowns. Last year's bottom line was influenced favourably by the sale of a stake in Slovakia's TV Joj, and the sale of some claims from 2002-2004. 
CET 21, which owns the broadcasting licence for TV Nova netted 1.095bn crowns on sales of over five billion crowns last year. Ceska produkcni 2000, a producer and distributor of audiovisual works generated a net profit of 507m crowns and sales of 1.864 billion crowns, the report said. 
Mag Media 99, which sells advertising time for TV Nova, netted 113m crowns on 4.93bn crowns in sales. Erika, providing audio text services, netted 35m crowns on 245m crowns in sales. 
The companies' performance had an effect on the final price CME paid PPF for its stake in Nova. CME acquired 85 per cent in Nova in late 2004. In early June CME bought the rest of Nova from PPF and also acquired all stakes in CET 21. The takeover of TV Nova was thus completed in a transaction worth 22.4bn crowns. 
CME announced previously that it would start trading on the Prague bourse at end of June. 
CME was founded in 1994 by Ronald Lauder and financed the launch of TV Nova. It later lost control over Nova in a dispute with Nova chief executive Vladimir Zelezny. Arbitration followed and the Czech Republic had to pay CME more than 10bn crowns. 

TV Prima profit at 300m crowns 

TV Prima made an operating profit of close to 300m Czech crowns last year, Director Martin Dvorak told Mlada fronta Dnes on June 18, cited by Prague Monitor. Prima has managed to offset a shortfall in advertising revenues seen early this year, and income from advertisement was even higher year-on-year in May, Dvorak was quoted as saying, adding that Prima might have lost dozens of millions of crowns. "We've paid insufficient attention to the business policy of a rival which started to motivate clients to stop advertising on Prima," said Dvorak. He said Prima is unlikely to make the same profit as last year.

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