Monthly Newsletter - January 2007

Headline News

Red Hat to develop software in Brno

The American company Red Hat, a leading provider of open source software solutions, has established a  development center in the Czech Republic. With its 207 specialists, the Brno centre will become a globally significant branch of the company. Red Hat is known for its operating system based on Linux, which at this time is the strongest competitor of the Windows operating system. The company anticipates extensive cooperation with universities, especially with Masaryk University in Brno.

2006: FDI inflow into the Czech economy stronger than in previous years

In 2006 CzechInvest mediated for the CR a total of 176 investment projects worth USD 4.6 billion. The number of received projects and the volume of investments in 2006 were the largest in the agency's history, far surpassing the totals for 2005 (151 projects). Thanks to these projects, more than 34,800 new jobs should be created in the coming years.

Business

Accenture investing in Brno

Brno is the site of another large investment in the field of information technologies. The multinational consulting firm Accenturehas opened a technology centre here. The centre currently employs 55 workers. The company plans toexpand the staff to 400 in the next few years. Accenture is one of a number of companies such as IBM and Logica CMG that have chosen Brno as the location for their operations.

SITA is expanding

The Swiss company SITA, which provides aviation companies with communications solutions, logistics systems and software used in the reservation of airline tickets, is substantially expanding its operation in the Czech Republic. In Prague the company will establish a centre operating financial and accounting services for the SITA group. Some of the centre’s employees will likely work on the development of IT applications. The final number of employees should reach 150.

Dymos to build new plant in Nosovice industrial zone

The South Korean car-seat manufacturer Dymos intends to invest CZK 847 million in a new plant in the Czech Republic and to create up to 400 new jobs next year. The facility should be built in the Nosovice industrial zone, in which carmaker Hyundai is already building its plant. The firm is part of the Hyundai Kia Automotive Group.

 BenQ plans to build new facility in Cernovicka Terasa

The Taiwanese firm BenQ plans to build a facility for the production of LCD displays and monitors in Brno's  Cernovicka Terasa industrial zone before the end of this year. Production should also begin at the end of 2007. Annual production should total one million displays; the facility will create 700 jobs. This will be BenQ's second facility in the Moravian metropolis. The firm employs 600 people at its existing facility.

New investors in the Joseph industrial zone

The Belgian firm Recticel has decided to build its new Czech plant in the Joseph industrial zone near the municipality of Most. Recticel will create at least 300 new jobs and manufacture automobile dashboards at the new location. The  developer Altech Mlada Boleslav will build the facility and rent it to Recticel. Two other firms will also invest in the Joseph industrial zone. Lumber processor Europahaus Holzindustries will create at least 250 jobs and plastics processor Semeko Plastics is expected to employ at least 100 people.

Wikov Industry to invest CZK 740 million in 2007-2008

The mechanical engineering group Wikov Industry will invest CZK 740 million in its plants in Hradec Kralove, Hronov, and Plzen this year and next. The firm's investments for the 2005- 2008 period will thus exceed CZK 900 million. The group will create 270 jobs by 2008 thanks to the investments. The firm plans to invest roughly CZK 500 million of the total in the construction of a new hall and the purchase of technology for Hronov's Wikov MGI.

Ultralight aircraft production on the rise in the CR

Czech manufacturers of light aircraft had a successful year in 2006, when they manufactured 588 ultralight planes, worth more than CZK 1 billion; this is 170 more than they produced four years ago. The Czech Republic is now one of the leading European manufacturers of these planes along with Germany, France, and Italy. Nearly 200 of the 560 ultralight aircraft registered in the United States in December were manufactured in the Czech Republic.

DHL to build three new logistics terminals this year

The international logistics and courier service DHL and its subsidiary PPL will build three new logistics terminals in theCzech Republic this year. Their construction is part of a project worth nearly CZK 1 billion, which includes the construction of 10 new transhipment points within the next 3 years. The terminals will be built in Plzen, Teplice, and Hradec Kralove in the first phase. A new modernized transhipment point will also be opened in Ceske Bud ejovice in April. Additional transhipment points are to be created in Ostrava, Olomouc, and Prague.

Denso Manufacturing to build another production line in Liberec

Denso Manufacturing Czech will add another line to its facility for the production of automobile air-conditioning units in Liberec. The installation of the third line will increase the facility's existing capacity of fewer than 5 million air-conditioning units by 53%. The expansion will include minimal modifications to the existing production hall. The firmintends to launch operation of the third line before the middle of the year.

Batz building plant in Frydlant nad Ostravici

The Basque firm Batz, a member of Spain's seventh largest industrial and financial group, Mondragon CorporacionCooperativa , is in the process of building a facility for the production of jacks, handbrakes, and pedals worth almost CZK 420 million in Frydlant nad Ostravici. Batz Czech, in which Lakum-AP owns one-third share, will create more than 90 jobs within two years. The first production phase will begin at the start of February. The firm's main customers will be General Motors (Opel) and Suzuki's Hungarian plant; annual turnover should total EUR 13 million.

Economy

Year-on-year inflation rate averaged 2.5% in 2006

The average y/y inflation rate totalled 2.5% in 2006; prices had increased by 1.9% in 2005. In December the y/y growth rate of consumer prices increased to 1.7% from November's 1.5%. Last year Czechs paid more for housing, electricity, and heating (natural gas prices increased by more than 19%). Economists expect inflation will increase by 2.5-3% in 2007. At the beginning of the year regulated rental rates rose by almost 20%, the largest increase in six years.

The Czech Republic’s GDP to approach EU average in 2013

According to France's Center for International Studies and Research, the Czech Republic's gross domestic product should come close to the EU average in 2013. The report commends the trade balance surplus, economic growth, and the adherence to criteria for implementation of the common European currency.

Politics & Legislation

New Czech government wins confidence vote in parliament

The government of Mirek Topolanek (Civic Democrats) won a confidence vote in parliament on 19 January. The three-party coalition government consists of the Civic Democrats, the Christian Democrats and the Greens. The main points of the programme announced by the new government include reduction of the public finance deficit, reform of the pension system, reduction of taxes and simplification of tax collection, introduction of ecological tax reform, provision of quality healthcare, and creation of a favourable business environment as a key condition for reducing unemployment.

New Labour Code

The new Labour Code came into force on 1 January 2007, replacing the existing Labour Code of 1965. The current Labour Code is accompanied by new laws on sickness insurance, injury insurance and social security benefits. One of the fundamental changes is elimination of the concept that “what is not allowed, is forbidden” and application of the concept that “what is not forbidden, is allowed”. There is also a distinct change in the arrangement of health insurance,where the obligation to pay benefits to employees is transferred to the employer after the first two weeks of incapacitation.

Miscellaneous

CVUT celebrates tercentennial

The Czech Technical University (CVUT), the oldest institution of tertiary technical education in the Czech Republic,celebrated its 300th anniversary in January. The university has 23,000 students, seven faculties, and a budget of CZK 3 billion. The university intensively collaborates with the private sector, for example operating a laboratory for development of control software for Rockwell Automation and two research and development centres of Strom telecom.

European Business Summit

The fifth annual European Business Summit (EBS) will be held in Brussels on March 15-16. Every year, the EBS brings together leading European politicians, top managers and a range of distinguished experts from various fields. This year with the theme “Reform to Perform: Europe is our Business“, the summit will discuss necessary economicreforms in Europe. More information can be found at www.ebsummit.org.

Exchange Rates, Averages for the 2ndhalf of 2006 (Czech National Bank; January 2007)

EUR 1 = CZK 28.185; GBP 1 = CZK 41.674; USD 1 = CZK 21.992

^{Sources: Czech AM by Czech, Information Agency, Prague Daily, Monitor, Radio Prague, dailies Hospodarske noviny, Pravo, MF Dnes and Lidove noviny}