Wednesday, November 28, 2001

Zeman courts U.S. investors Manufacturing of military technology seen as sector with most development potential By Frantisek Bouc Prime Minister Milos Zeman claims his meetings with 100 U.S. businessmen were not in vain. Zeman, who was hoping to inspire an increase in foreign investment during his official visit to the United States earlier this month, was optimistic even as an economic slowdown gripped the country following the Sept. 11 terrorist attacks. "Actually," Zeman told reporters, "I think we've arrived just in time and despite that such negotiations are a long-distance run, we hope they'll be fruitful." Based on Czech Statistical Bureau data, the United States, the fourth-largest investor in the Czech Republic, pumped $1.33 billion (50.5 billion Kc) into the Czech Republic between 1993 and 2000, accounting for 5.5 percent of overall investment coming in the country. Last year, U.S. firms invested $148.6 million, but the figure dropped off to some $95 million for 2001. Radomil Novak, director of CzechInvest's branch in Silicon Valley, California, told The Prague Post that Zeman's visit to the United States "was good PR for the Czech Republic." "We are a small country and we hardly get into newspaper reports," Novak said. "Zeman's visit helped catch some attention." Novak said that a CzechInvest survey showed that major U.S. firms expected the current negative economic climate to end in the first half of 2002, which would mean a return to investing overseas. Novak said companies dealing with microelectronics will especially be looking for investment opportunities, and that the Czech Republic could become an advantageous location thanks to its cheap and highly qualified work force. Neither Novak nor government representatives were willing to reveal the names of the firms Zeman met, but according to a CTK news agency report, Zeman met with representatives of analogue chipmaker National Semiconductors and IT companies Intel, Samsung, Dell and Motorola. Motorola publicly expressed its interest in the Czech Republic. "Wage costs here are really low and the Czechs have a good reputation for their skills and qualifications," said Vaclav Smid, Motorola's sales director for Central and Eastern Europe. Other companies, such as Samsung or Intel, insisted it was too early to comment on investing in the country. Analysts speculated that the Czech Republic could be attractive to electronic combat systems manufacturers. Following the current military strikes against terrorism, the sector is expected to go through an economic boom. "Many investors used to capitalize rather on our cheap work force, and the added value on products manufactured here was low," said Jan Schiesser, business analyst for Prague-based Atlantik Financni trhy. "The U.S. investors could further capitalize on the high qualification of local workers and on the overall potential electronic industry here. ... Both electronics and military production have deep roots in this country." Weston Stacey, executive director of the American Chamber of Commerce in Prague, said the general trend in military spending has been toward electronic solutions. "The Czech Republic certainly has the intellectual capability to play a role in that," Stacey said. "Government nurturing of research and development would need to be increased, as would its support for the protection of intellectual property rights and the development of a market for such products." In the recent past, major U.S. investors complained about the unfair business climate they said was created by Czech authorities. Among the most recognized examples has been U.S. billionaire Ronald Lauder's lawsuit against the Czech government for not protecting Lauder's sizable investment in the country's first private television station, TV Nova. Another controversial case involved the Lockheed Martin and Boeing pullout on a bid to supply the country with a modern fleet of fighter jets, due to an alleged lack of transparency and flexibility in the tender process. In the most recent example of strained U.S.-Czech commercial relations, the U.S. Department of Commerce cried foul over the Czech government's electricity and gas privatization, saying that U.S. investors were intentionally shut out because they didn't receive the same bidding information as some other firms, particularly those with Russian ties. Stacey said the government needs to abandon its defensive approach to criticism. "What has concerned investors more than 'unfair' practices themselves is the obdurate attitude expressed by major Czech politicians that no unfair activity has ever occurred in this country," Stacey said. "Insisting that it is so does not persuade investors; it just impacts the government's credibility. "Businesses are run by human beings, so it is natural, but not logical, that one negative story such as TV Nova would receive more prominent consideration than the success of other, larger investments." Frantisek Bouc's e-mail address is fbouc@praguepost.cz More business stories Working for less The gap between expat and Czech pay is slowly shrinking Where to invest in troubled times Crown-denominated bonds provide safety and high returns Falling oil prices to benefit economy Lower costs steady inflation, trade balance Reviving the CD business Will new label 's low-cost recordings sell? Tourism down, but hope shines through Industry expects revenue boost as season starts Spaces & Places Fantasy, heraldry and realty Movers & Shakers Hamill to manage Antal International