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Business Business Profile The Czech Republic’s principal industries are power engineering and fuels, metallurgy, engineering, glass, wood and armaments. The rapidly growing service industry is a major source of income, with the related tourist industry providing enough invisible income to help redress the trade deficit. Global recession in 1996 revealed just how fragile the Czech ‘economic miracle’ actually was. Increased domestic demand and poor export performance have generated a growing deficit. Prague is the centre of Czech business – 20% of the country’s GDP is created here – although there is no particular central business district and companies are located in all parts of the city and suburbs. As heavy engineering moves outside the city, service – financial, retail and telecommunications – and manufacturing – electrical, transport and food processing – industries are becoming increasingly prevalent. Companies to base their Czech or Eastern European Headquarters in Prague include ABB, Siemens and Philips. Megalithic conglomerates, largely unchanged from their days as nationalised industries, have been a constant drain on bank reserves. Banks were hit by the collapse of the Russian economy in 1999, through exposure to bad debts in the former USSR. Banks are still overly cautious about making loans without sound collateral and sources of venture capital are still very narrow. This has led to a squeeze on the small and medium enterprises (SMEs), which should be at the heart of a dynamic economy. Preparations for admission to the EU have also contributed to the fragility of the economy and the target date of 2004 has been called into question. The EU have identified four main problem areas: the need to reform financial markets, weak disclosure rules and a lack of enforcement have led them to be plagued by insider dealing; the restructuring of the banking system; tightening of national borders to cut down on smuggling; and the need to deal with the rights of the Roma (gypsy) minority. Current unemployment in the Czech Republic stands at approximately 9.2%, although this is set to rise once the effects of the floods are fully known. The strong Czeck Koruna is also a factor – although good from the standpoint of tourism (and therefore certainly for the Prague economy), exports, especially to the United States, have fallen by about 16% in 2002. Prague’s rate of unemployment is only around 3%. Unemployment figures show wide regional variations and some regions of the country, notably those in coal mining and steel production areas, are above 20%. The coal region of Most is above 25%. All is not gloom, however, since much of the Czech workforce is well trained (and willing to retrain), intelligent and hard working. Opportunities for venture capital investment, especially in the SMEs, could reap rich rewards, while low share prices offer attractive bargains. Large conglomerates are being broken up and the companies that emerge should be leaner and better able to compete in a global market. Business Etiquette By and large the Czechs are a warm people who greatly value hospitality. In some instances, when dining, it will emerge that the bill has quietly been settled. If this happens, business visitors should accept gracefully (considering the disparity in Czech and Western wages, this may also be a matter of personal pride) and try to find some later means of showing appreciation. Czech society is still largely male dominated and, especially with older businessmen, it is unheard of for a woman to pay for a meal, even if she is the senior member of the team. If invited to dine at a colleague’s home, a small gift is appropriate – a bottle of wine and flowers are best. When offering or accepting a lift with a business colleague, the favoured location is the backseat. Initial business meetings are often serious affairs, during which even business partners refer to each other by title and surname. The use of forenames is a mark of friendship, however, using them without permission is seen as insulting or demeaning. Degrees are considered important and should always be used in addressing correspondence (only the doctorate is used in direct address). Meetings can take longer than expected and be more formal than the average Western businessperson is accustomed to. However, as the old communist bureaucratic ways give ground to capitalism, business lunches and such meetings are gaining popularity, especially with the younger generation of business movers. However, one should not expect work-related meals to be the norm. Office hours are generally 0830-1700 and punctuality is essential – colleagues should be informed of any unavoidable delays. Dress is conservative for older businesses, businessmen and women, while new companies tend to be more relaxed. A jacket and tie for men or smart suit for women is a good bet for first time business visitors. A firm handshake and maintaining eye contact are seen as signs of honesty and sincerity, while overloud talking and interrupting are construed as attempts to obscure issues. At first meetings, business cards will be echanged and an offer of coffee or drinks is common. |
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