Business News

New director of Ceske Drahy Petr Kousal, photo: CTK

In this weeks economic report we talk to the new director of the Czech Republic's dominant rail operator and largest employer, Ceske Drahy. And as usual we will recap some of the stories making economic headlines in the Czech Republic including: Struggling Union Banka closes its doors. The introduction of civil service law to be postponed one year. Skoda Auto agrees to a wage increase for employees. Employees at truck producer Tatra stage protest strike. Czech National Bank leaves interest rates unchanged and warns that inflation may increase in the future. And more...

Struggling Union Banka closes its doors, clients unable to access accounts

Management of Union Banka,  photo: CTK
Union Banka closed its doors on February 21st, prompting the Czech National Bank (CNB) to revoke its license due to a lack of liquidity. Representatives of the struggling bank have since submitted a proposal for rescuing the bank which would allow for the gradual renewal of operations. Union Banka is owned by the Italian financial group Invesmart, which took over the bank in October of last year. Pressure has been mounting on the Czech National Bank to ensure that the bank will be in operation soon and that customers would not lose their savings. The Deposit Insurance Fund has started paying compensation to clients of the bank. Union banka is one of the smaller banks in the Czech Republic.

Introduction of civil service law to be postponed one year

The law on the civil service which defines the rights, duties, and salaries for about 80,000 civil servants will come into effect one year later then originally planned, in 2005. The postponement was caused by financial reasons. Civil servants will come under a 16-category system of salaries, new rights and duties, and will have to take an oath of loyalty to the state and not be able to do a second job. Because of the postponement the government hopes to save about 8 billion crowns in the 2004 budget from the implementation process.

Skoda Auto agrees to wage increase for employees

Skoda Auto, the largest company by turnover as well as the largest exporter in the Czech Republic, has agreed to union demands. Workers at the car manufacturer will receive a 1,300 Czech crown or 45 US dollar increase in their monthly wage. The wage increase amounts to a 6.2 percent increase in Skoda's average gross monthly wage of just over 21,000 crowns. Skoda Auto has suffered because of the strong crown which has cut into its export margins while making imported cars cheaper, the over decline in European car market has not helped the company either.

Employees at truck producer Tatra stage protest strike

Photo: CTK
About 1,000 employees of the truck producer Tatra staged a protest on March 3rd against the planned dismissals of one-third of the current 5,200 staff, which the firm announced in January. American SDC International and its shareholder Terex purchased the troubled truck manufacturer last January. Union leaders have appealed to Prime Minister Vladimir Spidla and some senators and deputies to help reverse the decision by the company's owners. Job cuts at the Tatra holding firm will send the unemployment rate in Koprivnice up 7 points to some 20 percent. Almost 10,000 employees have been sacked in the past 13 years.

Czech Central Bank leaves interest rates unchanged, warns inflation may


CNB governor Zdenek Tuma,  photo: CTK
The board of the CNB left interest rates at their current level late last week. Analysts were expecting little or no change in the rate. Regarding the inflation rate, CNB governor Zdenek Tuma said the biggest risk was the price of oil. However, with the uncertainty surrounding a possible war in Iraq it is unclear how long oil prices will keep growing.

Presentation of tender adviser in privatization of Unipetrol indefinitely

postponed The National Property Fund has postponed indefinitely the presentation of participants of a tender for an adviser in the privatisation of Unipetrol, which was to take place on March 3 and 4, for administrative and organisational reasons. The privatisation of Unipetrol failed last October after Czech chemical group Agrofert failed to pay for the government's majority stake in the company.

Alternative fixed line carrier to provide ADSL service

Nextra, a provider of Internet and communication services, has begun to offer high-speed connections to the Internet through the Asymmetric Digital Subscriber Line or ADSL. Monthly fees will reach 1,500 to 12,400 Czech crowns or 50 - 425 US dollars, depending on speed. The telecommunications firm is offering the service through an agreement signed with dominant fixed-line carrier Cesky Telecom. Nextra, which provides Internet and communication services to corporate clients, will offer the service in Prague, Brno and Ostrava.

Profits increase for top Czech banks

The largest bank in the Czech Republic, CSOB, posted a profit of 5.7 billion Czech crowns or just under 180 million euros last year, 1.5 billion crowns higher then the year before. The second largest bank in the Czech Republic, Komercni banka, showed a record net profit of 8.7 billion Czech crowns or just under 300 million US dollars, an increase of 2.5 billion crowns from the previous year.

Town to launch industrial park for local entrepreneurs

The town of Hranice, in Western Bohemia, where Dutch-Korean firm LG Philips Displays opened a plant for TV tubes, has launched preparation of a new industrial zone. The industrial zone is to be developed specifically for local entrepreneurs. In the past the overwhelming majority of industrial parks in such cities and towns have been designed for foreign investors.

Some stories in brief...

One in four Czechs surfs the net at home, compared to one in 50 people who connected to the net in 1997. However, the survey by the Dema agency shows that internet use is largely limited to people with higher education and income levels.

People can't seem to get enough of Czech beer. Czech breweries last year exported a record 1.9 million hectolitres of beer. In 2001, beer exports totalled 1.8 million hectolitres.

The international trend of decreasing music sales around the world is also present in the Czech Republic. Music sales fell by 20 percent in 2002 as compared to 2001.

Czech Airlines (CSA) will this year buy one Airbus A310 and three Boeing 737s. Originally the company planned to purchase only three planes but added one more plane because a continued increase in demand. CSA has 21 Boeing 737s, nine ATRs, and two Airbus A310s.

Shares of the dominant fixed-line telecommunications operator Cesky Telecom fell on Wednesday after Standard and Poor's downgraded the firms debt rating by one level to an A rating.

Head of largest Czech rail operator and employer replaced

Petr Kousal,  photo: CTK
The supervisory board of Ceske Drahy replaced Dalibor Zeleny as chairman of the Czech Republic's largest rail operator and later dismissed him as CEO. Mr. Zeleny was replaced by Petr Kousal who was until now the representative for Ceske Drahy in Austria. The Transport Ministry has been seeking the removal Mr. Zeleny for some time now, it cited the fact that the much needed restructuring of Ceske Drahy has slowed down as the reason for his dismissal. Last year the company was transformed from a state owned enterprise to that of a joint-stock company.

The new director of Ceske Drahy, Mr. Kousal, explains how he wants to restart the restructuring process:

Dalibor Zeleny,  photo: CTK
"One organization exists but we have a number of financial divisions, strategic divisions, and legal divisions. We have too many employees in our offices and I would like to downsize this organization, to downsize it from the top."

Mr. Kousal went further to say that the number of passengers taking the train has decreased from last year, he explains how he plans to change this:

"I would like to make travelling more attractive by focusing on general repairs and, more importantly, the cleanliness of the railway. There will also be an analysis of the various tariffs. We are even willing to reduce prices. I don't want to speculate to what degree but they will surely be adjusted to the current market in road transport."

Ceske Drahy is the largest employer in the Czech Republic with 80,000 employees. In 2002 the rail operator posted a 2.6 billion Czech crown, or just over 80 million euro loss, 1.6 billion crowns lower then in 2001. The company expects to post a profit this year, estimates range from one to four billion Czech crowns.