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CZECH REPUBLIC


 



In-depth Business Intelligence 

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%


Update No: 092 - (01/01/05)

The Bohemian Thatcher
President Vaclav Klaus of the Czech Republic remains the EU's highest-positioned critic. His main model is Margaret Thatcher no less, not exactly an enthusiast for European cooperation. 
While in Germany recently, the president spoke against the European constitution; in Bulgaria soon afterwards, he challenged local Euro-enthusiasm by saying that Brussels needs a Velvet Revolution. Such radical stands are somewhat unusual from a head of state -- particularly a state where the majority of citizens voted in favour of the EU in a referendum. It is also notable that it was Klaus who submitted the country's EU admission request. He is in favour of a Europe connected by liberal economic relations, but little more. Europe has allegedly taken a step into the darkness of a bureaucratically governed federation, and this is what Klaus is fighting. 
It takes courage for the head of a relatively small state to go against the majority of Europe. However, such an attitude is nothing original. Even the biggest Euro-optimists know all the bureaucracy traps and deficits of democracy. They work hard to make things better and most people would like to see Europe as more than just a free-market structure. 

A caretaker government
Last year saw a political crisis in the Czech Republic, with Klaus appointing a new premier, Stanislav Gross. In July Klaus appointed the 34-year-old Gross as prime minister. Gross keeps a low level of public backing in the Czech Republic, according to a poll by STEM. Only 40 per cent of respondents have a favourable opinion of the prime minister.
Gross is the interim leader of the Czech Social Democratic Party (CSSD). Gross-who had acted as the country's interior minister-now leads a coalition government, which also includes the Christian and Democratic Union - Czech People's Party (KDU-CSL) and the Freedom Union - Democratic Union (US-DEU).
The governing CSSD has trailed the Civic Democratic Party (ODS) and the Communist Party of Bohemia and Moravia (KSCM) in recent voting intention polls. The next election to the Chamber of Representatives is tentatively scheduled for June 2006.

Klaus in controversy
President Vaclav Klaus has bestowed Banana Republic status on the Czech Republic by doing something presidents in democratic countries are not supposed to do: He criticized the decision of an independent court. It so happens that the court made a ruling that went against the right-wing Civic Democrats (ODS), the party Klaus headed for 13 years.
The Supreme Administrative Court on Dec. 3 invalidated November's Senate elections for the Prague 11 seat. The court agreed with a complaint from a Christian Democratic candidate who said voters were unfairly influenced by slanderous town-hall bulletins accusing him of preferring his private interests to his public post. The candidate then narrowly lost the first round of the election to an independent, who was then defeated in a run-off by the ODS candidate.
Klaus, who reportedly never read the court verdict, called the court decision a "precedent that intervenes in political freedom."
The problem is that a president erodes the rule of law who even hints that the judiciary is not to be abided by, something that is taken pretty seriously in these parts. Hence the reaction of Lubomir Zaoralek, a Social Democrat and chairman of the Chamber of Deputies: "The president has challenged one of the pillars of [democracy], the rule of law. Politicians, and even less so constitutional officials, should not enter into polemics with independent courts. The president has challenged the verdict without knowing the justification for it. He therefore acted hastily and irresponsibly." 
The Supreme Administrative Court's decision marks the first time the post-1989 judiciary has invalidated an election, although as Prime Minister Gross points out, election law allows for "such a corrective tool."

Flat tax works
Klaus said last year that a flat tax like the one Slovakia recently implemented would not be likely to work in the Czech Republic. Now, however, deputies in the front-running opposition ODS, his old party, are saying Slovakia's record shows that a flat tax does work. And with Slovakia competing next door, implementing a flat tax in their own country may be a necessity rather than an option, they say.
"I see it as the only way for the Czech Republic," ODS shadow finance minister Vlastimil Tlusty said. "If a [neighbouring] country such as Slovakia, where it's easy for companies to move, has such an attractive tax system, it's a necessity for us to follow suit."
There's no way of calculating how much investment Slovakia has siphoned from its neighbours in the past year. Yet data shows Slovakia's Foreign Direct Investment (FDI) growth - 222 percent this year, according to figures from ING Bank - is much higher than that of neighbours Hungary, Poland and the Czech Republic. Czech FDI growth, in second place, is expected to double, according to ING Bank. 

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AVIATION

More passengers via Prague

Prague's Ruzyne international airport could clear up to 9.8 million passengers for all of 2004, accounting for an increase of 30 per cent over 2003, Martin Kacur, CEO of the Czech airport Authority (CSL), said recently, Interfax News Agency reported.
The figure represents the most optimistic scenario, said Kacur, but the total is certain to reach 9.5 million. Ruzyne has an official annual capacity of 6.5 million, but has built several new terminals and rescheduled flights to accommodate the surge in passengers. In October, traditionally the last month of the summer tourist season, Ruzyne cleared 900,000 passengers - more than in August 2003. This August, the airport saw a record 1.07 million passengers. In the first eight months of 2004, Ruzyne processed more passengers than in all of 2002. The numbers should continue rising as 10 airlines have applied to add flights to Prague to their schedules, although all 10 will not begin flying to the Czech capital immediately.

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BANKING

GE Capital Bank boosts profit


GE Capital bank netted 1.4bn Czech crowns by US accounting standards in the first nine months of 2004, an 18 per cent year-on-year increase, Interfax News Agency has reported.
Total assets grew by 1.3bn crowns to 57.4bn crowns. CEO, Gerard Ryan, attributes the growth mainly to an increase in a volume of provided loans, especially consumer and mortgage loans, as well as loans to small and mid-sized businesses. In the monitored period, GE Capital Bank provided loans worth 34.5bn crowns, up one-third year-on-year. The amount of provided mortgage loans increased 73 per cent to 6.9bn crowns. Client deposits fell to 46bn crowns. GE Capital Bank is the seventh largest bank in the Czech market and it has 727,754 clients. Capital adequacy stood at 30.9 per cent in mid-2004.

Ceska sporitelna boosts profit

Czech bank Cestka sporitelna (CS) posted a consolidated net profit of 5.6bn Czech crowns to international financial reporting standards (IFRS) in the first nine months of last year, a 17 per cent increase over the same period in 2003, CS spokesperson, Klara Gajduskova, said recently, Interfax News Agency reported.
The bank expects its net profit to rise by 10 to 15 per cent for last year over 2003. Return on equity (RoE) will top 20 per cent last year and should remain above this level in 2005-7 as well, Gajduskova said. CS' cost/income ration should amount to 58-60 per cent in 2004 and 55-57 per cent in 2005-2007.

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FOREIGN TRADE

Czech October trade results best in 10 years

The Czech Republic's trade is doing very well. The Czech Statistical Office has announced that the trade deficit stood at 4.1bn Czech korunas in October; this is the best October result in the past 10 years, Czech Radio1 reported. 
Exports went up 17 per cent year-on-year, which was the slowest pace since January, however. Czech firms were exceptionally successful in trading with EU countries; they exported goods worth 17bn Czech korunas more than goods imported to the Czech Republic from EU countries. The trade balance therefore went up 1.5bn Czech korunas. 

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INFORMATION TECHNOLOGY

Symbol Tech division opens shared services centre in Brno

Enterprise Mobility Company, a unit of the IT firm symbol Technologies, opened a shared services centre in the Moravian capital of Brno, the company announced in a recent statement, Interfax News Agency reported.
The centre will cover the EMEA (Europe, Middle East and Africa) region. The 10,000sqm facility will serve as the hub for Symbol's EMEA customer support services including a repair centre, multi-lingual customer call centre, finance, contract administration and sales ordering operations. The centre was expected to be fully operational by December last year.
"The Brno location was selected because the region offers a highly skilled local workforce, a central location and proximity to Symbol's existing operations and customer base in Europe," the firm said. Initially the centre will employ 200 people, but that should rise to 500 in future.
Petr Herskovic, who went to Symbol from the Invensys Corporation, where he was plant manager of Slovak operations, will manage the centre. Herskovic is a graduate of Brno's Technical University.

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TELECOMMUNICATIONS

T-Mobile records profit rise

T-Mobile, the Czech Republic's second biggest mobile operator, saw its net profit rise 19 per cent year-on-year to 3.4bn Czech crowns in the first nine months of this year, according to results released by the firm on November 11th, Interfax News Agency reported.
T-Mobile's revenues were up 8 per cent year-on-year to 19.4bn crowns in the monitored period. Operating profit (EBITDA) went up by 7 per cent year-on-year to 8.9bn crowns. T-Mobile customers use some of the firm's tariff programmes. The firm's list of new corporate clients includes the State Environmental Fund, the Czech Environmental Inspection Agency, the steel maker, Trinecke zelezarny, the food company, Setuza, and Renault Trucks CR. The firm has seen interest in its data services increase- the amount of data transferred rose by over 38 times year-on-year. Voice services grew 15.5 per cent compared to the same period last year.

Oskar Mobil ups operating income

Oskar Mobil, the Czech Republic's third and smallest mobile phone operator, significantly raised its operating income in the third quarter of 2004, but the result was distorted by the US dollar's depreciation against the Czech crown, the parent company, the Montreal-based TIW, said, reports New Europe.
Oskar Mobil's operating profit before depreciation and amortisation (OIBDA) grew to one billion crowns, or US$41.3m in the monitored period, from US$26m in the same period last year. On the other hand, average revenue per user (ARPU) fell to 633 crowns in the third quarter of 2004 from 660 crowns in the third quarter of 2003. Oskar Mobil continues to attract new subscribers.

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