ON a European continent wrenched by a recession in the West and
radical reforms in the East, the Czech Republic stands relatively
content in the middle. It has so far maintained political and
social stability while undergoing drastic economic change.
By just about any measure, the Czech Republic can be considered
the biggest economic success story among Eastern European nations
trying to make the unprecedented switch to a market economy from a
communist command system.
Nearly all Eastern European governments have stumbled, and some
have retreated slightly on reform attempts since 1989, the year
that totalitarian governments came crashing down throughout the
region. But here, the fiscally conservative policies of Czech Prime
Minister Vaclav Klaus have remained largely intact, even amid last
year's peaceful partition of the former Czechoslovakia.
Unemployment, the scourge of the European Union, is relatively
unknown in this nation of 10.5 million. The roughly 3.5 percent
jobless rate is the Continent's second lowest behind Luxembourg.
Other favorable economic conditions in the Czech Republic
include: a stable currency; a relatively low 1993 inflation rate of
18 percent, which is projected to fall further this year; and no
significant foreign debt.
Czech government officials say foreign investment is pouring
into the country, and trade with Western Europe is rising. Czech
Central Bank figures show that foreign investment totaled about
$455 million during the first nine months of 1993, one of the
highest rates of investment per capita in Europe.
But despite all the bright statistics, many prominent figures in
the nation's fledgling financial community say now is no time for
self-congratulation. This nation still faces the daunting challenge
of economic restructuring, experts and officials say.
"Right now there is a gap between stabilization and
restructuring," explains Pavel Kavanek, chairman of Ceskoslovenska
Obchodni Banka, the principal foreign trade bank of both the Czech
and Slovak republics.
Among the challenges is an expected rise in unemployment. As
market conditions develop, entire industrial sectors stand to be
phased out and others to undergo consolidation. The Czech consumer
electronics industry, for example, is one likely casualty.
"Everyone knows the Asians can make the products cheaper," says
Michal Otradovec, a senior consultant with BIG, a Prague-based
financial consulting firm. …