Business News

The manufacturing sector hits its lowest point in three years; the government approves legislation banning anonymous bearer shares; the Finance Ministry expects the public finance deficit to drop to 3% GDP this year; new law on emission fees ratified; the Czech Republic’s international competitiveness slips for the third year.

Manufacturing sector at lowest point in three years

The Czech manufacturing sector is at its lowest point in three years, according to at least one market assessor. The company Markit Economics reports that their Purchasing Managers Index fell in May to 47.6 points from 49.7 the month before. That would mean the worst deterioration of business conditions since August of 2009. A result of more than 50 on the index entails growth. According to Markit Economics, productivity was down in four out of five sectors of the main index, with only suppliers’ delivery times remaining at the same level. The volume of new orders dropped to the lowest rate in nearly three years, production was stagnant and companies were laying off employees. The volume of new export orders went down for the seventh consecutive month, and did so at the fastest rate since July of 2009.

Government approves legislation to ban anonymous bearer shares

Photo: Czech Television

The Czech government approved legislation this week that will do away with anonymous bearer shares. In its current form, the bill requires companies to register bearer shares with the stock exchange or deposit them with banks. Both alternatives will enable law enforcement bodies and those awarding public tenders or subsidies to identify share owners. The bill is part of a broader package of anti-corruption measures approved by the centre-right government. Still, even supporters of the legislation admit that banning bearer shares is only a small step towards transparency. Lawyers note that there are still a number of other ways to obscure the real ownership structure of a company, for instance by establishing a Czech company whose only shareholder would be a foreign firm based in a country where bearer shares are permitted.

Finance Ministry expects public finance deficit to drop to 3% GDP this year

Photo: Štěpánka Budková

The Czech Finance Ministry expects the public finance deficit to drop to 3% of GDP this year from 3.1% in 2011, according to the ministry’s fiscal outlook, which was released Thursday. A deficit of less than 3% GDP is one of the conditions for adopting the euro. Last year, the deficit fell to 3.09% from 4.83% in 2010. These figures show that the fiscal outlook is in line with the plan the cabinet outlined in its updated Convergence Programme from April, sent to the European Commission. The deficit is expected to reach 2.9% GDP in 2013 and 1.9% in 2014, according to the ministry's estimates. Public sector finances should be balanced in 2016.

President signs into law legislation on emission fees

President Václav Klaus signed environmental legislation that will gradually increase emission fees. As per the new act, ratified on Tuesday, firms with high levels of emissions will have to pay 4,200 Czech crowns per ton of CO2 emitted, beginning in 2013. The fee will gradually be increased to 14,700 crowns by 2021. The new law also states that solid fuel boilers must be inspected every two years, and allows communities to set up low-emissions zones where older automobiles will not be permitted. The new regulation will mostly affect large corporations. Industry, transport and chemical associations have opposed the law. Mr Klaus himself vetoed similar legislation last year.

Czech Republic’s international competitiveness slips for third year

The Czech Republic’s international competitiveness slipped this year, according to the annual index compiled by the International Institute for Management Development. This year, the Swiss institute puts the country three places lower, at 33rd place out of 59 countries, just after Kazakhstan. Just like last year, first place on the index was taken by the United States and Hong Kong. The last such list, published by the World Economic Forum last September, also put the Czech Republic down two places to 38th. This marks the third consecutive year that the country has slipped on these lists, which some say indicate systemic problems, among them corruption.