Despite curbing state expenditure, supporting Czech exports to foreign markets remains a priority for the current interim government. In the near future the government agency CzechTrade will open a representative office in Kazakhstan - one of the wealthiest countries in the world in terms of mineral resources.
With the Czech Republic entering 2010 in a less than perfect financial situation, head of CzechTrade Ivan Jukl said that firms should not be dependent on any help from the state. At the same time, he said that he is not going to accept any reduction in quality of services provided by CzechTrade. He explained that while there may be economizing planned this does not mean the agency’s activities will be curbed, adding that unlike other state agencies they receive money from clients that has been growing every year. He referred to the opening of the new office in Kazakhstan as a gift for the agency and for Czech exporters.
Q: In the opinion of one of the most revered economists of the 20th century, Paul Samuelson, a state can boost or inhibit its economy through interference. On the other hand, President Václav Klaus is an advocate of the ‘free hand of trade.’ Which of these opinions would you support?
A: This is a subject of endless debates among experts. But I have been entrusted with the management of an organization owned by the state and our task is to support export. Thus my duties are clearly defined. I’m here to make CzechTrade useful so that our companies can export more goods, gain a larger share of markets and increase their competitiveness.
Q: So this cannot be achieved without the support of the state?
A: One thing is clear: In the near future the role of the state will get ever stronger, whether we like it or not. That is the current trend. Some may say ‘unfortunately,’ others may ‘thank God.’ Either way, that’s how things are.
Q: But the state has not entered 2010 in very good financial shape. Should Czech exporters not be afraid that state support may weaken?
A: First of all, firms should not depend on any help. The most successful firms obviously can do without the state’s support in most if not all areas. On the other hand, as the director of CzechTrade, I cannot accept lightly the idea that our activities could be curbed in any way or that our clients should not be provided with services we have developed over such a long period of time with a quality with which they have got accustomed to.
Q: But the state does intend to economize, despite the finance minister canceling his preparation of a further austerity package for this year.
A: To economize does not mean necessarily to curb certain activities and it need not be harmful. For instance, the state was spending some Kč 33 million (€1.25 million) a year supporting Czech design. When the responsibility for this was shifted to us, we received only a third of that amount. But among the design companies the notion remained that the state supports the segment—I would even say it became stronger. Among other things, we changed our approach to support. Earlier, the target was a small group of designers, but we directly addressed companies. Nowadays, most initiatives to support design are not from the state, but the companies themselves. After all, they know best of all that appearances and packaging also sell.
Q: What is going to happen to the Export Training Centers? For a limited period you have been offering clients offices, phones and interpreters abroad for a limited period of time free of charge.
A: But it has never been free of charge. It’s a paid service. On the other hand, it’s true that depending on the length of time, we are willing to provide it for a song. When you send people abroad on business for one to three months and they have at their disposal a secretary, an interpreter, a fax, a phone and good knowledge of local market—all this for some Kč 30,000, such an expense can be recuperated by a company many times over with the signing of a single contract.
Q: So is there interest in the service?
A: It depends on distance. Vietnam, Shanghai, North and South America ... for Europe the interest is nil. We can see that here our companies are able to move and operate easily without much or any help. For us it means being in the right place at the right time. And especially during the global crisis the right places where assistance is required are the faraway markets, where it is too expensive for a single firm to expand.
Q: So do you intend to continue offering these services?
A: Yes, but we are working to change the product so it’s not just about a cheap phone and interpreter, but a complete package of services enabling companies to penetrate the given market. Our next step will be a shift from simply introducing clients to a market in general terms, to individually conceived services for specific exporters.
Q: Could you be a little more specific?
A: Let’s say you are an exporter. You have a competitive product and you want to expand with it. Currently there are two possibilities; you select five or six countries and you order our standard service Check for Demand. We produce a limited database of companies, address them and arrange for meetings. This may result in cooperation, or it may come to nothing in which case the question arises as to whether you should have made more research in advance, for example on local customs or special requirements concerning design.
Q: And what will be the difference with the newly conceived service?
A: We would not address companies directly but instead conduct research of the wider market. Then according to conditions arranged with our clients, we would create certain ratings of the company’s capacity and attractiveness. Only then can clients decide where they are to focus.
Q: How much will it cost?
A: We certainly don’t want to raise prices of our services. The crisis has by no means ended yet and our main task is to support business, not make money. But we will have to stop certain benevolence towards our clients which we could afford in the ‘fat years.’
Q: Is the state benevolent?
A: Now and then we simply charged our clients for fewer hours than the time actually spent on providing services. It was a bonus of sorts for their order. Now we will have to be more careful.
Q: But the state budget has already been passed which includes the allocation for CzechTrade.
A: It’s not that simple. Parliament approved how the money is to be divided among chapters of the budget. In our case this means that the whole package went to our superior authority, which is the Ministry of Industry and Trade. We will see how much of this comes our way.
Q: But you surely must have something to go on.
A: We have prepared three basic scenarios from 20 percent cuts up to keeping expenses at the level of 2009. I should remind you that beside our income from the state, we also receive payments from our clients which have been growing every year. Unlike other state agencies, we have one advantage—the better the services we provide, the more money we earn.
Q: Do you expect that the newly opened office in Kazakhstan will help in this respect?
A: Absolutely. First of all, it’ a gift of sorts for us as it is for Czech exporters. I’m very glad to confirm that we really will open this foreign representative office. We have been promising to put it in operation for two years at least. But now it really is operating and its director Antonín Marčík left for Kazakhstan on Dec. 28 with the first business contracts in his briefcase.
Q: Are they only one-off contracts?
A: I hope not. Judging by the interest shown by companies, I would compare the situation to when we opened our office in Vietnam which was the best performing in terms of upturn of contracts signed.
Q: Which other offices are performing especially well?
A: For several years the office in Warsaw has been by far the most productive. But there are others too.
Q: Back to new initiatives. What can the office in Kazakhstan offer Czech firms?
A: It’s no secret that the country is extremely rich in mineral resources. With some exaggeration, I could say that you could find the whole periodic table of elements in the country. So there is a chance for traditional Czech industries—mining and processing of ores and chemical elements.
Q: It sounds like the opportunities are more for large companies. What about smaller firms?
A: The second priority on the market there is food processing technologies. Most produce sold in shops in Kazakhstan is imported. The third area is equipment for hospitals and in this line we are really competitive [for example with medical supply companies] Linet and First Czech Health Alliance.
Q: In the first wave of companies interested in Kazakhstan there were also Czech breweries.
A: That was two years ago, meanwhile the situation has changed somewhat. Now we hear less about these projects. Mini-breweries for example are experiencing more difficulties with access to investments because of the crisis. But the opportunities are still alive.
Q: As is well known, the country has huge reserves of gas and negotiations are continuing on delivering Kazakh gas to Europe via the projected Nabucco pipeline.
A: The level of such business is too high for our involvement. We are looking for opportunities for sub-contracts which could be realized by smaller Czech firms because often they cannot find out about them without us. You cannot find out about such opportunities from the papers or TV.
Q: Where else would you encourage Czech companies to look?
A: Let me put it this way—if we had the chance now for further expansion, I would definitely open an office in South Africa. We conducted research and we saw enormous interest among companies and I understand them. For sure, we have some other regions of interest too, but if I am to name just one, South Africa is it. … It may seem pretty incredible to us, but in the last 40 years, the relatively small area around Johannesburg has been producing one-third of the output of the whole African continent. There is enormous potential.
Q: And where do you see chances for Czech firms?
A: There is a very broad scale of opportunities; waterworks engineering, metallurgy, hospital equipment.
Q: How is the general state of Czech competitiveness?
A: Unfortunately, recent surveys indicate that the Czech Republic remains in the second half of the field as far as competitiveness ratings are concerned. On the other hand, we probably have the most rapid growth of productivity per worker, so our standing shouldn’t be so bad. In the long term it is somewhere around 5 percent.
Q: Is there any reason to praise Czech workers?
A: It may seem like a paradox, but there is. From a long-term point of view, personal output of every worker has been improving. And the crisis will perhaps make this more visible. Development of technologies plays its role here. One need not spend hours looking for documents when everything can be accessed by computers.
This article was originally published by Czech Business Weekly journal. Author: Jiří Němeček
