Business News

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Czech banking sector past serious problems, ready for EU

The Czech banking sector will soon be nearly completely in the hands of foreign capital. At the moment, around 70 percent of all Czech banking assets is owned by foreign investors. After the privatisation of the only remaining state-controlled bank, Komercni Banka, the figure will increase to 95 percent, with an absolute majority of the investors coming from EU countries. The privatisation of Komercni is expected to be completed smoothly within the coming months.

The Czech banking sector has overcome the serious problems that it faced during the economic transitions over the past decade and now is comparable to EU standards. According to economic experts, further development will depend on external factors, such as restructuring large industrial companies, legislative changes, mergers and the development of new technologies.

RWE intends to stop buying electricity from CEZ

Reports have appeared in the German media that the German electricity company RWE intends to terminate its contract with Czech power utility CEZ to purchase electricity, following a similar decision by the E.ON company. CEZ reportedly exports a total of around 9 TWh to Germany utilities. However, German companies have been under pressure from Austrian anti-nuclear activists who claim that CEZ exports electricity produced by the Temelin nuclear power station to Germany, from where it can get to nuclear-free Austria.

Defence industry performance improves

Sales in the Czech defence industry grew by 10 percent year-on-year to around 114 million USD in the year 2000, the Ministry of Industry and Trade has announced. Exports of weapons and ammunition in 2000 increased by a third, while imports dropped by 8 percent. The Czech Republic has had a positive trade balance in the arms trade since 1995.

Siemens planning to build a factory in Pilsen

The Czech town of Plzen is about to sign an agreement with the German company Siemens Automotive AG on the sale of land in an industrial zone in Pilsen, the Czech business daily HOSPODARSKE NOVINY has reported. Siemens is planning to build a new automotive parts production facility there which will employ around 1200 people. Pilsen expects to receive around 30 million CZK or 760 thousand USD from the deal.

UMTS networks have a chance in the Czech republic

According to a recent survey, 2 out of 5 Czechs are interested in services that will be provided in the third-generation or UMTS mobile networks. The level of interest in these services in the Czech republic exceeds, for example, that in Britain. People would in particular welcome the possibility to send and receive e-mails, gain access to maps and travel information, banking services, and purchase tickets with their mobile phones. Currently, mobile penetration exceeds 50 percent of the Czech population. The market regulator, the Czech Telecommunications Office is planning to grant four UMTS licences by the end of September.

Czech ceramic tile producers to merge

The Czech Anti-monopoly authority has approved a merger of the three largest Czech ceramic tile producers. The merger of the companies RAKO Rakovnik, Chlumcanske keramicke zavody and Keramika Horni Briza will create one of the ten largest companies in Europe in this industry.

Trade Unions call for sensitive privatisation

The trade unions of energy production and distribution companies went on strike alert on Monday to support their demands for a more socially sensitive approach to the planned restructuring and privatisation of the energy sector. The trade unions have threatened to cut off electricity supplies unless their demands are taken into consideration by the government.

The Czech energy production and distribution industry is one of the last sectors that awaits full privatisation and the process has been littered with controversies concerning the method and pace of privatisation.

The trade unions say they are ready to go as far as to switch off the national electricity grid and prevent imports of electricity from abroad. The chairman of the strike committee, Jiri Kubicek specified their demands:

"We want the government to guarantee that the privatisation and restructuring of our industry will be socially sensitive and in line with European standards," Kubicek said and added that the trade unions have been trying to negotiate with the government for the last three years, but without success.

During the process of restructuring the energy industry in other European countries, an average of 30 percent of jobs were lost, in Germany, it was 40 percent. Independent studies indicate that at least two thirds of the employees in the Czech energy sector will lose their jobs, and the trade unions estimate that it might be up to 70 percent.

However, according to Mr Kubicek, some foreign companies interested in taking part in the privatisation of Czech energy distribution firms say they could provide the same services with just one tenth of the current number of employees.

Estimates of privatisation revenues revised

Earlier this year, the government announced that it expected revenues from the privatisation of the remaining state owned companies to reach as much as 170 billion CZK or 4.3 billion USD. However, some Czech media have recently reported that this might be revised to a substantially lower figure. Economic analyst Radomir Jac from Commerzbank is convinced that the original estimate was overly optimistic. According to unofficial reports, the Czech Ministry of Finance and the National Property Fund have decreased their estimates for the revenues from privatisation down to 100 billion crowns, or 2.5 billion USD, which is around 60 percent of the original sum. The government, of course, counted on the privatisation revenues as an important source for state finances. What will a drop in the income mean for the state budget? This year, the government hopes to complete the privatisation of four strategic companies - the fixed-line telephone operator Czech Telecom, the wireless telecommunications operator Ceske Radiokomunikace, the bank Komercni banka and the beverage producer Becherovka. On the other hand, it is likely that other state-owned companies, namely electricity and gas producers and distributors, will be sold later than expected.