CZECH F CUS Magazine of the Association for Foreign Investment Number 1/2009 the Czech Republic: Europe's Top Location for ICT Sector Focus 4-9

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CZECH F CUS Magazine of the Association for Foreign Investment Number 1/2009 The Czech Republic: Europe's top location for ICT Sector Focus 4-9

Data centres & green IT Spotlight on Project

10-11

Are CFOs from Mars and CIOs from Venus? AFI Insights

12-13

American investment and the potential for the Czech Republic Country Focus 18-19

Investment in the Czech Republic in 2008 Hot Topic

20-21

Welcome to the Czech e-Republic Business Climate

22-23

Moravia-Silesia: a region of many contrasts and opportunities Region Focus 24-25

Czech cuisine: an exceptional mix of tastes Living Czech

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 Technoprojekt Jan Bobek  TÜV SÜD Czech Chairman of the Steering Committee, AFI  Weinhold Legal >> Foreword 1

At its second meeting, the NEC trimmed INVESTOR’S CALENDAR down more than 250 original proposals on the May - July 2009 most fundamental areas and the result was a 26-point revitalisation programme. May It was important that we not do things that 5. - 7.5. Czech Open Days we would regret later. Therefore, we always in Luxembourg 2009 asked whether the steps that we are taking Luxembourg, Luxembourg would be reasonable in times of normality. Conference The measures are focused primarily on the transparency of credit mechanisms, promo- 18. - 21.5. BIO 2009 tion of employment and support for the busi- Atlanta, Georgia, USA ness environment. We are also promoting the Conference flexibility of the labour market and reduction 19. - 20.5. Neue Fördergelder für of social-security contributions, which has long nvestitionen in CEE/SEE Tomáš Sedláček been discussed in professional circles. Vienna, Austria Member of the National Economic Council From the beginning we wanted to formu- Seminar and Chief Macroeconomic Strategist, ČSOB late strong fiscal-stimulus packages, though conversely the aim was to provide relief for June entrepreneurs and firms during this difficult 2. - 4.6. Czech-Finnish Technology Dear Reader, time. Acceleration of depreciation is an impor- Days 2009 tant proposal that will not overburden the state Helsinki, Finland The Czech economy is feeling the budget. Seminar impact of the global economic crisis. The result of the first phase of our work was 9.6. Investieren in Tschechien The prognoses for when it might end are a package, a combination of the supply and de- Bremen, Germany mostly only prophecies taken from a crystal mand sides of the economy, that would not sig- Seminar ball, but it can basically be said that when we nificantly encumber the Czech national budget. bounce back from the depths of this crisis The resulting NEC package is a compromise 15. - 16.6. Gartner Outsourcing does not depend only on us, but mainly on of people with differing opinions but also with & IT Services Summit surrounding countries. mutual respect. London, UK The market economy grows in cycles. When From the beginning, it was clear that we Conference the economic downturn began in 2007, it ap- would not be able to avoid foreign-policy 15. - 21.6. Le Bourget peared in the housing bubble underpinned by themes and international economic policy. Not Paris, France the American sub-prime mortgage sector. We only is it necessary to take into consideration Trade fair hoped that the bubble would simply deflate as the aims of the anti-crisis plans in the surround- had been the case in many previous instances. ing countries and other significant world econ- 25.6. Swissmem – Industrietag Instead, it burst and brought on the greatest omies, but we must also keep the European Zurich, Switzerland economic crisis since the 1930s. agenda in mind. In no case we wish to end up Seminar The current crisis differs from past reces- in the role of freeloaders who are only along July sions in several respects. Primarily, it is global for the ride. Nevertheless, just as our economy 1. - 3.7. Bio Expo Japan and thus no country can fully escape it. Sec- has its own specific nature, so must our anti- Tokyo, Japan ondly, it has adversely affected the absolute crisis measures. Trade fair majority of sectors. Thirdly, the massive sale At the beginning of April the successful G20 of state-owned shares in banks will take much summit was held in London and the NEC had longer than expected. specific recommendations for the approach of The financial crisis did not affect the Czech the Czech government representing the Euro- Republic until autumn last year. In an interna- pean Union. tional comparison, our banks were in much We still have a lot of work to do. Compa- better condition than other banks to the west nies will continue to lay off workers; industry of us. We are one of a few OECD countries will be restructured. In spite of this, however, where the government did not have to rescue I remain optimistic. My ideal consists in active the banks. and responsible people. Being unemployed is We have always emphasised that we could unpleasant for anyone and particularly for the Title: Czech Focus not realistically avoid the economic crisis. Be- poor. I believe, however, that many of those Publication periodicity: quarterly cause we have a small, open economy depend- who lose their jobs will find the courage to Place of issue: Prague ent on exports, the crisis in surrounding coun- start their own businesses. Thus it is necessary Number and date of issue: 1/2009, 5 May 2009 tries is impacting the Czech Republic. for our country to have an open and favourable Ref. no.: MK ČR E 18872 At the beginning of January, Prime Minis- business environment. I believe that many of Publisher: Association for ter Mirek Topolánek introduced the National the NEC’s proposals will contribute to achiev- Foreign Investment Economic Council (NEC), of which I am a ing this goal. Štěpánská 11 member. Most of us are at the disposal of the It is of fundamental importance that the eco- 120 00, Prague 2 republic, not only of the government, though nomic crisis does not become a social crisis. Identification No.: 63835339 the government assured us that our work has a I am firmly convinced that this will not happen purpose and that our results are useful. in the Czech Republic. 2 >> Quarter in Review

Headline news which will last several weeks  February 2009 Last year the Czech Republic but will not affect tourist visas, attracted 213 investment projects worth CZK 30 due to the impacts of the eco- billion with the assistance of CzechInvest. Investors nomic crisis. undertook to create 14,606 new jobs. The most frequent investors were domestic companies, fol- Economy lowed by German, Dutch, and South Korean com-  February 2009 The inter- panies. More information on investments in national ratings agency Stand- 2008 is available in the Hot Topic section of ard & Poor’s states in its latest this issue of Czech Focus. report that the Czech Republic will most likely deal with the  April 2009 The Czech government led by Mirek crisis better than most Eastern Topolánek lost a no-confidence vote at the end of European countries. Resilient March. Ninety-seven of the 197 members of par- consumer demand and rela- liament present voted against the measure. The tively strong economic foun- government subsequently resigned and in April the dations will supposedly help. coalition agreed on the formation of a new care- Conversely, according to a sur- taker government led by Jan Fisher, chairman of the vey conducted by the Czech Czech Statistical Office. A new cabinet should be Chamber of Commerce, near- named by the beginning of May and will function ly 50% of domestic companies until early elections planned for autumn. have laid off or will lay off some of their employees.  April 2009 At the beginning of April American President Barack Obama visited the Czech Repub-  March 2009 Robert Hol- lic. To an enthusiastic crowd at Prague’s Hradčanské man, director and board náměstí, he delivered a speech emphasising liberty member of the Czech Nation- At the beginning of April US President Barack and nuclear disarmament, and later participated in al Bank, stated that the central Obama visited the Czech Republic. the EU-US security summit. bank will negatively adjust its forecast of the decline in the Politics and Legislation country‘s gross domestic product. The bank has parts, with three factories in the Czech Repub-  February 2009 The government adopted the predicted GDP to total 0.3%. Holman estimates lic and one in Hungary. National Anti-Crisis Plan presented by the National that GDP will fall by one to two percent. Economic Council. The main goal of the plan is to  February 2009 From August this year reagents temper the increase in unemployment and to sus-  April 2009 According to an analysis conducted for biotechnology research will be produced by tain the stability of public finances. For example, the by investment bank Goldman Sachs (GS), the A2Z Bio, the Czech subsidiary of the British government has approved a reduction of social- Czech crown will be the strongest currency in firm Yorkshire Bioscience, at the ČKD Prague security contributions and faster property depre- Eastern Europe in the coming 12 months. After a Technological Innovation Centre. The company ciation, and has also pushed for the development brief drop in the coming three months it should, ac- will invest EUR 100,000 in the first phase of the of science and research and support for residential cording to GS, remain at CZK 25.50 to the euro. project. construction.  April 2009 The average unemployment rate in  February 2009 Brose CZ is planning to build a  March 2009 The European Commission has ap- the Czech Republic rose to 7.7% (from 7.4% in factory in Trutnov to produce components for the proved three support programmes to acquire and February). According to the Ministry of Labour and automotive industry. refurbish rail cars, municipal transport vehicles, and Social Affairs, 448,912 people are currently job- regional transport vehicles in the Czech Republic. less.  February 2009 Elmarco, a global manufacturer Subsidies, which will take the form of direct invest- of machines for producing nanofibres, has opened ment contributions, will go to companies created  April 2009 According to a study conducted by a new centre for research, development and pro- by public bodies and companies that provide public the consulting company DTZ, there is currently duction. The facility covers 3,000 m2 and is the only transport services. 555,000 m2 of available industrial space in the one of its kind in the world. The costs of construct- Czech Republic. More than half of all industrial ing and equipping this unique centre of nanofibre  March 2009 projects are located near the capital (roughly 1.5 technology amounted to CZK 190 million. The Ministry of Industry and Trade has issued a million m2). A total of 72,700 m2 were rented out second call for investment-aid applications as part in the first quarter of this year, down 40% on the  February 2009 The holding company Less of the Operational Programme Enterprise and In- preceding quarter. In a y/y comparison, this repre- has built in Čáslav the largest European plant for novation. Investment aid in this case involves the sents a drop of 60%. processing the most massive parts of trees at a cost provision of favourable loans, which can total up to of CZK 1.8 billion, making it the biggest investment CZK 20 million, though no more than 75% of the Business in this sector to date. expected project expenditures.  February 2009 Magna International of Canada, the third big-  February 2009 The domestic banking sec-  April 2009 The Czech Republic suspended issu- gest global producer of automotive compo- tor recorded a net profit of CZK 45.7 billion for ance of work and business visas in Moldova, Mon- nents, is entering the Czech Republic. The 2008. Česká spořitelna had the highest profit golia, Thailand, Ukraine and Vietnam. The Czech company is purchasing the Liberec-based firm (CZK 15.8 billion), followed by Komerční banka authorities decided to implement this measure, Cadence Innovation, a manufacturer of plastic (CZK 13.2 billion). >> Quarter in Review 3

 February 2009 Microsoft is planning to open its trepreneurs are at this time interested in fixing  April 2009 In February exports of road ve- second Microsoft Innovation Centre in the Czech electricity prices for next year. According to the hicles and components from the Czech Repub- Republic. The centre, which should be established chamber, companies lic fell 29% to CZK in Hradec Králové, will have the purpose of assist- should accept the 27.35 billion. Exports ing start-up computer firms. current offer being of cars from the made by the ČEZ Czech Republic were  February 2009 The restaurant chain Hooters group, which is offer- affected by the intro- of America announced plans to enter the Czech ing a 15% reduction duction of so-called market through franchising. of the price of base- liquidation subsidies load electricity start- in EU countries.  February 2009 The transportation company ing in January 2010. Student Agency will expand its cooperation with Miscellaneous the French company Keolis and enter into region-  March 2009  February 2009 al train transport as well as express-train routes. Plasma TV manufac- The Czech Repub- The Liberec region will be the first to benefit from turer Hitachi has an- lic hosted the 2009 the expanded services. nounced the closure Nordic World Ski of its plant located Championship,  March 2009 This year Pardubice-based Synpo in the Triangle Indus- which took place in will begin operating a new research and develop- trial Zone near Žatec. the second half of ment centre, at which it will produce nanoparti- This is primarily due February in the Lib- cles for use in paint systems in the automotive, to a global reduction erec region of north- construction, and defence industries. in interest in plasma ern Bohemia. The televisions and the The government adopted the Na- total cost of organis-  March 2009 Thanks to a subsidy from the resulting decline in tional Anti-Crisis Plan presented ing the championship European Union, a specialized centre focusing on sales earnings. by the National Economic Council. amounted to CZK researching the use of geothermal energy to pro- 2 billion. duce electricity and heat in the Czech Republic  April 2009 will be established in North Bohemia. The entire Donghee Czech is planning to expand pro-  March 2009 According to the World Peace project will cost EUR 78 million (roughly CZK 2.1 duction of chassis parts and fuel tanks for Index compiled by the organisation Vision of Hu- billion), which will be covered by the Operational the automobile industry in Český Těšín. manity and covering 140 nations, the Czech Re- Programme R&D for Innovation. The company wants to implement this plan public is the world’s seventeenth safest country. in June and to in- Iceland, Denmark and Norway top the index,  March 2009 crease its staff by while the lowest ranking include Iraq, Somalia, According to a survey 120 to 300 and in- Sudan and Afghanistan. conducted by Incoma troduce a second Research, there were shift.  March 2009 Last year the Czech Republic 246 hypermarkets ranked as the fourth largest exporter of electric- with a sales area  April 2009 ity among the states of the European common of 1.16 million m2 The Czech soft- market. Net exports of electricity from the Czech in operation in the ware company Republic totalled 11.5 billion kWh. The largest ex- Czech Republic at the Bohemia Interac- porter was France. beginning of 2009. tive transferred The turnover of all its development  March 2009 The Czech Republic is the clear stores of this format team from Aus- leader among the 12 new EU member states exceeded CZK 141 tralia back to when it comes to the use of solar energy. At the billion last year. Prague. The team end of 2008 photovoltaic plants with an output is responsible for of 62.2 MW were in operation in the region; the  March 2009 developing the Czech Republic accounted for 88% (54.7 MW) of It was announced next generation this total. that the brewery of the company’s Starobrno will merge military training  April 2009 Czech Airlines has been named the with Královský Pivo- simulator Virtual Best Airline in Central Europe in the agency Sky- var Krušovice, which Battlespace. trax’s World Airline Awards for the third time in is currently its sole a row. Within the awards survey, the services of shareholder. The  April 2009 individual airlines from around the world are as- sole shareholder The Czech com- sessed by passengers. of the successor pany Alta and company, Královský representatives Sources: Pivovar Krušovice, is Austrian Brau Union. Straro- of Magnitogorskij Metalurgickij Kombinat Czech Information Agency, Česká tisková kancelář, brno has been part of Heineken since 2003. (MMK) have signed a contract for the refur- MF Dnes, Právo, Lidové noviny, Hospodářské noviny, bishment of equipment and construction of a E15, Profit, Euro, Czech Business Weekly, iHNed.cz,  March 2009 According to the Czech Cham- rolling mill at a cost of USD 440 million (CZK Aktualne.cz , Novinky.cz , iDnes.cz , ber of Commerce, 46.3% of companies and en- 8.7 billion). MediaFax, Revers. 4 >> Sector Focus

The Czech Republic: Europe's top location for ICT

Illustrative photo

In today’s society modern Information and Communication Technologies (ICT) are considered to be a decisive factor in economic and social development. This is in large part due to the fact that such technologies make it possible to overcome the obstacles of distance and unfavourable geographical location. The dynamism of development and the scope of operation show that they play an indispensable role in society.

The Czech Republic has emerged as Eu- pean Clients), Deutsche Börse and RedHat components of the Czech economy – last rope’s top location for offshoring and out- (Software Development Centres) were year ICT companies prepared the larg- sourcing of IT services. Repeatedly rec- added to the list of already successfully es- est number of new investments in which ognized by various researchers, this fact tablished centres in the country. Also, com- CzechInvest participated, surpassing even is confirmed by the strong inflow of high- panies such as Sun Microsystems, Monster the traditional champions – the automo- value-added projects of the world’s top IT Technologies, Acision and Infosys have of- tive and engineering industries,” says companies and is fuelled by the country’s ficially announced expansions based on the Alexandra Rudysarova, CEO of CzechIn- tradition of excellence in technical fields. success of their operations in the country. vest. In 2006 and 2007, new projects of Micro- Last year CzechInvest, the Investment Many interesting projects were launched soft (Development Centre for Mobile Tech- and Business Development Agency of in 2008 and the plans of companies (either nologies), Skype (Application Development the Czech Republic, helped mediate 43 newcomers or already established players Centre, the first outside the company’s new IT investments for the Czech Repub- expanding their activities) are promising. home country), CSC (IT Centre for Euro- lic. “Today IT comprises one of the key Such plans involve, for example, the Ex- >> Sector Focus 5

information about the Czech Republic is growing maturity of advanced industrial growing year by year,” stresses Rudysa- sectors. The country’s cultural compat- rová. “Interestingly, we can actually ben- ibility also plays an important role. efit from the current economic downturn Another positive aspect of the Czech as companies are forced to seek the most Republic is its high living standard, thanks cost-effective solutions and the Czech Re- to which it is not difficult for investors to public, with its great location in the middle persuade key employees to relocate to the of Europe coupled with talented program- country, where they will find an extensive mers and wages that are still considerably and safe transportation network and will lower compared to most old EU coun- not have a problem communicating with tries, is the country of choice for many.” the locals in at least one world language. According to the Czech Statistical Office This is one of the reasons that firms such there are currently about 100,000 Czechs as IBM, Adobe and DHL run their Central employed in IT, making the sector one of European operations from Prague. the largest employers in the country. Furthermore, IT companies with Czech “The Czech Republic is a suitable origins are renowned worldwide for their site for offshore outsourcing; it is products, such as antivirus software from highly rated in terms of political AVG Technologies and Alwil (Avast!) and economic stability, cultural protecting millions of computers world- compatibility and security.” wide, integrated security solutions from The Czech Republic: Gartner Analysis Kerio, advanced communication systems from 2N Telekomunikace, consulting and of the Czech Republic as technology services provided by Logos an Offshore Services Location, (2008). (acquired by Ness Technologies in June 2008) and comprehensive services and ICT-related Education – solutions in development and implemen- The Basis of Future Skills Europe's top location for ICT tation of enterprise applications and infor- Development mation systems provided by Unicorn, the The Czech Republic combines an out- biggest Czech software company, whose standing level of general education with chairman, Vladimír Kovář, won the pres- strong science and engineering disciplines. tigious title Entrepreneur of the Year 2008 For generations the Czech education sys- in the Czech Republic. Despite being one tem has generated high-level technical of the most mature IT markets in the re- problem-solving skills in environments gion, the Czech Republic still offers plenty where standard solutions are inadequate. of growth potential and CzechInvest is The Czech education system has a very ready to provide potential investors with strong position in upper secondary educa- comprehensive support, during the entire tion, which serves as the foundation for investment decision-making and imple- advanced learning and training opportuni- mentation process, in order to reduce the ties, as well as preparation for direct en- burden on their management resources, try into the labour market. especially in matters such as location se- An abundant supply of university gradu- lection, information support, matchmak- ates assures continuous replenishment of pert and Solution Centre of Suse Linux, ing, supplier identification and so on. the country’s available labour pool. Pub- which focuses on providing specialist sup- lic universities offer programmes ranging port for installation and use of Novell Ideal location from ICT and electronics to life sciences software products, HSBC Bank’s new for company headquarters and humanities, while a number of private project involving the establishment of an Many organizations that choose to move institutions offer mainly business adminis- Applications and Software Development IT services to lower-cost countries are tration or economics studies. University Centre within its existing shared-servic- daunted by the task of determining which education is generally focused to meet es centre in Ostrava, and the Software- country would best host their operations. the needs of a competitive economy and Development Centre of Solarwinds Soft- Thanks to its location in the centre of Eu- the cooperation between universities and ware Europe Limited in Brno. The Czech rope, the Czech Republic is a gateway to the corporate sector has been expanding Republic’s advantages in the IT field also both eastern and western markets. The in recent years. Overall, there are nearly prompted the American software giant Czech Republic is less than two hours by 350,000 students at 25 public and 39 pri- IBM to choose Prague as the location for air from most European destinations. vate universities and colleges in the Czech its regional headquarters, from which The Czech Republic fares well against Republic. it will direct its activities in Central and other Eastern European countries as a The Czech Republic offers a large Eastern Europe. suitable site for offshore outsourcing. The number of skilled technical workers. The IT companies are becoming increasingly country’s well-developed education sys- country has traditionally been very strong interested in the Czech Republic. “The tem can serve as a basis for future skills in technical fields and approximately one- trend is obvious – the number of com- development and produces a very capa- third of all university graduates have a panies that approach us asking for more ble workforce while contributing to the technical degree. There are currently 6 >> Sector Focus

more than 73,000 technical-university consecutive year this demand is growing tion of the cost” of those in other western students and students who study technical markedly faster than the number of spe- economies. The table shows (page 8) a com- subjects at other universities. More than cialists seeking jobs in the IT sector. parison of salaries of IT specialists in the Unit- 13,000 university graduates in technical The result of this is that the IT sector ed States in 2007 and the salaries paid for the and scientific subjects enter the work- has highest average level of wages among same positions in the Czech Republic. force every year. University students are all professions in the Czech Republic. The engaged in R&D of various technologies, highest wage growth in 2007 was primarily The Czech property market giving them exposure to these technolo- among graduates and specialists with up to is increasingly attractive gies and contributing to the quality of three years’ experience, who were most in for foreign investors graduates. demand in the IT market. The amount of office space in the Czech The wage amount always depends on the Republic is growing steadily while the availabil- Workforce – Skills are the critical level of education, specialization and length ity of space for production facilities has been factor for success in this sector of experience, as well as on the size of the boosted by a major government programme Costs play a substantial role in deciding given company. Bonuses commonly com- designed to support the construction and where to locate and operate a business. prise a significant wage component in sales development of industrial zones, brownfield The continuing growth of the Czech econ- and project-management positions, as well regeneration and development of speculative omy and investment by companies and as in the majority of management positions. buildings, and premises for R&D and shared- state institutions in information technology Nevertheless, one of the main attractions services centres. An increasing number of large has spurred an ever increasing demand for of the Czech economy remains its skilled and international and Czech property developers experienced IT specialists. For the third well-educated workers available at a “frac- are actively seeking sites for new industrial, logistics and business parks.

Ict students and graduates on selected universities 2007/2008 Science and Technology Parks Czech Technical Technical University University University in Prague of Liberec of Hradec Kralove Science and technology parks facilitate Students: 5 601 Students: 1 133 Students: 1 342 cooperation between universities, re- Graduates: 1 359 LIBEREC Graduates: 168 Graduates: 401 search institutes and innovative firms and University of Pardubice thus act as a bridge between the science HRADEC KRALOVE USTI NAD LABEM Students: 1 719 Graduates: 503 and business spheres. Thanks to the in- PRAGUE volvement of universities and research in- KARLOVY VARY Technical University PARDUBICE of Ostrava stitutes, a science and technology park can OLOMOUC OSTRAVA Students: 3 985 offer firms specialized advisory and con- PLZEN Graduates: 502 sulting services, mediate valuable contacts JIHLAVA ZLIN Tomas Bata University and offer custom research services. Firms Students: 851 BRNO can use the park’s office equipment, meet- Graduates: 318 CESKE BUDEJOVICE ing and conference spaces, laboratories Masaryk University and workshops. The key benefit of science Students: 2 315 Graduates: 296 and technology parks is the presence of University advanced companies that are able to help of West Bohemia Charles University University of Economics Brno University Students: 2 632 Students: 1 363 Students: 2 077 of Technology other firms grow and prosper. Graduates: 876 Graduates: 515 Graduates: 371 Students: 6 644 Thanks to the Prosperity Programme, Source: Institute for Information on Education, 2008 Graduates: 1 359 the Czech Republic is now home to an >> Sector Focus 7

expansive network of facilities providing top- the area of transportation technologies and ple of years and nowadays many profession- quality infrastructure for modern innovative related fields. ally trained and highly skilled engineers and companies involved primarily in research and managers are working on different projects. development. ICT in the Regions There are many emerging regions suitable In comparison with other regions of the The most important regions in the Czech for new ICT projects in the Czech Republic, Czech Republic, incubation activities in Republic from the ICT point of view are cer- mainly Plzen, Liberec, Hradec Králové, Par- South Moravia are above average. Moravia is tainly Prague, South Moravia and Moravia- dubice and Zlín, whose local universities have known for its universities, experienced certi- Silesia. Many IT companies have already ex- a long tradition of technical education. In re- fied suppliers, quality workforce and exten- ploited the ideal conditions to set up software cent years, numerous science and technology sive opportunities for investors. Science and development centres or regional headquarters parks have been established near universities, technology parks that have recently opened for CEE operations. The biggest impact that small and medium-sized ICT companies have outside the South Moravia region include the this has had is on the labour market, which is joined clusters and large international and do- Hradec Králové Science and Technology Park, almost saturated in these areas, thus making it mestic companies shown increasing interest in whose purpose is to provide quality facilities difficult to find workers. However, the effects exploiting the opportunities related to these for developing the region’s commercial ac- of the financial crisis have recently brought developments. tivities. Another is the Mstětice Science and about a slight improvement in the situation. Technology Park, which will offer facilities for In the aforementioned regions there has been Jan Fried, developers, scientists and start-up firms in a huge transfer of knowledge in the past cou- CzechInvest

Main specifics and wage trends in individual IT fields and professions in the Czech Republic

Companies’ investments in information technologies have SYSTEM ADMINISTRATORS been rising since 2005 and last year was no exception. This Companies’ demand for UNIX system administrators increased with has led to relatively high demand for IT specialists, particularly corresponding growth in wages for these positions of CZK 2,000 – 5,000 programmers, analysts, project managers, salespeople and con- per month on average. sultants. In 2008 we recorded a slight decline in wages among The position of MS administrator requires at least one year of experi- graduates and, conversely, wage growth among experienced ence in the field, though most companies prefer more experience. How- workers, which is the result of an effort to preclude the exit ever, this no long applies in the case of UNIX system administrators, in of these specialists. At the end of 2008 there was a slight yet which case fresh graduates are offered job opportunities. Among junior notable decrease of investments and thus a decline in demand employees in Helpdesk/HW-technician positions (secondary-school grad- for new employees on the part of ICT companies. Below we uates without experience, university students), we continue to see month- present the main specifics and wage trends in individual IT fields ly salaries under CZK 20,000. Wages of experienced workers increased and professions: by 10% on average. These employees advance to administrator positions after five years at the latest. SOFTWARE DEVELOPMENT The most highly demanded specialisations remain JAVA, C#/. TELECOMMUNICATIONS AND NETWORKS net and C++. Monthly salaries among junior employees are in Demand for university graduates gradually declined in 2008. Wages for the range of CZK 25,000, i.e. CZK 5,000 less than in the previous these positions decreased by an average of 20%. year. Conversely, the salaries of experienced senior program- Specialists focused on network technologies with certification (CCNA, mers/system architects at the upper wage limit increased by at CCNP, CCIE) continue to be better compensated for their work. least CZK 10,000. In the case of junior web programmers (HTML, JavaScript, MANAGEMET PHP, etc.) wages did not increase last year, but rather declined Project managers continue to be the most in-demand employees in this on average to CZK 22,000. PHP remains among the most in-de- category. Unlike in previous years, supply and demand were balanced in mand technologies. Senior web programmers’ top-scale salaries 2008, resulting in a negligible wage increase of CZK 5,000 on average. increased by roughly 20%. In comparison with previous years, we again noticed a trend of reduced Other technologies (Visual basic, Delphi and ABAP) recorded average wages among inexperienced specialists. a slight decline, as there is minimum demand for them, with corresponding wage rates for specialists in these technologies. CONSULTANTS AND ANALYSTS The percentage of companies that require active knowledge of Among junior analysts, there was notable growth in top-scale wages. English in addition to technical knowledge is increasing. Conversely, the upper limit of salaries among senior analysts decreased by The salaries of development-team leaders with up to three CZK 6,000. These positions require certification and training focused on years’ experience barely increased, by approximately CZK 3,000 Microsoft, SAP, Siebel and ITIL. – 5,000 monthly. Specialists with longer experience (five or more Tester jobs remain entry-level positions for secondary-school graduates years) did not see any wage increase. or university students and graduates. 8 >> Sector Focus

MANAGEMENT Position 0-1 year xperience 1-3 years experience 3-5 years experience 5 or more years experience Director, CEO - - - 100 000-250 000 IT manager, CIO - - 50 000-100 000 80 000-150 000 Project manager - 40 000-60 000 50 000-85 000 70 000-140 000 Security manager, CSO - - - 70 000-130 000

SOFTWARE DEVELOPMENT Position 0-1 year experience 1-3 years experience 3-5 years experience 5 or more years experience Team leader - 45 000-55 000 50 000-70 000 60 000-90 000 Programmer C++ 25 000-30 000 30 000-45 000 40 000-60 000 50 000-70 000 Programmer JAVA, J2EE 25 000-30 000 35 000-48 000 45 000-60 000 53 000-90 000 Programmer C#, .net 25 000-30 000 32 000-48 000 43 000-60 000 50 000-80 000 Programmer HTML, PHP 22 000-28 000 25 000-40 000 35 000-50 000 40 000-60 000 Programmer VB, Delphi 25 000-30 000 30 000-40 000 35 000-45 000 40 000-50 000 Programmer PL/SQL 25 000-30 000 32 000-45 000 40 000-55 000 50 000-70 000 Programmer ABAP 25 000-30 000 30 000-45 000 45 000-55 000 50 000-60 000

SYSTEM ADMINISTRATOR Position 0-1 year experience 1-3 years experience 3-5 years experience 5 or more years experience Administrator MS - 25 000-43 000 35 000-50 000 45 000-65 000 Administrator UNIX 23 000-28 000 30 000-45 000 45 000-55 000 50 000-75 000 Application administrator/ERP 22 000-25 000 25 000-45 000 45 000-50 000 50 000-65 000 Database administrator 25 000-28 000 30 000-40 000 40 000-50 000 50 000-60 000 Helpdesk / HW technician 18 000-25 000 25 000-30 000 30 000-35 000 -

TELECOMMUNICATION AND NETWORK Position 0-1 year experience 1-3 years experience 3-5 years experience 5 or more years experience Telecommuni-cations specialist 20 000-25 000 30 000-45 000 35 000-52 000 45 000-65 000 Administrator LAN/WAN 22 000-28 000 25 000-40 000 30 000-45 000 35 000-50 000 Network consultant - 30 000-40 000 40 000-55 000 50 000-75 000

CONSULTANTS Position 0-1 year experience 1-3 years experience 3-5 years experience 5 or more years experience Analyst 25 000-32 000 30 000-43 000 40 000-62 000 40 000-74 000 Tester / Quality engineer 22 000-28 000 30 000-44 000 35 000-55 000 50 000-65 000 System consultant (MS, UNIX) - 30 000-45 000 40 000-55 000 55 000-65 000 Consultant ERP, CRM, - 30 000-50 000 40 000-80 000 60 000-100 000 MIS, DMS, ITIL Safety consultant - 30 000-45 000 40 000-75 000 60 000-90 000 Technical writer 20 000-25 000 25 000-30 000 30 000-40 000 40 000-50 000

Source: Salary & Benefits Guide 2008/2009, Robert Half International

WAGE COMPARISON, CR-USA Position CR min. CZK/month USA min. CZK/month CR max. CZK/month USA max. CZK/month Programmer JAVA 25 000 117 000 90 000 182 000 Team leader 45 000 147 000 90 000 200 000 Administrator MS 25 000 92 000 65 000 144 000 IT manager 50 000 230 000 150 000 378 000 Project manager 40 000 137 000 140 000 200 000 Quality engineer 22 000 98 000 65 000 142 000 Helpdesk 18 000 65 000 35 000 85 000 Analyst 25 000 118 000 74 000 163 000

Source: Salary & Benefits Guide 2008/2009, Robert Half International >> Sector Focus 9

Czech software engineers in demand

What do Hewlett-Packard, In summary, the Czech software-development market is a mature IBM, CA, RedHat, Novell, or environment offering many opportunities ranging from the adventure Sun Microsystems have in com- of establishing a software startup to working on enterprise software mon? Among many other things, products having a global impact. they are involved in significant The roots of this healthy environment lie in the Czech Republic’s enterprise software-product high-quality education system, which provides the heterogeneous research and development skill sets of the country’s software engineers. The Faculty of Math- (R&D) in the Czech Republic. ematics and Physics at Charles University is geared more toward Why? Cheap labor? Routine math and computer science. Technical universities in Prague and tasks such as software test- Brno turn out developers with extensive knowledge of hardware or ing or debugging? Actually, the specific areas such as telecommunications or computer graphics. situation is quite the opposite. The country’s economic universities provide project management- HP Software conducts strategic oriented education focusing on the economic, social, and process R&D for its SOA products. Sun aspects of software development. The Czech Academy of Sciences Microsystem’s Czech branch offers yet another avenue of learning for students interested in tech- has grown into an operation nical fields. Courses led by the Academy’s scientists have tradition- employing several hundred en- ally been seen as the nation’s finest study opportunities. Finally, in gineers and has become one of the few global R&D sites of the the Internet age, anybody can have access to all needed information company that created to Java. CA has established a large R&D team beyond what any university can offer in its curriculum. to bring its mainframe technologies into the future. Novell’s grand Although collaboration between academia and industry has not plans with SUSE Linux have relied on Prague’s R&D team since the been a strength of our education system, the situation has improved very beginning. significantly in the past decade, especially since the Czech Republic Other “new” international firms linked to the era of internet star- entered the European Union. In any case, good developers usually tups, such as eBay and Skype, have established their R&D cent- exit universities with two or three years of experience working in ers here when seeking out new engineering talent. Google employs commercial companies in parallel with their studies, which gives Czech engineers in Krakow and Zurich. We must also mention origi- them a very important head start. nal Czech startups like Grisoft (recently renamed AVG technologies) How can we characterize the Czech software engineer? Based on of the famous AVG anti-virus software and Compelson Labs, the my experience working with international teams from China to the maker of the hugely successful MobilEdit software for cell phones. Bay Area I can say that Czech software engineers are as good as their Systinet is a startup that delivered the first commercial web services western counterparts, regardless of whether we look at innovation, toolkit and was acquired by Mercury Interactive. Illusion Softworks efficiency, discipline, or experience, and they usually work harder. has created a brand known to everybody who plays computer games. There are many first-class Czech developers and architects work- Prague-based JetBrains has started a new era of software refactor- ing at Google and Microsoft, establishing their own successful start- ing. Good Data is bringing a completely new approach to the busi- ups, selling programming books on Amazon, or contributing to open ness intelligence market. In addition, the Czech Republic is among source. Also, you can find many “old-fashioned” developers that are the top ten countries contributing to Linux Kernel development. This less visible but deliver the best code you will ever see. is just to name few Czech firms selling software worldwide. The difference lies in how these engineers are allocated on the Nevertheless, this picture is incomplete. We cannot forget the market. Compared to the hot markets in the US, Israel, and India, very dynamic market of software solutions and consulting, whether it is still very possible to attract first-class talent to work for large these are outsourced from abroad, as in the case of LogicaCMG, or international companies while not paying a fortune for it. Moreover, provided by original Czech companies such as Unicorn, which has the top talented engineers tend to be very loyal employees. They revenues exceeding CZK 1 billion. These two giants are accompa- usually do not shop for opportunities as long as the work they do nied by numerous smaller consulting firms that are also doing quite is interesting and challenging. You don’t normally find the most tal- well on the market. ented people in the consultancy business. In the Czech Republic you Another important market segment for software engineers is driv- do. And this “anomaly” is not going to disappear any time soon. en by large international corporations establishing IT centres here. DHL, Deutsche Börse, and CSC Corporation together employ hun- Contact: dreds of engineers in the Czech Republic. Of no less importance, the Hewlett-Packard Czech Internet community is extremely vital. The list of successful Vyskočilova 1 Internet startups in the Czech Republic is very long, as an example 140 21 Praha 4 we can take the highly successful Seznam.cz, which is the country’s Phone: 420 261 307 111 leading search engine, even outstripping Google in terms of popular- www.hp.cz ity on the local market. 10 >> Spotlight on Project

DATA CENTRES

Illustrative photo & GREEN IT Professional and modern solutions for placement and administration of servers, data fields and other elements of ICT infrastructure

Introduction basic guidelines for the installation of computer Currently, most data centres are operating at The global economic downturn and lack of en- systems. The most stringent level is a Tier 4 data nearly full capacity. In the Czech market there are ergy sources are impacting development in many centre, which is designed to host mission-critical several dozen firms, each offering somewhat dif- sectors, including data centres. This situation can computer systems, with fully redundant subsys- ferent services and focusing on different types of be addressed by focusing development in the ICT tems and compartmentalised security zones con- customers. For the sake of simplification, these field on environmentally friendly technologies and trolled using biometric access-control methods. companies can be divided into two groups. The energy-efficient solutions. Investments in green Another consideration is the placement of the first group comprises operators and owners of energy should contribute to lower costs, greater data centre in a subterranean context to ensure data centres that own the building and perhaps effectiveness and higher energy efficiency. data security as well as environmental considera- even the IT hardware, and ensure cooling, power, tions, such as cooling requirements. In the Czech connectivity, etc. The second group comprises DC DC technology infrastructure Republic there are data centres categorised as renters, i.e. providers of hosting servers that rent In a data centre (DC) and data halls, servers Tier III+, which are mostly situated in Prague and data halls equipped with hardware (or without it) are placed in rack cabinets. These are connected its surrounding areas. In past few years, DCs have and manage the operation of servers, which they to the network’s physical infrastructure (support been built outside of expansive built-up areas; it further rent to their clients. In some cases, these systems), which ensure their power supply, cool- is sometimes required that data centres to be lo- two groups variously overlap or diverge in terms ing, etc. The data halls have technology rooms that cated at least eighty kilometres from city centres. of business relations (B2B and B2C). house, for example, distribution switchboards, The main purpose of this is to limit the risk of at- backup UPS sources and batteries, a motor- tack and breaches of security. Blackouts are an- Data centres in the Czech Republic generator room, an air-conditioning room and other significant risk for data centres. Thanks to its Telefonica O2 cooling chambers. The chillers and transformer good infrastructure, however, the Czech Republic approx. 6,000 m2 , Tier 3+, 50% for corpo- stations are located outside the building. is not prone to blackouts. rate use, 50% for commercial use The entire data centre is secured physically and DHL against fire. Gas and water-mist fire suppression Data centres market approx. 2,500 m2, Tier 3++, corporate systems are used in the data halls. Walls, ceilings in the Czech Republic use only and doors must provide sufficient protection In the Czech market, primarily telecommuni- Vodafone against unauthorised access and against exter- cations companies own and operate data centres. approx. 1,000 m2, Tier 3+, corporate nal fires. The entire building is monitored and is The total area covered by servers in the Czech use only physically guarded continually in 24/7 mode in or- Republic is approximately 10,000 m2. Turnover Other low-cost DCs (commercial use) der to eliminate possible risks such as fire, power on one square metre amounts to roughly EUR GTS Novera, Sitel, TTC Telekomunikace, outages, overheating, malfunctions, unauthorised 600-700 per month. Multinational companies Vegacom, T-Systems, Master, Casablanca access, etc., thus ensuring maximum availability of operating in our region generally build and man- Other corporate DCs data and physical security. age corporate DCs intended for their own use. ČEZ, Česká Spořitelna – Erste Group DC pro As such, they use their own hardware, on which CEE (approx. 2,000 m2), T-Mobile and System Classification of data centres they operate all company applications. With grow- (1,500 m2) The first data centres were built at the begin- ing pressure to reduce company costs, there is a ning of the 1960s and with the advancement of continually growing need to outsource not only Green IT technological development began to be classified this administration but the hardware itself. It can “Green IT” is a relatively new expression in four categories, which are designated as Tier be said that natural development, not only in the that is again gaining prominence due to the oft- I to Tier IV. The simplest is a Tier 1 data centre, Czech market, is trending toward consolidation discussed topics of climate change and rising

which is basically a computer room, following of corporate data centres. energy costs. Data centres contribute to CO2 >> Spotlight on Project 11

emissions, and thus the greenhouse effect, ac- tres is used for cooling systems, whereas in com- upper and lower aisles (Hot and Cold Aisle ap- counting for up to 2% of total emissions. Since panies that apply a green policy cooling systems proach) allows cooling of individual areas. Accord- 2000 the amount of energy consumed by data account for only 15% of energy consumption. In ing to the PUE value, systems can be arranged in centres has more than doubled as a result of not addition, purchasing efficient hardware has a syn- order to create separate cooling zones. Hot air only a greater number of data centres and serv- ergistic effect, because the less energy consumed, in a space does not mix with cold air. By short- ers in operation, but also due to the larger share the less heat is produced; and the less heat pro- ening the distance between the heat source and of so-called “volume servers” (low-cost servers) duced, the less energy is required for cooling the its point of removal, cooling of the space is more with relatively high average consumption of elec- systems. Green IT products have reduced levels focused and more efficient. tricity. In the case of these servers, ever-increas- of cadmium, lead and mercury, which means they ing energy consumption is expected due to rising are healthier to use and less taxing on the envi- Outside-the-box thinking performance and more complex configurations. ronment. They are also more energy efficient and We can cite several endeavours to find a so- Monthly payments for energy currently comprise easier to upgrade and recycle. As an example of lution to problems connected with DC cooling. the most sharply rising operating cost, amounting efficient hardware, we can cite the first 0-Watt For example, Microsoft planned the construction to as much as 35% of ICT firms’ overall budget. PC, an environmentally conscious server that of a DC in Siberia and Sun Microsystems planned With rising energy costs, investments in more ef- does not use any energy when in stand-by mode to set up subterranean DCs in abandoned coal ficient and ecologically friendly hardware appear or hibernation. mines, using groundwater as a coolant. However, to be unavoidable. Application of green policies Green IT requires regular measurement of the most surprising solution is Google’s “compu- could be a way to change the direction of current the energy efficiency of data centres so that po- ter navy” on the open ocean, which would use development. tential problems can be identified and improve- waves to generate energy and for cooling while ments can be quantified. Energy efficiency and saving money on property taxes. Green policies economical operation in the area of power sup- The operation and cooling of computer units ply and cooling of data centres’ IT equipment are Terminology requires more and more energy. One of the measured according to metrics developed by a  Data centre (colocation centre/telehouse) strategies for improving the energy efficiency of consortium of The Green Grid, Uptime Institute, – central workplace for depositing, storage and data centres is virtualisation, which separates the etc. The PUE ratio (Power Usage Effectiveness) management of data using IT infrastructure. server and rack environments for several applica- calculates a data centre’s total facility power and  Server Housing (server hosting/coloca- tions operating on a single physical servers. This divides it by the IT equipment power, i.e. the load tion) of customer servers – includes rental of optimises usage of the infrastructure, reduces associated with all the IT equipment in use there. spaces for the customer’s servers and uninter- energy consumption and lowers the costs of For example, a data centre with a PUE value of rupted high-speed internet connection; the cus- hardware and management. 3.0 consumes three times as much energy as tomer is responsible for server administration. Return on investment is often realised in the the equipment in operation there would actu-  Dedicated servers – rental of a physical medium to long term in the case of exchanging ally need, indicating poor energy efficiency. Well- server to one customer; the customer is respon- inefficient equipment for new, economical hard- designed, environmentally-friendly DCs achieve sible for server administration. ware and more efficient cooling units. However, a PUE value of 1.7, a very high level of energy  Managed servers – rental of a server includ- such investment does not only improve the envi- efficiency by comparison. ing its administration and data backup. ronment, but also saves money. According to a Better organisation of the data hall contributes study conducted by the consulting firm Gartner, to the improved use of electricity and higher ef- Eliška Pazdziorová, 35% to 50% of energy consumed by data cen- ficiency of cooling. A data hall that is divided into CzechInvest

Tier I – Basic: Tier II – Redundant Tier III – Concurrently Tier IV – Fault Tolerant: 99.671% availability components: maintainable: 99.995% availability 99.741% availability 99.982% availability

Susceptible to disruptions from Less susceptible to disruption Enables planned activity without Planned activity does not disrupt both planned and unplanned from both planned and unplanned disrupting computer hardware critical load and the data centre activity activity operation, but unplanned events can sustain at least one worst-case will still cause disruption unplanned event with no critical Single path for power and cool- Single path for power and cooling load impact ing distribution, no redundant distribution, includes redundant Multiple power and cooling components (N) components (N+1) distribution paths but with only Multiple active power and cooling one path active, includes redundant distribution paths, includes May or may not have a raised Includes a raised floor, UPS and components (N+1) redundant components (2 floor, UPS, or generator generator (N+1), i.e. 2 UPS each with N+1 Takes 15 to 20 months to redundancy) Takes 3 months to implement Takes 3 to 6 months to implement implement Takes 15 to 20 months to Annual downtime of 28.8 hours Annual downtime of 22.0 hours Annual downtime of 1.6 hours implement

Must be shut down completely Maintenance of power path and Includes a raised floor and sufficient Annual downtime of 0.4 hours for performance of preventive other parts of the infrastructure capacity and distribution to carry maintenance require a processing shutdown load on one path while performing maintenance on the other. 12 >> AFI insights

The report is based on an online survey Rating the success of the most recent collaboration between 53 senior IT executives and 80 senior finance executives from all across Europe (i.e. from Baťa, Vodafone, Swiss

Life, Barentz, and Beherman). The fol- Unssuccessful lowing paragraphs elaborate on the most important research findings and perspectives for the way forward. Neither unsuccessful nor successful Percentage gap Take just two examples where views diverge: when it comes to the most recent collaboration, 72% of CFOs sur- Successful veyed believe their last project involving CIO IT was successful, compared with 37% of CIOs. And when asked to rate each CFO 0% 20% 40% 60% 80% other on leadership skills, the ability to >> AFI insights 13

collaborate and long- by establishing new metrics that will show driving value. By their very nature, CFOs term strategic thinking how technology can drive productivity in and CIOs often compete for attention, and planning, 98% of other parts of the business and demon- resources and authority, but the success CIOs say CFOs were strate the returns on IT investments. The of their projects – and the company’s good or excellent lead- finance and IT departments should work overall performance – is dependant on ers, while only 42% of together to identify the measures that their ability to cooperate. The CFO and CFOs believe the same matter to the business and mechanisms CIO relationship needs to be built on about their CIOs. This ensuring that they can be successfully im- trust and mutual confidence to become suggests that CIOs plemented and communicated. Evalua- a partnership and, even though it is very have a higher opinion tion of this information could be done by difficult to achieve a perfect level of com- of their CFOs than an established steering committee, which munication, it will eventually pay off. The vice versa. would include members from the opera- fresh ideas resulting from genuine collab- The research found tional, IT and finance departments, who oration can save a lot of resources from that while CFOs and meet regularly. The emphasis placed on being wasted on mistakes. CIOs generally ex- communication would then extend from pressed high mutual the board level to cross-functional teams What is the way forward? regard for each other, and to the shop floor, thus getting “re- The model for the future is based on CFOs believed that sults for the business”. ambitious CFOs and CIOs who drive IT lacked understand- Sharing knowledge and experience is business change, speak the same lan- ing of their company’s key. A oft-cited problem is that CFOs guage and share common goals. The re- business strategy and and CIOs in a meeting room always speak lationship between the CIO and the CFO financial reality, while different languages. One of the research will still be very important, because it CIOs said that the fi- participants, for example, implemented has the potential to impede or accelerate nance department regular job rotations, moving promising IT overall business performance. Accepting failed to communicate managers into the business section for a the status quo looks like a sure-fire route goals effectively. period of time and giving people from the to a marriage of convenience rather than business side a chance to work in the IT de- a beautiful friendship. The in-depth in- Collaboration partment. This should help the IT staff to terviews indicated that many companies is key understand business priorities and those in have made progress by understanding To bridge the gap, finance to be aware of underlying technol- the fundamental differences and bridging collaboration between ogy problems so that everyone is on the the gaps. The research results show that the IT and finance same page. Other companies emphasised understanding how to dismantle barriers departments is cru- the need for more business education for between the IT function and finance to- cial for the success of IT leaders as a way to bridge the gap be- day and then building a platform for col- their projects and their tween the functions and achieve better laboration will be the key to their mutual subsequent impact on understanding. success. earnings. Today, when The mutual expectations of CIOs from a company’s success, CFOs and vice versa are stated in the ta- even its viability, de- ble below. pends on the integrity of its financial data and The IT function must have a voice timeliness of transmis- Research respondents were in near sion, CFOs and CIOs universal agreement that the IT depart- must make sure they ment needs to have a voice at the high- communicate regular- est level of the company, regardless of ly, resolve their natural differences in a whether this means that the CIO reports rational manner and regularly review the directly to the board or to the CFO. process to ensure that it is working. What is crucial is that the IT function’s The quality of collaboration between role and contribution should be under- Jiří Halouzka Ladislav Juza the finance and IT departments needs to stood and that it should be able to align Advisory Services, be evaluated and measured, for example, itself with achieving strategic goals and PricewaterhouseCoopers Czech Republic

What CIOs want from CFOs What CFOs want from CIOs “More communication” “Working more closely together”

“Talking to each other” “CIO reports to the CFO” Contact: “More written communication” “Finance courses for the IT people” PricewaterhouseCoopers Czech Republic “More forced communication” “Mutual understanding of business strategy” Katerinska 40, 120 00 Prague 2 Phone: +420 251 151 111 “Better communication” “IT should deliver more value” E-mail: [email protected] “More flexibility” “Clarify the IT strategy” www.pwc.com/cz 14 >> AFI insights

KPMG’s Global M&A Predictor: Global deal activity set to hit bottom in Q2/Q3, with gradual recovery from late 2009

Illustrative photo

KPMG Corporate Finance’s Global M&A Predictor – a forward-looking survey of 1,000 leading companies’ estimated ratios of net debt-to-EBITDA and prospective price/earnings ratios – forecasts that 2009 will see a continued fall in global mergers and acquisitions (M&A) but that deal activity should slowly rebound late in the year as liquidity improves and attractive value is recognised in certain sectors.

The Predictor reveals a significant fall in 2009 will be a bad year for M&A activity. from endless bad news have started 2009 12-month forward corporate valuations We expect global deal volumes to contin- with a desire to kick-start the deals mar- and therefore also in the appetite to make ue to fall through Q3. With less liquidity ket. This will be facilitated by opportuni- deals (down globally 22.2% from 15.3x at in the market and reduced availability of ties that will inevitably emerge for value the end May 2008 to 11.9x at the end of credit, the appetite and capacity for mak- investors in certain regions and sectors. November 2008). Forecasted net debt- ing deals will continue to decline. The market players to watch will be to-EBITDA ratios have moved from 0.93 However, our analysis leads us to believe those able to execute cash deals, such times to 1.06 times, a 13.5% decline sign- that the corner may well be turned late in as companies that have preserved cash aling a decreasing capacity to make deals. the second half of this year. Those who funds, some sovereign wealth funds, These findings confirm our view that ended 2008 feeling tired and disappointed and private family businesses. Within 12 >> AFI insights 15

Czech Republic and CEE While the Americas and Europe have all The Czech Republic and CEE will see a witnessed significant falls in forward PE ra- similar dramatic fall in deal activity. In the last tios, balance sheets remain robust in North three months of 2008 we saw several nearly America and Latin America, suggesting that finalised deals fall through at the last mo- some corporations will remain in a strong ment. This was due to a combination of fac- position should value-enhancing acquisition tors. On the one hand, it was very difficult to opportunities arise. Within Europe, how- obtain bank financing for acquisitions and, on ever, balance sheets have deteriorated by the other hand, potential buyers were wait- 19%, implying that these companies are in- ing for prices to come down further. creasingly less likely to execute deals in the In terms of bank financing, the situation near term. has been extremely difficult in the past few months and this is expected to continue. If Forecasted M&A Activity banks are willing to provide financing in this by Global Sector market, they will do so only at significantly The Predictor has shown a decline in for- increased interest margins (by several hun- ward PE valuation across all sectors, with dred basis points) and at extremely low lev- technology (18.4x to 12.6x), basic materi- erage. Though it may seem a paradox, this als (13.8x to 9.6x) and industrials (15.5x to shortage in credit availability is also likely to 11.1x) registering the most significant de- lead to new deal activity. Companies that terioration. Unlike the results shown in the currently have short-term financing and previous edition of the Predictor, oil and need to refinance or companies that may gas fell significantly (11.8x to 8.6x) along be in breach of credit-agreement covenants with telecommunications (14.1x to 10.8x), as a result of the economic crisis may be consumer services (17.0x to 13.5x) and forced to sell assets. This will provide good healthcare (15.5x to 12.5x). The smallest opportunities for cash-rich investors. decline was in the consumer goods sector The impact of all this will very likely also (16.2x to 14.6x). be seen in the privatisation of Czech Airlines Utilities and industrials continue to and Prague Airport. Even such strong assets maintain the highest debt ratios, with net will likely attract fewer potential buyers and debt-to-EBITDA at 2.68 times and 2.27 will be sold for less than normally would times, respectively. The technology sec- have been the case. tor continues to show net cash, which re- flects a traditional balance sheet structure Forecasted M&A Activity for this peer group, though healthcare has by World Region moved from a net cash position to one of For the first time, the Predictor indicates a net debt. declining valuation trend in all regions of the world, demonstrating the global decline in M&A activity. As previously, the region which had the biggest drop in valuation was Africa and the Middle East (PEs down 31.6%, from 13.3x to 9.1x). Latin America had the second biggest fall (28.7%, from 16.1x to 11.5x), fol- Alex Verbeek, lowed by North America (24.6%, down from CEE chairman of 15.9x to 12.0). In contrast to the last Predic- KPMG’s corporate tor, in which Europe experienced the second finance practice months, we will start to see some clear biggest decliine, six months on Europe saw signs of a slow, yet strong, recovery in the the second smallest fall (21%, from 13.5x M&A transactions marketplace. A reliable to 10.7x) behind Asia Pacific, which declined indicator that this time has arrived will be 19.9%, from 17.0x to 13.6x. when quality assets come on the market Although the capacity to make deals has and go for reasonable, rather than fire- decreased with the global forecasted net sale, prices. debt-to-EBITDA ratio moving from 0.93 The latest Predictor indicates that by times to 1.06 times, some regions have seen Q2/Q3 2009 the point will come when an improvement in their balance sheets. Contact: the appetite for making deals will im- Latin America and Africa and the Middle prove as cash-rich investors find it hard East bucked the trend and both regions saw KPMG Czech Republic to resist the very low valuations in the improvements of 3.2% and 35.7%, respec- Pobřežní 1a market. This forecasted pick-up in M&A tively, with Africa and the Middle East’s ratio 186 00 Prague 8 activity may provide one of the positive of 0.33 times being the most modest of all. Tel.: +420 222 123 111 indicators needed by economic commen- Europe maintains its position as having the E-mail: [email protected] tators to signal an upturn in the broader highest regional ratio of 1.15, having moved www.kpmg.cz economy. from 0.97 times, a decline of 19.0%. 16 >> AFI insights

Legal framework of Public Private Partnerships in the Czech Republic

a stipulated period administrative units (TAUs), and contributory or- of time. The private ganisations governed by TAUs. However, a public partner should thus contracting authority may also be another legal en- be motivated to tity if it was established for the purpose of serving use the most effec- the public interest, does not have an industrial or tive solutions and commercial character, and is financed or control- processes not only led by another contracting authority or another in construction, but contracting authority appoints or selects more than also in selecting the half of the members of its statutory, management, best technology supervisory and auditing bodies. when equipping the Prior to the commencement of the concession facilities, in order procedure, the public contracting authority must to minimise future ensure the formulation of a concession project, operating costs and which should contain the basic definition of the increase its profit. concession activity, economic conditions and legal Unlike in standard regulationships ensuing from the implementation public tenders, in PPP of the concession contract and economic assess- projects the public ment of the suitability of ensuring the concession entity sets forth only activity in the form of a concession contract. Prior the general entry to commencement of the concession procedure, a criteria and leaves concession project of the Czech Republic or a state the manner of their contributory organisation must be approved by the fulfilment to the pri- government of the Czech Republic. If this concerns vate partner, which a concession project of a TAU, it must thus also What is a public-private partnership? chooses the most suitable solution. Another differ- be approved by the relevant regional or municipal At present, there is no all-encompassing definition ence between public tenders and PPP projects is council. The public contracting authority can then of a public-private partnership (PPP). A partnership the distribution of risks and the transfer thereof to publish an announcement on the commencement between the public and private sectors is one of the the partner that can better offset such risks with of the concession procedure. If this involves, for means of ensuring the availability of public services lower costs. The private partner generally takes on example, a concession contract on construction and related infrastructure. This generally involves a the risks associated with project documentation, work with the planned value of the subject thereof long-term (e.g. 25-30 years) contractually governed design/construction, construction-cost overruns, greater than CZK 146,447,000, the announcement relationship between a public entity, such as a local defective technology, technological deficiencies, on the commencement of the concession proce- administrative unit or the state represented by a lack of human resources, human error, etc. dure is published simultaneously in the public-pro- ministry or the government, and a private company There is a full range of projects in which PPP curement information system and in the Official or consortium. Within such a relationship company, methodology is used – this most commonly involves Journal of the EU. Other announcements are pub- as a private partner, takes on the traditional role of projects in the transportation sector (motorways, lished only in the public-procurement information the state as the caretaker and provider of a public railways, airports, tunnels, bridges, parking fa- system. service. The private partner bears the immediate cilities), healthcare (hospitals), water management The Concession Act recognises a single method acquisition costs of infrastructure/facilities, though (sewerage, water-treatment plants), and waste of selecting suppliers/concessionaires, which is the for a contractually stipulated period payments for management (pressing stations, recycling facilities), concession dialogue, whereas this refers in detail to accessibility are paid either by the public partner though we can also find projects involving housing the provisions of the Act on Public Procurement re- or through direct collection of fees from the end- facilities (prisons, care homes, residential buildings lating to competition dialogue. Within competition users of the infrastructure or service. The extent with rental flats) and recreation facilities (sports dialogue, the public contracting authority engages of the private partner’s involvement may vary. In stadiums). in negotiations with the interested party on all as- a typical PPP project, the private partner designs pects of the project and, jointly with the partner, and builds facilities that it manages and operates for Legal regulation endeavours to find the most suitable solutions that Pursuant to the Concession Act? would fulfil the partners’ needs and requirements. PPPs in Europe Due to a lack of legal regulations that would com- The contracting authority selects one or more pro- prehensively govern concession contracts conclud- posed solutions and subsequently submits to the Since the beginning of the 1990s, more than ed within PPP projects, Act No. 139/2006 Coll., on interested party its offers, from which an assess- 625 projects valued at GBP 58 billion have Concession Contracts and Concession Procedures ment committee selects the one that was judged been implemented in Great Britain alone. In (the Concession Act) was passed in 2006. the most economically favourable. other European countries, 200 PPP projects Pursuant to the Concession Act, this involves so- The contracting authority then concludes a con- were implemented between 2001 and 2007 called public contracting authorities, i.e. the Czech cession contract with the chosen interested party, at a cost of over EUR 31.6 billion. Republic, state contributory organisations (e.g. i.e. the concessionaire. The law expressly stipulates the Road and Motorway Directorate), territorial that such a contract can be concluded only for a de- >> AFI insights 17

fined period, must contain the reasons for prema- applied. Thus arises a special public tender with the basic qualification requirements. Fulfilment of ture termination of the contract and a definition of concession elements, i.e. a quasi-concession. The the professional qualification requirements is dem- the legal relationships of the contracting authority contract, on the basis of which such a public ten- onstrated by a trade licence, a document issued by and concessionaire to the asset that is the subject der is realised, can be concluded only for a finite a professional organisation if membership in such of the contract, including regulations pertaining to period and must contain the provisions required an organisation is required for fulfilment of public its settlement if the contract is terminated prema- for a concession contract. Unlike standard pub- contracts, or a document verifying the professional turely, and must fulfil the stipulated formal require- lic tenders, in the case of a quasi-concession the competence of the supplier. Fulfilment of the tech- ments – the contract must be in written form with contracting authority is obligated to ensure, prior nical qualification requirements is demonstrated by the signatures of the contracting parties. In addition, to commencement of the award procedure, the a list of realised deliveries, technicians, the technical the concession contract must be approved similarly formulation of a concession project that, like an equipment and facilities that the supplier or conces- as in the case of a concession project. actual concession contract, is subject to approval sionaire will have at its disposal, etc. by the government or relevant councils. Unlike the Pursuant to the Public Procurement Act? Public Procurement Act, however, the Concession Current PPP projects However in some cases, Act No. 137/2006 Coll., Act contains provisions that allow, if the defined in the Czech Republic on Public Procurement (the Public Procurement conditions are fulfilled, conclusion of a concession Currently the first domestic PPP projects are Act), is also applied during the implementation contract instead with a selected supplier, even a le- being implemented in the Czech Republic with a of a PPP project. Application of this act does not gal entity, that did not participate in the concession total value of more than CZK 188 billion. The Min- depend on the will of the public entity (contract- procedure. In PPP projects the Act thus takes into istry of Transportation is preparing two projects ing authority), but rather on whether the private account the commonly used institution of special, – AirCon, which will link Prague-Ruzyně Airport partner as the supplier will take the benefits ensu- independent commercial firms established for the to the centre of Prague, including operation and ing from the provision of services or from the use purpose of implementing the project (Special Pur- maintenance, at an estimated cost of CZK 25 bil- of the produced good. Interpretation regulations pose Vehicle – SPV), whose shares are owned by lion; and a project involving the construction and of the European Commission on concessions pur- private companies that were selected as suppliers financing of sections of the D3 motorway and R3 suant to EC law expressly state that “a project is for the project. The involvement of an SPV simpli- expressway at an expected cost of more than CZK considered a public tender for construction work fies the web of mutual contractual relationships, 59 billion. The Ministry of Justice is planning to use in the terms of Community law if construction which brings benefits particular to the public entity, a PPP variant for construction and operation of a costs are covered primarily by the public contract- which thus deals with only one private entity. In the prison in Rapotice u Brna and construction of a ing authority and the supplier does not receive re- case of a PPP project to which the Public Procure- court complex in Ústí nad Labem. The combined muneration from fees paid directly by those who ment Act will be applied, it is necessary for such a cost of both projects will be nearly CZK 7 billion. use the structure.” The same opinion is held by the firm to be established prior to commencement of The largest amount, nearly CZK 100 billion, will be Ministry for Regional Development of the Czech the award procedure, as the Act on Public Procure- invested by the Ministry of Finance in a project to Republic, where it is expressly stipulated in the ment allows the conclusion of a contract only with eliminate certain ecological burdens that arose be- Concession Act methodology that “if the entire an applicant that participated in the procedure. fore privatisation. Concession projects have been payment for the subject of fulfilment is provided approved in all cases, with the exception of the to the supplier by the contracting authority, this by Who can be a supplier/concessionaire? AirCon project. Award procedures will follow. definition involves public procurement.” A supplier, as well as a concessionaire, must fulfil The Public Procurement Act governs six types of basic professional and technical qualification re- award procedures, of which only two will pertain quirements. The basic qualification requirements to most PPP projects – a negotiation procedure include, among other things, probity and non- with publication and competition dialogue. Both existence of unpaid tax liabilities and contributions forms of award procedures allow negotiation on for medical insurance, social security and the state the conditions of the project and the requirements employment policy. Fulfilment of these qualification and needs of the contracting authorities’ entities. requirements is demonstrated with an extract from The methodology of the Ministry for Regional De- the Register of Criminal Records and a confirmation velopment recommends competition dialogue, from the relevant tax authority and insurance ad- Marta Drbohlavová, Ilona Šrollová, “with regard to the fact that [...] it enables the ap- ministration offices that the entity is not in arrears. advokátní koncipientka advokátka plicant to specify the parameters of the project so In the case that the supplier or concessionaire is that it will maximally correspond to the needs of a foreign legal entity, it must demonstrate that all NÖRR STIEFENHOFER LUTZ v. o. s. the contracting authority.” members of its statutory body are not in arrears both in the country in which the entity is registered Or something from everyone? and in the Czech Republic. Documents confirming However, PPP projects differ from standard that the concerned parties are not in arrears may public orders, particularly by the long duration of not be older than 90 days, must be submitted to the contractual relationship between the private the contracting authority in their original form or Contact: and public partners and distribution of risks. In notarised copies thereof together with a notarised the case of so-called above-limit public tenders, translation into the Czech language. Generally, it NÖRR STIEFENHOFER LUTZ v. o. s. where the contract should be concluded for a pe- will also be necessary to furnish these documents Na Poříčí 1079/3a riod of at least five years and the supplier bears with an apostille. With regard to the relatively short 110 00 Prague 1 some of the economic risks connected with the period of validity of the documents and time-con- Czech Republic realisation of the public order that would normally suming nature of acquiring them, including apos- Tel.: +420 233 112 111 be borne by the public contracting authority, the tilles, from abroad, the law offers the possibility to E-mail: [email protected] Public Procurement Act expressly stipulates that register in a list of qualified suppliers. An extract www.noerr.com certain provisions of the Concession Act shall be from this list serves as confirmation of fulfilment of 18 >> Country Focus

American investment and the potential for the Czech Republic

Microsoft in the Czech Republic (source: www.passerinvest.cz)

The American economy is still not in the best shape. Unemployment increased to 8.1% in February, the highest rate since 1983. This is higher than in some European countries, that generally had higher unemployment than the United States. The recovery has not come yet and it is unclear, how long it will take. This situation can influence global investment overall, either posi- tively or negatively for different economies. Oracle in the Czech Republic

Some big, diversified multinational Ameri- still one of the most important players in American corporations made their way can companies are not in such bad shape the world in terms of foreign direct invest- to the top through global investment, prod- as the overall economy and some sectors. ment. Overall, the country is both one of ucts and services, and globally recognised Companies continue to invest at home and the biggest recipients and one of the biggest brands. In the early 1990s, some American abroad and CzechInvest is still busy with providers of capital and projects. The US companies entered the Czech and other new American projects. We are still receiv- also historically ranks at the top in innova- Eastern European markets mainly through ing some manufacturing inquiries, though tion and R&D activities in almost all sectors, product penetration, acquisitions and mod- we would increasingly prefer to concentrate together with Germany, Japan and some ernisation of Czech companies. One of on projects in sectors such as IT, software other countries. This fact is also reflected in the best examples of these early projects development, shared services, business CzechInvest’s marketing and project strat- is that of the company Procter & Gamble support services, life sciences, biotechnol- egy in the territory (US and Canada). As and its growth in Rakovnik. Even when ogy, aerospace, and other interesting areas, mentioned above, in 2008 and 2009 we are some companies followed, such as Hon- including various research and innovation focusing mainly on the following high-value- eywell and Ingersoll Rand, foreign direct activities, cooperation among business, gov- added sectors to attract new investment: investment in the Czech Republic was not ernment and academic entities, joint ven- so significant in the beginning. Countries tures and higher-value-added sourcing of IT and software development like Poland and Hungary received many products from the Czech Republic, mainly Shared services and business services more projects from the United States, Ja- to the strong EU market by American multi- Life sciences and biotechnology pan and Germany. In the late 1990s, the European operations. The United States is Aerospace Czech government decided to implement >> Country Focus 19

various kinds of investment incentives to States as the new star in Central Europe. As always, the most important factor is help boost foreign direct investment in the In the North American market this year, a helpful approach to investors and busi- country, and we could see some positive CzechInvest is focusing almost exclusively ness activities, which provides a clear sig- results of this effort later, especially from on sophisticated investments and projects nal that they are welcome in the Czech 2000 to 2006. Incentives were first ap- with higher added value. In the first half Republic. An important part of this approved for the manufacturing industry and of the 1990s the agency worked mainly proach is to point out that the extent of later applied to business support services on manufacturing projects and following incentives, whether in the form of sub- and technology centres. These measures 2002 the number of production-oriented sidies, tax relief or other benefits, can also helped to increase the number of projects was equalled by services and – but may not necessarily – change on a American projects for which CzechInvest technology centres. American projects case-by-case basis. In the United States, provides assistance. Although incentives substantially transformed the nature of governors of individual states and mayors are usually not the most decisive factor in FDI in the Czech Republic, helping to of cities compete intensely for investors, new investment location (these are usually push non-manufacturing projects to the and the fight for investments is probably labour availability, infrastructure, the prod- fore. Of course, this is due to the high even more intense than that between Eu- uct and market), the welcoming approach degree of development of American in- ropean nations. of the Czech government could have a sig- vestments on a global scale. GE Aviation’s CzechInvest and CzechTrade currently nificant positive influence on investors. acquisition of Walter, an aircraft-engine operate a joint office in Chicago, syner- American companies in the Czech Re- manufacturer, and its preparations to gistically covering priority activities by public are now leaders in new projects in build a large technology unit in new and attracting high-quality investors to the sectors like information technology, soft- modernised spaces based on the existing Czech Republic and supporting small ware development, shared services and production operations provide a good ex- and medium-sized enterprises’ exports business services centres, as well as in ample of such an investment implemented to the American market. The agencies’ expansion of existing operations and busi- in the Czech Republic in past year. The same joint events help to enhance the Czech ness activities. can be said for Concur’s project to open Republic’s image among all concerned Honeywell and Ingersoll Rand provide a software centre in Prague. IT projects business entities. In addition, the office some of the best examples of the con- comprise a big part of new activities origi- collaborates with the economic section tinuing expansions of multi-investment nating in the United States. Perhaps even of the Czech embassy in Washington and American projects in the Czech Republic. more important than new projects are consulates in New York, Chicago and Los These corporations have all kinds of busi- those involving the continuing expansion Angeles. CzechInvest has decided to re- ness activities in our country, from several of American firms that are further de- open its office on the west coast of the manufacturing plants to several innovation veloping their existing operations in the United States this year in order to better and services centres in various Czech cit- Czech Republic (e.g. Honeywell, Ingersoll serve this important and expansive terri- ies. Another outstanding recent example Rand, IBM, Visteon, Microsoft, Meopta, tory. CzechInvest is now in the process is Microsoft’s growing number of innova- Computer Associates, etc.). Projects re- of selecting the location of the new office tion centres and business activities in the lated to healthcare and medical research and exploring ways to best exploit syner- Czech Republic. All of these companies and development are also of great impor- gies between both of its American offices and many others continue to enjoy access tance. For example, in Brno the Interna- and for the whole region, including some to skilled Czech labour and the stable and tional Clinical Research Centre, in which projects, seminars and business exhibi- favourable business environment of the the renowned Mayo Clinic is participat- tions in Canada. CzechInvest will continue Czech Republic, where from they can ing, is one of the best representations to concentrate on the higher-value-added serve the powerful EU market. of advanced medical investments in the projects and bringing new, high-quality As for projects involving business Czech Republic. Thanks to this, other gi- American investments to the Czech Re- services and development centres, until ants in the healthcare industry, such as public. Even during the economic crisis, relatively recently Prague was the most GE Healthcare and Cleveland Clinic, and or perhaps because of it, American com- popular location, with investments from, pharmaceuticals and biotechnology firms panies are still very actively searching for among others, Computer Associates, like Wyeth, Abbott, Amgen, Genentech new markets and investment locations in Microsoft, Exxon Mobil, Sun Microsys- or Genzyme have shown interest in es- order to diversify their global business tems and ADP (see our updated maps tablishing a presence here. portfolios. of American companies in the Czech Re- Successful expansions provide a guar- public). But lately, however, many com- antee of long-term operation in the ter- panies have discovered the advantages of ritory, though of course in the competi- Bohuslav Frelich university cities like Brno, Ostrava, Plzen tive environment and constantly changing CzechInvest, Chicago Office and Olomouc and a growing number of global economy it is necessary to be pre- new projects are being directed to these pared for all possible contingencies. In Contact: new locations, which is very important the United States, for example, it is not for the overall development of the Czech unusual for a previously successful firm to 222 Merchandise Mart Plaza economy. Honeywell, IBM, Red Hat, Sch- restrict or even discontinue operations Suite 938 neider Logistics, Roper, Solectron and in a given region due to changing market Chicago, IL 60654 SRA are only a few of the companies that conditions. Conversely, a region, city or U.S.A. have set up operations outside the capi- country that possesses quality infrastruc- Phone: +1-312-245 0180 tal. Brno in particular, with its talented ture and an educated, flexible workforce E-mail: [email protected] and skilled university-educated work- could expect to retain such operations, Web: www.czechinvest.org force is now being viewed in the United though perhaps under a different owner. 20 >> Hot Topic

Investment in the Czech Republic in 2008: services surpass manufacturing for the first time

IBM provides an outstanding example from the past year. The company has focused on software development in the Czech Republic since the 1990s. Its excellent experience with Czech programmers and the overall business environment in the Czech Republic played a significant role in the company’s decision last year to relocate the management of the entire IBM group for Central and Eastern Europe from Vienna to Prague. The list of new investors from last year includes, for example, eBay, which opened its marketing and analysis centre for Europe in Prague. Re- gus, which leases out office spaces including all related services in 70 countries, is gradually concentrating the complete administration of its finances and other shared services in Prague. Last year’s most significant expansions included a billion-crown investment by the Israeli company Teva in pharmaceutical production at its IVAX subsidiary in Opava. EXBIO and CPN, for example, are preparing centres for research in the areas of pharmacy and biotechnology, while the Zlín- based company Rokospol, which produces paint containing nanoparticles, is also establishing a technology centre. “Last year CzechInvest also helped Czech firms to obtain orders in the value of CZK 930 million from significant foreign companies,” adds Rudyšarová, commenting on the agency’s other important services for domestic companies. “The Czech Republic has clearly entered the next phase of attracting new investments and building a knowledge-based economy, as investments in services have begun to flow into the country on a large scale following the previous dominance of manufacturing investments,” says mac- roeconomist Tomáš Sedláček, commenting on the statistics. “In past years, a range of truly big investors have been attracted to regions with high unemployment. Having had positive initial experience with production here, many of these investors have entrusted original research and development to their Czech branches. However, we mustn’t forget that a large propor- tion of these investments would not have been possible or have been made so soon if the Czech Republic had not first proven itself worthy in the area of production.”

Software developers in the forefront Nearly two out of three new investment projects Software developers are behind the greatest number of new investments, gained by CzechInvest in 2008 involved research accounting for 21% of the total number of new projects. Forty-three new and development or business support services. software-development centres are being established with CzechInvest’s assistance. These centres will employ 3,000 people, two-thirds of whom Last year investments in research and development and business support will be university graduates. Engineering, with 37 projects, was the second services in the Czech Republic outweighed those in manufacturing projects strongest sector last year in terms of new investments. The country’s tradi- for the first time. This is according to statistics from CzechInvest, which tional champion, the automotive industry, fell to third place with 28 invest- helps domestic and foreign investors to implement their business plans in the ments. Czech Republic. With CzechInvest’s assistance, a total of 213 new invest- “AVG in Brno, TeLogic in Liberec and IT Systems in České Budějovice ment projects are to be implemented; 76 of these are focused on research are just a few names on a long list of new and expanding software-devel- and development, 58 on services and 79 on production. These projects will opment companies in the Czech Republic. The dominant share of such create jobs for 14,606 people, including nearly 4,000 university graduates. companies in the total number of new projects is further evidence of how The total value of the new investments is CZK 30 billion. the composition of investments is changing dramatically,” says Rudyšarová. “There was a fundamental change in the nature of new investments in “Only a few years ago the automotive industry was undeniably dominant; 2008. It was the first time ever that services, including research and develop- today sectors involving services rather than manufacturing are of compara- ment, comprised the majority of new projects,” says Alexandra Rudyšarová, ble importance.” acting CEO of CzechInvest. “On one hand, this is a natural development – Comparison with 2007 the Czech Republic is literally in the centre of Europe and if companies want According to precise statistics for 2007, CzechInvest assisted in gaining to succeed here, they have only one option, which is to invest in state-of-the- 201 investment projects for the Czech Republic that year in the total value art technologies and in research so that they can offer customers the highest of CZK 71 billion. “Whereas in 2007 research and development or services possible quality. On the other hand, CzechInvest has been able to accelerate comprised only 32% of all investment projects, this year that figure is 63%. this development thanks to support from national and European sources.” Top-quality equipment for software developers is generally less expensive >> Hot Topic 21

than construction of a new manufacturing plant. In addition, most companies Number of projects mediated by CzechInvest in 2008 by country that are investing in services lease facilities and equipment, so according to our statistics their initial investment is lower,” says Rudyšarová. China, Taiwan Other “Attracting new investment projects to the country is not about the size of 1% 2% the initial investment. The important thing is the level of added value created Germany Israel 14% 1% by the investor’s employees. In coming years we can expect that investment Poland volumes will decline while added value in companies will grow,” says Tomáš United States 1% Sedláček. 7% Belgium, Netherlands 2% Japan, Korea Aid accelerates research 3% The possibility to receive support from the European Operational Pro- Italy, Cyprus, Spain Czech Republic 5% 60% gramme Enterprise and Innovation was fully opened to companies that de- Great Britain cided to invest in research and development in the Czech Republic in 2008. 2% Seventy-five companies immediately made use of the Potential Programme, France 2% while another 25 firms decided for the ICT and Business Support Services Programme, which supports software development and the establishment of expert solution centres and high-tech service centres. In addition, state Number of projects mediated by CzechInvest in 2008 by sectors aid is being used to support the establishment of shared-services centres and one research and development centre. wood-processing and paper other “It is very important that we are able to offer tailored support to many 1% 7% food production automotive types of companies. If we did not have this ability, a range of companies that 3% 13% we are talking about today would have set up their operations in neighbour- business support biotechnology ing countries,” adds Rudyšarová. services centres and medical technology 6% 1% IT and software mechanical engineering Two out three investors are based development 17% 21% in the Czech Republic metal-working “The greatest number of new investment projects in which CzechInvest rubber and plastics and -processing took part last year have their origins in the Czech Republic,” Rudyšarová 3% 6% chemical and pharmaceutical electronics and electrical engineering emphasises. “Companies based in the Czech Republic prepared 127 new 11% 11% investments in the total value of nearly ten billion crowns. These investments will create 4,054 new jobs. In addition, every third newly created position in Czech companies will be occupied by a specialist with a university degree.” Number of projects mediated According to the statistics for 2008, investments undertaken direct- by CzechInvest in 2008 by type of activity ly by Czech companies rank first both in terms of the number of new projects as well as in total investment volume and the number of newly created jobs. “The statistics show that every second investment project Research on which we worked last year originated in the Czech Republic,” adds and development Rudyšarová. According to the number of investment projects, investors 36% from Germany, with 29 projects, placed second behind Czech compa- Manufacturing nies, followed by companies from the United States in third place with 14 37% investments.

South Moravia leads the way, Services thanks to IT 27% As in 2007, the greatest number of new investments last year was in the South Moravia region, which was chosen by 35 companies, one-third of which operate in the areas of IT and software development. With 30 CzechInvest: 17 years of supporting new projects, the second most popular region among investors was investment in the Czech Republic Moravia-Silesia, though the largest number of new jobs (2,912) will be CzechInvest was established in 1992 and mediated its first invest- created there. Central Bohemia finished 2008 in third place with 27 new ment project for the Czech Republic a year later. Since then, the investments. agency has taken part in 1,193 investments in the value of CZK 647 billion. Projects mediated by CzechInvest have directly resulted in the creation of 202,461 new jobs. Thousands more jobs have been created in connection with related investments.

Stepanska 15, 120 00 Prague, Czech Republic

Phone: +420 296 342 500, Fax: +420 296 342 502 E-mail: [email protected] 22 >> Business Climate Welcome to the Czech e-Republic

competitiveness and now plays a significant role in the CEE region. If we leave aside a given country’s strategic location and infrastructure, the education level of its inhabitants, its interest rates and basic macroeconomic indicators, on the basis of which a potential foreign investor may decide to invest in that country, an important criterion is indisputably the administrative burden faced by companies. Czech POINT, one of the component parts of the comprehensive eGON (eGovernment) system, is the most visible manifestation of the electronisation of public administration.

Czech POINT Czech POINT is a project intended to reduce the excessive amount of red tape in public administration. Until the system was launched, a citizen or representative of a foreign investor had to visit several offices to resolve just one problem. Czech POINT serves as a location for performance of public administration, enabling communication with the state at a single, universal point of contact, which brings obvious benefits for everyone concerned. The goal was to create a comprehensive service for communication with the state via one universal office where it would be possible to obtain and verify data from public and non-public information systems, notarise documents, transfer printed documents into electronic form and vice versa, obtain information on the course of administrative procedures in relation to the citizen and to submit materials for commencement of administrative procedures. This involves the maximal use A few years ago the following conversation of information in the state’s possession in could frequently be heard in Czech companies: order to minimise the requirements places Business manager: “Do we need to complete any more on citizens. materials before submitting our offer for the tender?” The Czech POINT project significantly Consultant: “I still have to request extracts from the eases communication with the state. In some situations it will suffice to visit only Commercial Register and Register of Criminal Records.” one office. In the final phase of the project it With a power of attorney, the young consultant would then will be possible to handle these matters via head to the relevant authorities, which were scattered around the internet from one’s home or office. the city, and spend hours standing in a queue, only to find out later that the extract from the Commercial Register could What Czech POINT provides: not be issued on the spot.  Extracts from the Property Register  Extracts from the Commercial Register  Extracts from the Trades Register Until the launch of the Czech POINT This year marks the twentieth anniver-  Extracts from the Register system, this was a typical situation. Thanks sary of the Velvet Revolution. During the of Criminal Records to this new system, however, today it is past two decades, the Czech Republic has  Acceptance of submissions pursuant necessary only to find the nearest post of- transformed itself from a centrally planned to the Trade Licensing Act (Section 72) fice, where you can obtain a range of of- to an export-oriented market economy.  Applications for extracts or transcripts ficial extracts while you wait. The country has substantially improved its from the Register of Criminal Records >> Business Climate 23

pursuant to Act No. 124/2008 Coll. ties), register of territorial identification, sibilities is much more difficult to define.  Extracts from the Register addresses and property; and a register of It comprises two main areas, the first of of Traffic Violations rights and responsibilities. which is the competency of public ad-  Issuance of verified data from The basic register of inhabitants con- ministrative bodies (from the legislative the Listing of Qualified Suppliers tains information both on citizens of the perspective, offices do not have rights  Submissions to the register Czech Republic and on foreigners resid- and responsibilities, as they only perform of participants in the operation ing here. Information on natural persons activities stipulated by legal regulations). of the ISOH wrecked-vehicles module will be maintained on a smaller scale The second area involves the rights and  Czech POINT E-SHOP – extracts via post than is the case with records of inhabit- responsibilities of natural persons and le- ants maintained in the information sys- gal entities. The purpose of this register On 16 February 2009 at 9:05:53 a.m. an tem, because the basic register should be is to create a space that will gradually be extract with the curious number 1234567 accessible to a broader group of offices filled with information on the rights and was issued at a branch of the Czech Post- that do not need more detailed personal responsibilities most frequently exercised al service. This was an extract from the information for their everyday operation. on the part of the offices. The register of Register of Traffic Violations, which is the In the register of inhabitants, information rights and responsibilities will contain an third most commonly used by citizens, on natural persons will be maintain in the overview of the activities performed by accounting for 14.02% of the overall following scope: name, surname, residen- public authorities, information on the of- number of issued extracts. The Register tial address (in this case only a link to the fices that conduct the given activities and of Criminal Records leads with 44.68%, basic register of territorial identification, definition of the roles that are necessary followed by the Property Register with addresses and property will be used so in order to conduct these activities. 25.52% of issued extracts. Between the that if, in the given location, the name of a For a body to function properly, it needs beginning of the year and 16 February street changes, for example, the user will not only a “brain” in the form of the basic 2009, 28,597 extracts from the Register always be shown the current data with registers, but also a “heart”, which con- of Traffic Violations were issued. In total, the correct name), date and place of birth sists of an information system of data box- 1,417,978 extracts had been issued by 31 and death (whereas in the case of place of es. An act drafted by the Ministry of the March 2009. birth there will again be only a link to the Interior which came into force in Septem- basic register of territorial identification, ber 2008 governs the area of data boxes as EGON addresses and property). well as the conversion of documents from Greater demands are now being placed Information on the territory of the electronic to printed form and vice versa. on existing information technologies and Czech Republic is among the most fre- For both individuals and firms, data boxes their further development within the quently used in the public administration. will simplify electronic communication state administration. This stems prima- This particularly concerns information on with administrative offices while ensur- rily from the requirements of building an addresses that most public administrative ing greater reliability than is the case with e-state, i.e. electronisation of the agen- bodies need when conducting their ac- ordinary e-mail communication. When an das required for the proper running of tivities. However, a range of these bod- individual or firm has a data box set up, the state, for which it no longer suffices ies also use information that defines the the offices will deliver document primarily to have individual information sources location of a territory on the ground. The to the box. In two-way communication, and individual provision of services. It is frequency of use or the non-existence of a public administrative bodies will have an necessary to have overall mutual coor- single source of information, which should obligation to use the electronic form of dination of the development of informa- guarantee the correctness, precision and communication via data boxes. This will tion sources in order to fully facilitate the thoroughness of such information, led to lead to lower costs and higher efficiency performance of users’ necessary activities the decision to create the basic register of the activities conducted by the public (either within the state administration or of territorial identification, addresses and administrative bodies. on the part of its clients – citizens) from a property. The electronisation of the state adminis- single location. The basic register of entities (ROE) cov- tration – eGovernment – will comprehen- The brain of eGON comprises the ba- ers the creation of one reference source sively facilitate communication between sic registers of the public administration. – a register of entities that will include all private entities and administrative offices, These will serve as a source of the most types of entities (economic units and enti- which will lead to the improved efficiency frequently used information in the per- ties) of a business as well as non-business of processes on both sides, a reduction formance of public administration. In to- character and integral linking of individual of costs associated with these activities tal, four basic registers will be established records (structure, classification, location and, primarily, to the greater attractive- along with an information system ensuring and means of registration, communica- ness of the Czech business environment the interface between these registers. tion interface, verification and inspection in the eyes of potential foreign investors. The inability to share data and to en- of data, updating and use of data). Among Thanks to this project, the Czech Repub- sure the secure sharing of data by state other things, this will make it possible for lic will rank among those countries that administrative bodies is the biggest prob- all public administrative bodies to have apply modern information technologies lem at this time. Therefore, the next step available a single source of uniform and not only for their own benefit, but mainly in the eGovernment project is to launch verified data on entities maintained in the for that of business entities and their citi- the project establishing the four basic ROE. The reference data in the register zens in general. registers – register of inhabitants (data on of entities will concern entities within the natural persons); register of entities (data Czech Republic. on legal entities, natural persons conduct- Unlike the basic registers described Martin Michalov, ing business, and bodies of public authori- above, the register of rights and respon- Association for Foreign Investment 24 >> Region Focus

Moravia-Silesia: a region of many contrasts and opportunities

Ostrava

In the past, Moravia-Silesia, in the northeast corner of the Czech Republic, was often neglected, overshadowed by more well-known regions of the country. In recent years, however, that has changed and Moravia-Silesia is now the fastest-developing region in the republic. This is thanks not only to the massive inflow of foreign investments, but also to the explosive development of the region’s traditional producers, which through restructuring have become much more competitive and have thus established themselves on global markets.

Moravia-Silesia and its surroundings by the Hrubý Jeseník, which gently gradates into dustrialisation and, therefore, the establishment and The region is located in the north-eastern part rolling hills – Nízký Jeseník and Oderské vrchy. growth of new towns. of the country, more than 300 km from Prague, The region’s natural wealth consists of its high- The region’s most well-known genius loci in in- and borders the Žilina region of Slovakia to the quality farmland in the Opavská nížina and Moravská arguably iron and steel (though Ostrava was long east and Polish Opole voivodeship and heavily brána areas and the large amount of mineral raw presented as the steel heart of the republic). The industrialised Silesian voivodeship to the north. materials found here (black coal – Ostrava-Karvina small town of Vítkovice on the Ostravice River had Moravian-Silesian’s neighbours to the south and Basin, limestone, gypsum, granite, slate, sand and the best conditions for the establishment of the first west are the Czech Republic’s Zlín and Olomouc gravel). smelter (at the Rudolf Ironworks in 1828) not only in regions, respectively. It is necessary to point out the Czech lands but in the entire Habsburg Empire. that the borders with Slovakia and Poland are not Industry and investment: The fast-flowing Ostravice River offered hydro- barriers as they were in the past. Following acces- history and present power, nearby Silesian Ostrava provided the black sion to the EU and Schengen area, new opportu- Covering 5,427 km2, Moravia-Silesia is the sixth coal, and iron ore was brought in from the Beskydy nities for cooperation have opened up in a range biggest region in the Czech Republic in terms of deposits. of fields (trade, education, travel, culture, etc.). land area, and is home to over 1.2 million people, In the 19th and 20th centuries coal mining was which makes it the country’s most densely popu- expanded to the entire Ostrava-Karvina Basin and Diverse scenery and natural wealth lated region, though even in this respect there more steel mills were established in Třinec (1839 From the physical-geographical perspective, are enormous contrasts. While the Ostrava ag- – Třinecké železárny) and Ostrava-Kunčice (1949 – Moravia-Silesia is very diverse. The region’s low- glomeration (Ostrava, Havířov, Karvina, Orlova, Nová Hu, now ArcelorMitall). est point (at 195 metres above sea level) lies near Bohumín, etc.), has 1,000 residents per square Unfortunately, reckless coal mining and the in- the Odra River on the border with Poland. Fifty kilometre, the Osoblaha and Rýmařov areas are tense concentration of heavy industry had a very kilometres to the west, however, we come to the practically devoid of human settlement and un- negative impact on the region’s natural environment “the roof of Moravia” – Praděd, the highest point touched by industry. in the form of soil degradation, slag heaps and high of the Hrubý Jeseník mountain range, at 1,492 Black-coal mining in the Ostrava area dates back concentrations of pollutants in the air, water and soil. meters above sea level. Praděd is well-known to the end of the 18th century, which also saw the After 1989, steps were taken to reverse this trend, due to the presence of Central Europe’s biggest establishment of the region’s first steel mills and often through closure of obsolete plants, and coal snow cap. The western part of the region is fringed machine shops, which brought about explosive in- mining in Ostrava was halted in 1994. Devastated >> Region Focus 25

Opava - museum well-prepared industrial zones. For example, Brose, scheduled service to Prague and Vienna. The high Dura Automotive Systems, Erich Jaeger and Rieger, quality of education in Moravia-Silesia constitutes set up operations in the Kopřivnice industrial zone another benefit for existing and newly incoming to supply for Volkswagen, Opel and a range of other investors. Emphasis is placed on close cooperation European automotive firms. Following the decision between the manufacturing industry and tertiary ed- of the Korean carmaker Hyundai to build its first Eu- ucational institutes in order to produce highly quali- ropean plant in Nošovice, several of the company’s fied graduates. The region also offers a full range of suppliers followed (Sungwoo Hitech, Dymos, Plakor, secondary schools (high schools, business acad- Hysco, Donghee, Sejong, PHA, Matador-Dongwon, emies, language schools and technical schools pro- Hanwha L&C). Production of the Hyundai i30 was viding education in various engineering disciplines) officially launched at the end of 2008; an estate ver- and four universities, the largest being the Technical sion will be introduced this year. University of Ostrava with 19,000 students receiving Other new investments in the region include education in economics, electrical engineering and those of Osram Bruntál (fine wire and spools, light- informatics, mechanical engineering, mining-geology ing components), Shimano Karvina (bicycle compo- and metallurgy and metals engineering. University of nents), Mölnlycke Health Care (single-use surgical Ostrava educates students in the fields of natural sci- supplies), Central European Aircraft Maintenance ences, philosophy, pedagogy, healthcare and social Mošnov (aircraft repair centre – Boeing, Saab, etc.), sciences, and a medical school is being established Tieto Ostrava (software and applications develop- there. The other two universities in the region are ment), Bang & Olufsen Kopřivnice (consumer elec- Silesian University (Opava, Karvina) and Business tronics), ASUS Ostrava (production and assembly of School Ostrava plc. computer components), HSBC Ostrava (business With the Operational Programme Research and support services centre, software development) and Development for Innovation, three of the local uni- GE Money Bank Ostrava (call-centre and business versities are preparing to establish a centre of excel- support services centre). lence under the name IT4Innovations. This involves For new investors and established firms inter- a unique super-computer centre that will be focused ested in expanding, Moravia-Silesia offers abundant on modern fields of science including mechatronics,

Praděd industrial zones (Mošnov, Karvina, Krnov, Studénka, biomedicine, security engineering and nanotechnol- Rýmařov) and prepared rental facilities for produc- ogy. The project will lead to a significant concentration and logistics (CTP Park Ostrava, Nový Jičín, Pro- tion of research capacities in the IT and other inno- locations were cleaned up and recultivated and one Logis Park Ostrava-Poruba, SEGRO Ostrava-Přívoz). vative sectors in the region, thus contributing not can again see fishermen and rowers on the Ostravice For IT and BSS projects, a full range of modern of- only to economic development, but also to stronger River in the centre of Ostrava. fice spaces is newly available (AXIS Park Ostrava- links between business and academia, more effect The region’s economy has never relied solely Hrabová, Orchard Ostrava, Nordica Ostrava) and transfer of technologies and the establishment of on heavy industry, as companies here represent a other office projects are being implemented not only new spin-off firms. broad spectrum of sectors, including the automo- in Ostrava. Innovative companies that want to closely tive industry (Tatra Kopřivnice – freight vehicles, cooperate with the academic sphere can also find Leisure activities Autopal Nový Jičín – lighting technology, Continen- high-quality facilities in the newly established Business Beyond business, Moravia-Silesia offers an abun- tal Automotive Systems Frenštát pod Radhoštěm, Incubator at the Technical University of Ostrava. dance of entertainment, sporting and cultural activi- Brano Hradec nad Moravicí – door systems, jacks), ties for spending one’s leisure time. In winter down- mechanical engineering (ŽDB Bohumín – steel ca- High-quality infrastructure and education hill and cross-country skiing are easily available, bles, cords, heating technology; Bonatrans Bohumín A key factor for the successful entry and effec- while in summer a dense network of cycling and – rail-vehicle axles, VOP Šenov – modernisation of tive operation of firms in the region is high-quality hiking trails give visitors and residents an opportunity tanks, MSA Dolní Benešov – armatures), mining infrastructure and thus easy accessibility to suppliers. to enjoy the region’s natural beauty. Golf enthusiasts technology (Ostroj Opava, Ferrit Frýdlant nad Os- Until recently, Moravia-Silesia suffered from the lack will find high-quality courses in Čeladná, Ostravice, travicí), the chemical industry (Ivax Pharmaceuticals of an highway linking it to the rest of the country Šilheřovice, Kravaře and Ropice u Třince. Opava – drugs, Walmark Třinec – food supplements, and to neighbouring states. Today, the situation has Moravia-Silesia is well-known for the numerous BorsodChem MCHZ – aniline, Bochemie Bohumín improved somewhat with the opening of a section cultural and sporting events that take place here. – disinfectants), the food industry (Opavia Opava – of the D1 highway linking Ostrava to Brno, and thus The region has hosted World Championships in ice biscuits; Kofola Krnov – non-alcoholic beverages, to Prague, Vienna, and Bratislava (final completion is hockey, floorball and volleyball and the European Bivoj Opava – meat products, Nowaco Opava – scheduled for the end of 2009). Another highway is Championship in indoor football and other sports. frozen foods), and breweries (Radegast Nošovice under construction and will connect the region to Each year, more than 100 world-music artists and and Ostravar). The region’s economy also features the Polish road network (A1 – Gliwice, Gdansk and roughly 20,000 fans from around Central Europe highly specialised companies such Rieger Kloss, a A4 – Krakow, Wroclaw, Berlin). Of course, feeder come to the region for the Colours of Ostrava fes- manufacturer of organs in Krnov, and TONAK Nový roads, city bypasses and access roads to industrial tival. Lovers of classical music particularly enjoy the Jičín, which produces felt hats and fezzes. zones are also being built. Beethoven and Janáček festivals held in Hradec and The decline of production in the 1990s and neces- A jewel of the region’s transport infrastructure is Hukvaldy, respectively. sary restructuring resulted in massive layoffs, which the high-speed Pendolino rail service from Ostrava Ostrava’s theatre scene is well-known thanks to culminated in 2004 when the region’s unemploy- to Prague. Trains also run daily to other regional cen- the Moravian-Silesian National Theatre and Petr ment rate reached 16%. Fortunately, this trend tres in the Czech Republic and there are direct lines Bezruč Theatre. was reversed when new investments, particularly to Warsaw, Krakow, Bratislava and Vienna. in the automotive industry, began flowing into the Leoš Janáček International Airport in Mošnov (20 Filip Chlebiš, region, largely thanks to investment incentives and km from the centre of Ostrava) provides regularly CzechInvest 26 >> Focus on Universities

Technical University of Ostrava and cooperation with industry

Focus on the IT4INNOVATIONS Centre of Excellence

Technical University of Ostrava

Reform of tertiary education in the Czech protection of intellectual property and targeted university’s cooperation with companies and Republic sets a demanding task for the coun- development so that these results can be put into support for innovation, was completed in June try’s institutions of higher learning – conceptual practice and become part of existing or newly es- 2008, when it began operation with a workshop establishment of modern third-generation uni- tablished innovative firms within the processes of titled Research and Development for Innovation, versities. Universities serve as a source of highly creating market value. Innovation for Business. The business-incubator skilled workers, whereas the investment of re- With roots dating back to 1716, the Technical building had previously served for a presentation sources in higher education has far-reaching ef- University of Ostrava is one of the Czech Re- of the region in March, when we welcomed the fects on society by directly influencing the quality public’s leading universities. In 1849 the school European commissioner for regional develop- of education, research and development, and received an imperial decree and this year is cel- ment, Danuta Hübner. services. In connection with the changing para- ebrating the 160th anniversary of its establish- The concept of the CAIT, an important part of digms of the role of universities in society (Lisbon ment. TUO has long been engaged in develop- the infrastructure for effective application of R&D Process, ERA) and in accordance with the long- ing the necessary conditions for the effective results, was progressively promoted through term focus of the Ministry of Education, Youth practical application of research and develop- CAIT workshops in cooperation with leading and Sport (MEYS) and reform of tertiary educa- ment findings. An important part of the school Czech and European specialists. The first work- tion, the importance of universities’ third role is was and still is the building of infrastructure for shop was conducted in February 2005 on the growing, particularly with regard to their com- the development of cooperation with the com- TUO campus under the auspices of Ing. Martin petitiveness and development. In this respect, mercial sphere. This infrastructure comprises the Jahn, deputy prime minister of the Czech Repub- one of the key areas for creation of added value technology pavilions of the Centre for Advanced lic and chairman of the Government Council for and development of universities’ services for the Innovation Technologies (CAIT). The CAIT-TL1 Research and Development. The second annual broader public consists in the infrastructure for applied-research laboratory and TUO’s business workshop took place in February 2006 under the knowledge transfer, which is the basic element incubator represent a unique infrastructure in auspices of Linda Duffield, ambassador of Great of support for innovation processes leading to the Czech Republic. For example, the business Britain. The event featured the participation of effective application of research and develop- incubator was established within the Prosperity Dr. Alex Smeets (director of St. John’s Innovation ment findings in the commercial sphere. From Programme (part of the Operational Programme Centre, Cambridge), Dr. Jon Cox (manager of the state’s perspective, importance is attached Industry and Enterprise) at a cost of CZK 220 the Oxfordshire Investment Opportunity Net- to new inventions and products resulting from million; aid from the Ministry of Industry and work, Oxford Innovation) and Dr. Geraldine the creative endeavours of universities. This con- Trade (MIT) amounted to CZK 148,790,000. Barry (director of the Technology Transfer and cerns not only creation and publication, but also The incubator, which is a key element of the Scientific Cooperation Department, Brussels), as >> Focus on Universities 27

well as representatives of companies, the MEYS, information technologies. Within this area, TUO small-scale computing. Research and develop- MIT, the Council for Research and Development, has already realised initial successes with the ment of sophisticated embedded systems ap- CzechInvest and other organisations. The 2007 FLOREON+ project, which involves a unique plied in interdisciplinary solutions, e.g. in inno- CAIT workshop, under the title Incubation of system that enables modelling and prediction of vative medicine, is only a further extension of Companies and Support for the Development of the development of flood scenarios. The results the use of these systems, which currently are Innovative Business, focused on the construction of flood prediction should be available to a broad a part of nearly all advanced devices commonly of the business incubator. spectrum of specialists (crisis-relief organisations, in use, such as mobile telephones, cars, aircraft Within the Technical University of Ostrava, a municipal authorities, etc.) that in the event of a and many others. Interdisciplinary research in unique infrastructure for connecting the academic crisis situation or threat thereof will be informed the area of biomedicine in cooperation with the and commercial spheres is being developed, thus via advanced visual means. It should be possible University Hospital is uncovering many non- creating an important to display the provid- traditional applications (photoelectrical plethys- basis for effective use What is a supercomputer? ed information of any mography, nanopathology in connection with of ERDF (European device, i.e. not only in the Nanotechnology Centre, etc.). Regional Development A supercomputer is generally consid- a centre with state- Fund) resources within ered to be a very high-performance of-the-art technology, 4. Theory4IT the Operational Pro- computer that has vastly higher com- but also on mobile (Theory for Information Technology) grammes Education for puting power than an ordinary com- telephones. Every- Focused on basic research, Theory4IT is open- Competitiveness and puters. Supercomputers are currently one who needs to be ing up the possibility of further development Research and Devel- used for solving the most difficult informed of a flood in the three previously mentioned areas. This opment for Innovation research and development problems situation, for example, involves new fields such as bioinformatics, soft (OPEC, OPRDI) in or- through simulations, and their impor- will be able to obtain computing, formal methods, etc. It is possible to der to fulfil the conver- tance is continually growing. There- maximum information document the applicability of formal methods in gence priorities of the fore, if the Czech Republic wants to and thus properly as- standard practice at crisis centres, where within European Union. The be competitive, it must ensure that sess the situation. It is emergency events these methods comprise a university is actively research workers and others have expected that FLORE- tool for resolving crisis situations, i.e. procedural preparing projects in access to a supercomputer, thus ena- ON+ will be used processing of acquired information (e.g. tel- individual priority axes bling them to perform computation- throughout the Czech ephone conversations) and transfer of responsi- of the Operational ally demanding tasks in various fields. Republic and abroad, bility to the exact algorithms that overcome the Programmes focusing though the large vol- inadequacy of human reasoning in emergency on its strengths and competencies. Emphasis ume of data processed during simulations places situations. is placed on interdisciplinary research activities extreme demands on the computer equipment. The benefit of the supercomputer centre can bringing forth unconventional new ideas that are Similar modelling and simulations, using the be seen in the possibility to perform extensive necessary for the development of innovation. GSM network and GPS technology, are used for science-research calculations that increase the One of the most prestigious OPRDI projects monitoring traffic in Ostrava. Simulations of pol- competitiveness of entities using the given infra- being prepared by TUO involves cooperation lution, fires and ecological hazards are also being structure, for which it is currently necessary to with Ostrava University, Silesian University in developed. go abroad. Potential users of the centre include Opava and the Institute of Geonics of the Acad- industrial organisations such as Vítkovice, Saab emy of Sciences of the Czech Republic. This 2. SC4Simulations Group, IVAX, the University Hospital in Ostrava unique project, called IT4INNOVATIONS, has (Supercomputing for Simulations) and a range of others. For example, Olympus the aim of building a national centre of outstand- The second key area is focused on super- could use the data centre’s infrastructure to ing research in the area of information technolo- computing – research and development of handle tasks in the area of telepathology – scan- gies. This newly established centre will make it new methods and algorithms for computational ning, evaluation and transfer of samples (one possible to concentrate a full range of scientific mathematics. Supercomputing is an integral as- such sample can be 30 GB in size). Roughly 200 fields relating to information technologies and pect of high-quality research and development employees will work at the IT4INNOVATIONS thus to enhance their development. Among oth- in a wide range of fields, including medicine and centre of excellence, whereas in the course of its er things, the project will involve the acquisition biomechanics, in which supercomputing is used construction specialists from other areas of the of a supercomputer that should be put into oper- for optimising the design of rehabilitation aids. country and from around the world will be hired. ation in 2013 and should rank among the world’s Due to economic reasons, in the mechanical-en- The costs of implementing the project in 2010- 100 most powerful supercomputers (currently gineering and automotive industries supercom- 2015 are estimated at CZK 2 billion. Partners the Czech Republic does not have even one su- puting is increasingly being used for simulations of the project will endeavour to obtain financing percomputer in the world’s top 500). in optimising the shapes of products, whereas from EU structural funds, particularly from the The IT4Innovations centre of excellence should the potential of algorithms in strength calcula- Operational Programme Research and Develop- function as a top research centre for academic tions is widely used. For example, a project ment for Innovation. The project documentation purposes while also conducting research that is implemented by research workers at TUO in is currently being prepared, and final approval of applicable in the commercial sphere. The basis cooperation with Stanford University resulted in the project by the European Commission is ex- of the planned centre will be computing, which the development of algorithms that enable opti- pected in the first half of 2010. is ranked ahead of other scientific disciplines and mised performance of engines used in Formula categorised in four mutually related key areas: 1 cars. Vladimír Kebo, Vice-Rector for Cooperation with Industry 1. IT4People 3. EC4Innovations (Information Technology for People) (Embedded Computing for Innovations) Ivo Vondrák, IT4People is focused on improving the gen- IT4Innovations is not only about supercom- Dean of the Faculty of Electrical eral population’s quality of life through modern puting, but also involves its connection with Engineering and Informatics 28 >> Spotlight on People Cosmopolitan connections An interview with Pascal Adam, Head of Transaction Services, DHL Information Services (Europe)

Why did your company decide to in- lows us to approach problem-solving from a vest in the Czech Republic? wide range of perspectives and better equips Prague became the location of choice after our organization to serve our global custom- fulfilling several criteria including the avail- ers. You’d have to ask each of our foreign ability of a skilled and flexible labour force, employees why they were attracted to the English in common use, well-established Czech Republic, but I believe the theme that and reliable telecommunications networks, would emerge would be the comfortable good air links with Europe and the rest of standard of living, the rich cultural heritage the world, the opportunity to reduce costs, and social life, and Prague’s convenient loca- and favourable investment incentives from tion at the heart of Europe. the Czech government. Czech wages are going up. Is this a Are you happy with your Czech threat to your operations here? employees? Pascal Adam, So far this has not been an issue. Natu- Yes, very much so. The specific skill sets Head of Transaction Services rally we are always concerned with manag- required for our complex IT systems are being our costs; however, the recent global coming more generally available on the local Pascal Adam, a French national, economic situation has led to a more stable labour market both as a result of increas- moved to the Czech Republic in 2003 environment. In addition, we are able to ing numbers of qualified graduates as well to oversee transaction services at the take advantage of improvements in comput- as Czech nationals returning home from for- DHL Information Services centre for ing technology, such as virtualization of the eign assignments. the Europe, Middle East and Africa hardware environment, which continue to region. enable gains in productivity and counter any Do you cooperate with any of the lo- DHL IT Services (Europe) is one of inflationary trends. cal secondary schools or universities the most important hubs within DHL IT to attract employees and ensure that Services worldwide. The company oper- Is the current global economic they have the skills you require? ates a state-of-the-art data centre hous- downturn going to have any effect We cooperate regularly with the major ing hundreds of servers and processing on companies like yours? Czech universities such as Czech Technical millions of transactions per day. We believe it will strengthen functions like University and the University of Economics Prague was selected as the location shared IT services that leverage economies in their activities to attract new students in for the IT centre out of 60 potential of scale and centres of expertise to provide the IT area and to provide career opportuni- locations all over Europe. The decision economic and competitive advantages. DHL ties for their graduates. We participate regu- to locate the centre in Prague was an- IT Services, which specialises in managing larly in career fairs at the universities as part nounced in March 2003 and the centre information technology and the IT infra- of our graduate recruitment program. We began operations in 2004. It currently structure, can demonstrate the ability to re- also occasionally offer part-time jobs to uni- employs over 1,000 people represent- duce costs while delivering improved serv- versity students to enable them to augment ing over 60 nationalities. ice, benefits which are key to any company’s their classroom-based knowledge with real- success in the market place. world experience. Republic’s membership of the European Un- The Czech Republic has undergone Your centre covers all of the EMEA ion, the growing involvement of Czechs in massive changes in the last two de- countries, so you presumably need international business, and Prague’s increas- cades. Nevertheless, is anything still people who speak many languages? ingly cosmopolitan society which attracts missing? We require proficiency in English for all citizens from across Europe. Since DHL IT Services is in the busi- employees at DHL IT Services and have ness of providing reliable, predictable and not faced any difficulties in finding qualified You employ people of many nationa- cost-effective computing development and candidates with this knowledge on the lo- lities. What attracted these people operations services to the Deutsche Post cal market. We require additional European to the Czech Republic? DHL group, we value stability and predict- languages, such as German and French, for Our team in Prague consists of people ability in our working and operational en- our Service Desk, which responds to re- from more than 60 different countries. In vironment. The Czech Republic has been quests for assistance from the users of our many cases this is due to requirements for able to provide this environment to date services in Europe. Even for these languages very specific technical skills not available on and we have every reason to be confident we are able to find qualified candidates on the local market. There is also a benefit to that this will continue to be the case in the the local market. I credit this to the Czech having a culturally diverse workforce. It al- future. >> Spotlight on People 29

DHL IT Systems – DHL – Deutsche Post World Net

DHL IT Services belongs to the Global Business Services division of Deutsche Post World Net. The GBS division bundles all common and non-business-specific services and provides them at cost and at world-class service levels to the entire DPWN group. DHL IT Services delivers end-to-end IT solutions and support for the company’s IT infrastructure consisting of networks, hardware, operating systems and applications. The company’s operations are divided into three geographical regions: • IT Services Europe (offices in Prague, Czech Republic and Bonn, Germany) • IT Services Americas (offices in Scottsdale, Arizona, USA) • IT Services Asia-Pacific (offices in Kuala Lumpur, Malaysia) DHL is a wholly owned subsidiary of Deutsche Post World Net (DPWN), the world’s leading logistics group. Its integrated companies – Deutsche Post, DHL and Postbank – employ over 500,000 full time employees worldwide.

What advice would you give to foreigners who are sent by their employer to the Czech Republic? Well, I think that for an expatriate it is important to learn about the country and not try to replicate their previous life. The history and mentality are different, but the Czech Republic is really in the centre of Eu- rope so it is easy to travel back if you are missing your home country. But I promise this will happen less and less if you discover the Czech lifestyle.

What is your favourite place in the Czech Republic? I have a particular affinity for Vyšehrad in Prague; walking there at the weekend is very relaxing. Also, of course, Český Krum- lov outside the tourist season. But definite- ly my preferred place is my apartment with my family. It is now our second home and even from time to time our main one as we spend more time here than in the south of France. The Park office campus in Prague hosts shared services and other operations of Accenture, Computer Associates, DHL, Honeywel etc. ed. 30 >> Events CeBIT 2009: the global economic crisis leaves its mark

CEBIT 2009 CEBIT 2009

CeBIT, the international ICT industry’s leading event, took place in Han- Here are only a few innovations that were nover, Germany from 3 to 8 March 2009. As with other big trade fairs, Ce- introduced in CeBIT 2009: BIT saw a decline in attendance this year. Fewer exhibitors (4,300, roughly 25% fewer than in 2008) and visitors showed that the world economic crisis has left its mark on the ICT sector too. Cuts in marketing budgets Car radios presented by Blaupunkt can receive hundreds have particularly affected small and medium-sized Asian companies. “Given of thousands of stations worldwide through the internet. the depth of the global economic crisis, the number of exhibitors is a suc- All these unique devices need to get online is a Bluetooth- cess. In view of the overall business environment, we are extremely satis- enabled mobile phone. fied,” said Ernst Raue, member of the board of directors at Deutche Messe. “Companies exhibiting at CeBIT are demonstrating that they are in good Vodafone presented its Google G2 mobile phone with the shape and want to put the recession behind them quickly. At CeBIT 2009 Android operating system. the goal is – now more than ever – to develop new business and act boldly vis-à-vis the future.” Laptops are getting smaller and smaller, but they are The key focus this year was on “green IT”, i.e. energy-efficient IT solu- packed full of technology. Acer presented its first ten- tions, as well as on the continued development of the internet, as epito- inch notebook fitted with Intel’s new 1.66 GHz processor mized by the buzzword “Webciety”. CeBIT also featured all aspects of which can be equipped with 2GB of RAM. business IT solutions, including risk-management and business-intelligence applications and safety aspects of the IT world. Microsoft released a test version of the successor to Vis- CeBIT is not only an event where you can find plenty of new ICT tech- ta: Windows 7. The highlight features of the new operat- nologies and solutions. It is businesses and investors from around the globe ing system are billed as simplicity, reliability and speed. that are looking for new opportunities. The importance of this event was Critics are unanimous in saying that the new operating demonstrated by the attendance of German Chancellor Angela Mer- system runs like a dream. Installation is fast, memory re- kel, who opened this year’s exhibition and Californian Governor Arnold quirements are lower, and it consumes less energy than Schwarzenegger. California became a partner of CeBIT this year, repre- its predecessor. senting more than 100 companies mainly from Silicon Valley. The Czech Republic left its mark on CeBIT as well. More than 15 ICT The fact that computers in stand-by mode continue using companies presented their innovations and ideas. CzechInvest sent its rep- electricity unless you actually unplug them is a long-stand- resentatives to keep tabs on new trends in the ICT sector as well as to find ing problem. Fujitsu Siemens demonstrated a solution to new potential investors. They noticed the increasing interest of investors this problem with a world premiere of 0-watt computer, from the ICT industry in learning more about the business environment and which uses no power in standby mode. potential of the Czech Republic. Last year alone, CzechInvest attracted 43 new investment projects focused on software development or IT services Intel presented a new generation of processors based and this year it would like to increase this number. In terms of the number on the new Intel Core microarchitecture. The particu- of investment projects attracted to the country, ICT surpassed traditional larly powerful Core i7 965 Extreme Edition (3.2 GHz) sectors like the automotive industry and mechanical engineering in 2008. improves performance by up to 40% without increasing power consumption. Tomáš Hanáček, CzechInvest >> Events 31

MIPIM 2009 descent from Olympus

Winners, MIPIM 2009

After a record 2008, when the sumptuous MIPIM enticed exhibi- of Western Europe with its business regulations. Another important tors and visitors with luxury, the 2009 event was marked by a certain part of the trade fair consisted in meetings with existing clients and disenchantment. A small yet very revealing detail – while the mod- partners and strengthening of cooperation between our respective est heliport at the end of the pier strained under constant take-offs organisations. and landings of helicopters last year, the distinctive sound of rotors Each year MIPIM traditionally concludes with the MIPIM Awards was heard only a few times a day this year. The number of yachts for the world’s best projects of the past year in five categories: ad- anchored nearby also declined somewhat. And the number of visi- ministrative centres, renovated office buildings, projects for the ho- tors – 18,000 from eighty countries – was less than two-thirds of last tel and tourism industries, residential projects and “green buildings” year’s total. for environmentally friendly projects. A point of interest is that the In spite of the lower number of visitors, both Czech segments fea- Czech architect and former politician Jan Kasl is a traditional mem- tured numerous municipal, regional and private development projects ber of the jury. This year’s overall winner was the conversion of the and a range of important meetings. The relative lack of visitors para- former Highbury stadium into the Highbury Square residential area. doxically resulted in higher quality and intensity of individual meetings. MIPIM is one of the world’s biggest and most important trade fairs Representatives of CzechInvest were thus in a favourable position focused on real estate and investment in this segment. It is thus an when after a slight collapse of investments focused purely on Eastern ideal opportunity for presenting projects from the private and public Europe, i.e. mainly Ukraine and Russia, many investors began inquiring sectors across the real estate market, from construction of hotels about the Czech Republic due to its stability in the CEE region. and golf courses, through regeneration of old industrial complexes The most numerous visitors included representatives of investors, and construction of new industrial properties and office buildings, to banks and funds that have money today and see an outstanding op- regeneration of entire city districts and visionary projects involving portunity to grab a big piece of the market and increase their profits. the construction of valleys of skyscrapers beyond the Urals accord- As opposed to last year, on the other hand, there were fewer expan- ing to the designs of Norman Foster. For visitors, the trade fair offers sion-minded developers of business properties; in spite of this, how- the possibility to gather information, form opinions on the current ever, there was a range of meetings focused mainly on construction situation during the many discussions with specialists and, mainly, to of industrial and office spaces in the regions. Thus, there is a chance find suitable opportunities for entering the market and investing. At that class-A offices may arise in the regions in mixed projects also MIPIM one can meet with representatives of municipalities, major involving retail and residential spaces. If individual projects can be consulting firms, banks, development companies, architects, design- combined with regeneration of municipal brownfields, we must con- ers and other entities that operate on the real estate market. sider this as a great success. Among architects and designers there was also a large number of parties interested in extending their serv- Milan Kratina, ices to the Czech Republic, which they increasingly perceive as a part CzechInvest 32 >> LivingSpotlight Czech on Project Czech cuisine: an exceptional mix of tastes

There is no such thing as Czech cuisine. If you ask ten Czechs about their national food, you will get eleven different answers. Located in the heart of Europe, the Czech Republic is a culinary melting pot of influences from Germany, Austria, Hungary and practically everywhere else. The result is an interesting mix of tastes even though it is true that the country’s cuisine mostly consists of heavy, rich foods, but only if you know how to make them properly.

the fish-farming town of served with a lot of stale garnish. Nevertheless, Třebon is loved by those these establishments are slowly but surely raising who otherwise simply their game and putting pressure on restaurants cannot stand fish. where the cooks actually know how to cook. More than anywhere else, in the Czech Republic Michelin a basic rule is that if a menu has more than two Morning-star or three pages, the best option is simply to run The biggest problem away. with Czech food is the Perhaps the most expansive, reliable guide to fact that nobody knows restaurants in the Czech Republic can be found how to cook it. That is, at www.grand-restaurant.com. But if you do not they don’t know how have access to the internet, this simple bit of ad- to cook it in restaurants. vice may help: a typical Czech food is Hungarian Home-cooked pork with goulash. There isn’t much to it, so it’s hard to ruin dumplings and cabbage it and it is available in most restaurants. And if it’s is a delicacy. During four already a day old when you eat it, that’s when decades of communist it’s the best. rule, training programmes Jiri Sochor, CzechInvest Statistics convincingly show that in the kitchen for cooks and waiters were the last resort for young most Czechs give priority to one of the following: people that could not get into other schools. This Goulash for four people pork with dumplings and cabbage, beef in cream was quite a paradox, as under central planning star sauce or goulash. These are the most popular foods chefs had incomes well above the average. for eight out of ten Czechs. And the drink of choice Fortunately, this situation now belongs to the is, of course, beer. In fact, Pilsner takes its name past. Last year Prague celebrated the awarding of from the West Bohemian city of Plzen, where this the first Michelin star for a local restaurant, Allegro type of beer was first brewed. at the Four Seasons hotel with its Italian chef. This illustrates that Czech gastronomy as a whole has Regional specialities decidedly taken a turn for the better in the past two If the Czech Republic does not have one specific or three years. Goulash national cuisine, it does have a lot of local speci- Another Michelin star was awarded to the res- alities, including several protected by the Euro- taurant Maze at the Hilton Old Prague hotel. Maze Ingredients: pean Union, such as Horice Rolls in east-central was established by the gastronomical celebrity Gor- 400g pork shoulder, 3 onions, 2 spoons of Bohemia, Karlovy Vary waffles in the northwest, don Ramsey and thus attracted Michelin’s attention sweet pepper, pinch of hot paprika, 2 cloves Olomouc curd cheese in central Moravia and many to Prague. Six month later, however, Ramsey sold of garlic, strained tomatoes, (ground) cloves, more. Maze, along with a number of his other restaurants (ground) cumin, bay leaves, allspice, marjo- The most widespread regional speciality is fresh- around the world. Prague lost a good restaurant but ram, pepper, salt water fish. Czechs have a long tradition of fish- there are certainly plenty more pleasant eateries farming, particularly in southern Bohemia, where that deserve the attention of the French producers Slice the onions into a large pot and lightly fry one will find a network of interlinked artificial of the Michelin catalogue. them in oil. Quickly brown the cubed pork on ponds and canals in which fish are raised, primarily the onions and add spices and garlic to taste. carp (another great side-dish for beer) as well as Where to eat well Fry for a maximum of one minute so that the many other types. On one hand, there are the aforementioned re- paprika does not become bitter. Add a little Whereas in many other places in Europe people gional specialities that are best served at home in water and let it simmer (approx. 60 min- look down a bit on commercially raised fish, thanks their respective birthplaces – fish in southern Bohe- utes). Add tomatoes, more water and spice to their centuries-old tradition of fish-farming mia, waffles in the northwest, wine in the southeast. to taste, and thicken with flower dissolved in Czechs tend to view harvested wild fish with suspi- On the other hand, there are restaurants. Here, water in a separate cup. Let simmer for ap- cion. Incidentally, fried carp with potato salad (and unfortunately, it still applies that it is not a problem prox. 20 minutes. Goulash is best served with beer) is the traditional Czech Christmas dinner. Re- to wander into a smoky pub where the height of dark bread or bread dumplings. gional traditions mean that carp from restaurants in culinary art is dry chicken with peaches and cheese

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