Q: According to fDi's locations assessment tool – fDi Benchmark – the Czech Republic is ranked as the best country in central and eastern Europe (CEE) in terms of the quality of its workforce, but the cost of labour is the highest in the region. Is your government addressing this issue, and if so, how?
A: The Czech Republic has a highly qualified workforce compared to other CEE countries. We are of course aware that, in terms of international competition, the Czech workforce is more expensive, in particular because of the secondary costs of work, meaning [that] contributions towards social security and health insurance for employees [must be] paid by the employer.
But within the framework of the tax reform that will become valid from 2014 or 2015, we are planning to transfer these contributions into a tax on total wages. This will not only provide administrative savings for companies, but also decrease the total contributions by 1.5 percentage points from 34% to 32.5%. We are therefore gradually reducing secondary costs. It has to be noted, however, that our priority at the current time is to reduce the public budgets deficit. As soon as public finances are stabilised, we will be able to consider further reductions in the tax burden on companies.
Q: The Czech Republic may soon witness the biggest business deal in its history as it is seeking a partner with which to build two nuclear reactors worth between $15bn and $30bn to complete the Temelín nuclear power plant. Has a partner been chosen?
A: The eventual winner of the commission for the completion of the Temelín nuclear power plant should be chosen next year. However, the Czech state, as the majority owner of ČEZ, which operates Temelín, has retained the right not to select any winner. This is because the overall economics of such a project is important, and if none of the possible contractors convinces us of the economic benefits of the completion, it will not take place.
Nevertheless, the Czech Republic can offer foreign investors much more in the energy sector – for example, the skilled workforce mentioned before. New, large science infrastructure projects are also appearing throughout the country, some of which are focusing precisely on the issue of energy efficiency. Many companies are focusing their research activities in this area. Recently, for example, the company Eaton opened its global innovation centre in Roztoky u Prahy.
Q: Your country can boast more international brands than other countries in CEE, including names such as Bata, Skoda and Avast. What makes Czech companies so successful when competing abroad?
A: Our country has many capable and hard-working people who are not afraid to push their ideas further. Such people are not afraid of offering their products and services abroad, even without state support. Additionally, Czechs have historically been excellent innovators. Today, [people are familiar with] common items such as contact lenses, the ship propeller, the lightning conductor or differentiating blood groups. All of these were invented [or discovered] by Czechs. It is therefore no surprise to me that, in the field of business, Czech entrepreneurs are also capable of finding market niches and exploiting them with their ideas.
We should value such enterprising people, and the least we can do for them is to stop putting obstacles in their way. Therefore we have, among other things, launched a large project to reduce the bureaucracy connected with doing business.
Q: The biggest investors in the Czech Republic – Germany, Austria, Italy, the US and Japan – have remained unchanged over the past eight years. Are you fixed on obtaining FDI projects from these developed countries, or are you looking to attract investment from emerging economies too?
A: The sources for global economic growth now lie outside Europe. The Czech Republic, which is very open to foreign trade, must adapt to this. In the same way that, together with exporters, we are searching for new markets in which they can succeed, we are also searching for new investors to invest in this country.
Hence the CzechInvest agency, which attracts foreign investors to the Czech Republic, is also planning closer co-operation with Slovak and Polish colleagues in order to attract investors, primarily from Asia and the US. The reasoning for this is that the Czech economy might be under the radar of such distant countries, and a strategic alliance could help us increase the visibility of the whole region.
Q: The Czech Republic was chosen by the German International Chambers of Commerce as the best place to invest out of 16 CEE countries. But the organisation pointed out negative factors connected to investing in the country, such as corruption and public procurement indicators. How are you tackling these problems?
A: In addition to a budget responsibility, a fight against corruption is another main priority of this government. Because of that, the government also adopted a detailed strategy for the fight against corruption with the participation of expert groups, the government’s National Economic Council, the American Chamber of Commerce, and other institutions including non-profit organisations. Approximately half the points in this strategy have already been fulfilled, resulting in savings of tens of billions of Czech crowns for taxpayers.
It has to be made clear, however, that the fight against profiteering is a process that has no end, and the objective is primarily to reduce the opportunities for corrupt behaviour. We have therefore adopted an amendment to the Act on Public Contracts. Another significant anti-corruption measure is the simple reduction in the volume of public expenditure. Corruption is not only an economic, but also a moral problem. Hence I personally consider corruption as the worst social phenomenon that we have to face.