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Czech regional cities facing challenging times

( 22 / October / 2009 )

Between the highly dominant economic position of Prague and the more troubled position of some former industrial cities there is a wide variety of development and investment opportunity in the country.

The MasterCard Czech Centers of Commerce 2009 study, conducted by MasterCard Worldwide evaluates the social and economic development of individual Czech cities and regions as well as assessing their attractiveness for investors. While Prague’s dominant position in the country’s overall economy is evident, the study finds that regional economies have not been as heavily affected by the economic crisis.

“The impact will be long lasting, it will show itself in regions only in the coming years and it will vary. A worse impact is to be expected in the northwestern parts of Bohemia,” said René Wokoun from the University of Economics, Prague (VŠE). His school cooperated on the study with MasterCard and Czech Top 100, a private firm that promotes awareness of Czech businesses. Because of the high rate of unemployment and low average education and qualification of the work force, he said he believes that the gravest problems are to be expected in the Karlovy Vary and Ústí nad Labem regions, where economic troubles are compounded by social ones. “Karlovy Vary has another problem in its rather secluded location,” Wokoun added.

Leading position of Prague surprised no one

Mladá Boleslav, Central Bohemia; Brno, South Moravia; and Plzeň, West Bohemia rank as the most attractive towns for investors. Among regions the leading positions are held by Plzeň, Pardubice, Hradec Králové and Central Bohemia. Of course, Prague is traditionally number one. It won in all categories by a rather large margin.  

For instance, in the “discipline” attractiveness for investors the capital obtained 98.8 points out of 100, while the Plzeň region came in second place with only 58.7. “The victory of Prague is no surprise. Capitals elsewhere in the world are also the driving force of economic development,” Wokoun said. In the long term the activities of big companies are being concentrated in the capital, while it also contains sites of all central state offices and produces a quarter of the national GDP.

“If Prague can keep above water, so does the rest of the country,” Prague Mayor Pavel Bém asserted. At the ceremonial evaluation of the study he reminded representatives of regions and towns present at the ceremony that they are all in the same boat of the economic crisis, calling for solidarity and respect.  “We can cope with the crisis only when we cooperate,” Bém said.

Milan Damborský from the department of regional studies at VŠE said that though Prague dominates the country the regional capitals remain the country’s “workhorses.” Besides, the study clearly shows that the opinion, once rather common, that Moravia is the most backward part of the country, is more than obsolete now. South Moravia in particular is doing very well, thanks mainly to its capital, Brno. The MasterCard study comparing 24 Czech towns and cities puts Brno in second place in its socioeconomic level and in the third place in its attractiveness for investors.

An American developer is interested in Brno

In the first quarter of 2009 the city nominated a coordinator to systematically look after investors so as to avoid their wasting time with bureaucracy by running back and forth between various state agencies and offices. The coordinator is Tereza Chrástalová, who says that investors are drawn by the quantity of educated work force available thanks to the high concentration of universities in the city.  “We help businessmen carry out their aims and we also offer them possibilities to get engaged in long-term projects of the city,” Chrástalová said. She added that at present she is negotiating with an undisclosed big investor from the U.S. As the name is being kept secret for the time being, she only said it is an important, globally known developer.

“Most businesses in Brno are doing well in spite of the crisis. A large campus of [U.S.-based technology conglomerate] Honeywell is being built here, which is probably also going to bring another division of the company to Brno, which will be their fourth. Brno can also show off the hospital U svaté Anny, which is cooperating with the Mayo Clinic. Only [medical research and production company] Pliva-Lachema is going to close its activities; their last 400 employees are set to be laid off,” Chrástalová said.

A discount in Mladá Boleslav

Mladá Boleslav came in second after Prague among towns and cities in attractiveness for investors. Carmaker Škoda Auto is obviously the leader here. Although the carmaking industry was hit by the first wave of the recession, car-scrapping schemes in Germany and Poland helped the factory in Mladá Boleslav, so that the impact has been somewhat lessened and postponed.

“Dozens of businesses are connected to Škoda here, but fortunately we have hundreds of other business activities, too. And we have been trying in the long-term to create suitable conditions for them,” said Adolf Beznoska, deputy of the mayor of Mladá Boleslav. He added that currently the town has two interesting projects that are able to help against the crisis. The first project provides firms coming to establish new business activities in Mladá Boleslav with a discount when buying land in the town’s area to build their facilities. 

“We want to help to create new business opportunities in our town. A mechanism of discounts is to make the place more attractive to investors, who can offer people work outside the carmaking industry. We want to avoid the town getting hit if another crisis appears in the future,” Beznoska explained. The town council expects more jobs to create a larger demand for housing, which is where the other project is focused. “In our territorial plan we defined specific development zones, where we invite firms interested in the opportunity of carrying out their housing projects, both for mass and individual housing,” Beznoska said.

The source of information for investors  

The MasterCard Czech Centers of Commerce study is part of a globally coordinated study that has been adjusted to the conditions of the Czech market. The main target of the study is the creation of an independent source of information about the economically most significant 24 Czech towns and cities and 14 regions.

“The results of the project can serve as a useful source of information for local and foreign investors, for the European Union, for developers, banks, chain stores, hotels, travel agencies, ministries and regional institutions,” said Pavel Javorský, MasterCard director for the Czech Republic and Slovakia.

The study examines the relative influence of towns, cities and regions on the economy of Czech Republic. It also judges investment activities in the localities examined and defines what opportunities they offer. All details are available at the website www.centrarozvoje.cz.

Source: Czech Business Weekly

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