Czech Republic

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Prague – an old city with a modern outlook

One of the biggest success stories of Central and Eastern Europe, the Czech Republic has benefitted from its political stability, steady and sustainable growth and good international profile to become a prime location for FDI inflow from Europe and beyond. The three largest investors in the country are currently Germany, the USA and Japan, suggesting that the country has a global appeal. 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. The Czech republic has been a member of the EU since 2004, and has recently declared that it could be “realistic” to adopt the Euro by 2012, although this has not yet been confirmed as an official target.

Increasing value-added

A mainly service-based economy, with widespread telecommunications and internet takeup, and a fast-growing internal market, the Czech Republic offers an attractive business climate that is further encouraged by a government incentive programme. Although some 60% of the country’s GDP is service-based, investors have tended to concentrate on projects in manufacturing and other industries, particularly in auto manufacture, where a number of international companies have established factories in the Czech Republic. However, given the presence of a highly skilled and well-educated workforce, with labor costs rising over the coming decades, it is expected that investment will increasingly migrate to sectors with greater value-added, including business services and ICT. Engineering is likely to remain a strong investment sector, but with the focus on innovation, rather than on manufacture.

The crossroads of Europe

The Czech Republic stands at the “crossroads of Europe”, straddling major transport corridors both N/S and E/W. It has well-developed road and rail networks, connecting the vast EU market, and offering good access further east. A diversified supplier base within the country, 10% 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.

Booming Investment Climate

The government has a program of incentives to encourage FDI, organized through the business development agency CzechInvest. Latest reports from Locomonitor show that 2006 was a record year for FDI in the Czech republic, with some $4.5 billion invested in a total of 174 projects. This was a clear increase over 2005, itself a record year at the time, demonstrating that investor confidence in the Czech Republic is remaining high.

Incentives to invest

Precision engineering is a strength here

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 centers. 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 employees’ salaries’ 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 labor offices and tax relief.

AMCHAM Czech Republic

Amcham’s purpose is to strive for constructive solutions to business issues in the Czech Republic and to promote economic relations between the Czech Republic and the United States. The Chamber strives for continuous improvement of business climate in the Czech Republic, so every member company can concentrate on its core business, not bureaucratic tangles or complicated policy. Membership is open to all businesses operating in the Czech Republic, whether Czech, American, or from a third country.

Contact Information

American Chamber of Commerce in the Czech Republic
Dusni 10, 11000 Prague 1,
Czech Republic
Tel: +420 2 2232 9430
E-mail: amcham@amcham.cz
Website: www.amcham.cz

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