Business News

The Czech cabinet has failed to agree on the 2004 draft state budget. The government's factoring agency, Konsolidacni Agentura, has said it will offer investors 40-50 billion Czech crowns worth of non-performing assets. Former defence minister has been appointed chairman of Czech Airlines. Russia is considering raising duty on Czech Skoda cars by 6 percent. Skoda Auto has been negotiating with the Kazakh government about building a car production plant in Kazakhstan.

Business News

Cabinet postpones debate on state budget

The Czech cabinet failed to agree on the 2004 draft state budget on Wednesday and will meet again to discuss it on September 17. The delay was not unexpected given ministries have asked for more than 40 billion crowns in excess of limits set within a budget framework approved in July. The government has set a ceiling of 118 billion crowns on the budget deficit for next year. Finance Minister Bohuslav Sobotka has said the limit is untouchable as a part of the government's drive to slash the public finance gap to four percent of gross domestic product in 2006 from more than 7 percent this year. The cabinet must send the budget draft to parliament by the end of September.

Konsolidacni Agentura to sell off non-performing assets

The government's factoring agency, Konsolidacni Agentura, said it would offer investors 40-50 billion Czech crowns worth of non-performing assets as part of its drive to spin the receivables off the government's books. The agency said on Wednesday it wanted to complete the two-stage tender in the first quarter of next year. Konsolidacni Agentura was set up to buy off non-performing loans from banks and to restructure ailing businesses during the country's transition to a free market following the 1989 collapse of communism. It aims to gradually sell off the debts and close down in 2007.

The head of the agency, Pavel Rezabek, said the package was formed by loans previously owed to Komercni Banka. The government bought the loans as part of a bailout preceding the privatisation of the bank, which was then sold to France's Societe Generale in 2001. Most of the debtors are in bankruptcy. The price paid for previous debt packages sold by Konsolidacni Agentura was usually in single percentage points of the debts' face value. The agency had over 90 billion crowns in uncovered past losses at the end of July. The government eventually has to cover the gap, as well as any future losses at the agency.

Former defence minister appointed head of national air carrier

The Czech national carrier Czech Airlines has a new board of directors to be headed by the former defence Minister Jaroslav Tvrdik. Czech Airlines is majority-owned by the state which, through the National Property Fund, controls 90 percent of shares. Upon his appointment, Mr. Tvrdik said he trusted the current management and was not planning any major personnel changes or bringing in his former colleagues from the defence ministry.

Czech Airlines said on Tuesday it posted first-half profit of 4.1 million USD under international accounting standards. However, under Czech accounting standards, which order faster write-offs, the company had an almost 10-million-dollar loss. The airline is a member of the Sky Team alliance led by Delta Air Lines and Air France, which is aiming to turn CSA's main airport in Prague Ruzyne into its hub for travellers to eastern Europe.

Russia to impose import surcharge on Czech cars

The Russian Ministry of Economic Development and Trade has confirmed that Russia was considering raising duty on Czech Skoda cars by 6 percent. The decision is expected to be made by Friday. The duty would be raised in retaliation for the imposition of a 35-percent duty on imports of Russian potassium nitrate to the Czech Republic. As a result, Russian producers of fertilisers will lose 1.5 million US dollars. The raising of import duty on Skoda cars should cause the same loss to Czech company Skoda Auto. Analysts say the higher duty could render Skoda cars unsellable on the Russian market. Skoda Auto exports about 2 percent of its output to Russia, with 10,000 units sold there in 2002.

Skoda Auto chief talking to Kazakh president about new plant

Vratislav Kulhanek

Skoda Auto has been negotiating with Kazakhstan's government about building a car production plant in that central Asian country. The talks between Skoda Chairman Vratislav Kulhanek and Kazakh President Nursultan Nazarbayev come as the company faces new customs duties that could lock its cars out of the Russian market. According to the daily Mlada Fronta Dnes, Mr. Kulhanek travelled to the Kazakh capital on Tuesday and will return to Europe next week for the Frankfurt Auto Show. He told the newspaper that his company, along with German parent Volkswagen and sister company Audi, will announce a "new mission and goal" in Frankfurt.

Skoda this week rolled out its 4-millionth car since joining the Volkswagen family in 1991. In addition to its three main plants in the Czech Republic, the company operates assembly plants in India, Bosnia & Herzegovina and Ukraine.

Skoda has sought for years to expand sales in Russia, and has looked at building an assembly plant near Moscow. However, its Russian plans came under attack this week when Moscow warned that it might impose a retaliatory 6-percent import duty on Czech-made cars. By building cars in Kazakhstan, Skoda could find a way to avoid the duties and continue its expansion plans for the Russian market.