CzechInvest

Tomas Novak,DirectorCzechInvest, US West

Our Organization

STEERING COMMITTEE

MINISTEROF INDUSTRY AND TRADE CR

Chicago

Silicon Valley

BrusselsLondon Cologne

Paris Prague Yokohama

Hong Kong

Czech Republic

-- Highlights

Czech Republic: EU member

SINGLE MARKET OF 455 million CONSUMERS

Czech Republic

Population 2004 10.2 million

GDP growth 2004 3.1%

Unemployment 2004 10.3 %

Annual inflation 2004 2.9%

Average monthly salary 2003 USD 632

Source: Czech Ministry of Finance, July 20042004 –forecast

old members

new members

Top Location for Offshoring

India (1)

China (2)

Malaysia (3)

Czech Republic (4)

Singapore (5)

Philippines (6)

Brazil (7)

Canada (8)

Chile (9)

Poland (10)

Hungary (11)

Costa Rica (16)

South Africa (17)

Spain (22)

Ireland (23)

People skills andavailability

Business environment

Financial structure

Note: The numbers in the bars are index numbers. The weight distribution for the three categories is 40:30:30, meaning that the financial structure is rated on a scale of 1 to 4, an that business environment, and people skills and availability are on a scale of 1 to 3.

A.T.KEARNEY Offshore location attractiveness index 2004

3.72

3.32

3.09

2.64

1.47

3.59

3.17

1.00

2.99

2.88

2.71

3.06

2.83

1.12

0.62

1.31

0.93

1.77

2.02

2.63

0.92

1.41

2.48

1.68

1.57

1.68

1.33

1.21

2.05

2.48

2.09

1.36

0.73

0.92

1.36

0.94

0.86

1.94

0.70

0.88

0.90

0.67

0.94

1.38

1.39

Czech Republic (4)

Software Development

╌Entered the CR in 1994, acquisition of NetBeans in 1999╌90 software engineers in Prague develop Java Tools for Sun worldwide

╌Software development for parent company in Germany╌50 software engineers in Brno

╌In CR since 1994, Central European expert solution centre in 1998╌More than 100 IT professionals

╌In CR since 1991, European expert solution centre in 2001 ╌investment 8.8 mil. USD╌385 employees

╌European Configuration Centre for EMEA╌IT services – SW and HW support, project management and outsourcing╌250 IT experts in HP Prague

Shared Services

╌ Opened in October 2001 in Prague╌ Provides accounting and financial services to its global clients from the

manufacturing sector╌ Now 450 employees working in 12 languages, 1,500 people by 2008

╌ In CR since 2002, Competence Centre for desktop services, 40 employees

╌ Supports desktop users from countries from Central and Eastern Europe and Scandinavian countries with IT expert services

╌ Opened in September 2004 in Prague╌ Support to global DHL IT systems, one of three DHL strategic data

centres worldwide╌ Wants to employ 1,000 people by 2008

╌ In CR since 2004, in Prague╌ Credit services and IT support, Customer service╌ Now 300 employees, wants to employ 1,300 people in the near future

Selected U.S. investment projects

PRAGUE

JOHNSON CONTROLS

ARROW

LEXMARK

EASTMAN CHEMICALS

TEXTRON

ON SEMICONDUCTOR(MOTOROLA)

VISTEON

AVX

INGERSOLL RANDPHILIP MORRIS

MARS (MASTER FOODS)

HONEYWELL

TYCO

PARKER HANNIFIN

HAYES LEMMERZ

WESTVACO

DELPHI PACKARD

DURA AUTOMOTIVE

PROCTER & GAMBLE

TRW

TRW

OTIS

-

JOHNSON CONTROLS

ITWMETHODE

MERITOR

TECUMSEH

KIMBERLY-CLARK

KIMBERLY-CLARK

GILLETTE

PRAGUE

JOHNSON CONTROLS

ARROW

PRECISION CAST CORP.

LEXMARK

TEXTRON

ON SEMICONDUCTOR(MOTOROLA)

VISTEON

AVX

INGERSOLL RANDPHILIP MORRIS

MARS (MASTER FOODS)

TYCO

HAYES LEMMERZ

WESTVACO

DELPHI PACKARD

DURA AUTOMOTIVE

TRW

TRW

OTIS

OWENS ILLINOIS

JOHNSON CONTROLS

ITWMETHODE

MERITOR

TECUMSEH

KIMBERLY-CLARK

KIMBERLY-CLARK

MANUFACTURINGFACILITY

STRATEGIC SERVICES OR R&D

IBM

TCI

ACCENTURE EDS

BAXTER

TORRINGTON

PITSBURGH CORNING

BRNO

OSTRAVA

LAIRD TECHNOLOGIES

HONEYWELL AEROSPACE

YOUNGER OPTICS EUROPE

ROPER

LEAR

EXXON MOBILE

COLLINS & AIKMAN

Update: 8.12.2004.

Prague airport – the next major hub in Europe?

Number of passengers through Prague airport 1991 - 2004Source : Czech Airport Authority 2005

Investment Inflow

INVESTMENT INCENTIVES for -- Manufacturing -- Technology Centres and Centres of Business Support Services -- Job Creation in Regions Most

Affected by Unemployment

FDI inflows

0

1000

2000

3000

4000

5000

6000

7000

8000

9000

10000

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

Czech Republic Hungary* Poland Slovakia

* Includes estimates of re-invested earnings

Source: Economist Intelligence Unit, 2003

FDI stock per capita as of 2003

4020

3997

2764

2005

1802

1673

1257

1207

1161

462

418

362

Czech Republic

Estonia

Hungary

Slovenia

Croatia

Slovakia

Poland

Latvia

Lithuania

Bulgaria

Romania

Russia

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

in EUR

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

Inflow of FDIand exchange rates

Source: Czech National Bank, January 2004, note – exchange rates are not yearly averages, but selected monthly

averages to illustrate the extreme value or trend in that year.

USD BN

34 34 34 34

38

35 3536

3231

32

30 30

29 29

27 27

34

30

35

39

30

26

2223

40

0

1

2

3

4

5

6

7

8

9

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

0

5

10

15

20

25

30

35

40

45

FDI

EUR

USD

CZK/EURCZK/USD

Cumulative FDI inflow by sector 1993 – 2003

Electricity, gas and water supply 6%

Other 5%

Financial intermediation 20 %

Transport, storage and communications 15 %

Trade, hotels and restaurants 13 %

Real estate and business activities 8 %

Total EUR: 37.818 billion

Source: Czech National Bank, March 2004

Manufacturing 33 %

Investment mediated by CzechInvest by sector

Textiles3%

Automotive45%

Electronics, microelectronics

19%

Chemical, plastic, bitotechnology

10%

Construction2%

Glass2%

Engineering, aerospace,metalworkig

4%

Wood-processing, printing, packaging

5%

Other10%

Source: CzechInvest, October 2004

Investment commitments mediated: 9,839.9 mil. USD

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

1. Germany2. Netherlands3. Austria

Investment mediated by CzechInvest by country of origin

France6%

Italy, Spain2%

Japan21%

Germany27%

Benelux11%

Canada, Mexico4%

Austria,Switzerland

3%

Taiwan2%

USA8%

Ireland and United Kingdom5%

Denmark, Finland, Norway, Sweden

1%

Czech Republic10%

Source: CzechInvest, October 2004

Investment commitments mediated: 9,839.9 mil. USD

1. Germany2. Japan3. Netherlands

More value added projects

Automotiveindustry

29%

1994 2003

Chemicalindustry

14%

Electricalindustry

29%

Wood-processing Industry

8%

Manufacturing70%

R&D11%

Business supportservices

19%

Construction industry

14%Manufacturing

100%

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

Enterprises under foreign control

Continual increase of industrial outputForeign enterprises account for:

-- 35% of employment

-- 47% value added

-- 48 % output

-- 55 % profit

-- Over 70 % of export (EU – 96 %)

Source: Ministry of Industry & Trade, 2002

Czech Contributions to the US and to the World╌Beer battle

╌ over the brand Budweiser – Czech Republic vs Anheuser Busch

╌1900

╌ Niagara Falls power plant manufactured

in Pilsen

╌1961

╌ Soft gel contact lense invented

by Otto Wichterle

Quiz I

How many jet airplanes were produced in the Czech Republic during the last 50 years

A. none, the Czech Republic is not

capable of producing a jet

B. around 500, some of them are still flying today

C. more than 10,000 trainers and fighters

?

Quiz II

40 is the

A. average yearly consumption of beer in the Czech Republic per capita in gallons

B. number of senators in the Czech senate

C. the estimated percentage share of the Czech Republic on European

computer production

Quiz III

The gentleman on this cover of a California band Faith No More 1997 „Album of the Year“ is:

A. Czech philantropist Milos Neruda, who financially supported the band in the 80’s

B. The first Czechoslovak prezident, Tomas Garrigue Masaryk

C. One of the Czech passengers onthe Titanic

CzechInvest, the Investment and Business Development Agency, is an agency of the Ministry of Industry & Trade of the Czech Republic

THANK YOU

Tomas Novak tomas.novak@czechinvest.org www.czechinvest.org