Survey: More Than Half of Major Investors Would not Implement Projects in the Czech Republic Because of Reduced Investment Incentives

A significant increase of costs, loss of motivation and low return on investment are the most frequently cited reasons why foreign and domestic firms addressed in a survey conducted by CzechInvest would not invest in new or existing projects in the Czech Republic if state aid were reduced from the current 40% to 25% of eligible costs as proposed by the European Commission. According to the survey, even if these firms invested in the Czech Republic, the change could negatively impact the extent and scope of investments and thus the number of newly created jobs.

“The European Commission’s proposal significantly worsens the conditions for providing state aid in the Czech Republic, especially for large firms, which comprise 92% of all current applicants for investment incentives,” says Minister of Industry and Trade Martin Kuba. “Therefore, we have a number of objections to this proposal, which we have sent to Brussels. We cannot and we do not want to lose future investments and the new jobs connected with them.”

In light of the Czech Republic’s higher per-capita GDP, the European Commission’s proposal would affect the entire country, though it would not apply to some regions of Poland, Hungary and Slovakia. “We see this as a big problem. We already have the lowest state-aid intensity in the Visegrád Four. However, restriction of aid would reduce the competitiveness of not only the Czech Republic, but of the whole European Union,” addsPetr Očko, acting CEO of CzechInvest and director of the EU Funds Section of the Ministry of Industry and Trade.

In the event of approval of the proposal to reduce investment aid to 25% of eligible costs, the new investment-incentives system will be valid for projects that receive a positive ruling on provision of state aid after 1 January 2014. “In light of the time intensity of the approval process, we will be able to guarantee the current conditions, i.e. state aid in the amount of 40% of eligible costs, to firms that submit their application by the end of August 2013. However, it now depends mainly on how the European Commission decides in the end,” adds Marian Piecha, director of the Innovative Business and Investments Department of the Ministry of Industry and Trade.

The objections to the European Commission’s proposal are the result of a meeting at which CzechInvest, the Ministry of Industry and Trade, the Office for Protection of Competition, the Association for Foreign Investment, the University of Economics in Prague, Confederation of Industry of the Czech Republic and several investors were represented. Among other things, these organisations are appealing for the preservation of the existing intensity of state aid for investments and are protesting against the proposed administrative changes.

The current version of the Investment Incentives Act has been in force since 12 July 2012, when, among other things, the field of applicants was expanded with the addition of technology centres and business support services centres and the period for tax relief was extended from five to ten years. A number of firms waited for the amendment of the Investment Incentives Act, about which more information is available here: http://www.czechinvest.org/novela-zakona-o-investicnich-pobidkach-odstartovala-priliv-investicnich-zameru. Since the amendment came into force, CzechInvest has accepted a total of 55 investment projects in the volume of CZK 27.3 billion and representing nearly seven thousand new jobs.

Would you implement an investment project in the Czech Republic even if the maximum aid amount were 25% of eligible costs?

Addressed: 69 investors
Responded: 58 investors

For more information please contact the CzechInvest Press Centre

Adéla Tomíčková, spokesperson, phone: +420 296 342 832, adela.tomickova@czechinvest.org

Contact to Ministry of Industry and Trade:

Veronika Forejtová, spokesperson , phone: +420 224 853 291, forejtova@mpo.cz