Flextronics to leave Czech Republic


Over the past few years, the Czech Republic has attracted an enormous volume of foreign direct investment due to a combination of factors - cheap and skilled labour, ideal geographic location for supplying European markets, and generous investment incentive schemes.

A few days ago, the Czech Republic's second largest city, Brno, suffered a shock as the biggest investor there, high-tech contract manufacturer Flextronics, announced it was consolidating its worldwide operations and decided to move the production capacity from the Czech Republic to Hungary.

Flextronics being the first big investor to leave the country, the issue raised many questions: Were sceptics right when they had predicted that investors will use up the incentives and then leave? Will other foreign companies move production elsewhere when consolidating their worldwide operations? Is the Czech Republic losing its competitive advantage in cheap labour due to the recent appreciation of the Czech crown? And what can make investors stay?

I talked to Martin Jahn, the head of the Czech government's agency CzechInvest, which assists foreign companies in placing their investment in the Czech Republic. He believes the country is still highly attractive for investors: