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The Czech Republic
Euro Info Centre
Country Profile
April 2006
CZECH REPUBLIC
Country’s full name: Czech Republic (Ĉeská Republika).
Capital city: Prague (population: 1.2 million).
Population: 10.2 million. 81.2% of the population are Czech,
13.2% Moravian and 3.1% of Slovak origin. Other minorities
include Poles, Germans, Hungarians and Roma.
Official language: Czech.
Currency: Koruna (Crown) of 100 haléru.
Religion: 39.8% of the population are non-religious, 39.2%
Roman Catholic with small Protestant and Orthodox Christian
minorities.
Area: 78,866 sq. km (30,450 square miles).
Terrain: The Czech Republic consists of the two historic areas,
Bohemia and Moravia, the former consisting of plains and rolling
hills, the latter hillier, especially in the southeast.
Climate: Continental climate with cold winters and mild summers.
Annual rainfall 27.3 inches.
Administrative divisions: The Czech Republic is divided into 14 administrative regions (kraj)
including Prague.
Weights and measures: Metric.
Time zone: GMT plus one hour. From late March to late September a daylight saving scheme is in
operation, which is two hours ahead of GMT.
International dialling code: 00 420.
RECENT HISTORY
Occupied by Soviet and American troops after World War II, Czechoslovakia became a communist
state following a coup in 1948 and in turn a satellite state of the Soviet Union. Now known as the
‘Prague Spring’, a brief period of political and economic liberalisation took place in 1968 but was
brought to an end by the intervention of Soviet troops. In 1989 the one-party state collapsed and was
quickly followed by free elections in 1990 with former dissident Vaclav Havel made president.
Czechoslovakia then dissolved its federation in 1993 and became two distinct sovereign states –
Slovakia and the Czech Republic, each with its own government and currency.
Throughout the 1990s, the Czech Republic instituted a range of reforms aimed at modernising the
economy and paving the way for economic integration with the EU. These included the restitution of
private property, privatisation of industry, and fiscal reforms including the deregulation of the banking
sector in 2001. Despite a brief recession between 1997 and 1999, these measures allied with low
unemployment and low inflation made the Czech Republic one of the economic frontrunners among
the EU accession countries and an attractive place for foreign investment.
The Czech Republic first applied for accession to the European Union in 1996. On 13 and 14 June
2003 a referendum on accession to the EU was held, with 77% of voters casting their vote in favour of
joining. Turnout was just over 55%. On 1 May 2004, the Czech Republic became an EU Member
State.
GOVERNMENT
The Czech parliament is made up of two chambers: the Chamber of Deputies is the lower house and
is made up of 200 members elected for four years under a proportional voting system; the Senate is
the upper house and consists of 81 elected members. The President is Vaclav Klaus, elected for a
five-year term in February 2003. Jiri Paroubek has been Prime Minister since April 2005.
ECONOMIC OVERVIEW
The Czech Republic is one of the most successful of the “transition” economies of Eastern/Central
Europe. Its economy is characterised by a strong manufacturing sector, a skilled workforce and a
growing service sector. Privatisation and deregulation has turned the country into an affluent,
economically competitive market economy and member of the WTO, NATO, the OECD and the EU.
© Euro Info Centre, London Chamber of Commerce and Industry, April 2006
1
Private companies now account for approximately 80% of GDP and most industrial infrastructure has
been deregulated and opened to competition.
Exports to the EU play a significant role in the economy and in particular trade with Germany, its
immediate and largest neighbour, which played a predominate role in the development of the Czech
economy throughout the 1990s. However, with the decline of the German economy and the
replacement of the once mighty Deutschmark with the euro, the Czech Republic is looking to other
markets and investors within the EU such as the UK. Other major trading partners include Austria,
Russia and the Slovak Republic.
The country has experienced an explosion in foreign investment since 1999 when it began to recover
from recession. Since then, Czech trade deficit has decreased and inflation has stabilised. The
economy should further benefit from EU membership, restructuring of the private sector, stabilisation
of the financial sectors and the current tourist boom.
On the downside, the old industries such as steel and energy which propped up the planned economy
are still resistant to change and inefficient by Western European standards.
Growth in 2005 was approximately 5% due to particularly high export figures. In the coming years,
exports are forecast to decline but thanks to a stronger domestic demand, growth is expected to stay
around 4.5% p.a.
ECONOMIC INDICATORS
Population (2005)
Unemployment rate (2005)
GDP per head (euro) (2004)
GDP average growth rate (2000-2004)
Inflation rate (2005)
Total exports (billion euro) (2004)
Total imports (billion euro) (2004)
Internet usage rate (2005)
10.2 million
8%
7,560
3.1%
1.6%
55.5
56.3
19% of the population
Sources: Eurostat
INFRASTRUCTURE/ENVIRONMENT
Roads
The total road network in the Czech Republic amounts to 55,000 km, of which over 500 km are
motorway and over 6,000 km are first class roads. Recent projects to improve road infrastructure
include the construction of bypasses around major cities such as Prague, Brno, Plzen and Ostrava
and the construction of a new motorway link from Olomouc to Ostrava in the east of the country. The
government plans to double the size of the motorway network to 1,021 km by 2010, financed by a
programme of state and private capital investment.
Railways
Czech Railways operates 9,600 km of track, 3,000 km of which are electrified. Priority is now being
given to the construction of high-speed international links with Berlin, Vienna, Bratislava, Warsaw,
Nuremberg, Munich and Linz with a series of planned modernisation projects, the first of which, a 160
km long piece of track between Ceska Trebova and Breclav, was completed in 2001. The total length
of track to be modernised is 1,442 km.
Civil Aviation
The main airports are Prague, Brno, Ostrava, Pardubice and Karlovy. Prague (Ruznye) Airport
accounts for 95% of passenger air traffic and 85% of freight traffic. It handles over 10 million
passengers each year.
Energy
Although coal remains the Czech Republic’s most important fuel source, accounting for over 50% of
primary energy consumption, the country is relying ever more on cheap imported fuel oil and natural
gas, overwhelmingly from Russia. Due partly to the inefficiency of the coal production industry which
© Euro Info Centre, London Chamber of Commerce and Industry, April 2006
2
has declined steadily since 1989 and partly to environmental considerations, the country is looking to
increase the use of natural gas. Approximately 3/4 of it is imported through a gas pipeline from Russia.
The Czech Republic is also looking to increase gas imports from Norway and Germany in particular.
RWE (Germany) has operated the Czech gas distribution network since 2001.
Domestic electricity generation is dominated by CEZ, the former state owned utility, which produces
almost 3/4 of all electricity generated in the Czech Republic. It operates 11 fossil power stations, 35
hydropower stations, 2 nuclear power stations, 2 wind power stations, and 1 solar power station. Most
of its production is sold to eight regional electricity companies.
Telecommunications
Whilst liberalisation of the telecommunications market took effect from 2001, the industry is still
dominated by the former state telephone company Česky Telecom, with 3.368 million customers and
a 72% share of the domestic market. Česky Telecom is now part of the Spanish group Telefonica.
Mobile communications have experienced a dramatic surge and there are now more mobile phones
than fixed lines. The market is an increasingly competitive one and is being exploited by investment
from foreign companies.
Environment
Although the Czech Republic has made considerable progress in reducing sulphur emissions from
power stations and improving air and water quality, the country remains one of the heaviest industrial
polluters in Eastern Europe and has only gradually adopted modern recycling and waste management
processes.
MAJOR SECTORS OF THE ECONOMY
Electronics
The electronics sector is one of the fastest growing sectors in the Czech economy and now accounts
for 15% of total manufacturing output and 16% of manufacturing exports. With over 18,000
employees, it is the second largest industry. The growth in this sector is due mainly to massive foreign
investment since 1998 by companies such as Matsushita, ABB, Honeywell, Bosch and Marconi. The
sector is supported by a highly educated and skilled work force. Czech technical universities all run
R&D facilities, the most important of these are CVUT in Prague and VUT in Brno. Multinational
companies cooperate with Czech universities in a number of areas.
Engineering/Machine Tools
The Czech Republic has a history of technical expertise in this sector and a strong industrial
manufacturing base with many leading international firms undertaking R&D and engineering product
development through subsidiaries in the Czech Republic.
Telecoms
As profits fall in a maturing fixed line market, the traditional fixed line operators are losing out to the
boom in the mobile phone industry. Mobile line penetration exceeded 100% in 2004. Eurotel (a
subsidiary of Česky Telecom) and T-mobile both had about 4.4 million customers in 2005. Oscar, the
smallest mobile operator and part of Vodafone, boasts 2 million customers.
19% of households have Internet access; a quarter of these (about 275,000 subscribers) use
broadband connection. This market is as the fixed line market dominated by Česky Telecom.
Food Processing & Beverages
The food and beverage sector, one of the most important of the Czech economy, accounts for 11% of
GDP and over 10% of the workforce. Meat and dairy processors control the largest percentage of food
production. Following the privatisation and liberalisation of businesses, the Czech food-processing
sector has experienced fierce competition resulting in a number of bankruptcies and liquidations. The
industry is dominated by small or medium-sized companies. The food processing and retailing sector
is now 98% private. Leading investors in foods, confectionery and soft drinks include Danone, Procter
& Gamble, Nestle, Unilever and Kraft Foods. The Czech Republic is also famous for its Pilsner beer
which is exported worldwide.
© Euro Info Centre, London Chamber of Commerce and Industry, April 2006
3
Retailing
Since 1999, retail trade turnover has grown by almost 12% p.a., reflecting increased consumer
capacity. The retail sector is dominated by foreign hypermarket chains, mainly German. The top three
are German Metro (operating under the name Makro), Dutch Ahold, and the German group Schwarz
(Kaufland and Lidl). Tesco, active on the Czech market since 1996, is the fifth biggest, with 25 stores
and 8 more planned. Wholesale and retailing account for 13.5% of GDP.
Automotive
The automotive industry is a very important part of the Czech economy, particularly the components
sector. With around 100,000 employees, it accounts for 10.6% of the value-added by manufacturing
industries and 20% of the manufacturing output. It also represents 25% of all Czech exports. The
sector is very export-oriented and depends on the EU market for more than two thirds of its sales.
Exports represent 71% of the production and grow by 10% a year.
Overall car production reached 608,946 units in 2005, a 34% increase compared to 2004. Skoda
dominates both in terms of production (82% of cars) and in terms of domestic sales. With a 48%
market share of the registration of new cars, it is far ahead of Renault (7.16%) and Volkswagen
(5.44%), its closest competitors.
Half of the world top 50 component manufacturers operate in the Czech Republic. Additionally, foreign
direct investment is increasingly focusing on R&D and from 2002 to 2004, the Czech Republic secured
more automotive R&D projects than any other country in Europe. The share of export is likely to
increase as new plants open both in the Czech Republic (a new Toyota Peugeot Citroën factory in
Kolin opened in summer 2005) and in neighbouring Slovakia. However, opportunities for British
exporters appear to be decreasing as suppliers have relocated to the Czech Republic to be close to
the manufacturers.
Tourism
The success of the Czech tourism industry is to a great extent the result of the country's reputation as
a beautiful and affordable holiday destination at the centre of Europe. In 2004, 7.7 million foreign
tourists visited the Czech Republic, a 15% increase compared to 2003. If German visitors represent
the largest group, British visitors are one of the fastest growing groups. Revenue from foreign tourists
is estimated at £2.7 billion in 2004 (8 – 10 per cent more than in 2003).
The historical city of Prague is the principal attraction and tourism development is set to increase with
the building of new luxury hotels and the improvement and expansion in road, rail and especially air
links. In 2004, the Czech Republic had direct flights to 94 destinations, 18 more than in 2003, and lowcost flights linked Prague with 13 cities (16 flights a day from London to Prague). On the downside, the
tourist economy has been hit by September 11th and the catastrophic flooding of 2002 plus a global
downturn in the economy.
Czech demand in this sector is likely to increase, especially for expertise in leveraging EU funds, as
tourist numbers continue to rise and the Czechs try to diversify their tourism industry.
Banking & Financial Services
Banking reform was a pivotal factor in the transformation of the Czech economy. Currently there are
36 banks actively operating in the Czech Republic. 12 are branches of foreign banks, and foreign
investors are the main stakeholders in another 15. Over 90% of the banking sector is owned by
foreign capital, mainly German and Austrian financial institutions.
Soon after the privatisation of the banking sector and before EU accession, Czech banks integrated
into the European financial system. The stability of the Czech banking system has improved over the
last years and with less banks collapsing, the number of banks in operation has stabilised. Loans,
particularly to individual, have seen a high increase in recent years, mortgage loans for example grew
by 50% in 2004.
The Czech banking system consists of commercial banks, construction savings banks, mortgage
banks, and a state-owned agency managing the bad-debt portfolio transferred from formerly stateowned commercial banks. The largest banks, ranked by equity capital, are:
1. Komerční Banka
2. Česká Spořitelna
3. HVB Bank Czech Republic
© Euro Info Centre, London Chamber of Commerce and Industry, April 2006
4
4. Ceskoslovenska Obchodni Banka
Source: Czech National Bank
The Czech National Bank is the country’s central bank. It is responsible for issuing currency and for
maintaining inflationary and exchange rate stability in line with the economic requirements outlined
under the accession process.
Website: www.cnb.cz
The Prague Stock Exchange was formed in November 1992 and began trading in April 1993. The
exchange runs on membership principles and offers two basic trading systems, one for big and
medium investors and one for small investors.
Website: www.pse.cz
Insurance
The Czech insurance industry developed rapidly during the 1990s. As of 1 January 2006, 34
insurance companies had their seat in the Czech Republic and there were 12 branches of foreign
companies, all from other EU Member States. Ceska Pojistovna, which is entirely controlled by PPF, a
financial group of Czech origin, has dominated the market since 1991 and now controls about 35% of
the market. Foreign capital controls all the other major insurance companies: Kooperativa Pojistovna
(Wiener Städtische Allgemeine Versicherung, Austria), Allianz Pojistovna (Allianz, Germany) and
Nationale-Nederlanden (the Netherlands).
Compared with Western Europe, the Czech Republic is still underinsured. This is especially true for
life insurance, which has grown at around 20% p.a. in recent years. Property insurance also offers
good prospects. Mergers and acquisitions can be expected in the insurance market.
OPPORTUNITES FOR UK EXPORTERS / INVESTORS
Overview
The Czech Republic has experienced steady growth since independence in 1993 and has shifted its
economic focus westward. It has experienced a massive increase in trade with EU countries. In 2005,
UK exports to the Czech Republic reached £994 million.
The Czech Republic successfully attracts foreign direct investment, with the highest FDI per head ratio
in the region. 3% of total FDI comes from the UK. Privatisation and deregulation of state industries
coupled with political reform have turned the Czech Republic into an increasingly affluent and
consumer-led democracy.
Top 10 UK Exports to the Czech Republic (£ million)
1 Electrical machinery, apparatus
2 Office machines and ADP equipment
3 Medicinal & pharmaceutical products
4 General industrial machinery
5 Telecoms & sound recording equipment
6 Road Vehicles
7 Power generating machinery & equipment
8 Specialised industrial machinery
9 Textile yarn, fabrics, made up articles
10 Essential Oils & perfume
Total trade
2004
139.2
99.3
68.7
62.6
51.5
49.9
36.7
32.3
31.8
30.3
963.0
2003
159.5
82.4
48.3
77.2
37.5
49.7
22.6
49.2
40.3
29.1
999.4
Source: UK Trade and Investment
Environment
The environment of the Czech Republic was significantly damaged by heavy industry during the
communist era. As part of its EU accession reform programme, the Czech Republic has made
significant efforts to clean up the environment and modify and update its industrial processes to meet
stricter environmental regulations. This provides opportunities for British companies in the waste
management, recycling and environmental technology sectors.
© Euro Info Centre, London Chamber of Commerce and Industry, April 2006
5
Transport
Infrastructure projects are underway including the expansion of airport facilities, motorway networks
and high-speed railway.
Retailing
The Czech food and drink sector has seen large scale British and other foreign investment in recent
years. International food retail chains demand a similar level of service, quality and supply that they
expect in their home markets.
Textiles retail trade has grown by over 50% between 2000 and 2006. The Czech Republic has one of
the highest disposable income levels in Central Europe. Marks & Spencer, Next, Mothercare, Tie Rack
and Alfred Dunhill all have stores in Prague and Tesco has been a leading clothing retailer since
opening its first stores in 1996. There is a market for middle to top end British textiles as the cheaper
end of the market is dominated by Asian imports.
Plastics
The plastics sector is the only sector in the Czech Republic which continued to grow in 1997-98 when
all other sectors in the Czech economy showed a decline as a result of the economic slowdown. The
growth of the sector seems unaffected by domestic and global changes in the economy, and its
growth rate is higher than the average within the manufacturing industry. This demand is lead by the
automotive sector followed by rapid growth in the production of electronics. However, foreign direct
investment in plastics has not been as extensive as in other sectors, which means that there are still
opportunities in the plastic sector for British investors. In 2002, the deficit of local plastics supply
amounted to $600 million. Sales grew by over 15% in 2002, exceeding $2 billion.
BUSINESS CULTURE
Business Hours
Offices are usually open 08.00 - 16.00 Mondays to Fridays and shops, banks and post offices until
18.00. On Saturdays shops and some post offices are open 08.00 - 12.00. Supermarkets are open on
Sundays.
Public Holidays
(Dates given are for 2006)
 New Years Day/Independence Day (1 January)
 Easter Monday (17 April)
 May Day (1 May)
 Liberation from Fascism (8 May)
 Cyril and Methodius (5 July)
 Burning at the Stake of Jan Hus (6 July)
 Czech Statehood Day (28 September)
 Independent Czechoslovakia Day (28 October)
 Fight for Freedom and Democracy (17 November)
 Christmas Eve (24 December)
 Christmas Day (25 December)
 Second Day of Christmas (26 December)
Dress
Business suits for men and an understated dress or suit for women is appropriate. Warm coats, hats,
gloves, etc. are necessary in winter.
Business Etiquette
A formal introduction is expected when meeting someone for the first time, shaking hands and using a
person’s title is expected and formal address is required. Czechs are quite conservative and take time
to make decisions so patience in business dealings is required. Although the younger generation has
an increasingly good command of English, German remains the most commonly spoken language
after Czech, so the services of a native Czech translator may be required for business dealings.
© Euro Info Centre, London Chamber of Commerce and Industry, April 2006
6
SETTING UP A BUSINESS IN THE CZECH REPUBLIC
A company comes into existence through registration in the Commercial Register held by the Regional
Court. Before registration in the Commercial Register all companies need to obtain a trade licence
corresponding to the activities they intend to perform. For this purpose, they must appoint an
authorised representative (“odpovědný zástupce” in Czech) who represents the company before the
trade licence office and is responsible for the company’s compliance with the conditions of trade
licences. An authorised representative must be designated for each activity performed by the
company, however, one authorised representative may cover all the trades of the company. Foreign
authorised representatives need to acquire a visa for doing business in the Czech Republic and must
have adequate knowledge of the Czech language. A Company also needs to register the company
with a local tax office.
There are various types of business entity and those most commonly used by British investors in the
Czech Republic are Limited Liability Company, branch of a foreign company, Joint-Stock Company
and Partnership.
The website of Czech Invest contains an excellent guide to business law, the different types of
enterprise and a step-by-step guide to setting up a company in the Czech Republic
Website:
www.czechinvest.org
UK Trade and Investment's website also contains relevant information on setting up a business in the
Czech Republic.
Website:
www.uktradeinvest.gov.uk/
FURTHER SOURCES OF INFORMATION/ USEFUL ADDRESSES
London Chamber of Commerce and Industry, 33 Queen Street, London EC4R 1AP.
Tel: 020 7248 4444. Fax: 020 7489 0391. Email: lc@londonchamber.co.uk
London Chamber of Commerce's World Trade Team, Information Centre, and European Information
Centre can provide information or advice on many topics relating to international trade and overseas
markets, including the Czech Republic. London Chamber of Commerce is a membership organisation
but non-members can utilise certain of its services on a charged basis.
Website:
www.londonchamber.co.uk
UK Trade and Investment, Kingsgate House, 66-74 Victoria Street, London SW1E 6SW.
Contact: Mr Peter Blawat
Tel: 020 7215 4735/4723. Fax: 020 7215 8313.
UK Trade and Investment is a British government body responsible for helping UK companies secure
overseas sales and investments. Their website has pages for each country of the world, including the
Czech Republic, and gives useful information and contacts.
Website:
www.uktradeinvest.gov.uk/
Czech Invest, 1 Harley street, London W1G 9QD.
Tel: 020 7291 4610. Fax: 020 7291 4612. Email: london@czechinvest.org
Contact: Hana Chlebna
Czech Invest is the investment development agency of the Czech Republic. The website is a
comprehensive guide for companies interested in investing in the Czech Republic and contains a lot of
useful general information on the economy and industry sectors.
Website:
www.czechinvest.org
Czech Trade, London, 1 Harley Street, London W1G 9QD.
Tel: 020 7291 4580. Fax: 020 7291 4582. Email: london@czechtrade.cz
Contact: Michal Minčev
The Czech trade promotion agency provides services to British companies interested in doing
business with the Czech Republic.
Website:
www.czechtrade.co.uk
British Embassy in the Czech Republic, Thunovska 14, 118 00 Prague 1, Czech Republic
Tel: 00420 257 402 111. Fax: 00420 257 402 296. Email: info@britain.cz
Website:
www.britain.cz
© Euro Info Centre, London Chamber of Commerce and Industry, April 2006
7
Embassy of the Czech Republic in London, 26 Kensington Palace Gardens, W8 4QY
Tel: 020 7243 7914. Fax: 020 7727 9654. Email: london@embassy.mzv.cz
Website:
www.mzv.cz/wwwo/?zu=london
British Czech Chamber of Commerce, Pobřežní 3, 186 00 Praha 8, Czech Republic
Tel: 00420 224 835 161. Fax: 00420 224 835 162. Email: britcham@britcham.cz
Website:
www.britishchamber.cz
Doing Business in the Czech Republic
This website offers information on the structure and development of the Czech economy and business
climate.
Website:
www.doingbusiness.cz
Business Info
The official Czech business portal which provides information on, e.g. market access and legislation
and operates a business cooperation database.
Website:
www.businessinfo.cz/en/

Disclaimers
Whilst every effort has been made to ensure the accuracy of the information contained in this Guide, the London Chamber of
Commerce and Industry does not guarantee the accuracy of the information contained therein and does not accept
responsibility for errors, omissions or their consequences.
This publication has been produced with the support of the European Union. The content of this publication is the sole responsibility of
London Euro Info Centre and can in no way be taken to reflect the views of the EU.
© Euro Info Centre, London Chamber of Commerce and Industry, April 2006
8