Business News

The sale of the national telecommunications operator Czech Telecom has been postponed until 2005. Dispute over power sector consolidation continues. The cabinet has approved a package of measures to improve the business environment in the Czech Republic and support entrepreneurship but not without controversy. Czech steel production has grown in 2002 over a limit acceptable for the EU. Czech industrial output grew by a stronger-than-expected 6.6 percent in December. Czech retail sales rose by 4 percent year-on-year in December. The Czech government may bail out heavily indebted municipalities that are in danger of bankruptcy.

Czech government agrees to keep Cesky Telecom until 2005

The Czech government has given up attempts to sell the national telecommunications operator Czech Telecom. The largest fixed-line operator should remain in state hands at least until 2005. An attempt to sell the government's 51-percent stake in Telecom to a Deutsche Bank-led consortium last year failed, mainly due to a low offering price. The Finance Ministry will present a new privatisation plan by September.

Government at odds with antitrust body over power sector consolidation

The Czech government has clashed with the Anti-monopoly Office over a consolidation of the power sector in the Czech Republic. The government plan is aimed at boosting the value and strengthening the position of state-controlled national power producer CEZ prior to a liberalisation of the energy market. Under the plan, CEZ would be sold state stakes in lucrative power distribution firms. However, the anti-monopoly authority is questioning the low price tag on the 8 distributors which it sees as a potential hidden state subsidy, and it demands a new evaluation of the assets of the companies in question. Both CEZ and the government oppose the idea, saying a new valuation of the assets as well as any other delays could damage CEZ or even kill the whole deal.

Government's new business support package: not without controversy

The cabinet has approved a package of measures to improve the business environment in the Czech Republic and support entrepreneurship. The measures include speeding up the process of registering a new company in the Commercial Register, changes in the tax system to encourage investment and more support to small and medium-sized businesses.

Part of the package is a controversial draft law that allows expropriation of private land and property for the construction of strategic industrial zones. Under the current law, land can be expropriated only under strictly defined conditions in what is called a public interest. The new draft law, which is yet to be discussed by parliament, would extend the extreme measure to serve the interests of private investors. The government claims the change would improve the business environment in the country. However, an obvious underlying reason is the problems some large foreign investors have had with buying out land from individuals, which caused delays in construction of their plants. Opponents say the law would violate the principle of equality in market competition.

Czech steel production grows, EU demands cuts

Czech steel production has grown in 2002 over a limit acceptable for the EU, which demands that the Czech Republic decrease the output. In 2002, steel production in the Czech Republic increased by three percent compared to 2001, reaching 6.5 million tons, half a million tons over the EU limit. By 2006, the Czech Republic must scale down its steelworks to produce no more than 6 million tons a year.

Czech industrial output grows

Czech industrial output grew by a stronger-than-expected 6.6 percent in December year-on-year and by 4.8 percent for all of 2002. The growth was pulled by the electronics, rubber, plastics and wood processing industries. The data made available by the Czech Statistics Office showed that foreign-owned manufacturing industries account for a rising proportion of output in the Czech Republic. The full-year result was weaker than in 2001, mainly as a result of an economic slowdown in the EU, especially in the Czech Republic's main trade partner, Germany.

Czech retail sales in December up 4 percent year-on-year

Czech retail sales rose by 4 percent year-on-year in December, led by higher fuel and car sales and pre-Christmas spending on foodstuffs and other consumer goods. The Czech Statistics Office said the December figure showed a rebound from a 0.4-percent drop in November but slightly lagged behind forecasts. The recovery was helped by a 14.6-percent jump in fuel sales, which analysts attributed to stock-piling by motorists expecting hikes in petrol prices. For the whole of 2002, retail sales rose 2.7 percent year-on-year, slowing down from 4.5 percent growth in 2001.

Government may bail out heavily indebted municipalities

The Czech government may bail out heavily indebted municipalities that are in danger of bankruptcy. The government's factoring agency, CKA, which administers unpaid municipal debts, is working on a debt clearance plan involving some 1.7 billion CZK. Until recently, municipalities could act as guarantors of loans for private companies, and a major part of the current problem has been caused by private firms failing to repay their debts, burdening municipal budgets. Last year, the town of Rokytnice nad Jizerou in Eastern Bohemia went bankrupt and had to sell some of its assets in an auction. There are dozens of municipalities in danger of serious financial problems, and the government has been taking steps to prevent any such bankruptcies in the future.