Business News

Vaclav Klaus

Foreign trade development suggests a recovery. President Klaus has vetoed one of fiscal reform bills. Financial market supervision to be entrusted to one institution instead of the existing four. The Czech Republic fails to make it on Hyundai's shortlist for new car plant. Unipetrol privatisation has been postponed again. Czechs will face a series of price hikes from the New Year - including telephone, gas, and electricity. But before that, they may experience a blackout on the Christmas Eve.

Trade gap slightly below forecasts in October

The Czech Republic posted a monthly trade deficit of 245 million USD in October, slightly below market expectations as exports continued their strong performance. The Czech Statistics Office said that exports in nominal crown terms grew 13.5 percent year-on-year, compared with an 11.8-percent increase in imports. The export growth was the second highest for any month this year. Experts say the data signals an economic recovery both at home and in western Europe. Over 70 percent of all October exports from the Czech Republic headed for the European Union.

President Klaus vetoes one of fiscal reform bills

President Klaus has vetoed a bill that was part of the government's package of reform measures, already approved by Parliament. The bill was aimed at increasing the social and health insurance payments by self-employed people. In Mr. Klaus's opinion, the bill would not help solve the problems in the health sector while worsening the situation of sole entrepreneurs. The president has approved six out of eleven reform bills, his stance on the remaining four is unknown. The vetoed bill now goes back to parliament where the governing coalition will need the votes of all of its 101 MPs to overrule the president's veto.

Just one institution to oversee financial market as of 2010

The finance ministry has revealed a plan to create just one institution to oversee the Czech financial markets instead of the existing four. The aim is to create a cheaper yet more effective system. In two years from now, supervision of credit unions and banks should merge, and supervision of insurance companies and pension funds should follow in 2006, the Finance Ministry, the Czech National Bank and the Securities Commission said in a joint press release. The two institutions should then be transformed into just one before the adoption of the euro in 2009 or 2010. The process of merging the various institutions is very complicated, and the Committee for Coordination of Financial Market Supervision has therefore preferred to divide it into several stages.

Czech Republic not on Hyundai's shortlist for new car plant

The South Korean car manufacturer, Hyundai Motor, said it would not build its new car plant in the Czech Republic but shortlisted Poland and Slovakia for the investment. Whereas Slovakia offers lower taxes, Poland is a much larger market. Hyundai plans to invest 1.5 billion US dollars into a new car plant to produce 300,000 cars a year, employing between 3,500 and 4,000 people.

Telecoms office pushes dominant operator to cut rates

The Czech telecommunications market regulator, the Telecommunications Office, is pushing the dominant fixed-line operator Czech Telecom to reduce prices in 2004 to compensate for a hike in the VAT rate. The former monopoly operator has been lobbying for an increase in a basket of regulated prices to justify massive past investments into its network. Those investments were ordered by the state. But the regulator will insist that prices for most of Czech Telecom's services in 2004 should fall, when adjusted for the VAT change from 5 to 22 percent.

The Telecommunications Office is looking for the average price of selected services to grow by a maximum 5-13 percent, less than the cost of the tax increase. Telecom has said it would seek a rise in average prices that would exceed the rise in VAT and warned it may write off part of its infrastructure if the regulator does not allow it. The write-off - required by international accounting standards - would result in a 2003 loss, Telecom said, but declined to specify the possible 2003 financial result.

Czech Telecom posted its lowest nine-month profit in seven years due to weak fixed-line revenue on client outflow to rivals entering the liberalised Czech telephony market or to cellular telephone services. Earlier in November, it revealed a plan to lay off one third of its staff by 2005 to maintain high profit margins.

Unipetrol privatisation postponed again until January

The privatisation of the Czech chemicals group Unipetrol has been postponed until next January as initial investor bids failed to meet expectations. The government's privatisation committee received 10 letters of intent, with only Polish oil firm PKN and Hungarian oil and gas group MOL publicly announced. A new deadline for preliminary detailed bids was postponed until January to allow other investors time to join the tender.

The government is selling its 63-percent stake in Unipetrol and over 150 million USD worth of receivables, or debt owed by Unipetrol units to the state. Experts expect the state to raise around 400 million USD for the stake and around 130 million for the debt. Analysts said the number of bids was not particularly impressive, noting that some of them could also team up. PKN and MOL signed a letter of intent last Thursday to work toward a merger, which could mean that they could join forces for a bid for Unipetrol. The government unsuccessfully tried to sell Unipetrol last year, when there were 20 bidders.

Unipetrol is a conglomerate of firms active in crude oil processing, petrochemicals business and fuel distribution. The company's profit margins have been hit by fierce domestic competition and weak exports, which have also damaged investor sentiment. Its large debt load is also expected to discourage some buyers.

Trade Unions threaten with blackout on Christmas Eve

Another large-scale privatisation - that of two large North Bohemian coalmining companies - has not been going too smoothly either. Recently, the European Commission criticised the government's public tender as discriminatory, because major foreign players as well as the domestic power utility CEZ have been excluded from it. Most recently, the Trade Unions in both CEZ and the mining companies have threatened to switch off the power grid on Christmas Eve if the government goes ahead with privatisation in the current course. They have been on strike alert since mid-November. In their opinion, the sale of the coalmines is not transparent, and is coming at the least suitable time.

Electricity and gas prices to go up after New Year

The Czech power sector regulator said on Wednesday it would hike electricity and natural gas prices from January to reflect rising market prices and costs related to power supplies. The Energy Regulatory Office said electricity prices for residents would rise by an average of nearly 4 percent, prices for both small and large enterprises by 3 percent. It said the increase resulted from a wholesale raw electricity price hike of dominant power producer CEZ in a reaction to power price growth in Europe. Other factors were a rise in the cost of system services, and the third factor was higher cost of mandatory power purchases from renewable resources, the regulator said. The regulator also approved an average 1.23 percent hike in gas prices, due to higher transport and storage costs.