High expectations are being put on CzechInvest to deliver greater foreign investment and more job creation by the new Social Democrat minister for industry and trade.
New Czech minister of industry and trade Jan Mládek promised continuity and change in his inaugural speech after being ushered into his imposing ministry edifice on the banks of the Vltava on Thursday.
Continuity means flying the Czech flag and opposing any energy or climate change proposals coming out of Brussels which will impose extra carbon dioxide or renewables targets on the country.
Change means beefing up Czech exports and attracting more direct foreign investment into the Czech Republic. Mládek in particular didn’t pull any punches about the performance of CzechInvest, the state agency for attracting foreign investment. The agency’s performance on inward investment has been disastrous in recent years with the influx of foreign investors almost coming to a halt, he complained.
Mládek is one of the few incoming ministers with some government experience under his belt. He was deputy minister at the ministry of finance, handling among other things state incentives for Volkswagen to invest in Czech car maker Škoda Auto, and later Minister of Agriculture.
The bad news for the current bosses at CzechInvest is that he seems to have a pretty good memory of the agency’s heyday era around eight years ago when the Czech Republic was the undisputed inward investment focus for Central Europe. Those days have disappeared and fast personnel changes are promised by the new minister.
In 2006, CzechInvest boasted a role in attracting 114 billion crowns of foreign investment which led to the creation of 35,000 jobs. In 2012, the last year for which figures are available, the agency pulled in around 26 billion crowns and claims credit for the creation of around 12,000 jobs. Figures for 2013, out in mid February, will apparently be better than 2012, though unlikely to be enough to satisfy Mr. Mládek.
In comparison, Slovak counterpart SARIO claims its finalized deals attracting 466 million of foreign investment (around 12.6 billion crowns) and 3,200 new jobs in the same year. Given the population and prosperity of Slovakia, the performances seems fairly matched, though Slovak politicians were probably looking for better results as well.
CzechInvest’s inward investment incentives were altered in 2012 to allow it to compete better for technology and strategic centres as well as manufacturing. The basic incentives are 10 year tax holidays, bonuses for every new job created, training payments and help purchasing land and building transport links. However, manufacturing industry is still the biggest segment of incoming investment. It accounted for around two thirds of the incoming investment and just under half of the new jobs in 2012. Germany remains the most important incoming investor.
CzechInvest defends its recent record saying that the type of big greenfield investments, such as the Hyundai and TCPA car plants, attracted to the Czech Republic in the past are not up for grabs any more. There are no major investment projects of that scale in the pipeline at the moment. Many of the projects it now deals with are much smaller, but still demanding in terms of paperwork and time.
Whereas the Czech Republic apparently had a strong lead over regional rivals in attracting foreign investors a decade or so ago, the gap appears to have closed. Ironically, some of CzechInvest’s former workers and know-how has been recruited by the agency’s Slovak counterpart. Many foreign companies now openly say it makes more sense to locate in Poland than its neighbours if they are looking for a regional base.
The Czech Republic can still offer more, and higher qualified, students and better transport connections, its backers say. Minister Mládek would like to tip the balance a lot further in the country’s favour and is clearly expecting a remodelled CzechInvest to deliver.
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