CZECH REPUBLIC – CZECH REPUBLIC – investment opportunityinvestment opportunity!!

31 March 2005

Csaba Gyöpös

Director, South East Asia Operations

Presentation Structure

1. Role of CzechInvest

2. General information about the Czech Republic

3. FDI into Central and Eastern Europe and the Czech Republic

4. Czech investment climate

5. CEE Electronics and Automotive Industries

6. Life in the Czech Republic

VOur Organization

Chicago

Silicon ValleyBrussels

London

CologneParis Prague

Yokohama

Hong Kong

Steering committeeSteering committee

MarketingMarketing

Ministerof Industry and Trade CR

Ministerof Industry and Trade CR

Investment support

Investment support Enterprise

development

Enterprise development Smes

SmesBusiness properties and regions

Business properties and regions

Coordination of development programs

Coordination of development programs

The European investment promotion agency (IPA) of the year 2000 & 2001

Best IPA in the EU accession countries of the year 2002

CzechInvest - Investment and Business Development Agency

General information about the Czech Republic

Czech Republic: Basic Data

Source: Ministry of Finance, Czech Statistical Office, 2004

POPULATION 04 10.3 million

LABOUR FORCE 04 5.3 million

UNEMPLOYMENT DEC 04 9.5 %

GDP per capita (PPP) 03 USD 18 700

GDP growth 2.Q 2004 4.1 %

INFLATION RATE (CPI) DEC 04 2.8 %

AVERAGE MONTHLY WAGE 04 USD 716

1 USD = 23.50 CZK

SINGLE MARKET OF 455 million CONSUMERS

CZECH REPUBLIC: EU MEMBER from MAY 2004

Foreign Direct Investment (FDI) into Central and Eastern Europe

and the Czech Republic

FDI stock per capita in Central and Eastern Europe

By the end of 2003, the Czech Republic had attracted more FDI per capita than any other country in Central and Eastern Europe (in EUR):

362

418

462

1161

1207

1257

1673

1802

2005

2764

3997

4020

Russia

Romania

Bulgaria

Lithuania

Latvia

Poland

Slovakia

Croatia

Slovenia

Hungary

Estonia

Czech Republic

Sources: WIIW, Wiener Institut für internationale Wirtschaftsvergleiche, February 2004

….Attractive

The Czech Republic is in the Top 10 for investment

Source: Ernst &Young, Europe: The Opportunity of Diversity, 2004

1.1. China China

2.2. USA USA

3.3. Germany Germany

4.4. UK UK

5.5. Poland Poland

6.- 7.6.- 7. Czech Republic,Czech Republic, India India

8.- 9. 8.- 9. France, Russia France, Russia

10. 10. HungaryHungary

Inflow of foreign direct investment

Source: CNB, December 2004

2004 - 2008: Country Forecast, April 2004 Updater, EIU

USD BN

“2006-08: Compliance with EU regulations improves the business environment and sustains foreign direct investment (FDI) inflows of US$3.5bn-4bn annually“. Source: Country Forecast Czech Republic, EIU

0

1

2

3

4

5

6

7

8

9

10

1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008

1993 – Q3 2004 USD 42.1 BILLION

Q1 – Q3 2004: USD 3.5 BILLION

Top 10 CzechInvest investments

Toyota Peugeot Citroën Automobile Czech, s.r.o.

Japan, France automotive 850.20 2.000 March 2002 Kolín

LG. Philips Displays Czech Republic s.r.o.

Netherlands electronics 628.84 3.250 February 2000 Hranice na Moravě

Škoda Auto a.s. Germany automotive 562.00 600 December 1998

Mladá Boleslav

Nemak Europe s.r.o. Mexico automotive 317.15 1.361 November 2000

Havraň

DENSO MANUFACTURING CZECH s.r.o.

Japan automotive 254.53 936 May 2001 Liberec

BOSCH DIESEL s.r.o. Germany automotive 237.48 1.458 December 2000

Jihlava

Panasonic Mobil & Automotive Systems Czech, s.r.o.

Japan electronics 235.19 1.182 December 2000

Pardubice

DHL Information Services (Europe) s.r.o.

United Kingdom

IT 190.25 866 March 2003 Praha

VDO Česká republika, s.r.o. Germany automotive 178.99 1.900 February 2002 Brandýs nad Labem

Matsushita Electric Works (CZ), s.r.o.

Japan electronics 100.00 900 January 1996 Planá

Czech branch Country Sector Investment (mil. USD)

Jobs Announced Location

Source : CzechInvest, October 2004

Source: Czech National Bank, March 2004

Cumulative FDI inflow by country 1993 - 2003

Sweden 1%

Other 11%

France 9%

United States 7%

Switzerland 5 %

Belgium 6 %

Austria 11%

Netherlands 13%

Germany 32%

United Kingdom 4% Japan 1%Total EUR: 37.818 billion

Cumulative FDI inflow by sector 1993 – 2003

Czech investment climate

1004 respondents

0

10

20

30

40

50

fluent quite good sufficient not good I don't know

%

english (n=346) german (n=508) russian (n=415)

Source: FESSEL-GfK Omnibus Survey in Central and Eastern Europe, 2003

Language levels

72.977.482.682.987.293.4

0

10

20

30

40

50

60

70

80

90

100

CzechRepublic

Hungary France Belgium Germany Italy

Source: Progress towards the common objectives in education and training, EC 2004

Percentage of those aged 22 who have successfully completed at least an upper secondary education in selected countries, 2002

Completion of upper secondary education

Czech university students

Source: Institute for Information on Education, Statistical Yearbook, 2004

Bachelor’s programme

Master’s programme

Postgraduate

Total number

of students

259,674

Opava

1,845

Prague

96,692

Brno

55,181

Ostrava

25,331Olomouc

14,925

Plzen

14,594

H. Kralove

8,496

C. Budejovice

7,900

Usti n. L

7,578

Liberec

6,851

Pardubice

6,332

Zlin

5,622

Karvina

1,900

Cheb

1,597

Vyskov

1,195

J. Hradec

1,109

Lednice

893

K. Vary

587

Kunovice

526

M. Boleslav

266

Litomysl

61

Trebic

10

Kladno

183

Intellectual capital - Czech Universities

Source: Institute for Information on Education, 2004

Prague

Plzen

Hradec Kralove

Třebíč

Opava

Ostrava

2,135

9,394

57,830

15,020

2,015

1,675

9,202

10

112

1,916

6,522

26,051

104,530

total students: 274,192

IT students: *21,863

* The figures are based on location of faculty

Brno

Ostrava

Unemployment

Source: Czech Ministry of Finance, April 2004 forecast

* *

*

0

2

4

6

8

10

12

1997 1998 1999 2000 2001 2002 2003 2004 2005

%

0

200

400

600

800

1000

1200

Source: Czech Statistical Office, 2004

Average Exchange rate 2003: 31, 844 CZK/EUR

Average monthly wages in the Czech Republic in 2003

Transportation

-- strategic location in the centre of Europe

-- current 518 km of motorways represent about 50% of planned highways in 2010

-- the best transport network in Central and Eastern Europe

Infrastructure Density (km/km²)

Czech. Rep.

Slovakia Hungary Poland

Roads 161.4 35.6 32.0 118.8

Railways 12.0 7.5 8.2 7.3

Motorways 0.6 0.6 0.5 0.1

Source: Ministry of Transport, 2004

Investment incentives available in the Czech Republic

Manufacturing

Business Support Services & Technology Centers

Job creation in regions of high unemployment

Minimum investment - according to regions (Manufacturing)

SM

OV

LN

LBDC

PHRA

KD

TP

JC

PV

CV

CL

MBLT

MOUL

PRPE

PU

PJ

NA

ST

ZR

KO

PM

NB

PI

HB

SU

PB

TU

NJ

OP

SY

RO

AB

BK

BRUO

KV

JN

VS

JE

CRBE

RK

DO

KT

KH

PS

ME

OC

TA

PZ

BN

HK

TC

ZN

JI

BI

CHSO

BMTRJHPT CB

BVCK

KI

KM

UH

FM

VY ZL

HO

Group Minimum Investment

A 100 mil CZK / 3 mil. EUR / 4 mil. USD

B 150 mil CZK / 5 mil. EUR / 6 mil. USD

C 200 mil CZK / 6 mil. EUR / 8 mil. USD

D 200 mil CZK / 6 mil. EUR / 8 mil. USD Valid: January 1 – June 30, 2005

Tax incentive(Manufacturing)

╌ New firms: corporate tax relief

for max. 10 years

╌ Existing companies: partial tax

relief for max. 10 years

╌ Current corporate income

tax rate = 26 %

Job creation and training grants (Manufacturing)

╌Offered in regions with high unemployment only

╌200 000 CZK (app. 6 600 EUR / 8 000 USD) per each new job

created in regions „A“ and 100 000 CZK (app. 3 300 EUR / 4 000

USD) per each new job created in regions „B“

╌35% of total training costs in regions „A, B, C“

Job creation and training grants (Manufacturing)

Valid January 1 – June 30, 2005SM

OV

LN

LBDC

PHRA

KD

TP

JC

PV

CV

CL

MBLT

MOUL

PRPE

PU

PJ

NA

ST

ZR

KO

PM

NB

PI

HB

SU

PB

TU

NJ

OP

SY

RO

AB

BK

BRUO

KV

JN

VS

JE

CRBE

RK

DO

KT

KH

PS

ME

OC

TA

PZ

BN

HK

TC

ZN

JI

BI

CHSO

BMTRJHPT CB

BVCK

KI

KM

UH

FM

VY ZL

HO

GroupJOB CREATION

RE-TRAINING

A 200,000 CZK 35%

B 100,000 CZK 35%C 0 CZK 35%D 0 CZK 0%

Business Support Services and Technology Centres

Framework Programme for Support of Technology Centres and Centres of Business Support Services

Types of supported projects

╌ Development and innovation activities with the

close linkage to production of high-tech

products and technologies, including development of

specific software, in the following fields:

╌ aerospace

╌ computers and machinery

╌ electronics and microelectronics

╌ telecommunications

╌ pharmaceutics

╌ motor vehicles

╌ etc.

Technology Centres (TC)

Forms of support(BSS & TC)

╌SUBSIDY FOR BUSINESS ACTIVITY

╌ provided by the Ministry of Industry and Trade

╌ SUBSIDY FOR TRAINING AND RETRAINING

╌ provided by the Ministry of Labour and Social Affairs

Regions with average unemployment higher than 14%

Valid for the period: January 1 – June 30, 2005

SM

OV

LN

LBDC

PHRA

KD

TP

JC

PV

CV

CL

MBLT

MOUL

PRPE

PU

PJ

NA

ST

ZR

KO

PM

NB

PI

HB

SU

PB

TU

NJ

OP

SY

RO

AB

BK

BRUO

KV

JN

VS

JE

CRBE

RK

DO

KT

KH

PS

ME

OC

TA

PZ

BN

HK

TC

ZN

JI

BI

CHSO

BMTRJHPT CB

BVCK

KI

KM

UH

FM

VY ZL

HO

Eligibility criteria(Programme - regions)

╌Min. amount of investment 10 mil. CZK (cca 0,3 mil. EUR / 0,4

mil. USD) within 2 years

╌Min. of 10 newly created jobs within 2 years

╌Min. 5 mil. CZK (cca 0,16 mil. EUR / 0,2 mil. USD) of the

investment will be financed with own sources

╌At least 25 % of the total amount of investment must be

financed by resources, which do not include part of the State Aid

Investment risk rating

Source: Czech National Bank, May 2004 Last update: May 2004

COUNTRYSTANDARD AND POOR´S

MOODY´S FITCH-IBCA

Slovenia A+ Aa3 A+

Czech Republic A- A1 A-

Hungary A- A1 A-

Poland BBB+ A2 BBB+

Estonia A- A1 A-

Slovakia BBB+ A3 BBB+

Romania BB Ba3 BB

Russia BB+ Baa3 BB+

Investment Opportunities in the

Czech Electronics Sector

Contract electronics manufacturingEuropean production trends

3.857 4.32 5.356 7.186 8.624 10.6 13.05

16.05 19 20.4 18.96 19.97 20.66 20.72

0.38 0.518 0.697 1.025

1.433 1.905

2.63 3.67

5.15 7.5 11.5

14.83 19.14

24.7

1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 WESTERN EUROPE EASTERN EUROPE

4.237 4.838 6

.053 8.211

3.534

10.057 12.505

19.72

24.15

27.97 30.45

34.8

39.8

45.42

PRODUCTION IN BILLION USD

Eastern Europe fuels growth

Source: EMS Opportunity in Europe, MHM, 2003

The Czech Electric and Electronics Sector in 2003

╌ 12.1 billion USD sales

╌ 11.4 billion USD exports

╌ 182,000 employees

╌ 15% of Czech manufacturing industry output

╌ 450 manufacturing companies

╌ 25% of foreign manufacturing investments

╌ 2.5 billion USD foreign investment since 1990

╌ 16% of manufacturing exports

BASIC DATA

Source: EIA, 2004

Structure of the Czech Electronics and EE Industry

Computer equipment, 23%

Electronics components, telecommunication and consumer electronics, 21%

Heavy-current technology, 44%

Instrument and automation equipment, 12%

Source: Czech and Moravian electrical and electronic association, 2004

COMPUTER ASSEMBLY

PilsenPrague

PardubiceOstrava

40% of European PC production is manufactured in the Czech Republic

1. PANASONIC AVC NETWORKS CZECH – TV SETS 1996-97* 2. MATSUSHITA ELECTRIC WORKS COMMUNICATION RELAYS – 1998 3. MATSUSHITA ELECTRIC INDUSTRIAL – EXPANSION – 1999-2000 4. PANASONIC MOBILE & AUTOMOTIVE SYSTEMS CZECH – 2000

*5 millionth TV set produced in March 2003

PRAHA

Ostrava

Brno

2

1+3*

4

USD 250 MILLIONTOTAL INVESTMENT

“WHY DID WE CHOOSE THE CZECH REPUBLIC?”1. QUALIFIED LABOR2. STRATEGIC LOCATION3. POLITICAL AND ECONOMIC STABILITY

Mr. KIYOSUKE IMAI, PRESIDENT MATSUSHITA ELECTRIC WORKS, 1999

Investment Opportunities in the Automotive Sector in the Czech Republic

Automotive Investments In CEE - Trends

╌ Automotive sector will continue to be the leading industrial

sector in CEE countries

╌ Knowledge and experience in this field remains an

enticement of FDI

╌ Creation of “regional” suppliers in CEE

Attractivity of the RegionWhich countries or regions are you likely to consider investing in?

Source: Trends in Advanced Engineering study, January 2004

200

km

70% of CEE’s OEMs and suppliers are here

Source: McKinsey&Company

LIVING POSSIBILITIES

0 1 2 3 4 5 6 7

Poland

Slovak Rep.

Hungary

Czech Rep.

GOOD QUALITY AT A GOOD PRICE!

Quality of life

Source: The World Competitiveness Yearbook 2003, IMD

55 60 65 70 75 80

Poland

Hungary

Czech Rep.

Slovak Rep.

Cost of living index consumer goods, excl. housing,

New York City = 100

WORLD CLASS GOLF COURSES

and Karlovy Vary – established 1933

Marianske Lazne – established 1905 & inaugurated by King Edward VII

チェコの日本企業

製造業

合弁 and OEM´S

PRAGUE

松下電器産業MATSUSHITA ELECTRIC

INDUSTRIAL Co. 東レ TORAY INDUSTRIES

京セラ KYOCERA(AVX)

昭和アルミニウムSHOWA ALUMINUM

JAPAN METAL CHEMICAL-NIKOM

日本重化学工業

ASAHI GLASS

旭硝子

松下電工 MATSUSHITA EL.WORKS

日本化薬NIPPON KAYAKU

アルプス電気ALPS ELECTRIC

TESLA Y. S.

MELCO

三菱電機

OPTREX

三洋電機 SANYO

ASAHI BEER

アサヒビール

大宝工業DAIHO KOGYO

JCCE

オークマOKUMA

KAWASAKI H.I.

川崎重工

KOMATSU

小松HITACHI SEIKO

日立精工HITACHI METAL

日立金属

TATSUNO

タツノ

豊田織機TOYODA A.W. LOOMS

SHIMANO

シマノ

AISAN

愛三工業

SIEMENS-MATSUSHITA

シーメンス松下

松下通信工業MATSUSHITA COMMUNICATION

INDUSTRIAL Co.

TOYODA GOSEI

豊田合成

KOITO

小糸製作所

KOYO SEIKO

光洋精工

ONAMBA

オーナンバ

DENSO

デンソー

FURUKAWA ELECTRIC

古河電工

Toyota Motor

トヨタ自動車

Tokai Rika

東海理化TRIS

ZEXEL-VALEO

FUTABA IND.

アイシン精機

AISIN SEIKI

SHIMIZU IND.

シミズ工業デンソーエアーズ

DENSO AIRS 　

光洋精工

KOYO SEIKO

5

PRAGUE

Updated in March 2005

Taiwan 台灣

LG Philips

Lite-On Enclosure松喬實業股份有限公司

Hualon 華隆

Foxconn Honhai鴻海精密工業股份有限公司 Daewoo

AIDC 漢翔航空工業 股份有限公司

FIC 大衆電腦 Asustek 華碩電腦

Marwi 台萬工業股份有限公司

Korea 韓國

Malaysia馬來西亞

Flex Design Centre Czech

Singapore 星加坡

Tatung 大同公司

在捷克投資的亞洲商務公司 ( 日本除外 )ASIA PACIFIC COMPANIES IN THE CZECH REPUBLIC

(Excluding Japan)

BRNO

OSTRAVA

Asustek 華碩電腦

Inventec 英業達

Chicony 群光電子

Beijing 北京

Amtek

Kinloon 北京中海信業科技

Lite-On Technology

光寶科技股份有限公司

System Access

Vivatek

Shanghai　　　 上海

Hudong-Zhonghua Shipbuilding (Group)滬東中華造船 (集團 )有限公司

We are hereWe are here,, ready ready and glad to assist you!and glad to assist you!

Thank youThank you

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