Skilled Workers Drive the Economy Labour Law Information and Communication Technologies
The Czech Republic to preside over the Council of the EU in the first half of 2009
09-10 2008 CONTENTS
CZECH BUSINESS AND TRADE
Economic Bi-monthly Magazine with a Supplement is Designed for Foreign Partners, Interested in Cooperation with the Czech Republic INTRODUCTION Questions of the Month Ivan Langer, Minister of the Interior...... 4 Issued by PP AGENCY s.r.o. as an exclusive commission ECONOMIC POLICY for the Ministry of Industry and Trade Skilled Workers Drive the Economy...... 5 of the Czech Republic KALEIDOSCOPE EDITORIAL BOARD: Czechs Want to Go on Working after Reaching Retirement Age ...... 7 Milan Hovorka (Chairman), Ivan Angelis, Czech Beer to Be Registered as a Protected Geographical Indication...... 7 Zdena Balcerová, Jiří Eibel, Růžena Hejná, Technical Norms Will Be Cheaper and Better Accessible ...... 7 Josef Jílek, Zdeněk Kočárek, Tomáš Kopečný, Marie Pavlů, Pavla Podskalská, Josef Postránecký, LEGISLATION Libor Rouček, Jiřina Semanová, Labour Law in the Czech Republic ...... 8 Jiří Sochor, Jarmila Škvrnová BUSINESS AND PRODUCTION MANAGING EDITOR: Changes of Shopping Behaviour in the Czech Republic ...... 10 Petr Kamenický CZECH TOP EDITORS: ALTA – General Contractor for Mine Construction in Russia ...... 12 JTEKT of Japan Expands its Pardubice Plant ...... 12 Jiří Bouzek, Jaroslava Bradová SERVICES REGULAR COLLABORATORS: Information and Communication Technologies in the Czech Republic...... 15 Eva Tomášková REGION TRANSLATION: NUTS 2 – Moravia-Silesia Region ...... 18-34 Vlasta Benešová, Alena Kenclová, Robert Krátký, Lucie Pavlíčková, David Stránský, PRESENTATION OF FIRMS Dagmar Šímová, Halka Varhaníková ROWAN LEGAL s.r.o...... 2 Hybernská Properties s.r.o...... 13 READ: ESA s.r.o...... 14 Mathew Booth, Pearl Harris, Ivana Kadlecová, ATACO spol. s r.o...... 24 Zuzana Pavlíčková MERKO CZ, a.s...... 27 FERRIT s. r. o...... 31 GRAPHIC DESIGN: Vojenský opravárenský podnik 025 Nový Jičín, státní podnik...... 33 Helena Dvořáková, Lobby Česká republika DERUTEX, s.r.o...... 35 AXITECH, s.r.o...... 36 DEADLINE: 23/7/2008
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ADDRESS: Myslíkova 25, 110 00 Praha 1 Czech Republic Phone: +420 221 406 623, +420 221 406 626 Information and Communication Moravia-Silesia Region Fax: +420 224 930 016 Technologies in the Czech Republic e-mail: [email protected] www.ppagency.cz COVER PICTURE: THE CZECH REPUBLIC WINS SIX MEDALS www.mpo.cz/cbt Press run: 13.500 copies. The Czech Republic won three gold and three silver medals at the Beijing Olympic The number of printed and sold copies Games, ranking 24th in the world in the number of gold medals. The cover page of the journal is verified by auditor, HZ Praha, s.r.o., displays the three Olympic gold winners (from left to right: Barbora Špotáková – javelin member of PANNELL KERR FORSTER Worldwide. throw, David Kostelecký – trap shooting, Kateřina Emmons – air rifle). Silver medals It is not allowed to reproduce any part were won by Czech athletes in single sculls rowing (Ondřej Synek), the kayak slalom of the contents of this journal without prior consent from the editor. (Jaroslav Volf and Ondřej Štěpánek), and the three-position rifle event (Kateřina Attitudes expressed by the authors of articles Emmons). The Czech Republic presented itself at the Olympic Games not only through carried by CBT need not necessarily be consistent the performance of its athletes: car manufacturer Škoda Auto, part of the VW group, with the standpoint of the Publisher. was the official automobile partner of the Olympic Games in Beijing. Altogether 650 MK ČR E 6379, ISSN 1211-2208 Škoda Octavia vehicles were put at the disposal of the organising committee of the „Podávání novinových zásilek povoleno Beijing Olympic Games for the transfer of athletes and their entourage. Škoda Octavia Českou poštou, s. p., odštěpný závod Přeprava, vehicles also served the needs of participants to the Paralympic Games, to which Škoda č. j. 3468/95, ze dne 24/10/1995“ Auto is also official automobile partner. Front cover: ČTK archives 3 | INTRODUCTION
Questions of the Month for Ivan Langer, Minister of the Interior
The symbol of e-Government is eGON, in ■ the figurative sense a living organism in In mid-2008, the Government which everything is interdependent as is approved Strategic Projects for the functioning of the different elements. drawing money from the EU The backup of the eGON existence and Structural Funds in the framework function includes: the fingers (Czech of Smart Administration. How will POINT), the circulation system (Communic- these funds be used? ation Infrastructure of Public Plenty of money can easily be spent on Administration), the heart (e-Government various projects. The point is that the Act), and the brain (the basic public projects must give sense, be administration registers). interconnected and as a whole benefit The eGovernment Act places on par citizens and officials alike – simply, quickly electronic and paper documents once and and cheaply. This is our objective. for all. It stipulates the duty of the bodies The places to which money from the EU of state power to communicate with each Structural Funds will flow are many. It will other electronically through data go to the creation, development, and ■ mailboxes, which will be obligatory for all maintenance of the basic registers of bodies of public power and legal entities. public administration including the system One of the objectives of the Biggest progress has been made in the of safe and protected access, the Ministry of the Interior in eGON fingers, which are the Czech POINT construction of the communication 2008 is progress in contact places. Thanks to the almost 2 500 infrastructure of public administration, and e-Government. What has Czech POINTs so far set up throughout the the construction of contact places for been done along this line Czech Republic, people will save the time communication with information systems, so far? For example, have they would otherwise spend going round and, last but not least, to electronic public some austerity measures authorities. administration services. been introduced due to e-Government? ■ You have mentioned electronic data I am deeply convinced that our BASIC REGISTERS mailboxes. Can you explain the OF PUBLIC concept of e-Government in the ADMINISTRATION principle of their function? as the brain form of eGON (see further on) Data mailboxes will enable us to is a fundamental change in the communicate with authorities comfortably Czech public administration. The from our homes by means of our personal relevant laws certainly simplify computers. We shall set up a mailbox for and accelerate Czech public everybody who applies for it, and send administration and make it them a personal identification number cheaper and more efficient. (PIN) which will serve as the password. PIN will be unmistakable for the birth number and will protect personal data better than COMMUNICATION INFRASTRUCTURE the birth number. OF PUBLIC ADMINISTRATION as the circulation e-GOVERNMENT system ■ ACT as the heart How will e-Government benefit foreign entrepreneurs and investors? The e-Government Act should be a great advantage to entrepreneurs, both foreign CZECH POINT and domestic. All that is needed for the UNIVERSAL use of data mailboxes is a computer CONTACT PLACE as the fingers and Internet connection. Electronic communication through data mailboxes will be quicker than going round from place to place, and will thus save money and human resources.
| 4 CZECH BUSINESS AND TRADE
Skilled Workers Drive the Economy
One of the Czech This enumeration, however, is useless Permanent growth of employment Republic’s important competitive for analytical purposes. Education as throughout the entire period from 1995 to the sole criterion disregards the fact 2006 is characteristic of the manufacture of advantages, which helped to there are also highly skilled people in electrical machines and devices, including attract foreign investors to the professions that require special manual communication equipment. While in 1995 country, was its highly skilled skills. The latter played an important role in this sector employed a little over 74 000 certain lines of production which were employees and the remaining branches and inexpensive labour. To what recipients of foreign capital in the 1990s. with highly skilled labour employed a total degree did highly skilled workers 180 000, in 2006 the number of persons help the Czech economy to ■ CHOICE OF SECTORS employed in the manufacture of electrical grow? Obviously a great deal, as The analysis of skilled labour is further machines and devices grew by nearly a half hindered by the absence of detailed in comparison with 1995, to 115 000, in sectors with higher demand statistics on the number of skilled workers while for the remaining branches under for skilled labour, added value employed in different companies. Let us review the increase amounted to less than grew faster. A professional therefore select several branches of the a quarter. The slower growth of the "rest" assessment of average wages, manufacturing industry and services sector was partly due to the drop in the number where demand for higher skills is to be of people working in banking and however, shows that in terms of expected. This selection comprises insurance. remuneration, university degree branches linked to information and This sample shows that changes in the qualifications are not adequately communication technologies and certain Czech economy related to employment services. Beyond the business sphere, strengthened the industrial sector rather valued in the Czech Republic. highly skilled workers also work in the than the services sector. The old EU states Economic theory claims that public sector (education and the health experienced quite the opposite trend. economic performance depends service) where in view of the predominance on the volume of capital and of the public sector, added value is ■ HIGHER EMPLOYMENT generated for the most part by their wages. INCREASES labour which generate value in In 2006, the sectors selected for scrutiny – With the exception of research and the economy. Does added value manufacture of electrical machines and development, employment increases in the in the Czech Republic grow the equipment, including communications, selected sample of branches were fastest in sectors that employ medical devices, banking, insurance, data substantially higher between 1995 and processing, research and development, as 2006 than the average for the economy as a larger number of highly skilled a whole, accounted for 6.6% of total a whole, where employment was more or workers? Is this qualification employment (in 1995 the figure was less stagnant (a negligible decrease of remunerated adequately? The 4.9%). Together with education and the 0.1% a year on average). Branches defined health service, where most employees are as spheres with highly skilled labour answer cannot be accurate – it is university graduates, these sectors employed many more new workers than quite difficult to define the accounted for 17.5% of total employment the manufacturing industry as a whole, meaning of “highly skilled“. In in comparison with 15.4% in 1995 (these where the number of workers grew on general, skill is linked to two branches of the public sector are, average by 0.1% a year between 1995 and however, not included in the following 2006. Lower employment increases and education, flexibility, knowledge analysis). rapid growth of wages in the sector may, of foreign languages, willingness however, be a sign of structural change. to learn new things, and so on. ■ EMPLOYMENT FIGURES Furthermore, if such growth is DISPLAY LESS FLUCTUATION accompanied by increases in added value, it Following marked growth rate changes in is a sign of growth driven by productivity. the latter half of the 1990s, lasting approximately until 2003, employment ■ RAPID GROWTH OF WAGES fluctuation and dynamics became less In each of the selected branches, wages marked in practically all the selected grew at a higher rate between 1996 and branches of the business sphere. After 2006 than in the economy as a whole. This 2003, branches with employment increases would indicate that higher qualifications displayed smaller year-on-year changes; were reflected in the rate of growth of branches with previous decreases (banking, wages. What is somewhat surprising is the insurance) displayed stagnation in the average annual growth of wages in number of employees. The data processing research and development (7.9%) which sector is, however, accelerating. Between was only slightly higher than the growth 2004 and 2006, the number of employees rate for the economy as a whole (7.5%), in the sector grew by 7.7% a year on despite the fact that this very sector clearly average, while the figure for the entire employs a large share of highly skilled Czech economy was only 0.3% (the annual people. A possible explanation is that increase for branches chosen for this research and development are financed analysis was 3% in total). from public – and considering the Czech
5 | ECONOMIC POLICY
budget – limited resources. In 2006, however, half of research and development spending was financed from private sources, of which half was funded by foreign investors. This signifies research and development are not sufficiently valued, despite above-average nominal wages in the sector. In 2005 (the latest reliable annual data made available by the Czech Statistical Office), average monthly wages in research and development, converted to full-time employment, were approximately 20% higher than the national average (in 1995 this surplus was Value added has been rising more rapidly in sectors with higher demand for qualified labour only 15%). insurance sector, added value grew on ■ EDUCATION PAYS LITTLE ■ HIGHEST WAGES IN THE average by 40% per annum, while in the In the Czech Republic, education is not BANKING SECTOR economy as a whole added value grew by reflected adequately in remuneration. This Over the past ten years, the banking sector a mere 7.4% per annum. However, the is evident from figures of the Employment has displayed practically the same average added value of the selected branches is not Classification, especially as regards growth of wages as the Czech economy as influenced exclusively by higher growth of professions in class "Scientific and a whole (7.6 % per annum). As this sector employee numbers and higher wages. intellectual workers", which covers a wide boasts the highest wages, even this Other elements include "non-wage" range of professions, from mathematicians average growth is leading to a greater factors, chiefly the impact of margins, the and project designers to architects, income gap between banking and other level of which is, in certain branches, teachers, and physicians, i.e. specialists in economic sectors in the Czech Republic. influenced by foreign trade prices, their professions, who are not managers, While in 1995 average wages in banking exchange rates, and so on. whose work requires university education. (excl. insurance) were 81% higher than the International comparisons of the share of A comparison of salaries across national average (EUR 514 in comparison wages in added value made by Eurostat professions shows, for instance, in 2006 with EUR 284), in 2005 the figure was 125% divide countries into "cheap" and the average pay of dental surgeons was (EUR 1 419 in comparison with EUR 636). "expensive" states. "The most expensive" EUR 1 117 and nearly identical with that For nearly the entire period between among EU states is the workforce in the earned by explosives experts (EUR 1 104). 1995 and 2006, employment in financial United Kingdom, with wages accounting for Philologists and linguists earned the same services fell, while total wages increased. 56.5% of GDP; on the contrary, the pay as coal and ore miners, i.e. EUR 999 This was the consequence of cost "cheapest" workforce is that of Slovakia, and EUR 994, respectively. Tarmac layers reductions made by banks in the late with a share of 37.2%. In the Czech Republic and pavers (EUR 831) earned more than 1990s, which continued even after the wages account for between 46% and 47% philosophers, historians, and political unfavourable period had passed, caused by of GDP, as is the case in Hungary and scientists (EUR 805). Archivists were the the critical condition of credit portfolios of Norway. In developed European countries lowest paid in the group of scientific and large banks. Cost reductions were a result this share is above the 50% threshold intellectual workers with just EUR 712, less of restructuring carried out by new foreign (53.5% in Denmark and France, 52.9% in than, for instance, concrete workers (EUR bank owners. The considerable growth of the Netherlands, 51.6% in Germany). 717) and just a little more than labourers productivity in the financial services sectors and unskilled road building and resulting from cuts in personnel also led to ■ MANAGERS AND OTHER maintenance workers (EUR 685). These the growth of added value, which was also EMPLOYEES comparisons show that education is not partly spurred on by rapid growth of profit In 2006, the difference in remuneration for adequately remunerated in the Czech from personal and small business credit work among professions in the business Republic. This is true in spite of the fact transactions, where banks attain higher sector in the economy as a whole was nearly that the wages of professions under margins than in trade with businesses. EUR 4 682. While directors and CEO’s of large scrutiny are also influenced by yet more Another reason for higher value added was companies earned EUR 5 095 on average per factors (risk, physical strain, and so on). the growing revenue from charges and month, at the other end of the scales the commissions since the end of the 1990s, wages of, for instance, cleaners totalled EUR Drahomíra Dubská which compensated for the previously high 395 and those of laundresses EUR 380. Analyst interest revenue. Naturally salaries depend on the sector the Economic and Statistical Analyses company operates in – while in the case of Department ■ WAGES AND ADDED VALUE banks and insurance companies the average Czech Statistical Office Besides profit, added value is generated by pay of top management exceeded EUR (e-mail: [email protected]) wages. In branches that employ highly 10 806 in 2006, in the automobile sector, real skilled employees, added value between estate or in private schools the remuneration 1995 and 2006 grew considerably faster on of directors and top management ranged Note: The conversion to EUR was made average than did employment or wages – between EUR 2 160 and 3 250 (in agriculture indicatively using the 2007 average the growth was a two-digit figure. In the the average wage was EUR 1 873). CZK/EUR exchange rate. Photo: Photocombo
| 6 CZECH BUSINESS AND TRADE
Kaleidoscope
■ CZECHS WANT TO GO ON WORKING AFTER REACHING RETIREMENT AGE
Most Czechs want to carry on in their paid 72% of economically active Czechs want to other hand, 78% of the population of 41 to employment when reaching retirement have paid employment even after 50 year-olds disagree with the idea of age. Their share in the population is the registering officially as pensioners. In the retiring at a later age. Voluntary retirement highest not only in Central and Eastern capital city of Prague, in central Bohemia, is very seldom used in the Czech Republic. Europe but almost worldwide. This has and most large towns as many as 34% of Only 39% of Czechs have voluntarily been demonstrated by a research of the pensioners have paid jobs. Most of these terminated their employment before AXA financial group, AXA Retirement employees are people up to 71 years old. reaching official retirement age. In West Scope 2008, which monitored the stands The research also showed that the young Europe over 50% of people retire early, and and views of employed people and generation of the Czech population is not in Canada it is even 84%. The low figure in retirees in 26 countries. Only the opposed to an increase in the official the Czech Republic is due to the proportion of Japanese who wish to be retirement age. People under 40 realise that penalisation of early retirees by employed in retirement age is higher. a higher retirement age is necessary. On the a permanent reduction in old age pension.
■ CZECH BEER TO BE REGISTERED AS A PROTECTED GEOGRAPHICAL INDICATION
Czech beer will join the list of foodstuffs used in most other countries," explained showed that, thanks to the specific protected by the European Union Ivo Hlaváč, First Deputy Minister of qualities of Czech beer, it is possible to indication. "According to experts, Czech Agriculture of the Czech Republic. At the determine whether an unknown sample is beer is unique thanks to the used turn of the millennium the Research or is not a Czech beer with 95% certainty. ingredients – special species of barley Institute of Brewing and Malting in Prague "The criteria that define 'Czech beer' are and hops – and specific production examined a number of world beers in two strict; for instance, the designation can technology, which is different to that separate years. The results of research only be applied to beers containing 2.6- 6% of alcohol and brewed in the Czech Republic. This means breweries that brew ■ SYSTEM OF PROTECTED INDICATIONS their beer abroad based on a licence will not be allowed to use this designation for The purpose of protected geographical indications is to protect the names of high-quality beer brewed outside of the Czech agricultural and food products that have gained repute in the EU and worldwide against Republic," clarified Petr Gandalovič the competition of products that seek to imitate them illegally. The aim is to promote Minister of Agriculture of the Czech a system of EU quality vis-`a-vis third countries. The EU has been trying long-term to Republic. The Czech Republic will be the achieve full recognition of this system within the WTO. first state in the European Union with a protected national technology.
■ TECHNICAL NORMS WILL BE CHEAPER AND BETTER ACCESSIBLE
As of 1 January 2009, Czech technical norms (ČSN) will be drawn up and ■ FULFILLING THE PRIORITIES OF NORM TRANSFORMATION issued by the Czech Office for Standards, Metrology, and Testing. 1. To fulfil the priority concerning better accessibility, all valid ČSN will be published in Norms will be cheaper to purchase for "certified" electronic format (PDF) allowing all interested parties who register companies, better accessible, and easier according to the rules to make individual print-outs. At the same time, to understand. The Ministry of Industry professionally printed ČSN will remain available. As can be assumed on the basis of and Trade of the Czech Republic has set negotiations that have taken place, other entities, such as the Czech Chamber of three basic priorities to be achieved Commerce, will also participate in distributing and making the ČSN accessible. through transformation. The first 2. The priority to lower ČSN rates will mean reducing fees for access to the ČSN, priority is better accessibility of ČSN in especially its electronic form. It is also expected that the price of professionally its electronic form. The second priority printed ČSN will be reduced. This will be made possible by increasing the efficiency is to significantly reduce ČSN rates – cut of the entire system. of up to 50% of current prices. The third priority is to improve the clarity of 3. The priority to increase the clarity of norms entails influencing their content ČSN content and terminology. The through the active participation of Czech experts, whether from the public or Czech Republic will thus likely become private sphere, in the process of drafting. Measures have already been taken on the the first EU country to make its terminology front to improve current conditions, contribute to an unambiguous technical norms accessible in such wording of the ČSN, and also improve the unity of terminology of the ČSN and away. valid legislation.
7 | LEGISLATION
Labour Law in the Czech Republic
The new Labour Code in effect ■ NEW LABOUR CODE since the beginning of 2007 is The new Czech Labour Code came ALTERATIONS OF into force on 1 January 2007. Act No. CONTRACTUAL TERMS characterised by a higher degree 262/2006 Coll., the Labour Code, replaces The Labour Code allows changes to the of contractual freedom and the previous Code which governed labour- content of an employment contract only if flexibility of labour-law relations. law relations for over 40 years. Provisions of there is agreement between the employee The amendment in effect since the Labour Code address all labour-law and the employer. Any alterations to the relations that exist between the employer employment contract must be made in the beginning of 2008 and the and the employee in the private sphere. The writing. finding of the Constitutional new legislation provides contractual parties The Labour Code stipulates certain cases Court also dating from 2008 with a broader freedom to manage their where the employer may transfer an labour-law relations. Employers may also employee to perform work of a type other reaffirm this trend which, it conclude employment contracts that are not than agreed in the employment contract seems, will continue on into the explicitly governed by the law as long as such without the prior consent of the employee. future. contracts are not in violation of the content In cases other than those defined by law, it is and purpose of the law. inadmissible to transfer an employee to perform other work than that agreed in the BINDING REQUIREMENTS employment contract without the prior An employment relationship is based purely consent of that employee. The employer on an employment contract. Employees in may, for instance, send an employee on managerial roles may be appointed to their a business trip defined in the Labour Code as position, however an employment contract a limited period of time for which the must be concluded nonetheless. The non- employer instructs his/her employee to work competition clause is not limited to away from the agreed place of work employees in managerial positions only; it performance. The employer may instruct an may be concluded with any employee. The employee to go on a business trip only for following terms must be agreed by the the necessary period if the trip has been employee and the employer within the agreed with the employee. employment contract: the type of work, the place of work where the employee will CHANGES TO NOTICE perform his/her duties, and the date on The employer may give notice to an which the employee will take up duties. The employee for reasons listed in the Labour Labour Code obliges the employer to notify Code only. The notice period has been the employee in writing of his/her unified to two months. At the same time, an fundamental rights and obligations arising increase has been made to severance payable from the employment relationship if such by the employer to employees who are information is not included in the dismissed on grounds of redundancy. The employment contract. severance pay has been raised from two to If the necessary terms of employment three times the employee's average monthly have not been fixed within an employment earnings. contract, the employee has, however, already begun to perform work for the employer FIXED-TERM CONTRACTS (with the employer's agreement), the A fixed-term employment contract may be employment relationship between the concluded or extended in total for employer and employee is thereby a maximum period of 2 years from the established and, as such, is subject to the beginning of the employment relationship. Labour Code. The employee is thus Where a period of at least six months has guaranteed all rights ensuing from the expired from the end of the previous labour-law relationship (especially the right employment relationship, such previous to remuneration for work performed). employment shall not be taken into account.
EMPLOYMENT CONTRACT FORM MINIMUM WAGE The Labour Code stipulates the employment REQUIREMENTS contract must be concluded in writing. In the Czech Republic remuneration is However, it also states that where an governed by provisions of the Labour Code, employment contract is not concluded in as is the minimum wage, the amount of writing, it is not automatically considered which is also set in accordance with the invalid. The Labour Code makes no mention Labour Code. The minimum wage in the of the language to be used in the Czech Republic is fixed at CZK 7 955 (approx. employment contract. The choice of EUR 339) per month. The minimum hourly language is thus left to the parties to the rate is fixed at CZK 48,10 (approx. EUR 2). contract. However, collective agreements may Photo: Photocombo
| 8 CZECH BUSINESS AND TRADE
stipulate a minimum wage higher than the employees of employers not engaged in in collective agreements over provisions of minimum wage required by law as stated in business activities is set at five weeks. the law. the Labour Code. Pedagogical and academic employees of Social security and health insurance universities are granted an annual leave of b) Decision of the Constitutional Court contributions as well as state employment eight weeks. In the case of employees of Changes in the Labour Code have also been policy contributions are deducted from the employers engaged in business activities, brought about by the finding of the employee's income. Each employer is obliged collective agreements and internal Constitutional Court published in the by law to deduct these contributions as well regulations may stipulate an extension of Collection of Laws under No. 116/2008 Coll. as income tax advance payments. Since annual leave by additional weeks or days on 14 April 2008. The Constitutional Court 1 January 2008, the progressive taxation of without limitation. Employees are entitled to partly satisfied the motion of a group of personal income has been replaced by a flat full compensation of income for the time of Deputies and Senators and repealed 11 income tax rate of 15% (as of 1 January their annual leave. In addition to paid annual provisions (or their parts) of the Labour Code. 2009, this rate will drop to 12.5%) and the leave, employees are entitled to leave from The Constitutional Court primarily repealed so-called "super-gross wage" (gross wage work on the thirteen public holidays unclear sections of the Code and limited the plus health insurance and social security stipulated by a special legal provision. authority of unions (provisions governing the contributions paid by the employer). The supervisory powers of unions and those income tax base of employees is thus ■ CHANGES TO THE LABOUR favouring large union organisations). calculated as the gross wage (without CODE IN 2008 The definition of cogent provisions of the deducting social security and health a) Amendment to the Labour Code Labour Code (those that may not be deviated insurance payments made by the employee) Since the new Code entered into force, from contractually) was found too plus the amount paid in social security and certain technical and legal inaccuracies have complicated and vague and, as such, was health insurance by the employer. At the come to light. The Government has therefore changed. In future, cogent provisions will be same time, a maximum annual employee prepared an amendment, which came into limited to those explicitly defined as such by assessment base has been introduced for force on 1 January 2008. The purpose of this the Labour Code, those whose nature implies paying the premium amounting to 48 times so-called technical amendment is to liberalise it and provisions that implement legislation the average wage. the labour market and eliminate all of the European Communities, given that the obscurities and inaccuracies within the new deviation would not benefit the employee. WORKING HOURS Labour Code. The amendment introduces The relation between the Labour Code The maximum length of working hours as the following new features to Czech labour and the Civil Code was also addressed. In defined by law may not exceed 40 hours per law: future, the Civil Code will always apply in week (with the following exceptions: 37.5 cases where the Labour Code lacks hours in the case of employees who work ❚ It omits the requirement to obtain the provisions applicable to the case at hand underground and those who work a three- agreement of all employees for (instead of only in cases when the Labour shift pattern; 38.75 hours for those working introduction of the working hours account Code itself explicitly states so). a two-shift pattern). Generally speaking, an ❚ It permits the negotiation of higher rewards employee is entitled to rest lasting at least 12 for work at night and at weekends within ■ PLANNED CHANGES TO THE hours between the end of one shift and the the collective agreement as a fixed amount LABOUR CODE beginning of the following shift as well as ❚ A work break for food and rest may be split Another important conceptual amendment one uninterrupted period of rest lasting at into more parts as long as at least one part to the Labour Code is currently being least 35 hours per week (a week is of the break is at least 15 minutes in length prepared by an expert committee of the understood to mean seven consecutive (previously each part of the break had to be Ministry of Labour and Social Affairs. Act No. calendar days). A fine may be imposed on at least 15 minutes in length) 187/2006 Coll., on Sickness Insurance, has employers who fail to observe the rules ❚ It permits employees under the age of 18 already been passed and will come into force governing working hours and periods of rest. to perform work for the standard 40 hours on 1 January 2009. Sickness insurance will If an employee has worked continuously a week 8 hours a day, whereas previously newly be administered exclusively by sickness for six hours at the most (four and a half they were permitted to work for insurance authorities (and no longer by hours in the case of employees under the age a maximum 30 hours a week and 6 hours employers). Legislation governing employee of 16), he/she must be provided a work break a day. accident insurance should come into force on for food and rest lasting at least 30 minutes. ❚ It permits employees who are caring for 1 January 2010. Under the current system, This time is not included in working hours. a child under the age of 1 to work the employer must be insured against liability The employer is obliged to keep a record of overtime. for damage caused as a result of work- working hours, work overtime, standby and ❚ It stipulates cases where employees will not related accidents and occupational disease. night work for each individual employee. be entitled to increased severance pay New legislation will transfer employee Overtime in excess of the 40 hours per upon the termination of their employment accident insurance to the social security working week limit is permitted only under relationship for reasons of health. system. Preparations are also underway for certain conditions and is rewarded at ❚ It permits overtime in the case of an anti-discrimination law which, however, a higher rate. employees in management positions in has not yet been passed. This law should view of the nature of their work (however, come into force by the end of 2008. ANNUAL LEAVE WITH PAY overtime may not exceed 150 hours per Pavel Jakab The standard length of annual leave with pay year). Lawyer is fixed at four weeks per calendar year. The ❚ It gives supremacy to provisions on pay for PETERKA & PARTNERS v.o.s. law firm basic length of annual leave in the case of work performed during weekends settled www.peterkapartners.com
9 | BUSINESS AND PRODUCTION
Changes of Shopping Behaviour in the Czech Republic
The standard of living in the ■ ENTRY OF LARGE RETAIL reflected, not only in a broad range of goods, Czech Republic is steadily CHAINS but also in long-term low prices. The Czechs, The most significant changes in who are well-known for their pragmatic increasing and, according to consumer behaviour were brought about by approach to life, have adapted quickly and Eurostat estimates, the the appearance of large retail chains in the have substantially changed their shopping purchasing power of the Czech Czech market. During the 1990s, at first habits. mostly Czech firms started to operate in the population is expected to reach retail market, to be increasingly followed by ■ THE CZECH REPUBLIC WAS 82% of the average of EU international companies later. The opening A GREAT OPPORTUNITY countries in 2008. In less than of the market in central and eastern Europe While in the early 1990s it was normal to go twenty years of the gradual offered big retailers the chance to enter an shopping every day and 80% of consumers absolutely unsaturated market with a huge bought fast moving goods in small shops transition to a market economy, consumer appetite. The expansion of the owned by Czech retailers, the ratio has been great changes have thus modern forms of sale was unprecedented. reversed and at present consumers buy 78% occurred in lifestyles as well as For example, the first hypermarket was of products for regular consumption in opened in the Czech Republic by the modern retail format locations which are consumer and shopping Carrefour company in 1997, and ten years owned by international companies. The behaviour. later there are 22 hypermarkets per million markets of Central and East Europe have inhabitants, which ranks the Czech Republic become an extraordinary opportunity for among countries with the densest networks international retail firms to expand and in Europe and gives it top position among especially west European firms were keen to the countries of Central Europe. gain as high shares of the markets as Shopping venues of Czech consumers for fast moving goods
% 2000 2007
16 22
38 25
31 36 18 15
Hypermarket Supermarket Discount store Small shop Source: GfK, Shopping Monitor CEE 2008 ■ THE POPULARITY OF possible. These firms took advantage of the situation when there were no major DISCOUNT STORES IS RISING obstacles to their entry and countries of A rapid growth has also been recorded in Central and East Europe had benevolent discount chains. The number of discount laws, in contrast to countries where the stores is close to five hundred and the Czech retailers had their seats, such as France, Republic has the second densest network of where building a new hypermarket is next to discount stores in central Europe, after impossible because of a strict regional Hungary. The keen competition was good for planning regulation, or in Germany with its consumers because it was extensively considerable limitations on opening hours. In Development of the number of hypermarkets in the Czech Republic an effort to gain control of market shares, retail companies were ready to invest in the 250 231 future, without being under pressure for 215 short-term return on investment, unlike 192 200 domestic under-capitalised firms that lacked 161 even the basic commercial know-how. 145 150 127 ■ DEPARTURE OF SOME 106 CHAINS 100 82 The Czech market, with its 10 million people
51 a small one for retail companies, has seen an 50 unusual situation in which renowned firms, 25 such as Carrefour, the second-largest 2 7 0 distribution firm in the world, have failed. 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 Concentration processes thus logically Source: GfK, Shopping Centre & Hypermarket 2008 started at the turn of 2005/2006 and
| 10 CZECH BUSINESS AND TRADE
Carrefour, Edeka, Delhaize le Lion (Delvita) households accounts for 41% of total enough, but with regard to demand and to have left the Czech market. The Plus chain of household expenditures and the 30-39 age EU support for ecological farming, the offer discount stores announced its departure in group makes up the largest share of the from Czech producers is likely to grow. May 2008. Czech retail is thus consolidating clients of hypermarkets and shopping Another example of the tendency to healthy and the chains are starting to build up their centres. lifestyles can be seen in the increase in the profiles. sale of non-alcoholic beer. It is well-known ■ NEW GENERATION that the Czech Republic has had the highest ■ HYPERMARKETS TOP OF CONSUMERS consumption of beer per inhabitant in the POPULARITY LIST The new generation of Czech consumers world (about 158 litres annually) for many As the retail market is changing, and cares about healthy lifestyles, is well informed years. Despite that, the production and especially in connection with the growing about market supply, in consumption and consumption of non-alcoholic beer is rising standard of living and the growing social shopping regards the related experience as an fast and it has become the most dynamically differences, consumer and shopping important criterion, increasingly uses the growing beer category at present. Although behaviour is beginning to change as well. At Internet, and is frequently interested in it accounts merely for 1.65% of total sales, the end of the 1990s hypermarkets and environmental issues. The young generation non-alcoholic beer has been rising more than shopping centres were a form of spending is also different as it does not fear the future 30% year on year. So-called Fair Trade leisure time for many Czech households, and is ready to borrow, not only for housing, products imported from developing countries rather than places to do shopping (at that but also for consumption. According to are beginning to appear on the Czech time a number of consumers lacked research conducted by the private Czech market as well. According to estimates of the sufficient financial resources for real research agency STEM, 80% of respondents Czech Fair Trade Association, the sale of this shopping, but welcomed the possibility of up to 30 years old consider it normal to "live type of product has risen by 70% year on using the modern facilities of the shopping on credit". year, which proves the growing social responsibility of Czech consumers. Development of market shares of TOP 10 retailers in the Czech market
% 70 66 63 ■ STRESS ON FRESHNESS 60 53 AND QUALITY 50 51 47 The stress on quality is apparent in the fall of 50 44 41 the volume of the sale of fresh goods in big 40 34 format stores. For example, over a half of 30 24 consumers do not buy meat and fresh bakery 18 20 15 products in these stores nowadays because 12 10 7 8 they prefer small specialised shops. Fears that modern big-size formats of sale will liquidate 0 1993 1994 1995 19961997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 small independent retailers have thus not Source: Incoma and Moderní obchod 1/2008, page 12 been confirmed. However, it is crucial that small shops offer a higher value added, i.e. malls to view the goods). Nowadays ■ ORGANIC FOODS AND FAIR fresh goods, a pleasant shopping hypermarkets are the most frequented TRADE environment and a specialised range of shopping venues for Czech households. With Healthy lifestyles and social responsibility are products. the growing purchasing power, consumers a trend in all developed countries and they begin to differ more and more and require are beginning to gain ground in the Czech that retail meet their specific needs and Republic as well. The consumption of organic wishes. foods increased by 70% last year as compared to 2006 and Czech households Hana Machková ■ COMPETITION LEADS TO spent a total of EUR 46.5 million on buying Head of the International Trade Department SPECIALISATION these foods. More than 60% of bio products University of Economics, Prague Retail chains, which pursued similar are imported to the Czech market because (e-mail: [email protected]) strategies for many years and sought mainly supply from domestic producers is not broad www.vse.cz to maintain low prices, have now started increasingly to build up their specific profiles. Typology of consumers in central European countries by age and purchasing power In October 2007, for example, Tesco, who % 100 introduced to the market a line of natural 22 24 21 19 fresh and non-perishable foods of the Tesco 80 Organic brand and has launched an organic 23 20 20 26 60 fruit and vegetables range called Tesco Bio, is 15 14 18 22 starting to develop its format of more 40 expensive smaller convenience stores called 41 38 44 Tesco Express, which offer bakery products 20 33 from their own bakeries, ready meals, fast 0 foods, and a broad range of wines. These Czech Republic Slovakia Hungary Poland stores target the group of higher-salaried Young rich Young poor young educated consumers. According to Old rich Old poor research, this target group of young rich Source: GfK Group, Consumer Tracking, November 2007
11 | CZECH TOP In this section, we present and follow interesting success stories of export projects implemented by Czech businesses from a variety of sectors; success that is, for the most part, based on remarkable feats of research and innovation. We also introduce examples of important foreign investment projects carried out in the Czech Republic. ALTA – General Contractor for Mine Construction in Russia
ALTA of the Czech Republic has ■ CONSTRUCTION OF THE world’s largest wagon works, OAO NPK become the general contractor for PRIOSKOL COMBINE Uralvagonzavod. The deal is worth EUR 1 Prioskol iron ore deposits in the Belgorod billion at present. Another strategic customer the construction of the Prioskol region are part of an important iron-ore basin and partner of ALTA since 1992 is RUPP iron ore mine, owned by called the Kursk Magnetic Anomaly with an BELAZ of Belarus, a manufacturer of giant Magnitogorsk Metallurgical area of 160 000 sq. km and 30 billion tonnes dump trucks. ALTA also operates in Vietnam, Combine (MMC) – the largest in ore reserves. MMC won the ownership which it supplies with mining equipment. right to these reserves in an auction held in company of its kind in Russia. This November 2006. In January 2008, MMC ■ BRIEF INTRODUCTION is the first construction of an ore founded a branch in Prioskol, called Prioskol OF THE COMPANY combine in Russia in 30 years and GOK, and concluded a contract with the ALTA, a.s. is a supplier of technological CentrGiproRuda project design institute for equipment for the power industry, at the same time the largest the preparation of project documentation. metallurgical works and the engineering and project of its kind in Europe in the This project will provide MMC with a supply mining industries. In 2007, its consolidated past several decades. ALTA will of raw material for over 60 years of revenues amounted to EUR 322.7 million and manage the implementation of production. consolidated company profit totalled EUR 8 The project, which is in its preparatory million after tax. In comparison with 2006, its the entire project, including its phase (the first stage will cost EUR 200 profit showed a 34% increase. In 2005, ALTA financing. The cost is estimated at million and comprises preparatory work and Group expanded by acquiring TOS Kuřim EUR 3 billion. the exposure of deposits), involves the engineering company, the Kuřim Foundry, construction of the entire works, from iron and KSK Kuřim. ore extraction to its processing, including the More information at www.alta.cz preparation of iron concentrate. The greatest opportunities will be available to Czech ■ BRIEF INTRODUCTION heavy engineering, providers of transport OF THE RUSSIAN PARTNER and mining technology. The new combine The OAO Magnitogorsk Metallurgical will begin supplying iron ore in 2012. In 2016 Combine is one of the world’s largest steel its output is expected to reach 25 million manufacturers and a leader on the Russian tonnes. market. It is a vast metallurgical complex with a full production cycle, ranging from iron ore ■ EXPORT ACTIVITIES preparation to steel processing and the Ninety per cent of the company’s turnover is manufacture of products with high added generated by activities in Russia, the Ukraine, value. In 2007 the combine’s output and Belarus. It supplies heavy engineering amounted to 13.3 million tonnes of steel and works, the mining industry, metallurgy, the 12.2 million tonnes of metallurgical A memorandum on strategic co-operation worth EUR 3 billion was signed by Viktor Rashnikov, power industry, and the building materials products. Its sales volume reached USD 8.2 president of the Magnitogorsk Metallurgical industry in particular. In 2007, ALTA billion, while net profit equalled USD 1.8 Combine, and Vladimír Plašil, chairman of the board concluded contracts in Russia worth over of directors at ALTA, a.s. The signing ceremony was billion. attended by Czech Prime Minister Mirek Topolánek EUR 40 million. Its most important project in and Martin Říman, Minister of Industry and Trade. Russia so far is the modernisation of the More information at www.mmk.ru Photo: ALTA archives Photo: ALTA
JTEKT of Japan Expands its Pardubice Plant
In July this year, JTEKT of Japan Until recently, the company supplied Agency, JTEKT has invested over EUR 45.02 launched production of steering its customers, especially the local million in the Czech Republic. This sum also Toyota Peugeot Citroen ¨ Automobile includes the expansion of the Pardubice boosters for cars in its works in works, with precision parts for gearboxes. works," Alexandra Rudyšarová, Acting Pardubice. The steering booster is The Japanese owners invested more than Managing Director of CzechInvest, pointed a useful device, which also EUR 18.01 million in the expansion of the out. "What is important is the trade policy works. The official opening of the of JTEKT, which purchases large quantities reduces fuel consumption and modernised factory took place on 14 July of material and services from Czech thus the environmental burden. 2008. businessmen, whereby it helps to boost "In co-operation with CzechInvest the region’s economic development."
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■ NO NEW GREENFIELD components. JTEKT came to the Czech JTEKT Automotive Czech Pardubice has "I am glad JTEKT has decided to use its Republic five years ago, together with been operating in the Czech Republic since existing plant in Pardubice. In part, the Toyota Peugeot Citroen ¨ (TPCA) car factory 2003. In Pardubice it employs some 400 new production will take advantage of the in Kolín, which it supplies with most of its people, and its sister company in Plzeň has technical facilities and experience of the products. created jobs for 500 more specialists. existing works, without the need for Worldwide, JTEKT Group, which belongs a complete new greenfield investment," ■ THE JAPANESE ARE to the Toyota concern, has over 30 000 says Pavel Háněl, Managing Director of IMPORTANT INVESTORS employees and, in terms of sales volumes, JTEKT Automotive Czech Pardubice s.r.o. "Japanese companies are doing extremely it is the world’s twentieth largest "Moreover, the manufacture of steering well in the Czech Republic. According to contractor in the automotive industry. It booster components will become our most the JETRO Japanese trade promotion ranks top among European producers of important production segment, and we organisation, a total of 226 Japanese power steering boosters. Total company shall keep it in focus also in future. I must companies are operating in the Czech revenue amounts to the equivalent of EUR point out this is a product that helps to Republic, where they employ over 44 000 4.61 billion. reduce exhaust fumes produced by cars, so people and thus constitute an important we are ultimately helping to reduce the part of the Czech economy," Alexandra environmental burden." Rudyšarová adds. "According to In its plant in Pardubice, JTEKT CzechInvest’s statistics, Japanese More at www.jtekt-pa.com manufactures parts for gearboxes using businessmen are the second most active aluminium die casting and CNC machining investors in the Czech Republic, after of steel elements. A similar technology will Germany, with Japanese projects worth Jiří Sochor be used for power steering booster more than EUR 3.64 billion." CzechInvest
13 | CZECH BUSINESS AND TRADE
Information and Communication Technologies in the Czech Republic
The Czech Republic's economy is ■ ICT MARKET third place in the world in terms of profiting from the positive trend According to the EITO 2007 study attractiveness to foreign investors (rating (European Information Technology 7.26), behind India (7.76) and China (7.34). of recent years: low inflation of Observatory), the Czech Republic has one of A Gartner Group study about countries 2.8% (2007), two-digit export the most developed markets from among ideal for offshore IT services ranks the Czech growth (14.6% in 2007), positive the new EU member countries. It maintains Republic in the first place in Europe, the balance of foreign trade, and the highest level of IT spending in terms of Middle East, and Africa, before Hungary, GDP (3.2% in 2006) in the region, followed Ireland, and Israel (source: Martin Noska: continuous GDP growth (6.6% in by Estonia (2.86%). This figure is What Will the IT Market Look Like in 2008). 2007). Labour productivity is comparable to many West European A recent Ernst & Young survey arrived at growing hand in hand with the countries (the EU 15 average is 2.72%). a similar conclusion, stating the Czech Overall ICT spending increased to EUR Republic has maintained its 9th place growth of the economy. The 6 914 million in 2006, which represents an among ten of the most attractive countries Czech market of information and increase of 9.2% against 2005. According in the world for foreign direct investment. communication technologies to IDC, further growth of approx. 8.4% is ■ (ICT) has also experienced expected in 2007. SUCCESS OF CZECH ICT The share of costs for software and COMPANIES ABROAD turbulent growth during recent services related to the maintenance of Many Czech ICT companies have made years. According to OECD and hardware in total expenditure is generally a breakthrough abroad. The quality of IDC data, the Czech considered a reliable indicator of the Czech IT professionals abroad has been Republic’s investments in maturity of a given IT market. According to demonstrated by many successful IDC reports, IT hardware costs amounted to companies, such as LANGMaster information and communication "just" EUR 1 034 million in 2006, i.e. about International, CN Resources International, technologies are comparable 35.5% of the overall IT expenses. The IT 2N TELEKOMUNIKACE, and many others. with the EU average (measured services market in the Czech Republic The success of Czech IT companies displays two-digit growth each year (10.0% abroad was started off by Software 602 at in % of GDP). to EUR 1 017 million in 2006). the beginning of the nineties. The fame of The Czech Republic has recently become the "timeless" T602 text editor is now an important centre for the provision of emulated by other Czech companies. high value added services (see the box One of the greatest exporters of anti- entitled Foreign Investment on p. 17). This virus software AVG is Grisoft, a Brno-based fact is further underlined by the CEO company with international success (a 65% Briefing — Corporate priorities for 2005 company share was acquired by Intel study which ranks the Czech Republic in the Capital and Enterprise for EUR 43.23 million in 2005). Prague's OKsystem has extended the not so numerous ranks of successful Czech solution providers for European research projects. The company has been developing a solution for EU identification cards during the three-year Onom@topic+ project (European Smart Card Platform for Citizenship and Mobile Multimedia Applications). A consortium of 17 organisations from 7 countries worked together on this project. The result is a chip card operating system design and the design and implementation of middleware. OKsystem shall also participate in the subsequent BioP@ss project that will engage the use of biometric methods. An increasing number of Czech companies are establishing branches abroad. For instance, Cleverlance has established a branch in Slovakia. Other companies are heading for more distant countries. Zoner supplies graphics and digital photography software via its offices in the USA, Slovakia, and Hungary. It recently opened a new branch in Japan. The example of Bohemia Interactive IBM Brno Integrated Delivery Center in Brno has more than 2 400 employees
Studio shows there remains room for Photo: IBM archives
15 | SERVICES
innovative solutions. Based on the world- famous game Operation Flashpoint and its newer engine, the Australian branch, Bohemia Interactive Australia, created Virtual Battlespace Systems 1, a tactical simulator for the military in the USA, Australia, and other countries. It is a three- dimensional training system for teaching tactics to small units. Czech companies have also had considerable success in developing mobile phone games, as displayed by Multiplayer Reversi, a multi-player logic game developed by Geewa, a Czech company. In June 2008 it was the most popular application for the iPhone smartphone introduced by Apple, Inc. At the same time, Apple employees chose the game as "Staff Pick", i.e. worthy of attention.
■ MOBILE PHONE NETWORKS At present the business environment is highly competitive as there are three mobile phone networks in the Czech Republic operated by Telefónica O2, T-Mobile, and Vodafone. These established companies have been joined by one other operator: Mobilkom with its U:fon network. The number of active mobile phone users increased year-on-year by 6.7% to 12.56 million in the first half of 2007. There were 123 mobile phone numbers per 100 persons, eight more than last year. 13 million active numbers are indicated for 2008.
■ E-GOVERNMENT IN THE CZECH REPUBLIC The government of the Czech Republic pays In the Czech Republic, 40% of households have personal computers and 32% of households have Internet a lot of attention to making the public connection administration services provided to companies and citizens more effective by modifying processes with the help of facilities will prevent data duplication and ❚ Public administration, particularly legal available information and communication will uphold required security standards. proceedings, administration and tax technologies. At present, the government is 2. Universal contact point (Czech POINT – procedures, management of electronic discussing a document entitled "Strategy for assisted or self-service communication records allowing for an easy transfer of the Development of Services for the with the public administration, public agendas between different public Information Society in the Czech Republic for administration portal and individual administration bodies. 2008 – 2012". Its main purpose is to allow agenda portals, system of data accounts). ❚ Administration of state and municipal citizens and businesses to communicate 3. Guaranteed and secure electronic assets, especially records of assets, budget comfortably, securely, and reliably with the communication between authorities and procedures, the state treasury, disposal of public administration on all levels and between citizens and authorities, assets and finances, public tenders, regarding as many life situations as possible. including independent oversight of subsidies. conformance to security and operational The strategy will be implemented through rules. The introduction of the aforementioned a series of mutually interconnected projects; 4. Digitalisation of data funds and archiving services is also an opportunity to initiate the projects will be divided into five thereof. deep reforms of the public administration – programme areas: 5. Services for "information society", chiefly its organisational and procedural 1. Basic registers and identification (land mainly in the following areas: aspects. Therefore, e-Government is not an identification and real estate register; ❚ Healthcare, care for the retired, schools; end, but a tool for achieving a more citizens register; persons register; register especially as concerns electronic user cards effective public administration. of rights and duties) together with (insurance policy-holders, school children, Upon the dissolving of the Ministry of students). organisational architecture and technical Informatics, a number of competences were Photo: Photocombo
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passed to the Ministry of the Interior, which Intellectual Property Rights): Bern and Rome Republic ranked 10th. All the other post- is now responsible for e-Government. The Conventions on International Copyright and communist countries are lagging behind as Chamber of Deputies passed a law on Neighbouring Rights, Paris Convention, well as many West and South-European electronic actions and authorised the Madrid Agreement, Nice Agreement, Lisbon countries, such as France (45%), Italy conversion of documents on 25 June 2008. Agreement, Protocol Relating to the Madrid (51%), and Spain (46%). Laws concerning basic registers are now Agreement, the Trademark Law Treaty, being prepared. Czech POINTs have become Patent Cooperation Treaty and Convention ■ IT IN THE CZECH REPUBLIC operational, allowing citizens to settle on Awarding European Patents for ON A PAR WITH THE a number of tasks in a single place, Industrial Rights, Budapest Treaty on DEVELOPED WORLD including obtaining an extract from criminal Biotechnology, and Treaty on Intellectual In conclusion, it is possible to say most records, an extract from the real estate Property in Respect of Integrated Circuits. Czech entities, be it in the public or private register and, as of 1 July 2008, applications After the conclusion of the TRIPS sector, have already implemented to the Trade Licensing Office. A number of Agreement, the WIPO (World Intellectual information systems comparable to similar other projects are in the pipeline. Property Organisation) Internet Treaties systems used in other countries of the EU. were signed - they improve the protection The Czech Republic has a highly competitive ■ INTERNET AVAILABILITY of copyright and related rights. market with discerning customers and As concerns the Internet and its accessibility According to BSA (Business Software competent local business entities with in the Czech Republic, it is very difficult to Alliance) statistics, the rate of software business culture comparable to that of determine total Internet penetration. The piracy in the Czech Republic was 39% in similar entities in EU or OECD countries. record growth of customers was spurred 2007, one percentage point less than in on, especially by offers of new services, 2005. The Czech Republic has managed to price reductions, expansion of coverage, lower the rate of piracy by 27 percentage Miloslav Marčan and the continuing development of data points from 66% in 1994. In comparison to CIO, Ministry of Industry and Trade technologies. other EU member states, the Czech www.mpo.cz According to a survey by the Czech Statistical Office from the summer of 2007, almost 40% of households own a personal computer – PC (1.7 million households). ■ FOREIGN INVESTMENT 32% of households have an Internet The performance of the IT industry is expected to be spurred on by foreign direct connection (1.35 million households) most investment which has been flowing into this branch in recent years. IBM became the of whom use a broadband connection (1.1 investor of the year 2006, when it officially opened an information technologies million). Almost a quarter of all connections outsourcing centre in Brno in April 2006. Today, the centre services over 600 clients use wireless technology. The figures on the worldwide. IBM Brno Integrated Delivery Center employs over 2 400 persons of more overall number of WiFi connections rank the than 70 different nationalities. Czech Republic in the position of European In June 2006, Hewlett-Packard opened regional headquarters for production wireless superpower (source: www.czso.cz). management and distribution of personal computers, printing and image processing Internet access among Czech businesses products in Europe, the Middle-East, and Africa. Honeywell of USA also chose Prague is also very high. According to the Czech for its global centre for support of its aviation manufacture in the same region. Statistical Office, 95% of Czech businesses Microsoft software giant has built a European centre for support of mobile with ten or more employees had Internet technologies, which became operational in January 2007. In February of the following access in 2006 (approx. 38 000 businesses year, Microsoft opened the so-called Microsoft Innovation Center in Brno in in total). When compared to the end of cooperation with the South Moravian Innovation Centre. The aim of the centre is to 2001, there is almost 18% growth. support promising start-up companies, mainly from the IT field, and thus help the development of innovation and innovative business in the Czech Republic. ■ LOW RATE OF SOFTWARE Computer Sciences Corporation opened a new service centre in 2007. The centre PIRACY will provide a wide range of IT services. The progress the Czech Republic has made Another American company – Red Hat – one of the world's leading suppliers of in relation to protection, adherence to, and software based on open source code, opened a new development centre in Brno in enforcement of intellectual property rights 2007. With 207 professionals, the centre ranks among the company's most important ranks it among the most developed branches. countries of the world. Through intensive ICT investments are not limited to foreign companies. This is clearly illustrated by work during the past few years, the Czech the fact that a genuinely Czech company (Logos) was named most important investor Republic has built a very solid foundation of the year in 2007 in the area of strategic services for the expansion of its Prague IT for effective protection of intellectual development centre. property rights, a foundation that all The list is concluded by Novell, which opened its Suse Linux global support centre domestic and foreign investors may rely on. in Prague in 2008, and eBay, with 276 million users worldwide, the largest Internet The Czech Republic is a party to the auction house. It plans to create a marketing and analytical centre in Prague to following most significant international support business activities in Europe and Asia, online advertising campaigns, and treaties on intellectual property rights that testing of new applications. The centre should employ 20 persons by the end of 2008 preceded the conclusion of the WTO TRIPS who will use the infrastructure of the Czech branch of its Skype subsidiary. Agreement (Trade-Related Aspects of Source: CzechInvest
17 | REGION
NUTS 2 – Moravia-Silesia Region
The Moravia-Silesia Region has GERMANY been an important industrial area POLAND of Central Europe since the 19th century. It is the Czech Bruntál Republic’s centre of metallurgy Karviná Opava Ostrava-City and hard coal mining and Nov˘ accounts for 10.5% of the Jiãín Fr˘dek- country’s GDP, which is the SLOVAKIA Místek second largest share after AUSTRIA Prague. The second largest airport in the Czech Republic LOCATION, TERRITORIAL DIVISION, Opava (www.opava-city.cz), and Frýdek- is located here. POPULATION Místek (www.frydekmistek.cz). The Region is situated in the north-east of the Czech Republic and borders on Poland ECONOMIC CHARACTERISTIC (Voivodeships of Silesia and Opole) in the The Region has been an important industrial north and east, and on Slovakia (Žilina area of Central Europe since the 19th Region) in the south-east. The Moravia- century. Its centre is the Ostrava-Karviná Silesia Region has six Local Administrative industrial and mining basin. Industrialisation Units (LAU 1) – Bruntál, Frýdek-Místek, has been closely connected with the use of Karviná, Nový Jičín, Opava, and Ostrava-City local mineral resources (especially high- (město). quality coking coal) and the related With an area of 5 427 sq. km it takes up development of the heavy industry and 6.9% of the area of the Czech Republic and metallurgy. The Region is the country’s is 6th in size among regions. The Region is centre of metallurgy and hard coal mining. divided into 22 administrative areas of Engineering comprises the automobile municipalities with expanded competence industry and metal processing. The chemical that comprise a total of 299 municipalities industry is represented mainly by bulk including 41 towns. chemicals - primary products or semi-finished With a population of 1 249 897 it is the products determined for processing - and the most densely populated region of the Czech manufacture of rubber and plastic materials. Republic, although its 299 municipalities In addition to these traditional sectors, there Moravskoslezský kraj rank it among regions with the lowest is the food industry (beer brewing and meat (Moravia-Silesia Region) number of settlements. Most of the processing in particular), woodworking, the Krajský úřad (Regional Office) Region’s population (62%) live in towns manufacture of electronic and optical 28. října 117 with more than 20 000 inhabitants, which is apparatus, and the production and 702 18 Ostrava exceptional in the Czech Republic. Almost distribution of electricity and gas. Czech Republic a quarter of the Region’s inhabitants live The Region accounts for 10.5% of the phone: +420 595 622 222 in the regional capital of Ostrava (www. Czech Republic’s total exports (of which fax: +420 595 622 126 ostrava.cz). Towns with over 50 000 84.9% go to EU countries). Exports are e-mail: [email protected] inhabitants include Havířov (www. dominated by semi-finished products and www.kr-moravskoslezsky.cz havirov.cz), Karviná (www.karvina.cz), materials (41.2% of regional exports), and machinery and transport equipment (33.2%). Export of mineral fuels and related materials accounts for 31% of total exports. The Moravia-Silesia Region accounts for 10.5% of the GDP of the Czech Republic, which is the second largest share after Prague. The structure of sectors, however, poses a serious problem in terms of restructuring. Receding coal mining and heavy industry has led to unemployment, especially in the Karviná (13.3%) and Bruntál (10.6%) districts. The highest employment is affecting the manufacturing industry and foundries, with mineral mining and transport equipment manufacture in the third place in this respect. With Prague and Ostrava is the second largest town in the Czech Republic in terms of area and the third largest in terms of the the Central Bohemia Region, the Moravia- number of inhabitants Photo: Ostrava City Hall archives
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Silesia Region has the highest average gross EDUCATION, CULTURE, is based in Ostrava. Towns and villages offer wage (EUR 772) among regions. Wages in TOURISM many sports facilities – 136 stadiums, 25 the mineral mining sector are 24.5% higher The Moravia-Silesia Region has a high- winter stadiums, and hundreds of fields, than the regional average. quality system of education, comprising gymnasiums, and swimming pools. There The Region’s location in the border area many elementary schools, secondary are plentiful possibilities in North Moravia offers opportunities for effective co- schools, vocational schools, 12 higher and Silesia for recreation and tourism, operation in manufacture, development of vocational schools, and 4 universities – VŠB therapeutic stays, and visits to cultural infrastructure, environmental protection, -Technical University Ostrava (www.vsb.cz), monuments. In the summer, the Region cultural and educational activities, and University of Ostrava (www.osu.cz), Silesian offers a large network of tourist routes and tourism. For this purpose, the Region has University in Opava (www.slu.cz), and good conditions for both hiking and cycling. established four Euroregions – Beskydy Business School Ostrava (www.vsp.cz), In winter, the Hrubý Jeseník and Beskydy (www.euroregion-beskydy.cz), Praděd which have a combined capacity of 35 000 mountain ranges are the location of popular (www.europraded.cz), Silesia (www. students. centres for cross-country and downhill skiing. The Moravia Silesia Region boasts many cultural monuments, urban BRIEF CHARACTERISTICS OF THE REGION monument reserves, chateaus and castles, NUTS Area (sq. km) Population Municipalities Population density the most important ones including Sovinec (persons/sq. km) in the Rýmařov area (www.sovinec.cz), Starý NUTS 1 – Czech Republic 78 867 10 381 130 6 249 132 Jičín (www.stary-jicin.cz), and Hukvaldy in NUTS 2 – Moravia-Silesia Region 5 427 1 249 897 299 230 Pobeskydí (www.janackovy-hukvaldy.cz). LAU 1 – Bruntál 1 536 98 148 67 64 Industrial sights are specific to this region. LAU 1 – Frýdek-Místek 1 208 210 369 72 174 They include the Technical Museum of LAU 1 – Karviná 356 275 397 17 774 Automobiles in Kopřivnice (www. LAU 1 – Nový Jičín 882 152 352 53 173 tatramuseum.cz), the Railway Wagon LAU 1 – Opava 1 113 176 820 77 159 Museum in Studénka, the Mining Museum LAU 1 – Ostrava-city 332 336 811 13 1 014 (www.muzeumokd.cz), the Dolní Vítkovice Source: Czech Statistical Office (as of 31 December 2007) NUTS = territorial unit according to the unified classification of the EU, LAU 1 = district complex, and the Michal Mine National Cultural Monument. The local spa industry is based on the use euroregion-silesia.cz), and Těšín Silesia The traditional cultural centres of the of iodine-bromine water in the spa of (http://euroregion.inforeg.cz). Region are Ostrava, Opava, and Český Těšín Darkov (www.darkov.cz) and the new (www.tesin.cz) in the Těšín Silesia area with sanatorium at Klimkovice (www.sanatoria- TRANSPORT its significant Polish minority. The Region klimkovice.cz) opened in the early 1990s. In 2003, construction of the D47 motorway has 23 theatres, 78 museums, 129 galleries, The ferric-carbon springs in the Karlova was begun as part of the 6th pan-European and 62 cinemas. The internationally Studánka spa (www.k.studanka.cz) have multimodal corridor. The 80.2-km renowned Janáček Philharmonic Orchestra been used since the 17th century. motorway between Lipník nad Bečvou and the Polish border near Bohumín is to facilitate transport, benefit the economy, Average gross monthly wages 2001-2007 linking the Region to the main European Moravia-Silesia Region Czech Republic transport network.
The main segments of the present road EUR system are the international I/11 road Opava – Ostrava – Český Těšín – Mosty u Jablunkova, and the R48 express road Nový Jičín – Frýdek-Místek – Český Těšín, which cross the east of the Region. The Region is crossed by two international railways, which are a part of the high-speed corridors: the Břeclav – Bohumín – Dětmarovice – Poland section of Unemployment rate 2001-2007 the 2nd transit railway corridor, and the Moravia-Silesia Region Czech Republic Dětmarovice – Slovakia section of the 3rd transit railway corridor. It allows for example % a swift train connection along the entire modernised Prague – Bohumín line. Flights to the Region are served by the Leoš Janáček international airport in Mošnov, the second largest airport in the Czech Republic. Aircraft of all categories can land without limitation on its 3 600 m runway. EUR exchange rate as of 31 December 2007 (CZK 26.6).
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Moravia-Silesia Region Draws Investors from the World Over
This excellent strategic location offers The Region boasts unique wooden large sub-regions and a population buildings, beautiful castles, historical with a well-sized purchasing power. towns, and remarkable technical Traditionally, our people have always had monuments. It is also the location of one excellent technical expertise and displayed of the most beautiful and best preserved great flexibility. We are especially proud of natural habitats in the Czech Republic - our four universities. It is for these reasons and this surprisingly in close proximity to we have seen a great restructuring of the large towns. Our region has three local economy in recent years – many protected landscape areas - Beskydy, subcontractors are making their presence Jeseníky and Poodří. Beskydy offer felt in the automotive industry, information breathtakingly picturesque forests and and communication technologies industry, typical highland architecture with timbering and other new industries. The numerous wooden churches. The wild green landscape around Ostrava, Karviná, countryside of the Jeseníky Mountains and Havířov is constantly expanding into offers various sports, activities as well as former mining areas. Landscape opportunities for pleasant repose. The recultivation is underway at full speed and Poodří countryside, which extends along grey cities are beginning to be a thing of the Odra River, is very well preserved, The Moravia-Silesia Region is the past. Thanks to the high technical skill passing through the Moravian Gateway viewed as the land of contrasts of the workforce, a vast amount of towards Ostrava. investment is flowing in from around the and opportunities. One of the world. The Moravia-Silesia Region is most important industrial regions considered one of the most dynamic of Central Europe, it is situated regions in the Czech Republic. on the borderland of the Czech Moravia-Silesia boasts many natural resources, age-old traditions and crafts, Republic, Poland, and Slovakia. historic and cultural monuments, spas, Evžen Tošenovský sports facilities, and excellent restaurants. Governor of the Moravia-Silesia Region
Comprehensive Services for Investors
The Regional Development SERVICES FOR they search for suitable business locations - Agency (RDA) carries out INCOMING INVESTORS industrial zones, greenfields, brownfields Services for investors are a key activity of and other business properties, they development objectives of the the Agency. They are offered on the organise meetings with the owners, Moravia-Silesia Region and principle of a One-Stop Shop, so incoming provide assistance and accompaniment, assists with the economic and investors receive guaranteed information search for reference businesses and infrastructure development of and comprehensive services in a single organise visits. Furthermore, they search for place. RDA is the entry point for investors suppliers of construction equipment for the Region. The main activities of considering investing in the Moravia-Silesia plants/factories, conduct surveys of the Agency include: services for Region. With cooperation from its partners, suppliers in the Region, organise visits to investors, improving the the RDA assists investors throughout all their sites and, last but no least, they offer stages of their decision-making process. selected outsourcing services in the Region. absorption capacity of the These highly professional services are the RDA assistance obviously does not cease Region to draw EU funds, Region’s added value. In 2007, the RDA upon the completion of the investment. For marketing and tourism, strategic provided services to over 40 investors. the successful assimilation of investors into advice and planning for cities Basic information on the Moravia-Silesia the Region, the Agency offers aftercare. RDA Region is published on the regional portal also offers a new service entitled "RELIO" - and municipalities and the www.dynamicregion.cz. assistance to families of foreign managers in development of real estate, A "tailor-made" presentation is their adaptation to life in the Region. including issues related to prepared for each potential investor. It brownfields. takes into account the strengths, SERVICES FOR ESTABLISHED opportunities, and competitive advantages INVESTORS - AFTERCARE of the Region. Specialists of the RDA The RDA has created a communication provide information for feasibility studies, platform for investors in the Region and
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representatives of the public sector. according to specific investor to key customers in the Region at Regular events include "Breakfast of requirements. To this end, the RDA has organised bilateral negotiations. investors with the Deputy Governor" and built up the KREDO database – a register Although the Agency values investor "Breakfast with the Minister", which is of suppliers containing details of over 500 interest in the manufacturing sector, given used to obtain feedback and improve the regional companies. Suppliers are divided that industrial zones are relatively highly quality of services provided. The major into four categories, with a focus on the occupied, it is a challenge for the Agency themes of the past year, inter alia, included automotive industry, construction, to attract to a greater extent providers of the network services sector with the technology suppliers, and suppliers of services as well as research and participation of the Deputy Minister of other products and services. development companies, i.e. companies Industry and Trade Tomáš Hüner, who gave The supply potential was fully reaped in that generate the highest added value. a presentation on energy policy in the December 2007 at the match-making Czech Republic. KREDO Meeting Day. The first of its kind in As a premium service, the RDA offers the Region, it enabled companies from More information available at: investors information on regional suppliers KREDO to offer their products and services www.arr.cz
Support for Innovative Business Activities
The official opening of the new SUPPORT FOR Regional Centre for Transfer of technology centre – Business INNOVATIVE START-UP Technologies or mediated by external COMPANIES consultants. The structure of potential Incubator at VŠB-TUO (Technical In 2005, Vysoká škola báňská – Technical clients is very broad. Generally, they are University of Ostrava) took place University of Ostrava (VŠB-TUO) began to businessmen from the ranks of academic in June 2008. VŠB-TUO is the build an important innovation and research workers, students, graduates, or existing investor, founder, and operator & development infrastructure via the companies with innovative ideas or plans of the business incubator. Centre of Advanced Innovation and close ties with research and Technologies. Since then the development activities of universities and Centre has prepared successful research institutes in the Moravia-Silesia projects financed from EU Region. structural funds to build the The overall costs of setting up the facilities and launch the activities technology centre amounted to EUR 9.3 of the Business Incubator at VŠB- million. The project for the construction of TUO and the Regional Centre for the technology centre was carried out Transfer of Technologies. The under the Operational Programme Industry aim was to build a complex and Enterprise - the Prosperity Programme. infrastructure in support of Co-financing by the European Fund for innovative business in the Regional Development and the Ministry of Moravia-Silesia Region and to Industry and Trade amounted to approx. become the leading provider of EUR 6 million. support for innovative start-up Over 40 innovative companies will be companies in the Czech based in the centre, along with almost 300 Republic. company employees. The technology The Business Incubator at centre conforms to the highest standards VŠB-TUO offers potential clients for modern offices and semi-industrial quality space for offices, semi- space and is situated at the centre of the industrial space, and other use, University campus in Ostrava-Poruba. providing them with all the necessities for doing successful business under favourable conditions and at a good address. The offer includes consulting services provided by professional consultants of the More at: www.cpit.vsb.cz/inkubator/
Interior of the business incubator building of VŠB-TUO Photo: VŠB-TUO archives
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Development in Třinec Area
PUBLIC PRIVATE A concrete example of support for building the STEEL IT incubator originated at PARTNERSHIPS businesses is its cooperation with the the Třinec Economic Development Agency in The Třinec area is part of the town of Třinec on building the Baliny Industrial cooperation with the Euroschola Institute. The Zone that ranked in the first place in a rating of STEEL IT incubator serves start-up enterprises Moravia-Silesia Region. At industrial zones in 2007. The zone is a 100% operating in the field of information and present it is undergoing dynamic utilised brownfield 20 ha in size, which communication technologies. It also aims to development supported by investors have used and are using to create over curb the exodus of young graduates of 800 jobs. The industrial zone was conceived as technical professions and help with the advanced projects in the area. a joint project of the town of Třinec and development of a new information and The Třinec Economic Třinecké železárny, a. s. (Třinec Ironworks) with communication technology sector in the Development Agency (HRAT), has the help of state financial support – the PPP region. More than 13 partners are partaking in been operating here for the past principle (Public Private Partnership). the project. They are a guarantee of the quality of the services the incubator will offer. 12 years and has been the INVESTMENTS IN THE Assistance includes preferential rent, the latest catalyst behind many of these INDUSTRIAL ZONE equipment, consulting, education, active projects. The largest investor in the industrial zone is marketing, and help with obtaining contracts. Besides preparing and Matador–Dongwon, a sub-supplier for the Another interesting project which is being Hyundai car manufacturer. The investment, prepared in the Třinec area is the establishing implementing development begun in September 2007, will amount to of the Třinec Technology Centre for projects for municipalities and approx. EUR 17.4 million, and will offer jobs to Engineering and Tool-making. Its aim is to non-governmental organisations, 200 persons. At the same time, work on create an environment for research and HRAT also supports businesses a highway grade separation leading to the development in this field and to promote Baliny Industrial Zone has been initiated. This effective cooperation among local companies and cooperates with new will have a major impact on the planned through partnership. investors arriving in the region. diversion of heavy transport from the centre of The purpose of the afore-mentioned the town. The overall investment volume projects is to create conditions for the exceeds EUR 13 million and is expected to be development of businesses with added value completed in October 2008. for the region.