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Foreign direct investments in developed economies see a sharp increase, the Czech Republic has strengthened its position

In the last year the developed economies, including EU Member States, succeeded to attract more foreign direct investments (FDI‘s) by 37 per cent than in the year before when their inflow amounted USD 542 milliard in total. Those countries have remained the strongest recipients and investors at the same time and their prospects for future growth are very promising. This fact follows from the latest edition of The World Investment Report 2006, the report on international investment issued by the UN Conference for Trade and Development (UNCTAD).

17.10.2006

The first ten of the biggest FDI recipients is led by the United Kingdom, but the ten new EU Members States that attracted the sum of USD 34 milliards in total have improved their standings considerably, as this growth represents the increase by 19 per cent as compared to the figure of 2004. The Czech Republic, as the only new EU country, has got to the world first twenty of FDI recipients by attracting investments equal to the overall sum of USD 11 milliard in total. Together with Slovakia and Hungary it has strengthened its position as an attractive place for automotive industry.

“In connection with the data of the inflow of FDI’s published by Eurostat one can state again that the Czech Republic has experienced a bumper period in this respect. Moreover, the structure of investments of concern clearly shows that our strategy focused on the winning of investments advanced in terms of technology has been right”, says Mr. Tomas Hruda, director general of CzechInvest. “For a long time the Czech Republic has not been a cheap country and the only chance for its long-term success should be sought in the improvement in the areas, in which we are able to compete – the well educated and competent labour force on the whole scale, from manufacturing industries up to research and development.”

An important trend should be seen in the growing proportion of FDI‘s from developing countries; besides Taiwan now it is China in particular, and, potentially, India, too. In the Czech Republic this trend has been strongest just due to projects coming from Taiwan – Czechinvest has mediated 13 such projects of the value of investment amounting to more than CZK 6 milliard. In connection with the investment realised by Hyundai of South Korea the arrival of other Korean companies is expected.

„India is another expanding economy, in this year only Indian firms have already spent USD 7 milliard for taking control of foreign companies. In addition to the steel giant of Mittal Steel the purchase of Avia Letnany by Ashok Leyland of India may serve as the newest example of those efforts,” says Mr. Rene Samek, director of the Investment and Applied Research Division, and adds:” „Light engineering, pharmaceutical industry and, particularly, the IT belong to quickly developing sectors. What is essential is the fact that Indian firms have a good potential for new investment project, such as the Centre of Shared Services built by Indian Infosys/Progeon in Brno, which can serve of a good example of such activities.

“The Indian economy grows with the rate of 8% to 10% a year; for instance, the volume of Indian investments in the United Kingdom is already higher than that of the UK in India. For Indian firms the Czech Republic is attractive particularly for its strategic position as a gate to western markets”, says Ramesh Chander, minister for trade affairs of the Indian Embassy in Prague. „In addition to the said examples the Indian acquisitions of Czech firms comprised, e.g., the company of Mileta, purchased by Indian Alok or Jemca, owned now by Tatley Teas. A few concrete projects are pending in the banking sector,“ he adds.

One of the most quickly growing economies, China, is the biggest FDI source among the developing economies, being rated even as the sixth in the world in this respect. The estimates of Chinese investments in the Czech Republic are in the region of CZK 260 million and include, e.g., the Chinese manufacturer of TV sets Changhong, building their new factory at Nymburk, or the food producer Shanghai Maling, who commenced production this year in the region of Usti nad Labem. Chinese firms are potentially very important for the CR, especially in the electronic industry, as they response quickly to the recent boom of LCD monitors and TV sets and in telecommunication technology as well.

“The economies of those countries are strengthening and local markets are not enough for many firms, which try to expand into developed countries. They require both a good place in terms of logistics and a good technological background for the purpose. Their cheap production will be kept in Asia, but the services to be provided to American and European customers are moving closer to them, as well as the development activities of such firms. It is a good opportunity for the Czech Republic”, says Rene Samek.