Business News
Czech government faces another arbitration. New calls for privatisation of remaining state assets. Parliament passes law to speed up energy market liberalisation. Pilsner Urquell brewery found guilty of compeititon-blocking practices. Government would like mobile operators to pay for UMTS licences as soon as possible. Central Bank intercepts an increasing number of forged euros. Consumer confidence has been on the rise. Czech foreign debt decreases.
Czech government faces new arbitration
The Czech government faces a new legal battle with a foreign investor after a unit of Italian fund manager Investar Group said it was seeking a 10 billion crown (365 million USD) redress for a lost investment. Investar's Dutch-registered unit Invesmart was the main investor at Union Banka, a small Czech lender which was put under forced administration in March due to severe liquidity problems. The bank's failure is subject to police probe and various law suits. The Czech Republic has become a target of arbitration claims by two other investors who had lost business in the country, and another two are reportedly considering initiating an arbitration proceeding for the same reason. Government officials declined to comment on Invesmart's move until after arbitration proceedings have started.
SEC suggests moves to revive market
The Czech Securities Commission has called on the government to enliven the stock market by floating some of the state's shares in leading firms. The Securities Commission wrote in a document prepared for the cabinet that the market has long been missing incentives for its further development, and that in this respect, it is important for the market that privatisation of some strategic companies continue. The document also suggests that the government should also provide assistance to mid-sized companies wanting to list on the bourse. The Securities Commission said the capital market was failing to act as a place where companies could find funds for expansion, mainly because its reputation was damaged by rogue trading and takeover practices after a massive privatisation wave last decade. Even the Czech stock market's 17 percent jump last year, when most of the world's leading markets were in rapid decline, failed to attract more widespread investor interest. The Prague Stock Exchange has not seen any initial public offerings since its establishment in 1992 as part of the post-communist economic transition after 1989. On the contrary, hundreds of companies were delisted by their new majority owners who were keen to avoid disclosing data to the public. Only seven stocks now actively trade on the bourse. State-owned stocks that the government could potentially offer include the dominant power producer CEZ, leading phone operator Cech Telecom, the national air carrier CSA, postal service firm Ceska Posta, national power grid CEPS, the famous beer brewer Budejovicky Budvar or three coal mining firms.
Government to sell majority stake in engineering firm CKD Praha Holding
The cabinet has agreed to open a tender for a more than 85-percent stake in machinery and engineering firm CKD Praha Holding. The repeated privatisation of CKD through the sale of a combined stake held by several government bodies should be completed by the end of March next year. The Finance Ministry has set the price and the business plan as the main tender criteria. It did not say what would be the minimum acceptable bid. CKD, which was privatised after 1989, nearly collapsed in the year 2000 due to excessive debt it accumulated during its massive expansion in the 1990s, when it produced everything from locomotives to dental equipment. The previous government then decided to re-nationalise the company, which employed some 24,000 people in its heyday, though it had to sell the most valuable tram and locomotive business to German rival Siemens. After the restructuring and spin-off of non-profitable activities, CKD now controls rail transport unit CKD Vagonka and turn-key project firm CKD DIZ. It showed last year net profit of 127 million crowns ($4.6 million) on sales of 3.18 billion.
Agriculture minister rejects Budvar sale
Competition watchdog fines largest Czech brewer for illegal market practices
The Czech anti-monopoly office has imposed a fine of 2.3 million CZK on the largest Czech brewer Pilsner Urquell for forcing restaurants into signing disadvantageous contracts. Contracts between Pilsner Urquell and restaurants concerning brand awareness and promotion included a pledge to buy a minimum amount of beer equal to the annual beer sales at the given restaurant. This practice was found to be a serious barrier preventing the supply of different products at different prices and, in effect, harming consumers. The anti-monopoly authority previously fined Pilsner Urquell, a unit of the SABMiller group, for exclusive contracts on the purchase of its beer in 1998.
Czech power market to be liberalised sooner
The Czech electricity market will be liberalised faster than expected, as the lower house this week approved an amendment to the energy law. The amended law is yet to be viewed by the Senate. The change will make it possible for all corporate customers to choose a power supplier a year earlier than planned in the original liberalisation schedule approved in 2000. At present, only large companies with consumption of more than 9 GWh a year can freely select their power supplier. As of next year, all companies will be able to select their supplier. In 2005, it will be all customers with the exception of households, and households will be allowed to do so as of January 1, 2006. The approved change will stimulate competition and cut electricity prices. Experience from other European countries shows that about one-fourth of firms will change their supplier in the end. The price then can go down by 10-30 percent within a few years, making it possible for Czech firms to save up to several billion crowns a year.
Govt needs cash for UMTS licences now
The Czech government will ask two leading mobile phone operators to pay for third-generation UMTS mobile phone licences earlier than over the originally agreed 10 years. The cabinet, which has been looking for extra revenues to ready the economy for EU membership from next May, originally planned to take a bank loan of five billion crowns ($181 million) and repay it with instalments received from the telecoms operators. The government sold two UMTS licences in 2001. T-Mobile's Czech unit promised to pay 3.86 billion Czech crowns while its rival, Cesky Telecom's Eurotel, offered 3.54 billion crowns. Finance minister Bohuslav Sobotka declined to elaborate on conditions the state would offer to the companies and said the cabinet may return to the initial idea of taking a loan, if the talks fail.
Central bank registers more forged euros in H1
Czech per capita GDP catches up with EU average
Czech per capita GDP has been slowly but steadily catching up with EU average. The indicator has been growing since the second half of 1999. According to the European statistics office Eurostat, Czech per capita GDP reached 60 percent of the EU average in 2002, which is one percent more than in 2001.
Consumers more optimistic
Czech consumer confidence strengthened in June as people hoped to have more cash on hand and some abandoned fears they will lose jobs in the coming months, according to the Czech Statistics Office. Consumer confidence, measured by an opinion poll, rose to minus 10 points in June from minus 12 in the previous month. The indicator has been struggling to rebound from minus 13 in February and March which was its lowest in more than two years. Business confidence - including indices for industry, construction, trade and selected services - was unchanged from the previous month, holding steady at four points. Unemployment has eased to 9.4 percent of workforce in May from February's ten-year high of over 10 percent. At the same time, record low borrowing costs and zero inflation boost consumer spending that has helped the economy resist an economic slowdown in key EU markets where Czechs ship some two thirds of their exports.
Tax revenues help cut Czech budget gap in June
The Czech state budget posted a rare surplus in June due to an influx of advance tax payments from profitable corporations. However, the half-year balance remained deep in the red. The Finance Ministry said the monthly June surplus of 21.2 billion crowns ($775.1 million) narrowed the cumulative six-month shortfall to 53.4 billion crowns. The deficit shrank from a January-May gap of almost 75 billion crowns, the country's biggest shortfall ever. Last time the state budget posted a monthly surplus was in September 2002. The central budget is only one part of the overall fiscal balance which includes various off-budget funds, government agencies, health insurance and municipal finances and which has tended to post a widening gap.
Money supply grows
Czech money supply as measured by the M2 indicator, rose by 2.1 percent year-on-year at the end of May, at its slowest growth pace in 10 years, after 3.1 percent in April.
Czech Republic's indebtedness decreases
Total Czech foreign indebtedness dipped under 24 billion euros at the end of March from more than 25 billion euros at the end of December. The Czech National Bank said the foreign debt equalled 33.3 percent of the Czech GDP, down from 34.8 percent at the end of last year, safely below the 45-50 percent level perceived by investors as a potential cause for concern.
