Business News

State budget approved in second reading

The lower house of the Czech parliament passed the state budget in the second reading. Revenues should reach 636 billion CZK, expenditures will be 49 billion higher. Minister of Finance Pavel Mertlik has promised to cut the budget deficit to ten billion in 2002. He warned though that the structure of the budget needed a substantial reform without which the deficits will grow further and it would be necessary to raise taxes. It seems that nothing stands in the way of the 2001 state budget being approved in the third reading due to an agreement between the ruling Social Democratic Party and the main opposition Civic Democrats.

No Christmas shopping this year?

Czech retailers say they've registered no significant increase in the number of customers before Christmas. Due to the gloomy weather at the beginning of Advent, less people than expected have started their Christmas shopping. Retailers are therefore expecting a higher demand in the coming weeks.

Stock market to stabilise and grow

The Czech stock market in likely to enjoy a period of sustained growth after the dispute around the election of the US president is over and world markets calm down. At the moment, analysts rate most of the Czech stocks as good buys. They do not, however, expect a return to the high prices of last spring.

Czech authorities to introduce large-scale BSE testing

The Czech Veterinary Authority is implementing wide-scale testing of cattle as of January 1, 2001, amidst the crisis over BSE, or mad cow disease. The plan includes ten times more preventive tests than in the past. Meanwhile, the daily newspaper Zemske Noviny found that Czech cows, too, were probably being fed with infected bone meal which may cause BSE, despite an import ban. A member of the Czech Association of Butchers told the newspaper that a large amount of bone meal of questionable quality was allegedly imported to the country illegally in 1998 and 1999.

Negotiations on interconnection of telecom networks fail

Negotiations between the monopoly telecommunications operator, Czech Telecom, and its competitors on conditions of interconnection have failed to produce an agreement. The major alternative operators claim that the prices for interconnection offered by Czech Telecom are discriminatory and unacceptable. They have appealed to the Czech Telecommunications Office to intervene before the 15th of December. Otherwise, the new operators will not be able to start providing their services as of January 1st, when Czech Telecom'm monopoly officially ends.

Politicians to quit lucrative jobs

The leaders of the ruling Social Democrats have urged all the party's MP's and senators to quit their posts in supervisory boards and boards of directors of enterprises by April next year. The main opposition Civic Democrats suggested that they might follow suit. Membership of statutory bodies of both private and state-controlled companies has been a widespread and much-criticised practice among members of parliament, especially the two strongest parties which are bound together by a power-sharing pact.

Natural gas prices to grow 25% in January

The government has approved a 24-percent increase in natural gas prices for households. The price hike is part of a plan to gradually lift administrative regulations of energy prices. It is also a reaction to higher oil prices on world markets. As the cabinet explained, if oil prices decrease as expected in several months time, the gas prices might be lowered again. Besides natural gas, Czech households will also have to pay more for electricity and long-distance heating.

Russians decline responsibility for Temelin

The Russian Ministry of Energy has distanced itself from the Czech nuclear power station at Temelin. The Russian ministry said that the use of third-party nuclear fuel and an upgrade of the control system with technology supplied by American Westinghouse has relieved Russia of all responsibility for the project, which dates back to 1980's.

Aicraft import duties lifted for 2001

The Czech cabinet has lifted import duties on civilian aeroplanes and aircraft parts for the year 2001. Government spokesman Libor Roucek told journalists the plan had already been discussed with the World Trade Organisation and if the body raises no major objections the abolition of import duties on these items could last longer than one year. The duty rate for civilian aircraft imports is 4.8 percent, while engine and propeller imports are taxed at 6.4 percent. The decision is a relief for the Czech national airline, CSA, which intends to buy two Boeing 737-400 next year.

Czech central bank urges restraint on wage growth

The Czech National Bank will meet trade union leaders in an effort to bring down their wage growth demands which the bank says poses a risk to stable growth next year. Central bank spokesman Milan Tomanek said that the meeting, to be attended by the entire governing board of the central bank and top union leaders, will take place on December 18.

The unions are demanding at least 10 percent nominal wage growth next year as the economy gathers pace after a long recession and productivity gains exceed wage rises this year. The demand is more than twice as high as the end-year inflation forecasts of between 4.1 and 4.5 percent.

The central bank considers nominal wage growth of up to seven percent the maximum acceptable raise for the next year.

The average nominal wage grew by 6.1 percent year-on-year in the third quarter, putting real growth at 2.0 percent. Productivity in industry rose by 9.0 percent year-on-year over the first nine months, while nominal wages in the sector grew 6.1 percent and real wages by 2.2 percent over the same period.

The central bank, which has kept interest rates flat for a full year, has also pointed to widening fiscal deficits and external price developments as potential risks for the economy.

Trade unions - unwanted

The popular Czech daily newspaper Mlada Fronta Dnes reported this week on an allegedly widespread practice among foreign companies in the Czech Republic who force employees to abolish union organisations.

The newspaper claims that those foreign investors who bought into Czech companies earlier in 1990, took the trade unions as partners. However, managers of factories that were built in the Czech Republic as green-field investment exert strong pressure on employees in order to prevent the formation of trade unions.

The chairman of the Czech Chamber of Trade Unions, Richard Falbr, confirmed that the pressure was getting stronger and often verged on breaking the law. Some of the foreign companies have defended themselves, saying trade unions were often established at the last moment by the worst performing employees who were in danger of losing their jobs. As trade union leaders, they enjoy protection under the law and cannot be sacked.

The reason why companies are fighting against the establishment of trade union organisations is simple: they do not have to lead wage negotiations with them and keep costs at the lowest possible level by increasing wages only very slowly. At a time when there is unemployment of 15 or more percent in some regions, people are simply afraid to protest.

Anti-monopoly authority process cable TV price hike

The Czech anti-monopoly authority has launched a probe against the local unit of Dutch-based United Pan-European Communications on suspicion of excessive hikes in cable television prices.

The Czech Office for Protection of Economic Competition said in a statement that UPC Czech Republic may have abused its dominant position on the cable TV market, as it had not been able to justify price hikes for local customers planned for January 1. UPC risks a fine of up to 10 million crowns and may be ordered to cut prices.

After several acquisitions in the Czech Republic, UPC has gained a nearly 50-percent market share with more than 400,000 subscribers.

The company has informed customers that it will raise prices by 10 percent in its two networks and by 140 percent in a newly-acquired loss-making network Dattelkabel as of January, which has led to numerous complaints from subscribers.

A UPC corporate spokesman said UPC would cooperate fully with the investigation, but said the hikes were needed to align prices between regional networks.