Business News

Карлов мост

The Czech foreign trade balance last month reached its highest monthly surplus in a decade. The government has announced the privatisation of two coalmining companies. The telecommunications regulator has cut fixed-to-mobile interconnection rates. The number of tourists visiting the Czech Republic was up last year, while the number of bankruptcies was down. A poll suggests few Czechs will go choose to work in other EU countries after accession. And the governor of the Czech National Bank has called for changes in euro adoption criteria.

Czech trade surplus at decade high

The Czech foreign trade balance reached its highest monthly surplus in a decade last month. The trade balance swung into a surplus of 3.6 billion crowns (134 million USD) in February, beating market expectations of a two-billion-crown deficit. In January, the trade balance ended with a 0.2-billion-crown deficit. The Czech Statistics Office said nominal exports jumped 18 percent year-on-year in crown terms in February while imports were up 13 percent.

Many economists and central bankers say the Czech economy needs an export boom to maintain or accelerate its three percent GDP growth rate from last year, as household spending cools down due to tax increases. The structure of exports - dominated by higher valued-added goods - also pleased many analysts.

Govt decides on privatisation of two coalmines, one remains

The Czech government has made a final decision on the privatisation of its stakes in two coalmining companies. It decided to sell its majority stake in Sokolovska uhelna for 2.6 billion crowns to a company established for this purpose by the mining company's management. The government also announced it was selling its 46-percent stake in the North Moravian OKD black coal mine to its majority owner Karbon Invest for 2.25 billion crowns.

Meanwhile, the Czech national power utility producer CEZ said it may team up with rival private energy firm Appian Group to buy the country's biggest brown coal mine Severoceske Doly. The government has said it may call a new tender for the sale of its 55-percent stake in the company later this year. Earlier this month, the government rejected a bid from Czech-Slovak investment bank J&T, backed by International Power and local investment group PPF. Both CEZ and Appian, which already controls a neighbouring coal mine, said they have reopened talks on a possible joint bid. CEZ already owns 37 percent of Severoceske Doly, its main supplier with an annual output of 22 million tonnes of coal. It attempted to take full control over it in the cancelled sale but the government at the time excluded CEZ from the tender.

Telecommunications regulator cuts fixed-to-mobile interconnection rates

The Czech Telecommunications Office decided to cut the prices paid by fixed-line operators to their mobile competitors. The office said in a statement the maximum price for fixed-to-mobile calls, paid by fixed-line companies and incorporated in prices paid by customers, would fall to 3.19 crowns per minute as of April; the current price is 3.66 crowns. It said the new price is one of the lowest in Europe.

The head of the association of fixed-line operators, Svatoslav Novak, welcomed the ruling but said the industry believed the correct price was much lower, around 2 crowns, adding that the association would continue to push for a further decrease. The income from fixed-line operators account for a large part of mobile companies' profits. The measure will make it possible for fixed-line operators to reduce end-user prices. However, calling from mobiles to fixed lines remains significantly cheaper than the other way round.

Czech Republic sees rise in number of foreign tourists in 2003

The number of foreign tourists visiting the Czech Republic rose by seven percent last year to 6.7 million, the Czech Tourist Authority said this week. The increase was higher than earlier estimates. A rise in the number of visitors from Western Europe has been attributed to a boom in low-cost airlines and relatively cheap accommodation.

Tourism officials expect an even bigger increase of 10-12 percent this year, due to the ice hockey world championships taking place in Prague and Ostrava next month, and due to the country's accession to the European Union in May. Next month, the Czech Republic will launch an international tourist advertising campaign on TV stations around the world.

Number of bankruptcies declining in Czech Republic

The number of bankruptcies declared in the Czech Republic last year fell to 1,800 from more than 2,100 in 2002. In Europe, the number of bankruptcies has been rising. It has been suggested that the positive trend in the Czech Republic is due to courts dealing with bankruptcy petitions faster.

On-line income tax returns likely as of June

As of June this year, individuals and firms should be able to submit income tax returns on-line. Those who decide to submit their tax returns over the Internet must own an electronic signature certificate which is issued by an independent certification authority.

So far around 5,000 people have acquired it. At present, businesses can submit their VAT, road and real estate tax returns on-line. According to the Finance Ministry, over 2,500 tax returns have been submitted over the Internet this year.

Mass exodus of Czechs to EU for work unlikely - poll

Photo: European Commission
It is highly unlikely that many Czechs will seek jobs in the EU after the Czech Republic's accession in May. In a recent survey, 80 percent of respondents said they were not planning to work abroad, despite a relatively high unemployment rate in their home country. In the poll, conducted by the Labour and Social Affairs Research Institute, only 17.5 percent of respondents said that they were considering moving abroad for work, primarily students and young people under the age of 29.

According to the survey, the main bonds that keep Czechs at home include family and friends. The vast majority of those who said they were considering working abroad have not yet taken any concrete steps and their intentions are more theoretical. The majority of them also said that they would prefer to wait until all the EU member states allow for a completely free movement of labour.

At present, only Great Britain and Ireland are planning to allow free access to their labour markets for citizens from the new EU member states. The other 13 EU members will continue to require work permits for a period of 2 to 7 years.

The Dublin-based European Foundation for Living and Working Conditions has estimated that if a completely free movement of people were introduced, around one percent of the total population of all the new EU member states would migrate to the current EU 15, which would mean around 200,000 people a year.

Foreigners will not be able to buy real estate freely after EU accession

Citizens of both EU member and non-member countries will be allowed to buy real estate for housing purposes in the Czech Republic after its EU accession freely only if they have permanent or long-term residence in the country. The Local Development Ministry said there will be an exception for EU citizens with the status of a migrating worker. The limitations will be in place for five years after accession.

Czech central bank governor calls for change in euro adoption criteria

Photo: European Commission
Czech National Bank Governor Zdenek Tuma has called for flexibility in the euro adoption criterion on inflation, saying it was designed for a different situation from that of today's euro hopefuls. Mr. Tuma told a conference this week that the Maastricht Treaty rule governing eurozone entry may bee too strict for east European countries and could force them to push inflation too low.

The criteria for euro adoption include inflation, debt, interest rates, currency stability and budget balances. The inflation rule, which was set years before the euro zone existed, allows price growth to be at most 1.5 percentage points above the average of the three best performers in the EU.

Mr. Tuma said it could be politically difficult to change the rules, and therefore the way forward may be to take into account the overall economic fundamentals and balance. However, European Central Bank board member Gertrude Tumpel-Gugerell told the same conference that the applicants would not have as much trouble with the inflation and interest rate rules as with the need to cut their budget deficits, which might be a tough task especially for the largest candidates like Poland, Hungary and the Czech Republic.