Business News

The Czech Republic's foreign debt grew by 81 billion in 2003 to 894 billion. Anti-monopoly office fines three largest Czech bakeries for cartel. The Czech government offers US company Boeing 1 crown for its stake in troubled Czech aircraft maker Aero Vodochody. Czech civil servants threaten to go on strike after the government decided to significantly reduce their special end-year bonuses. The Industry and Trade Ministry decides to review a project in support of Iraq because of the involvement of a former communist secret police agent. The Czech Republic negotiates the inclusion of the Prague-Linz railway line in a list of 26 European priority transport projects. Czechs plan to spend billions to develop tourist industry. Some current EU members express concern about the low level of taxation in the new member states.

Czech foreign debt reaches 37 percent of GDP in 2003

The Czech Republic's foreign debt grew by 81 billion in 2003 to 894 billion, which represents 37 percent of the GDP. The Czech National Bank said indebtedness of businesses accounted for the biggest part of the total. At the same time, indebtedness of domestic commercial banks increased significantly. The government sector's foreign debt increased in Q4 due to loans from the European Investment Bank for anti- flood measures and transport infrastructure. The government sector accounts for almost 8 percent of the Czech Republic's total foreign debt.

Anti-monopoly office fines three largest Czech bakeries for cartel

The Czech Office for the Protection of Competition has imposed a fine of a total of 120 million Czech crowns, or around 4 million USD, on the country's three largest bakeries. The office launched a probe into the practices of the bakeries Delta, Odkolek, and Penam last year after all of them increased prices by almost twenty percent. They were found guilty of concluding a cartel agreement. Delta rejected the accusation, saying it had always had an independent pricing policy.

Since it was established in 1991, the anti-monopoly office has imposed dozens of fines for anti-competitive business practices. The heaviest fines so far were imposed on five fuel distributors for a prohibited price agreement and the national fixed-line phone operator Czech Telecom for abuse of its dominant market position.

Govt offers Boeing 1 koruna for stake in Aero

The Czech government is offering US company Boeing 1 crown for its stake in Czech aircraft maker Aero Vodochody, instead of the 1 billion reportedly requested by Boeing. The daily Pravo quoted finance minister Bohuslav Sobotka as saying that this was the Czech Republic's final position on the matter. Boeing holds a minority stake in the troubled company but has managerial control. The government and Boeing have recently agreed to terminate the strategic partnership. There have been reports that Boeing is willing to quit Aero, which it has brought to the verge of bankruptcy, but is demanding 1 billion crowns in compensation, as well as guarantees that the state will never take it to court over Aero. The government hopes to sell Aero to another strategic partner. European aircraft producer Airbus and UK's BAE Systems have reportedly shown interest.

Civil servants to go on strike in protest at reduction of end-year bonuses

The country's civil servants may go on strike to protest against Sunday's Cabinet decision to give them only limited end of year bonuses, in line with the government's fiscal reform plan. Despite protests from the Trade Unions and warnings by social affairs minister Zdenek Skromach, the Cabinet agreed to pay the country's 450,000 civil servants only 10 percent of their so-called 13th monthly salaries, a special end of year bonus which was guaranteed by law in the past. Civil servants say their annual incomes will drop significantly without this supplement to their wages and have threatened to launch various protest actions. At a meeting of trade union representatives on Monday, trade union leaders agreed to call on all union members and civil servants to go on a one-hour strike after the Easter holiday. About 750,000 people are employed in the civil service and the state administration, of which 450,000 are paid from the state budget. The remaining 300,000 receive salaries from the regions or are paid from public health insurance.

Trade minister to review Iraq support project

The Industry and Trade Minister Milan Urban has decided to review a project in support of Iraq because of the involvement of Frantisek Malata, a long-term agent of the former Communist secret police StB and alleged collaborator of the former Soviet KGB intelligence service. According to the daily Mlada Fronta Dnes, Malata was sacked when these facts came to light. Czech companies that are interested in taking part in the reconstruction of Iraq are applying for subsidies from the government. The minister has now stopped the process of selecting suitable projects to make sure it has not been manipulated. The paper also said that Malata possessed an extensive collection of antiques and unusually large property for a civil servant.

Prague-Linz railway line on list of priority projects in Europe

The Czech Republic has negotiated the inclusion of the Prague-Linz railway line in a list of 26 European priority transport projects. These so-called "projects of European interest" will be given priority in allocating money from EU funds. Modernisation of the Prague-Linz line should be completed in 2016. The line is part of a long, branching trans-European railway corridor connecting Athens, Sofia, Budapest, Vienna, Prague, Nuremberg and Dresden.

Czechs to spend billions to develop tourist industry

The Czech Republic will spend more than 8 billion crowns on developing the tourist industry between 2004 and 2006. The money will come from both domestic resources and EU funds. Local Development Minister Pavel Nemec said that most of the money would be spent on infrastructure as well as promotion of the country abroad. Entrepreneurs will also be able to draw money from funds allocated for the development of human resources. At present, the state earmarks roughly 150 million a year for tourism and spa projects. Annual foreign exchange revenues from tourism hover around 100 billion, which is over seven per cent of the country's exports. Experts recommend that the government also support tourism by creating a more favourable business environment. The state should also motivate Czechs to spend their holidays in the Czech Republic and travel agencies to bring more foreign tourists to the country, they say.

Wealthy EU states criticise newcomers for low taxes

Some current EU members have expressed concern about the low level of taxation in the new member states that will join the EU in May. On Monday, German chancellor Gerhard Schroeder suggested that low corporate tax rates in eastern Europe could be a sticking point in future EU regional aid negotiations. Noting the average corporate tax rate in the 10 EU newcomers was under 20 percent, compared with over 30 percent in the EU now, he said this creates a competitive situation which causes difficulties for the existing EU states. He accused the incoming states of having "a tax policy which is not adequate to fund infrastructure on their own but which is aimed at co-financing this infrastructure with transfers from Brussels". Sweden's prime minister, Goran Persson, joined the attack a day later, saying the highly-taxed Nordic EU states will not tolerate incoming East European nations who have significantly lower income taxes. In December, Sweden led a campaign by the six biggest net contributors to the European Union coffers to limit spending in the post-enlargement budget between 2007 and 2013, a move that would leave much less cash for the needs of less wealthy newcomers. Representatives of the new member states argue that they need lower tax rates to boost economic growth in that part of Europe, where the average per capita GDP is about 40 percent of the current EU level.