Business News

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State budget gap wider than expected

The Finance Ministry announced the Czech state budget for the year 2000 showed a deficit of 46 billion crowns, almost 11 billion higher than agreed by parliament. The ministry attributes the wider gap to problems on the revenue side of the budget, especially lower revenues from consumer tax and VAT, which were due to a drop in demand for diesel and petrol. Finance Minister Pavel Mertlik stressed that the treasury had not exceeded planned expenditures.

Czech exports to Cuba plunge in 2000

Amidst the diplomatic row between the Czech Republic and Cuba over the detention of Czech MP Ivan Pilip, the Czech authorities have announced that the volume of Czech exports to Cuba reached an all-time low in the year 2000, shrinking to mere 5 million USD, about half of the 1999 figure. On the other hand, imports from Cuba accelerated by 150 percent year-on-year to 1.3 million USD. Czech exports to Cuba mainly consist of motor vehicles, electrical appliances and power generation facilities, as well as dairy and poultry products. Imports mainly include raw materials, tobacco, and fruit and vegetables.

Czechs ban beef imports from Italy and Austria

The Czech Republic has banned all beef imports from Italy and Austria as of January 17, due to concerns over mad cow disease. The head of the state veterinary inspection office, Josef Holejsovsky, said two laboratories had been set up to help increase the number of tests for mad cow disease at least 10-fold. He stressed that so far there had been no cases of either BSE or its human form, new variant CJD, reported in the Czech Republic. Late last year the Czech Republic banned beef and beef product imports from all EU countries which have reported BSE cases or suspected cases. Only imports from Sweden and Finland are now allowed.

Apple-growers in trouble: too much fruit in storage

And staying with the agricultural sector, and Czech fruit-growers have got themselves in serious trouble due an unexpectedly good crop last year. The supply of apples on the market far exceeds demand and growers describe the situation as a crisis. They've asked the State Agriculture Intervention Fund to buy some 7,000 tonnes of fruit. Fruit growers sold less than 13,000 tonnes in the last quarter of 2000, almost 50 percent less than in the previous year, although the stock was nearly 60 percent higher. The Minister of Agriculture, Jan Fencl, has promised to help if the growers come up with a reasonable proposal.

Telecommunications Office outlines interconnection conditions

The Czech State Telecommunications Office has ended a long dispute between the dominant telecommunications operator, Czech Telecom, and alternative operators who were allowed to enter the market on January 1. The alternative operators have been unable to reach agreement with Czech Telecom on prices for interconnection of their networks. The regulator has set prices for interconnection at a level 100 percent higher than recommended by the European Commission, but far lower than prices included in Czech Telecom's Reference Interconnection Offer. The alternative operators are satisfied with the outcome, however, and say their prices will be determined according to the so-called "best practice principle", that means according to prices common in EU countries.

Telecom negotiates better prices with mobile operators

And in a separate development, Czech Telecom has been negotiating with mobile phone operators on amending the interconnection conditions which reflect the situation in the mid-1990s, when the mobile sector was just emerging in the country. Now, when mobile penetration has reached 43 percent, Czech Telecom is making an effort to negotiate lower prices with mobile operators. Calls from fixed-line phones to mobile networks and vice versa are approximately twice as expensive as calls within mobile networks.

Electricity to remain expensive

Unlike in telecommunications, Czechs will not be seeing lower electricity prices once the sector is liberalised. The chairwoman of the independent Energy Regulation Office, Jana Novotna, explained that the economics of Czech energy firms were different from neighbouring Germany, where prices decreased significantly after the market was opened to competition. The main problem is the depreciation procedure which is not sufficient for renewal of machinery and forces companies to generate higher profits for this purpose. The Office says, however, that it is possible to expect a wider gap between prices in the peak and off-peak hours. The liberalisation of the Czech energy market will take place in several steps, starting in 2002, when only the largest customers will be able to select their suppliers of electricity. Households and smaller clients will be the last to have the choice - in 2006.

Will Czech Republic become new economic tiger?

The year 2000 has been marked with global disappointment with the so-called New Economy, with a number of bankruptcies and stocks of some of the largest ventures on the downward slope.

But despite the pessimism, e-business and e-commerce seem to be booming in the Czech Republic. The last quarter of 2000 was the most successful period ever for the Czech electronic trade, with sales totalling more than 2 million USD. For the whole year 2000, on-line sales exceeded 5 million USD. The year 2000 also saw a large volume of green-field foreign investment in the Czech Republic in high-tech industries.

I talked to economic analyst Petr Zahradnik about the phenomenon called the "new economy", and its repercussions in the Czech Republic.