PhDr Vlastimil Cerny, CSc, MA Head of the International Office Faculty of Economics and Management

1. PhDr Vlastimil Cerny, CSc, MA Head of the International Office Faculty of Economics and Management Czech University of Agriculture Prague cerny@pef.czu.cz Phone/fax+420.234381804

2. CZECH REPUBLIC 2006(a small country in the centre of Europe) Area: 78,886 sq.km Population: 10,211 million GDP per capita: 19, 300 USD (based on Purchasing Power Parity 37th place in the world) Average monthly wages 20, 600 CZK(726 EUR, PPP 1,8 = 1,306 EUR) Exchange rates 1 USD=23,688 CZK; 1 EUR=28,36 CZK; 1GBP=41,219 CZK (February 10, 2006) Strong industrial base and skilled workforce

3. Capital City Prague

4. Capital City Prague • Centre of Czech national life since 9th century • European “capital” 1348-1420 & 1560-1618 • Provincial city of Austrian Empire -18th and 19th centuries • Fairy tail medieval architecture (not destroyed by wars or modernizations) • Prague GDP - 219 % of the whole country, 157% of the EU average, together with Central Bohemia, Prague region generates 62% of the Czech GDP

5. Historic framework • Celts in the area (600 BC-200 AD) – first name of the country Bohemia • Germanic tribes (200 -500 AD) • Arrival of Slavs in the 5th century, Slavic people dominate the area • 863 – Christianity • 995 –unification of Czech lands into Czech state • Prague as a seat of Roman Kings and Emperors 1346-1420 & 1560-1618 • Tragedy of the Thirty years war (1618-1648) • Industrial development in the 19th and 20th centuries • Higher living standard than in Germany or Switzerland before World War II • Soviet block country 1948-1989 • EU member 2004

6. prediction

7. 55 % of GDP is created by foreign owned companies In 2005 their total revenues increased yearly by 13.4% • The growth is sound – it is driven by the investments and growing exports • The growth applies mostly to big companies with foreign participation, small companies with less than 25 employees have stagnated for years – they don’t earn money and can’t invest • 2005 GDP was higher by 16% of the Czech GDP before transformation in 1989 • In 2005 Czech Republic overtook in GDP per capita the poorest country of the old 15 EU countries (Portugal – 71.4% of EU average), reaching 73% of EU average

8. Strong position of “old economy” alongside of “knowledge based economy” • The direct share of Tourism on GDP is 3,5%, but including the additional assets of the connected sectors (goods, services, construction) – up to 12%

9. The cumulative inflation since 1989 was 415 % - first transformation years were marked by hyperinflation.

10. Inflow of FDI • The CR is one of the most successful transition economies in attracting foreign direct investment • Inflow of FDI since 1993 was more than EUR 48 bn • Ireland received from 1990 to 2003 over 176 bn EUR in FDI

11. Competitive advantage of the Czech Republic for investors • Qualified and inexpensive labour • Macroeconomic and social stability • Accessibility of lucrative European markets • Investment incentives of Czech government • Relatively good infrastructure • Moderate property and land price • Growing prosperity of the country

12. External trade 86.3 % Exports to the EU 71.4 % Imports come from the EU Czech exports growth in 2004&2005 - the biggest among EU countries Trade Balance

13. Germany 36.2% Slovakia 8.5% Austria 6.0% Poland 5.3% UK 4.7% France 4.6% Italy 4.3% Netherlands 4.3% Germany 31.7% Slovakia 5.4% Italy 5.3% China 5.2% Poland 4.8% France 4.7% Russia 4.1% Austria 4.0% Main Imports partners Main Exports partners

14. Foreign Investment in Central and Eastern Europe Real Estate Market Czech Republic represents cca 24% of 2005 transactions in CEE and Russia Prague market continues to be viewed as a low risk investment Source: Jones Lang LaSalle

15. In absolute terms, In Central and Eastern Europe Czech Republic is on the 2nd place after Poland and before Russia.

16. FDI INFLOW INTO THE CZECH REPUBLIC BY COUNTRY

17. FDI INFLOW INTO THE CZECH REPUBLIC BY SECTOR

18. Irish presence in the CR • Some 60 Irish owned companies operating in the CR (Mergon International in Brno, Connacht Electronics in Humpolec, Norkom Technologies, Mouldpro, Finglas, Waterford Glass) • A twofold increase compared to 5 years ago • Huge Irish involvement in property development (Four Seasons and Hilton hotels, Kotva department store – Markland) • Irish-based subsidiaries of multinational companies expand to CR (Flextronics International, ALPS Electric) • Only 1% of Irish exports went to the new member states in 2004

19. EURO Adoption Prospects • All Maastricht single currency criteria fulfilled in 2004 and 2005 • 2005 annual state deficit 2,7 % (M 3,0 %) • 2005 Inflation 2,0 % (M 3,1%) • Overall public debt 37 % (M 60) • Local interest rate 2 % ECB 2.25 • Government plans to adopt the single currency by January 1, 2010 • Czech drive to meet the Ma--cht criteria cost the country faster growth • Specialists argue that adopting EURO in 2010 could be a source of economic depression (different economic cycle, different structure of Czech economy, low flexibility of Czech labour market)

20. Labour market • The percentage of employed population is 54.3% • Unemployment 8.9% Ratio of those employed in various sectors Agriculture 3.9% Manufacturing and Industry 39.6% Services 56.5% At-risk of poverty rate (lowest in EU) 8% (60% of the national median disposable income, for IR-21%)

21. Czech Agriculture 2004 1990 Share of agriculture of GDP 3,1% 7.32% Number of workers 139 000 (-6% in 2004)513 500 Share of agricultural employment 3,9% 9,5% Agrarian foreign trade balance -30 bn CZK -2,9 bn CZK Farmland total 4,27 m ha Arable land 3,06 m ha Set aside land 177 000 ha

22. Farm structure Individual private farms32 496 Cooperatives 686 Farming & trading companies2 336 Others, including state owned 174 93% of the country’s farm land is leased In 2004 the annual rent increased by 28 % to 1000 CZK/ha , the rents will inevitably continue to grow

23. Czech Agriculture’s results in 2004 • Best year since 1989 - net profit for the sector4 bn CZK • The value of Czech gross agricultural productionup 25 % on last year • Subsidies (25%of EU level from EU+the same as top-ups)22 bn CZK (Czech top-up maximum authorised by the Czech treaty of accession is 30%) • Czech net trade deficit in agri-food products grew by 5 bn CZK (20 %) on last year • Number of workers decreased by 6 % • Grain production is 2 m tonnes in excess of domestic demand

24. Threats to farm incomes in the future • Inputs are to increase - labour costs - agricultural rents • Czech food processing exports are not successful (image problems) • Exports of raw materials (pigs, milk, etc) is not able to overcome that disadvantage)

25. Chosen conditions from the Accession Treaty and the 2002 situation

26. Beer sales, 2002 from retail outlets, litres per person Source: Euromonitor

27. European City Monitor 2004 – Cushman&Wakfield The best cities to locate a business today Senior executives from 500 European companies gave their views on Europe’s leading business cities.