There is a rift looming within the three-party coalition over further steps in the fiscal reforms. The two junior parties in the ruling coalition led by the Social Democrats have called for bringing the country's two VAT rates of five and 22 percent closer together. However, Finance Minister Bohuslav Sobotka of the Social Democratic Party rejected the proposal. Instead of a simultaneous hike in the lower VAT rate and a cut in the higher one which applies to most goods, the Social Democrats have preferred creating a third VAT rate somewhere around 10-14 percent which would apply to goods now taxed by five percent with the exception of food, medicines and other basic subsistence goods. Many goods and services were shifted to the upper tax rate as of the beginning of this year and further changes are expected on May 1, when the Czech Republic joins the EU.
The composite confidence indicator, combining consumer and business sentiment, decreased in January, the Czech Statistics Office reported. The decrease in the composite confidence indicator was caused primarily by a marked decrease of confidence indicator in trade and a long-term lower level of the consumer indicator. On the other hand, the construction sector was more optimistic. Sentiment among industrial companies hit 100.4 points - its lowest level since September, mainly due to uncertainties over foreign demand.
Consumer confidence has improved only a touch, with the index edging higher to 86.6 from the three-year low of 85.5 a month ago. Consumers are more optimistic about the overall economic situation in the next twelve months. However, more people than before expect a rise in unemployment.
The national rail operator Czech Railways is planning to lay off 6,000 employees this year. The plan has angered trade unions who are threatening to go on strike. Their main objection is that the state-controlled company has not earmarked enough money for severance pay for the redundancies. The unions agreed with the management that the severance pay, estimated at a total of 500 million crowns, should be covered by the state. The unions and Railways management will hold further talks on the lay-offs on February 25.
Stock brokers from the European Union are becoming interested in membership of the Prague Stock Exchange. Secretary general Pavel Hollmann said that after the Czech EU accession in May, the Prague bourse will open up and it will be easier to become a member. The number of members has dropped below thirty over the past years. Certain restrictions exist for foreign brokers who can now trade through intermediaries, which is less convenient and more expensive than direct access. Mr. Hollmann predicts that after May 1, volume of trading could increase as well. While becoming an EU member, the Czech Republic will remain a so-called emerging market, which will be interesting for a certain group of investors.
Production of trucks in the Czech Republic decreased in 2003. Truck makers Tatra Koprivnice and Daewoo Avia manufactured a total of 2,300 trucks last year, a decline of 16 percent as compared to 2002, while the third Czech producer Praga assembled a mere 30 lorries. Both Tatra and Avia changed their principal owners last year.
Avia was taken over by a group of Korean banks after the indebted Daewoo concern split and found a partner, General Motors, for its passenger car production. Daewoo Avia is now waiting to be rescued by a new owner that is expected to come this year. Avia's owners are in talks with several car makers on the company's sale.
Tatra was acquired by US company Terex, which took over the shares from financial investor SDC International. Tatra expects to increase output again in 2004, thanks to new orders from Israel as well as traditional markets such as Russia and India. The company is also on the shortlist for supplies to Iraq, which should involve up to 1,500 trucks.
The Brno-based tractor producer Zetor is reportedly balancing on the verge of bankruptcy again. The firm ZKL filed for Zetor bankruptcy because of an overdue 23-million-crown receivable. Zetor was acquired by Slovak company HTC holding for 310 million crowns in 2002. HTC had averted the previous threat of bankruptcy against Zetor having bought all claims after the company. HTC holding said earlier that Zetor expected a moderate profit for last year, with sales expected at around 2.7 billion.
Czech black-coal mine OKD is in talks with foreign banks on securing 50-100 million USD for privatisation of coal mines in Poland, an official of the firm told the business daily Hospodarske Noviny on Tuesday. The daily wrote that OKD would be interested in Budryk and Jastrzebska Spolka Weglowa mines, with combined annual output of around 16 million tonnes, compared to OKD's existing production of just 13 million tonnes. OKD's supervisory board member Petr Otava said that the company changed its strategy and will focus only on underground mining of black coal. OKD, whose biggest customers are Czech steel companies, has been troubled by cheap imports of coal from neighbouring Poland.
Czech travel agencies showed a significant increase in sales in 2003 after a few years. The largest players on the market recorded the biggest rise of 10-40 percent. Experts estimate last year's aggregate sales of Czech travel agencies at over 15 billion crowns or over 500 million USD. However, many travel agents are facing problems due to mandatory insurance against bankruptcy.
Many importers of goods from China are worried about going out of business because they failed to apply in time for a licence that will be mandatory after the Czech Republic's EU accession in May. The commercial TV station Prima reported that importers should have applied for the licence by December 31, but many failed to do so. At present, imports from China to the Czech Republic are not regulated. However, the European Union protects its market by import licences.
Czech engineering firm Skoda Holding has reportedly been in talks to sell three subsidiaries to Russian industrial group United Heavy Machinery (OMZ). The privately owned Skoda has put for sale six units, a part of its plan to narrow focus only to transport machinery and conventional power plant equipment. The sources said OMZ is interested in nuclear power plant equipment producer Skoda JS and two units of the Czech group's steel making subsidiaries, Skoda Hute and Skoda Kovarny. Russian daily Vedomosti said OMZ offered 15 million USD for Skoda JS, which had revenue of 65 million USD in 2002. The Russian bidder has been given exclusivity until the end of January, according to the paper. OMZ produces ships, equipment for nuclear power stations and mining tools.
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