Czech Republic
Location: Central Europe, bordering Austria, Germany, Poland, and Slovakia.
Geographic Area: 78,866 sq km, slightly smaller than South Carolina.
Climate: Temperate; cool summers; cold, cloudy, humid winters.
Major Cities: Prague (Capital), Brno, Ostrava, and Plzen (Pilsen).
Population: 10,272,179 (July 2000 est.).
Ethnic Groups: Czech 81.2%, Moravian 13.2%, Slovak 3.1%, Polish 0.6%, German
0.5%, Silesian 0.4%, Roma 0.3%, Hungarian 0.2%, other 0.5%.
Languages: Czech
Time Zone: The Czech Republic is one hour ahead of Greenwich Mean Time
(GMT+1), or six hours ahead of U.S. Eastern Standard Time (EST+6).
Workweek: Business hours are 8:00 or 8:30 a.m. to 4:00 or 5:15 p.m., Monday
through Friday. Store hours are 8:00 or 9:00 a.m. to 5:00 or 6:00 p.m., Monday
through Friday.
Type of Government: Parliamentary democracy.
Head of State: President Vaclav Havel (since 2 February 1993), Prime Minister
Milos Zeman (since 17 July 1998).
Currency: 1 koruna (Kc) = 100 haleru.
Exchange Rate: $1U.S.= 39.9 koruna
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Current Economic and Political Conditions: The economy in the Czech Republic has been recovering from a recession since mid-1999. Continued strong exports will contribute to this trend, as the major trading partners help to accelerate growth. EU accession requirements and direct pressure from foreign companies will push the Czech government to privatize the remaining government owned industries and liberalize many of the markets. Once privatization is firmly in place, the opportunities for exports and investments will increase appreciably for U.S. firms. Completion of pending judicial reform will also be key to securing sustainable economic growth.
Trade between the United States and the Czech Republic has seen a steady rise
despite the recent recession. This growth is attributed to Czech companies that
continue to import machine tools, raw materials, transportation equipment, and
information technology. Restructuring continues to drive many companies to retool,
which requires them to purchase new technology.
Economic Data
(1999, in $US)
Total GDP: Purchasing power parity = $120.8 billion
GDP Growth: -0.5%
Per Capita GDP: $11,700 purchasing power parity
Inflation Rate: 2.5%
Trade Balance: $2.1 billion trade deficit.
Trade with RI: The Czech Republic is Rhode Island’s 32nd largest
trading partner, with $3.04 million in exports in 1999.
Exports: $26.9 billion, machinery and transport equipment, other manufactured
goods, chemicals, raw materials and fuel. Export trading partners: Germany (42%),
Slovakia (8%), Austria (6%), Poland (6%), and France (4%).
Imports: $29 billion, machinery and transport equipment, other manufactured
goods, chemicals, raw materials and fuels, food. Import trading partners: Germany
(34%), Slovakia (6%), Russia (6%), Austria (6%), and France (5%).
Best Prospects for Exports: Telecommunication services, E-Commerce, Internet infrastructure and services, energy services, leasing, private pension funds, specialized retailing (fashion, drugstore, hardware/home improvement), cleaner production/integrated prevention and pollution control, travel and tourism services, aerospace industry, electronics.
Chief imports include telecommunications equipment, specialized metalworking machinery, non-ferrous metals, plastics, chemicals and transport equipment. Primary business opportunities related to the redevelopment of basic infrastructure and restructuring of privatized firms remain important. Major upgrades of pollution control equipment, telecommunications equipment and services, energy production and distribution, housing/municipal infrastructure and medical services have been under way for several years.
Tariffs, Trade, Taxes, Trademarks
Tariffs: The Czech Republic is a member of the World Trade Organization
(WTO) and has adopted a tariff code with an average tariff rate of 4.7 percent.
Specific duty rates are published in the Czech tariff schedule based on the Harmonized
System of Classification. The Czech Republic has an association agreement with
the European Union as part of its EU accession process, and is lowering and or
eliminating tariffs on an increasing number of industrial products under the agreement.
Non-Tariff Barriers: Some technical barriers continue to hamper imports
of certain agricultural and food products. American business people often cite
a convoluted, or in some cases, corrupt, bureaucratic system, at both national
and local levels, which can act as an impediment to market access. European companies
have sought on occasion to use the Czech Republic’s interest in EU membership
to gain advantage in commercial competition. Also, some changes to standards and
other regulations are adopted in the guise of EU harmonization but act to protect
Czech interest. A lack of consistency in the application of customs norms can
also act as a non-tariff barrier. These problems are caused primarily by the newness
of recent regulatory changes and recent expansion of customs personnel. Training
efforts are under way to correct the situation and address these concerns. All
of these problems should be eliminated or eased as the Czech Republic continues
to harmonize its regulations with EU norms.
Taxes: The value-added tax (VAT) applies to all goods, both domestic and
foreign, sold within the Czech Republic. The VAT rate is generally 22 percent,
although a lower VAT of 5 percent is charged for selected goods, such as food
and pharmaceuticals.
Foreign Investment: The Czech Republic’s relatively stable political and economic environment and well-qualified labor force make it an attractive place for foreign direct investment. An open investment climate has been a key element of the Czech Republic’s economic transition. While the Czech Republic is economically stable, unfinished elements in the transition have hurt the country’s short-term growth prospects, competitiveness, and company restructuring. The Czech government has started to take the steps needed to consolidate the transition to a market economy. Changes in the behavior of the real economy have been slower. The crucial role that foreign investment must play in the transition’s next stage – deeper restructuring of Czech firms – should create opportunities for U.S. investors. Foreign investment has played a major role in the development of the Czech economy by providing both management experience and capital needed to restructure Czech firms. While foreign capital flows from European Union countries are considerable, the United States, as of July 2000, has been the fourth largest investor in the Czech Republic, and U.S. firms stand to profit from the Czech Republic’s continued economic transformation.
Free Trade Zones: Eleven free trade zones have been established throughout the Czech Republic. Materials, components and semi-finished products are exempted from customs duties or VAT if they are exported into a free trade zone. If the goods are then used in the manufacturing or processing of a final product that is then re-exported, it is also exempted from duties or VAT. Duties and VAT are applied on the declared value of the goods if they are cleared for free circulation within the Czech Republic. Czech Republic law permits foreign investors involved in joint ventures to take advantage of free trade zones.
Trade Finance: Forty-two banks are currently operating in the Czech Republic, including 17 foreign banks and 10 branches of foreign banks. The five largest local banks dominate the market, with 65 percent of the banking sector’s overall assets. Foreign banks and branch offices of foreign banks have increased their activity over the past several years and continue to increase their share of the total Czech-banking sector. Citibank and GE Capital have banking operations in the Czech Republic. Several U.S. investment banks also have representative offices.
Marketing and Selling Factors: Disposable income in the Czech Republic remains low in relation to Western European countries, and most Czech consumers still buy mainly on the basis of price. The increased availability of competing name brands on the market has started to shift consumer tastes toward quality over price when making certain purchases.
Key Contacts
Bryant College, John H. Chafee Center for International Business
R.I. Export Assistance Center, Raymond W. Fogarty, Director
World Trade Center, Edward Barr, Manager
R.I. State Directorate, Maureen Mezei, International Trade Director
Contact: Mary-Ruth Foley
Telephone: (401) 232-6566
Fax: (401) 232-6416
E-mail: mrfoley@itdn.net
Web site: www.rieac.org
U.S. Export Assistance Center, Department of Commerce
Keith M. Yatsuhashi, International Trade Specialist
Telephone: (401) 528-5104
E-Mail: kyatsuha@mail.doc.gov
U.S. Small Business Administration
Marilyn Bogue, International Trade Officer
Telephone: (401) 528-4585
E-Mail: marilyn.bogue@sba.gov
U.S. Embassy in the Czech Republic
Ambassador John Shattuck
Trziste 15, 11801 Prague 1
Telephone: [420] (2) 5753-0663
Fax: [420] (2) 5753-0583
U.S. & Foreign Commercial Service
Judy Rolph Ebner, Acting Senior Commercial Officer
U.S. Commercial Service
American Embassy Prague
Trziste 15, 118 01 Prague 1
Telephone: (420-2) 5753-1162
Fax: (420-2) 5753-1165
Embassy of the Czech Republic
Ambassador Alexsandr Vondra
3900 Spring of Freedom Street NW, Washington, DC 20008
Telephone: [1] (202) 363-6315
Fax: [1] (202) 966-8540
Economic Chamber of the Czech Republic
Dr. Zdenek Somr, President
Seifertova 22
130 00 Prague 3
Telephone: (420-2) 2409 6111,2409 6252, 2409 6204
Fax: (420-2) 2409 6221,2409 6257
E-Mail: hrkal@hrkal.cz
