Investments in 2008: Services surpasses manufacturing for the first time

• R&D and services surpassed production at a ratio of 2:1
• The most numerous investments in the Czech Republic are in software development – IT comprises 21% of all investments
• With CzechInvest’s assistance, 213 investment projects are to be implemented, representing a 6% increase
• 14,606 new jobs to be created, nearly 4,000 of which will be occupied by university graduates
• The value of new investments should reach CZK 30 billion

 Last year investments in research and development or business support services in the Czech Republic outweighed those in manufacturing projects for the first time. This is according to statistics from CzechInvest, which helps domestic and foreign investors in the Czech Republic to implement their business plans. With CzechInvest’s assistance, a total of 213 new investment projects are to be implemented; 76 of these are focused on research and development, 58 on services and 79 on production. These projects will create jobs for 14,606 people, including nearly 4,000 university graduates. The total value of the new investments is CZK 30 billion.

“There was a fundamental turnaround in the composition of new investments in 2008. It was the first time ever that services, including research and development, comprised the majority of new projects,” says Alexandra Rudyšarová, acting CEO of CzechInvest. “On one hand, this is a natural development – the Czech Republic is literally in the centre of Europe and if companies want to succeed here, they have only one option – invest in state-of-the-art technologies and in research so that they can offer customers the highest quality. On the other hand, CzechInvest has been able to accelerate this development thanks to support from national and European sources.”

IBM is an outstanding example from the past year. Since the 1990s the company has focused on software development in the Czech Republic. 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. Regus, which leases out office spaces including all related services in 70 countries, is gradually concentrating 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 biotechnologies, while Rokospol of Zlín, 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 businesses.

“The Czech Republic has clearly entered the next phase in gaining 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 macroeconomist 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 to their Czech branches. However, we mustn’t forget that a large proportion of these investments would not have been possible or have been made so soon if the Czech Republic had not made a good name for itself thanks to production.” 

Software developers in the forefront

Software developers are behind the greatest number of new investments, accounting for 21% of the total number of new projects. Forty-three new software-development centres are being established with CzechInvest’s assistance. These centres will employ 3,000 people, two-thirds of whom will be university graduates. Engineering, with 37 projects, was the second strongest sector last year in terms of new investments. The country’s traditional champion, the automotive industry, fell to third place with 28 new investments. 

“AVG in Brno, TeLogic in Liberec and IT Systems in České Budějovice are just a few names on a long list of new or expanding software-development companies in the Czech Republic. The dominant share of such companies in the total number of new projects is only further evidence of how the composition of investments is changing dramatically,” says Rudyšarová. “Only a few years ago the automotive industry was undeniably dominant; today sectors involving services rather than manufacturing are of comparable importance.”

Comparison with 2007

According to precise statistics for 2007, in that year CzechInvest assisted in gaining 2001 investment projects for the Czech Republic in the total value of CZK 71 billion. “Whereas in 2007 research and development or services comprised only 32% of all investment project, this year that figure is 63%. Top-quality equipment for software developers is generally less expensive than construction of a new manufacturing plant. In addition, most companies that are investing in services lease facilities and equipment, so their initial investment is lower in our statistics,” says Rudyšarová.

“Attracting new investment projects to the country is not about the size of the initial investment. The important thing is the level of added value created by the investor’s employees. In coming years we can expect that investment volumes will decline while added value in companies will grow,” says Tomáš Sedláček.

Aid accelerates research

The possibility to receive support from the European Operational Programme Enterprise and Innovation was fully opened to companies that decided to invest in research and development in the Czech Republic in 2008. Seventy-five companies immediately made use of the Potential Programme, while another 25 firms decided for the ICT and Business Support Services Programme, which supports software development and establishment of expert solution centres and high-tech service centres. In addition, state aid is being used to support the establishment of shared-services centres and one research and development centre.

“It is very important that we are able to offer tailored support to many types of companies. If we did not have this ability, a range of companies that we are talking about today would have set up shop in neighbouring countries,” add Rudyšarová. “The current aid programmes differ from each other by a range of details, but thanks to these details we are able to address a truly broad spectrum of the most interesting investors.”

Two out of three investors are based in the CR

“The greatest number of new investment projects in which CzechInvest played last year have their origins in the Czech Republic,” Rudyšarová emphasises. “Companies based in the Czech Republic prepared 127 new investments in the total value of nearly CZK 10 billion. 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.”

In the statistics for 2008, investments undertaken directly 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 on which we worked last year originated in the Czech Republic,” adds Rudyšarová. According to the number of investment projects, investors from Germany, with 29 projects, placed second behind Czech companies, followed by companies from the United States in third place with 14 investments.

South Moravia leads the way thanks to IT

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 new projects, the second most popular region among investors was Moravia-Silesia, though the largest number of new jobs (2,912) will be created there. The Central Bohemia region finished 2008 in third place with 27 new investments.

CzechInvest was established in 1992 and mediated its first investment project for the Czech Republic a year later. Since then, the agency has played a role 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 also been created in connection with related investments.

2008: TypEs of mediated investment projects

TOTAL: 1993-2008