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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

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: 113 - (26/10/06)

People can have too much of a good thing. The point of democracy is that you can change your government. This the Czechs could never do under communism, frozen into an eternal Peoples' Democracy. Now they can do it all the time. 
The result is perpetual strife and disarray, as in Poland.
As regards the constitution, the Czech Republic has a weak presidency and a strong executive and legislature. Actually, it turns out, it seems at the moment, to be the other way around.
An apparently endless wrangle is occurring at governmental level, with the recent government becoming a sitting duck, while the president of the republic is there secure as a rock.
The Eastern Europeans have not quite got the point of democracy yet, which is amongst other things that you have to give people time to do their stuff. 

The mentor of his country; which Vaclav, Havel or Klaus? 
Vaclav Klaus, the honorary chairman of the Civic Democratic Party (ODS) who patiently put up with three long rounds of presidential elections, lived to see his political importance confirmed on election in March, 2003. He became Vaclav Havel's successor, and the longstanding duel with his greatest ideological adversary continued in a new form. In his five years of office, the ambitious Klaus was sure to do his best to show everyone that he would be a better president for the Czech Republic, or at least as good as Havel was.
Havel has a big reputation abroad as a playwright and long-time dissident against communism. He publicly denounced the Soviet occupation of Czechoslovakia in 1968 (as did privately a certain Soviet functionary called Mikhail Gorbachev, whose top-level dissidence was to change world history twenty years later) Havel became the author of Charter 77, an act of defiance against the communist regime. He is clearly an admirable and gifted man. Who better to be the spiritual mentor of his country?
Klaus has a very different track record. He was every bit as opposed to the rape of 1968, but had been rather more involved than Havel in what gave rise to it, the Prague Spring of that year, working to fashion a new economy freeing it from communist shibboleths against market economics as much as was possible in his post at the Economic Institute of the Czechoslovak Academy of Sciences. He maintained a stout resistance to the repressive regime and swift dismantling of pro-market reforms of Husak, who had replaced Dubcek, and was dismissed in 1970.
In this crazy period in Czechoslovak history he was to become the epitome of the following anecdote, working in lowly positions in the Czechoslovak State Bank. Faced with practical problems they could not surmount, the minister of the economy said to his officials, isn't there somebody who can advise us what to do? They said: 'Yes, but he is in the doghouse.' The desperate minister replied send for him all the same, which they duly did. When he was summoned he gave the conventional communist wisdom on the subject which had created the mess in the first place, at which the minister said: "I know all that. But don't you have your own point of view?" To which the answer was: "Yes, I do, but I am wrong."
He was lucky. He got another chance - in 1989. Klaus by then was a leading member, soon the leader, of Civic Forum, the victor of the Velvet Revolution, and he became finance minister in December, 1989 in what was now a free country. After a convoluted series of events, he became the effective leader of the newly founded Czech Republic in 1993, when Czechoslovakia split into two. He continued a strong reformist course and is certainly the author of modern Czech affairs - the practical mentor of his country.

What are his policies?
In the European Union, Klaus is seen as a distinctive critic of European conditions who does not hold dear the ingrained rituals and sticks to his guns even at guest sessions of the European Parliament.
Klaus' nationalistically tuned stance on the future shape of Europe is equally easy to see. At a time when the entire world, in confronting global issues, is dismissing the old concept of nation-states, Klaus seems to be returning to this concept. "I do not wage old battles," Klaus said several times, although he knew very well that this promise would be hard to keep, especially as regards the EU. 
Klaus has always wanted Europe to remain small and fragile, because this is the only chance for regional politicians with a vision that does not reach beyond home borders to maintain significance. This is surely a worthwhile point of view,

CR lags in taking structural funds 
The Czech Republic can draw approximately 26.7 billion Euro (Kc 755.6 billion) from European Union funds starting from next year. When it comes to making use of EU money, however, the Czech Republic has to date been one of Europe's laggards. It has been trammelled by excessive bureaucracy. 
Over the next few years, the EU intends to invest approximately 307.6 billion Euro into equalizing the differences between the richer and poorer regions. The Czech Republic can take a 26.7 billion Euro bite from this cake. The fundamental problem, however, is that when it comes to drawing EU funds, the Czech Republic on a long-term evaluation is among the worst performing countries. Only Cyprus has proven to be more inept in this respect. 
For a long time, the unnecessarily cumbersome administrative mechanisms that the Czech Republic had set up for drawing the EU funds were the biggest problem in obtaining the earmarked funds. However, better times are dawning. Politicians have removed the biggest brakes on the entire process, and Brussels has also adopted several measures that should make it easier to obtain funds. Yet a clear possibility remains that these improvements will still be impaired by Czech politicians' inability to form a lasting government. 
The Czech Republic also wants to change the way it will spend the EU money in the coming years. More money from the EU funds should be spent on construction of highways and other infrastructure, and less on social projects like re-qualification or educational programs, said Petr Gandalovic, the minister for regional development, which is responsible for coordinating the drawing of money from EU funds. 
Out of the amount of money that can be spent between 2007 and 2013, about 14 per cent would go to social projects instead of the previously allocated 17 per cent. The saved money would be spent on infrastructure and public transport projects, Gandalovic said. 

Shift forward 
Within the tempestuous EU budget discussions, with the outcome still not finally approved, new member states successfully negotiated several significant changes. To offset the slight reduction in the total volume of money, they received better conditions for qualifying and withdrawing EU funds. The current obligation to exhaust subsidies within two years from the year of their being granted (the N + 2 rule) will be prolonged by one year; this one-year extension will be valid for funds authorized until end 2010. 
But Danuta Hübner, EU commissioner for regional policy, is not so enthusiastic about the new rules. "It will result in a slowing down of the pace. Consequently, the brakes will be put on the entire restructuring process that these funds aim to set in motion." With regard to the enormous sums of money that have been offered to the new member states, immensely important is consensus when it comes to increased co-financing of projects. Whereas individual states and recipients of this money have hitherto had to deliver at least 25 per cent of the entire subsidy from their own resources, with the new rule it has been reduced to 15 per cent. By means of the co-financing mechanism, the EU ensures that it won't replace national subsidy programs. This rule, however, will be somewhat hindered by continuous inspections on the part of the European Commission which, in the case of projects with an exceptionally high return, will propose that Brussels' participation be smaller than the given 85 per cent. 
Of crucial importance, especially for poorer non-profit organizations and some municipalities, will be the possibility to apply non-returnable value-added tax (VAT) as a project cost. "In principle, it concerns equalization of payers and non-payers of value added tax. VAT will also be partially acknowledgeable in the case of payers who can write it off at entry. This will result in equalizing their conditions," said Martin Kristof, an analyst at Raven Consulting.
Brussels' decision has had the biggest impact on Germany, in whose former communist part there are poor regions possessing the right to draw aid from structural funds. "For example, the east of Germany has different, more advantageous rules than the west. It therefore comes as no surprise that the western provinces are already protesting. Given the differing conditions, it will be pretty difficult to coordinate the programs within a single federal country," Hübner points out. 

Only time will tell 
The patchy record of the Czech Republic to date in utilizing funds has compelled those in charge to change their approach. Access to EU funds should be significantly simplified on the Czech side. Several key problems have disappeared, and the entire administrative process should be fundamentally streamlined. It's a sad truth that the already relatively strict and bureaucratic Brussels standards were brought to absolute confusion by the procedures and interventions of Czech officials.
Hence, the Ministry for Regional Development (MMR) announced a host of improvements that should lead to EU money flowing to Czech recipients much more smoothly. The promised administrative simplification should eliminate the several-month-long procedures for evaluating and selecting projects and, ultimately, speed up the conclusion of contracts. Rapid and high-quality work will be carried out by newly employed officials who, in addition, will be financially rewarded for successfully obtaining subsidies for projects. Furthermore, certification should shed more light on the dozens of consultancy companies operating in this sector. 
"Sure, administration and applications will be simplified, as has recently been trumpeted. Drawn-out contract negotiations and other complications that caused virtually no interest in some programs should become a thing of the past. The essential question, however, is to what extent these fine-sounding plans will be reflected in reality, whether or not proposals will ultimately remain at the level of promises. Merely the fact that it won't be necessary to add several irrelevant appendices to every application would significantly simplify matters," Kristof says. 

Don't all apply at once!
Yet the greatest expectations for improvement are connected with two specific changes to the current rules set up by the Czech government. Firstly, the practice of periodical calls for submitting applications should be replaced by a continual system, with the possibility to constantly bring forward new projects. The aim is to remove bottlenecks within the entire system; in the last week prior to the deadline for handing over projects, registries of the respective institutions were bursting at the seams. 
The entire Czech system's effectiveness will also be significantly enhanced by changes in the system of paying money. One of the biggest problems for those applying for Brussels funds was the fact that they only received the required money after the project had been completed. Thus, they first had to finance its implementation from their own sources. For the future, however, the MMR promises a transition into a system of continuous payments with applicants not having to wait on cost reimbursements. 
"This is a crucial aspect. In addition, it complements the drawn-up advanced payments mechanism. It will allow for substantially better use of money allocated to non-profit organizations and non-business subjects in general; they will receive a portion of the whole sum as an advance before commencing a project," Kristof said. The introduction of the advance payments that the MMR has provided to non-profit organizations since May has elicited a very positive response - witnessed by the consequent growth in the number of submitted projects. 
All these proposals should become a reality over the next few years. However, there's a long way from promises to their fulfilment and only their implementation into practice will allow the Czech Republic to make full use of the offered funds. 
One large problem with the existing Czech system is its operating programs (OPs). These specifically define the strategy and conditions for distribution of money within the framework of individual subprograms. The total of 24 programs is sure to make individual applicants' orientation far more difficult since many of these OPs will be so similarly focused as to seem overlapped, and applicants will be uncertain where they should direct their efforts. Also, turf wars seem likely between individual ministries and authorities, while dispersion of the entire system will result in unnecessary confusion. In no other EU country is there a system with a similar number of programs. 

Arguing in a vacuum
An uproar was caused in political circles by the statement of Jaroslav Míl, president of the Confederation of Industry and Trade (SP CR), who warned against possible problems that may arise owing to drawn-out negotiations about forming a new government. "In the vacuum that will occur in the event that a new and strong government doesn't emerge, it won't be possible to complete negotiations in Brussels about the conditions of distribution of the offered funds, and submission of projects will stop, too," Míl pointed out. Even though the majority of experts don't consider the situation to be quite this serious, their optimism has faded with the ongoing uncertainty. 
The National Strategic Reference Framework (NSRF), the crucial document defining the position of the Czech Republic, its priorities, weaknesses and strengths, and describing the fundamental structure of individual operating programs, has already been sent to the European Commission for review. Completion and final modifications of the operating programs are now in progress at the level of individual ministries. The snag is that these programs must ultimately be approved at the highest political level and subsequently, just like the NSRF, defended in Brussels. In the absence of a government with a firm mandate, the Czech Republic's negotiating position is weakened, while governmental instability also contributes to a deceleration of the entire process. In ideal circumstances, on Jan. 1, 2007 the first calls should be announced and the system will start up. However, even today a delay of several months can be expected, with this probably being a conservative estimate. 

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AUTOMOBILES

Czech's Tatra plans to increase production next year 


Czech truck maker Tatra plans to increase production to 1,600 vehicles in 2007, says the new owner Blue River, New Europe reported. 
Blue River is comprised of KBC Private Equity, Vectra, US entrepreneur Sam Eyde and the Meadow Hill Company owned by Adams and his wife, and has acquired an 81 per cent stake in Tatra for US$26.2 million. New CEO Ronald Adams said that next year Tatra is planning to produce at least 1,600 vehicles and this year the output will be 1,300 trucks. He added that the output should reached 2,500 vehicles in 2009 and Tatra's subsidiaries should raise output by 11 per cent annually. Blue River will change the name to Tatra Holdings and wants to focus on Russian and eastern European markets.

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ENERGY

Government to sell off 16% of CEZ energy supplier

The new Czech Government plans to sell 16 per cent of CEZ energy supplier on the Prague stock exchange, Czech Finance minister, Vlastimil Tlusty said on September 17th, New Europe reported.
The Czech state currently holds a 67 per cent stake in the company. Two years ago, experts valued the sale of such a package at a minimum of 516 million Euro. Tlusty's predecessor, Bohuslav Sobotka, of the opposition Social Democrats rejected the planned sale as badly timed. CEZ is the largest supplier of electricity in the Czech Republic and operates the controversial nuclear plant at Temelin.

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