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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

 



Update No: 122 - (26/07/07)

The anti-populist Klaus
President Vaclav Klaus is fiercely pro-American and definitely one of those whom Margaret Thatcher would have called 'one of us.' He backed the US over Iraq and does again over the deployment of new missile defences in Central Europe, his country to house the radar, Poland the 10 interceptors. 

He knows that none of this is popular. Indeed, he warns of populism in connection with the discussion about the planned U.S. radar base in the Czech Republic in his reply to a petition by some prominent personalities today. 

Klaus said he could imagine both lawmakers and general public in a referendum deciding on the stationing of the radar installations, a rather remarkable, because quite implausible, statement. "Both alternatives have their pros and cons. However, I am warning of cheap populism," Klaus said in an open letter responding to the letter from some 50 personalities who demand that a referendum be held.

In the letter, Klaus said that given the well-known pacifist atmosphere in the Czech Republic and across Europe and given the underestimation of newly arising security risks, there was the reason to fear that rational arguments could be set aside and the outcome of the referendum would be known beforehand.

"I do not know whether the signatories of the open letter demand a referendum or whether they demand the answer NO," he said. Of course he knows well that it is the latter.

He repeated that as the president he would not apply his right of veto and would respect any majority result.

The U.S. embassy in Prague in mid-July took issue with the letter signatories' assertion that the radar would not protect the Czech Republic. "On the contrary, as General Henry Obering has stressed many times and most recently during his visit to Prague, the U.S. missile defence project in Europe will protect the Czech Republic and Poland along with most NATO allies from the threat of a long-range missile attack," the embassy said in a statement sent to CTK.

The authors of the letter said politicians should not decide on behalf of the public on the radar base as none of the parties had declared its views on its stationing in the Czech Republic before the 2006 general elections.

According to the latest polls, over 60 percent of Czechs are against the radar project.

The current centre-right government of the Civic Democratic Party (ODS), the Christian Democrats (KDU-CSL) and the Greens started official negotiations with the United States about the building of a radar installation in the Brdy military district, southwest of Prague, in May. The radar and an anti-missile base in Poland are to be parts of the U.S. global anti-missile shield.

A number of local referendums have rejected the planned radar base.

Most Czech CSSD members want direct presidential elections 
The paramount position of the Czech presidency in vital foreign policy issues is resented by opposition figures in parliament, which is precisely the body that elects the president now. A total of 87 percent of members of the Czech senior opposition Social Democrats (CSSD) would like direct presidential elections to be introduced in the Czech Republic, CSSD chairman Jiri Paroubek told reporters in mid-July, referring to the party's internal debate. 

Paroubek said he would soon disclose details on the CSSD's view of the situation ahead of the next presidential election, due in early 2008.

The president in the Czech Republic is elected by the two houses of parliament.

Incumbent President Vaclav Klaus has announced he would seek re-election for another five years. No other personality has announced his/her candidacy.

Klaus will be supported by the senior government Civic Democratic Party (ODS) of which he is honorary chairman, and probably a part of the junior government Christian Democrats (KDU-CSL).

The CSSD has been negotiating about a possible joint candidate for president with the KDU-CSL and the other junior ruling party, the Greens (SZ). The names of former Czechoslovak post-1989 foreign minister Jiri Dienstbier and economist Jan Svejnar have surfaced in this connection so far.

The CSSD and the junior ruling parties want to present their joint candidate in the autumn. To have a chance, the candidate must be acceptable for the Communists (KSCM) as well. Experts say it will be difficult to find a personality that could challenge Klaus.

The KSCM executive committee also discussed the presidential election recently. KSCM deputy chairman Jiri Dolejs said the committee agreed that Klaus does not meet the party's idea of a president, but the KSCM does not have a counter-candidate. "We are convinced that the matter can be dealt with seriously only after particular parties in parliament discuss it and after the launch of negotiations on a broader consensus that must be reached on a personality capable of representing the Czech Republic with dignity and in harmony with the interests of a majority of citizens," the KSCM committee said.

Klaus therefore remains a clear favourite. The ODS has 81 votes in the 200-seat Chamber of Deputies and 41 mandates, or an absolute majority in the 81-seat Senate. Klaus's opponent would need the votes of deputies of the other parties.

Politicians have discussed the possible introduction of direct presidential elections for many years now. According to Paroubek, direct elections would be more political than the present system and the election campaign would be conducted in a different style.

However, parties are unlikely to agree on the change by the 2008 election, therefore the new system could only be applied in the further election, if passed.

Paroubek said previously that the direct presidential election need not, but might, mean a change in the presidential powers.

The ODS, KDU-CSL and Greens coalition agreement also contains the direct presidential election, and its introduction was promised already in 2002 by the then government of the CSSD, KDU-CSL and Freedom Union-DEU.

Politicians have not, however, reached agreement on how many rounds such election would have, how many candidates would advance from the first to the second rounds and how many votes the winner would need.

The ODS and KDU-CSL did not mention the direct presidential election in their last year's manifestos. It has both supporters and opponents in both parties. The Greens favour the direct election. The Communists are not fundamentally opposed to it, but want it to be assessed within the position of executive and legislative powers.

Political scientists say parties make decisions according to which method is more advantageous for them at the moment.

Social Democrats lead polls for the first time in over a year
There may be little chance of an upset in the presidential stakes. But the government could certainly change hands. 

The rainy days of July seem to be full of sunshine for the Social Democrats, the largest opposition party in the Czech parliament. A recent series of polls suggests that for the first time since last year's elections, Social Democrats now have more public support than their main rival - the governing right-wing Civic Democrats. But that's not all the good news for the Jiri Paroubek's party - an investigation into a corruption scandal linked to the Social Democrats has just been dropped. 

An investigation into the so-called bio-fuel case, one of the country's largest corruption scandals was dropped by the prosecution on July 11th for lack of evidence. This is certainly good news for the Social Democrats, as several of their members had been accused in connection with the case. But that news may pale beside the latest polls, which show the Social Democrats in front for the first time since elections over a year ago. What has brought this about? One suggestion is approval of party leader's Jiri Paroubek handling of his recent marriage break-up. 

Political analyst Vladimira Dvorakova of Prague's University of Economics has this to say: "I am not sure whether the question of the divorce or the love affair of Mr Paroubek can help strengthen the support, but the Czech society is very tolerant and I don't think it will have a negative impact on the party as a whole. As far as the investigation of the corruption, this can be something that will probably help social democrats as the information used against them mainly during the electoral campaign was not based on some deeper facts or analysis." 

According to Jan Hamacek, Social Democrat MP and the chairman of the lower house's foreign affairs committee, the Social Democrats are well aware that the opportunity of coming back as the strongest party should not be missed. They seem to have already set about "re-branding" themselves, with the daily Pravo reporting that Petr Dimun, former justice ministry spokesperson, has prepared a detailed plan aimed at increasing the party's appeal with younger, more sophisticated voters. However, there has been a mixed reaction from Social Democrat members. 

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But geopolitics and politics are not what it is all about. The Czech economy is perhaps the most important issue. For an insider's view read the following:-

High time for German SME takeover
By: Cristina Muntean, 16. 07. 2007
Never have the trade figures between Germany and the Czech Republic looked as good as they did in 2006, and experts predict even more growth in the coming period, boosted by the Czech Republic joining the Schengen area.

All major German economic flagship firms are already in the Czech Republic, from car producer Volkswagen-present through its daughter company Škoda Auto-to engineering and electronic goods producers Siemens or Robert Bosch, making Germany the largest foreign country investing here, with over €14 billion (Kc 397.2 billion) or 26 percent of the total foreign direct investment (FDI) flowing here since 1993. 

But experts say now it's time to change focus. If till now large corporations targeted the country by investing mainly in the automotive industry, the technology sector or printed media, now it's high time for German small and medium-sized companies (SMEs) to push for a Czech expansion. The service sector is appealing: The expansion of companies such as express and logistics provider DHL Express (Czech Republic) is a good example, while other service providers, from insurance houses to law firms, expect sustainable growth. 

According to a survey in March by the Czech-German Chamber of Commerce (CNOPK), more than 80 percent of German companies would choose the Czech Republic if planning for investment abroad. Yet, for all the firms that invest and want to expand here, the reality isn't without obstacles. A cumbersome Czech labor market-affected by an unemployment rate that's continually falling, the lack of qualified employees, growing salaries and legislation that doesn't make things easy for expatriates-makes German representatives raise their eyebrows and ask for solutions. If the situation isn't improved quickly, further development is endangered and the volume of German investments here could rapidly decrease, experts say. 

Cashing on growth 
One of the major corporate names planning to expand its activities in the Czech Republic is utility provider RWE group. Martin Chalupský, media relations specialist with Czech-based daughter company RWE Transgas, said that recently all the companies belonging to the RWE group in the Czech Republic went through significant changes that involved new legal unbundling requirements. 

In May this year, RWE Transgas Net announced its interest in building a new transit gas pipeline between the stations of Hora Sv. Kateriny in North Bohemia and Waidhaus, Bavaria. "The new pipeline will allow us to take part in the transportation of terrestrial gas from Russia on the north trajectory via the Baltic Sea," he said. Another investment planned by the RWE group is a pipeline that should start close to the Czech border that will be connected near Aachen to the Belgian transport system. "The Czech Republic will continue to play a key role for the gas activities of the RWE group in the future," Chalupský said.

The focus on services boosted activity for other German entities as well. "The recent economic development is positive, this is why I expect further growth in the insurance market, both life and nonlife. Due to a still low penetration, the insurance market has great growth potential here," said Pavla Paseková, head of communications for insurer Allianz pojištovna. Paseková said the results of the company are encouraging. Allianz pojištovna entered the Czech market in 1993 as a greenfield company and since then has become number three on the insurance market, she said. The company was the first to offer online sales of insurance products for retail and corporate clients, and a year ago it founded a daughter company that specializes in online insurance products. "The concept proved so successful that it was evaluated as a top innovative project within Allianz Group worldwide and at present, the respective Czech know-how is being implemented in other Central and Eastern European [CEE] countries as well," she said. 

As the second largest private bank in Germany, Commerzbank is focusing on medium-sized companies. "This segment plays a very important role in the Czech economy … we see good opportunities for our business here," said Arno Walter, general manager of Commerzbank in the Czech Republic. "The main target of Commerzbank in the Czech Republic is growth," he said, adding that in the summer of 2007 Commerzbank will be expanding its branch network by opening new offices in Plzen, West Bohemia, and Hradec Králové, East Bohemia. Currently, the bank operates in the Czech Republic as a bank for corporate and private banking clients. "We are finalizing our due diligence to establish retail and Internet banking as we see interesting opportunities for this business in the future," Walter said.

Another sector massively targeted by German investments was media. Large media groups such as Axel Springer Praha, Bauer Media, Burda Praha, Mafra or Vltava-Labe-Press hold the majority of printed magazines or regional media. "These are purely commercially motivated investments that don't affect the editorial side of these papers," said Helmut Elfenkämper, the German ambassador in Prague. "I can imagine that the Czech Republic will remain an attractive market for other German investments in the entertainment press," he said.

Law firm Nörr Stiefenhofer Lutz (NSL) also sees room for expanding its team and activities. It represented carmaker Volkswagen in what was probably the most resounding German investment in the Czech Republic, the privatisation of Škoda Auto. 

The first foreign law firm to open an office in Prague in early spring 1990, NSL now focuses on mergers and acquisitions and real estate. Recently, it was involved in the acquisition of the Palladium in Prague, the biggest transaction in a single real estate object in the whole CEE. "Our financial results were much higher in 2006 than in 2005 and we expect even more growth this year," said Libor Prokeš, local partner with NSL.

Bernard Bauer, head of the CNOPK, said the Czech Republic's attractiveness for German companies remains high thanks to its proximity-something particularly helpful for SME expansion-but, in the future, these conditions may change, especially for big enterprises that want to invest in manufacturing and research and development (R&D) here. "The main problem is the complicated labour market," Bauer said. The lack of skilled people in technical fields is increasing, and for this reason wages for those who are qualified have started to rise to unforeseen levels. "This will slow down the further development of the Czech economy and will lead to a decrease of foreign investments in the Czech Republic in the future," he said. 

With €23.9 billion, or 32 percent, of the total volume of exports and an 20.9 billion volume of imports, the Czech Republic cashed a positive trade balance of more than €3 billion in relation with Germany in 2006. The backbone of the bilateral trade was made of transport-related goods, followed by technology. Ambassador Elfenkämper said that investment relations concentrated on the car industry and automotive supply have led to a substantial modernization of the Czech industrial structure and to the transfer of more sophisticated industry here. "What is really important is that all these investments are long-term investments, not just short-term profit-driven moves based on short-term contracts. I think we have here a perfect example of a win-win situation between the two national economies," he said.

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AVIATION

CSA launches flight from spa town to St Petersburg


Czech Airlines (CSA) announced on June 19th that it is due to launch a new once-a-week connection between the Czech spa town of Karlovy Vary and St Petersburg, Russia, as of June 31st, Interfax News Agency reported. 
"The new line between St Petersburg and Karlovy Vary will complement the existing connection between the Czech capital Prague and St Petersburg, which is available four times a week," CSA spokesperson Daniela Hupakova was quoted as saying. Besides Airbus A320 flights to St Petersburg, CSA also flies to Moscow, Yekaterinburg, and Samara. Last year, CSA reported 273,000 clients traveling between the Czech Republic and Russia, a 12 per cent year-on-year (y/y) increase, with the Prague-Moscow line the most popular, Interfax News Agency reported. CSA's fleet consists of 50 planes and the airline employs 5,000 people.

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FOOD & DRINK

Takeover of Heli Food approved by UOHS

The takeover of Czech food producer, Heli Food, by British frozen-food maker, Bakkavor Foods Limited, was recently approved by the Czech Republic's Anti-Monopoly Office, (UOHS), according to UOHS spokesman, Christian Chalupa, Interfax News Agency reported. 
"The merger will not lead to creation or increase of a dominant position (of the players), which would have resulted in violation of competition," Chalupa was quoted as saying in a statement. Bakkavor will at first acquire a 51 per cent stake in the Czech market leader in frozen-food products, and will take over the entire company in three years, according to Czech online portal Aktualne.cz.

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INFORMATION TECHNOLOGY

Microsoft gets new of business for CEE 

Czech national, Veronika Prikrylova, was recently appointed by Microsoft to take over the new position of head of business development for Central and Eastern European markets, according to the company, Interfax News Agency reported. 
"As of June 21st, Veronika Prikrylova took over her new tasks, which include business strategy for the CEE," Microsoft spokesperson Marketa Kuklova was quoted by Interfax as saying, adding that Prikrylova will also handle sales support and marketing for Armenia, Azerbaijan, Bosnia and Herzegovina, Cyprus and Malta. Prikrylova joined Microsoft in 1996 and last worked as sales and marketing head for the Baltic States and Kazakstan. In her new position, Prikrylova will be reporting to the Vice President for Europe, the Middle East and Africa, Vahe Torrosian. In April, another Czech national, Jan Muhlfeit, was named by Microsoft as Chairman Europe to represent the company in dealings with European governments, key institutions, large corporate customers and business partners, it was reported.

Centrum.cz reports profits at 15.8m crowns

Centrum.cz reported on June 19th a first profit last year, netting 15.8 million crowns on revenues up 63 per cent year-on-year (y/y) at 367.589 million crowns. The company was cited as saying it might float its shares on bourse in future, Interfax News Agency reported.
Centrum.cz is the second-largest Czech web portal operated by NetCentrum. "Last year's net profit in accordance with IFRS standards amounted to some 15.8 million crowns, up by 22.1 million crowns," Financial Director Tomas Cibulka was quoted by Interfax as telling a press conference. Centrum.cz co-owner Oldrich Bajer said that the firm switched to IFRS accounting methods so as to be comparable to publicly traded players on the Central Eastern European (CEE) market, and said he did not rule out a future initial public offering (IPO). "It (an IPO) is not an issue for the upcoming 12 months, we are not working on it now, but we have been thinking about that," Bajer was quoted as saying. Earnings before interests, taxes, depreciation and amortisation (EBITDA) increased by 37.543 million crowns last year to 33.042 million crowns, while the portal's revenues increased by some 141.717 million crowns to 367.589 million crowns in 2006, it was reported. Cibulka said that some 47 percent of the company's revenues stem from media ads, while the rest was made up by advertising servers, through search-engines and by pay-per-click Internet-advertising scheme AdFox. Centrum.cz registers some 550,000 real users per day and aims to increase this number to three million by the end of the year due to greater focus on specialised web sites and services and on mobile Internet, Interfax reported. In line with that goal, the company expects to reach revenues totaling some 450-500 million crowns in 2007. Centrum.cz's Internet daily, Aktualne.cz, which was launched at the beginning of 2006, registers some 200,000 unique readers a day.

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RETAIL

Halfords to open 3 new stores in Czech Republic

Halfords recently announced that it plans to open around 50 new outlets in Europe by the end of this year. This includes three new stores in the Czech Republic, Interfax news Agency reported. 
Halfords is a British car parts and bicycle retailer. The first Czech outlet was to open on June 29 in a retail park near Prague, Czech news agency CTK reported. Jiri Mica, head of the firm's Czech operations for Halfords, was cited by Interfax as saying the company sees a niche on the local market as Czechs earning power has increased and they are willing to spend more on hobbies. Halfords, established in 1892, is Britian's largest non-food retailer. It specialises in auto, leisure and cycling products, with some 426 stores including and employs 10,000 staff, and has been listed on the London Stock Exchange since June 2004, it was reported.

Retail sales slow to 8% on year in April

Czech Statistical Office (CSU) data showed recently that the retail market in April had a growth in sales of eight per cent year-on-year (y/y), Interfax News Agency reported. 
This, however, is a slowdown from March, which showed a 9.6 per cent increase. "In April, seasonally adjusted sales in retail trade except of motor vehicles and motorcycles dropped by 0.2 per cent month-on-month (m/m) at constant prices," the CSU was quoted by Interfax as saying, adding: "The year-on-year, not seasonally adjusted, increase was eight percent." The published figures were slightly below the market's expectations of the 10 percent y/y growth. "This figure, although lower than expected, will not leave (Czech central bankers calm)," Ceska sporitelna analyst Martin Lobotka was quoted by Interfax as saying. 
Lobotka expects the Czech National Bank (CNB) to raise the country's interest rates by 25 basis points in July - one month earlier than analysts had previously said - in line with the published figures, which indicate the possible risks for inflation growth. Noting that the largest increase was seen in retail of clothes, shoes, furniture, electronic goods and cars, Raiffeisenbank analyst Ales Michl was quoted as saying: "The fastest household consumption in the last three years is causing shopping mania in stores." The biggest share in the year-on-year increase of total sales was recorded for specialised stores with non-food goods and stores with household goods, according to CSU. Sales in hotels and restaurants grew by 1.7 per cent, CSU added. In retail trade including the automotive segment, seasonally adjusted sales at constant prices decreased by 0.8 per cent m/m, while non-seasonally adjusted sales went up by 8.1 per cent y/y.  

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