Business News
The international rating agency Standard and Poor's has downgraded the Czech Republic's credit rating from AA- to A+. The Agriculture Ministry says it might need do double its budget after the Czech Republic's EU accession, while Czech food producers are gearing up for tougher competition. The government has postponed the signing of a contract to sell its majority stake in Czech Telecom to strategic investor. The Czech capital Prague is becoming increasingly attractive for businesses from around the world. Although little known at home, Czech aviation companies are quite successful on world markets.
S&P downgrades Czech Republic's credit rating
The international rating agency Standard and Poor's has downgraded the Czech Republic's credit rating from AA- to A+. Standard & Poors said the election of a weak coalition government in June with a one-vote majority in the lower house as well as its generous social spending caused worries about the government's capability and willingness to adopt difficult fiscal reforms that are necessary for the sustainability of public finances. The Czech crown reacted to the news by a steep depreciation, but subsequently recovered somewhat. Observers consider the downgrading of the Czech Republic's credit rating as a serious warning for the Social Democrat-led government to take action and stop using transformation debts and the recent devastating floods as an excuse for ignoring the widening public finance deficit.
Agriculture Ministry to claim higher budget after EU entry
The Agriculture Ministry says it might temporarily claim a higher budget after the Czech Republic's EU accession. According to the Agriculture Minister Jaroslav Palas, the budget could double as compared to the current one. He said the reason was an inevitable delay in payments from EU sources which the Czech Republic will have to cover itself. He also would like to compensate Czech farmers for receiving lower payments than their western colleagues. The European Commission wants to introduce full direct payments to the newcomers in 2013, raising subsidies gradually from the initial 25 per cent of what EU farmers are entitled to.
Czech food producers to set up Marketing Agency
Czech food producers intend to set up their own marketing agency to promote Czech products especially on the Czech market. The move is part of their preparations for tougher competition from abroad once the Czech Republic joins the EU. The Czech food producers say similar agencies work in some current EU member sates, and cite Austria as an example, where the market share occupied by local producers fell by a third after the country's EU accession. The establishment of a marketing agency helped domestic firms regain lost positions. Organisers of the project say though that the agency would support only quality products, not just any goods which happen to be from the Czech Republic.
BSE still a threat in Czech Republic, cattle testing to continue
The Czech Veterinary Authority says the threat of mad cow disease or BSE is still real in the Czech Republic and testing of risk groups of cattle will continue. So far, four animals have tested positive. Experts say they could have been infected by contaminated feed in what the Veterinary Authority describes as isolated incidents. Mixing cattle fodder with potentially hazardous bone meal was prohibited in the Czech Republic in 1991.
Government postpones signing of Telecom privatisation deal
The government has postponed the signing of a contract to sell its majority stake in the dominant telecommunications operator, Czech telecom, to a consortium of Deutsche Bank and Danish telecom TDC. The consortium which has won a tender to purchase the state's 51 percent stake in Czech Telecom for EUR 1.82 billion, has put forth additional requirements, including a 10-percent discount on the agreed price in case Telecom's books reveal facts unknown today. The consortium has also asked for government guarantees concerning any future rulings by the anti-monopoly office and the telecommunications regulatory body on the privatisation deal. The Transport Minister and other cabinet members say they are inclined to cancel the privatisation rather than accept these and other additional demands.
Prague increasingly attractive to businesses
The Czech capital Prague is becoming increasingly attractive for businesses from around the world. In a recent survey among investors conducted by the prestigious agency Cushman & Wakefield Healey & Baker, Prague ended as the 16th most attractive European city, as compared to last year's 21st place. Prague's reputation saw the biggest boost of all the cities mentioned in the poll. The agency said the main impediment for Prague was that many still do not know it. The attractiveness of European cities for businesses was assessed from various viewpoints, such as business climate, government regulation, average wage, rent, and quality of life in general. Despite the fact that Prague's reputation improved over the past decade, it will probably take a long time before it can get close to the top five which has remained unchanged for many years - with London as number one, followed by Paris, Frankfurt, Brussels and Amsterdam.
Czech aircraft engine manufacturer set to enter US market
A leading Czech producer of aircraft engines, Walter, is planning a massive entry into the North American market. The company wants to launch a project next year to re-equip older US-made aircraft, such as King Air, with its new propeller engines. Walter will work with two American aviation companies, Seagull Aviation and Lone Star. Walter is planning to supply 40 to 60 engines a year to the United States which will significantly boost its sales and strengthen its position on the market. In this segment it has only one competitor - Canadian Pratt&Whitney.
Letov to supply parts for super-jumbo Airbus A380
Another Czech aviation company, Letov, has been preparing for production of parts for the super-jumbo Airbus A-380, especially passenger and luggage compartment doors. Letov is to start supplies for the world's biggest passenger transport airplane next year, while the aircraft should be made put in commercial use in 2006. Letov currently focuses on production of various types of aircraft doors, one of the biggest contracts being the Brazilian cargo aircraft Embraer.
