Impact of investment incentives on the Czech economy
2007/06/28, Prague, 29th May 2007: A positive influence of the system of investment incentives on the overall investments, GDP, labour market, fiscal indexes and trade balance is proven by the analysis „Impact of investment incentives on the Czech economy“, which has been prepared for the Association for Foreign Investment – AFI by the renowned company Patria Finance.
„Year 2007 is the tenth year of a systematic support of industrial investments in the form of investment incentives. The objective of the incentives has been to stimulate and support investment activity in the industry as a necessary basis for future prosperity, to help adapt the structure of industry and labour force to the needs of the today’s and tomorrow’s market and to face unemployment in specific regions. Although the widely known figures on the growth of GDP and decreasing unemployment speak for themselves, we had an independent study worked out with the task to assess the real dependence of the positive development of the recent years on the realized investment incentives,“ explained Martin Slabý, Chairman of the Association for Foreign Investment.
The results of the analysis show, among other things, the following facts:
- Between 1998 – 2006, more than 700 projects with investment costs of 432 billion CZK were supported by investment incentives.
- The number of directly created jobs from the incited investments reached 112,000.
- The overall impact of investment incentives on the unemployment rate in the year 2006 is estimated at 3.01 percentage points.
- The investment incentives have had a positive influence on the trade balance (their positive impact is bigger on the export dynamics rather than import).
- The investment incentives help to improve the state budget balance. They enable to support investment activity without a decrease in the collected income taxes from the existing production capacities.
- The increased support for selected regions (Ústí nad Labem, Moravian-Silesian regions) is causing a more balanced distribution of production and a mitigation of problems on regional labour markets.
- The study admits that the incentives are probably not the main and decisive factor behind all the incited foreign investments in the Czech Republic (it is not possible to verify, whether or not the investors, who received the incentives, made their decision primarily because of the incentives).
"Impact of investment incentives on the Czech economy, measured by GDP, unemployment rates, trade balance or impact on the state budget, is positive and not insignificant. Up to this day, the benefit of investment incentives can be evaluated at 170 billion CZK. However, at the same time, the used system of investment incentives has helped to increase the concentration of the Czech economy," commented David Marek from Patria Finance on the results of the study.