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					“Getting to know the Czech Republic
   Business, Economy and Life”




                          Petr Tochacek
                          Strategic Sourcing Manager
                          UNION PUMP
                          Battle Creek, MI
                          October 8th, 2008
                    Czech Republic
Parliamentary democracy
President – Prime Minister – Parliament
Parliament bicameral
    Chamber of Deputies – 200
    Senate – 81
Political Parties
    ODS-Civic Democratic Party (81)
    CSSD-Social Democratic Party (74)
    KSCM-Communist Party (26)
    KDU-CSL-Christian Democratic Union (13)
    SZ-Green Party (6)
Population – 10.4 million
Capital - Prague
Language – Czech
Currency – Czech koruna (CZK)
                               Basic data

•GDP growth for six consecutive years
•GDP growth 6% for last three years
•2008 GDP real growth rate at 4.9%




                                        • Manufacturing industry #1 GDP contributor
                                         - Machinery manufacturing (18%)
                                         - Electrical/optical equipment (16%)
                                         - Transport equipment (14% growth y-o-y)
                                  Basic data
• 2008 inflation rate at 6%
• Inflation forecast for coming years
 above the target
• CZ Interest rates consistently below
  Euro zone rates
                                  Labor Market
• Unemployment raised since ’96 but declined         Average monthly Labor Costs ‘05: EUR
  since ’04
                                                     • Netherlands   3,974
• Regional & Industry differences
                                                     • Austria       3,767
•     Automotive, electrical & optical instrument,
                                                     • EU27          2,981
    rubber & wood processing
                                                     • Czech Rep.      954
•     Textile, agriculture
                                                     • Hungary         944
• Less people leave CZ to work abroad/
  10x more came to CZ in ‘07                         • Poland          818
• Number of self-employed rose to 16.1%              • Bulgaria        229       Source: Eurostat
Labor - Wage Growth
Labor - Wages
                  Labor - Skills Level
• High percentage of skilled/ well educated workforce
• Labor costs still attractive compared to West EU
• The number of University students increased three times since 1990/91
 (from 118,000 in 1990/91 to 323,765 in 2006/07)
                          Labor – Education Level
 • Well developed education system
 • 72% schools municipal, 21% regional government, 5% private
 • 80% of population aged 24-64 has completed upper secondary education
 • University graduates – 38% Business Administration, 32% Eng.&Manufacturing,
                                    15% Science, 9% in Law, 6% in Computing.

Education in the labor force 2007                 Labor force in 1000s         Share
Primary                                                 295.2                   5.9%
Secondary w/out GCE*                                  2,028.7                  40.8%
Secondary with GCE*                                   1,593.0                  38.1%
University                                              749.6                  15.1%
Total                                                 4,967.0                  100 %

*General Certificate of Education
                              Language skills
• Education system enhancing language skills
• English and German dominate
• English predominates in all levels of education
• Number of students in language courses at
  same level as in academic
•76% of University students study one foreign
 language, 20% study two, 4% study three
                 Investment Climate

• Stable economic performance

• Highly skilled labor force
• High share of secondary and tertiary education
• Favorable labor costs and price stability
• Codified system of investment incentives
• Safe investment environment
• Compact and high-quality infrastructure
• Mentality, culture and attitude close to Western Countries
• Strong focus on R&D
• EU membership
      Investment Climate - Incentives


1. Tax incentive – Corporate tax relief for up to 5 years for new companies
                    Partial tax relieve for existing companies

2. Job Creation Grants – Financial support for creation of new jobs

3. Training and Re-training Grants – Supported by government and EU

4. Site support – Provisions of low-cost land and/or infrastructure
              Investment Climate - FDI
FDI by Country :         FDI by Sector :
Netherlands        29%   1. Non Manufacturing             58%
Austria            12%       •   Technology Centers

France             11%       •   Real Estate/ Business activities
                             •   Financial
Germany            8%
                         2. Manufacturing                  42%
USA                4%
                             •   Machinery
                             •   Petrochemical/ Chemical
       Investment Climate – New Trend

• The change in structure of FDI
• Rapid increase of projects in R&D and Shared Services
• New as well as existing investors focused more on transfer of “Higher
 Value Added” development activities – Technology Centers or
 Business Service Centers
• Less manual labor, more technology
• Software development dominates
• 16 new programming centers
                     Investment Climate


•Easy of doing business   56         •Getting credit              26
•Starting a business      91         •Protecting investors        83
•Dealing with licenses    83         •Paying taxes                113
•Employing workers        55         •Trading across boarders 30
•Registering property     54         •Enforcing contracts         97


                          Czech Republic’s rank in world comparison (1=best)
Investment Climate – Major Investors
               Transport Infrastructure
• One of the most advanced transport networks in CEE
• Infrastructure has improved since 1989 significantly
• Density of the transport network one of the highest in CEE
                                                                     Oil pipeline
• Transit hub for other EU members                             Air
                                                             0.01%       1.5%

                                                 Inland
                                                waterways                       Rail   Rail
                                                  0.5%                          18%
                                                                                       Road
                                                                                       Inland waterways
                                                                                       Air
                                                                                       Oil pipeline
                                                      Road
                                                      80%
Road and Highway Network
                                    Life
• “Quality of Life” index - Czech Republic has the best result among CEE
• Costs of Living - although life in the Czech Republic rapidly approached
                Western standards of living the cost remains substantially lower
• Healthcare - healthcare system is inspired by European tradition
             - financed by predominantly public means
             - guaranteed by state public insurance scheme
• Retirement – Women from 60, Man at 61, present legislative reform intends
               to raise retirement age to 65
           Current challenges

• Entering to EURO zone
• Disproportional Exchange Rate
• Lack of qualified work force
• High dependency on Automotive sector
• Health and Pension system upgrade

				
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posted:8/29/2012
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