Foreign markets Czech Republic: Favourable reasons for a commitment

Von Stéphane Itasse

Czech Republic not only has many location advantages, but also a strong mechanical engineering sector. Dr. Martin Partl, Head of the Czechinvest-representative office in Germany, Austria and Switzerland explains the reasons, as to why a view of Eastern neighbour is profitable.

Czech economy booms; thus Skoda expanded its plant in Kvasiny. The mechanical engineering sector also profited from this.
Czech economy booms; thus Skoda expanded its plant in Kvasiny. The mechanical engineering sector also profited from this.
(Photo: Skoda/andreas pohlmann)

Martin Partl mentioned six reasons for a location in Czech Republic: A strategic situation in East-Central Europe with direct transport accesses to EU-market, highly qualified workforce, properties with good infrastructure, a well-developed transport infrastructure and the most modern telecommunication infrastructure within East- and Central Europe; a well-developed supplier base and a wide range of local funding options – EU-funds and investment incentives.

In addition, the country also offers a solid environment for investments. "The national debt is lowered by more than two percent to 42.6 % of GDP in 2014. The budget deficit was 2 %. A similar level is expected for 2015", reported Partl. In addition, there would be hefty investments. "Many companies invest in new capacities owing to the increased production. After a plus of 4.5 % in 2014, the gross capital investments should increase by above 5 % in this year", explained the head of Czechinvest-representative office.


Czech Republic offers many investment incentives to the companies

There are a number of incentives for such investments. Thus, a corporate income tax exemption is possible for up to ten years according to the information by Partl. There is an exemption from property tax for five years in the favoured industrial zones. Up to 300,000 Czech kroner (converted approximately more than 11,000 Euro) are possible in the subsidies for creation of workplaces; for training and retraining activities, up to 50 % of training costs. Lastly, the companies can receive physical subsidies for the purchase of property in case of strategic investments. In addition, there is support from Brussels. "The new support program of EU for the period from 2014 up to 2020 also offers opportunities. The first calls for projects are in the areas environmental protection, power efficiency and research. Up to 24 billion Euros are made available for Czech Republic. Projects in the region of Czech Republic, except in Prag, are promoted", reported Partl.

In addition, there is strong mechanical engineering sector. The head of Czechinvest-agency explained: "The mechanical engineering sector in Czech Republic is linked to more than 100-years tradition." Thus, there is highly educated and qualified workforce; every year, more than 20,000 graduates of the technical universities attain their degrees. With the increasing investement, the research and development in this sector would be highly supported.

Mechanical engineering industry in Czech Republic also favourable for procurement

"With more than 6700 companies, Czech mechanical engineering sector is a favourable procurement market for the maximum branches of processing industry and other sectors, such as agriculture, transportation, metal fabrication, metallurgy, mining, textile-, paper- and food industry and building industry", said Partl further. The sector is highly export oriented; approximately 80 % of production would be exported. In addition, the branch shows a positive trade balance for over more than ten years; it was 21.4 billion Euros in the year 2013. "According to the calculations of Germany Trade & Invest, the market volume increased in 2014 by almost 13 % to over 5.5 billion Euros", reported the head of Czechinvest-agency.

The economic situation is the reason for the increasing demand: After an increase of gross domestic product (GDP) by 2 % in the year 2014, the economic performance gained in the first quarter of 2015 by 4.2 % in the annual comparison (refer to MM 45/2015). "Thus, Czech Republic was the market leader in Europe along with Romania", explained Partl.

Czech automobile industry also offered interesting sales prospects. The expansion of production capacities continued according to Partl. E.g. Skoda extended its plant in Kvasiny and wants to manufacture there 280,000 off-road vehicles and sports vehicles per year from 2018. In the supply area of the branch, Czechinvest has procured 46 new investment projects in the previous year. Lastly, there were project announcements of Simoldes Plasticos, Saargummi, KV Final, Gumotex, Benteler and Röchling.

Impulse for the demand of machines would have also come from the energy sector. An increasing requirement of machinery persists in the agriculture and forestry as well as in construction industry. Primarily, the bigger investment projects must be planned in the expansion of infrastructure.


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