COUNTRY PROFILES
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COUNTRY PROFILE
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Czech Republic |
Print article Prague Square |
The Czech Republic is one of the most developed and most stable of the ex-communist economies. A full member of the European Community, the Czech Republic is likely to join the Euro in 2010. GDP growth was at 4.4% in 2004, and is expected to be similar for 2005, with government growth strategies predicting that it will reach and remain at 6%. Inflation in 2005 was at 1.9%, one third down from 2004, when it was at 2.8%.
A mainly service-based economy, with widespread telecommunications and internet takeup, and a fast-growing internal market, it offers an attractive business climate that is further encouraged by a government incentive programme. In 2005, the Economist Intelligence Unit judged the Czech Republic the most advantageous country in Europe for offshoring. Worldwide, it ranked third behind India and China.
Location
The Czech Republic stands at the “crossroads of Europe”, straddling major transport corridors both north/south and east/west. It has well-developed road and rail networks. Ten per cent of the population, and most head offices, are located in the capital city, Prague. Personal relations are crucial to doing business here, so a central location is particularly important. The US Commercial Service advises that it is a good idea to tap into a readymade network by using a local agent or distributor where possible.
A sophisticated marketplace
Approximately 20% of Czech homes are connected to the internet, and there is an exceptionally high level of mobile phone ownership — some groups estimate it at over 100%. Credit cards are increasingly common, especially in major cities. As income continues to rise, high-quality and value-added products will become increasingly important.
Booming investment climate
The government has a programme of incentives to encourage FDI, organised through the business development agency CzechInvest. Latest reports from CzechInvest claim that 2005 saw a record level of investment and new projects, including 154 new foreign and domestic investment projects worth over $3.2 billion dollars – eight projects and nearly $890 million more than in the previous year. “This demonstrates that the pessimistic scenarios, which predicted a loss of interest from investors and their tangible business to cheaper countries, were not realistic. On the contrary, last year we noted the opposite trend, that existing investors are not only further expanding and enhancing production, but are establishing shared-services centres and transferring their research and development activities to the Czech Republic,” states Vaclav Petricek, Deputy Minister of Industry and Trade.
Incentives to invest
Incentives are available to all investors, irrespective of their country of origin. Particularly valuable is the National Investment Incentives Scheme, which supports investors in manufacturing schemes, in research and development, and in business support services such as call centres. The scheme covers either up to 50% of the cost of investment in infrastructure over the first five years, or up to 50% of the employee’s salary for the first two years of employment. The level of support is dependent on the nature of the business and the number of jobs created. CzechInvest particularly favours enterprises requiring high skill levels, such as the IT, medical, electronics and automotive sectors. Its support services are available to investors free of charge.
Although no specific investment incentives are available in other sectors, benefits available include support of new job creation, support for SMEs, grants from local labour offices and tax relief.
Bidding restrictions
However, there is a certain amount of protectionism with bids from Czech companies receiving a 10% preference over outside companies (at present, joint ventures with a Czech company and an outside company count as “foreign”, though this is likely to change).
Entry requirements
US staff will require both visas and work permits. Long-term visas must be applied for from outside the Czech Republic. The process can be lengthy, and you are advised to start the application process at least six months before you plan to enter the country, or three months if you are going through a specialist firm. Legislation is being put in place to cut the visa application process to 90 days, and streamline the work permit system.
Facts in brief
The Czech Republic’s location is Central Europe, southeast of Germany. Landlocked; strategically located astride some of oldest and most significant land routes in Europe; Moravian Gate is a traditional military corridor between the North European Plain and the Danube in Central Europe
Its climate is temperate: cool summers; cold, cloudy, humid winters
Natural resources include hard coal, soft coal, kaolin, clay, graphite, timber
Agricultural products are wheat, potatoes, sugar beets, hops, fruit; pigs, poultry
Industries include metallurgy, machinery and equipment, motor vehicles, glass, armaments
The Czech Republic has a civil law system based on Austro-Hungarian codes; has not accepted compulsory ICJ jurisdiction; legal code modified to bring it in line with Organization on Security and Cooperation in Europe (OSCE) obligations and to expunge Marxist-Leninist legal theory.
Diplomatic representation in the US — Chief of mission: Ambassador Petr Kolar
Diplomatic representation from the US — Chief of mission: Ambassador William J Cabaniss
Contact Information
American Chamber of
Commerce in the Czech
Republic
Dusni 10, 11000 Prague 1,
Czech Republic
Tel: +420 2 2232 9430
E-mail:
execdir@amcham.cz
Website: www.amcham.cz
Useful websites
| www.czso.cz | National Statistics Office |
| www.czechinvest.org | Government guide to investment |
| www.businessinfo.cz | Range of articles on taxation, setup, individual sectors and more |
| www.afi.cz | Association for Foreign Investment |
| www.mpo.cz/eng | Ministry of Trade and Industry |
| www.czechtourism.com | Visits and free time |