CzechInvest arranged investments worth CZK 64 billion in 2016

Domestic and foreign investors plan to invest more than CZK 64 billion in the Czech Republic based on deals concluded with CzechInvest in 2016. Last year’s total is CZK 20 billion more than in 2015. In 84 out of 100 cases, the investments involve expansions of companies that are already operating in the Czech Republic, while 16 projects are completely new investments. Every fourth investment is a high-tech project, i.e. a project with higher value added. Eighty percent of the investment projects intend to use investment incentives.

“A further increase in the share of investments with higher value added is desirable. This can be aided by an adjustment of the investment-incentives system focused on wage growth and raising the population’s standard of living, rather than on creating new jobs,” says Minister of Industry and Trade Jan Mládek.

“Owing to the development of the economy, cost factors are starting to play a smaller role for investors than in the past. The presence of high-quality conditions for long-term sustainable development oriented toward investments with higher value added is becoming a motivating factor for them, and we can offer that,” says Karel Kučera, CEO of CzechInvest, “whether it concerns stability and security in the country, the level of the standard of living or the quality of Czech suppliers with which investors cooperate, even if they decide to place their investments in neighbouring countries.”

Foreign investors are behind 78 projects, while domestic companies account for 21 projects. One case involves a joint venture. CzechInvest arranged the largest number of foreign investment projects with investors from Germany, specifically 20 projects in the aggregate value of CZK 9.3 billion. The agency also concluded investment deals with investors from Austria (ten in the value of CZK 8.1 billion) and the United States (ten in the value of CZK 4.4 billion). The share of Chinese investments increased year on year. Chinese investors pledged investments worth CZK 3.2 billion, twice as much as in 2015.

Companies most frequently want to invest in the vehicle-manufacturing sector, which attracted 22 investment projects in the aggregate value of CZK 19.2 billion, followed by metallurgy/metalworking (16 projects in the value of CZK 4.7 billion) and plastics (nine in the value of CZK 3.4 billion).

The largest number of firms plan to invest in the Ústí and Moravia-Silesia regions, each of which received 13 investment projects. The investments will bring CZK 24.1 billion and 1,949 new jobs to the Ústí region and CZK 4.6 billion and 1,688 new jobs to Moravia-Silesia. Ten companies plan to invest CZK 4.3 billion and create 1,117 jobs in the Plzeň region, which ranks third in terms of the number of investments arranged by CzechInvest.

The biggest investment arranged by CzechInvest in 2016 is the expansion of Karsit Automotive, s.r.o. in Trutnov. The company is investing CZK 2.7 billion in the expansion of its production of components for the automotive industry and plans to thus create 230 jobs. This is followed by the expansion of Benteler International Aktiengesellschaft in the industrial zone in Klášterec nad Ohří, where the company is investing CZK 2.5 billion in the production of steel and aluminium automobile body components and plans to create 576 jobs. The third-biggest investment is the business support services centre of the originally Czech company Kiwi.com, previously a start-up known as Skypicker, which will create 700 jobs through its investment in the amount of CZK 1.5 billion. Among other things, this project is the result of CzechInvest’s long-term support for Czech start-ups.

Investors are currently experiencing a distinct shortage of skilled workers caused by the Czech Republic’s record low unemployment rate. The fact that many large investors are giving priority to countries other than the Czech Republic is also due to the lack of prepared locations where they could commence operations in a short period of time. The investment process itself, from planning to implementation, is also accelerating. In this respect, inordinately lengthy permit processes remain a major disadvantage of the Czech investment environment.

“We anticipate heightened interest among investors in the aerospace sector who will follow the example of GE Aviation at the supplier level. Discussions with Czech suppliers are already underway. Revival of demand from Japanese investors and relocation of firms operating in Great Britain to continental Europe can also be expected,” say Karel Kučera, commenting on the outlook for the coming years. “In connection with the Czech Republic’s focus on investments with higher value added, it is also possible that purely manufacturing firms will depart for countries with cheaper labour. On the other hand, however, that would free up the workers needed for new investments and could lead to wage growth.”