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ZECH USINESS volume 3 C B Association Maison Tchèque /2004

3 today

Implementation of Structural Funds in the Czech Republic Czech Members of the European Parliament Emissions Trading Czech Investment Environment

"CZECH REPUBLIC MUST BE A TRUSTWORTHY AND CONSTRUCTIVE PARTNER OF THE OTHER MEMBER STATES AS WELL AS OF THE EU AS A WHOLE", SAYS CZECH Jan AMBASSADOR TO THE EUROPEAN UNION, JAN KOHOUT Kohout

What do you consider to be your main pri- have the chance to grow and gain respect. I would whose implementation has suffered setbacks; to ority as Czech ambassador to the EU? What like to help this process as much as I can. finalise attempts to create a zone of safety and jus- are your main objectives? In your view, where is the EU headed after tice, including the fight against terrorism, to After several years of tough negotiations and 1 May 2004, which in itself brought the great- strengthen considerably our position in the world internal preparations for EU membership, we est wave of enlargement to date? What will be through Common Foreign, Defence and Security have now begun to focus intensively on the day- the most important task for the EU? Policy, as well as trade and development policy. to-day business of the EU. As the Czech Republic's Enlargement has been perceived as one of the These are difficult tasks requiring the aspiration Permanent Representative in Brussels, my primary greatest challenges for the EU at the onset of the and will of the member states. The most difficult task is to represent my country and serve its inter- 21st century. In this respect, I think the EU has domestic task of the member states in the upcom- ests in the EU and its institutions. One of my stood its ground. The acceptance of 10 very well ing period will consist of the ratification of the important jobs is to ensure a high level of effective prepared countries will obviously change the EU, newly passed European Constitution. At least 10 communication between the EU and the Czech but it will not really disturb the way it operates. countries have decided or are considering organiz- Republic. Although I am aware that the upcoming And even if the EU still is not finished in terms of ing referenda, the results of which cannot be easi- period will be difficult and demanding, I believe expansion, there will not be any more dramatic ly predicted. The Constitutional Agree-ment can and will do all I can to make sure the Czech changes, with the possible exception of Turkey's give the European Union the needed power to Republic becomes a trustworthy and constructive admittance. The EU can now concentrate on resolve the aforementioned matter and its approval partner of the other member states as well as of more troublesome matters: to carry out economic is absolutely necessary. I believe that Czech Re- the EU as a whole. We can now forge specific reforms within the framework of the so-called public will not be the country which would block positions in various European policies, and we Lisbon strategy, which looked great on paper, but the approval of the Constitution.

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CZECHBtoday USINESS 3/2004 Structural Funds in the Czech Republic - Finally "in" – the Picture as well as the Decision Making Process

The Past siderable burden that served to grind down the will be interested in and will be willing to pay co-ordinating body. As it did in other areas of the membership fees for. It is hard to imagine many In 1998 the government of the Czech preparatory process, time played an important other spheres in which these professional organi- Republic passed resolutions to commence role here - the main areas of friction between the zations could better utilise their positions than the preparations for the use of structural funds (SF) various players were smoothed over, boundaries provision of information and the preparation and after the admittance of the Czech Republic to were defined for the purposes of delegating com- co-ordination of projects financed from SF. the EU. The agenda was then divided among the petencies, and constructive discussions could various ministries, which assigned it to one of begin. Even though some institutions were unable The Future their units or civil servants. The entrusted civil to foster a feeling of mutual trust amongst them- servants then began to perform their role as selves, at least the participating parties were able The numerous former scouts - not only from scouts, that were set down in an environment to glimpse the potential and abilities of the others. state administration - became SF specialists work- that was completely unknown for Czechs. With Carrying out the principle of partnership will ing in management positions. They have their own only a set of orders sent from Brussels, they remain one of the greatest and most beneficial view on the current legislative arrangement of the were to monitor a demarcated territory, major experiences from the SF preparations that will pay structural policy, they are at present creating their obstacles, and propose steps that needed to be dividends in other agendas. own positions on the draft regulations that the taken. In light of the numerous future tasks that European Commission has put forward and which it was discovered lay around the corner, they The Present should enter in force in 2007. These proposals can tried to convince their chiefs to reinforce the be expected to go through certain changes - team. They did not always manage to establish During the first weeks of the Czech Republic's whether cosmetic or radical remains to be seen - good communication with their leaders for membership in the EU, operational programmes when they are discussed at the EU Council or in reports of more pressing problems were often were announced and as well as the first calls for the European Parliament, and the Czech Republic preferably broadcasted on their meetings. the submission of projects. The first requests for will want their own recent experiences from the Yet in time the weight of the preparations began grants are being collected. For instance, the demanding SF preparations to pay dividends. to shift more to the level of strategic decision-mak- Ministry of Industry and Trade, which announced Their enthusiasm will be even greater for the fact ing. Fortunately in the case of strategic planning it Operational Programme Industry and Enterprise that it is the first time that they can fully join in the was not only about an awareness of the fact that 2004-2006, registered 170 grants for contributions decision-making on EU matters in the area of the European Union's SF are actually closer to from the SF by mid-July. Due to the huge interest regional development. One of the areas in which regional development and policies of employment in certain types of support, it is quite likely that a they could effectively apply the know-how they or education than to the Czech Republic's foreign portion of the funds will have to be rearranged have acquired in developing partnership is in find- relations. The steps taken in some cases really among selected measures. If companies still do not ing other member countries that will promote a changed the mechanisms for providing public serv- know how to request support, they at least know joint position. Because from 2007 onwards that ices that were commonly used in some organiza- where they obtain this information for free or for a will be the policy at whose birth we were present. tions. Even though in the end each ministry fee. It might seem from the initial experiences that Monitoring the absorption capacities of the approached preparations for implementation of the implementation of SF in the Czech Republic is individual spheres of economic and social life, i.e. structures in its own way, the final result was the already in full swing. Let's hope that this start will the extent of fund take-up in various priorities, establishment of organizational systems that are continue smoothly and that the Czech Republic will be interesting and challenging. Based on the ready to allocate funds from the SF. will become one of the countries that is able to facts ascertained from grant applications as well as In the past the state administration did not have effectively use the funds of offer. from the quality of completed projects, we should many problems whose solutions required inten- It is a good sign that entrepreneurial and em- be better able to formulate future objectives: we sive and systematic support from external part- ployer organizations are also interested in this will have a clearer picture of whether and by how ners, i.e. other ministries, regions or social part- area and that they are preparing their own pro- much more or less to invest into concrete, inno- ners. The partnership principal required by the jects. It is very important for these organizations to vations or equal opportunities. European Commission was frequently perceived know how to offer its members - especially small from the start of preparations for the SF as a con- and medium sized enterprises - services that they Martin Duda, CEBRE, Brussels

Operational Programme Industry and Enterprise - Initial Findings from Implementation

Operational Programme Industry and Enterprise potential applicants of OPIE programmes. The employees of these offices over 200 business pro- 2004 - 2006 (OPIE) was announced in May 2004 nature of the interest in new information is shift- jects were prepared and approved as of 27 July. by the Ministry of Industry and Trade, which is the ing from requests for general information to Most of the projects are geared toward the programme's Managing Authority. It is one of the requests for information that already satisfies a Development Programme (approx. 80%) as well Czech Republic's five operational programmes specific need when processing a business project. as to the Innovation Programme. Territorially that have arisen directly from the relevant part of Seminars on OPIE programme in the various speaking, most projects concern the regions of the National Development Plan, geared in this regions were attended by 1,386 people and, Brno, Zlín and Olomouc. Most applicants consist case toward the sphere of economic development. based on the suggestions and recommendations of entrepreneurs from small and medium enter- CzechInvest, an agency supporting business and of the participants, the agency and its other part- prises, but large companies are represented as well. investment, assumed the role of the implementa- ners are preparing special-focus workshops for The initial findings from the OPIE programmes tion agency for OPIE along with other organiza- those interested in receiving support. confirm an active response on the part of busi- tions - Českomoravská záruční a rozvojová banka, The interest in information is also shown by the nesses. It can be assumed that the projects a.s. (ČMZRB), the trade support agency increased number of visits to the CzechInvest already presented, as well as those prepared to CzechTrade, and the Czech Energy Agency (ČEA). website, which was launched at the beginning date, will contribute upon their implementation Since the programme was announced just two of June. to raising the level and competitiveness of Czech months ago, it is still too early to draw any con- Perhaps the most important role in the com- industry, which is the main objective of the clusions or reach any assessments. Nevertheless, munication and support of OPIE programmes is Operational Programme Industry and Enterprise. the initial findings and characteristics from the played by CzechInvest's 13 regional offices. These implementation phase can already be recorded. offices are closest to the entrepreneurs in the indi- Kamila Hájková, Clearly, the level of information has increased for vidual regions, and with the support of the CzechInvest

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3/2004 CZECHBtoday USINESS Structural Funds in the Czech Republic - Readiness to Draw from Structural Funds

"Structural funds" is a term that is gradually enter- lengthy procedures of approval, political agreement, sultancy companies, which tailor their client's proj- ing every Czech businessperson's vocabulary. After the provision of financing and the preparation of ects to their own ready-made model. The result is a entering the European Union we joined the ranks of project documentation. Local authority representa- kind of universal project which simply changes the countries entitled to use these funds. In concrete tives have poor experience of preparing projects name of the applicant. These projects are prepared terms there is almost CZK 80 billion (EURO 2.6. bil- from the pre-structural funds and so are waiting for according to a system of points within the pro- lion) earmarked for Czech Republic up until 2006 the final conditions of support to be announced. gramme in question in order to maximise the likeli- for projects promoting the civil-economic develop- But the least prepared for the entire process are the hood of support. The client is pleased that their ment of regions. The individual spheres of support appropriate ministries. The whole way the project is selected, but then finds himself disillu- are described in detail in what are called the oper- announcement was made leaves one with the sioned by what he submitted, signed up to and have ational programmes, of which there are five in the impression that something, anything, had to be to achieve in order to actually draw down the sup- CR. Four of these programmes are nationwide announced as quickly as possible. The basic condi- port and to avoid having to return it. (Industry and Enterprise, Human Resource Deve- tions of support were published on the Internet and lopment, Infrastructure, Rural Development and then amended several times in the run up to the Deprived Regions Multi-functional Agriculture). They describe the spe- deadlines. This was often on the basis of queries put Another interesting aspect of support for business cific sector and contain priorities from the point of by the applicants for support regarding ambiguities, activities is the ability of individual regions to absorb view of the whole of the CR. One operational pro- irregularities, etc. The Ministries made good their gramme is aimed at the regions (Joint Regional backlogs, oversights and errors in retrospect. At the Operational Programme) and contains a description same time the forms were changed as well as the Structural funds of the regions of the CR and the priorities for devel- methods for filling them in. All of these problems Allocation of support (in total 1286.4 billion EURO) opment, not from the point of view of the individ- were then compounded by the incompetence of 548.3 million ual sectors of the economy, but from that of region- civil servants, who are frequently incapable of reply- al requirements. This programme also offers a pre- ing to questions put to them by applicants, even 431 million cise level of financial support set aside for the devel- though this is what they are there for. Either that or 307 milion opment of the individual regions. an applicant has to wait forever for an answer, Leaving aside Prague, almost the whole of the CR which, when it comes, is incomplete, imprecise, or falls into the category underdeveloped and for this combined with completely inconsistent recommen- reason is being offered the most support. Gradually, dations. This is complicating the life of the appli- all the actors of regional development are preparing cants and acting as a disincentive to many appli- 2004 2005 2006 to avail themselves of these resources. These include cants for support. businessmen, municipal authorities, chambers of Source: EUROPEUM, Institute for European policy commerce, NGOs, and the regions themselves. First Experience For businessmen there is the Operational The first preparations and acceptance of applica- support. Although the support is intended mainly for Programme Industry and Enterprise, aimed at tions during the period May to June is now behind deprived regions, paradoxically these regions are increasing the competitiveness of companies. There us. The procedure was a learning process for both the worst at actually getting their hands on it. Their are some CZK 11 billion (EURO 360 million) avail- applicants and civil servants. Several interesting status means that they have less opportunity (main- able, mainly for the needs of small and medium points came to light during the course of the ly from a financial and specialist point of view) to sized enterprises. As part of this programme it is pos- process. The basic error encountered frequently is prepare projects and ensure the requisite financing sible to receive support for industrial research and the idea that the money for your project is being of projects. Thus the impact of the support is development and its link-up to the tertiary sphere, awarded by Brussels. This is not so. The European reduced and regions which do not have such need for business real estate, training centres for specialist Union provides resources to the Czech Republic on of it end up receiving more of it. The effect of the requirements, the development of the production the basis of the National Developmental Plan as a assistance is also lessened by other negative factors bases of small and medium enterprises, use of non- kind of financial assistance for its implementation. ensuing from the projects themselves, and which traditional energy sources by SMEs, etc. Since this is The ministries, regions and special organisations applicants should be aware off. This often involves a nationwide programme there are no region-by- subsequently distribute the support to the final ben- the additional costs linked with the administration of region resources specified, which means that com- eficiaries; the support is drawn down on the basis of handling the resources. Furthermore, delays in the panies applying for support find themselves com- developmental projects submitted by the appli- system of distribution of the structural funds cause peting with companies from regions around the CR. cants, which contain specific outputs capable of problems for the applicants, and as far as activities The body responsible for administrating the pro- meeting the global objectives specified in the NDP. go which have to be swiftly and flexibly implement- gramme is the government agency CzechInvest, It is not possible, therefore, to finance the regular ed, e.g. for reason of changes on the market, sup- which has a network of regional offices at its dis- activities of final beneficiaries. Support should func- port of the structural funds is almost unusable. posal. Other programmes earmarked for business- tion more as encouragement to implement further people fall into the Joint Regional Operational development subsequently realised from a party's Conclusion Programme. This involves support for the creation own resources. Advisors in this sphere, as the hand- Overall support from the structural funds can of new jobs and support for tourism. In both cases waving of their lobbying contacts in Brussels shows, only be expected to have a small impact on the support will be distributed by means of the regions have not understood the problem or have even lied development of the economy. Compared with the in the form of grant schemes. to clients in an effort to drum up business. This is volume of GDP it is a small item and frequently fails connected to the huge upswing in consultancy to respond to the underlying causes of poor eco- Readiness of Czech Actors activities during preparation of projects. nomic conditions. Companies are suffering prob- As well as businessmen and other potential recip- Unfortunately, most advisors do not have sufficient lems other than insufficient development capital. ients of support the appropriate ministries are also experience, and overnight agencies are appearing These problems include the administrative barriers naturally getting ready to use resources from the in order to exploit the popularity of the topic in the to doing business, the difficulty of enforcing the law, structural funds, along with their selected agencies. media and the ignorance of applicants. For this rea- the lack of motivation to work, etc. But this is a topic Since 1 May 2004, when we joined the EU and son a client should always have sufficient references which would require its own article. I would like to become entitled to utilise these funds, it has to the previous tasks undertaken by the advisor, wish all applicants great success in making use of the become clear that levels of readiness are many and since everyone had enough of an opportunity to support, and I am of the firm belief that they will varied. The best prepared are companies. They display their mettle during the period of the pre- know how to use the resources on offer to their own have sufficient new developmental objectives accession assistance from Phare, Sapard, ISPA funds benefit and to the benefit of the country's economy already prepared and there is no need to worry that etc. An important point to take into consideration as a whole. they will not avail themselves of the funds on offer. when choosing an advisor is their ability to reflect František Jochman The municipal authorities and town councils are less the specific needs and requests of the client. Often Regional Economic Chamber well prepared. These institutions have to go through the opposite approach is to be found in these con- Ústí nad Labem

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Representatives of the Czech Republic at the European Parliament

The European elections which took place in the Czech Republic on 11 and 12 June 2004 saw 30% Results of the European Elections in the Czech Republic the first ever 24 representatives of the Czech Republic elected to the European Parliament. These MEPs represent 6 political parties, with right and centre-right parties having a stronger 20% showing in the parliament. The strongest presence at the European Parliament will be enjoyed by the Civil De- 12% 11% 10% mocratic Party (ODS), which won 9 seats. It is fol- 9% 8% lowed by the Communist Party (KSČM) with 6 MEPs, the Federation of Independent Candidates and European Democrats (SNK/ED) with 3 MEPs, the Christian Democratic Union (KDU-ČSL) with 2 seats, the Social Democrats (ČSSD) with 2 ODS KSČM SNK-ED KDU-ČSL ČSSD NEZ others seats, and the Independents (NEZ) with 2 MEPs. Most of the political parties elected to the CEBRE and Czech MEPs attitudes toward the EU's proposed chemical pol- European Parliament quickly incorporated Before Czech MEPs left their work at Brussels's icy, or Jan Březina, who ran through his ideas on themselves into established European alliances. European institutions for the summer break, CEBRE streamlining advisory services for small and medi- Three of them, including the winning party, managed to meet up with some of them. The flow um enterprises. Proposed and agreed forms of became part of the European People's Party and of information from Czech businesses to and from future co-operation - not only in the aforemen- European Democrats (PPE-DE). It is worth men- Brussels was the most frequently discussed topic. tioned areas - give plenty of hope for utilising the tioning that Czech politics has won for itself the But each of the MEPs also focused on their own potential and know-how of Czech representatives post of deputy chair of the European Parliament agenda: for instance Miroslav Ouzký, Vice-presi- and organizations operating in Brussels. in the figure of Miroslav Ouzký (ODS). dent of the EP, who was interested in companies' -RM-

The position of Czech MEPs on individual EP committees

COMMITTEE MEP POLITICAL GROUP PARTY

Committee for Regional Development Jana BOBOŠÍKOVÁ NI NEZ Oldřich VLASÁK PPE-DE ODS Vladimír ŽELEZNÝ IND/DEM NEZ Committee for Industry Research and Energy Jan BŘEZINA PPE-DE KDU - ČSL Miloslav RANSDORF GUE/NGL KSČM VladimÍr REMEK GUE/NGL KSČM Committee for Employment and Social Affairs Milan CABRNOCH PPE-DE ODS Richard FALBR PSE ČSSD Jiří MAŠTÁLKA GUE/NGL KSČM Committee for Foreign Affairs Libor ROUČEK PSE ČSSD Josef ZIELENIEC PPE-DE SNK/ED Committee for Culture and Education Věra FLASAROVÁ GUE/NGL KSČM Tomáš ZATLOUKAL PPE-DE SNK/ED Nina ŠKOTTOVÁ PPE-DE ODS Committee for Legal Affairs Daniel STROZ GUE/NGL KSČM Jaroslav ZVEŘINA PPE-DE ODS Committee for Transport and Tourism Petr DUCHOŇ PPE-DE ODS Jaromír KOHLÍČEK GUE/NGL KSČM Committee for Development Jana HYBÁŠKOVÁ PPE-DE SNK / ED Jan ZAHRADIL PPE-DE ODS Budget Committee Hynek FAJMON PPE-DE ODS Committee for Budgetary Control Petr DUCHOŇ PPE-DE ODS Economic and Currency Committee Ivo STREJČEK PPE-DE ODS Committee for the Rights of Women and Equal Opportunities Věra FLASAROVÁ GUE/NGL KSČM Committee for the Environment, Public Health and Safety of Foodstuffs Miroslav OUZKÝ PPE-DE ODS Committee for the Internal Market and Consumer Protection Zuzana ROITHOVÁ PPE-DE KDU - ČSL

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Emissions Trading

The National Allocation Plan unquestionably NAP problems independent parts: electrical, CZT (district heating) represents the most visible part of the energy trad- and industrial energy, a move which will allow us ing system. This is completely understandable. The The basic problem of the allocation plan, a better overview of the aspects specific to each plan is the key to trading, above all from the point despite all its technical finesse, remains the volu- individual group of facilities. Energy sources sup- of view of individual businesses, which will be allo- me of licenses to be distributed amongst compa- plying energy to facilities which fall within the cated permits with which they will do business for nies. The main area of dispute is whether the allo- trading system because of their technological the following three years. To a certain extent the cation plan should utilise a lower level of alloca- emissions will be classified using the same param- allocation unjustly pushes into the background tion at first in order to put pressure on companies eters as their parent sector. In many of the indus- other key elements related to the launch of the to make reductions, innovate or purchase licens- trial sectors agreement has already been reached trading system, which have been no less arduous as es, or whether the relative ease with which the on setting up the parameters of allocation and the tasks and are no less important. Well, that's life. quotas of the Kyoto protocol can be met allows input data has been cleaned of ambiguities and The Ministry of the Environment published the for the full allocation of permits to the anticipated errors. The reserve for new resources will be draft allocation plan and put it forward for com- ments by the general public on 3 June 2004, and a The Ministry of the Environment puts the finishing touches to the draft week later the draft entered the committee stage, which ended on 2 July. Space for suggestions was allocation plan for consideration by the Czech government. reduced by time pressures, since the Czech Republic is lagging considerably behind the dead- level of requirements, i.e. in accordance with the increased and set in such a way that it will not be line for notification stipulated by the European criteria of the appropriate instructions. All this subtracted from the basic allocation. A prerequi- Commission. For this reason the suggestions made given the fact that meeting the Kyoto quotas does site of this approach, however, is that unused by the public were not included in the allocation not mean that the Czech Republic does not have licenses will be cancelled. Those companies plan as it progressed through the committee stage. problems with emissions of greenhouse gases per which recorded considerable growth in 2001- So far the committee stage has resulted in sug- capita or per product unit, or with the effective 2003 will have the opportunity of an individual gestions from only the Ministry of Industry and utilisation of fossil fuels and energy in general. modification of their allocation base in order to Trade, the Ministry of Finance, and non-govern- Despite these factors the Ministry of the allow for this development. Other such modifica- mental ecological organisations, though there has Environment decided to listen attentively to com- tions could also be enumerated. been a far broader range of proposals from the panies and set the level of allocation in such a way general public. Both individuals and civic associa- that it covered the anticipated requirements of Conclusion tions gave their opinion of the plan, as well as companies. This means that we are heading down companies and professional federations. The sug- a path which is open to criticism, mainly from It ensues from what has been said so far that it gestions can be divided into three basic groups. ecological organisations, and with some justifica- would be unfair to claim that we have failed to lis- tion. The basic problem, however, remains the ten to companies and to pay heed to their specif- Suggestions to NAP energy sector. It is worth reflecting on what the ic problems. Proof of this are the dozens of meet- government approved in its State Energy ings which the department of climate change has The first group comprises suggestions resulting Conception, which anticipates the development had and is still having. from a failure to understand certain elements both of the energy sector accompanied by a fall in the Notwithstanding this the method by which of the trading system and the national allocation overall emission of greenhouse gases. This docu- the allocation plan has been prepared is the plan. They were valuable in that they were a ment must be born in mind during preparation of constant target of harsh criticism, most of it gauge of how much the Czech public understood the allocation plan. emotive and personal rather than objective. Few this complex problem or is prepared to give it In many other sectors one problem has been of the critics see the hundreds of hours of hard their thought, and to what extent the plan put for- the input data used for allocation prognoses, work handling data from 500 facilities, the daily ward by us is intelligible. which has not always adequately reflected deve- resolution of the individual problems of individ- The second group comprised proposals based lopments over recent years. This has meant that ual facilities, political meetings and the pressure both on criticism of the trading system as such, sectors which have recently recorded dynamic from various parties, and the hundreds of phone and above all taking issue with the climate change growth have, because of the data selected, found calls, emails and letters. However, there is one policy of the European Union, the very origin of themselves in difficulties. This problem was also interesting point to note. Although companies this trading system. The groups making these pro- the subject of dozens of suggestions and observa- frequently argue over the million impacts of the posals wanted the system to be set up in such a tions. trading system on their economic fortunes, they way that it pay greater heed to the relatively have never of their own bat created a platform advantageous status of the Czech Republic vis-a- Next Steps which would prepare solid arguments, studies vis meeting the reduction quotas set by the Kyoto and data which we could use, not only within Protocol. These groups suggested using the trad- At present the Ministry of the Environment is the framework of domestic discussion, but ing system as a mechanism for compensating working on collating these suggestions and modi- when defending the allocation plan before the investment made by companies in the nineties, fications of the material so that they can be pre- European Commission. A similar platform (the the costs of economic transformation, and the sented for discussion by the new government, Emission Trading Group) was created upon the pressures imposed by the entry into the single since the outgoing cabinet left this difficult deci- launch of trading in emissions in Great Britain market of the EU. However, there were also rele- sion to be taken by its successor. It is not true what and was an equal partner of the government's vant concerns expressed of loss of competitive- has been heard in the media recently, that the during discussions. In the Czech Republic we ness, above all from the region outside the EU. Ministry of the Environment, when preparing its are still witnessing a pretty uncoordinated The last group involved concrete proposals and draft, proceeded arrogantly and did not sufficient- protest groups, full of sound and fury, signifying observations regarding the individual elements of ly reflect the requirements of companies. nothing. And this is a pity. Though you would the plan and addressing concrete aspects of its Nevertheless, a receptive approach does not not realise it from what the media says our aim application to Czech businesses. In many cases the mean automatically that each and every sugges- is to prepare a top-quality National Allocation suggestions described in detail concrete problems tion must be born in mind. In many cases the Plan which will be approved by the European and drew attention to the potential weak points of requirements for increased allocation are backed Commission and which will best reflect the spe- the allocation plan. Although many of the proposals up by very flawed arguments, and forecast cific conditions of this country. Perhaps we will from this group of suggestions cannot be realised in requirements really cannot be interpreted as hav- manage it some day. practice, this was unquestionably the most valuable ing as much as I want. part of the deliberative proceedings, since in many However, many of the suggestions will be Tomáš Chmelík cases it helped identify specific problem areas and incorporated in the plan. Above all this will in- Ministry of the Environment proposed resolutions where and when possible. volve the division of the energy sector into three of the Czech Republic

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A Look at the Czech Investment Environment

In the recent years the Czech Republic has fi- in Pilsen and created work opportunities for 430 because investors are less interested. This problem gured amongst countries offering a very fa- people. This clearly shows move to a more applies above all to potential investors from Russia, vourable environment for foreign investment. advanced foreign direct investment such as serv- China and Arabian countries. According to the agency CzechInvest in the first ice and competence centres, and research and Another ingrained problem is the complexity half of this year the agency acted as mediator for development laboratories. and inflexibility of the legal and administrative envi- 60 new projects with a total value of CZK 27 bil- The region of Ústi nad Labem was unusually ronment regulating entry into business. This can be lion (EURO 900 million), and investors promised successful in 2003 as far as attracting foreign seen if you compare how long it takes to record a to create some 8,500 new jobs, which is 3,000 investors went. Jana Víšková from CzechInvest company in the Commercial Register here with more jobs than in 2003. The number of invest- claims that the region is receiving the most invest- another country, or the lack of contact between the ment projects has doubled in the first half of this ment in Europe, fifty projects in all. Investment individual offices of the state administration, which year and the overall value of investments rose has been promised, mainly by foreign companies, means that businessmen have to obtain the same more than CZK 3.5 billion (EURO 113 million). of some CZK 52 billion (EURO 1,7 billion) and confirmation at various phases of establishing a The vast majority of the new investments have 9,400 jobs. She also had good words to say about company. In this case, perhaps brighter days are been aimed at the regions which are stricken with the study by Ernst & Young, which points out that around the corner, since the government is giving the highest level of unemployment, i.e. to it is mainly automotive companies investing in the consideration to the concept of "one contact point Moravia Silesia and the Ústi nad Labem region. region. Although investors have promised to cre- for businessmen", a policy which is supported by The largest foreign investor in 2003 was the ate almost ten thousand jobs, CzechInvest and the businessmen via the Economic Chamber of the logistics company DHL. This company is building labour offices do not want to say when these jobs Czech Republic. The implementation of this proj- a European service and logistics centre in Prague will materialise. ect might be speeded up by the new Deputy Prime for CZK 5.8 billion (EURO 180 million) and creat- However, these positive figures need to be ba- Minister for Economics, Mr Martin Jahn, who has ing 866 new jobs at the same time. The second lanced by negative features which are putting the been straining after improvement of the Czech largest investor this year was Exxon Mobil, which brakes on foreign investment. business environment since he was appointed the has established a services centre in Prague for One of these involves the policy on issuing visas, Chief Executive Officer of CzechInvest. CZK 2.4 billion (EURO 74 million) with 1,300 as a result of which the Czech Republic loses out jobs. Third in line was Daikin, the air-conditioning on billions of crowns a year. The country is not los- Robert Mulač, systems manufacture, which invested CZK 3 billion ing money only because of reduced tourism, but Centre for European Integration, ECCR

Economic Indicators

Budget Deficit billion (EURO 2.2 billion), according to the Czech expected year-on-year growth of 3.1 % and The budget deficit Statistics Office. Tlapa says that these positive month-on-month of 0.3 %. In a month-on-month showed a surprise forecasts could suffer most from a rise in the price comparison the price of services rose and the price drop at the end of of oil, which on the commodity markets has now of goods fell. While the price of goods fell by 0,5 %, July, falling to CZK reached new records. Oil could increase compa- the price of services rose by 1.6 %. Accom-moda- 48.8 billion (EURO ny expenses and thus increase the price of their tion was also to blame for the increases, with pay- 1.55 billion) from goods. The result might be a fall in demand. ments to housing cooperatives and landlords ris- June's figure of CZK ing. January's change to excise duty saw a rise in 49.7 billion (EURO Rise in Unemployment the price of tobacco products. 1.6 billion). Non-tax The unemployment rate rose in July to 10.1 % revenue rose and the from June's figure of 9.9 %. This means that Slow Growth % state collected more 532,128 people were without work at the end of The Czech Republic is recording the slowest in taxes. The Ministry of Finance press spokesper- July. But according to the methodology of the rate of growth in Central Europe. Although its rate son announced that this time last year the state International Labour Organization, by which most of growth is accelerating, this year and next the was running a deficit of more than CZK 62 billion EU member states comply and which is now once Czech Republic will remain in last place on the (EURO 2 billion). In June more than CZK 35 bil- more being used by the Ministry of Labour and ladder of countries of Central Europe, reveals a lion (EURO 1.1 billion) was collected in taxes, up Social Affairs, unemployment was lower, at 9.2 %. study by leading Czech bank ČSOB. While this more than CZK 2 billion on the previous months. In June unemployment was 8.8 % according to year an estimate by the ČSOB has the Czech Companies using tax advisors paid CZK 8 billion the ILO methodology. This does not include peo- economy growing by 3.3 %, neighbouring Poland in income tax. After a fall in June VAT collections ple who are registered at labour offices but cannot will grow by 6 %, Slovak GDP will grow by 4.9 %, also rose, and year-on-year the state collected 10 take up work immediately. The rate of registered and Hungary will report growth of 3.6 %. Next % more in consumer taxes. unemployment amongst women was 11.1 % and year, although economic growth in the Czech amongst men 7.7 %. As of 31 July labour offices Republic looks set to increase to a rate of 3.7 %, Lower Foreign Trade Deficit registered 45,737 free workplaces. There are on it will still trail behind that of Poland and Slovakia. The Czech foreign trade deficit could fall to average 11.6 people applying for each job. All the region's countries are bogged down in some CZK 64 billion (EURO 2.1 billion) this year, problems with public finance (with the exception which would be the lowest for the last 10 years. Inflation of Slovakia), but the Czech Republic has the high- This was the news put out by the Deputy Minister The rate of increases in the prices of goods and est deficit in relation to GDP. The previous gov- of Trade and Industry, Martin Tlapa. Last year's services again increased in July, rising by 3.2 % ernment at least took a step on the road to reviv- trends hint at a lowering of the deficit. According year-on-year, the largest hike for 2 years. Analysts ing the fortunes of Czech state finance, but it was to information available so far imports into the CR agree that seasonal effects are responsible for the too little, say economists. outdid exports by CZK 11.7 billion (EURO 380 higher level of inflation. This is the highest year- million) in the first half of the year, while that fig- on-year increase since May 2002, up 0.4 % on (Sources: ekomail, ure was CZK 17.4 billion (EURO 561 million) last June. An increase in the price of summer holi- Hospodářské noviny, www.ihned.cz) year. The total trade deficit last year was CZK 69.4 days is mainly responsible for July's rise. Analysts

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servants will be able to circulate it amongst New Czech Goverment Public Private Partnership themselves automatically. The database actively reacts to changes of residence or business activ- On 24 August 2004 the Houses of Parliament In six months time cooperation should com- ities, including registration, or to termination of gave a vote of confidence to the government of mence between the state and private compa- activities. Other offices linked up to the system premier Stanislav Gross, with all 101 MPs of the nies. Pilot Public-Private-Partnership projects hear of the changes automatically. In the future government side voting for the government as will be submitted by the end of September and the interactive database may be able to uncov- expected. Thus came to an end a two-month work on them should begin in February of next er the indebtedness of cooperating companies long political crisis caused by the failure of the year. The government is examining a coopera- for business partners. But legislation will have to governing coalition in the European elections. tion plan to last until 2006. In June work will be amended to make this possible. In the first The new government is now in a position to being on the second wave of projects submitted phase the idea is only to lighten the workload of begin implementation of its own programme, by the end of January. Over the next two years civil servants, admit the project creators from which was announced prior to the key vote of private companies could be investing anything the Ministry of Industry and Trade. confidence. "The government's announcement from CZK 15 to 30 billion (EURO 500 to 900 promises measures to improve the economy and million) crowns in state orders annually. When the business environment. Unfortunately, the the entire system is up and running and the measures in practice seem to point in the oppo- regions and municipalities have become The Anti-Spam Act site direction," said president of the Economic involved this figure could be as much as CZK 50 Chamber of the Czech Republic, Jaromír billion (EURO 1.6 billion) a year. A public pri- Companies offering free email boxes are not Drábek, of the current debate of the programme vate partnership centre has been created for this happy about new anti-spam legislation. These underway. For instance, he rejects the changes purpose. Certain aspects of current legislation companies earn money through the advertise- to tax, which will handicap people on higher are holding things up, especially the rules cover- ments attached to each e-mail sent. Under the incomes. On the contrary, he agrees with the ing concessions. The act on public contracts and new law the recipient of the message must give principle of privatising all state enterprises and budgetary rules is to be amended. The EU will their agreement in advance, something which, turning them into joint-stock companies, with apparently not allow assistance from European for instance, the portal Centrum.cz cannot the reservation that the cash injection thus funds to be used in the PPP system. guarantee. The same thing applies to advertise- acquired not be drowned in current expendi- ments send to mobile telephones - Eurotel ture. Drábek also praises the government for attaches long advertisements to messages sent aiming to clarify legislation and to speed up from the web. The new law will introduce fines work associated with the commercial registers. Czech Transmision Period of up to CZK 10 million (EURO 320 thousand) "We shall see how these generally formulated - Regulation on Packing on spammers, though the spokesperson of the objectives are translated into concrete steps," he Ministry of Informatics reassured companies concluded From February of this year regulation that this form of advertising will not be regard- 2004/12/CE came into force relating to waste ed as being in breach of the law. from packaging, which amends the original reg- ulation 94/62/EC. The new regulation lays a Czech duty on member states to ensure the utilisation Commissioner Suspension of Money and recycling of waste from packaging. Given from Other EU Funds Knows his Portfolio that the new requirements are relatively demanding, there were several transition pe- In September 2004 the results should be riods allowed. The CR has a transition period On 12 August 2004 the president designate known of an audit which the Ministry of lasting until 2012, by which time it should have of the next European Commission, Jose Manuel Finance commissioned to look into the way that attained a level of utilisation which is in gener- Barrosso, officially introduced the individual funds were being drawn down from the EU. It al higher than that required by the EU. The candidates nominated by member countries for seems that the results so far are poor, and if the amendment stresses that measures aimed at the post of European commissioners, and entire audit were to continue that way, Brussels increasing the utilisation of packaging in the included a specification of their portfolio. The would react by suspending advance payments individual countries do not disturb the internal Czech representative, ex-premier Vladimír and other money. The Ministry of Finance is trading of the Union. Špidla, was assigned to the agenda of employ- denying this. On 4 August the European ment, social affairs and equal opportunities. Commission suspended some two billion The new commission is to begin its work from crowns of the pre-accession Phare fund. The 1 November 2004, assuming that it is approved spokesperson of the EC in the CR said that the by the European Parliament. The CR still has Millions of Shareholders Czech Republic had not supplied all the neces- sary information. However the Ministry of The Czech Republic has one of the highest num- Finance claims that the audit will not have a Government Offices bers of shareholders. More than ten years after direct impact on the way the funds are drawn should be Obliged voucher privatisation there are some two and a half down. They say the audit is a national initiative to Explicate the Law million share accounts remaining out of the original and that the commission did not require it. seven and a half million. This despite the fact that Confederation of Industry of the Czech numbers are going down all the time. New figures Republic has submitted a proposal to premier released by the Securities Centre show that in the VAT Law Gross that government offices should be first half of this year there was a reduction of some obliged to explicate relevant legislation to busi- seventy thousand share accounts. Moreover, most Breaking the law in the CR is simple - simply nessmen. Businessmen would then have the shareholders are doing nothing with their stock. comply with it. Thousands of companies have security of knowing that they were proceeding However, voucher privatisation means that the been doing this for more than two months. To in accordance with the law. The Confederation country still has one of the highest numbers of abide by the new amendment on VAT means presented the proposal to the new premier, shareholders, even approaching the record level in breaking it elsewhere. What's more, many para- Stanislav Gross, amongst others, and the presi- the United States. graphs allow for various interpretations. For dent of the federation, Jaroslav Míl, believes example, importers still do not know which that agreement might be possible. Gross has exchange rate to use when calculating the tax announced the development of business activi- Easier Life for Businessmen they have to pay, whether this is the rate on the ties as one of his priorities. According to Míl day the goods arrived from abroad, as laid down businessmen are victims of the ambiguous Selected trade offices have inaugurated the by the Accountancy Act, or the day the invoice is wording of Czech acts, resolutions and other trial operation of central records of business- drawn up, as required by the new VAT Act. But norms which they cannot be expected to mas- men, thanks to which businessmen should be even businessmen with no business relations ter, and thus comply with. He believes the new able to avoid running around various different abroad have similar problems. From May con- government could begin by putting the full offices, filling out similar forms, and tracking struction companies have been wondering what wording of all valid regulations on the Internet, down various confirmations and statements. to record as a residential construction in order to so that companies at least had access to them. Once the information has been filled in civil pay the reduced five percent rate of VAT. (source: ekomail, Hospodářské noviny, www.ihned.cz, www.businessinfo.cz www.cebre.cz 7 C04_2_2.qxd 1.9.2004 20:13 Page 8

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(interview with Jan Kohout from page 1) our citizens and entrepreneurs. Member states actively take part in the development of policies, What's your view on the real European policy? must, however, honour other national interests their forms and content. There is still room for Do national interests play an important role in and, if their own interests cannot be pushed improvement in the flow of information, which creating European policy or are they at least through, they must yield to the interests of the would, among other things, lead to an easier ori- partially held back? majority. In most cases it pays for a country not to entation within overly complicated European The EU used properly to be called a community insist on a partial narrow-minded position. structures. As for structural funds, I feel that we of law. The tasks, principles and rules of the Union Do you think we are sufficiently prepared for managed to prepare as much as possible within a are defined by the founding agreements and full-value membership in the EU; for instance, relatively short timeframe. The fact that interest in other European legislation. I understand your with regard to the Czech Republic's ability to support is high and that both our entrepreneurs as phrase "real European policy" as the practical per- draw from structural funds? well as our regional structures are taking the bull formance of these rules in fully respecting them. The fact that EU member states agreed with the by the horns and submitting top-quality, profes- National interests play a key role in the reality of Czech Republic's entry into the European Union sional projects bear witness to this. But we can not European integration and they should. The very provides ample proof that we are prepared. Today become complacent; everything is just around the idea of European integration arose from the back- we are fully integrated; we are part of European corner. Each citizen should try to look for, obtain drop of the national interests of the founding six, policies and events. We have the chance to influ- and take an interest in information. The success of who realised that intensive co-operation under ence them, to actively enter them and promote the effective utilisation of EU financial support peaceful conditions is much more advantageous our interests. On the practical side, this means depends only on us. for their development than war and rivalry. It's plenty of hard work. We must refine co-ordina- Thank you very much for the interview completely understandable that countries try to tion mechanisms, train specialists, communicate defend their interests within the framework of the effectively on the Prague - Brussels line, have Robert Mulač EU - we do the same; it's our obligation toward quality and reliable state administration that will Centre for European Integration, ECCR

Economic Chamber Confederation of Employers' and Entrepreneurs' Confederation of Industry of the Czech Republic (ECCR) Associations of the Czech Republic of the Czech Republic

The Economic Chamber of the Czech Republic The Confederation of Employers' and Entrepreneurs' The Confederation of Industry of the Czech Republic is the self-governance institution in the Czech Associations of the Czech Republic is an independ- is a non-governmental, voluntary federation of Republic. Within its structure it embraces more than ent, voluntary and open lobby group promoting and employers and entrepreneurs in the Czech Republic. 60 active district chambers and regional chambers, co-ordinating entrepreneurial, employers' and pro- It represents and defends the interests of employers as well as 70 professional associations covering the fessional interests in negotiations with Parliament, in the sphere of social policy during tripartite negoti- entire territory of the Czech Republic and the entire the Government, public administration and the ations with the Government and Trade Unions. It scale of enterprises, from the largest to the smallest. Trade Unions. At present the organisation has the fol- strives to define, support and assert its mem- This network ensures daily contact with the entre- lowing members: the Association of Entrepreneurs of bers' interests in order to achieve prosperity and ¥ preneurs, the monitoring of their interests, and effi- the Czech Republic, the Union of Employers' a favourable business environment. It also provides cient representation vis a vis the Czech Government. Associations of the Czech Republic, the Union of consultation and information services for its mem- The ECCR provides customs and certification servic- Agriculture of the Czech Republic, the Association bers which focus on international relations, trade es, legal and legislative services, and representative of Textile, Clothing and Leather Industries, the opportunities, production co-operation, legislation, and information services. It plays an important role in Association of Building Entre-preneurs of the Czech collective bargaining, European integration, educa- supporting exports, European integration, and SMEs. Republic, the Union of the Czech and Moravian tion, and training. It is a full member of the Inter- Its Court of Arbitration resolves commercial disputes Producer Cooperatives. national Organisation of Employers (UNICE). relating to foreign and domestic trade. Contact: Contact: Contact: The Confederation of Employers' and Entrepreneurs' The Confederation of Industry Economic Chamber of the Czech Republic Associations of the Czech Republic of the Czech Republic Freyova 27, 190 00 Prague 9, Czech Republic Těšnov 5, 110 01 Prague 1, Czech Republic Mikulandská 7, 113 61 Prague 1 tel.: +420 296 641 356 tel.: +420-222 324 985 tel.: +420-224 934 514 fax: +420 296 646 221 fax: +420-224 230 606 fax: +420-224 934 038 e-mail: [email protected] e-mail: [email protected] e-mail: [email protected] www.komora.cz www.kzps.cz www.spcr.cz

l Represents the Czech Business Community in Brussels l Provides Entrepreneurs and their Organisations with Information and Services Facilitating their Integration into the Single European Market l Defends Interests of Czech Business Community within Integrating Europe and Helps in Satisfying their Needs l Represents Various Czech Entrepreneurs and Employers Organisations at their Pan-European Counterparts l Promotes Interests of Czech Businesses within the Context of EU Institutions and European Associations

CEBRE - Czech Business Representation Bastion Tower, level 20, 5 Place du Champ de Mars, 1050 Brussels; Tel.: 0032 2 550 3547/49; Fax: 0032 2 550 3548; e-mail: [email protected]

Czech Business Today Quarterly; September 2004 issue, volume 3 Publisher: Economic Chamber of the Czech Republic, Freyova 27, 190 00 Prague 9, IČ : 49279530; in co-operation with Confederation of Employers' and Entrepreneurs' Associations of the Czech Republic and Confederation of Industry of the Czech Republic; Editorial Board: Štajf Ota, Fischer Aleš, Hradil Ondřej; Voleš Ivan Editor: Centre for European Integration, Economic Chamber of the Czech Republic, Robert Mulač, e-mail: [email protected]; Advertising: Centre for European Integration, Economic Chamber of the Czech Republic, Robert Mulač, Freyova 27, 190 00 Prague 9, tel.: +420 296 646 356, fax:+420 296 646 221, e-mail: [email protected], Registration: Ministry of Culture of the Czech Republic - MK ČR E 13767; Publisher service: Q-art-s; [email protected] Edition: 1000 printouts 8 www.cebre.cz