CzechInvest reports 'radical shift' towards 'knowledge economy'

Мартин Ян

This week CzechInvest, the government agency charged with attracting investment and business development, released its mid-year report on its activities. The agency's data show that during the first half of 2004, there was over a 100-percent increase in the number of projects brought about with the help of CzechInvest, compared to the same period last year, and the country is rapidly moving toward a "knowledge economy."

Martin Jahn
Aside from attracting 100 million euros more in investment than at this time last year, CzechInvest, the government agency charged with attracting investment and business development, says there has been three times as much investment into research & development and strategic services projects. CzechInvest CEO Martin Jahn says that's represents a "radical shift" towards projects which favour a qualified work force, and shows the Czech Republic is rapidly moving towards a "knowledge economy."

"We have changed our policy more towards this type of investment with high-added value in services and so on because we have proved to the world that the skills and services are good enough here to attract these investments, but also because labour costs grew to the point where [the Czech Republic] is no longer an attractive location for simple manufacturing."

Altogether, in the first half of this year, CzechInvest has procured 60 new foreign and domestic investment projects. The total value of these investments is close to one billion euros. Owing to these investment projects, at least 8,500 new jobs will be created over the next few years in the Czech Republic, of which more than two-thirds are positions intended for college graduates and high school graduates.

In addition to building the "knowledge economy," Mr Jahn says CzechInvest has succeeded in channelling the vast majority of all new investments into those regions which suffer from the highest unemployment rates, such as the Moravian-Silesian region along the border with Poland.

"We are changing the conditions according to our needs. That means we are looking at what types of investments we need, the size of the investment, to which regions we need to bring these investments — and that is the determining factor for changing investment incentives."

The companies behind many of the new investments have not yet been made public. Among those included in the CzechInvest report released this week are the Taiwan-based firm ASUSTeK COMPUTER, which is building a new European centre for manufacturing and servicing, and the Scandinavian IT service provider TietoEnator, which is opening a software development centre. Both of these multinational companies will be based in Ostrava, an industrial Czech city that was hard hit with the closure of inefficient mines and the collapse of some heavy industry.

Getting companies to locate in such depressed or remote areas, well outside of the Czech capital, Prague, often means offering multinationals more public support, albeit within European Union regulations.

Martin Jahn explains:

While by mid-year 2003, only seven companies had decided to invest in research & development or strategic services projects, by the end of June this year, 23 Czech and foreign-owned companies had filed investment proposals. Aside from the automotive industry, which is traditionally strongest in direct investment, a number of new mechanical engineering and electronics projects — such as the ASUSTeK COMPUTER and TietoEnator project — are underway in the Czech Republic.

Mr Jahn says that the Czech Republic has been more successful in attracting foreign direct investment than other new EU member states in the region in large part because of the country's infrastructure and the quality of technical education on offer here.

"If you look at total FDI [foreign direct investment] per capita, Poland has attracted about three times less than the Czech Republic. And I think the main reason is, first of all, infrastructure. The Czech Republic has much better infrastructure allowing good access to all regions. And the second is the skill base, driven by the quality of technical education and industrial tradition. The Czech Republic just has the best quality and density of technical education in the region of Central and Eastern Europe."