Czech Republic

Overview

• Since its independence from the Soviet Union in 1989, Czech political and economic reforms have been based on Western models.
• 80% of business is privately owned and the economy is largely free-market. · The government is very open to foreign direct investing.
• There are over 47,000 foreign owned or partially foreign owned companies currently in the Czech Republic.
  
• The Czech Republic is a good central location for exporting to the Central European Free Trade Agreement (CEEFTA), whose members are: The Czech Republic, Hungary, Poland, Slovakia, Slovenia, Bulgaria and Romania.
• Prague is the main market for the Czech Republic.
• There is a highly skilled labor force and good infrastructure.
• The government's priority is to integrate the Czech Republic into the E.U. with a target date of 2003.
  
• Structural reforms have been incomplete due to the government's lack of experience and lack of a majority in the parliament.
• Due to the incomplete structural reforms (in bank privatization, judicial reform, enforceable bankruptcy laws, improved capital markets regulation and increased transparency in transactions), Czech GDP contracted 3% in 1998 and was expected to contract in 1999.
• The government is committed to completing the structural reform programs, but it may take longer than expected.
• The introduction of products and development of consumer demand takes time and patience.

Opportunities

• Telecommunications Services
• Pollution Control Equipment
• Electrical Power
• Aircraft and Parts
• Insurance
• Soybean Meal
• Rice
• Pulses
• Almonds

Trade

• The large bureaucratic government is sometimes criticized for corruption, which inhibits market competitiveness.
• The Czech Republic is a member of the WTO and has average tariffs around 5%.
• A lack of consistency in applying customs norms can act as a trade barrier, but these problems are mainly due to the newness of the regulatory programs.
• There are 11 free trade zones established in several cities throughout the country.

Marketing Tips

• Established distributors have been increasing in recent years, the most effective work closely with their foreign suppliers to develop marketing strategies.
• Margins for distributors are close to those in Western Europe.
• Support for the distributor by the foreign exporter is crucial, for example in providing advertising and retail promotions.
• Local distribution systems can effectively be developed from the ground up with a local partner.
• Direct marketing is often very successful.
• In general labels must be in Czech and labels can come as attached leaflets to the product; Czech importers and distributors are responsible for labeling.
• English is not widespread and for close involvement, knowledge of the Czech language is important.

Business Culture

• Avoid setting meetings with Czechs on Friday afternoons, because many Czechs retreat to country homes for extended weekends.
• Czechs don't smile as much as Americans do for the purpose of non-verbal communication and greeting.
• Status titles are important in verbal and written address.

Legal Environment

• There exists a commercial code and courts of justice, but the system is largely overwhelmed and inexperienced.
• It would be useful to hire a lawyer to review important contracts.
• National treatment is the standard since the Czech Republic is a member of the WTO.