The Era of Major Foreign Investments Has Come to an End. Expansions of Firms Operating in the Czech Republic Now Dominate

In the first half of 2013 CzechInvest mediated domestic and foreign direct invests worth nearly CZK 19.5 billion, thanks to which more than 5,000 new jobs will be created in the Czech Republic. These investments predominantly involve expansion of companies already established here. In connection with a change of investment-statistics methodology, projects supported from EU structural funds, in which CzechInvest has not in any way participated, are not included in these figures.

“It is immensely important and beneficial for the Czech Republic that foreign firms that have come here in the past trust the country and are expanding their projects here. In comparison with our western neighbours, the Czech Republic possesses, among other things, a skilled workforce in combination with lower costs,” says outgoing Minister of Industry and Trade Jiří Cienciala. “At the same time, it is a good signal for foreign investors with projects with higher value added who are considering locations for their projects.”

Of the 44 direct investments mediated by CzechInvest in the first half of this year, 36 involve expansions. Eight companies chose the Czech Republic as the new destination for their investments. The largest number of projects come from Germany, while Czech, Swiss and Japanese firms account for a significant share of the total. Vehicle manufacturing and the rubber and plastics industry are the dominant sectors among the investments undertaken in H1 2013.

“The South Moravia, Central Bohemia and Ústí regions are the most frequent destinations of new investments. More than 700 jobs will be created in the Ústí region, which suffers from high unemployment,” says Marian Piecha, CEO of CzechInvest. “We cannot dictate to investors where exactly in the Czech Republic they should implement their investments, though in future we want to focus more on regions with high unemployment in our efforts to attract investments to the country.”

Continental Barum s.r.o. plans to invest the largest amount, nearly CZK 2.5 billion. The company will create more than 290 jobs in Otrokovice, in the Zlín region, through expansion of its production of freight-vehicle tires. The next biggest investment, totaling CZK 1.2 billion, is being undertaken by KAMAX s.r.o., which is expanding production in Turnov andDaliměřice in the Semily region, where it plans to employ an additional 120 people. The third most significant investment also involves expansion. CPI Moravia Books s.r.o. which will hire up to 74 new employees in connection with its investment of nearly CZK 830 million in expanding production of books and other printed materials in Pohořelice in the Brno-rural district.  

AMENDMENT OF THE INVESTMENT INCENTIVES ACT

Last year’s amendment of the Investment Incentives Act had a significant impact on the statistics, as a number of investors waited for it to come into force before implementing their projects. Existing and newly incoming investors in the manufacturing industry, business support services and technology centres can now receive an income-tax holiday for a period of ten years instead of the previous five.

“During the first half of 2013, thirty-six projects worth more than CZK 18 billion used this possibility and will create 4,371 new jobs,” says Marian Piecha, adding that CzechInvest anticipates the same development in the second half of the year. “Additionally, changes are being prepared in the investment-incentives system in connection with a European Commission regulation, so a number of firms are striving to obtain incentives under the current rules,” Piecha explains.

The amendment also introduced the concept of so-called strategic investment actions, i.e. investments whose value reaches at least CZK 500 million and which create at least 500 jobs. Two such investments were undertaken in the first half of the year.

NEW INVESTMENT-STATISTICS METHODOLOGY

The purpose of the change in methodology for compiling statistics of investments mediated by CzechInvest is to make the statistics clearer, more transparent and without any distortions. The change will also contribute to the more precise interpretation of the current and future development of direct investments in the Czech Republic.

Changes in the methodology for statistics of investment projects mediated by CzechInvest

• exclusion of projects supported from EU structural funds, in which CzechInvest did not participate
• division of projects into newly incoming investments and expansions
• origin of investments determined according to the country of origin of the parent company

CzechInvest has hitherto viewed expansions as domestic investments because they are undertaken by companies with Czech identification numbers. However, in the absolute majority of cases where a foreign owner is involved, funding for expansion is provided by the parent company rather than by the Czech branch. Therefore, CzechInvest is now dividing projects into two categories – newly incoming investments and expansions – and basing the determination of a given investment’s origin on the country of origin of the parent company. At the same time, projects receiving aid from the EU budget, which in most cases do not involve direct investments in the correct meaning of the term, have been excluded from the statistics. CzechInvest registers such projects separately, not as investments, but rather as projects which receive support from European funds.

For more information please contact the CzechInvest Press Centre

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

Contact to the Ministry of Industry and Trade:

Communication and Marketing Department, phone: +420 224 852 218, press@mpo.cz