Czech Republic: Economic Overview
The Czech Republic is considered by many analysts to be the most economically advanced and politically stable of the emerging European countries. Still, the government faces the challenge of reducing its high inflation rate, relative to the European Union, while maintaining a satisfactory pace of industrial and social reforms. With unemployment at a low level of around 3%-one of the lowest in Europe-the government seems to be successfully balancing the divergent demands of job creation and fiscal austerity.
FOREIGN INVESTMENT CLIMATE
Cumulative foreign direct investment in the Czech Republic since the first free elections in 1990 is close to $6 billion. Continued privatization is expected to raise that figure substantially with sales or concessions of assets in the steel, electric utilities, telecommunications, and financial sectors.The government's National Property Fund still holds large minority stakes in many major Czech enterprises, which represent nearly a third of the GDP.
Among recent project finance concessions awarded in the energy sector is the estimated $350 million modernization of the coal-fired power facility at Kladno, which include foreign investors and a loan from the World Bank's private sector arm, the International Finance Corporation. A large internationally financed project still being considered is the estimated $20 billion intermodal transportation complex surrounding the former Milovice military base, which would include rail connections and commercial airport facilities. One element of the government plan to modernize the national transportation system includes the proposed $3.5 billion modernization of the Czech section of the Berlin-PragueVienna rail line. Similarly, modernization of the Prague airport is under way, and there are plans to revamp the airports at Karlovy Vary, Liberec, and Ostrava.
The sale of a number of state-owned banks is a key element of the Czech Republic's plan for reducing state participation in the national economy.The sales of banks, however, are not expected to begin until mid1997.While the Central Bank has lifted its ban on new banking licenses, imposed following the collapse of several small banks in 1994, it has indicated that new licenses will be issued on a highly selective basis. …