TOP INTERVIEWS Interview with H.E. JIRI RUSNOK Ex-Minister of Industry & Trade of Czech Republic After many companies have been privatised and changes made, what is your assessment of the Czech industrial sector now in September 2002? The Czech economy and industry have become more liberal than a few years ago. This country is undergoing dramatic changes, which do not only concern the Czech Republic. I believe a transformation is taking place everywhere, not only in the former Soviet block, but also in France, in the United Kingdom and in the United States. Our task is more difficult than for your country or for our Western neighbours because we have to overcome not only the current challenges due to the globalization, but also the challenges connected to our past. There are two main challenges connected with our past. The first one is the backwardness in technical and physical aspects. The second one, which is maybe more difficult, is the necessity to change people's mind. All these trends are taking place in this country. Nevertheless, I believe that we have made significant progress and have succeeded in the modernisation of the country. We have significantly improved our export ability and our trade balance is positive. The Czech economy is open and we are able to compete on the world market. There are still many challenges, a major one being our integration into the European Union. Looking at all the challenges ahead, what do you consider as the top priority and the main actions for your Ministry? As the Minister of Industry & Trade, I have so many tasks that it is difficult to order them. The integration into the European Union is of course the number one priority for the whole government and the Czech society. This is also true for my ministry as we would like to be a member of the EU and enter this big market as a fairly treated partner. We are not afraid of this new situation as we believe that we are relatively well prepared. We have been training for ten years and sometimes made mistakes, for which we sometimes paid heavily. I believe that we are now ready to start competing in this first division as partners and I am sure that we will succeed if we are treated in the same way as any other member. Of course, very important internal tasks connected to our integration still remain. We have to finalize smoothly and as quickly as possible the improvement of our industry and to continue our privatisation efforts, where we recognize it as reasonable and where we have started it, but did not succeed in the first attempt. We should and will prepare the amendment of our energy policy for the next decades because this has to be long term oriented. We will afterwards decide about the privatization of the remaining fully or partly state owned companies. We also would like to improve the system of support and promotion of small and medium-sized enterprises because the Czech economy is becoming increasingly dependent on small and medium sized enterprises. The Czech economy will not be an economy based on multinationals because this country was undercapitalised during fifty years. Therefore, this is an important component of our industrial policy. What are the major measures you will be taking to help the small and medium-sized companies? We have already implemented many measures in this respect. Subsidized credits are provided by the Czech Moravian Development and Guarantee Bank, a state owned institution. This bank provides many programs for various reasons and types of SMEs using state subsidies. The main type of support are guarantees for SMEs taking out bank loans from commercial banks because it is very difficult for small companies in the Czech Republic to get a bank loan as they do not have enough property, references or history to guarantee the repayment. Furthermore, we are using standard tools and measures comparable to the ones used by our counterparts in EU countries and we will try to develop this system in the future. We want to continue our pro-export policy, promoting exports, including by SMEs. Several state agencies help us to carry out these activities: the Czech Export Bank; EGAP, a state owned insurance company insuring loans and exports; Czech Trade, which is under my ministry and is an information agency for exporters. Czech Trade has 21 offices in Europe and around the world to inform companies, mainly SMEs, about export opportunities, contacts and the necessary information to enter a foreign market. Already 70 percent of Czech exports go into the European Union. Do you expect this part to increase during the next years? It will be very difficult to increase this share because we have reached a certain limit of our possibilities. It is already high and if you take into account that 15 percent of our trade is done with CEFTA countries, most of which will join the EU as well, the share of our trade done with the EU will increase from 70 to 85 percent and I think that this is absolutely a limit in the medium term as I do not see many possibilities to grow it more on this very difficult market. We also do not want to neglect other markets as the Czech Republic, and Czechoslovakia in the past, always used to be a very export oriented country. Russia, the Middle-East and the Balkans were also very important for us and we do not want to neglect these regions because there is also a large potential, but the EU remains of course the priority in our trade policy. Furthermore, the Czech Republic has been a champion in attracting foreign direct investments (FDI) for the past ten years culminating at more than Euro 5 billion last year. How can you manage to retain this level of investment and what do you see as the key sectors with opportunities for investors? First of all, we are very glad and proud to be the regional leader in attracting FDI and I see this as the best result of the previous government. I believe that this was a crucial factor for the recovery of the Czech economy after the recession of the late nineties. For the last few years, we have attracted around Euro 5 billion per year in FDI and the figure will be higher this year if we count the revenues from the privatisation of Transgas, which was sold for more than Euro 4 billion and definitely was the gas deal of the year. I see many reasons for our success. There are objective and natural reasons for this and first of all the strategic geographical location of the Czech Republic in the heart of Europe as the best and shortest way from Berlin to Vienna is via Prague. There is also the impact from our membership in the NATO since 1999. However, another very important factor is the skilled and relatively cheap labour force. This skilled labour force is a major advantage of the Czech Republic and there is a long and efficient technical tradition in this country. Czechoslovakia was for example an important car producer and manufacturer of many other technical products before the Second World War. Furthermore, the Czech Republic, especially Bohemia and Moravia, was already the most developed region of the Austro-Hungarian Empire. The infrastructure is also relatively good in this country compared to the other countries in the region. A further important factor is our governmental policy of attracting FDI. We have started a little later than other countries in the region, but we probably could learn from some of their mistakes and we are relatively successful. Looking at the future, I think that this dynamic pace is impossible to maintain in the long run as the absorption capacity of the country is limited. However, this period was, and still is, very important because FDI is completing our own capital resources. I believe that relatively high investment inflows will continue for another two or three years and the Czech Republic will remain an attractive country for foreign investors after this. So far the most important investments were done in the automotive industry, and especially in the automotive components industry. The Czech Republic has become a powerhouse in the automotive components industry. You can find here the whole range of components from many automotive groups. This is growing thanks to the recent investments of Peugeot and Toyota, which is now attracting other Japanese suppliers. The electronics industry is very important as well. In Moravia, there is a company producing tubes for large screens, which is a joint venture between LG and Philips. There is also a significant presence of Matsuchita, the company behind Panasonic, producing here audio, mobile phones and other products. We would now like to reorient our incentives to investments, which will bring higher added value. We have already started this and some new sites are very modern and updated as of course the Peugeot and Toyota site. However, we would like to, and already started to, attract more investors into the strategic services field and we have started with two pilot projects, one of them being an IBM developing centre. We want to pursue this trend. We are creating a friendly environment for foreign investors, but also for our domestic investors as they are also very active and some of them have obtained incentives too. We sometimes read in the press that our system is discriminating domestic investors, but this is not true. The issue is that there are minimum limits for investors to obtain an investment incentive. These limits are relatively high and not all Czech companies are able to invest such a significant amount of money. However, more and more Czech companies, including medium enterprises, are investing and we are very proud of this. Last year, France became the second largest investor in the Czech Republic. What is your level of cooperation with your French counterparts and how do you expect this to develop in the near future? Do you expect France to become an increasingly important partner? I hope so. One of our principles in attracting FDI is to diversify the countries of origin. In the early stages, there was an overweight of German and Austrian investors, which was natural as they are closer to us and therefore know us better. I must admit that I am very glad that the origin of the investors has broadened. France has traditionally been an important trade partner for us and we believe that there are many opportunities because the French investments were more important in the past few years and it is true that France has become more important for us. The privatization deal of Komercni Banka with Société Générale was also important and I am very proud that as the then Minister of Finance I was one of the important persons in this deal. I believe that I did a good job and hope that the people at Société Générale have the same opinion. Generally there are more French investors. We have important investors in the heating industry, the fibreoptics industry, etc. Renault V.I. also bought in the mid nineties Carossa, a manufacturer of buses, which is now joint venture with iveco. Others, such as Pechiney or Pernod Ricard, which invested in Becherovka, are also present. You recently arrived at one of the key ministeries in the country. What do you consider as your biggest challenge for the near future? To find a solution to reconstruct the the steel industry smoothly will be the number one challenge because the region of Northern Moravia is still dependent on this industry. This issue will therefore be difficult to manage. What would be your final message to our readers? I would like to tell potential investors that despite the floods our country and its population remain stable and they are very welcome. Note: WINNE cannot be held responsible for the content of unedited transcriptions.