TOP INTERVIEWS Interview with MR. MARTIN JAHN General Manager of CzechInvest Date: 9/10/2002 What have the been major changes in your activities during the past two or three years? I believe that we have significantly improved the implementation the incentives system of the government, which we were just starting three years ago. The system has proved to be very successful and a large number of companies, both international and domestic companies, have benefited from this system. Since then, the Czech Republic became the top destination for investments in Central Europe. We also introduced new incentives to cover more areas, including strategic services and R&D. More and more companies are interested in developing R&D projects here: shared service centres, call centres, software development centres and R&D centres. Another change is that we increasingly work with companies that have already invested in the Czech Republic. We call this after care and want to make sure that we look after companies after they have invested so that they are satisfied with their investment. The most significant project during the past three years is the new automotive plant by Toyota and PSA, which is the largest greenfield nvestment ever made in Central and Eastern Europe. This also increases the importance of French investors in the Czech Republic. How do you view the current investment climate, especially after the floods of this Summer? The floods basically have no effect on the investment environment. We surveyed companies, which have recently invested in the Czech Republic and basically none of them has suffered under damages as they were not located in the flooded zone. All the special zones for investors are also fine. The floods were very bad for small sized businesses located close to the river and for the inhabitants of the villages close to the river, but medium and large sized businesses were not affected and we do not see any effect of the floods on what we are doing. In this report, you mentioned some foreign companies, which helped after the floods. How important was this help? And what is the symbolic meaning of it? I think that the importance of this was that the Czech people could see that we are part of a bigger family and that multinational companies located in the Czech Republic do not view us only as a base for manufacturing, but that they also want to be responsible corporate citizens. This was a very important signal. It also showed us that the EU is looking at what is happening here and is trying to help. Speaking about incentives, which are the tools you are using to attract foreign investors? I believe that the major issue is still the Czech Republic itself, its location and its skilled workforce. I think that thirteen years after the revolution, it is clear to everybody that we have a very skilled labourforce and that the quality of our technical education is of a very good level. Furthermore, our infrastructure is better than in the other countries of this region. I therefore think that the main attractions are these three points: location, labourforce and infrastructure. The incentives that we have introduced are very appealing to foreign investors because they are easy to administer and are compatible with EU regulations which is a big advantage. For the new investments for R&D and strategic services, we have two types of subsidies: one for business activity and another one for the training of people. We consider the investments into people, meaning training, as the most significant ones. These incentives help companies to locate here, but they are not coming because of this. They are coming because of our people and our location. Do you try to attract a specific type of activity? We still focus on automotive, electronics and engineering as these are the three major sectors, but companies in biotechnology and pharmaceuticals increasingly invest here. There was a recent investment of Baxter, an American pharmaceutical company. We will maybe see more in terms of pharmaceuticals and biotechnology. Which are the major countries that are now investing here? France definitely took big steps ahead during the past three years, and it has become a very important player. In addition to Germany and France, United States and Asian countries, especially Japan and Taiwan, are increasing their presence. However, we have had investments from all the European countries andare very happy about it because we are not dependent on one country only. Do you, however, have more activities in one region or another? We have more activities the further the location is from the Czech Republic because Germans and Austrians know us quite well already, the Franch and Americans a little less. It is in Asia that we have to make the most efforts to achieve the same results. Which countries do you see increasing their investments the most? Germany will maintain its current level and we see growth opportunity for France and Asian countries. Are you working specially with organizations in these countries? We have offices in France, Japan and Hong Kong and cooperate with chambers of commerce, our embassies and their embassies. We basically cooperate with everybody, but our approach is very direct as we directly go to the companies. After all these years, we know the industry quite well and we know who could locate here and who could be interested. This is why most of our marketing activities are directly focused at specific companies. Where do you currently see the most opportunities for investors? Automotive components still remains the number one sector as we are becoming the automotive center of Central Europe. We also see a lot of opportunities in services, shared service centers, call centers and R&D. Are there any specific regions or companies, which are currently looking for foreign investors? We mostly work with foreign companies, who want to set up new operations here and do not actively promote Czech companies. We do have some Czech companies registered, which want to create joint-ventures, but our main focus is to attract investors, who have a specific project. How do you see this helping to develop the economy and thus the country? We do not want to be too specific because we need diversification. We need investments into the software development sector as well as into the goods processing industry because some traditional industries are less cyclical. This is why we do not really choose. If it is a quality project, it can be of any industry and we will be very happy to support it. Obviously, greenfield investments have a bigger multiplication effect than acquisitions. With acquisitions, the companies are restructured and there can be some people laid off, but with greenfield investments there is always new employment created. From this point of view, greenfield investment may seem to be better for us, but then again many Czech companies need to be restructured. This is why we need both. Do you try to attract investments in specific regions where investments are perhaps more needed than in Prague? I think that this flow is to some extent natural, but there are some regions that suffer from a high unemployment: Northern Moravia, the region around Ostrava and North Western Bohemia. Are you developing specific actions to attract investments in these regions? Our incentives include a regional focus as you can receive slightly bigger incentives in these regions. We also focus on developing new industrial zones, especially in these regions. However, investors will then choose where they want to be located. We are not pushing investors to some regions because we need to solve our problems. Investors have to understand that a region is good for them. Speaking about industrial zones, are the incentives to invest in these zones higher? No. The benefit of an industrial zone is the possibility to come and start construction rapidly, which is a big incentive because speed is always a big concern. You have a site, which is fully prepared, for a symbolic price and I think that this is a big incentive. To attract R&D centres and technology companies, a very highly qualified labour force is required. Do you cooperate with universities to develop this? The government is developing a strategy to make universities more focused on cooperating with private companies. However, I believe that we already have a solid base as the quality of technical universities has always been very high. They now need to improve their understanding of the needs of businesses, but I think we are on the right way. Do you see it as important for companies to help universities develop this? Companies never help universities just for the sake of it, but help them to fill their own needs. We already have examples of cooperation between universities and foreign companies and the governmental project is focused on fostering these cooperations. Can you give us examples of foreign companies doing this? Rockwell, for example, has had an R&D centre attached to a Czech university for a long time. Other companies carrying out R&D in cooperation with Czech universities include Phillips, Honeywell and Volkswagen. The level of attraction of FDI has been very high in the country for the past three or four years. How do you expect this to develop during the next few years? We expect to maintain the current annual level of USD 4 to 6 billion during the next two years. After this, it will probably decrease because we will have completed the privatization process. The level, which would allow us to maintain our position in the global economy is probably around USD 3 billion per year. How will the accession of the Czech Republic into the EU affect this? I believe that it will improve the situation for small and medium sized businesses because it will reduce the risk and we will not be viewed as an emergent country anymore. For large corporations, I do not see many changes as all the investors that are coming now are coming with the assumption that we will be a member of the EU. This is why most of the large investments will take place before we become a EU member. I have to stress that everybody takes this as a fact: it is not about if we will join, but when we will join. When the Czech Republic will be a member, do you expect the inflow of investments to increase? Or maybe the origin of investments to change? I do not expect any major changes because investors are not waiting for us to join. They make their decisions in the meantime. There are EU companies investing now because they know that we will be a part of their common market in the near future. There are also American investors coming to the EU through the Czech Republic. They are building here their base for the EU. They are coming already as it is easier for them to come before we access and become a formal member. Our readers are also interested in knowing how a manager arrived at his position. Can you briefly summarize us your careerpath? When I finished university, I replied to a recruitment ad and was accepted in 1994 in CzechInvest. I have been here ever since and as they did not know what to do with me, they decided to make me the CEO. During these years at CzechInvest, what would you remember as your biggest achievement? I had a chance to work in several departments: I have been the marketing director and the director of the projects department, I also have been running our US operations. The best experience for me was to run our operations in the US. Business is like playing chess and you always need to predict your next move. So what is your next move? I think you should never reveal your next move to your competitors and we can expect our competitors to read this. I believe that our next move will be to focus on new incentives for R&D centres. Another next move will also be to improve our aftercare service to ensure that our current investors are satisfied. A third move will be to focus more on the Czech suppliers, meaning to help Czech companies to become the suppliers of multinational companies. This is not only good for Czech companies, but it is also good for investors because it can help them to further reduce the cost here in the Czech Republic. This report will be read by many French and Francophone investors. What would be your final message to them? My final message would be to tell them that I believe that our culture is very close to the francophone culture and we also like good food. Furthermore, I believe that the Czech Republic provides many opportunities for both professional and private life for francophone people. The francophone community in the Czech Republic is growing. You have to make sure that your readers know that they are always welcome in the Czech Republic. Winne cannot be held responsible for unedited transcription.