Czech government highlights foreign investment turnaround

Turning on the tap of incoming foreign investment in the Czech Republic was one of the main priorities for the new centre-left government when it came to power a year and a half ago. They accused the previous coalition of winding down the proactive policies that brought in big money investments and hundreds of new jobs. But after 18 months, how have the high ambitions played out.

Jan Mládek, Bohuslav Sobotka, Karel Kučera, photo: CTK

Prime Minister Bohuslav Sobotka flanked by Minister of Industry and Trade, Jan Mládek, and the head of the state agency for promoting inward investment CzechInvest, Karel Kučera, presented some of the fruits of their efforts to boost foreign investment over the recent months. To some extent it was an opportunity for mutual congratulations but also a pledge that the struggle goes on.

Prime Minister Bohuslav Sobotka: “The fact that the investment policy is paying off is shown by a year on year comparison. If we look at the number of projects that were mediated, in 2013 it was 108 and in 2014 it 147 such projects. That is a significant increase.“

The total investment sums for 2014 hit 87 billion crowns with the Czech Republic far outstripping its neighbours, Poland, Hungary, and Slovakia in the incoming investment stakes, according to the Ministry of Industry.

The prime minister stressed that in today’s globalized economy, no country can hope to boost growth and cut unemployment without foreign direct investment as part of the economic toolbox.

Photo: Tomáš Adamec

The head of CzechInvest says the strong trend is continuing in the first half of 2015 with 49 investment projects agreed so far this year. The investment sums though are in a lower league than those from 2014, totalling around 21 billion crowns. While South Korea was one of the main investors in 2014, the lead investors in projects with the most added value so far this year have been coming from the US, China, and Japan.

The government and CzechInvest say they are looking to improve their offer to foreign firms with better coordination between ministries, finetuning of investment incentives, such as new economic zones, and stepped up activities abroad through so called economic diplomacy.

And the direct jobs creation from these investments? That is put at around 23,000 over the last year and a half with most of the investments being targeted at the unemployment blackspot regions of Moravia-Silesia and the Ústí regions where the average jobless rate still stands above 11 percent. Some regions though, such as Vysočina, have though seen almost no bonus in terms of new jobs from the investment policy.

And the breakdown of the investments? Well the car sector dominates in terms of the number of projects, 67 in total, followed by various metal bashing activities and engineering. But the dependence on the car sector is even higher if some of the investments in new tyre plants is also factored in.

Photo: archive of Foxconn

There are clearly several major investment projects in the pipeline. A final deal bringing thousands of jobs to the Czech Republic still has to be sealed with Taiwanese electronics producer Foxconn. And only on Wednesday, the prime minister was in personal talks with the head of the world’s biggest steelmaker, Arcelor Mittal, over investments in its Ostrava steelworks which could probably guarantee thousands of jobs for several decades to come. The high powered personal approach is judged to be one factor usually paying off when courting the foreigners.