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Sweden & Czech Republic

Tear down the Mental Iron Curtain

Article by former Sweden's Ambassador to the Czech Republic Ms. Annika Jagander and the President of the Nordic Chamber of Commerce in the Czech Republic Mr. Stefan Lager.

When we tell people that we live in Prague, we are often asked what it's like to live in Eastern Europe. We generally start by answering that Prague is west of both Stockholm and Vienna and that this region has been known as Central Europé for close to a thousand years.

Centrally located, travel time from Prague to either Vienna or Berlin is about 3 ½ hours; to Munich it takes 4 hours; Zurich, Milan or Venice are 7-8 hours distant. While most people would recognize the central geographical location of the Czech Republic, the general perception is still that this former communist country is behind Western Europe in economic and technical terms.

Perhaps it’s time for a re-think? Exceptional growth in the wake of the Velvet Revolution has rocketed the Czech Republic among the EU countries. "A quarter of a century with market economy has significantly  improved Czech economic output and our standard of living", comments David Marek, chief economist at Deloitte. In purchasing power parity, the Czech GDP per capita grew from 60 percent compared to the EU average in 1993 to 84 percent in 2014. The regional differences are significant, however, and while some mountain regions in the northeast have lower GDP per capita, Prague, with its metro area of 2.2 million inhabitants, is among Europe's top 10 regions, just behind Paris and Stockholm, but ahead of other Western capitals like Copenhagen, Helsinki, Rome, Madrid and Vienna.

And the GDP continues to grow. The Czech economy accelerated during 2015 and with a GDP growth of 4.7 percent outpaced all other EU member nations. The Czech National Bank (CNB) forecasts a continuous strong growth, around 3 percent, for 2016 and 2017. The CNB explains the growth by accelerating external demand, low oil prices, eased domestic monetary conditions due to the weakened koruna and exceptionally low interest rates.
The Czech economy is very dependent on exports, with 80 percent of the GDP being shipped abroad. Although we have seen a transformation towards a knowledge-based society, with the service sector counting for more than 60 percent of the GDP, the main economic pillar is still the industry sector, in which the automotive industry is the most important, representing about 20 percent of the GDP and 54 percent of the yearly export value. Interesting to note is that while Volvo struggled, Saab went bankrupt and total passenger car sales in the EU fell 7.8 percent in 2008, Czech car sales increased 8.4 percent. In 2010, the production output exceeded one million cars for the first time.

If we consider a slightly larger region, we can see that the car industry is even more important. By drawing a circle with a radius of about 300 kms from the centre of the Czech Republic, thus including the southern part of Poland and western Slovakia, we have defined a region in which the yearly car production exceeds three million vehicles.

Furthermore, more than 30 companies have established R&D centres here, among them Škoda Auto, Porsche Engineering Services, Mercedes-Benz Technology, Ricardo, Swell, Valeo, Visteon, Aufeer Design, Bosch, Continental, Honeywell, Siemens, ZF TRW and many others. The last time we counted, there were more than 900 automotive sub-suppliers in the Czech Republic.

Unfortunately, we have seen so far very few Nordic companies from the automotive industry.

Outside the car industry, Honeywell Technology Systems is a noteworthy company. In 2013, Honeywell opened one of its main worldwide technology and innovation centres in Brno, where for example, it is developing equipment allowing pilots to see clearly in foul weather conditions, crucial for landings in heavy rain and fog.

French Latécoère is another example. The company is a "Tier-1" supplier to the aircraft industry and develops and manufactures doors, door components and cabin electronics for Airbus, BoEing, Dassault and Embraer. Their export goes to Europe, Latin and North America.  Latécoère bought a Czech company, founded in 1918, which had produced its first aircraft already in 1921, the fighter plane Letov Š1 constructed by Alois Šmolík.
Even on a global scale, the Czech Republic is noted for its success in attracting foreign direct investments (FDI). IBM-Plant Location International (IBM-PLI) is a division of IBM Global Business Services that specializes in corporate location and economic development strategies. In its 2015 Annual Report, IBM-PLI recognises that USA, India and China attracted the highest level of FDI during 2014, but counted per million the Czech Republic was the third most successful globally.

So what about Nordic companies? Well, many are already here.
When Bang & Olufsen looked for a site outside Denmark for production of its highly sophisticated audio and video equipment, it chose Koprivnice in Moravia because, as B&O stated, "the region’s unrivalled technical traditions and great pool of talented people“.

Ericsson has been here since the 1930's, being well aware of the impressive standards of the Czech Technical University in Prague, the alma mater of people like Christian Andreas Doppler, of the effect bearing his name, and Otto Wichterle, the inventor of soft contact lenses. Already in the 1990s, Ericsson started a research program in cooperation with the school.

Since 2004, Tieto has its main software development centre in Ostrava in the eastern part of the country. With more than 2,000 employees, it is one of the biggest IT services companies in the Czech Republic.
Statoil clinched an historic deal in 1997 with the Czech gas importer Transgas. The agreement broke Russia’s energy monopoly in the former east bloc.

At that time, no other "former east bloc country" had shown greater political will to diversify its energy sources, thus guaranteeing its Citizens and industry diversified energy supplies. Currently, over 10 percent of Czech households‘ gas needs are covered by North Sea gas.

These are just a few examples that showcase the technical and economical capability of Czech industry as well as the maturity of Czech society. So, in summary, we urge you to join us in tearing down the mental Iron Curtain and start thinking of the Czech Republic as a country to do business with.
Once here, you will also find that it's a great country to visit and live in.
Contact us in case you have questions – we can help.

Last updated 10 Jan 2018, 12.17 PM