1. The business environment in the Czech Republic Viktorie Klímová klimova@econ.muni.cz

2. 2 Content Business environment in the CR Business environment in the CR Assessment of business environment – WB Assessment of business environment – WB Small and medium-sized enterprises Small and medium-sized enterprises

3. 3 Factors influencing business environment Finance Government policy Education, knowledge, skills Technology transfer Business partners, services, law Market Physical infrastructure Entrepreneurial mentality Programmes for support

4. 4 Strenghts in the CR Tradition of industrial production Tradition of research and development Offer of new industrial zones and real estate for enterprises Geographical location and proximity of major markets Good transport infrastructure Existence of network of institutions promoting enterprises and innovation

5. 5 Weaknesses in the CR   enforceability of law   regulation of bankruptcy   environmental legislation   tax system and tax rates   lack of capital   qualification of workforce   mobility of workforce

6. 6 Tax system TaxTax rate Corporate income tax 24 %. There are plans for a reduction of corporate income tax. Personal income tax Progressive taxation with tax rates from 12% to 32%. New government reform? Value added tax (VAT) 5% (food, healthcare services) or 19% (most goods and services) Excise tax Levied on petrol and petrol derivates, alcohol (beer, wine and spirits) and tobacco Road taxCZK 1,200 - 4,200 (cars), CZK 1,800 - 50,400 (trucks) + road-toll for trucks Real estate taxAccording to type, location and purpose of use of the real estate Real estate transfer tax 3% Inheritance tax & gift tax From 1% (0.5% for inheritance tax) to 40% (20% for inheritance tax)

7. 7 Insurance ContributionsEmployer (%)Employee (%) Health care insurance9.04.5 Pensions21.56.5 Unemployment1.20.4 Sickness and other benefits3.31.1 Total35.012.5

8. 8 Labour costs Minimum wage 1.1.1993 – 31.12.19952 200 Kč 1.1.1996 – 31.12.19972 500 Kč 1.1.1998 – 31.12.19982 650 Kč 1.1.1999 – 30.6.19993 250 Kč 1.7.1999 – 31.12.19993 600 Kč 1.1.2000 – 30.6.20004 000 Kč 1.7.2000 – 31.12.20004 500 Kč 1.1.2001 – 31.12.20015 000 Kč 1.1.2002 – 31.12.20025 700 Kč 1.1.2003 – 31.12.20036 200 Kč 1.1.2004 – 31.12.20046 700 Kč 1.1.2005 – 31.12.20057 185 Kč 1.1.2006 – 30. 6.20067 570 Kč 1.7.2006 – 31.12.20067 955 Kč 1.1.20078 000 Kč

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11. 11 Doing Business in 2006 The World Bank Objective measurement of business regulations and their enforcement 175 economies Regulatory costs of business Ranking from 1 to 175

12. 12 Doing Business - methodology Doing Business Starting a Business Dealing with Licenses Employing Workers Registering Property Getting Credit Protecting Investors Paying Taxes Trading Across Borders Enforcing Contracts Closing a Business

13. 13 Doing Business – Czech Republic Ease of... 2006 rank 2005 rank Change in rank Doing Business5250-2 Starting a Business7485+11 Dealing with Licenses110111+1 Employing Workers4544 Registering Property5855-3 Getting Credit2119-2 Protecting Investors8381-2 Paying Taxes110104-6 Trading Across Borders4139-2 Enforcing Contracts5755-2 Closing a Business113110-3

14. 14 Ranking in 2006 CRSlovakiaPolandHungary Doing Business52367566 Starting a Business746311487 Dealing with Licenses11047146143 Employing Workers45724990 Registering Property58586103 Getting Credit21136521 Protecting Investors8311833118 Paying Taxes11011471118 Trading Across Borders418810276 Enforcing Contracts575911212 Closing a Business113318548

15. 15 Doing Business in 2006 1. 1. Singapore 2. 2. New Zealand 3. 3. United States 4. 4. Canada 5. 5. Hong Kong, China 6. 6. United Kingdom 7. 7. Denmark 8. 8. Australia 9. 9. Norway 10. 10. Ireland 11.Japan 12.Iceland 13.Sweden 14.Finland 15.Switzerland 16.Lithuania 17.Estonia 18.Thailand 19.Puerto Rico 20.Belgium

16. Small and medium-sized enterprises

17. 17 Importance of SMEs Business environment Business environment Structural changes Structural changes Stabilizing element Stabilizing element EU: backbone of European economy

18. 18 Economic and social contribution  structural changes  subcontractors  new technologies  marginal areas of the market  development of regions  new jobs  main factor of economic development

19. 19 Disadvantages of SMEs  low economic power  access to capital  education, information, consulting  unfair competition, dumping  public contracts  payment habits  administrative requirements

20. 20 Some statistics about SMEs

21. 21 The Number of Enterprises 2005 juristic persons 0-249 employees physical persons 0-249 employees SMEs in total The share of the number of SMEs in the total number of enterprises in the Czech Republic (%) Industry25 959133 884159 84399,42 Construction6 58196 869103 45099,93 Trade43 280190 048233 32899,94 Entertainme nt 5 06743 63148 69899,96 Transport5 88040 55646 43699,79 Finance1 01914 68415 70399,82 Services 52 957289 761342 71899,95 Agriculture 2 49241 04443 53699,92 Total 143 235850 477993 71299,85

22. 22 The number of employees (thousand) 2005 juristic persons 0-249 employees physical persons 0-249 employees SMEs in total The share of the number of employees in the total number of enterprises in the CR (%) Industry55310866149,96 Construction1265017678,92 Trade28111239377,06 Entertainment485610488,89 Transport713010134,95 Finance1211320,00 Services 2847936378,74 Agriculture 1071612386,62 Total 1 4824521 93461,79

23. 23 Indicator199719981999200020012002200320042005 Number of businesses 99,7799,7899,8099,81 99,7999,8199,85 Number of employees 59,8256,3559,1259,4759,7360,9462,2161,5061,79 Performance52,9151,7353,3452,8551,4452,0252,0152,1552,27 Value added57,3651,3553,0352,6051,3352,6952,0652,9053,43 Labour cost /without OPC/ 1) 54,6954,6755,7255,5056,1855,6756,01 Investment 1) 41,6640,5637,8144,5249,5550,5052,88 Exports36,4036,2536,5436,1535,7434,1634,034,339,7 Imports48,0048,8450,7449,4347,1250,3349,852,554,4 GDP 1) 34,7831,7431,1232,2435,1534,8634,72 Performance of SME (in %)

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25. 25 Definition of SMEs Micro, small and medium enterprise: a) Fewer than 250 employees b) Assets 43 MEUR or net turnover 50 MEUR (or equivalent in Czech crowns)

26. 26 Definition of SMEs Small enterprise: a) Fewer than 50 employees b) Assets or net turnover 10 MEUR (or equivalent in Czech crowns)

27. 27 Definition of SMEs Micro firm: a) Fewer than 10 employees b) Assets or net turnover 2 MEUR (or equivalent in Czech crowns)