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Monhtly Newsletter - July 2006

HEADLINE NEWS Honeywell to open Global Aviation Centre in Prague The American firm Honeywell will open a Global Aviation Centre for Europe, the Middle East, and Africa in Prague. The facility is to create 500 jobs within the first year. The centre will be located in the Czech Republic due to the high quality and low cost of labour and also due to the strategic location of Prague within the EMEA region. The company already employs 2,000 people in manufacturing facilities in Moravia. In future, all non-manufacturing activities will be transferred to the Prague centre with the exception of the R&D center operating in Brno.

01.08.2006

BUSINESS


Hitachi plans to invest CZK 2.5 bln in plant in the Triangle industrial zone
The Japanese firmHitachiplans to invest CZK 2.5 bln in the construction of a television-assembly plant in the Triangle strategic industrial zone near the municipality of Zatec. The firm will pay EUR 1.97 mil. (roughly CZK 55 mil.) for the 40-hectare property; it should create 2,000 jobs and is expected to launch production in summer 2007. The company is establishing its production in this area in connection with the investment project of its supplier IPS Alpha.

Schott CR wants to hire 300 employees by the end of 2006
Schott CR
is planning modernization through expansion of its plant in the Valasske Mezirici municipality in August. Schott will produce glass tubes for LCD television displays and monitors. The company plans to begin operating eight melting aggregators and hire roughly 300 new employees by the end of this year. The firm will invest roughly CZK 1 bln in new production technology.

CTP Invest to build logistics park in Prerov district
CTP Invest
has announced its plan to build a logistics park in the southeast section of the industrial zone near the Lipnik Nad Becvou municipality in the Prerov district. The built-up area is to total 78,480 m2; the total area is to equal 172,154 m2. Roughly 750 people should find employment in the facility. Construction is scheduled to begin in the third quarter of this year and the facility should be completed in the third quarter of 2009.

Software for Deutsche Börse Group to be developed in Prague
Deutsche Börse Group
has decided to establish its Deutsche Börse Services agency in Prague. The agency will support the development of intra-firm applications within the DBG group and take over the tasks that are currently entrusted to external IT service providers. Deutsche Börse Services s.r.o. will be a wholly-owned subsidiary of Deutsche Börse Group. The company is expected to eventually employ a highly qualified workforce of around 150.

Investments in development have created more than 18,000 jobs in the CR
According to the CzechInvest agency, investments in development and technology centres in the Czech Republic have totalled almost CZK 20 bln and created more than 18,000 new jobs. Thirty-seven investments into services and technology had been announced in the Czech Republic as of last year. The largest, worth almost CZK 6 bln, was DHL's 2003 project to build a data centre in Prague.

Hradec Kralove to obtain a CZK 63 mil. subsidy
The Hradec Kralove municipal councilwill obtain a subsidy of CZK 63 mil. from the European Regional Development Fund. The money is to be used for the construction of a new technology centre at the local airport. It is estimated that 30 firms could be located in the centre. Construction costs will total CZK 87 mil.; the centre is to be completed in 2008.

ECONOMY


Automobile production in CR to increase by 13% in next few years
According to a PricewaterhouseCoopers study, automobile production in the Czech Republic is to increase by 13% in the next few years; this will be the most significant increase of all new EU states and other new industrial states. The study notes that 84% of all newly built assembly lines for cars and small trucks will be built in these countries in the 2005 - 2010 period. Europe is to manufacture 2 mil. vehicles by the end of the decade, this could account for 21% of the total automobile production increase, which totals 9.1 mil vehicles.

Unemployment rate fell to 7.7% in June
In June the unemployment rate fell from May's 7.9% to 7.7%. The number of unemployed individuals was at its lowest since 2005 and totalled 451,000. There are on average 5.2 applicants for every job, the lowest number since 1998.

POLITICS & LEGISLATION


European Commission proposes exemption for lower VAT rates
Apartment repairs, window cleaning, and domestic care services in the Czech Republic will be subject to a lower 5% tax until 2010. The European Commission recently proposed to grant 17 member states exemptions for lower VAT rates for selected services. Conversely, the services of hair stylists and repair shops will remain subject to a 19% tax. The proposal has yet to be approved by member states at the Council of the European Union.

New act introduces demerit point system for Czech drivers
The new roadways act came into effect on July 1, 2006, introducing a demerit point system that is intended to improve the dismal state of Czech road traffic. The number of accidents on Czech roads has fallen by 30% y/y in the first month since the introduction of the new roadways act; the number of injured persons has fallen by one third and the number of casualties is down by 50%.

MISCELLANEOUS


Letiste Praha has introduced its first seven self-service kiosks
Airport operatorLetistě Prahahas introduced its first seven self-service kiosks. Travellers will be able to acquire their boarding passes and baggage-claim tickets at the machines. The first airlines to start using the kiosks in mid-August will be British Airways and Swiss Air; KLM and CSA will introduce self-serve options this November.

Gilead to donate CZK 100 mil. to fund scientist Antonin Holy's research
The American pharmaceutical firmGileadwill donate more than CZK 100 mil. to fund the further research of the one of the most successful Czech scientists, Antonin Holy, who is also responsible for discovering groundbreaking anti-HIV drugs. His Institute of Organic Chemistry and Biochemistry at the Academy of Sciences will use the money to create a new research centre.

Congress tourists contribute more to the CR’s economy than regular tourists
According to the estimates of Mag Consulting, roughly 300,000 congress tourists arrive in the Czech Republic and spend up to CZK 3 bln each year. Congress tourism is thus more advantageous for the country than regular tourism. Regular tourists stay an average of three days and spend a daily average of EUR 60 while conference participants spend roughly three times this amount and stay an average of five days. Mag Consulting estimates that the congress-tourism market will grow by five to seven percent per year in coming years.


Exchange Rates
Averages for the 1st half of 2006
EUR 1 = CZK 28.491
GBP 1 = CZK 41.466
USD 1 = CZK 23.199

Source: Czech National Bank; July 2006

Sources: Czech AM by Czech Information Agency, Prague Daily Monitor, Radio Prague, dailies Hospodarske noviny, Pravo, MF Dnes and Lidove noviny