The first 100 days: How well have Czech entrepreneurs coped in the expanded EU?

It's been just over 100 days since the Czech Republic joined the European Union. In this week's Business Report, we talk to Vaclav Smejkal of the European Consulting Institute about how well-prepared — or unprepared — Czech entrepreneurs were ahead of accession and how they've fared thus far in the expanded EU.

The first 100 days: How well have Czech entrepreneurs coped in the expanded EU?

Photo: European Commission

It's been over three months now since the historic expansion of the European Union from 15 to 25 member states. On the occasion of the 100th day since the Czech Republic joined the EU, the Czech association of small businesses and entrepreneurs, SPS, released the results of a comprehensive survey which aimed to find out just how well association members had coped with EU accession.

Earlier this week, I caught up with Vaclav Smejkal, a former representative of the Czech Economic Chamber in Brussels, and a partner in the Prague-based European Consulting Institute, which helped prepare and analyse the SPS survey. I began by asking him how well prepared most entrepreneurs and medium-size Czech businesses were for EU entry and what getting ready for the May 1st accession date entailed.

"The survey of opinions or experiences of Czech entrepreneurs after the first 100 days in the EU show that almost half managed their entry into the European Union well. They either feel prepared enough, or that they managed their preparations through some administrative changes within their companies."

"Almost half of the companies were satisfied with their preparatory work ahead of EU accession and did feel quite prepared for joining the EU."

"The majority of them made only administrative or formal changes — less than one-fifth did any marketing or strategic changes. Only three percent, which is really not a very significant percentage of companies, made some changes in their personnel or human resources policies."

But of course feeling prepared doesn't necessarily mean there were prepared.

"It's difficult to say after 100 days but of course....Many companies felt prepared, but not so many are really aware of the number of issues and the number of requirements they will have to meet and somehow cope with in order to be really ready, to be really prepared for all challenges of the European single market."

"And it's quite possible that those deeper changes in business strategy, marketing, human resources, will be carried out in the future because the survey also showed that the majority of Czech entrepreneurs still keep very high on the agenda the issue of EU integration and the EU single market. More than 90 percent of Czech entrepreneurs admit that even in the future, one of the major priorities for them will still be to get better prepared for the single market."

"There also was a question whether those companies were able to really follow all new legislative requirements of the European Union, and only 12 percent said they were fully aware of everything that's happening, that they follow the official journals of the EU regularly."

"On the other hand, almost the same percentage, 11 percent, said they didn't know what it was about and didn't care much about what's going on in Brussels and what's being published in the official journal."

So what was the biggest headache for Czech companies ahead of accession? Much of the EU body of law, the acquis communautaire had been adopted well ahead of accession, but the law on standardising VAT, value-added tax rates, for example, virtually came at the last minute.

"I think it was a nightmare for thousands of entrepreneurs. Of course, in principle, the change had been known well ahead, how VAT works between France-Germany, France-Belgium in their bilateral trade, so we could explain how, in principle, work after the 1st of May. But until about three days ahead of the accession, there was no Czech law stipulating exactly how the mechanism would work in the Czech case. So for many enterprises it was really a 24-hour long shifts several days before the accession in order to manage this change. And even now, quite a few companies still have problems to correctly fill out the new VAT forms, et cetera. So, from the point of view of time, money, investment, the VAT change was probably the biggest challenge at the time of accession."

What is the most important area where small Czech companies and entrepreneurs have failed to comply with the EU regulations required of them?

"I think, from the legal point of view, Czech companies still lack enough experience and maybe enough information, about how to defend themselves, using the new [to them] European legal system, in order to protect their interests, in order to overcome existing trade barriers."

"And from other legal issues which are becoming important to them now, after this VAT issue, which is already behind them, it's a question of competition and laws governing business, for doing business in other countries, posting people abroad, investing abroad, meaning in other EU countries."

Photo: European Commission

"There are specific harmonised rules of the European Union, and on the other hand, purely domestic rules which differ from country to country. And Czech companies, in order to enlarge their activities, to really take advantage of this larger 'domestic' market, have to learn both the harmonised side of the regulations and this purely domestic side of, let's say, the German market, Polish market, Slovak market, in order to be able to send their people there, et cetera."

So most Czech entrepreneurs still have a lot to learn about doing business in the EU, although most aren't overly concerned. What opportunities are Czechs excited about? And were there other interesting findings from the survey?

"It's clearly visible from the survey that the "hit" of the season is EU funding and these structural funds which provide money to regional or company projects. More than two-thirds of Czech companies are really interested to try their luck in this competition for EU money."

"As to other interesting findings of this survey, the channel through which half of Czech companies would like to learn about new developments or new regulations in the EU is the Internet, from web pages, preferably in the Czech language, they would like to learn as much as they can. And it's quite interesting that only five percent would like the Czech state to provide them with information; only 10 percent would like to get such information from their business association, or chamber of commerce, et cetera."

"And the last interesting question was whether EU issues remain among the priorities of their preparation for the future and the majority of Czech entrepreneurs said 'yes'."