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FY 2000: Czech Republic |
CHAPTER I: EXECUTIVE SUMMARY
This Country Commercial Guide (CCG) presents a comprehensive look at the Czech Republic's commercial environment, using economic, political, and market analysis. The Country Commercial Guides were established by recommendation of the Trade Promotion Coordinating Committee (TPCC), a multi-agency task force, to consolidate various reporting documents prepared for the U.S. business community. Country Commercial Guides are prepared annually at U.S. Embassies through the combined efforts of several U.S. government agencies.
In the 10 years since the 1989 Velvet Revolution, the Czech Republic has successfully reoriented itself politically and economically with the West. Now a NATO ally and an EU aspirant country, the Czech Republic counts the United States and Western Europe as its most important trading and investment partners. Total trade between the United States and the Czech Republic equaled $1.6 billion in 1998.
Currently, the Czech Republic is undergoing the severest recession of its short existence. The economy contracted by nearly three percent in 1998, as unemployment rose and inflation slowed. The roots of current economic decline lie with unfinished structural reforms during the transition to a full market economy, namely privatization, judicial reform, modernization of the commercial code, and enhanced transparency in economic decision-making. The government recently privatized one state-held bank and plans to revamp the country's bankruptcy laws, but more needs to be done to create the basis for sustainable economic growth in the future.
The Social Democratic government supports further economic reforms, but its position as a minority government and lack of previous governing experience has made quick progress difficult. The government has mounted a "clean hands" campaign to root out corruption associated with past privatization deals, but to date it has achieved limited results. The Czech Republic is in the process of ratifying the OECD Anti-Bribery Convention. EU accession remains a top foreign policy priority. The Czech Republic is currently harmonizing its legislation with EU norms.
The Czech Republic remains open to foreign investment, and policymakers see foreign investment as a vital tool in restructuring struggling Czech industries. Following the introduction of investment incentives, direct foreign investment rebounded to $2.5 billion in 1998, and strong FDI flows look set to continue in 1999. On a cumulative basis, the United States is the third largest investor in the Czech Republic, behind Germany and the Netherlands. Currently, there are over 47,000 foreign-owned or partly foreign-owned companies registered in the Czech Republic, including major multinationals such as Phillip Morris, Ford, Conoco-International Oil Consortium, Procter & Gamble, and Pepsi-Cola International.
Last year, U.S. exporters saw dramatic increases in sales to the Czech Republic of transportation equipment, including parts and separate equipment, specialized machine tools, manufactured items, chemicals and related products, fuel and fuel-related products, and crude materials. U.S. service industry skills continue to be sought after, particularly in the fields of consulting, marketing, public relations, and financing, as the Czech Republic moves toward privatizing such sectors as banking, telecommunications, and energy distribution.
The Czech Republic's central location makes it an excellent hub for exporting into CEFTA (Central European Free Trade Agreement, whose members are the Czech Republic, Hungary, Poland, Slovakia, Slovenia, Bulgaria and Romania), Russia, the NIS, and the European Union. Its highly skilled labor force and developed infrastructure present considerable advantages to U.S. companies seeking to establish local offices there. The quality of life in the capital, Prague, continues to improve. Ruzyne airport near Prague has expanded into a first-class facility, with further expansion planned for the next 2 years. A $13 million international school, opened in early 1997, offers state-of-the-art facilities and an innovative curriculum based on American educational standards and enriched with international content. Several U.S. universities are developing joint core programs with Czech universities and offering graduate degrees in management, international education, and other fields. Over the next 10 years, the Czech Republic looks to become the crossroads for the new European high-speed rail and highway systems, which should strengthen the country's position of importance in Central Europe.
Country Commercial Guides are available for U.S. exporters from the National Trade Data Bank's CD-ROM or via the Internet. Please contact STAT-USA at 1-800-STAT-USA for more information. Country Commercial Guides are available on the Internet at http://www.stat-usa.gov; http://1997-2001.state.gov; and http: www.mac.doc.gov. They can also be ordered in hard copy or on diskette from the National Technical Information Service (NTIS) at 1-800-553-NTIS. U.S. exporters seeking general export information/assistance and country-specific commercial information should contact the U.S. Department of Commerce, Trade Information Center, by phone at 1-800-USA-Trade or by fax at (202) 482-2164.
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Note* International Copyright, United States Government, 1998 (or other year of first publication). All rights under foreign copyright laws are reserved. All portions of this publication are protected against any type or form of reproduction, communications to the public and the preparation of adaptations, arrangement and alterations outside the United States. U. S. copyright is not asserted under the U.S. Copyright Law, Title17, United States Code.