Current Affairs Czech Republic posts first November trade surplus in 10 years

Jan Sykora According to the Statistics Office the result was driven by record growth in exports of cars and electrical engineering products. Radio Prauge asked Jan Sykora of the equity firm Wood & Co. what these figures signified for the Czech economy.

"First of all, it's great news that the economy is demonstrating that Czech companies can clearly compete on the Western European markets, or now the former Western European markets. So that's fantastic news, and if you look at the composition of those exports which can mainly be attributed to automotive, high-end value-added products, it's really fantastic news and it's positioning the Czech economy on a very good footing in going forward. I think that it's a little bit sad that maybe this positive news has not received as much media attention as it would have deserved, because I think that it clearly shows that the structure of the Czech economy has changed over the last couple of years and will probably continue to do so."

Considering the fact that the figures are just for November, is it a one-off situation or do you think it marks the beginning of a trend?

"Well, I think clearly we saw improvement in the Czech trade with the EU countries after the accession and I think it's the beginning of a trend. And clearly, this trend can be attributed to the influx of foreign direct investment over the last five to ten years when the Czech Republic received around 40 billion dollars of foreign direct investment. And clearly this foreign direct investment got translated into newly installed capacity, new factories which are now competing very well on the world markets."

I understand that much of the exports were thanks to international or foreign-owned companies. Now how are medium-sized and small Czech companies faring?

"Well, clearly this goes hand-in-hand. The foreign direct investment that was brought into the country was mainly thanks to the large multinationals which are using the Czech Republic as their Central European base. Smaller companies may not be doing as greatly but if the whole economy is growing, even the smaller companies are growing and very often in a lot of sectors these smaller companies are then subcontractors to the large companies."

Photo: European Commission You've been emphasising the positive aspects of this development, now are there any downsides to it?

"Well, I wouldn't be too worried about Czech companies exporting too much, I think that's never bad news. I guess the bad news is that I believe the economy as a whole could be much more competitive. The local macro-environment could be much more business-friendly. We are talking about the reforms we need on the tax front and the liberalisation of the labour laws. Basically the government would need to embrace serious reforms, whether it's the pension reform, healthcare reform etc., basically take the Slovak or Irish model as an example and pursue on those things."