Czech Republic - Foreign investment

Moody's Investors Service gave the Czech Republic the first investment-grade A rating to be awarded to a former Soviet bloc country. As of 2001, foreign direct investment (FDI) stock per capita in the Czech Republic was $2,432, the highest among the Eastern European transitional economies. FDI has served Czech economic development in providing capital and managerial expertise for restructuring its enterprises. National treatment is the general rule, with screening of foreign investment proposals required only in banking, insurance and defense industries. A competitive exchange rate and low wages have been conducive to foreign investment, but in 1998 a six-point incentive package approved by the Czech government helped ratchet annual FDI inflows to about double previous levels. Incentives—tax breaks up to 10 years, duty-free imports, rent reductions, benefits for job creation, training grants, and incentives for reinvestments and expansions—are available for investments above $10 million, or above $5 million in regions were unemployment is over 25%. The Czech Republic has also authorized nine commercial or industrial custom-free zones that operate according to the same rules as those in the European Union. By 2002, the government had negotiated bilateral investment treaties (BITs) with 66 countries, the BIT with the United States in force since 1992.

From 1993 to 2001, the Czech Republic attracted $26.76 billion cumulative FDI inflow, of which 27.6% has come from the Netherlands, 26% from Germany, 10.2% from Austria, 8.6% from France, 6.2% from the United States, 4.1% from Belgium, 3.8% from Switzerland, 3.1% from the United Kingdom, 1.9% from Denmark, and 8.5% from other counties. Annul FDI inflow jumped for about $880 million in 1993 to 2.5 billion in 1995 due to the first foreign investment in the state-owned telecommunications system and German investment in the automotive industry. In 1997, FDI inflow had fallen back to $1.3 billion, but in 1998, with the introduction of incentives for foreign investment, FDI inflow rose to $3.7 billion and then spiked to $6.3 billion in 1999. For 2000 and 2001, annual FDI was just below $5 billion and in 2002, reached a record $7.5 billion. By economic sector, the principal destinations for FDI flows into the Czech Republic from 1990 to 2000 have been financial intermediation (18%), whole sale trade (15%), non-metallic mineral products manufacture (7.5%), and motor vehicle manufacture (6.5%). Other significant areas have been food and beverages, energy, and retail sales.

In 2000, direct investment outflow from the Czech Republic totaled $726 million, 37.7% to Slovenia, 25.6% to Poland, and 15.9% to Russia.

Also read article about Czech Republic from Wikipedia

User Contributions:

Comment about this article, ask questions, or add new information about this topic: