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									2005 – the Most
Successful Year
of the Czech

Massive Growth
of Industry

Czech Republic
– a Congress

the Capital of the Czech Republic


Ministry of Industry and Trade

                                                                s INTRODUCTION
AND TRADE                                                          Question of the Month for Milan Urban, Minister of Industry and Trade............4
Economic Bi-monthly Magazine with                               s ECONOMIC POLICY
a Supplement is Designed for Foreign
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the Czech Republic                                                 Massive Growth of Industry ...............................................................................6
                                                                   The Manufacturing Industry Changed Its Proportions.........................................8
For the Ministry of Industry and Trade
of the Czech Republic
                                                                s BUSINESS AND PRODUCTION
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                                                                   PROSPER GOLF CLUB ČELADNÁ ......................................................................35
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                                                           PPP Projects Get the Go-Ahead in the Czech Republic               Prague, the Capital of the Czech Republic


Question of the Month for Milan Urban,
Minister of Industry and Trade
                         s                                                continued to increase, up to 51.7 %, but at
                         How would you characterise                       a much slower pace than in previous years.
                         the Czech economy two years                      The share of other export commodity
                         following the Czech                              categories also began to increase. The share
                         Republic’s accession to the EU?                  of foodstuffs, for instance, saw a sharp
                         Economic growth has reached peak highs in        increase. It is possible to observe that export
                         the first two years following our entry into     expansion is now accompanied by a more
                         the EU, proving that Czech firms are thriving    balanced growth in a broader goods
                         in the common economic environment, and          structure. A sharp increase was, for instance,
                         that they were well prepared for the fierce      recorded in the share of road vehicles and
                         competition. Industrial production alone has     office appliances in exports. It is clearly
                         been growing continuously for six years.         apparent that EU accession has impacted
                         Industrial companies are prospering not only     positively on our penetration of EU markets.
                         on the domestic market, but mainly on the        We have become members of the
                         global level. Foreign trade is breaking all      world’s largest trade zone and, as a result,
                         records. In 2005, Czech foreign trade            the conditions for trade and the physical
                         displayed a surplus of more than CZK 40          movement of goods have improved.
                         billion (about EUR 1.33 billion), an excellent   Branches such as automobile manufacture,
                         result considering the deficits regularly        which have been the recipients of significant
                         experienced in the past. The same trend          volumes of foreign direct investment in
                         continues this year. Statistics confirm that     previous years, are now having an increasing
                         Czech products are competitive and have          impact on exports. Investment and modern
                         become established on European Union             technology increase competitiveness on
                         markets. The trade balance with the EU has       developed markets as well as on the
                         improved by several tens of billions of          domestic marketplace.
                         crowns. In addition, exports to Russia and
                         the USA have also grown significantly and        s
                         the pick-up in trade with most countries of      The Ministry of Industry and Trade
                         the former CMEA is promising. Overall            has prepared a Strategy
                         foreign trade results reflect the position of    for the Promotion of the Czech
                         the CR as a small dynamic and very open          Republic’s Trade and Economic
                         economy, dependant in many respects on           Interests in the EU. What is the basis
                         imports, especially imports of raw materials     of this Strategy?
                         and fuels. The result of trade with the EU       The Czech Republic must compete with new
                         documents our capacity to cooperate and          ferocious exporters who are able to easily
                         integrate, and reflects an increasing            eliminate rivals by producing with great
                         harmony with developed economies.                efficiency. The exposure of domestic
                                                                          producers to a greater openness of
                         s                                                competition renders it necessary to speed up
                         Which structural changes have taken              innovation, to apply the results of research in
                         place in the Czech economy during                practice, increase labour productivity,
                         this period?                                     promote investment and make savings. It is
                         EU accession represents a landmark in the        for this reason the Ministry has drawn up
                         development of the basic structure of our        a Strategy that sums up the priorities we
     M O R E AT:         exports to EU countries. For a long period       intend to stress in our talks in Brussels. We
                         prior to accession, our exports comprised        seek adequate access to the markets of third          mainly machinery and transport equipment.        countries, protection against unfair
                         At the same time, the share of all other         competition in exports and imports,   commodities in our exports to the EU, with       completion and adaptation of the single
                         the exception of foodstuffs, was decreasing.     internal market for greater growth,          Following EU accession, the basic structure      investment and employment opportunities.
                         of exports began to change. A comparison         The Strategy is to become the initial impulse         of data on the structure of exports to the EU    for debate with the business sphere on
                         one year prior to accession (2003) and one       competitiveness in trade. It is for this reason       year following accession (2005) shows that       the Czech Republic will push for trade
                         the share of the dominant group,                 liberalisation in the EU as one of its chief
                         "machinery and transport equipment",             priorities.


2005 – the Most Successful Year
of the Czech Economy
The economic results for 2005,             s DOMESTIC DEMAND                          a booster last year, most responsible for the
                                           D O E S N OT C O N T R I BU T E            growth of GDP was the favourable trend in
published by the Czech                                                                foreign trade. Doing best were machines
                                           M U C H TO E C O N O M I C
Statistical Office at the                  GROWTH …                                   and means of transport, which account for
beginning of March, were             The unequivocal leader of the Czech              more than one-half of the Czech
a great surprise. The robust         Republic’s economic growth is exports,           Republic’s total exports and are most
                                     while domestic demand in 2005 grew only          responsible for the country’s massive trade
growth of the Czech economy in       very moderately. Its most important part –       surplus balance. The results in commodity
the last quarter of 2005 (+6.9 %)    household consumption – last year grew at        and services trading in comparable prices
surpassed all expectations of        the slowest rate for the past six years. There   improved as a result of the higher export
the financial market and broke       are two main reasons for this rather             efficiency of domestic enterprises by nearly
                                     unsatisfactory trend: slower growth of real      CZK130 billion, which accounts for 4.4 %
previous records. The annual         wages and growing investments of                 of GDP. Such an improvement is
growth of the economy by 6 %,        households in housing. The strongest             unparalleled in modern Czech history. In
too, was unprecedented for           influence in this case was the rather            current prices the improvement is smaller,
                                     moderate growth of real wages, which rose        but this is the consequence of the
Czech conditions. The Czech                                                           movement of exchange relations
                                     by only 3.5 %. At first sight it seems that
Republic, together with Slovakia,    households are not feeling the massive           influenced by high prices of raw materials,
is the fastest-growing economy       economic growth much. It is true that,           pushing up the import side of the balance.
in the framework of the Visegrad     thanks to the economic boom, the situation           The structure of exports reveals that the
                                     on the labour market has improved,               growth goes mainly to the credit of
Four (V-4) and the fourth fastest-   although the decline in unemployment is          enterprises under foreign control, which
growing economy in the EU. The       still unsatisfactory. Despite the very rapid     realise more than three-quarters of
Czech Republic’s gross domestic      growth of the productivity of labour, wages      revenues from direct exports of industrial
product is growing nearly four       in the Czech Republic are growing only           enterprises. These results illustrate the
                                     moderately, which strengthens the                favourable influence of foreign direct
times as fast as the economy of      competitive position of export-oriented          investments flowing into the Czech
the EU and nearly five times         companies. The difference between the cost       Republic, the total value of which at the
faster than that of the Eurozone     of labour in the Czech Republic, and in the      end of last year amounted to EUR 50.4
                                     other V-4 countries, in comparison with          billion. The success of the investments is
countries. It is obvious that the                                                     proved not only by the continuing massive
                                     neighbouring Germany (FRG) is still rather
GDP level in the last quarter of     high (according to Eurostat data, the            interest of foreign investors in the Czech
2005 and the annual result           average hourly wage in the Czech Republic        market, but also by the favourable financial
massively surpassed the              was 5.5 fold lower than in the FRG), which       results of enterprises under foreign control.
                                     is a strong competitive advantage for            Another favourable aspect is that investors
expectation of the financial         domestic firms. On the other hand,               prefer to develop those enterprises, and
markets. Last year, the Czech        however, it is also true that Czech              they re-invest more than half of their profits
economy was doing very well          employees have the highest wages within          in the Czech Republic.
and its results were regularly       the V-4 region, both in terms of the euro            Looking at the supply side of the
                                     equivalent and in terms of the CZK               economy, it can be seen that the excellent
reviewed, each time bringing it      purchasing power parity.                         results of the Czech economy are owed
up by nearly one percentage              Government consumption, after the            mainly to industry. Last year alone, industry
point. The results for 2004, too,    deduction of the cost of foreign fighters        accounted for approximately half of the
                                     purchased for the Czech army, has been           GDP increase, and in the past four years it
had to be reviewed and brought                                                        has been unequivocally the driving force of
                                     declining for two years in real terms. The
up, as GDP in that year did not      growth of investments seems to be                the economy. Most likely, industry will be
increase by 4.4 %, as forecast,      encouraging at first sight, but a more           leading the economy also this year,
but by as much as 4.7 %.             detailed analysis of the figures shows that      especially thanks to the further growth of
                                     more than one-half of the increase was           motorcar production, which will reach
                                     accounted for by the means of transport,         a new high this year, both as regards
                                     followed by machinery equipment. So that,        manufacture and exports.
                                     for the time being, there is not much reason
                                     for overestimating last year’s investment        s W H AT C A N B E E X P E C T E D
                                     increase (+3.7 %). The situation, however,       NEXT?
                                     may soon improve thanks to the flow of           The review of the previous GDP figures
                                     money from EU funds and to the                   necessarily improves the economic
                                     appearance of another big foreign investor.      perspective for the next few years. This
                                                                                      year, the Czech economy is expected to
                                     s … THE DRIVING FORCE OF                         grow by 5-6 %. The favourable prospects
                                     ECONOMIC GROWTH IS THE                           are supported on the one hand by existing
                                     E X P O R T- O R I E N T E D I N D U S T R Y     figures indicating an acceleration of GDP in
                                     As domestic demand was not much of               all the quarters of last year, and on the


The excellent results of the Czech economy are mostly due to industry

other by the favourable trends in industry             the decision of the Hyundai car                 new plant.) In the long term therefore the
and exports, based in part on the running              manufacturer to build a new plant in the        Czech Republic may expect very good
in of the TPCA car factory. Favourable news            Czech Republic with an annual capacity or       results in its GDP, which will raise the
of the recovery of West European                       300 000 cars. This fact will manifest itself    country’s economic standard up to 76 %
economies indicate that the interest in                already this year in the growth of              of the EU average this year and to nearly
Czech production will grow also this year.             investments, and in two years it will begin     80 % in 2008.
The growth of the economy this year will               to strongly influence the export results and
be supported by higher domestic demand –               the entire GDP on the level of around                                          Petr Dufek
consumption and investments – but it will              1.5 %. (The actual figure will depend on                                           Analyst
not be the dominant factor of economic                 the extent of domestic sub-deliveries and                                            ČSOB
growth. Very good news for the economy is              the evaluation of cars manufactured in the                        (e-mail:

Massive Growth of Industry
In 2005, industrial production                               In 2005, the economic performance of      declined by 1.3 %. Revenues from direct
                                                             industry, in terms of the industrial      exports, in current prices, rose by 6.8 % on
grew at a slower rate, mainly as                             production index, increased by 6.7 %      a year-on-year basis, which was less than the
a result of a recession in the                         on a year-on-year basis, and in terms of        growth of total exports of goods. In real
Eurozone states, the destination                       revenues from the sale of own products and      terms, revenues from direct exports
of a large part of Czech exports.                      services of an industrial nature by 8.1 % in    increased by 10.2 % and domestic revenues
                                                       real terms, which is 2.9 percentage points      by 7.3 %. Despite the gradual slowing down
                                                       and 1.8 percentage points, respectively, less   of the growth of the export of goods to EU
                                                       than the year before. While in the first half   states, especially the FRG, the export
                                                       the growth of production and revenues was       orientation of Czech industry has not
                                                       lower, in the second half the growth rate       weakened.
                                                       was high. Domestic revenues in current
                                                       prices grew by 2.2 percentage points faster     s THE GROWTH OF
                                                       than revenues from direct exports, but this     ENGINEERING PRODUCTION
                                                                                                                                                       Photo: TPCA

                                                       was due to the fact that the prices of          HAD A STRONG ECONOMIC
                                                       products for the domestic market rose by        I M PA C T
                                                       2.7 %, while those for the external market      The production structure of industry has


changed; while the manufacturing industry            Development of Industrial Production
showed massive growth, the production of
energy raw materials and power generation
declined. Production in the manufacturing

                                                 Change in %
industry rose by 7.5 % on a year-on-year
basis, while the total output of mineral raw
materials rose only slightly (by 0.5 %).
Electricity, gas, and water production and
distribution declined by 1.2 %. The
manufacturing industry showed massive
structural movements – the increase in
engineering production was mainly due to
the massive growth of the production of                         Basic IPI (average                                                         Months
                                                                                       Seasonally adjusted          Trend
transport equipment (by 23.0 %) and the                         month of 2000 = 100)

growth of machinery and equipment                a whole, as in manufacturing enterprises,          alimentary goods rose faster (by 4.1 %) than
production and repair (by 14.1 %).               where the productivity of labour grew by           revenues from the sale of foodstuffs (by
A considerable increase was recorded by          7.7 % and average wages by 4.6 %, unit             3.1 %). Since the second half of 2004, the
production with a relatively small weight – of   wage costs dropped by 2.9 %.                       volume of revenues for accommodation and
coke and refined petroleum, rubber and                                                              catering declined and did not stop even in
plastics, which already supplement or even       s FA S T E R G R O W T H                           2005. The decline for the whole year was
substitute metallurgical and metallic            O F T H E B U I L D I N G I N D U S T RY           4.1 % in real terms, a difference of 5.5
products (and whose production has been          IN THE 4TH QUARTER                                 percentage points in comparison with the
reduced). The output of electrical and optical   In 2005, building production rose by 4.2 %         growth in the previous year. Experts believe
instruments increased, but their production      in real terms, 5.5 percentage points less than     that the reason for the decline in revenues in
grew at a much slower rate. The slowest-         a year before. In the course of the year, its      those facilities is the VAT Act amendment.
growing among the main industrial groups         growth accelerated considerably. In building
was the intermediate products sector             enterprises with 20 and more employees,            s THE GROWTH CONTINUED
(1.5 %), while the production of durable         production under contracts rose by 5.1 %           A L S O I N J A N UA RY 2 0 0 6
goods grew at an above-average rate.             for the whole of 2005, 3.8 percentage              The year-on-year change of industrial
                                                 points less than the year before. The              production in January 2006 was 115.1 %,
s THE INFLUENCE OF FOREIGN                       structure of building work under contracts         the second highest growth since 2001. Most
ENTERPRISES IS GROWING                           changed in favour of new construction,             responsible for the growth of industrial
The revenues of enterprises under foreign        reconstruction and modernisation, whose            production was the manufacture of the
control grew at a substantially higher rate in   volume rose by 6.5 % in real terms. The            means of transport and equipment (a 7.27
2005 (by 14.9 % in real terms) than the          fastest growth was recorded by structural          percentage-point contribution to the growth
revenues of the industry as a whole, which       engineering (9.6 %), while in civil                of industry - growth of the branch by
means that the remaining enterprises             engineering the growth was much slower             39.7 %), manufacture of electrical and
showed a moderate decline in revenues. The       (1.7 %).                                           optical instruments and apparatus
same is true of the revenues of foreign                                                             (contribution 2.40 percentage points,
enterprises from direct exports, which           s SLOWER GROWTH                                    growth by 22.0 %), and the manufacture of
exceeded their total growth, although not        OF REVENUES IN THE SERVICE                         base metals and metallurgical and metal
so massively. The productivity of labour in      S E C TO R                                         products (contribution 1.07 percentage
industry for 2005 rose by 8.2 % on a year-       In 2005, the volume of revenues in the             points, growth by 7.4 %). On the other
on-year basis and was largely responsible for    branches of the service sector under review        hand, production declined in the sector of
the growth of revenues, as the number of         rose by 3.1 % in real terms on the year-on-        other non-metallic mineral products
employees declined slightly. Average             year basis, which is less than a year before.      (contribution –0.10 percentage points,
monthly nominal wages increased by 3.3 %.        The revenues of retailers rose by 3.2 %, 0.8       decline by 2.8 %), the manufacture of
Considerable structural changes occurred,        percentage points more than the year               textiles, textile and clothing products
however, in the development of the different     before. The slowest growing were annual            (contribution –0.06 percentage points,
sections. In electricity, gas, and water         revenues in transport and communication            decline by 1.9 %), and the production of
production and distribution enterprises, the     enterprises (2.1 % in real terms) and their        other mineral raw materials (contribution
productivity of labour grew considerably,        increase was substantially smaller than in         –0.03 percentage points, decline by 6.3 %).
and despite the higher increase in average       2004 (by 4.1 percentage points). Revenues             In January 2006, production increased in
wages than in industry as a whole, their unit    in the motoring segment rose by 4.1 %              all industrial groups: durable goods (by
wage costs declined by 11.3 %. On the            a year in real terms, of which revenues for        36.4 %), products of investment character
other hand, the slight increase in the           the 4th quarter declined slightly, which           (by 32.2 %), intermediate products (by
productivity of labour with the simultaneous     represents an acceleration by 2.6 percentage       7.2 %), energies (by 6.5 %), and appliances
rapid growth of average wages in mineral         points, i.e. its considerable slowdown (by         (by 5.9 %).
raw material enterprises led to a 4.6 %          5.9 %). This development was due to higher
growth of unit wage costs. The largely           sales and repairs of motor vehicles (by                                          Daniel Kubát
different development in these two sections      4.7 %) and fuels (by 3.0 %). In the retail                                          Economist
did not have a great impact on industry as       business, revenues from the sale of non-                     (e-mail:


The Manufacturing Industry Changed Its Proportions
In 1997 the Czech manufacturing              THE DOMESTIC                                 ratio of their equity capital to the sum of
                                             M A N U FA C T U R I N G                     their liabilities rose by 8.6 percentage points
sector was working at a loss.                                                             from 1997 to 2004. The individual sectors,
                                             I N D U S T RY W E A K E N E D
Profits were rather low – the                ITS POSITION …                               however, contributed differently to this
sum of the equity capital of all       Unlike the massive expansion of foreign            result: the share of domestic firms showed
firms taken together was even          firms in the manufacturing industry in the         a 9.5 percentage point increase and that of
                                       Czech Republic, the sector of private              firms under foreign control rose by as much
lower than the sum of their            domestic firms was reduced by one-quarter          as 14.1 percentage points. The capital
registered capital, and the other      in terms of the volume of operating capital        resources of public enterprises are practically
components of the firms’ own           (liabilities) from 1997 to 2004: while in 1997,    the same as in 1997 (+0.3 p.p.), but on
resources, especially profits,         the sum of their resources amounted to CZK         a relatively high level in view of the nature of
                                       1 017.3 billion (EUR 31.9), in 2004 the figure     business activities in sectors, where public
were showing an unfavourable           was only CZK 757 billion (EUR 23.7 billion).       enterprises operate, as mentioned before
balance. Working at a loss were        The sector of domestic firms weakened,             (non-financial contributions to the registered
both domestic firms (equity            while the sector of firms under foreign            capital of those firms).
                                       control grew massively. The relative figures
capital amounted to CZK 365.6                                                             s THE LEADER IS THE
                                       show that in 1997 equity capital of domestic
billion, i.e. approx. EUR 11.5         private manufacturing firms accounted for          AU TO M O B I L E I N D U S T RY
billion1), and registered capital to   35.9 % of their total resources. In 2004,          The highest increase in equity capital was
CZK 371.4 billion, i.e. EUR 2.14       however, this indicator was on the level of        shown by car manufacturers – in the sector
                                       45.4 %, more than the average for the              of domestic firms from 17.5 % to 48.8 % of
billion) and firms under foreign       whole sector of firms operating in the             total resources, and in the whole sector
control (CZK 67 billion, i.e. EUR      manufacturing industry, which amounted to          making transport equipment from 25.2 %
2.1 billion in comparison with         45.1 % (the figure includes the public firms       to 40.8 %. In seven years, the resources of
CZK 68.4 billion, i.e. EUR 2.14        sector, where this ratio is traditionally high     car manufacturing firms rose by nearly
                                       because of non-financial investments in the        100 %, in comparison with the resources of
billion), which in addition            firms’ registered capital, such as forests,        firms in the entire Czech economy, which
incurred high costs in the first       mines, etc.). On the other hand, in 1997 the       rose only by 12 %.
years running their businesses         aggregate volume of the equity capital of             The car industry is practically entirely in
                                       foreign firms engaged in the Czech                 the hands of foreign capital (the data do not
without making much profit. This                                                          yet comprise the figures for the TPCA
                                       manufacturing industry amounted to a mere
changed significantly during the       31 % of their total resources. In 2004, they       Graph 1. Firms operating in the Czech
next seven years. In 2004, own         increased their capital to 45.1 % of their         manufacturing industry – development of
resources of firms under foreign       aggregate resources. An explanation for the        the liabilities and equity capital of firms*
                                       relatively lower level of capital in the case of   (billions of CZK)
control in the manufacturing           foreign firms, which could be observed still
industry were close on CZK 483         in the latter half of the 1990s, may be that
billion (EUR 15.1 billion) and         this sector knows how to use external
their registered capital amounted      resources to their best advantage, as in the
                                       following years their effectiveness and
to CZK 258 billion (EUR 8.1            performance proved to be better than the
billion). This means that while        results of domestic firms.
the registered capital of foreign                                                                    2004                2004             1997                1997
                                       s … BUT IT IS MUCH SOUNDER                                total liabilities   equity capital   total liabilities   equity capital
firms operating in the
                                       F I N A N C I A L LY                                       Public             Private            Private               Total
manufacturing industry rose            The decrease in the total resources of private                                domestic           foreign
                                                                                          * according to NACE classification, section D
approximately 3.7 fold from            domestic firms operating in the                    Source: Czech Statistical Office
1997 to 2004, their own                manufacturing industry was accompanied
                                       by the improvement of their financial health.      factory in Kolín, launched only in spring
resources increased 7.2 fold.          Their equity capital decreased from CZK            2005). While in 1997, the assets of firms
These proportions reflect the          365.6 billion (EUR 11.5 billion) in 1997 to        operating in this sector were divided
skyrocketing growth of their           CZK 343.8 billion (EUR 10.8 billion) in 2004,      practically equally between private domestic
profit. The highest increase was       but the volume of their registered capital         firms and firms under foreign control (CZK
                                       declined even more distinctly (from CZK            70 billion, i.e. EUR 2.2 billion, to CZK 80
shown by car manufacturers.            371.4 billion, i.e. EUR 11.6 billion, to CZK       billion, i.e. EUR 2.5 billion), in 2004 the ratio
                                       218 billion, i.e. EUR 6.8 billion). This shows     was only CZK 33 billion (EUR 1 billion) to
                                       that with the decline in their resources, and      CZK 260 billion (EUR 8.2 billion). At that
                                       the "shrinking" of the sector of domestic          time, the volume of resources of foreign
                                       firms doing business in the manufacturing          firms operating in this branch of the
                                                                                                                                                                           Photo: TPCA

                                       industry, their profits were rising. In the        manufacturing industry were nearly 8 times
                                       manufacturing industry as a whole, the             higher than the resources of domestic firms.
                                       firms’ capital resources expressed by the          The volume of their equity capital was


The economy is driven by the automotive industry

approximately 6 times higher, and that of               Such a development raises several              s CONCLUSION
their registered capital was up 5.5 times. The       questions: it can mean that the domestic          The growing weight of the automobile
strategic feature of their business is revealed      company sector is regarded by banks as less       industry in the economy of the Czech
by the fact that in their case short-term            creditable, posing continuous risks in            Republic (the expected arrival of the South
banking credits accounted for a little more          comparison with firms under foreign               Korean firm Hyundai) may be a risk from the
than one-fifth of their borrowings, while in         control. Another explanation, however, can        point of view of the trade cycle. In 1997, car
the case of domestic enterprises it was              be that foreign firms operating in this sector    making accounted for one-tenth of the
nearly two-thirds.                                   know how to use external resources to their       manufacturing industry in terms of
    In 1997, the equity capital of foreign firms     best advantage and opt for them in their          resources, and in 2004, for more than
operating in the automobile industry was             market expansion.                                 15 %. Soon, the resources of this branch
double that of domestic firms (CZK 25.6                 The financial development in the electrical    doubled to nearly CZK 290 billion (EUR 9.1
billion, i.e. EUR 0.8 billion, in comparison with    and optical instruments sector of the Czech       billion), in comparison with 28% of the
CZK 12.3 billion, i.e. EUR 0.4 billion). Seven       manufacturing industry shows that external        manufacturing industry as a whole and only
years later, however, their equity capital           resources helped the entire branch to             12 % of all firms in the Czech Republic.
exceeded the CZK 100 billion (EUR 3.1 billion)       accelerate to such an extent that its own             In this connection a question arises when
margin as against CZK 16 billion (EUR 0.5            resources could be strengthened, while the        looking at the development of the resources
billion) in the case of domestic firms.              share of external sources could be reduced.       of firms in the manufacturing industry in the
                                                                                                       period 1997-2004, namely whether the
s LIGHT BRANCHES ARE WEAK                            s STRENGTHENING                                   previous inadequacy of own resources was
I N T E R M S O F C A P I TA L                       O F C A P I TA L E V E N                          caused by the large proportion of external
"Light" and strongly accelerating branches           IN BRANCHES IN RECESSION                          sources, because banks considered some
in terms of revenue and export expansion             Even in branches strongly subdued by              branches creditable and the external
usually are not strong in terms of capital –         competition, the companies’ equity grew           resources helped towards the acceleration of
especially companies under foreign control           between 1997 and 2004. It can be assumed          business activities, with a corresponding
prefer external resources to expand, which           that the inadequacy of their own resources        impact on the growth of revenues and export
proves to have a leverage effect.                    (39.8 % in 1997, domestic firms 42.1 %)           performance. High capital resources need
    For example, in 1997 the equity capital of       and their long-term financial losses were         not always have an unequivocally favourable
companies manufacturing computers and                caused by the non-existence of good               effect on the market expansion of firms.
office machines amounted to just one-                business plans that could persuade the            Naturally they reduce the business hazards.
quarter of their total resources and in 2004 to      banks to help finance them or even by the
less than one-tenth. In the entire branch of         fact that firms did not even apply for credits.
electrical and optical machines and                  The crushing competition, especially from                                    Drahomíra Dubská
apparatus, the firms’ equity capital did not         Asia, had and still has a very negative impact                             Czech Statistical Office
grow so much as, for example, in                     on the branch. In spite of this, the                                   Macro-analysis Department
engineering. From 1997 to 2004, three-               proportion of equity capital to the total                     (e-mail:
quarters of total assets/total liabilities of that   resources of domestic firms making textiles                                
sector came under the control of foreign             and clothing from 1997 to 2004 rose by            1)
companies, where the share of own resources          13.7 p.p. to 55.8 % (firms in this sector              Orientation conversions in the article are made
                                                                                                            on the basis of the average 2004 CZK/EUR
is still lower than that of domestic firms.          generally by 9 p.p. to 48.8 %).                        exchange rate (31.904 CZK/EUR).


Car Exports Keep the Balance of Trade in Surplus
In February, the balance of trade                      The greatest contribution to the positive     equipment grew by 20.2 % (CZK 14.3
                                                       balance was that of car manufacturers         billion – approx. EUR 0.48 billion).
remained in surplus, so that                           and engineering enterprises, which, as            This increase was largely attributable to
despite a higher growth of                      a whole, display a surplus of seven billion; on      the export of road vehicles (up CZK 6.4
imports the Czech Republic                      the other hand, mineral fuels display                billion – approx. EUR 215 million), computer
maintained a positive trade                     a negative balance, where imports exceeded           equipment (up CZK 3.8 billion – approx. EUR
                                                exports by CZK 5.2 billion (approx. EUR 174.6        127.6 million), general industrial machinery
balance. Imports rose by 12.2 %                 million). Surpluses are recorded in trade with       and equipment (up CZK 1.3 billion – EUR
on a year-on-year basis, while                  EU states, with Czech exports exceeding              43.6 million), and electrical machinery,
exports were up by only 11.7 %.                 imports, keeping the balance in surplus (CZK         devices, and appliances (up CZK 1.1 billion –
The total balance amounts to                    26.5 billion – approx. EUR 0.89 billion).            approx. EUR 37 million).
                                                   On the other hand, the export/import                  Imports of machinery and transport
CZK 7.1 billion (approx. EUR                    ratio in trade with other countries is               equipment rose by 14.1 % (CZK 7.3 billion –
238.4 million).                                 unfavourable for the CR and the balance              approx. EUR 245 million). The greatest
                                                displays a deficit (CZK 19.4 billion – approx.       increase was attributable to imports of road
                                                EUR 0.65 billion).                                   vehicles - CZK 1.8 billion (EUR 60 million),
                                                                                                     electrical machinery, apparatus, and
                                                s R O A D V E H I C L E S D I S P L AY               appliances - CZK 1.2 billion (EUR 40.3 million),
                                                LARGEST SHARE OF EXPORTS                             power generating machinery and equipment -
                                                The export of machinery and transport                CZK 1.2 billion (approx. EUR 40.3 million), and


  s I N E KO N G R O U P T O B U I L D C E M E N T W O R K S             advantage of our global business policy, which is based on
  I N TA J I K I S TA N W O R T H O V E R C Z K 2 . 3 B I L L I O N      actively seeking out business opportunities in the world. In many
  A contract worth over CZK 2.3 billion (approx. EUR 77 million)         cases it involves cooperation with firms that have found demand
  was signed by the representatives of the Company with the              and are in need of a strong partner to secure the financing and
  Izmoili Somonij concern. The fact that the Czech mission was           realisation of supplies," Hušek explains the reasons for Inekon
  met by President Imomali S. Rachmonov in Dushanbe, the capital         Group’s success on foreign markets.
  of Tajikistan testifies to the significance of this contract for the
  development of this Central Asian country. Construction work is
  to start this year on the new cement factory with a capacity to
  produce 500 thousand tonnes of cement per year and a possible
  increase of output to 2.5 million tonnes per year. "We are glad
  that we have managed to gain trust in the professionalism of
  our work and to conclude the contract for the new cement
  works. The contract successfully follows a deal worth USD 73
  million previously signed by Inekon Group and GUP Tajikcement
  for the modernisation of the cement factory in Dushanbe," said
  Josef Hušek, Chairman of the Board of Directors and General
  Director of Inekon Group.

  s O T H E R C Z E C H C O M PA N I E S T O C O O P E R A T E
  Inekon Group is so far the only Czech company that has been
  able to penetrate Tajikistan’s market. However, other Czech
  companies, too, will participate on the realisation of the contract
  acting under the name of Inekon Group. PSG International
  ( from Zlín will work as the subcontractor for
                                                                         Inekon’s activities include the export of complete plant equipment
  construction. Machinery, i.e. huge furnaces and mills, will be
  produced by PSP Engineering (www. from                  Inekon was founded as an entirely private Czech company in
  Přerov. Other supplies will be provided by CZMT (         1990. From its initial business activities – mainly the export of rail
  The coordination of work and supplies will be administered by          vehicles and import of raw materials for the chemical industry -
                                                                                                                                                        Photo: Inekon Group

  Inekon Power. This syndicate of Czech companies is also                it has grown into a trade and production group with a focus on
  partaking in the realisation of other contracts for the construction   three business areas: production and sale of rail vehicles,
  of cement works in Iraq and Vietnam, signed by Inekon Group in         chemical production, and the export of complete plant facilities.
  recent months. "We are also interested in procuring contracts for
  building new hydroelectric power plants in Tajikistan. We take                           For more information, go to

| 10

telecommunications equipment by CZK 1.0           positive balance of trade with EU states        deficit by CZK 1.8 billion – approx. EUR
billion (EUR 33.6 million).                       increased by CZK 1.7 billion (approx. EUR       60.44 million), Poland (decrease in surplus
    The growth of mineral fuel imports by         57 million), while the trade deficit with       by CZK 1.6 billion – approx. EUR 53.7
45.4 % (CZK 5.4 billion – approx. EUR 181.3       states outside the EU increased by CZK 1.6      million), Russia (increase in deficit by CZK
million) was mainly due to higher oil imports,    billion (approx. EUR 53.7 million). The         1.2 billion – approx. EUR 40.4 million),
which grew by 43.7 % in terms of value, but       balance improved especially in trade with       Taiwan (growth of deficit by CZK 0.6 billion
in physical terms decreased by 1.7 %. Natural     the Netherlands – by CZK 1.6 billion            – approx. EUR 20.2 million), and Norway
gas imports, in current prices, reached           (approx. EUR 53.9 million), with France – by    (increase of trade gap by CZK 0.5 billion –
a record level (increase of 36.7 %), while in     CZK 1.1 billion (EUR 36.93 million), Italy –    approx. EUR 17.24 million).
physical terms they declined by 14.9 %.           by CZK 1.1 billion (approx. EUR 36.93
    The decrease of the trade balance surplus     million), with Belgium – by CZK 0.9 billion
in semi-finished products and materials was       (approx. EUR 30.3 million), the United
mainly due to the worsening of the balance of     Kingdom – by CZK 0.7 billion (approx. EUR
trade in non-ferrous metals by CZK 1.0 billion    23.5 million) and the Ukraine – by CZK 0.6
(approx. EUR 33.6 million) and iron and steel     billion (approx. EUR 20.1 million. On the
by CZK 0.5 billion (approx. EUR 16.79 million).   other hand, the balance worsened in trade
                                                  with Germany (the surplus dropped by CZK
s POSITIVE BALANCE                                2.9 billion – approx. EUR 97.4 million –                                  Marek Pšeničný
OF TRADE WITH EU                                  with exports growing by a mere 0.1 % and                                       CzechTrade
From the territorial point of view, the           imports by 6.9 %), with China (increase in          (e-mail:

PPP Projects Get the Go-Ahead in the Czech Republic
                                                         The Concession Act lays down those          In addition to the rules of the concession
On 14 March 2006, the Czech                              conditions and procedures which the      procedure, the Concession Act stipulates
                                                         contracting authorities must follow      conditions for the content and form of the
Parliament passed a new                           when entering into concession contracts in      concession contract. The concession
Concession Act 1) and                             the framework of a partnership between          contract must be for a limited period of
amendments to related acts 2).                    the contracting authorities and other           time, it must specify who owns the
                                                  entities (usually from the private sector) in   property, any reasons for which the
These acts specify those                          order to procure a certain service or to        contract may be terminated prior to its
conditions under which                            carry out building work that will serve         completion, and rules for a settlement
Public-Private Partnership                        public needs. When choosing the                 between the parties in the case of
("PPP") projects may be                           concessionaire, the contracting authority is    premature termination. Other issues
                                                  obliged to respect the principles of            concerning the concession contracts which
realised in the Czech Republic.                   transparency, equal treatment of tenderers,     are not covered by the Concession Act are
Furthermore, the Concession                       and non-discrimination, as in the case of       governed by the Commercial Code4).
Act implements the EC rules                       public contracts.
on concession contracts                                                                           s SIGNIFICANT CONCESSION
                                                  s M O R E D E TA I L E D R U L E S              CONTRACTS
contained in Directive                            The Concession Act lays down more               In the case of significant concession
2004/18/EC 3). Both acts                          detailed rules for the concession award         contracts where the concessionaire’s
are to become effective                           procedure than Directive 2004/18/EC. The        expected income exceeds certain limits laid
                                                  contracting authority is obliged to keep to     down by legislation, the Act stipulates
in mid-2006.                                      those rules when choosing a concessionaire      additional requirements. A concession
                                                  where the expected income of the                project must be prepared and approved
                                                  concessionaire ensuing from the realisation     before the actual concession award
                                                  of the concession contract will exceed CZK      procedure begins. The concession project
                                                  20 000 000 excluding VAT (approx. EUR           must be approved by the Government or
                                                  677 000). The concession award procedure        the local government of the particular
                                                  either takes the form of an invitation to       region or municipality, depending on the
                                                  tender followed by further negotiations on      level on which the concession contract is
                                                  the bids or a concession dialogue.              made. Failure to approve the concession

                                                                                                                                           11 |

PPP projects in the Czech Republic are to be focused, for example, on the construction of infrastructure

project, however, does not affect the                   also the budgets of local governments) for         under which PPP projects can be realised in
validity of the related concession contract if          a long time in the future and which could          the Czech Republic.
that itself is approved. In addition to the             result in the excessive growth of the public
approval of the concession project, the Act             debt, or even to making the municipalities                                        Mikuláš Touška
requires that the significant concession                insolvent, it was necessary to provide some                                                 Partner
contract itself be approved, again by the               form of a regulation for accepting long-                                     Allen & Overy, Prague
Government or the local council. The                    term commitments in the concession                                                  Lawyer’s Office
concession contract will not be valid                   contract. This issue is handled by the
without such approval.                                  provision on budgetary control by the                 At the time this article went to press, the Act on
                                                                                                              Concession Contracts ("Concession Act") had
                                                        Ministry of Finance in the Concession Act             not yet been published in the Collection of
s FEES FROM USERS                                       and in the amendment to the budgetary                 Laws. The authors based the article on the text
A N D B U D G E TA RY C O N T R O L                     rules (including budgetary rules for regional         of the Concession Act passed by Parliament on
                                                                                                              14 March 2006, published on the web site of
O F T H E M I N I S T RY                                administration units)5).                              the Chamber of Deputies (print 1078).
OF FINANCE                                                                                                 2)
                                                                                                              The authors based this article on the version
                                                                                                              published on the web site of the Chamber of
The basic difference between a public                   s CONCLUSION                                          Deputies (Print 1079).
contract and a concession is the                        Although it may prove necessary to make            3)
                                                                                                              Directive 2004/18/EC on the co-ordination of
concessionaire’s entitlement to derive                  further legislative changes in connection             procedures in awarding public orders for
                                                                                                              building work, deliveries, and services.
benefits from its provision of services or the          with the realisation of certain types of           4)
                                                                                                              Act No. 513/191 Coll, as amended.
use of the work it has carried out. This                concession projects, it can be said that the       5)
                                                                                                              Act No. 218/2000 Coll. on budgetary rules and
entitlement is granted to the                           new Concession Act, as well as the                    on the amendment of certain related laws
                                                                                                              (budgetary rules), as amended, and Act No.
concessionaire in consideration for the                 amendments to existing legislation, are an            250/2000 Coll. on the budgetary rules of
provision of that service or the performance            important step in clarifying conditions               regional administration units, as amended.
of the work. Part of the consideration may
be monetary. Previously, there was no                     Useful references – Czech Republic:
recognition by Czech legislation of the
concessionaire’s right to collect fees. This              Government of the Czech Republic –
right is provided for by the Concession Act,
which lays down the concessionaire’s                      Ministry of Finance of the Czech Republic –,
entitlement to collect payments from users                Ministry for Regional Development
where the contracting authority would                     of the Czech Republic –
                                                                                                                                                                   Photo: archive

have such a right themselves.
   As PPP projects are long-term schemes,                 Ministry of Transport of the Czech Republic – PPP
which may considerably burden public
                                                          PPP Association –
budgets (not only the state budget, but

| 12

What Are the Implications of the New
Public Procurement Act?
On 19 April 2006, the new                 O B L I G ATO RY D O C U M E N T S           new treatment, however, is in full
                                          FOR A PROPOSAL                               conformity with the relevant EU Directives.
Public Procurement Law No.
                                    The law specifies the necessary documents
137/2006 Coll. (Public              to be submitted by the supplier for each           Public contract tenderers for both above,
Procurement Act) was published      public contract as a rule according to             and below-threshold public contracts will
in the law code. As of 1 July       whether the public contract is above or            also have to submit documents
                                    below the threshold. According to the new          demonstrating fulfilment of professional
2006, it will replace the current   act, a below-threshold public contract is that     qualifications. These are
Public Procurement Law No.          whose expected value excluding value               – an extract from the Companies Register
40/2004 Coll. The current Public    added tax is at least CZK 2 million (approx.       – the authorisation to pursue business
Procurement Act will still be       EUR 67 000) for supplies or services and             activities such as trade licence or other
                                    CZK 6 million (approx. EUR 200 000) for              licences,
applied after this date for         construction work and whose value at the           – a document demonstrating membership in
award procedures already            same time does not reach that of above-              a professional self-regulated chamber or
initiated and for review            threshold contracts. An above-threshold              a professional organisation
                                    contract is that whose expected value              – a document demonstrating professional
proceedings on the practises                                                             qualifications of the supplier or the person
                                    excluding Value Added Tax is at least CZK
of contracting entities. The new    4 290, 6 607, and 13 215 million                     responsible for the fulfilment of the public
Public Procurement Act brings       respectively for supplies or services                contract.
many necessary changes that         depending on the contracting entity and
                                    CZK 165 288 million for construction works.           Each document demonstrating the
result from EU Directives,             In the case of the below-threshold              fulfilment of the general qualification criteria
changes that should have            contracts, the tenderer proves its fulfilment      and the extract from the Companies Register
already been incorporated into      of the general qualification criteria by           must not be dated more than 90 days from
the Czech legal system as of        statutory declaration only. Unlike in the          the last day to which the fulfilment of
                                    current law, the contractor will be entitled to    qualification is to be proved.
31 January 2006. Electronic         request the submission of documents in the
auctions, dynamic purchasing        contract documentation that are obligatorily       s A CHANGE IN THE
systems, competitive dialogue,      submitted only for above-threshold                 Q U A L I F I C AT I O N S O F
                                    contracts. The fulfilment of the general           A SUPPLIER
and a complete online system                                                           The public procurement act newly regulates
                                    qualification requirements for the above-
for awarding public contracts       threshold public contracts must be                 the situation where by the time of the
surely represent a step forward     demonstrated:                                      decision on the most suitable proposal or
in the field of public              – by an extract from the Criminal Register of      before the signing of the actual contract
                                      all members of the statutory body of the         there is a change in the supplier’s
procurement.                          tenderer,                                        qualifications that would result in the
                                    – by certification from a tax office that the      supplier's failure to meet the qualifications
                                      tenderer has no arrears relating to              criteria. In such cases the tenderer is obliged
                                      payments of taxes in the tax records,            to inform the contracting entity in writing
                                    – by certification from the Social Security        within seven days and at the same time to
                                      Administration that the tenderer has no          submit the necessary documents that will
                                      arrears relating to payments and penalties       prove the fulfilment of the qualifications
                                      of social security insurance and                 criteria in full. In my opinion, this obligation
                                      contribution to the State policy of              will mainly apply to changes in the statutory
                                      employment and                                   body of a tenderer and also to changes
                                    – a declaration with regard to other facts.        ensuing from legal succession as a result of
                                                                                       a merger. Under the new act, the
                                        The scope of documents demonstrating           contracting entity is also entitled to demand
                                    the fulfilment of general qualification criteria   that the supplier submit within a reasonable
                                    is thus newly expanded by the certification        period of time a written explanation in
                                    from the financial office that the tenderer        respect of the submitted information and
                                    has no tax arrears and the certification from      documents or to submit other additional
                                    the Social Security Administration that the        information and documents.
                                    tenderer has no arrears relating to payments
                                    and penalties of social security insurance         More information on supplier relations and
                                    and contributions to the State policy of           conditions for foreign investors resulting
                                    employment. The presentation of these              from the new law can be found in the next
                                    documents was abolished by the current act         issue.
                                    as of 1 May 2004, so the new public
                                    procurement act brings back the legislative                                       Mojmír Ježek
                                    treatment which applied under the Public                                                Lawyer
                                    Procurement Law No. 199/1994 Coll. This                          (e-mail:

                                                                                                                                   13 |

The Business Project of the Year Knows Its Winners
At the end of March this year,       s I N T H E C L U S T E R O F T H E Y E A R C A T E G O R Y, T H E A W A R D W E N T
the prizes were awarded at           T O T H E P R A G U E C O M PA N Y P O LY P L A S T Y S . R . O. F O R I T S
a special ceremony for the best      P R O J E C T " S E A R C H I N G F O R C O M PA N I E S F O R T H E O M N I PA C K
Czech business project of last       C L U S T E R ".
year. The competition for the
Best Business Project was held
for the first time this year, for
enterprises engaged in the
manufacturing industry and
related services, which were
at the same time supported from
the EU Structural Funds.
"The greatest credit for the
extraordinary success of the
economy naturally goes
to our businessmen and
entrepreneurs. To be competitive
not only in Europe, but also on
the world scale, requires
invention, perseverance, and
  This has been proved by
                                     The OMNIPACK cluster, formed by 21 firms, has decided to add promotion to its cooperation
a number of projects of an
                                     The project was supported from the                   but also advertising, marketing, co-
extraordinarily high standard,       Clusters Programme, which is part of the             operation with universities, and especially
which have not been publicly         Industry and Enterprise Operating                    development and innovation. Although
appreciated so far. Now we want      Programme, with a contribution of CZK                the firms continue to be independent,
                                     900 000 (approx. EUR 30 000). The search             competing with each other, thanks to their
to make up for it,"                  for firms to join the Cluster took place             membership in the Cluster they have easier
Milan Urban, Minister of Industry    from January to August 2005. It was                  access to information in the branch,
and Trade, explained why the         initiated by the companies themselves,               greater negotiating power in purchasing
new award had been introduced.       who until then co-operated in the                    and selling, and a better chance of
                                     framework of a free association of firms             receiving support from EU Structural
Commissions composed of              concerned with the production of packing.            Funds. Their first common aim is to build
independent experts,                 The OMNIPACK cluster consists of 21                  and operate a testing and development
representatives of the Ministry of   firms, who decided to broaden their co-              centre.
                                     operation not only to cover production,                      More at
Industry and Trade, and the
CzechInvest Agency had the task
to choose the best project in        s I N T H E E N T R E P R E N E U R I A L I N C U BATO R O F T H E Y E A R
four categories – Cluster of the     C A T E G O RY, T H E W I N N E R I S T H E C O M PA N Y B I C O S T R A V A S . R . O.
Year, Project with the Greatest      T H E J U RY A P P R E C I AT E D M O S T I T S P R O J E C T " B R O A D E N I N G
Innovation Potential,                SERVICES FOR ENTREPRENEURS"
Technological Development of         The centre has been helping both new and             companies apply to the centre for help
                                                                                                                                        Photo: Durabo, the OMNIPACK Cluster

the Year, and The Entrepreneurial    established firms since 1993. For                    each year. BIC Ostrava pays special
Incubator of the Year. They were     broadening its activities it gained CZK 30           attention to research and development. As
choosing amongst projects which      million (approx. EUR 1 million) from the             part of the project for the broadening of
                                     Prosperity Programme. BIC Ostrava offers             services, a centre has been set up for the
received support from the EU         businessmen and entrepreneurs services in            transfer of technologies, with a scientific
Structural Funds in the              the area of research and development,                and technical park. After construction has
framework of the Industry and        project management, international co-                been completed, the surface area designed
                                     operation, and education. More than 150              for production, research, and training will
Enterprise Operating Programme       firms have passed through its                        be enlarged by another 5000 sq. m.
in 2005.                             entrepreneurial incubator and another 300                             More at

| 14

I T S P R O J E C T " L A U N C H I N G T H E M A N U FA C T U R E O F C A M E L P N E U M AT I C W E A V I N G M A C H I N E S " .

This unique machine was developed with         especially for its output, which is nearly        elements. During its short existence, the
the support of the Ministry of Industry and    one-third higher in comparison with rival         machine has already won several
Trade. For launching its manufacture, the      products. This achievement was made               prestigious awards, among others the
research institute received a subsidy of CZK   possible thanks to a significant reduction        Czech Brain award for the year 2004.
12.8 million (approx. EUR 0.43 million)        in the weight of the mobile parts of the          Experts say that this is a model example of
from the Innovation Programme, which is        machine and the moments of inertia, the           what the introduction of new knowledge
part of the Industry and Enterprise            removal of mechanical transmissions, such         into practice should look like.
Operating Programme. The CAMEL                 as cam mechanisms and cogwheels, and
pneumatic weaving machine is exceptional       their substitution by mechatronic                              More at

s I N T H E T E C H N O L O G I C A L D E V E L O P M E N T O F T H E Y E A R C AT E G O R Y, T H E W I N N E R I S T H E
C O M PA N Y D U R A B O O F Č E L Á KO V I C E , F O R I T S P R O J E C T " I N T R O D U C T I O N
O F T O P - S TA N D A R D P R I N T I N G T E C H N O L O G Y " .

The application for support from the           support for the purchase of computers             Programme was used to cover the cost of
Industry and Enterprise Operating              and software for its lithographic studio.         training its employees.
Programme was filed by the owners of the       The money it received from the Profession                       
company in August 2004, who were
among the first to do so.
   From the Development Programme
they obtained CZK 20 million (approx. EUR
0.7 million) for the purchase of the
KOMORI Lithrone 540 SP printing line. Its
advantage is not only its low energy
consumption and space saving, but also its
technical design, as a result of which the
productivity of this sheet-fed press
compares well with the conventional
rotary printing machine and enables
a great variability in the basis weight of
the paper.
   The decisive factor for customers is
the lower price with the simultaneous
maintenance of top quality. The purchase
of the printing line is the third project of
DURABO to be supported from EU funds.
From the Phare 2003 Programme it gained        The DURABO printing line is a top class product

                                                                                                 "It was extremely difficult to choose only
Nearly CZK 4.2 billion were distributed last year among small and medium-sized                   one project in each category, as all of those
enterprises and other applicants for money from programmes in support of the                     nominated were of high quality and were
manufacturing industry and related services.                                                     unique in a certain respect. Our recognition
                                                                                                 therefore belongs not just to the winners,
   The most successful was the Industry and Enterprise Operating Programme, which is             but to all the participants," Tomáš Hruda,
the main instrument for the manufacturing industry and services related to it to draw            managing director of CzechInvest,
support from the Structural Funds of the European Union. In 2005, businessmen and                commented on the uneasy role of the
entrepreneurs obtained more than CZK 3.6 billion (approx. EUR 0.12 billion) from that            commission, and added: "We are confident
fund.                                                                                            that the new award will be motivation for
                                                                                                 more businessmen and entrepreneurs to
   The number of projects applying for support is continuously increasing. At the end            apply for support from European funds."
of the first quarter of 2006, nearly CZK 5.5 billion (approx. EUR 0.18 billion) was
divided among applicants, and the evaluation of applications is continuing. In all,                                      Alžběta Honsová
Czech small and medium-sized entrepreneurs filed over 3 500 applications under this                                            CzechInvest
programme.                                                                                        (e-mail:

                                                                                                                                          15 |

Prague, the Capital of the Czech Republic
In connection with the accession
of the Czech Republic to the EU,
eight statistical territorial units,
known as NUTS 2, have been
created in accordance with the                                                                                           Prague
binding regulation of the
European Parliament and the
Council of Europe for the unified
European classification of
territorial units, or NUTS. The
purpose of these units is to help      The Capital City of Prague is one of the                     of which originated by the gradual joining
evaluate and objectively compare       three regions that are classified both at                    of the surrounding villages. These districts
                                       the NUTS 2 and the NUTS 3 level (together                    have different levels of urbanisation,
the different European regions,        with the Regions of Central Bohemia and                      population density, quality of technical
especially with regard to drawing      Moravia-Silesia). The remaining regions                      i n f r a s t r u c t u re , a n d s o c i o - e c o n o m i c
finances from the EU Structural        are NUTS 3 and are joined into larger units                  conditions for their inhabitants. Important
Funds.                                 to create the NUTS 2 level.                                  differences also exist in their population.
                                                                                                    Whereas three districts exceed 100 000
                                       s T E R R I TO R I A L D I V I S I O N,                      inhabitants, 21 districts do not reach
                                       L O C AT I O N, P O P U L AT I O N                           2 000, from which 5 have less than 500
                                       Regarding the administrative division of                     inhabitants.
                                       the country, Prague is a region like the                          Prague is situated in the centre of the
                                       other 13 territorial units. Prague is also                   Bohemian Highlands and from the
                                       a statutory city ruled by the City                           geographical viewpoint, it can be
                                       Assembly headed by the Mayor. It is                          considered as the heart of Europe. It is
Magistrát hl. m. Praha                 divided into 57 self-gover ning city                         located almost in the centre of the
(Prague City Hall)                     districts and 22 higher administrative                       continent, with approximately the same
Mariánské nám. 2                       units with municipal offices.                                air distance from three seas: the Baltic Sea
110 01 Praha 1                             Prague districts include the typical city                (365 km), the North Sea (495 km), and
Czech Republic                         centre districts, districts with apartment                   the Adriatic Sea (490 km). Prague is the
phone: +420 236 001 111                houses mainly from the 1920s and 1930s,                      largest city in the Czech Republic. It
e-mail:          t h o s e w i t h a p re v a i l i n g i n d u s t r i a l   covers 496 sq. km, which is only 0.6% of                     character, pre-fab housing estates, or                       the country’s territory. However, the
                                       districts with a suburban character, many                    number of its inhabitants at 1 181 610,
                                                                                                    represents 11.5% of the total population.
                                                                                                    Its population is more than three times
                                                                                                    that of Brno's, which is the second largest
                                                                                                         Prague is the country’s capital. Its role
                                                                                                    a s a n a t u r a l c e n t re o f p o l i t i c s ,
                                                                                                    international relations, education, culture,
                                                                                                    and economics is a result of this fact. It is
                                                                                                    also an important Central European city,
                                                                                                    which has become obvious again,
                                                                                                    especially in recent years. Since the 1990s,
                                                                                                    the barriers built over decades between
                                                                                                    countries, regions, and towns of the
                                                                                                    European East and West have been
                                                                                                    removed. As the Czech Republic has been
                                                                                                    integrated into the newly formed
                                                                                                    European geopolitical space, Prague plays
                                                                                                    an extraordinary role. It is the centre of the
                                                                                                    Prague region and home to almost
                                                                                                                                                                     Photo: CzechTourism

                                                                                                    1.2 million people. However, it is also part
                                                                                                    of the socio-economic and population
                                                                                                    structure of the entire country. All of these
                                                                                                    aspects are reflected in the specific
                                                                                                    character and position of Prague as one of
A view of the centre of Prague                                                                      the Czech regions.

| 16

s ECONOMIC                                             based on a 1990s town-planning
CHARACTERISTICS                                        competetion, was included into the
R e g a rd i n g t h e re g i o n ’s e c o n o m i c   territorial plan as an area for amplifying
performance, the capital city of Prague                Prague’s central infrastructure. Railroad
occupies an absolutely privileged position.            lots, which will gradually be cleared, are
The Prague Region creates almost one                   reserved for these functions. In addition to
fourth of the country’s GDP. Its GDP per               mixed business and housing, a university
capita is 201.8% of the national average               campus is planned here, including a large
and 143% of the EU-25 average. The high                central park. This location would also be
value of this indicator is typical for large           important as a potential space for
cities. It is influenced by circumstances              activities related to the Olympics in case
that are closely related to the economic               Prague applied for the Summer Olympic
conditions of life in these densely                    Games in 2020. Intensive housing
populated urban agglomerations. These                  construction in the area is conditioned by
conditions include a different economic                both finishing the anti-flood protection,
structure than in other regions, high                  and building an important city ring
wages, but also extensive commuting, as                connecting the Strahov tunnel and Pelc-
well as the location and registration of               Tyrolka. A series of transformation
seats of important companies within the                objectives has already been developed,
city.                                                  which change the area’s original industrial
    The basic economic restructuring,                  complexes into mixed or housing areas.
which has considerably accelerated in the                 The territorial plan earmarks the most
past five years, is reflected in the changes           eastern part of this locality with the
of the sector structure of Prague’s                    Holešovice port for the development of
economy. The long-term growth in the                   administrative buildings and houses,
sphere of services and the depression in               provided that the port functions are
production sectors are typical features in             maintained.
the development of Prague’s economic                      A vast area in the meander of the            The statue of St Wenceslas in Wenceslas Square
base. Tertiary sectors currently represent             Vltava River, closely connected with the
more than 80% of the added value.                      historic quarters of Karlín and Libeň, is
Employment in this sphere is also                      another significant development area in         sq. m is planned for use. The plan also
considerably higher in Prague. Conversely,             the city centre.                                includes completing and enlarging the
the share of production sectors regarding                 This area between the river and the          centre of the Libeň quarter at the end of
their creation and employment figures in               existing houses includes a series of            the Libeň Bridge with a considerable
added value is in Prague markedly below                temporary constructions. The proposed           number of houses and green spaces which
the national average.                                  housing and mixed development on an             would be linked to the Palmovka
    Industry in Prague has lost employees              area of approximately 200 000 sq. m in          underground station. A surface area of
and is currently undergoing restructuring.             Karlín follows the River City administrative    approx. 400 000 sq. m is allocated for this
Vast abandoned complexes are being                     centre ( which is already      area and a project for building in the
recovered and the cleared lots are                     under construction. The area of Maniny          present-day Libeň docks is also prepared.
acquiring new functions. The so-called                 offers the possibility for a larger complex        T h e c i t y s u p p o r t s t h e a re a ’s
development areas, which also offer                    of buildings that would be important to         development with an extensive
possibilities for investors, are part of the           the entire city, as well as sports and          preliminary investment. This investment is
city’s development plan. For instance the              recreation activities connected with the        to ensure the completion of buildings so
Holešovice–Bubny area belongs to the so-               river. Around the Invalidovna underground       that the investors’ participation is
called large development territory which,              station, an area of approximately 190 000       problem-free.

Average gross monthly wages 2001-2005 (EUR)                                      Unemployment rate 2001-2005 (%)
                        Capital City of Prague          CR                                            Capital City of Prague          CR

EUR exchange rate as of 30 December 2005 (EUR 1 = CZK 29.00)

                                                                                                                                                        17 |

    Prague still, however, maintains its                     the city’s economic development. Its gross
important production sector, including                       added value creates a VAT of almost 37%.
heavy and light machinery (engines,                          Last year, Prague managed to break the
trucks, tramways), chemistry (tyres,                         record in the number in incoming foreign
varnishes, pharmaceuticals), electro-                        tourists. They totalled almost 4 million,
technics, printing and film, as well as                      with 11.5 million overnight stays. Prague
f o o d p ro c e s s i n g i n c l u d i n g s e v e r a l   has thus reached the 4th position in
breweries. After the construction of the                     overnight stay growth in Europe and the
housing estates was completed, the                           6th position in the number of tourists
construction firm premises are now being                     visiting. This year, the number of foreign
used for small business manufacturing                        visitors is estimated to grow by another
and distribution. The number of industrial                   half million.
companies is slightly decreasing, whereas                       The situation in the labour market is
profits from industry have grown. A rising                   directly related to the economy’s capacity.
trend can be seen in construction in                         Prague is the largest regional labour
recent years. The number of construction                     market in the country. Until now, the
firms, as well as the volume of                              typical features of development have been,
construction activities, have been                           on the one hand, the attractiveness of
increasing. They represent over one third                    Prague’s labour market location and, on
of all construction in the Czech Republic.                   the other, the city’s ability to meet the
Based on supply contracts, the                               increased demand. This is due to the
construction volume totalled CZK 10 831                      considerable professional mobility of
million in 2005 (approx. EUR 361 million),                   domestic resources, as well as the growing
which is 37% of the national average. As                     resources of foreign workers. Whereas, on
far as the volume is concerned, the                          average, 9.8 applicants apply for one job in   The astronomical clock in the Old Town is one of the
construction of houses and apartments is                     the country, there are only 2.2 applicants     best-known clocks of this kind in the world
only higher in the Region of Central                         in Prague. The 2005 unemployment rate             At the end of 2005, the companies
Bohemia, which is very closely                               was only 3.25% in the capital, in contrast     register contained 426 165 entities, of
interconnected with Prague. Retail and                       to 8.8% for the rest of the country.           which 289 116 were companies, 202 state
distribution              have           undergone              Compared         to   other    regions,     firms, 89 820 trading companies, and
e x t r a o rd i n a r y  development.             The       Prague’s workforce offers much higher          5 498 cooperatives.
traditional concentration in Prague’s                        qualifications. More than one-fourth of its
c e n t re a n d t h e s e c t o r ’s o v e r a l l          employees are university-educated, and         s TRANSPORT
insufficiency has improved thanks to                         these numbers have been regularly              The markedly central location and
privatisation and later to the construction                  increasing in recent years. The average        attractiveness of Prague, both within the
of hypermarkets on the outskirts and new                     wage in Prague is also markedly higher         Czech Republic and Europe, makes the
shopping arcades in the centre. Recently,                    than in other regions. In 2005, it reached     city not only an important destination, but
tourism has become one of the most                           CZK 24 782 (EUR 855) compared to the           also a crossroad for many transit roads.
dynamic sectors and an important pillar of                   national average of CZK 19 631 (EUR 677).      Traditionally, Prague has also been the
                                                                                                            centre of international transport for the
                                                                                                            west-east and north-south directions. At
                                                                                                            the same time, it is the largest transport
                                                                                                            junction interconnecting the country's
                                                                                                            regions. The capital is also the central
                                                                                                            point of all motorways. The most
                                                                                                            important of these include: D 1
                                                                                                            connecting Prague, Brno and Bratislava;
                                                                                                            D 5 Prague - Nuremberg; D 8 Prague -
                                                                                                            Dresden - Berlin; D3 Prague - České
                                                                                                            Budějovice - Austria; and D 11 Prague -
                                                                                                            Hradec Králové - Poland. Motorways in
                                                                                                            the city itself are only 11 km long, but
                                                                                                            they are connected to other faster
                                                                                                            communications (76 km). The total length
                                                                                                                                                                   Photo: CzechTourism, archive

                                                                                                            of Prague’s communication net is 3 400
                                                                                                            km. The lack of ring roads around Prague,
                                                                                                            particularly in the inner city, is becoming
                                                                                                            more and more perceptible. So far, only
                                                                                                            partial segments have been built for the
                                                                                                            two planned rings.
                                                                                                               Prague is also an important international
St Vitus Cathedral is the biggest church in Prague                                                          railway junction. It is part of the 4th

| 18

multimodal corridor of Berlin - Prague -           Prague has a relatively good public             European Union has awarded the title of
Bratislava, which also includes the line from   transportation system based on a 50-km             European Metropolis of Culture 2002. All
Prague to Nuremberg. There are 10 main          underground and 138-km tramway                     information on sights, including routes, is
railway lines, creating the backbone of the     system. Each year, approximately 1 billion         available at:
railway network ( Emphasis is      passengers use public transport, travelling            Regarding other aspects of social life,
mainly put on developing railway transport      150 million km. The persistent need to             Prague also holds an important position in
at the European level (Eurocity) and at the     make the public system more attractive has         education, as it can be considered the
same time restricting the lesser used lines.    led to the gradual creation of the Prague          national centre of education. The
Reconstruction of the key lines is being        integrated transport system. At present, it        concentration of schools is higher here,
prepared for express trains, which will         operates to the distance of 35 km from             starting from secondary education. Among
ensure high comfort for long-distances,         Prague’s      city   limits,    including          all regions, Prague has the highest number
especially international travelling. The        approximately 240 municipalities of the            of grammar schools and secondary
important railway stations in Prague include:   Central Bohemia Region (www.dp-                    professional schools. As for university
Hlavní nádraží (the Main or Wilson’s railway                                         education, the position of the capital is
station) - Prague 2, (underground line C,                                                          extraordinary. It seats 8 universities with
Hlavní nádraží station), Masarykovo nádraží     s C U LT U R E A N D E D U C A T I O N             36 faculties and 86 448 students
- Prague 1, (underground line B, Náměstí        The Czech capital is the country’s most            ( The Charles
Republiky station), Smíchovské nádraží -        significant town monument reservation. In          University, founded as early as in 1348
Prague 5, (underground line B, Smíchovské       1992, the historical centre of Prague (866         (, Institute of Chemical
nádraží station), and Prague-Holešovice -       ha) entered the UNESCO World Heritage              Technology (, Czech
Prague 7, (underground line C, Nádraží          List ( The capital has              Technical University (,
Holešovice station).                            a unique set of monuments including the            University of Economics (, and
    The Vltava River is used both for           Prague Castle, which is overlooking the            the Czech University of Agriculture
transporting goods and for recreational         town. It offers all sorts of artistic styles and   ( are the best known
purposes (on a 30.5-km-long route               tendencies. The historical centre is situated      throughout the world. In addition, 12 000
between Zbraslav and Sedlec). The former        on both banks of the Vltava River within six       students follow their doctoral studies in
uses three ports in the Prague’s area, the      quarters, formerly independent towns,              Prague. In the last few years, demographic
latter eleven wharfs (       which were unified in the 18th century.            development has also been reflected in the
    Air transport, both passenger and           They include: Staré Město (the Old Town),          changes regarding educational facilities.
cargo, is mainly concentrated at the            Josefov (the preserved part of the former          The number of nurseries and primary
Prague-Ruzyně airport. The airport’s            Jewish Town, today part of the Old                 schools, and their pupils, has decreased.
overall traffic capacity is 6.2 million         Quarter), Nové Město (the New Town),               The number of secondary school students
passengers a year. Over 30 airline              Malá Strana (the Lesser Quarter),                  more or less stays the same (in 2005, the
companies currently operate at the              Hradčany, and Vyšehrad. Prague also offers         158 grammar and secondary professional
airport, providing regular connection to        the greatest concentration of sights,              schools had 57 900 students), whereas the
almost 70 destinations all around the           museums, and galleries.                            number of university students has slightly
world (                      It is one of the nine cities that the           increased.

 This year Prague will join the rest of the cultural world in            opportunity to become
 the commemoration of the 250th anniversary of the birth of              acquainted         with
 Wolfgang Amadeus Mozart, the genius composer. On this                   Mozart’s works, the
 occasion, Prague has prepared a project entitled Mozart Praha           creation of which was
 2006 (Mozart Prague 2006).                                              in some way linked to
    Mozart’s work will be brought to life thanks to interpretation       Prague itself, as well as
 by leading national and foreign orchestras and soloists. More           the opportunity to
 than 190 concerts, opera performances, exhibitions, film                sample more of the
 screenings, and music festivals have been prepared as part of           admirable wealth of his
 this grand project. 17 prominent cultural institutions and              compositions.         By
 organisations have contributed to its preparation. The capital          organising          this
 city of Prague is one of the co-organisers of the project, which        comprehensive project comprising concerts, theatre
 has also received support from the Ministry of Culture of the           performances, exhibitions, and other social events, Prague has
 Czech Republic.                                                         joined other European cities in a commemoration of this
    In Prague, both Wolfgang Amadeus Mozart and his work                 significant anniversary, the birth of Wolfgang Amadeus Mozart,
 were embraced with an inspiring welcome full of goodwill and            and of his musical heritage to the world.
 admiration. Similarly to audiences back in those days, Prague           Further information on the project is available at:
 inhabitants and visitors to Prague in 2006 will have the      

                                                                                                                                           19 |

Prague is the Czech Republic’s Most Dynamic Region
Please allow me to take Prague,     It maintains a low long-term rate of                 international Ruzyně Airport, as well as
                                    unemployment and it is a city with appeal            new underground lines.
the capital city of the Czech       not only to businessmen and investors, but              Projects are also underway with the
Republic, as an example to          to all those who wish to develop their               objective of lifting some of the pressure
demonstrate that the Czech          activities in a city of extraordinary beauty,        off the overburdened historical centre
Republic and Prague are the right   unique character, spiritual, intellectual, and       and using more evenly the entire area
                                    cultural tradition, remarkable natural and           of the city. They involve a complete
venue for business and trade.       urban qualities, with an able and educated           network of municipal, district, and local
Present-day Prague is the most      population and, last but not least, a city           multifunctional centres. All such centres
dynamic and most prosperous         with a most advantageous location in the             are in each case situated at stations or the
region of the Czech Republic,       very heart of Europe.                                terminal stops of the underground
                                       Foreign investment serves as proof of             network. They are easily accessible by both
generating a quarter of the         the trustworthiness and appeal of Prague.            public and private transport and they offer
country‘s gross domestic product.   At present, over 38 000 foreign business             a whole range of opportunities for
It enjoys the reputation of         entities operate in the Capital of Prague,           investment projects.
                                    representing 46 % of the volume of all                  It is also necessary to mention other
a trustworthy partner with          foreign investment in the Czech Republic.            interesting investment possibilities in areas
no credit risks.                    According to reputable economic                      in the city centre. Such plans concern for
                                    periodicals, 41 % of addressed businesses            instance the railway infrastructure. Projects
                                    would choose Prague as the seat of their             are ready for the regeneration and
                                    regional head office, which makes Prague             modernisation of very interesting localities
                                    the 13th most attractive city in Europe.             in the lively part of the city centre. Other
                                       Prague is the centre of Europe in                 attractive development land is also
                                    the historical, social and cultural sense as         available in the former industrial zones,
                                    well as from the geographical point of               connected directly to the city centre and
                                    view. This is connected to the good                  with excellent transport access. This area
                                    accessibility of Prague for transport with           offers potential for interesting investment
                                    inter national       and     super-regional          projects, such as those for the construction
                                    thoroughfare from all directions                     of office and apartment blocks.
                                    converging here, be it Czech motorways,                 Prague is a modern, prosperous, and
                                    railway routes or the airspace, which is             wealthy city with a functioning market for
                                    accommodated by four airports (Ruzyně                real estate, office space, and housing. The
                                    Airport has reached an annual capacity of            city offers opportunities for development,
                                    10 million passengers and further                    potential for entrepreneurs from all
                                    expansions of its capacity and operating             manner of branches, good relations with
                                    infrastructure are planned). Prague is also          the EU, and a good geographical location.
                                    easily accessible for both freight ships and            Prague is a good investment venue for
                                    private boats via the Vltava River.                  entrepreneurs. It is a dynamically
                                       Tourism is a significant constituent of           developing city with exceptional "added
                                    economy of the capital. Prague has long              value" offering a liberal business
                                    surpassed Vienna, Paris, Amsterdam, or               environment, qualified labour, cultivated
                                    Berlin. At the same time, Prague is not              environment, and well-educated,
                                    only able to accommodate tourists but it             experienced and skilled people.
                                    successfully hosts a number of important                                              Pavel Bém
                                    international events. Of these I would                               Mayor of the City of Prague
                                    mention the congress of the
                                    International Monetary Fund, the
                                    congress of the Governors of the World                 More information at:
                                    Bank, the Nato Summit, and the recent
                                    congress entitled "Olympics of Tourism"      
                                    o f t h e A S TA I D E ( I n t e r n a t i o n a l
                                    Destination Expo).
                                       Thanks to the approved local area plan,   
                                    the conditions for investment in Prague are
                                                                                                                                         Photo: archive, CzechTourism

                                    now very good. The largest volume of         
                                    funds from public budgets is traditionally   
                                    targeted at infrastructure, at transport
                                    infrastructure in particular. Specific       
                                    examples include projects for the
                                    construction of an internal and external     
                                    road bypass, a new railway route, the        
                                    planned link-up of the city centre to the

| 20

Record Breaking Numbers of Foreign Tourists for Prague
In 2005, the City of Prague                    That is why the Czech capital has focused
                                               on more frequent fair resentations of the
managed to break the record                    town since last year. In addition to
in the number of incoming                      European fairs, Prague will be presented
foreign tourists. The number                   at fairs in China, Russia, and the USA.
totalled almost 4 million, with
                                               s P R AG U E : AT T R AC T I V E N OT
11.5 million overnight stays.                  O N LY F O R A M E R I C A N
Prague has thus reached 4th                    TO U R I S T S
position in Europe                             Prague could address US clients this
in overnight stay growth                       March, when hosting the ASTA (the
                                               American Society of Travel Agents)
and 6th position in the number                 Congress. More than one thousand of its
of incoming tourists. This year,               representatives were able to see local
the number of foreign visitors                 exhibition halls, the towns’ programme
                                               offer, and take in the sights. In Prague,
is estimated to grow                           foreign tourists mainly enjoy the high
by another half a million.                     concentration of sights on a relatively
Prague is the fastest developing               small area. In a single day, they are able
destination for the British,                   to walk from the Prague Castle to the
                                               Wenceslas Square. These locations,
the second fastest for the                     together with the Old Town Square, the
French, and the third for the                  Charles Bridge, and the Golden Lane,
Italians. The Japanese market                  form the pillars of the city’s tourist
is another chapter: in it, Prague              routes.
                                                  Over the past five years, the city has
has reached its absolute peak.                 invested over CZK half a billion into the
To maintain and foment this                    Prague Sights Reserve. It managed to
outstanding position, it is of                 stop the process of sight deterioration,
                                               leaving the Reserve with only a minimum
course necessary to continue                   of sights in an emergency state at
cultivating tourism and looking                present. The current situation, in which
for tools for its further                      house owners are able to repair their
development.                                   p ro p e r t y u s i n g d i re c t p ro f i t s f ro m
                                               tourism, is very advantageous in places
                                               that are attractive to tourists.

                                                                                                         Prague is a magnet for many foreign tourists

 s T H E S M E R AT I N G P R O J E C T H A S T H E S U P P O RT O F T H E E U R O P E A N U N I O N

 The SME Rating Project of the Prague Economic Chamber is a well-established service in the Czech Republic, which, in addition, has been
 granted financial support from the EU Structural Funds. Thanks to this support, the Chamber now can set up a consulting centre, which
 will be explaining with even greater intensity to small and medium-sized enterprises the usefulness of rating and the benefits this service
 will bring them.

 s T H E F I R S T R E S U LT S A R E E N C O U R A G I N G

 An analysis of two thousand firms which have undergone the rating process has proved that the absolute majority of SMEs which have
 used this service got the B, B+ and B- rating and no company has been accorded the worst mark of C-. While most applications for the
 SME Rating were filed in Prague (28 %), the most successful was the Liberec Region, where the worst rating was B+ (under 40 %) and
 B (approx. 55 %), with nearly 10 % having rating A. In Prague, the firms were usually rated B+, B and B-, with
 30 % in each category. Only 5 % SMEs got an A rating.
                                                                                                           Prague Economic Chamber

                                                                                                                                                        21 |

Sun Microsystems Opens Its New Development Centre
in Prague
                                       At present, the Prague development                  specialists in conjunction with Czech
Sun Microsystems, a leading         centre employs over 200 highly skilled                 universities. In 2004, Sun set up
                                    experts who work to develop Sun’s key                  a software usability laboratory at the
world supplier of computer          software technologies. NetBeans, the best              Faculty of Electrical Engineering of the
technologies, has opened its new    development environment for the Java                   Czech Technical University in Prague. The
high-tech development centre        platform, remains the centre’s chief                   laboratory is used both for teaching
                                    project. It is distributed as an open source           students and for the real testing of
and Czech branch headquarters       tool and has been downloaded from                      s o f t w a re p ro d u c t s d e v e l o p e d b y
in Prague 4-Chodov.                 Sun’s web site by more than 9 million                  Sun’s development centre in Prague. The
The history of the Sun              developers. In addition to NetBeans, the               usability lab at the Czech Technical
Microsystems development            Prague centre is participating in the                  University in Prague is the only facility of
                                    development of the Solaris operating                   its kind in Central Europe.
centre in Prague dates back to      system, Sun N1 Software products (IT                       "Promoting this type of investment is
1999, the year of the NetBeans      infrastructure lifecycle management), the              of key importance for the development of
(development environment for        Java W ireless Toolkit, and the Java                   the Czech economy. Its greatest value is in
the Java platform) project          Platform Enterprise Edition.                           the transfer of know-how and
                                       Sun Microsystems’ investment in the                 technology, and especially in further
acquisition. Between 1999 and       creation of new jobs for top specialists in            investment in the education and
2005, several dozen developers      the area of software development                       qualification of Czech experts. These are
were employed by the Sun centre     amounts to approximately CZK 260                       qualities that will bear fruit in the future,"
                                    million (approx. EUR 8.7 million). Another             says Tomáš Hruda, Managing Director of
in the CR. A breakthrough           CZK 253 million has been invested in                   CzechInvest, adding: "The fact that
occurred in mid-2005, when Sun      technological equipment. Over 200                      a company as significant as this is
Microsystems decided to expand      developers will be employed in the new                 expanding its activities here considerably
considerably its development        centre, their number expected to double                acts as impetus for other potential
                                    by 2008.                                               investors in the branch."
activities in the Czech Republic
with the support of CzechInvest.    s EMPHASIS ON RESEARCH                                 Further information available at
                                    S u n M i c ro s y s t e m s t r a i n s i t s n e w

HP’s European Regional Headquarter Activities
to Be Set Up in Prague
                                    It is estimated that the investment will               purchasing and purchase planning will be
Hewlett-Packard (HP) is setting     amount to CZK 275 million (approx. EUR 9.5             created. Also important is the establishment
                                    million) and 200 new, highly qualified jobs            of cooperation with Czech technical and
up regional headquarter             with a specialisation in engineering,                  economic universities, whose students are
activities in the Czech Republic    production management, logistics,                      given the opportunity to participate in
for managing operational                                                                         practical training in HP in the Czech
                                                                                                 Republic and abroad. Hewlett-Packard
activities for the printing and                                                                  (HP) is a technology solutions supplier
imaging, and personal computer                                                                   to consumers, businesses, and
businesses for Europe, the Middle                                                                institutions worldwide. HP supplies IT
East, and Africa (EMEA).                                                                         infrastructure, global services,
                                                                                                 business and home computing,
These new headquarters in the
                                                                                                                                                 Photo: Hewlett-Packard, Oritest

                                                                                                 imaging and printing. During the last
Logistic Park in Rudná near                                                                      four fiscal quarters ending 31 January
Prague will open in June 2006.                                                                   2006, HP’s revenues reached USD
                                                                                                 87.9 billion.

                                                                                                   Further information available at

| 22

ORITEST Develops Means of Protection against Chemical
Warfare Agents
                                                It exports its products
The company was founded in                    successfully to over 30
                                              countries       worldwide,
1992 by experienced specialists               including       the    most
from the field of defence. From               developed of countries
the very beginning it has                     (USA, Japan, Korea, United
                                              Kingdom, Germany), as well
specialised in protection against             as many other countries in
chemical warfare agents,                      the Near and Middle East,
especially in their detection. The            Africa, and Latin America,
Czech Republic has always                     and      to   inter national
                                              organisations such as
possessed the best know-how in                OPCW (Organisation for the
this field. Having such a narrow              Prohibition of Chemical
field of specialisation makes                 Weapons) and the UN. As
export a necessity, as the Czech              a supplier of the Czech
                                              Army, a NATO member
market is too small even for                  army, ORITEST is catalogued
a single company. From the very               in the NATO system and
beginning efforts were therefore              holds the ISO 9001:2000
                                              certificate. The volume of
made to expand abroad.                        export last year reached
In 1993, the company started                  CZK 20 million (approx. EUR
producing the "DETEHIT" nerve                 0.67 million).
agent detector for the Czech                                                 An instrument for the use of original detection tubes
                                              s S P OT L I G H T O N
Army. Today it operates as                    RESEARCH                                         A new device for the use of original
a regular supplier of the Czech               Production is based mainly on the                detection tubes developed by the company
Army, supplying a variety of                  company’s own know-how developed by              for the detection of air contamination
                                              its team of research and development             serves as an example of the successful
chemical protection products.
                                              workers. The majority of their findings are      promotion of company research and
                                              patented. The company’s research team            development. The device (see picture) was
                                              holds the authorship of over 80 patents          developed by ORITEST with substantial
                                              (mainly applied in production) and of over       support from Czech financial funds and
                                              150 scientific publications. Top quality         was launched in production at the
                                              know-how, interesting also to its greatest       beginning of 2006.
                                              competitors, includes in-house patent
                                              technology for the extraction and
                                              processing of enzymes from nerve tissue           For further information, please see:
                                              for the detection of nerve agents and   
                                              acetylcholinesterase inhibitors in general.       e-mail:


 During 2005, the export of goods for the City of Prague reached CZK 149 212 million (approx. EUR 5 010.5 million) and, with
 a share of 8.0 %, it held third place in the total export figures for the Czech Republic (CZK 1 875 220 million, approx. EUR 62 939
 million). In conversion of the goods export per one inhabitant, the City of Prague (due to a large number of citizens) came 12th
 among the 14 regions (NUTS 3) in the Czech Republic.

   The most significant items of Prague exports in 2005 were computing technology, electric energy, telecommunication equipment,
 parts and accessories for motor vehicles, medicines, cars, pumps, and musical instruments.

    The listed items represented over three-fifths (62 %) of the total goods exports for Prague. Territorially, the export of goods was
 mainly directed to the countries of EU25 (almost 9 out of 10), especially to Germany (20 %), Slovakia (17 %), the Netherlands
 (12 %), France (9 %), the United Kingdom (6 %), Spain (4 %), Hungary (3 %), and Austria (3 %).

                                         Note: Data for the year 2005 are according to a preliminary study as of 28 February 2006.

                                                                                                                                     23 |

The South of Prague Benefits from the Joint Efforts
of Important Investors
The Chodov Centre, situated        "This project is a very important leap for            75 000 sq. m. A whole new square should
                                   the urbanisation of the South District, so            be created as well, enclosed by the
in the south-eastern part of       that housing estates stop being                       buildings of the Chodov Centre.
Prague, along the D1 motorway      considered as mere dormitory towns and                   In addition to the attractive offer of
to Brno, Bratislava, and Vienna,   become places to shop, have fun, and                  shops and restaurants, the Centre proudly
is an urban multifunctional        spend leisure time – in short, places to              exhibits a unique chandelier by the world-
                                   live. And because this district of Prague is          renowned designer Bořek Šípek. The
centre combining shops,            home to one-thirteenth of the                         Centre not only offers its visitors from
apartments, services,              capital’s inhabitants, this leap was                  Prague and the entire country a chance to
entertainment, as well as work     extremely necessary," the Mayor of                    spend money, but provides jobs for
and public spaces. The first       Prague, Pavel Bém, says.                              approximately 2 500 people as well.
                                       The modern four-floor complex stands                 Two important companies joined their
phase of the project was           at the Chodov underground station and                 efforts in the construction of the Chodov
finished in November 2005,         offers its customers a parking place for              Centre. Rodamco Europe, one of the
on a total area of 130 000 sq.     2 600 cars. In the future, the project is to          largest and most successful firms in the
                                   be enlarged by two additional phases,                 European market of commercial estates,
m. The investment, which was       which will include a construction of                  has been the project’s investor and
worth CZK 4 billion, was           shopping, office, and housing spaces with             operator. And AM Development, an
completed in just 18 months.       a total leaseable area of approximately               important Dutch developer, has worked as
The offer of shops, services,                                                                          its construction partner. This
                                                                                                       c o m p a n y o ff e r s a w i d e
and leisure activities                                                                                 experience gained in similar
on 55 000 sq. m.,                                                                                      projects of multifunctional
unprecedented in the Czech                                                                             centres in the Netherlands,
Republic as far as the scope                                                                           France, Belgium, Germany,
                                                                                                       Spain, Portugal, United
and complexity of the centre                                                                           Kingdom, Czech Republic,
is concerned, is, however,                                                                             Turkey, and other countries.
not only focused on the
inhabitants of Prague's
South District.
                                                                                                       More information:
                                   The multifunctional centre at Chodov with a combination of shops

Geopolymers – Construction Material
for the Third Millennium
                                   The project was founded with the support              in production and the construction
                                                                                                                                            Photo: archive, the Institute of Chemical Technology

In 2005, the Innovation and        of the City of Prague and the European                industry. The Centre should serve the
                                   Fund for Regional Development in the                  specialist and business public and its task is
Information Centre for the Use     framework of the Single Programming                   to encourage entrepreneurs’ interest in
of the Geopolymeric Technology     Document Objective 2, whose objective is              geopolymeric technology and its
was founded in Prague. Its task    to eliminate the serious weaknesses and               implementation in production.
                                   regional development barriers in a selected
is to implement Czech research     area, especially by enhancing city
results.                           environment and developing the potential
                                   of the city.
                                      The Centre supports the development
                                   of geopolymeric technologies through the
                                                                                          Information and Innovation Centre
                                   processing of industrial waste, unused
                                                                                          for Geopolymeric Materials
                                   secondary resources, or some parts of
                                   separated communal waste into
                                   construction parts and its implementation

| 24

Cooperation between the University and Industrial
Companies Bears Fruit
The Institute of Chemical                 s SCIENTIFIC RESEARCH
Technology, Prague is the ninth           ACTIVITY
                                    Within its pedagogical and scientific
European university having the      activities, the Institute of Chemical
right to add the European           Technology, Prague closely cooperates with
bachelor’s studies                  several domestic and foreign institutions on
                                    both national and international grant
"EuroBachelor" identification       projects. The international programmes
to its bachelor’s diploma for the   include the following: TEMPUS,
study programme "chemistry"         COPERNICUS, EUREKA, COST, Kontakt, The
and its legal addendum.             European Community, Peco, The Czech-
                                    American Science and Technology
Following universities in           Programme, and others.
Helsinki, Oulu, Turku, Dublin          The University also works with several
City, Bologna, Trieste, Perugia,    grants from the Czech Science Foundation,
                                    the Fund for Development of Universities,         The University also works with several grants
and Ca' Foscari Venice, Prague
                                    and Department grants. Students of
University is the first             graduate and postgraduate programmes
                                                                                      s EVENT OF THE YEAR
representative from schools         whose expert works have been awarded, for
                                                                                      Each faculty makes an assessment at the end
from the new EU member states       example with the prize from the company
                                                                                      of the year. There were definitely several
                                    Rhone-Poulenc handed over by the Nobel
that complied with the strict       Prize winner J. M. Lehn, participate in
                                                                                      successes last year, but for sure only one can
standards both in terms of the                                                        be called "Event of the Year". This was the
                                    scientific research projects for the institute.
                                                                                      announcment of the contest winner for
structure of chemistry education       The best graduate and postgraduate
                                                                                      "Czech Brain". Professor Ing. Josef Pašek,
and in the area of so-called        students are awarded with scholarships and
                                                                                      DrSc. was awarded the prize of Sazka, a. s.,
                                    prizes from MSVK (Student Scientific and
"soft-skills" and "transferable     Expert Activities) via the Preciosa Foundation
                                                                                      one of the most prestigious Czech prizes. He
skills", which includes the                                                           was awarded this prize for his extraordinary
                                    and the Procter&Gamble Foundation. The
                                                                                      initiative in the area of applied research and
language abilities of students.     Foundation Fund of Professor Josef Koritta
                                                                                      technological innovation. Professor Pašek
                                    and the Plastics and Rubbers Foundation
Furthermore, the university also                                                      significantly influenced not only the
                                    Fund contribute, with the participation of
complied with these standards                                                         character of education within the Institute of
                                    industrial companies and in organisation of
                                                                                      Organic Technology of the Institute of
in the strictly assessed areas      educational visits, educational literature, and
                                                                                      Chemical Technology, Prague, his workplace
such as participation of students   other instruments. The Gaudeamus
                                                                                      since 1952, but also the overall development
                                    Chemopetrol Foundation focuses on
in school life, objectivity of      equipping laboratories and schoolrooms.
                                                                                      of the chemical industry. There were only
results evaluation and the                                                            few chemical processes in the former
                                    Representatives of industrial companies also
                                                                                      Czechoslovakia with a higher than average
employability of graduates.         work in commissions during contests. Prizes
                                                                                      world renown that were built on the base of
Possesssion of the EuroBachelor     from industrial companies are being
                                                                                      our own domestic research. Professor Pašek
                                    awarded in some sections of the contest.
label provides advantages to                                                          is the creator of three of them – production
students by offering them                                                             of aniline and cyclohexamin in BC–MCHZ
                                    s F O R E I G N R E L AT I O N S
                                                                                      Ostrava and of antiozonants on the basis of
a chance of masters’ studies in     All departments within the Institute of
                                                                                      4-aminodifenylamin in Duslo Šala. Professor
                                    Chemical Technology develop contacts with
any university that is similarly                                                      Pašek has been dealing with the process of
                                    universities and scientific and research
accredited, as well as by                                                             aniline production in cooperation with
                                    centres in foreign countries. Such contacts
                                                                                      chemical companies for 40 years. In 2003,
providing them with high            are arranged via direct cooperation with
                                                                                      the BC-MCHZ enterprise sold the know-how
quality studies.                    technical universities in CUT Göteborg,
                                                                                      and the license for 150 kilotonnes a year of
                                    ENSCI Limoges, ETH Zurich, EUT Eindhoven,
                                                                                      aniline production to the Japanese company
                                    Georgia Institute of Technology, Lvivskij
                                                                                      Tosoh. Professor Pašek recently proposed
                                    politechničeskij institut, NTNU Trondheim,
                                                                                      several technical changes for both these
                                    Polytechnika Warszawska, TU Freiberg, TU
                                                                                      new big capacities, that has resulted in the
                                    Wien, and with scientific technological
                                                                                      decrease of investment costs and in the
                                    institutions Battelle Memorial Institute,
                                                                                      improvement of energy efficiency.
                                    CNRS Caen, Earth Science Institute
                                    Barcelona, EC- R&D dept. Brusel, The Getty
                                    Conservation Institute, Hahn-Meitner
                                    Institut Berlin, Institut de Recherches sur la
                                    Catalyse Villeurbanne, Institut für
                                    Silikatchemie und Archäometrie Wien,
                                    Interoceanmetal, Moscow Steel and Alloys
                                    Institute, SULZER AG Winterthur, and others.

                                                                                                                                      25 |

Administrative Division of the Capital of Prague
Prague 1 District                        Prague 6 District                            Prague 11 District
is formed by the Prague 1 city area      is formed by the Prague 6, Prague-Suchdol,   is formed by the Prague 11,
                                         Prague-Nebušice, Prague-Přední Kopanina,     Prague-Křeslice, Prague-Šeberov,
Úřad Městské části Praha* 1              and Prague-Lysolaje city areas               and Prague-Újezd city areas
Vodičkova 18, 115 68 Praha 1
Czech Republic                           Úřad Městské části Praha* 6                  Úřad Městské části Praha* 11
phone:+ 420 221 097 111                  Československé armády 23,                    Ocelíkova 672, 149 41 - Praha 4
e-mail :              160 52 Praha 6                               Czech Republic                            Czech Republic                               phone:+420 267 902 111
                                         phone: +420 220 189 111                      e-mail:
                                         e-mail :     
Prague 2 District
is formed by the Prague 2 city area
                                                                                      Prague 12 District
                                         Prague 7 District                            is formed by the Prague 12
Úřad Městské části Praha* 2              is formed by the Prague 7 and Prague-Troja   and Prague-Libuš city areas
Náměstí Míru 20, 120 39 Praha 2          city districts
Czech Republic
                                                                                      Úřad Městské části Praha* 12
phone:+420 236 044 111                   Úřad Městské části Praha* 7                  Písková 830/25,
e-mail :          Nábřeží kapitána Jaroše 1000,                143 12 - Praha 4-Modřany                            170 00 Praha 7                               Czech Republic
                                         Czech Republic                               phone: +420 244 028 111
                                         phone: +420 220 141 111                      e-mail:
Prague 3 District                        e-mail :    
is formed by the Prague 3 city area

Úřad Městské části Praha* 3                                                           Prague 13 District
Havlíčkovo nám. 9,                       Prague 8 District                            is formed by the Prague 13
130 85 Praha 3                           is formed by the Prague 8, Prague-Dolní      and Prague-Řeporyje city areas
Czech Republic                           Chabry, Prague-Březiněves,
phone:+420 221 161 111                   and Prague-Ďáblice city areas                Úřad Městské části Praha* 13
e-mail :                                                       Sluneční náměstí 13/2580, 158 00 Praha 5
                                         Úřad Městské části Praha* 8                                                                         Czech Republic
                                         Zenklova 1/35,
                                                                                      phone: +420 235 011 111
                                         180 48 Praha 8
                                                                                      fax: 235 514 883
                                         Czech Republic
Prague 4 District                                                                     e-mail:
                                         phone: +420 222 805 111
is formed by the Prague 4                                                   
and Prague-Kunratice city areas

Úřad Městské části Praha* 4                                                           Prague 14 District
Táborská 350, 140 45 Praha 4                                                          is formed by the Prague 14
                                         Prague 9 District
Czech Republic                           is formed by the Prague 9 city area          and Prague-Dolní Počernice city areas
phone: +420 261 192 111, for Kunratice
                                         Úřad Městské části Praha* 9                  Úřad Městské části Praha* 14
+420 244 910 928
                                         Sokolovská 324/14,                           Bratří Venclíků 1073,
e-mail :
                                         180 49 - Praha 9                             198 21 Praha 9-Černý Most
                                         Czech Republic                               Czech Republic
                                         phone: +420 283 091 111                      phone: +420 281 005 111
                                         e-mail:                  +420 225 295 111
Prague 5 District                                                                     e-mail:
is formed by the Prague 5                                                   
and Prague-Slivenec city areas
                                         Prague 10 District
Úřad Městské části Praha* 5              is formed by the Prague 10 city area         Prague 15 District
Náměstí 14. října 4,                                                                  is formed by the Prague 15, Prague-Dolní
150 22 Praha 5                           Úřad Městské části Praha* 10                 Měcholupy, Prague-Dubeč, Prague
Czech Republic                           Vršovická 68, 101 38 - Praha 10              Petrovice, and Prague-Štěrboholy city areas
phone: +420 234 378 111,                 Czech Republic
+420 257 000 111                         phone: +420 267 093 111                      Úřad Městské části Praha* 15
e-mail :              e-mail:                     Boloňská 478/1,                                                 109 00 Praha 10-Horní Měcholupy

| 26

Czech Republic                                      Prague 18 District                                      phone: +420 271 071 611,
phone: +420 281 003 111                             is formed by the Prague-Letňany city area               +420 271 071 711
e-mail:                                                                             e-mail:                                      Úřad Městské části Praha* 18 - Letňany        
                                                    Bechyňská 639, 199 00 Praha-Letňany
                                                    Czech Republic
Prague 16 District                                  phone: +420 284 028 111                                 Prague 21 District
is formed by the Prague 16 (Radotín),               e-mail:                              is formed by the Prague-Újezd nad Lesy,
Prague-Velká Chuchle, Prague-Lochkov,                                               Prague-Klánovice, Prague-Koloděje, and
Prague-Zbraslav, and Prague-Lipence city                                                                    Prague-Běchovice city areas
                                                    Prague 19 District                                      Úřad Městské části Praha* 21
Úřad Městské části Praha* 16                        is formed by the Prague-Kbely,                          Staroklánovická 260, 190 16 Praha 9
Václava Balého 23,                                  Prague-Vinoř, Prague-Satalice,                          Czech Republic
153 00 Praha 5-Radotín                              and Prague-Čakovice city areas                          phone: +420 281 012 911
Czech Republic                                                                                              e-mail:
phone: +420 257 911 685                             Úřad Městské části Praha* 19                  
e-mail:                     Semilská 43/1, 197 00 Praha 9-Kbely                            Česká republika
                                                    phone: +420 284 080 811                                 Prague 22 District
                                                    e-mail:                       is formed by the Prague-Uhříněves, Prague-
Prague 17 District                                                                  Královice, Prague-Nedvězí, Prague-
is formed by the Prague-Řepy                                                                                Kolovraty, and Prague-Benice city areas
and Prague-Zličín city areas
                                                    Prague 20 District                                      Úřad Městské části Praha* 22
Úřad Městské části Praha* 17                                                                                Nové náměstí 1250,
                                                    is formed by the Prague-Horní Počernice
Žalanského 291/12b, 163 02 Praha-Řepy                                                                       104 00 Praha-Uhříněves
                                                    city area
Czech Republic                                                                                              Czech Republic
phone: +420 234 683 111                                                                                     phone: +420 271 071 811
                                                    Úřad Městské části Praha* 20
e-mail:                                                                            e-mail:
                                                    Jívanská 647,                                                                                
                                                    193 21 Praha 9-Horní Počernice
                                                    Czech Republic
                                                                                                                           * Office of the Prague City Area

 Investor                            Country of Origin   Czech Partner                                 Sector                       Contact
 Isoflock                            Germany             ISOFLOCK CZ s.r.o.                            plastics           
 Sun Microsystems International      USA                 Sun Microsystems Czech, s.r.o.                IT                 
 Younger Optics                      USA                 Younger Optics Europe, s.r.o.                 contact lenses     
 DHL                                 United Kingdom      DHL Information Services, s.r.o.              technologies, logistics
 Mafra                               Germany             Mafra, a.s.                                   printing           
 Computer Associates International   USA                 Computer Associates CZ, s.r.o.                IT                 
                                                         ExxonMobil Business                           financial and
 ExxonMobil                          USA                 Support Center Czechia, s.r.o.                accounting operations
 ESSA                                Spain               Essa Czech, s.r.o.                            car industry       
 Siemens AG                          Germany             Siemens Kolejová vozidla, s.r.o.              engineering        
 Ceneuprint                          Luxembourg          Svoboda Press, a.s.                           publishing         
 Ricardo                             United Kingdom      Ricardo Prague, s.r.o.                        car industry       
 Latecoere                           France              Letov Letecká výroba, s.r.o.                  aviation industry  
 SAP                                 Germany             SAP Business Services Center Europe, s.r.o.   system analysis of process
 Acesame                             France              Acesame CZ, s.r.o.                            car industry       
 Valeo Systems Thermiques            France              Valeo Autoklimatizace, s.r.o.                 car industry       
 Interoute                           United Kingdom      Interoute Czech, s.r.o.                       centre of shared services
 Itonis                              USA                 Itonis CZ, s.r.o.                             IT                 

                                                                                                                                                         27 |

Recognition and Enforcement of Foreign Judgements in Property-related
Matters in the Czech Republic, and Cooperation with the German-Czech
and German-Slovak Economic Association (DTSW)
As economic links between                                                              organises workshops, seminars, fairs, and
                                                                                       symposia. The Association has been
states are intensifying and                                                            successfully operating for over 15 years in
cross-border commercial law                                                            projects concer ning three different
contacts are developing, the                                                           countries.
importance of the enforceability                                                           The current project EUROPIADE
                                                                                       ( seeks to intensify
of law across the borders                                                              links between three regions in the Czech
of states is gaining                                                                   Republic, Germany, and Slovakia. The
in importance. In this respect,                                                        project, supported by the European
before its accession to the                                                            Commission, is to help speed up the
                                                                                       integration of new EU member states. The
European Union, the Czech                                                              participants are the regions around the
Republic had very modern                                                               cities of Ostrava, Martin, and the
rules in place, and concluded                                                          Odenwald district in southern Hesse. The
                                                                                       partners to the project are DTSW e.V.
international agreements                                                               Frankfurt am Main, RKW in Eschborn near
on the recognition and                                                                 Frankfurt, and the Odenwald district with
enforceability of law with some                                                        its seat in Erbach.
countries (e.g. with Germany,                                                              The one-year existence of the project
                                                                                       has so far brought numerous educational
Austria, France, the United                                                            events, and already produced lasting
Kingdom, Spain). A Czech                                                               results. Partnerships have been initiated
court orders the enforcement          The rules applied in relations between           between elementary schools and colleges,
of a foreign judgement                European Union member states are                 and political representatives of the regions
                                      contained in Council Regulation No.              have participated in reciprocal events.
if the conditions for its             44/2001. It stipulates that a judgement          Consultations between the heads of
recognition have been met.            given in one EU member state is                  departments for economic support of the
If a foreign judgement meets          recognised in another member state when,         authorities in the partner regions have had
                                      on the application of any interested party,      a promising start.
the conditions for recognition,       it has been declared enforceable there. The          At the same time, the DTSW e.V. has
the local body simply takes           Regulation thus introduces the institute of      established a brokerage point where
it into account as if it were         the declaration of enforceability.               entrepreneurs may quickly get an idea
the judgement of a Czech body.            In practical experience we have found        which company would be well suited for
                                      out that eligible foreign entities either have   bilateral cooperation, and on what level of
By no means may the foreign           only a notion - or do not know at all - that     production. Quite in line with the
judgement given in the case           a court judgement can be enforced by             catchphrase: "Europe is not a one-way
be reviewed as such.                  means of a Czech court in the Czech              street".
The basic prerequisite for            Republic, provided the Czech court’s                 The brokerage programme is actively
                                      competence in the enforceability of the          supported by the Hesse land government.
the recognition and enforcement       foreign judgement is given, and, on the          The terms of participation can be found at
of a judgement is that the            other hand, that also Czech entities can         the DTSW homepage It
judgement is final. Final             enforce the judgements of Czech courts           should be specifically pointed out that all
                                      abroad if the competence of the foreign          the information on the home page is
judgements of foreign courts          court is given at the moment of                  available in three languages.
can be neither recognised nor         enforceability.                                      The DTSW e.V. is represented in the
enforced in the Czech Republic            Judicial fees related to the enforcement     Czech Republic by the members engaged
if they are contrary to Czech         of a judgement in the Czech Republic             in the project; in Prague it is the
                                      range from CZK 1 000 to CZK 50 000. In           internationally oriented law firm Mgr.
public policy, if a final judgement   case of the application for the                  Hana Kuncová, and in Ostrava the owner
had been given earlier,               enforcement of a judgement in the Czech          of the company Trefil a Schomberg
if recognition is prevented           Republic by means of a court executor,           (
by the exclusive jurisdiction         judicial fees are not paid, but we                              Mgr. Hana Kuncová, Lawyer
                                      recommend to make an agreement on                                             Georg H. Weißler
of local bodies, and in several       a contractual fee with the court executor               Law Firm Mgr. Hana Kuncová, Prague
other cases.                          in advance.                                                       (e-mail:
                                          Presently, our law firm cooperates with                   
                                      the German-Czech and German-Slovak                                       Deutsch-Tschechische
                                      Economic Association, which provides                                 und Deutsch-Slowakische
                                      consultancy to investors, acquaints them                               Wirtschaftsvereinigung
                                      with Czech laws, ensures the exchange of                               
                                      know-how, assists in business activities and                                             –PR–

| 28

Czech Republic – a Congress Venue
The Czech Republic is                              Prague is clearly the most
                                                   sought after venue for
successfully building its                          holding inter national
profile as a place suitable                 congress events in the Czech
for holding all manner of                   Republic and is without doubt
international meetings,                     one of the most significant
                                            congress cities. As proof of this,
i.e. a place suitable for congress          there is the fact that Prague is
tourism. According                          listed each year in a ranking of
to surveys, conference tourism              leading hosting cities in
ranks fifth among the reasons               congress tourism drawn up by
                                            the UIA (Union of International
stated for visiting our country,            Associations). In 2003, Prague
accounting for 8 % of all                   hosted 86 inter national
tourists. In 2005, a total of               congresses that fulfilled the
                                            following criteria: a minimum
6 336 128 tourists travelled to             300 participants, a minimum
the Czech Republic from abroad              share of foreign participants
and stayed in public                        amounting        to     40    %, The Prague Congress Centre is designated for up to 9000 delegates
accommodation facilities,                   a minimum five participating
                                            countries, a minimum duration of three as much as a regular tourist. His/her average
representing an increase                    days. Prague thus ranked in 17th place with daily expenditure for accommodation,
of 4.5 % against 2004.                      a record 0.91 % of congress meetings meals, souvenirs, sightseeing tours, and
Foreign tourists most often visit           worldwide.                                     excursions amounts to approximately CZK
Prague, although the Karlovy                    The great advantages of Prague are its 6 000 (approximately EUR 200) not
                                            efficient integrated transport system and including the conference fee, which usually
Vary Region and the South                   a broad range of conference hotels and amounts to between CZK 500 and CZK
Moravia Region are also popular             other conference facilities. Prague has over 3 000 (approximately EUR 16.7 – EUR 100).
destinations. In 2005, the                  10 conference facilities that offer a capacity Large congresses usually go on for five days
                                            of more than 500 places in the largest and host on average more than 3 000
average length of stay of                   plenary room. The Prague Congress Centre, participants.
a foreign tourist amounted to               which offers the greatest capacity of all, is
4.1 days and foreign currency               able to host conferences numbering up to s H I G H S TA N D A R D
revenues from tourism amounted              9 000 delegates. Prague hotels offer O F FA C I L I T I E S
                                            conference capacity for small and medium- Hotel proprietors are well aware of the
to USD 4.6 billion, up by 11 %              scale events.                                  benefits of congress tourism. As evidence
against 2004.                                   The Czech Republic as a whole ranked of this, there is the growing number of new
                                            28th in the UIA’s rating of leading hosting four-star and five-star hotels. Today, the
                                            countries in congress tourism in 2003, with Czech Republic offers 27 five-star hotels (in
                                            a share of 1.07 %.                             comparison to 10 such hotels in 2001), 239
                                                                                           four-star hotels (in comparison to 144 such
                                            s C O N G R E S S TO U R I S M                 hotels in 2001), and more than 1 000
                                            IN THE CZECH REPUBLIC                          three-star hotels. The total capacity is 8 411
                                            IN NUMBERS                                     beds in five-star hotels, 32 951 beds in
                                            The economic benefit of congress tourism is four-star hotels, and over 100 000 beds in
                                            considerable. Each congress or conference three-star hotels.
                                            participant namely spends up to three times       There are 156 accommodation facilities
                                                                                           in the Czech Republic that offer facilities
                                                                                           for congress tourism with a capacity of up
 Daily expenditure of a congress tourist                                       CZK/EUR
                                                                                           to 66 786 persons. These include 14 five-
 Accommodation                                                               4 000/133     star hotels, 48 four-star hotels, and 92
 Meals                                                                         500/16.7    other hotels. The majority of these are
                                                                                           located in Prague – 38 to be exact, 19 are
 All other expenditures (souvenirs, …)                                         500/16.7
                                                                                           located in the South Moravia Region, and
 Sightseeing tours and excursions                                           1 000/33.3     16 in the Central Bohemia Region.
 Total daily expenditure:                                                    6 000/200        In 2004, the Czech Republic hosted
                                                                                                                                                 Photo: CzechTourism

                                                                                           a total of 4 148 congresses. The majority of
 Other expenditure of a participant                                                        these were held in Prague - 1 698, in the
 at an international conference                                                            South Moravia Region – 962, and in the
 Transportation to the CR and back (Europe)                                 10 000/333     South Bohemia Region - 232. Congress and
                                                                                           incentive tourism are one of the top priority
 Conference fee                                                    500-3 000/16.7-100      areas of CzechTourism, the agency that

                                                                                                                                          31 |

contributes via its marketing activities to    one of its chief marketing priorities. In                              Hana Fojtáchová
increasing the number of congresses held       association with other partners operating in                               CzechTourism
in the Czech Republic as part of the so-       tourism, both state and commercial, the             (e-mail:
called Campaigns of Candidature.               Agency seeks to accomplish the ranking of                 
   The Czech tourism authority has             Prague and the Czech Republic among the
identified congress and incentive tourism as   top ten most popular congress venues.

  Agency Carolina, s. r. o. –                         ICARIS – Conference Management –
  Agency EKU –                                             Incheba Praha, s. r. o. – Výstaviště Praha –
  Agency Madi –                                           Intercongress, s. r. o –
  Agency Triumf, s. r. o. –                             ITC Travel & Konference –
  AIMS International, s. r. o. –          Kaiserštejnský palác –
  Anthony Production, s. r. o. –                      Limousine car Spiritka –
  CBT, s. r. o. –                                    Motiv Prague, s. r. o. –
  Comenius –                                          Prague International –
  Conti promotor –                              Pražská asociace kongresové turistiky (Prague Convention Bureau)
  Czech Travel Center –                 – PAKT -
  Čedok, a. s. – centrála –                              S9 Company, s. r. o. –
  DCS Praha, s. r. –                                 Smart Agency –
  EuroAgentur Hotels & Travel, a. s. –            Teris 2002, a. s. –
  Guarant International, s. r. o. –                   Welcome Travel –

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Innovating Education and Education for Innovation
The transfer of production to                A certain step towards innovating        change and practicing methods by
                                             education and education for              applying them to real problems from
Central Europe in recent years               innovation is the Academy of             practice. Innovation of thinking has its
is only a small part of the global    Productivity and Innovations (API) in Slaný.    foundation in the idea that the greatest
movement of labour, people, and       Its main pillars are:                           barriers to innovation and change do not
new concepts that will radically      1. Innovation of thinking                       lie in financing or in accessibility of
                                      2. Innovation of products                       technologies, but in people’s minds. The
change the world of labour in         3. Innovation of processes                      problem is not how to get new ideas and
the near future.                      4. Innovation of business and business          new experience into people’s heads, but
More and more often firms and             with innovation and knowledge               how to get the old ones out. The aim of
companies accomplish wealth                                                           the Academy is not to teach the
                                      s I N W H A T W AY S D O E S T H I S            participants to apply modern methods, but
and success by innovating,            E D U C AT I O N A L A N D R E S E A R C H      to entice people towards innovations, to
searching for new revolutionary       INSTITUTE DIFFER?                               teach them how to listen and learn, to give
solutions and opportunities           1. Combines productivity and innovations,       them the ability to turn traditional myths
                                         thereby replacing the barrier of known       and restrictions upside down and to search
rather than by perfect                   productivity programmes (let’s do the        for new solutions. What in fact moves
benchmarking or by copying               right things the right way): "let’s          businesses forward far more than perfect
their competition. It is                 abandon our best products and                standards and directives do is teamwork
interesting to see how methods           processes in time so that we are not         and its development, the desire to change
                                         forced to fight for market shares,           things around oneself, a proactive
that brought success to Toyota,          let’s create new markets instead".           approach and the mutual cooperation of
General Electric, or Motorola         2. Prepares educational programmes based        people. The pinnacle of these changes is
years or decades ago now                 on project and experimental teaching,        innovation       in   business      –    the
prevail in the Central European          learning by practice and experience.         implementation of new ideas into plans,
                                      3. Combines the experience of successful        projects, and firms that open up new
environment in 2005. These               managers from the world of business          markets. Innovative companies do not
methods are not wrong.                   with the knowledge of renowned               have elaborate career plans, but they work
Nevertheless, in the course of           university professors from various           on the principle of opportunities that gives
                                         countries, combining the experience of       their best employees the chance to found
the last 15 years many new and           specialists from the field with the          and run new businesses or to partake in
unique concepts of management,           creativity of university and secondary       the manufacture and launch of the
production organisation, and             school students – mutual "smartening".       product they invented. Business innovation
product innovation have been          4. Organises experimental workshops and         should generate new directions for
                                         educational programmes to promote            business not necessarily based upon
created. It appears that the             creativity – involving pupils and students   material products, but such that would
success of companies does not            in finding solutions to real assignments.    potentially create brand new, at present
lie in the optimisation of existing   5. Systematically works to establish            unknown, sources of wealth.
processes (let’s do things right),       a broad knowledge base in the fields of         In 2006, the API in Slaný is offering the
                                         industrial engineering and innovations       following      study     programmes        –
but in innovation (let’s search          based on a daily confrontation of theory     international Master of Engineering
for the new and unknown – in             and practice, feedback and enhancing         Degree (MEng) in the sphere of industrial
a fast, even though imperfect,           of new methodology and techniques.           engineering and logistics, Lean Academy,
                                         This approach has been partially used by     School of Masters, School of Projects for
way).                                    Linet and is spreading to other              students and graduates, School of
What does this reasoning have            companies, too.                              Innovations and Creativity, School of Team
to do with the system and forms       6. Mediates an international network for        and Human Resources Development.
of education? The education              fast and effective access to the latest         To perfectly copy the perfect is not
                                         information. API Slaný is the gateway to     mastery. The API in Slaný represents a step
system must act as the driving           the Czech Republic of the largest            into a new and unknown field striving to
force behind these changes.              European company for applied research        create a synergy by combining world
Students must learn how to               and technical innovations – Fraunhofer       trends with the Czech and Slovak school,
solve new and unexpected                 and its institute Fraunhofer IPA             in linking students and engineers,
                                         Stuttgart. Institutions such as The          managers and professors, practice and
problems instead of learning             Educational           Academy          FH    theory, and productivity and creativity.
model solutions their fathers            (Fachhochshule Ulm), TU (Vienna
and teachers used.                       University of Technology), and other
                                         renowned establishments are gradually
                                         joining the project.                                                     Zbyněk Frolík

                                      The greatest change this teaching concept
                                      brings is the overcoming of resistance to

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