Business News
This week we take a look at SME's, small and medium sized businesses in the Czech Republic and more importantly, some recent initiatives to help this significant component of the economy develop. Also in the program, consumer and business confidence in economy fall in January. The Czech Republic's trade surplus increases. Japan's Furukawa commences building of a new plant in Unhost. Police change founder of bankrupt construction firm, H-Systems, for hundred million crown fraud. And, rail operator, Ceske Drahy, sees the number of passengers down in 2002.
Consumer and business confidence in economy fall in January
Consumer and business confidence in the economy fell in January compared to December of last year. The Czech Statistics Office - or CSU - reported that the composite confidence indicator dropped in industry, construction, and services. The survey, conducted by the CSU, claims that consumers expect their economic situation to worsen in the next 12 months, while their financial situation should remain unchanged.
Czech Republic's trade surplus increases
Czech exports to the European Union rose by over 8 percent to just under 28 billion EUROs in 2002. Consequently, imports from the EU decreased by nearly 7 percent. Thus, the Czech Republic's trade surplus with the EU sharply rose by 40 billion crowns to 58 billion crowns - or 1.8 billion EURO. Although trade with countries such as Great Britain, France, and the Netherlands was favourable - the Czech Republic exported less goods to its largest trading partner, Germany. The revival of the German economy, which is currently in the mists of a recession, is necessary if the Czech Republic wants to increase exports to the EU in the coming year.
Japan's Furukawa commences building of a new plant in Unhost
Furukawa Electric Autoparts Central Europe began construction of a new auto-parts plant worth 80 million crowns in Unhost, just a few kilometres west of Prague. In the coming year the company plans to invest another 300 million crowns in technologies and expansion, bringing their total investment in the Czech Republic to 380 million crowns - or over 12 million EURO. The plant will manufacture up to 100,000 car components a month with a workforce of 200 employees. The company's investment in the Czech Republic will be the fourth from Japan. Other Japanese investments have included Mitsubishi Electric, which invested 32 million US dollars in an alternator production plant in Slany and Showa Aluminium Corporation which built a 28 million US dollar plant also for the production of car components near Kladno.
Police change founder of bankrupt construction firm, H-Systems, for hundred million crown fraud
Police have charged Petr Smetka, the founder of the now bankrupt construction firm H-System, with fraud totalling hundreds of millions of Czech crowns. Together with Smetka, two former deputy chairmen, and another employee of the Prague centre branch of Komercni banka have been charged. H-System gradually accumulated a debt of 1.3 billion crowns or 43 million US dollars. More then 1,200 clients of the bankrupt H-System housing construction firm have lost everything. If convicted, the men could face up to 12 years in jail.
Rail operator, Ceske Drahy, sees number of passengers down in 2002
Rail operator Ceske Drahy or Czech Railways saw the number of passengers decrease by 13 million to 175 million last year. This year the rail operator expects to transport 180 million passengers. The company also expects sales from passenger transport to rise by 100 million to just under 5.3 billion crowns. Increasingly, more people are choosing to travel by bus, in 2001 only 30 percent of passengers travelled by rail.
Czech Railways is planing to become the Czech Republic's newest mobile phone operator. As strange as it may sound, the railway company wants to secure a telecom network for its train system. Czech Railways has called a tender for the development of a pilot mobile phone GSM network. The winner of the tender is supposed to cover with signal the first 60 kilometre railway corridor from Prague to Kolin central Bohemia by February 2004. If the pilot project goes well, further expansion would take place in the following years. The rail operator highlights the need to better integrate its communication network with those in the rest of Europe. Increasingly, mobile communications are becoming a necessity for the safe functioning of rapid national and international travel. Eventually, Czech Railways hopes to offer its free capacity to mobile phone operators, a move which should bring the company increased revenue and improve the unsatisfactory coverage of railway lines with a secure mobile signal.
Small and medium sized businesses in GDP formation could top 50 percent
The share of small and medium-sized businesses in GDP formation could top 50 percent this year, compared with 40 percent in 2000. This would mean that the country is getting closer to SME's in the EU where they contribute over 60 percent.
Small and medium sized businesses in the Czech Republic
SME's often constitute the most dynamic sector of the economy, generally these firms are relatively young, more profitable, and fast growing. This, compounded by the fact that these firms are often the driving force behind employment make them the engine of any healthy economy.
In the Czech Republic however, the role of SME's in the economy as a whole is less then favourable. Due to largely a lack of confidence, many SME's have problems gaining long-term financing which impedes their ability to grow. However, this is changing. One of the country's largest banks, Ceska Sporitelna, has announced it will invest 1 billion crowns - or 33 million US dollars - into venture capital funds for SME's. This was a requirement made by the government when the bank was privatized.
Another development which is sure to help SME's in the Czech Republic was the signing of a cooperation agreement between the Czech Chamber of Commerce and CzechTrade, the governments foreign trade promotion agency on Wednesday. Radio Prague attended the signing ceremony, and spoke to Jaromir Drabek and asked him first, what was the role of the Czech Chamber of Commerce all about:
"The economic chamber of the Czech Republic is a typical association of entrepreneurs, it has about 15,000 members and it is organized in Euro-Chambers. The main goal is to support our entrepreneurs in information base, service, in contacts, and so on."
How significant is the agreement signed today between your organization and CzechTrade and what does it mean for businesses in the Czech Republic?
"I think it is very important for developing our business because CzechTrade has a good position in support of exports and we want to support their ambition in spreading their information to the whole area of the Czech Republic."
How important are small and medium sized businesses in the Czech economy as a whole?
"In the Czech economy SME's have about 50 percent of GDP. Its less than in other countries in Europe, there it is about 60 percent. And we try to create the conditions for improving the market conditions for SME's and entrepreneurs."
I also spoke to Martin Tlapa, the director of CzechTrade, and asked him first, how important the cooperation agreement, not only for CzechTrade but also small and medium sized businesses in the Czech Republic:
"Its quite an important step in the life of CzechTrade because we did agree with the economic chamber of commerce in the Czech Republic which is a major representative of entrepreneurs. We will now extend our services to the different regions of the Czech Republic. So we agreed that our service for exporters in the regions will be provided and offered through CzechTrade. The main benefit for Czech exports will be through our offices that CzechTrade has world wide. Now we have 25 office and we would like to extend the services of these to the regions of the Czech Republic. It will be beneficial mainly for the SME's which will use more direct services which will help them to increase their exports abroad."
Will the agreement help only small and medium sized businesses?
"Primarily we will focus on the SME's but in fact we are working with all clients which are approaching our agency, not only SME's. It depends on the stage in which the company is. So we are also working with large manufactures and large companies which are looking for new partners abroad. But the majority of the clients are SME's and our target is to really increase the share of SME's in the share of total exports because in total GDP the percentage is much lower than the export of SME's in the EU countries."
How long do you estimate it will take the Czech Republic to equal the EU in these terms?
"So we are now trying to build the right infrastructure for their services. The result will depend on how successful we will be and it will depend on the cooperation with SME's, because most of their activities have to be done by themselves. We would be happy if the exports of SME's would increase, lets say, to 40-45 percent within the next five years."
