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Monhtly Newsletter - June 2006

HEADLINE NEWS CR is 7th most attractive country for investors According to a survey carried out by consulting firm Ernst & Young, the Czech Republic is the world’s seventh most attractive country for investors. The ranking is led by the USA and China. Europe remains the most interesting region for investors. Western Europe was one of the three most attractive regions according to 68% of the 1,019 investors surveyed. Central and Eastern Europe was named by 52% of respondents.

03.07.2006

GDP grew by 7.4% in Q1
The gross domestic product(GDP) grew by 7.4% in the first quarter of this year, the highest increase in the history of the independent Czech Republic. Growth equalled 5.4% in the same period of last year. The economy was driven by the manufacturing industry. The record high is also the result of the fact that an increasing amount of goods remains in storage facilities - 17% more than last year.

BUSINESS


Behr to invest CZK 0.5 bln in Mosnov
The German air conditioning and cooling unit manufacturer Behr will invest roughly CZK 0.5 bln in a new facility for the production of automobile cooling modules and components in the North Moravian municipality of Mosnov. The firm will create 130 new jobs in the first phase. Operations are scheduled to be launched in the middle of 2007. Behr has been active in the Czech Republic since 1999 and employs roughly 700 people in Mnichovo Hradiste.

SAP to open regional centre in Prague
The German software firmSAP, one of the world's two largest firms specializing in business information systems, will open a regional centre for the development of programs for small and medium-sized firms in Prague. The centre should cater to the needs of Central and Eastern Europe.

LogicaCMG to hire 300 new employees by the end of 2007
The software firmLogicaCMGplans to hire roughly 300 new employees for its new research and development centre at the Spielberk Office Center in Brno by the end of 2007. The Brno branch currently has 150 employees and specializes in software products for companies operating in the telecommunications sector.

Plakor to build plant in Mosnov industrial zone
The Korean firmPlakorwill build a facility for the production of plastic parts for automobile bumpers in the Mosnov industrial zone in the Moravia-Silesia region. Initially, production will be intended for the Kia automobile plant in Zilina, Slovakia; production for the Hyundai plant in Nosovice will be added later. The firm will create 111 new jobs.

Automotive Lighting to hire 200 new employees next year
Automotive Lighting
, a manufacturer of lighting components for motor vehicles, plans to hire 200 employees for its Jihlava plant next year. It intends to hire roughly 500 new employees as part of its expansion in upcoming years. The firm wants to invest CZK 2 bln in the next few years. Recently it has secured a contract for the production of 1.4 mil. headlights for Renault Megane vehicles. The firms expects turnover to total CZK 6.5 bln this year.

Frankische CZ to build production plant in Okrisky
Frankische CZ
will build a facility for the production of automobile and household appliance parts in the Okrisky municipality of the Trebicsko district. It is expected to create roughly 300 jobs at the plant. Construction is to begin this fall and operations will be launched at the end of next year. The firm is headquartered in Jihlava, where it employs roughly 130 individuals.

ECONOMY


CR is European leader in terms of auto industry investments
According to the Ernst&Young study, the Czech Republic is the European leader in terms of automobile industry investments. Last year saw 20 investments in new automobile component plants, up from 13 in 2004. The revenues of domestic automobile manufacturers and their suppliers increased last year by 25.6% to CZK 484.1 bln. A total of 115 investments have been made in the Czech Republic since 1997. The largest number of these investments, specifically 23, was made in 2003. Slovakia placed second with 18 investments and Poland placed third with 17 investments.

Moody's introduces "national" rating for CR
The American agencyMoody's has introduced the "national" rating for the Czech Republic. A "local" rating does not allow for international comparisons but does give investors and financiers more detailed information about the loan solvency of firms and municipalities. The introduction of the national rating coincides with strong development of the mutual fund sector in the Czech Republic and expected growth in the capital markets.

State budget deficit totalled CZK 12.2 bln at the end of May
At the end of May thestate budget deficit totalled CZK 12.2 bln, which is almost CZK 15 billion less than the CZK 27 billion in the same period of last year. The state posted CZK 373.4 billion in revenues for the January - May period, which represents CZK 49 billion more than one year ago.

Prague falls 22 places on list of most expensive cities in the world
According to Mercer Human Resource Consulting, Prague ranks 50th on the list of the world’s most expensive cities in the world, which is 22 places lower in comparison with last year. It is less expensive than Bratislava, Slovakia. The most expensive municipality is Moscow, Russia, which is followed by Seoul, Tokyo, and Hong Kong. The ranking of 144 cities compares more than 200 variables, including housing, transportation, food, clothing, and entertainment costs.

POLITICS & LEGISLATION


ODS wins election with 35.4% of the vote
Parliamentary elections were held in the Czech Republic at the beginning of June. TheCivic Democratic Party (ODS) won the election with 35.4% of the vote. The current ruling party, the Social Democrats (CSSD), received 32.3%, followed by the Communist Party (KSCM) with 12.8%, the Christian Democrats (KDU-CSL) with 7.2%, and the Green Party with 6.3%. Voter turnout for the election reached 64.47%.

Finance Ministry to launch taxation portal in July
As of July, entrepreneurs will be able to access their tax accounts with the tax authority online. The new service will be made possible by thetaxation portal, which will be launched by the Finance Ministry. Users will be granted passwords after submitting a request by e-mail and attaching their electronic signature.

MISCELLANEOUS


41st Karlovy Vary International Film Festival
The 41st Karlovy Vary International Film Festival begins 30 June with the world premiere of Kim Ki-Duk's “Time“. Several other world renowned directors including Andy Garcia and Robert K. Shaye and other guests, e.g. Saffron Burrows, Timothy Hutton, Tom Wilkinson, Danny Trejo, Milena Vukotic, are expected at this year's festival. The festival will also present the British film star Hugh Dancy.

Prague to host World Sudoku Championship
The second World Sudoku Championship
as an independent event will be held in Prague in April 2007. The Czech Republic has an exceptional position in the World Puzzle Federation, of which it is a founding member, and Czechs have been successful in various competitions. The first world Sudoku champion is Jana Tylova of Most, North Bohemia, who won the competition last March.

Exchange Rates
Averages for the 2nd half of 2005
EUR 1 = CZK 29.500
GBP 1 = CZK 43.264
USD 1 = CZK 24.499
Source: Czech National Bank; January 2006


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