Sdružení pro zahraniční investice

24.02.2009, It is said that Czechs are Slavic Germans. But based on numerous encounters with investors from the Netherlands, it is apparent that Czechs are really Slavic Netherlanders. The Dutch themselves have said that they have a lot in common with their Czech counterparts. This is possibly one of the reasons why the Czech Republic is visited by large numbers of Dutch tourists and why the Dutch comprise the second most active investment community in the country, immediately behind the Germans. In short, similarities are attractive.

Benelux, which can be considered the forerunner of today’s European Union, came into being in 1948 as a customs union of Belgium, the Netherlands and Luxembourg. The Benelux countries have a total of four official languages: Dutch, French, German and Luxembourgish. A common characteristic of these countries is that small and medium-sized enterprises account for a large proportion of GDP, which is explained at least in part by a well-developed and longstanding system of university education and a sophisticated system of support for start-up and spin-off firms.

Despite a significant decline of its manufacturing sectors, the Benelux countries have managed to preserve remarkable diversification in industry. Of Belgium’s traditional manufacturing sectors, the automotive, chemicals, pharmaceutical, aviation, metallurgy and general engineering industries remain dominant. In the Netherlands the food, chemicals, pharmaceutical and engineering sectors are also of primary importance, whereas Luxembourg’s industrial strength lies in its steel, chemicals and pharmaceutical industries. Logistics, financial and business services account for the lion’s share (roughly 70%) of GDP. Foreign investments flowing out of Benelux relatively faithfully reflect the local structure of firms and sectors. 

Initial investments came from Benelux

After 1990, Belgians and Netherlanders were the first to find the courage to invest in post-communist countries and thus in the Czech Republic. In the early 1990s some firms, such as Primus Laundry in Kopřivnice, invested in regions with high unemployment and thus helped the industrial revival of those regions. With their early entry into the Czech market, these firms were able to make the most of the numerous advantages they found here.

Businesspeople from the Benelux countries have a reputation for being frugal, austere, uncompromising and bold. This attitude is also reflected in the area of foreign direct investment. Even though, at the beginning of the 1990s the Czech Republic was seen as a low-cost destination with an abundance of available and relatively highly skilled workers due to the country’s high rate of unemployment, every investment in the former eastern bloc was considered risky. In the investors’ view, however, the positives outweighed the perceived negatives and the country’s high-quality technical and social infrastructure, together with the Czech Republic’s geographic proximity to Benelux, played an important role in decisions to invest here. A further impetus in this decision-making process was the introduction of the investment-incentives scheme at the end of the 1990s. The Czech Republic’s accession to the European Union in 2004 brought a level of certainty to particularly Benelux-based medium-sized enterprises that were considering expanding to Central Europe. The Czech Republic’s future adoption of the common European currency, investment incentives, support from EU structural funds, tax system, university system and new projects undertaken by the Czech government in the area of technical and transportation infrastructure are among the most discussed topics at meetings between CzechInvest’s representative and investors.

Attractive investment segments: from breweries to banks

Among the most well-known Benelux investors in the Czech Republic are primarily the Belgian bank KBC, which owns one of the largest Czech banks, ČSOB, the Dutch bank ING and brewing giants InBev and Heineken, which control a range of beer brands, and the Albert Heijn group, operator of the network of Hypernova hypermarkets and Albert supermarkets in the Czech Republic.

The biggest Belgian manufacturing investment in the Czech Republic supported by CzechInvest is Glaverbel’s project in Teplice. In 2003 Glaverbel merged with the Japanese firm Asaihi Glass and today it holds a leading position in the global glass industry. Another significant Benelux firm operating in the Czech Republic in the past decade was Philips, which in 1999 invested in a factory producing CRT displays in the Moravian town of Hranice. Unfortunately, due to the development of the consumer-electronics market and the rapid development of LCD technology, this investment was not successful in the long term.

            There are currently 73 Benelux-based investors operating in the Czech Republic whose investments were supported by CzechInvest. In terms of the size of investment, the most significant of these include ADP Nederland (financial and accounting operations), Meister (aviation), Draka (electrical engineering), Barco (electronics), Lefevre (plastics), Bekaert (metallurgy), Ontex (sanitation technology), Senior Investment and Bosal (automotive industry) and Unilever (food-production). Firms from Benelux are not investing only in manufacturing projects in the Czech Republic, but also in research and development. This is exemplified by the Dutch pharmaceutical firm Synthon, which has created several dozen high-skilled jobs in the Blansko region. By 2007 Benelux firms had invested in the Czech Republic a total of USD 1.69 billion and directly created more than 11,500 jobs.

Renewable sources of energy and environmental technologies also comprise a strength of the Benelux economy. Investors have very often expressed serious interest in directly operating environmentally friendly energy sources in the Czech Republic or in the production of such sources, whereas in the absolute majority of cases this involves the manufacture of solar panels. Furthermore, the Czech Republic is a popular destination for projects involving the recycling of used materials (most often paper, metals or textiles). Naturally, most of these firms are interested in financial aid from EU structural funds, as the European Union ranks similar environmentally friendly technologies and their development among its priorities.      

            Financial and business services, banking and insurance comprise the largest part of the Benelux economies. The most well-known banks that have invested in the Czech Republic are the aforementioned KBC and ING, though the Czech Republic represents a promising market for other, less well-known financial institutions, such as ABN Amro, Atradius, Aegon and Fortis. These banks do not operate here in the area of small-scale banking, but rather in enterprise banking.

Besides manufacturing and services projects, development of industrial properties is an attractive business segment for Benelux firms in the Czech Republic. The best example of this is the Dutch company CTP, which has been active in Central Europe since 2000. The company directs its operations in the Czech Republic, Slovakia and Romania from its headquarters in the Czech city of Humpolec. CTP is an important partner for incoming investors and is currently one of the biggest firms in the Czech industrial-property market. It is clear that the provision of such services increases the Czech Republic’s attractiveness in the eyes of the global investment community.