Business and Investment Development Agency


Monthly Newsletter - September 2006

HEADLINE NEWS Prague 13th best European city for business Prague ranked 13th among 33 European cities again this year in terms of conditions for running a business, according to the annual European Cities Monitor (ECM) conducted by the real-estate company Cushman & Wakefield. The survey is based on polls among managers of 507 major European companies and focuses on factors regarded by firms as important for their decisions on opening a new branch. The top criteria include the quality of communications, the level of costs and quality of life.

Monthly Newsletter - September 2006

CR is second most competitive country in CEE
The Czech Republic is the second most competitive country in Central and Eastern Europe. This stems from the regular report issued by the World Economic Forum, which judges the growth potential of economies based on their GDP, access to capital, and managerial assessments. As of last year, the Czech Republic placed 29th in the international competitiveness ranking; Switzerland placed first. Estonia is the CEE region's leader.


Scottish firm to create up to 500 jobs in the food-processing industry
The Scottish bakery group Lightbody is about to start construction of a new factory in Louny in the Usti region of the Czech Republic. The project will create up to 500 new jobs within the next five years. Lightbody, the market leader in celebration cakes in most Western European countries, decided to set up its second production base in Central Europe. The Czech Republic was selected for its favourable geographical location, developed transportation network and good availability of cost-effective labour. The company will invest EUR 4.5 million in the new facility.

Robert Bosch expanding its development centre in Ceske Budejovice
Robert Bosch
, a manufacturer of components for the automobile industry, has begun expanding its development centre in Ceske Budejovice. Construction is to be completed by April next year. By the end of the year the company wants to hire 50 additional development experts, both experienced professionals and new university graduates, bringing their total number to 250. The expansion is the result of new projects that the concern's management has entrusted to Budejovice-based Bosch.

New industrial properties in Plzen available to investors
Almost one third of the vacatedSkoda facility in Plzen has been made available to new investors. Two new rental halls have already been created on the 50-hectare property near the Borska Pole industrial zone; six additional halls should be completed by the end of February 2007. The halls should employ 1,100 people. Skoda Holding will build six additional halls with subsidies from European funds next year. In addition, the Borska Pole industrial zone is expanding by 32 hectares. CTP Invest is finishing two rental halls which are to employ 300 people. By mid-2007 additional eight halls plus a technology centre with offices are planned to be constructed, accounting for an investment of CZK 1.5 billion.

Matador-Dongwon to invest CZK 0.5 billion in the Baliny industrial zone
Matador-Dongwon, a joint venture of the Korean firm Dongwon Metal andMatador Automotive of Slovakia, will invest roughly CZK 0.5 billion in the construction of an automobile-component plant in the Baliny industrial zone located in Trinec. The firm will be the zone's seventh and largest investor, creating roughly 200 new jobs. Construction of the production halls is to begin next spring; production should commence in the spring of 2008.

Dura Automotive Systems building new hall in Koprivnice
The Dura Automotive Systems factory in Koprivnice will significantly expand its production of car parts. The company has built a new CZK 140 million hall where it should launch production in early November. After the hall is opened, the company will be able to increase its workforce from 450 to 900.


CNB Board increases interest rates
The Czech National Bank Board increased interest rates by one-quarter of a percentage point on 27 September. As of 29 September the two-week repo rate is equal to 2.5%, the discount rate is 1.5 %, and the Lombard rate is 3.5%. Domestic banks are analyzing the CNB's decision and will decide about interest-rate changes in the upcoming weeks. Ceska Sporitelna has already stated that it will react in the deposit and loan segments. Mortgages will also most likely be hit by rising interest rates.

2005 foreign trade surplus was CZK 38.6 billion
According to adjusted foreign trade resultsfor 2005, there was a surplus of CZK 38.6 billion last year, which is CZK 0.9 billion less than originally reported. The foreign trade surplus increased by CZK 2 billion in Q1 2006 to CZK 27.5 billion and in Q2 has so far grown by CZK 0.2 billion to CZK 9.7 billion.

IMF expects Czech economy to grow by 6% this year
According to the International Monetary Fund's (IMF) forecast, the Czech economy will once again be one of the fastest growing in Europe. The IMF expects growth to total 6%, i.e. 0.1% less than last year and 0.5% less than the Fund had predicted at the start of this year. The IMF expects growth to total "only" 4.7% in 2007. The structure of GDP is changing and higher household consumption is taking over the reins of the economy from foreign trade.

Labour productivity in the CR grows by 4.6% in 2006
Labour productivity
in the Czech Republic is estimated to grow by 4.6% in 2006, as indicated by Boeckler Institute report. This is a very good result in comparison with the rest of the EU – only the Baltic countries and Slovakia ranked higher. In countries like France, Germany and Italy, labour productivity is growing by only 1%. From the long-term perspective there is a positive trend in the development of Czech labour productivity – between 2002 and 2006 labour productivity grew by 15.2 %.

Tuma and Topolanek: CR not likely to implement euro in 2010
According to Czech National Bank Governor Zdenek Tuma and Prime Minister Mirek Topolanek, theCzech Republic is not likely to implement the euro in 2010. Topolanek, who declined to give a specific date for the implementation of the currency, claims that the delay is primarily the result of the poor state of public finances and the fact that the necessary state budget-expenditure reforms have not been introduced. He also ruled out the Czech Republic’s accession to the ERM II exchange-rate mechanism, which precedes the introduction of the euro, next year.

CR third for offshoring of service centres
TheCzech Republic is third on the list of countries that are advantageous locations for offshoring of firms' service centres
,a study conducted by the Economist Intelligence Unit reports. The analysis ranks India and China as the top two. International firms have opened more than 40 development, technology, and distribution centres in the Czech Republic in the past two years. Infosys BPO Limited, an important player in the field, is planning to double the workforce in its facility in Brno, South Moravia, during the coming year.


256 kilometres of new highways and expressways to be opened by 2009
The Road and Highway Directorate plans to open 256 kilometres of newhighwaysand expresswaysby 2009. A record-breaking number of kilometres of highways will be completed this year. Similarly to this year, the Directorate will need approximately CZK 50 billion per year for construction. Moravia will get the highest number of new kilometres of highways by 2009, due to the opening of almost the entire D47 highway from Lipnik nad Becvou to the Polish border.

Plzen Science & Technology Park (STP) to be opened in fall 2007
At the end of September and beginning of October 2007, a new STP will be opened in Plzen, near the Borska Pole industrial park. It will offer 4,700 m2 of offices, laboratories and conference halls of a high technical standard for developing centres of larger domestic and international companies, small innovative firms and spin-offs. Cooperation with the University of West Bohemia will also be established – part of the university’s research could be placed in the STP facilities. The STP is co-financed from the Prosperity programme under the EU funds scheme.

Prague 4 and 5 lead in terms of available office space
According to DTZ, an international real-estate consultancy, there should be 125,000 m2 of available office space in the Czech Republic at the end of the year, which would be 40,700 m2 more than at the end of H1. DTZ says Prague 4 andPrague 5remain the key development areas. The city districts should see approximately 82,000 m2 of office space completed in 2007 and 2008.

Brno could become Europe's leading-edge technology centre
Masaryk University, the University of Technology, and 10 other institutions from Brno want to secure CZK 12 - 15 billion from the EU for the construction of the Central European Technology Institute (CETI) in coming years. The centre would make Brno Europe's leading-edge technology hub. According to the plan, the EU would cover 85% of all costs and the state would pay for the remainder.

More flights to Russia to be introduced
Czech Airlines
is planning to increase the number of weekly flights to Moscow from 16 to 18 next summer. The carrier currently has 12 weekly connections from Prague and four from Karlovy Vary. At the end of October, the Russian airlineElbrus-Aviawill introduce two weekly connections from Prague to Nalchik in the south of Russia. A return ticket will cost EUR 700.

New airport facilities in the Czech Republic
In September,Brno's Turany Airport opened its new departures terminal, which is to increase the airport's capacity. The new hall terminal handles up to 1,000 departing passengers per hour during peak times. This year the airport, which is owned by the South Moravia region, will handle roughly 400,000 passengers. The region is currently negotiating six or seven new connections to Russia and southern Europe. Further airport capacity will appear soon in South Bohemia – the Airport in Plana near Ceske Budejoviceshould secure its license for the operation of large transport planes by the end of this year. A specialized firm has begun changing traffic signs on the 2.5 km runway and the airport should fulfil all requirements in 2008.

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

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