Investments in 2009: Smaller projects, demanding technologies

• Nearly half of all investments obtained by CzechInvest last year are focused on research and development.
• Three of every ten investments involve software development.
• With CzechInvest’s assistance, 186 new investment projects worth CZK 17 billion were initiated.
• Investors announced the creation of nearly 6,000 new jobs.
• Last year CzechInvest helped Czech firms to obtain orders worth three-quarters of a billion crowns.

According to the latest statistics from CzechInvest, the largest number of investments were in research and development and business support services last year. Conversely, only a fifth of new investors were focused on manufacturing, which had dominated the inflow of foreign investments in past years. With CzechInvest’s assistance, a total of 186 new investment projects worth CZK 17 billion were initiated in the Czech Republic last year. Of these, 84 are in the area of research and development, 67 in business support services and 35 in manufacturing. The new investments will lead to the creation of nearly 6,000 jobs.

“The statistics confirm that investors are choosing the Czech Republic for increasingly more demanding projects,” says Alexandra Rudyšarová, acting CEO of CzechInvest. “This is evident in the fact that the largest number of new investment projects – three out of every ten – last year were prepared by software-development firms, which of course concerns a field with above-average salaries as well as above-average skills requirements.” According to the statistics, the second strongest sector, with 32 projects, was mechanical engineering, followed by electronics and electrical engineering with 20 projects.

For example, development of Virtual Battlespace, which NATO and the American military use for training, returned to the Czech Republic last year. At its new development centre in Prague’s Dejvice district, Bohemia Interactive has been working since last year on a module that realistically simulates defence against improvised explosive devices. Vigour Gamma and Red Hat in Brno also announced expansion plans last year.

“The Czech Republic can offer to investors in research and development and business support services, such as software development, aid from European Union funds, particularly from the Operational Programme Enterprise and Innovation, for which CzechInvest is responsible. This is strong motivation for development even at a time when the global economy isn’t in the best shape,” explains macroeconomist Tomáš Sedláček.

Last year, financing from the European Union supported, for example, the software-development firm Asseco, which decided to enhance its centre in the Hradec Králové region. A good example of a smaller project is that of the software firm Hrdlička spol. s.r.o. in Česká Lípa. The German company Siemens invested in software development in the Czech Republic last year, when it expanded its staff of developers in Zlín with the addition of 15 specialists.

A very interesting investment in 2009 involved the launch of production at Olympus’s plant in Přerov, where the Japanese company develops and manufactures medical endoscopes. The ultramodern, environmentally friendly building with state-of-the-art equipment cost CZK 150 million and will bring up to 150 high-skilled jobs to the region.

“Olympus in Přerov is an outstanding example of an investor that we gained for the Czech Republic first with a relatively simple project and which was then convinced by the success of its Czech branch to invest in much more demanding fields,” adds Rudyšarová. “The share of expansions undertaken by companies already operating here into areas with high added value is increasingly stronger in our statistics.” Olympus has been operating in Přerov since 2002, when it began repairing cameras in rented spaces. The company’s has invested half a billion crowns in the Czech Republic to date.

In contrast to the rising number of investments in software development, however, the number of projects in the area of vehicle manufacturing declined last year, particularly in the automotive industry.  Whereas in 2007 there were 26 such projects, only eight were initiated last year. On the other hand, five of these are focused on research and development, which is exemplified by the Japanese company Denso’s expansion of its development centre in Liberec. At its facilities in Podještědí the company manufactures – and develops – automotive air-conditioning units and added nearly ten people to its team last year.

One of the biggest investments of last year was in the automotive industry, however. This involved the expansion of transmission production at Škoda Auto’s Mladá Boleslav plant. The carmaker invested more than CZK 1.5 billion in the expansion and will create up to 270 new jobs. Meanwhile, in September 2009, Hyundai officially began production in Nošovice after years of preparation.

The largest number of new investment projects, precisely 38, will be implemented in the Central Bohemia region. South Moravia with 32 projects and Moravia-Silesia with 24 rank second and third respectively in terms of the number of new investments. However, South Moravia comes out on top in the number of newly created jobs with 2,558. Investors in Central Bohemia announced the creation of 976 new positions, while northern Moravia will benefit from the creation of 607 jobs.

The largest volume of investments assisted by CzechInvest comprises expansions of Czech companies. German companies account for the second largest volume of investments, followed by those from Austria.

CzechInvest was established in 1992 and mediated its first investment project for the Czech Republic a year later. Since then, the agency has taken part in 1,356 investments worth CZK 665 billion. A total of 206,338 people have found work directly in projects mediated by CzechInvest. Thousands more jobs have been or will be created in related investments.

Orders worth a quarter billion crowns

In the course of last year, CzechInvest also helped to mediate for Czech firms orders from foreign customers in the value of CZK 744.59 million. Seven contracts resulted in the creation of 35 new jobs and helped to preserve hundreds of others. These orders involve mechanical engineering, the aviation industry and components for consumer electronics.

One of the largest orders was received by the Pelhřimov-based company Agrostroj, which thanks to CzechInvest began production of professional-grade lawnmowers under the Japanese Chikusui Canycom brand. Agrostroj plans to eventually manufacture up to one thousand of these small single-purpose tractors, which have a retail price of approximately CZK 250,000, per year in Pelhřimov.

Comparison: 2008 and 2009

With CzechInvest’s assistance, the Czech Republic gained a total of 208 new investment projects worth CZK 27 billion in 2008. By comparison, in 2009 there were 10% fewer projects and the total investment amount declined by CZK 10 billion.

“In light of the situation in the global economy, the number of projects successfully undertaken last year surprised us,” says Alexandra Rudyšarová, adding: “The overall investment amount has been in decline over the long term, and the global economic downturn is only one of the causes. Another reason is the long-term trend where an ever greater proportion of projects comprises research and development and services, which in comparison with manufacturing require much smaller initial investments. The third cause of declining investment amounts is that in the Czech Republic investors can choose from an increasingly broad offer of rental facilities in industrial parks instead constructing their own buildings, which again significantly reduces the necessary initial investment.”

Tomáš Sedláček agrees: “The current economic crisis is accelerating this development. Thanks to renting, companies save on costs and the more farsighted ones recognise that investments in research and development will pay off for them many times over in the very near future.”

Receding crisis

According to CzechInvest’s statistics, the greatest decline in interest among new investors occurred in the first half of the year. “If you invest in something, you’re counting mainly on future demand. But a number of companies do not see that demand materialising. At the same time, this means that companies often cut even their existing capacity, which they had already built up in anticipation of new orders that may not come. This could have only one consequence – higher unemployment,” Sedláček explains.

The fourth quarter brought a turnaround, when demand for the Czech Republic rose, even in comparison with the closing months of 2008. “Stimulus packages introduced by governments across the world are helping the global economy to slowly recover from the hangover following the wild period from 2002 to 2006 and investors are now beginning to dust off their dormant expansion plans,” adds Sedláček.

“From the first inquiry to the final decision to build a new factory, implementing a new investment is a long process taking at least several months, and recovery is already apparent in last year’s statistics,” Rudyšarová continues. “Therefore I am very pleased that we can now announce a very symbolic harbinger of things to come in the form of Gemtek’s investment. The company is planning to produce components for broadband computer networks and to create 150 jobs at its new plant only a few kilometres from Stříbro in the Plzeň region, which has been particularly hard hit by the problems in the global economy.

“I predict that this year will be marked by a brief return to more expansive investments that will take advantage of the currently higher unemployment and strong competition in the offer of industrial parks and business properties,” Rudyšarová concludes.

2009: types of mediated investment projects

total: 1993-2009

For more information please contact the CzechInvest Press Centre

Lucie Kocourková, spokesperson, phone: +420 296 342 538, lucie.kocourkova@czechinvest.org