Czech Republic: Powerful heart of the CEE Region

Publikováno: 17.10.2011


Region

The Czech Republic, along with Hungary, Poland and Slovenia, form the Visegrad group, which can be understood in the strict sense as the Central European region. The region has a very important position; it is a crossroad of cultural, economic and political influences. Central European states are characterized by a high population density and fragmented settlement structure.
These four countries have always been part of a single civilization sharing cultural and intellectual values and common roots. In terms of politics and economy, these countries have undergone similar development from the 50th to the 80th of the last century when they were members of the Eastern (communist) block. Since the fall of the Iron Curtain in 1990 there has also been a remarkable similarity in their economic and political transformation towards the free market economy.
The Central European region was hit by the global economic crisis with some delay, in the late 2008 and especially in 2009. In most countries, the economic downturn was triggered by a fall in commodity exports and interrelated problems with the growth of all components of domestic demand. The financial and banking crisis has contributed, to a lesser extent, to the stagnation and recession in the economies of individual countries, with some exceptions. Poland is known as the only country not affected by the crisis and the Czech Republic completely avoided the financial crisis thanks to the healthy banking sector.

Location

The Czech Republic is a landlocked country with a strategic location in the hearth of the Central European region having a very good access to the established western and emerging eastern markets. It borders Germany to the West, Poland to the North, Slovakia to the East and Austria to the South. Prague, the capital of the Czech Republic, is located only a two-hour flight from most other European capitals. With an area of nearly 79,000 square kilometers and 10.5 million inhabitants, the Czech Republic is a medium-sized European country.
The significance of the Czech Republic as a transit hub has grown since the membership of the EU in 2004. The road and motorway network is already one of the densest in Central and Eastern Europe and several rail modernization projects are currently underway to link the Czech Republic with the pan-European network of high-speed railways.

History

The Czech State has a long tradition dating from the 9th century. The modern Czech State (Czechoslovakia) was founded by the end of the First World War in 1918 and became one of the most industrialized countries in the world. The Nazi occupation ended with the end of the Second World War, from which Czechoslovakia emerged on the side of the winners. In 1948 we fell within the Soviet sphere of influence. The democratic system was restored in 1989 and in 1993 the independent Czech Republic was born. Throughout the modern history, we were economically the most developed territory in Central and Eastern Europe.

Political situation

The Czech Republic is a parliamentary republic with a representative democracy. The head of the state is the president and the supreme legislative body is the bicameral Parliament of the Czech Republic. The government represents the supreme executive power body responsible to the Parliament.
The Czech Republic is a member of the European Union, NATO, OECD, WTO, IMF, United Nations, Shengen treaty, EBRD and IBRD as well as many other organizations.
We are traditionally Christian country with the most numerous representation of the Roman Catholic Church. Due to the nearly forty-year rule of the Communist Party, the Church was repressed in general.
In 2010 the right-wing party (ODS) won election and formed a center-right coalition with two other parties (TOP 09 and VV). The aim of the current government is to carry out fundamental reforms (fiscal, pension system, social, health and educational) and strengthen the competitiveness of the country. Emphasis is placed on creating attractive business environment.
Reform efforts have been appreciated by international institutions and rating agencies. Actually, the Standard & Poor's rating of the Czech Republic is AA- and the Moody's is A1. The Czech Minister of Finance is the only one to win, for the second time, the first prize from the international journal Emerging Markets as the best in the field of Emerging European economies.

Economy

Our economy is open and strongly export-oriented, with the largest trading partner being Germany. Industry is an important sector of the economy which represents 35% of the Czech economy (services account for about 62.3% and agriculture 2.8%) and it employs over 40% of all economically active population. The main pillars of the Czech industry include industrial machinery, metallurgical, chemical and food processing. Other important components are the energy, construction and consumer industry.
The automotive industry remains the largest single industry and, together with its suppliers, accounts for as much as 20% of the Czech manufacturing. The Czech Republic produced more than a million cars for the first time in 2010, over 80% of which were exported.
Our GDP in purchasing power parity (PPP) represents 261.3 billion USD, which means 25,600 USD in PPP per inhabitant (2010 estimation). Our poverty rate has been the lowest in the whole European Union.

Investment climate

The Czech Republic has attracted a large amount of foreign direct investment (FDI) since 1990, making it the most successful transition country in terms of FDI per capita, and the first Central and Eastern European country to be admitted to the OECD.
The country’s economic policy is consistent and predictable. A strong and independent central bank (the Czech National Bank) has maintained an extraordinary degree of currency stability since 1991. The Czech Koruna is fully convertible. All international transfers related to an investment can be carried out freely and without delay.
Czech commercial, accounting and bankruptcy laws are compatible with Western standards. The Czech Republic is a member of the Multilateral Investment Guarantee Agency (MIGA), an international organization for protection of investments, which is part of the World Bank-IMF group. No expropriation of the property of a foreign investor has taken place since the Velvet Revolution in 1989.
The Czech Republic is at the top of the Central and Eastern European countries in the competitiveness of the world economies. Our country can provide manufacturers with impressive productivity levels and highly skilled labor. According to the last Eurobarometer survey, 61% of Czechs are able to speak at least one foreign language (predominantly English and German).

Authors: Ing. Karina Kubelková, MBA and Mgr. Jakub Vozdek