FDI in the Czech Republic
FDI in Figures
According to CzechInvest, Investment and Business Development Center, the Czech Republic is classified in the first place among the Central and Eastern European countries not only for the level of FDI stock but also for the FDI inflows per capita. This situation can be explained by the creation of investment incentives, by the presence of a skilled and inexpensive manpower and also by the natural advantages of the Czech Republic, such as its location in the heart of Central Europe. Since 2007, a change in FDI direction can be observed in the Czech Republic, which is going from the manufacturing industry to the "strategic services centers".
Due to the deterioration of the international situation, the FDI flow declined in 2008 and 2009, but they should recover progressively with the revival. The crisis has also reduced the size of the foreign investments in the automobile and electro-technical sectors.
The European Union and the United States are the two main foreign investors in the Czech Republic.
|Foreign Direct Investment||2007||2008||2009|
|FDI Inward Flow (million USD)||10,444||6,451||2,725|
|FDI Stock (million USD)||112,408||113,174||115,899|
|Performance Index*, Ranking on 141 Economies||54||86||98|
|Potential Index**, Ranking on 141 Economies||34||33||-|
|Number of Greenfield Investments***||149||142||99|
|FDI Inwards (in % of GFCF****)||23.8||12.5||1.3|
|FDI Stock (in % of GDP)||64.5||52.4||60.9|
Note: * The UNCTAD Inward FDI Performance Index is Based on a Ratio of the Country's Share in Global FDI Inflows and its Share in Global GDP. ** The UNCTAD Inward FDI Potential Index is Based on 12 Economic and Structural Variables Such as GDP, Foreign Trade, FDI, Infrastructures, Energy Use, R&D, Education, Country Risk. *** Green Field Investments Are a Form of Foreign Direct Investment Where a Parent Company Starts a New Venture in a Foreign Country By Constructing New Operational Facilities From the Ground Up. **** Gross Fixed Capital Formation (GFCF) Measures the Value of Additions to Fixed Assets Purchased By Business, Government and Households Less Disposals of Fixed Assets Sold Off or Scrapped.
FDI Inflows By Countries and Industry
|Main Investing Countries||2010, in %|
|Main Invested Sectors||2010, in %|
|Real estate and trade activities||19.0|
|Electricity, water and gas||12.8|
|Transportation and communications||10.0|
|Trade and repairs||3.4|
Source: Czech National Bank
- Form of Company Preferred By Foreign Investors
- Branch or an entity
- Form of Establishment Preferred By Foreign Investors
- Corporation limited (so called s.r.o.)
- Main Foreign Companies
- Hyundai Motor Company, Sungwoo Hitech, FTE automotive s.r.o., Sun Microsystems Czech, TietoEnator
- Sources of Statistics
Czech national bank
Why You Should Choose to Invest in the Czech Republic
- Strong Points
Good access to the European market, a long history of industrial production and the quality of the labor force are part of the positive factors of the Czech Republic. We can also name the following factors, which represent non-negligible advantages for the country:
- A strong and independent central bank and an extremely stable currency;
- Rapid economic growth;
- A good capacity to withstand the global economic crisis.
- Weak Points
The Czech Republic is very dependent in terms of export and on the influx of foreign investments, which makes it vulnerable during crises. The country's skepticism towards Europe and the lack of interest in the adoption of the Euro could discourage certain European entrepreneurs in the long term and make the country less competitive.
The country has also experienced political tensions, particularly in 2009, which could undermine its stability in the eyes of potential entrepreneurs.
The lack of labor force also slows down the country's development (it is often necessary to hire foreign workers in order to fulfill production demands).
- Government Measures to Motivate or Restrict FDI
From 1998, the government put into place an investment incentive plan and has encouraged massive FDI inflow as well as projects on unused land ("greenfield"), as well as on used land ("brownfield" or development of existing structures). We can name amongst these measures:
- The non-discrimination and equality of treatment between nationals and foreigners;
- The protection of investment and the avoidance of double taxation;
- The protection of property rights and the export of profits.
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