Industry and trade minister speaks out in favour of Russian trade links

18-02-2015

Trade links with Ukraine and Russia continue to be promoted by the Czech state in spite of the greater risks for business with both countries. Minister of Industry and Trade Jan Mládek says the contracts there can often be more worthwhile and offer higher earnings to companies.

Jan Mládek, photo: Filip JandourekJan Mládek, photo: Filip Jandourek The Czech Republic is seeking to continue trade with both sides of the current Ukraine-Russian conflict.

Minister of Industry and Trade Jan Mládek last week visited Kiev to explore what opportunities are still open to Czech companies to continue commercial activity there and to contribute to reconstruction when it eventually takes place. And he has backed continued trade with Russia as often offering greater opportunities to Czech firms than cooperation with West European companies.

The Kiev tip last week by Mládek comes against a backdrop of a plummeting two-way trade between the Czech Republic and Ukraine and problems with a series of past contacts in the country underwritten by the state bank promoting exports, Česká Exportní Banka (ČEB) and the state export insurer, EGAP. Top managers from both state institutions were part of the delegation.

Ukraine’s current problems are mirrored across the unstable border in Russia, though the collapse of the rouble and oil prices rather than direct conflict are the main factors. Czech state-backed loans and export insurance for several major projects there are also at risk of turning sour with hundreds of millions of crowns being lost as a result.

But Mládek argued in Wednesday’s edition of the business daily Hospodářske Noviny that exports to Russia and similar destinations can often offer better prospects to Czech companies than to Western Europe. He took the example of Czech aircraft maker Aero Vodochody.

Whereas Aero has sub-contract work to supply parts of the fuselage and other parts of planes for major western producers such as Airbus, Boeing, and Sikorsky, the high value production of engines and helicopter blades are covered by the main companies themselves. In Russia, however, Czech producers were offered the opportunity to sell planes as a whole, not just carry out the lower value added sub-contract work.

The ministry is reported to be keen for its routine meeting of the Czech-Russia intergovernmental commission, which brings together top trade officials, to go ahead in the short term although a date is still being sought.

In the same paper, the head of export insurer EGAP, Jan Procházky, said that its activity in both Russia and Ukraine will continue in spite of the higher risks of business there. He said that while before the current crisis around one in four Ukraine projects collapsed, that ratio has now climbed to one in two.

EGAP’s basic advice to Czech companies continuing with projects in Russia and Ukraine is to look carefully at who the partners are and to try and make sure that well established local banks with activities outside the country and foreign earnings are involved.

The policy of pursuing, and in some cases strengthening, trade relations with Russia and the continued involvement of state loans and export guarantees for projects in Ukraine and Russia is controversial. Minister of Finance Andrej Babiš has criticized the exposure of both ČEB and EGAP with the suggestion that they be brought under the control of his ministry rather than remaining with under cabinet colleague Jan Mládek.

18-02-2015