The Czech Republic has attracted a large amount of foreign direct investment (FDI) since 1990, making it one of the most successful transition countries in terms of FDI per capita. The introduction of investment incentives in 1998 stimulated a massive inflow of foreign direct investment in greenfield and brownfield projects. The Czech Republic` accession to the European Union in 2004 further boosted investment.
Key advantages of the Czech Republic as an investment location
- Central location in Europe
- Skilled workforce
- Safe investment environment
- High share of secondary and tertiary education
- Compact and high-quality infrastructure
- Favourable labour costs and price stability
- EU membership
- Transparent system of investment incentives
- Existing platform for R&D
- Rich and long industrial heritage
- Mentality, culture and attitudes close to western countries
- Enviable life style
Greenfield, Brownfield and Real Estate Investments
In general, the Czech property market currently offers many good investment opportunities, especially with regard to office, industrial and residential spaces as demand for high-quality real estate of all types is growing. CzechInvest, the Investment and Business Development Agency, provides special financial aid and consulting services for developers and real estate investors. CzechInvest is able to identify real estate opportunities mainly involving industrial properties and facilities suitable for business support services or R&D. More information available at CzechInvest or the Association for Foreign Investment.
The Czech Republic offers excellent conditions both for greenfield and brownfield investments. CzechInvest maintains its own national business-properties database of suitable industrial sites and buildings around the country that have clear title, industrial zoning permission and developed technical infrastructure. The country has 103 municipal industrial zones created through the government’s industrial-zone development programme. Investors locating operations in municipal industrial zones will receive fully serviced land at favourable prices. Projects meeting the eligibility criteria can receive investment incentives including tax relief, job-creation grants, training grants and other forms of aid. Moreover, it is possible to receive additional financial assistance for brownfield projects, particularly from EU Structural Funds.
Joint Ventures, Long-term Co-operation and Suppliers
CzechInvest plays a key role in finding joint-venture partners in the Czech Republic. Its services include recommendations of suitable companies through its database of manufacturing firms, in which it is possible to filter companies according to their interest in forming a joint venture, arrangement of meetings with potential partners and organisation of visits to their production facilities, arrangement of contacts to law offices and consulting firms that assist investors with the actual establishment of joint ventures.
Foreign investors expect from Czech partners primarily flexibility, an innovative approach and knowledge specific to the local environment. Conversely, small and medium-sized Czech suppliers are looking for stronger partners with the aim of gaining access to distribution networks, specialist knowledge and financial resources. Cooperation often begins with short-term projects and develops into a long-term partnership.
General Supplier Database
CzechInvest also implements the Supplier Development Project designed to boost the number of foreign investors that are increasing their use of Czech-based suppliers. Within this project, CzechInvest organises purchasing forums for multinational companies with operations in the Czech Republic. CzechInvest’s fundamental tool for seeking out suitable business partners is comprised of its sector databases of Czech companies. These databases contain nearly 3,000 high-quality records with a broad scope of information on Czech suppliers interested in long-term cooperation with foreign partners. The databases are regularly updated and supplemented according to demands of foreign companies, and contain companies from the following sectors: aerospace, automotive, electronics and electrical engineering, ICT, subcontracting – plastics, subcontracting – metal, materials, packaging and engineering, healthcare-pharmacy-biotechnology.
Mergers and Acquisitions
The Czech company market offers a great opportunity to expand a footprint in a competitive location with favourable cost structure and skilled labour force. After a boom in the manufacturing and IT sector over the last several years, many Czech owners are considering their factory growth in cooperation with a strong foreign partner or selling the equity and retiring.
To support current market trends, CzechInvest launched the CzechLink project to facilitate the qualified investor search and enable the pre-audit project stage. Czech companies actively searching for investor have been provided with assistance in order to prepare information in an internationally understood configuration. The final information is summarized in the company prospect.
Investor information is prepared in English. Financial data are compliant to the local corporate income tax methodology and internationally transparent indicators. Company profiles are available to potential investors (manufacturing companies, private equity funds, mandated consultants, etc.) after signing the non-disclosure agreement.
Investment Opportunities in Specific Sectors
Manufacturing: Investment in high-tech manufacturing sectors offers excellent potential due to the Czech Republic“s long and rich industrial heritage and is strongly supported through government aid programmes including the investment incentives scheme. Support for investment in high-tech manufacturing is at the core of CzechInvest“s activities.
Utilities: The electricity and water utilities sectors are still in the process of privatisation. All enquiries about producers and distributors in these sectors should be addressed directly to the Ministry of Industry and Trade.
Business support services and technology centres: These include customer contact centres, shared services centres, expert solution centres, software development, research and development centres, design centres and high-tech repair centres. The Czech Republic aims to become the regional hub for these services and CzechInvest has made attracting foreign direct investment into business support services one of its priorities.
Financial services, tourism and other services: Privatization of the banking sector is complete but there are still some very good investment opportunities in the financial services sector as demand for these services is increasing. Nevertheless, CzechInvest regrets that it does not have the resources to play an active role in aiding investments in financial services, tourism and other services. For more information contact the Association of Foreign Investment.
R&D: The Czech Republic’s spending on R&D has increased continually over the past ten years. In 2004, the country became a member of the European Union, which spurred an additional increase of support for science and research. The country has gained access to a variety of European funds and programmes, such as EU Structural and Cohesion Funds. These funds can be used particularly for development of R&D infrastructure and companies’ innovation activities.