. The structure of Czech business
. The structure of Czech business
The structure of Czech business
Similar to other countries in the region, there are sharp divides between foreign
and domestic controlled enterprises. Foreign operations are generally large
scale and are backed by big multi-national enterprises. The large domestic enterprises
have often struggled in the process of transition and the large number of
the many small and medium-sized enterprises are not strongly exposed to foreign
competition or advanced business models.
In the manufacturing sector, large foreign-owned and export-oriented manufacturing
operations have spearheaded the introduction of new capital and business
techniques, and have been responsible for a significant proportion of growth
in productivity. There are also some large domestic manufacturing firms that have
successfully weathered transition to become international players, albeit often
with significant foreign capital and expertise (e.g. Skoda). Exports and FDI developments
illustrate the significant growth in large-scale manufacture (the value of
exports is now equivalent to over 65 per cent of GDP). Total annual FDI inflows
have been equivalent to between 9 and 12 per cent of GDP over the past few
years (with the exception of 2003 when privatisation receipts were very low), with
manufacturing-sector FDI representing between 1½ and 4 percentage points of
the total.
Alongside the successful manufacturing operations, some traditional largescale
enterprises have not weathered the economic transition process easily. The
most notable examples are coal mining and steel production. These sectors have
been supported by considerable subsidy in the past. Concern about the consequences
of severe and typically highly localised economic collapse, combined
with active political support have both contributed to sustaining the subsidies. At
the same time, however, a network of domestic manufacturing firms (typically
small and medium-sized enterprises) has emerged that supplies the new largescale
manufacturing plants. This has been helped by policies to bring foreign
firms and domestic suppliers together.
In some private-sector services, notably in retailing and banking, big international
players are already playing a significant role in domestic markets, bringing
new competition through large-scale operations and leading-edge business models.
In addition, a demand for outsourced services has brought opportunities in
some other sectors, also bringing them into contact with international business
practices. In other services sectors, the scale of operations is typically small and
economic efficiency relies on there being strong local competition.
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