Foreign direct investment more than doubles in two years

13-10-2006

New figures released by the EU statistics office Eurostat this week show that the Czech Republic attracted 8.8 billion euros in foreign direct investment (FDI) last year. This is 5.2 billion euros more than two years previously and higher than foreign direct investment in any other new EU member state. Overall, the Czech Republic ranked eighth among the Union's 25 members.

Vladimir PikoraVladimir Pikora So, what exactly does that mean in terms of the economy and how does it affect the ordinary Czech citizen? Dita Asiedu spoke to economic analyst Vladimir Pikora:

"We can see that, in the Czech Republic, these investments brought new jobs to many towns, mainly in the car industry but also in other industry and these companies, on average, have better access to foreign markets and therefore have better results and can afford to pay higher wages. Besides that, there are some spill-over effects when you have foreign colleagues, who bring foreign know-how, and you have access to new technology and access to seminars abroad at headquarters in other countries, which also increases your value on the market."

Now, FDI in the Czech Republic has been growing for several years now. Why is that the case and in what ways is it more attractive than neighbouring Slovakia, for example, which only recorded 1.7 billion euros last year but has been considered the economic tiger of the new EU member states?

"I would say that the most important point is location. Because we are in the heart of Europe, many companies set up their headquarters and businesses here because it's easy for the managers to travel home and it's also easy to export abroad. That's because these companies are mainly oriented on exports to Western Europe and in the Czech Republic we have significantly better infrastructure than in other countries, in particular a higher number of highways, and therefore the transportation costs are significantly lower.

"Besides that, the labour force is significantly cheaper than in Austria or Germany and therefore production is cheaper. There are also some non-economic factors. The Czech Republic, for example, used advertisements to try to lure investors through TV and magazine ads and road shows too. So, all these factors played a role."

How do you foresee the country's future in terms of FDI?

"Well, we can see that the structure of investments is changing. While we only saw simple investments in the past, like assembling halls for example, we now see new investments with higher added value. Companies have begun to locate their headquarters here, not only for the CE [Central European] market but also for their global businesses. This is crucial because in the past we only saw simple investments that provided work for the less educated workers while these investments now also bring research and development."

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