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
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
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
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
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
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
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
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,
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,"
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,"
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
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
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.
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
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
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.
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
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.