CZECH REPUBLIC

1
CZECH REPUBLIC investment opportunity!
31 March 2005
Csaba Gyöpös Director, South East Asia Operations
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Presentation Structure

1. Role of CzechInvest
2. General information about the Czech Republic
3. FDI into Central and Eastern Europe and the Czech
   Republic
4. Czech investment climate
5. CEE Electronics and Automotive Industries
6. Life in the Czech Republic

3
V
Our Organization
Minister of Industry and Trade CR
Steering committee
Marketing
Investment support
Enterprise development
Smes
Business properties and regions
Coordination of development programs
London
Chicago
Paris
Prague
Cologne
Yokohama
Silicon Valley
Brussels
Hong Kong
The European investment promotion agency (IPA) of
the year 2000 2001 Best IPA in the EU accession
countries of the year 2002
CzechInvest - Investment and Business
Development Agency
4

• General information about the Czech Republic

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Czech Republic Basic Data
POPULATION 04 10.3 million LABOUR FORCE
04 5.3 million UNEMPLOYMENT DEC 04 9.5 GDP
per capita (PPP) 03 USD 18 700 GDP growth 2.Q
2004 4.1 INFLATION RATE (CPI) DEC 04 2.8
AVERAGE MONTHLY WAGE 04 USD 716 1 USD 23.50
CZK
Source Ministry of Finance, Czech Statistical
Office, 2004
6
CZECH REPUBLIC EU MEMBER from MAY 2004
SINGLE MARKET OF 455 million CONSUMERS
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• Foreign Direct Investment (FDI)
• into Central and Eastern Europe
• and the Czech Republic

8
FDI stock per capita in Central and Eastern
Europe

• By the end of 2003, the Czech Republic had
  attracted more FDI per capita than any other
  country in Central and Eastern Europe (in EUR)

Sources WIIW, Wiener Institut für internationale
Wirtschaftsvergleiche, February 2004
9
.Attractive
The Czech Republic is in the Top 10 for investment
1. China 2. USA 3. Germany 4. UK
5. Poland 6.- 7. Czech Republic, India 8.-
9. France, Russia 10. Hungary
Source Ernst Young, Europe The Opportunity of
Diversity, 2004
10
Inflow of foreign direct investment
2006-08 Compliance with EU regulations improves
the business environment and sustains foreign
direct investment (FDI) inflows of US3.5bn-4bn
annually. Source Country Forecast Czech
Republic, EIU
1993 Q3 2004 USD 42.1 BILLION
USD BN
Source CNB, December 2004 2004 - 2008 Country
Forecast, April 2004 Updater, EIU
Q1 Q3 2004 USD 3.5 BILLION
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Top 10 CzechInvest investments
Czech branch Country Sector Investment (mil. USD) Jobs Announced Location
Toyota Peugeot Citroën Automobile Czech, s.r.o. Japan, France automotive 850.20 2.000 March 2002 Kolín
LG. Philips Displays Czech Republic s.r.o. Netherlands electronics 628.84 3.250 February 2000 Hranice na Morave
Škoda Auto a.s. Germany automotive 562.00 600 December 1998 Mladá Boleslav
Nemak Europe s.r.o. Mexico automotive 317.15 1.361 November 2000 Havran
DENSO MANUFACTURING CZECH s.r.o. Japan automotive 254.53 936 May 2001 Liberec
BOSCH DIESEL s.r.o. Germany automotive 237.48 1.458 December 2000 Jihlava
Panasonic Mobil Automotive Systems Czech, s.r.o. Japan electronics 235.19 1.182 December 2000 Pardubice
DHL Information Services (Europe) s.r.o. United Kingdom IT 190.25 866 March 2003 Praha
VDO Ceská republika, s.r.o. Germany automotive 178.99 1.900 February 2002 Brandýs nad Labem
Matsushita Electric Works (CZ), s.r.o. Japan electronics 100.00 900 January 1996 Planá
Source CzechInvest, October 2004
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Cumulative FDI inflow by country 1993 - 2003
Total EUR 37.818 billion
Sweden 1
United Kingdom 4
Japan 1
Switzerland 5
Other 11
Belgium 6
United States 7
Germany 32
France 9
Austria 11
Netherlands 13
Source Czech National Bank, March 2004
13
Cumulative FDI inflow by sector 1993 2003
14

• Czech investment climate

15
Language levels
1004 respondents
Source FESSEL-GfK Omnibus Survey in Central and
Eastern Europe, 2003
16
Completion of upper secondary education
Percentage of those aged 22 who have successfully
completed at least an upper secondary education
in selected countries, 2002
Source Progress towards the common objectives in
education and training, EC 2004
17
Czech university students
Total number of students 259,674
Liberec 6,851
Bachelors programme
Usti n. L 7,578
Masters programme
M. Boleslav 266
Postgraduate
K. Vary 587
H. Kralove 8,496
Cheb 1,597
Opava 1,845
Kladno 183
Karvina 1,900
Litomysl 61
Prague 96,692
Pardubice 6,332
Plzen 14,594
Ostrava 25,331
Olomouc 14,925
J. Hradec 1,109
Zlin 5,622
Vyskov 1,195

• Source Institute
• for Information
• on Education,
• Statistical Yearbook, 2004

Trebic 10
Brno 55,181
C. Budejovice 7,900
Kunovice 526
Lednice 893
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Intellectual capital - Czech Universities

• total students 274,192

IT students 21,863
The figures are based on location of faculty
Prague
Opava
2,135
Hradec Kralove
104,530
Plzen
Ostrava
Ostrava
Trebíc
Brno

• Source Institute for Information on Education,
  2004

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Unemployment



forecast

Source Czech Ministry of Finance, April 2004
20
Average monthly wages in the Czech Republic in
2003
Average Exchange rate 2003 31, 844 CZK/EUR
Source Czech Statistical Office, 2004
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Transportation

• -- strategic location in the centre of Europe
• -- current 518 km of motorways represent about
  50 of planned highways in 2010
• -- the best transport network in Central and
  Eastern Europe

Infrastructure Density (km/km²) Czech. Rep. Slovakia Hungary Poland
Roads 161.4 35.6 32.0 118.8
Railways 12.0 7.5 8.2 7.3
Motorways 0.6 0.6 0.5 0.1
Source Ministry of Transport, 2004
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Investment incentives available in the Czech
Republic

• Manufacturing
• Business Support Services Technology Centers
• Job creation in regions of high unemployment

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Minimum investment - according to regions
(Manufacturing)
Group Minimum Investment
A 100 mil CZK / 3 mil. EUR / 4 mil. USD
B 150 mil CZK / 5 mil. EUR / 6 mil. USD
C 200 mil CZK / 6 mil. EUR / 8 mil. USD
D 200 mil CZK / 6 mil. EUR / 8 mil. USD

• Valid January 1 June 30, 2005

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Tax incentive(Manufacturing)

• New firms corporate tax relief
• for max. 10 years
• Existing companies partial tax
• relief for max. 10 years
• Current corporate income
• tax rate 26

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Job creation and training grants (Manufacturing)

• Offered in regions with high unemployment only
• 200 000 CZK (app. 6 600 EUR / 8 000 USD) per each
  new job
• created in regions A and 100 000 CZK (app. 3
  300 EUR / 4 000
• USD) per each new job created in regions B
• 35 of total training costs in regions A, B, C

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Job creation and training grants (Manufacturing)
Group JOB CREATION RE-TRAINING
A 200,000 CZK 35
B 100,000 CZK 35
C 0 CZK 35
D 0 CZK 0

• Valid January 1 June 30, 2005

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Business Support Services and Technology Centres
Framework Programme for Support of Technology
Centres and Centres of Business Support Services
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Types of supported projects

• Technology Centres (TC)

• Development and innovation activities with the
• close linkage to production of high-tech
• products and technologies, including development
  of
• specific software, in the following fields
• aerospace
• computers and machinery
• electronics and microelectronics
• telecommunications
• pharmaceutics
• motor vehicles
• etc.

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Forms of support(BSS TC)

• SUBSIDY FOR BUSINESS ACTIVITY
• provided by the Ministry of Industry and Trade
• SUBSIDY FOR TRAINING AND RETRAINING
• provided by the Ministry of Labour and Social
  Affairs

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Regions with average unemployment higher than 14

• Valid for the period January 1 June 30, 2005

DC
LB
UL
JN
TP
CL
MO
SM
TU
CV
LT
MB
LN
JC
NA
ME
KV
KD
SO
JE
HK
NB
RK
CH
PH
RA
AB
PU
KO
UO
PS
SU
BR
BE
PZ
OP
RO
CR
KH
TC
KI
PM
OV
PB
SY
BN
HB
OC
PJ
NJ
FM
DO
PR
PV
ZR
PE
PI
BK
TA
VS
KT
JI
ST
KM
BM
VY
ZL
TR
BI
JH
PT
CB
UH
HO
ZN
BV
CK
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Eligibility criteria(Programme - regions)

• Min. amount of investment 10 mil. CZK (cca 0,3
  mil. EUR / 0,4
• mil. USD) within 2 years
• Min. of 10 newly created jobs within 2 years
• Min. 5 mil. CZK (cca 0,16 mil. EUR / 0,2 mil.
  USD) of the
• investment will be financed with own sources
• At least 25 of the total amount of investment
  must be
• financed by resources, which do not include part
  of the State Aid

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Investment risk rating
COUNTRY STANDARD AND POORS MOODYS FITCH-IBCA
Slovenia A Aa3 A
Czech Republic A- A1 A-
Hungary A- A1 A-
Poland BBB A2 BBB
Estonia A- A1 A-
Slovakia BBB A3 BBB
Romania BB Ba3 BB
Russia BB Baa3 BB
Last update May 2004
Source Czech National Bank, May 2004
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• Investment Opportunities in the Czech Electronics
  Sector

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Contract electronics manufacturingEuropean
production trends
Eastern Europe fuels growth

45.42

39.8

34.8

24.7

30.45

19.14

27.97

14.83
PRODUCTION IN BILLION USD


24.15

11.5
7.5

5.15

19.72

3.67

12.505


2.63
10.057


1.905



3.534



20.66
20.72

8.211
20.4

19.97
19
18.96
1.433



.053
16.05
1.025

6

.838

13.05



4
237
0.697


10.6
4.


0.518
8.624

0.38

7.186



5.356
4.32
3.857















1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
WESTERN EUROPE
EASTERN EUROPE
Source EMS Opportunity in Europe, MHM, 2003
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The Czech Electric and Electronics Sector in 2003
BASIC DATA

• 12.1 billion USD sales
• 11.4 billion USD exports
• 182,000 employees
• 15 of Czech manufacturing industry output
• 450 manufacturing companies
• 25 of foreign manufacturing investments
• 2.5 billion USD foreign investment since 1990
• 16 of manufacturing exports

Source EIA, 2004
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Structure of the Czech Electronics and EE Industry
Electronics components, telecommunication and
consumer electronics, 21
Instrument and automation equipment, 12
Computer equipment, 23
Heavy-current technology, 44
Source Czech and Moravian electrical and
electronic association, 2004
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COMPUTER ASSEMBLY
40 of European PC production is manufactured in
the Czech Republic
Prague
Pilsen
Pardubice
Ostrava
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• 1. PANASONIC AVC NETWORKS CZECH TV SETS
  1996-97
• 2. MATSUSHITA ELECTRIC WORKS COMMUNICATION RELAYS
  1998
• 3. MATSUSHITA ELECTRIC INDUSTRIAL EXPANSION
  1999-2000
• 4. PANASONIC MOBILE AUTOMOTIVE SYSTEMS CZECH
  2000

• WHY DID WE CHOOSE THE CZECH REPUBLIC?
• QUALIFIED LABOR
• STRATEGIC LOCATION
• POLITICAL AND ECONOMIC STABILITY
• Mr. KIYOSUKE IMAI, PRESIDENT MATSUSHITA ELECTRIC
  WORKS, 1999

PRAHA
2
4
13
Ostrava
USD 250 MILLION
TOTAL INVESTMENT
Brno
5 millionth TV set
produced in March 2003
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Investment Opportunities in the Automotive
Sector in the Czech Republic
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Automotive Investments In CEE - Trends

• Automotive sector will continue to be the leading
  industrial sector in CEE countries
• Knowledge and experience in this field remains an
  enticement of FDI
• Creation of regional suppliers in CEE

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Attractivity of the Region
Which countries or regions are you likely to
consider investing in?
42
70 of CEEs OEMs and suppliers are here
200 km
Source McKinseyCompany
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LIVING POSSIBILITIES
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GOOD QUALITY AT A GOOD PRICE!
Quality of life
Cost of living index consumer goods, excl.
housing, New York City 100
Source The World Competitiveness Yearbook 2003,
IMD
45
WORLD CLASS GOLF COURSES
Marianske Lazne established 1905 inaugurated
by King Edward VII
and Karlovy Vary established 1933
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????????
??? ?? and OEMS
DENSO ????
SHIMIZU IND. ?????
ASAHI GLASS ???
Tokai Rika ????
TOYODA GOSEI ????
???????? DENSO AIRS
KOMATSU ?? HITACHI SEIKO ???? HITACHI METAL ????
KOYO SEIKO ????
AISAN ????
TRIS
OPTREX
MELCO ????
KOITO ?????
Toyota Motor ??????
SIEMENS-MATSUSHITA ???????
TESLA Y. S.
PRAGUE
???????? SHOWA ALUMINUM
ASAHI BEER ??????
?????? MATSUSHITA COMMUNICATION INDUSTRIAL Co.
???? MATSUSHITA EL.WORKS
FURUKAWA ELECTRIC ????
JCCE
JAPAN METAL CHEMICAL-NIKOM ???????
???? DAIHO KOGYO
SHIMANO ???
??? KYOCERA(AVX)
???? SANYO
FUTABA IND.
ONAMBA ?????
?????? MATSUSHITA ELECTRIC INDUSTRIAL Co.
ZEXEL-VALEO
?? TORAY INDUSTRIES
?????? AISIN SEIKI
?????? ALPS ELECTRIC
???? KOYO SEIKO
TATSUNO ???
???? NIPPON KAYAKU
KAWASAKI H.I. ????
???? TOYODA A.W. LOOMS
???? OKUMA
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????????????(????) ASIA PACIFIC COMPANIES IN THE
CZECH REPUBLIC (Excluding Japan)
Taiwan ??
Korea ??
Malaysia ????
Singapore ???
Beijing ??
Shanghai ??






Hudong-Zhonghua Shipbuilding (Group) ??????(??)???
?
Marwi ??????????



Kinloon ????????

Vivatek


Hualon ??
System Access
Lite-On Technology ??????????

PRAGUE
FIC ????

AIDC ?????? ??????
5


Foxconn Honhai ????????????
Asustek ????



Daewoo

OSTRAVA
Lite-On Enclosure ??????????



Tatung ????

Asustek ????

LG Philips
Amtek

BRNO
Flex Design Centre Czech

Inventec ???

Chicony ????

Updated in March 2005
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We are here, ready and glad to assist you!Thank
you
www.czechinvest.org