"The Czech economy has been through slight recession during the past couple of years, what are the reasons for this downturn?"
"There are several reasons for this, as is usually the case. They could be divided into two parts- the structural part and cyclical part, which is the less important one in this case. There are two main problems in the structural part. Firstly, the privatisation methods were not always perfect in the past and not all experiments were successful and secondly, the globalization issue, which was greatly underestimated. It's because many people in this country have a tendency to believe that globalization is just an empty term. I don't think it's true. The Czech economy as well as the global one have been through changes during the past ten years. We, as well as all the other ex-communist countries, are not only facing the problem that we are in the process of moving from a communist economy to a market economy, but also that the already established market economy is changing from being inward looking to being global. And that is making the overall process more difficult. Actually, from this perspective it looks if history is repeating itself, because a similar thing was happening in Europe after America was discovered. New horizons are opening and as a small country you feel it more."
"Changing landscape..."
" Yes."
"So, in light of this, what are the budgetary measures that the government is now proposing to be able to deal with this restructuring of the economy?"
"There are two concepts, one is a state budget and the other is a general government budget and there is a big difference between them. The state budget is solving any possible future problems, planning new bodies and so forth, whilst if there are restructuring costs, these are included in what is called the general government and the state budget , in a narrow sense. The restructuring is now financed by Konsolidacni Banka, which got involved in the process through the National Property Fund. Currently, our main goal is to privatise the banks and that is not a profitable activity. Some people think that it will just cover the costs of old mistakes. I believe, that in three or four years, we'll begin to see some benefits of the process. In the meantime, it is a pain though."
"I think the banking is one of the issues that has been stalling the budget, what are some of the other issues?"
"Be careful. This has no straightforward influence on the state budget. We are doing buyouts of commercial bank to allow their privatisation and it means that those 35% are moved to the Konsolidacni Banka and its losses are not part of the state budget. Although there were some discussions about this issue being included in the state budget for 2000, it is not so. Basically, from the point of view of the economics, it's the general government budget, that is the more important one, but it is not so from the political point of view. In fact, in this country there is no obligation in the constitution that if the government hasn't got an approved budget, it has to resign."
"So why isn't the budget approved yet? Is it because the opposition is stalling the process?"
"Well, it's because the ODS want to negotiate. They are willing to approve the budget only if they can negotiate some conditions."
"OK, let's leave it there. The minister said that he is supportive to foreign investments, in light of this, what are the main foreign investments you want to bring in ?"
" What we are trying to do is to have those incentives in the form of the law. So far, it was only the government decision, which was not the best way. Now it's more precise. These incentives for foreign investments don't make our live easy. But we believe it was necessary to change the policy, because the international organisation did not like the way it was. They had reason for this though, because some negative signs started to show. My point is though, that the tax incentives is not an issue that should be overemphasised. We only have to do it this way in order to be able to compete with other countries. I think it's the technical conditions like creation of the industrial construction, building the infrastructure, training of the labour force, that are more important. Also to have the assistance of the municipalities and things like that."
" And these are the things that the ministry is planning?"
" Yes, basically, it's a package that we provide for the investors. It's good that the government is taking care, creating cheap plans for the investors....but I believe that some things concerning the tax incentives are not right. To put it simply, you can collect tax credit for five years, than this sum gets paid and the same sum gets paid for the next five years, so technically, if you have flat tax obligation, you can have tax incentives for ten years. Immediately." | "The next question is about privatisation, there have been some problems in the past, can you comment on that and also say something about the new government strategy ?"
"As regards the privatisation we are trying to learn from past mistakes and we are trying to go ahead with what we could call the standard privatisation. It means a privatisation with strategic investors. I have to admit it is difficult. Just now, some negotiations with the Erste- Austrian bank are going on. We are hoping for a successful finish, but it's not clear, whether we will manage to reach that point."
"And you are in the process of privatising telecommunication..."
" Yes, it has started...."
" How is that going?"
" Well, considering the Telecom, we've just issued the first advertisement, because we are trying to find an advisor. And in the case of Ceske Radiokomunikace, we already do have an advisor, but there are some problems with rather a complex structure of the company. There is an option, which was expressed by Deutche Telecom investors, the subsidiary company of Radiomobile s.r.o. operator. But this is a complicated issue, because they are not only supposed to increase the capital of Radiomobile and obtain the control, but also to pay some money or vice versa. In this moment we're waiting for the result."
" And what are the next sectors to be privatised ?"
"It's steelworks."
"So what are the challenges for this industry?"
" Everything. This is an industry that is falling down. It was revitalised all around Western Europe with the help of the individual government's or EU money. We want to become members, but the best thing for Europe would be the liquidation of our steel market. In Europe, this market is very different. In some cases we got a foreign investor, but there is still a lot of stress going on."
" Another question is which is very important is EU membership, so far, Czech Republic is one of the first countries that are likely to join, but there is still work to do in the inflation and trades areas..."
"I think this is misleading, because you are referring to EU "after" membership. For now, we have to abide to Kopenhagen criteria. They are the most important for us. That means we have to have a working market economy, stable market conditions and companies that are capable of competing on the European market. This is the key requirement for us to become a member. In the best scenario, we'll become a member in 2003 and, let's say, 4 or 5 years later we should be a member of Euroland. This means that the criteria you were talking about will have to be fulfilled by 2006 or 2007. I have said this so many times, this is like my political message."
" As a Deputy Minister, what is your biggest success story, what is the thing you are most proud of?"
"First of all, the general issue is that we have helped to change the negatives to the positive growth, that we've been very pushy about the change of incentives for foreign investments, we did a lot to change the hostile opinion of the investment environment to a positive opinion and we got rid of not only the wrong concept of national capitalism, but also some of the national capitalists that were poisoning the environment. One more very concrete thing is that we have pushed and finalised the privatisation of a chemical factory in Sokolov. This is just one example, but of course there are many more."
" As a final issue, what would be your most important message to our readers?"
" It is simple. This is a country full of possibilities thanks to the very old tradition and qualified labour force. What is missing is some of the management competencies, so if a company comes here with only a few people, there is a potential of huge benefits." |
