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Monthly Newsletter - October 2006

HEADLINE NEWS FDI in the Czech Republic is highest of all new European Union members According to new Eurostat data, foreign direct investments (FDI) implemented in the Czech Republic last year were higher than investments implemented in any other new European Union member. Last year foreign investors spent EUR 8.8 billion in the Czech Republic while, for example, Slovakia received only EUR 1.7 billion in FDI. The World Investment Report 2006 released recently by the United Nations Conference on Trade and Development (UNCTAD) also confirms these figures. The volume of long-term and strategic investments in the Czech economy doubled in comparison with the previous year. The Czech Republic is the only new EU member country to rank among the world’s top twenty FDI recipients.

02.11.2006

BUSINESS


Microsoft chooses the Czech Republic for its mobile centre
In January, the software firm Microsoft will open a mobile-technology support centre in Prague. The centre, which is to support the European expansion of the Windows Mobile operating system, will provide services to mobile operators, their customers, and mobile-device manufacturers. The centre should employ roughly 20 specialists by the end of the year. Microsoft will hire tens of additional employees in 2007.

Aircraft operating throughout Europe being weighed in Brno
Lufthansa has opened a new centre for cargo management and aircraft load control in Brno. The Global Load Centre is responsible for weighing Lufthansa aircraft operating in the European air space. The first such centre has been in operation in Cape Town, South Africa since last year. In addition to Brno, the airline is planning to open another centre in Istanbul. The Brno centre currently employs 11 people; another 50 should be hired by spring of next year.

Hutchinson to manufacture high-tech products in the Czech Republic
The French automotive firm Hutchinson has decided to change the focus of production in its Czech branch in Rokycany. Simple assembly work will be transferred from the Czech Republic to countries with cheaper labour, while more technically demanding products requiring specialist workers will commence in Rokycany. The construction of a new production hall and introduction of new technologies will result in the preservation of jobs in the Czech branch.

State sells Aero for CZK 2.91 billion
The Czech government has decided on the sale of the arms firm Aero to the company Oakfield, a subsidiary of the Czech-Slovak investment group Penta. The new owner will pay CZK 2.91 billion for the company. Aero produces military and civilian aircraft and currently has 1,700 employees. According to Marek Dospiva, co-owner of Penta, the early restructuring of Aero’s production of aircraft and their components is planned, to be followed by the construction of a commercial airport.

Indians planning centre in the Czech Republic
Ashok Leyland, the Indian industrial group and producer mainly of freight vehicles, which in May purchased the Czech company Avia, is planning to establish a centre in the Czech Republic for the company’s European expansion. At Avia a process of restructuring is already underway, which is to revitalise the company and enable it to conduct business in foreign markets. However, Ashok’s activities in Europe do not end there – the company is interested in several other acquisitions within and outside of the Czech Republic, from which they would be managed.

Hill’s Pet Nutrition to build plant in Moravia
Hill's Pet Nutrition, one of the world's largest pet-food makers, will build a plant in Hustopec, South Moravia, employing 350 staff. The company, which has over one million customers and operates plants throughout the world, said it had picked the Czech Republic as its base for markets in Central and Eastern Europe. The plant covering 160,000 square metres will produce 160,000 tonnes of granulated pet food a year. At present, the annual Czech pet-food output amounts to approximately 100,000 tonnes.

ECONOMY


Moody’s: CR’s rating remains positive
According to the rating agency Moody's Investors Services, the Czech Republic's main rating outlooks remain positive. The country’s rating could even improve if the Czech economy develops as the agency expects and the budget deficit and inflation remain at reasonable levels.

CR will use “Big Bang” approach to implement euro
Based on recommendations made at the end of June by the National Coordinating group for Implementation of the Euro, the government decided on 25 October thatthe Czech Republic will take the “Big Bang” approach to implementing the euro. The Big Bang approach means that the euro will be introduced in cash and non-cash form at the same time. During a transition period, it will be possible to make cash payments in both crowns and euros. According to the Finance Ministry, this scenario will minimise costs, while providing more substantial legal guarantees and simpler communication regardless of when the euro is actually introduced.

POLITICS & LEGISLATION


ODS secures 41 Senate seats
ODS
won the second round of theSenate elections - the party's candidates were successful in 14 of 27 constituencies. ODS now has 41 seats in the Senate, making it the first party in the history of the Czech Republic with an absolute majority in one of the country's chambers. CSSD won in six constituencies and now has 12 senators; KDU-CSL won in four of six constituencies and has 11 seats. ODS can create a constitutional three-fifths majority by joining forces with either party.

MISCELLANEOUS


Two Czech schools ranked in the Top 500
In an international ranking compiled by The Times,Charles University and the Technical University in Brno are among the world’s 500 best universities. The main criteria include the quality of research at the schools, employability of graduates, international standing of the schools and quality of instruction.

Brno hosts the Biotec 2006 biotechnology trade fair
Biotec 2006, the first biotechnology trade fair in Central Europe, took place in Brno from 24 to 27 October. Key projects in the area of biomedicine and biotechnology research in the Czech Republic and abroad were presented during the event. On 24 October construction of the International Clinical Research Centre (ICRC) Brno was officially commenced. The ICRC will strengthen Euro-American cooperation in research and education, particularly in the fields of treating cardiovascular diseases, neurology and oncology. Comprehensive information on biotechnologies in the Czech Republic can be found atwww.gate2biotech.com.

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