From a magnet to investment by a tinkerer. The technology of the future of the Czech Republic is passing by

Less than ten thousand euros per person. Such a volume of funds arrived in the Czech Republic from the pockets of foreign investors in 2012. In the following years, it gradually increased, especially between 2016 and 2022, when it stopped at eighteen thousand euros.

With more than eighty percent growth, the Czech Republic outpaced competing countries in the region. Poland managed to increase the volume by less than seventy percent to 6.7 thousand euros, Hungary by a quarter from eight to ten thousand euros, Slovakia by 28 percent to almost ten thousand euros.

“The leading position of the Czech Republic reflects its long-term attractiveness for foreign investors in the region of Central and Eastern Europe. Its basis is a qualified workforce, the country’s industrial tradition, a strong footing in the EU, the quality of the scientific research and innovation infrastructure and an advantageous geographical location that enables easy access to the surrounding markets,” says Jan Michal, CEO of CzechInvest.

Among the companies that have settled in the Czech Republic and invest in science and research, he names, for example, the semiconductor manufacturer Onsemi, the microscope manufacturer Thermo Fischer and the manufacturer of car drive systems Vitesco.

In its calculations, the Vienna Institute takes into account the capital of companies that have expanded to the given countries, the profit they reinvested in them, and other capital. So, for example, funds that investors draw through loans or debt securities from their parent companies.

Almost one hundred thousand foreign companies, whether small or large, do business in the Czech Republic. They play a key role mainly in the manufacturing industry: They employ half of all employees and generate seventy percent of all turnover. Money flows into the Czech Republic mainly from Germany and goes mainly to the car industry.

Deloitte Chief Economist David Marek warns, however, that in addition to the quantity of investments, it is also important to monitor their quality, even if it is difficult to measure. And in this category, the Czech Republic – especially in the last few years – “does not excel”. “This applies especially to strategically important sectors, typically technology. For example, electromobility: All three remaining V4 countries already have factories for batteries for electric cars. The Czech Republic, even though it is an automotive superpower, does not have one,” reminds Marek.

The Volkswagen Group considered building a so-called gigafactory in the Czech Republic for 120 billion crowns, but due to the cooling of the electric car market, it postponed the plan indefinitely. In the meantime, however, factories of this type are being built in Germany, Spain, Norway and Canada. The project he intended also revealed the complete unpreparedness of the Czech Republic in attracting investors – it has almost no ready-made industrial parks to offer them.

The government of Petr Fiala (ODS) is currently negotiating with another, as yet unnamed, investor who is considering the construction of a similar factory in Karvinska. However, the Czech Republic is far from “sure” about this project either, as the investor – there is speculation about Samsung SDI – is also considering construction in other countries of the region.

For example, the duo of Poland and Hungary has already attracted the world’s largest battery producers, who have built dozens of factories on its territory. In addition, Hungary recently won the battle with Germany and France for one of the largest battery factories in Europe. The large Chinese car manufacturer BYD is preparing it in Szeged. In the last five years alone, Viktor Orbán’s government has managed to attract investments in electromobility worth an estimated twenty billion euros, reported the industry website Automotive News Europe.

“In the area of ​​clean mobility, semiconductors or renewable energy sources, these are energy-intensive operations, for which energy prices are an important factor when deciding on the location of an investment,” Michal points out the Czech competitive disadvantage.

However, the Czech Republic is also avoiding other interesting investments that it had a chance to win. Complex bureaucracy and long decision-making processes, for example, discouraged Microsoft from building a data center in Prague. He wanted to invest about five and a half billion.

The Czech Republic can increase its attractiveness in the eyes of investors, for example, by introducing accelerated depreciation or by further reducing the corporate income tax rate. Marek promises a substantial improvement from the already approved amendment to the Act on Investment Incentives.

For example, it expanded the possibilities of supporting those investment projects that have a significant contribution to the economic and social development of the Czech Republic. “We believe that the whole process will be easier and faster,” says Michal. The newly established State Development and Investment Company, which will start operating from May 1, is also helping. He will be in charge of the preparation of industrial zones that the state will offer to investors. He currently has almost none.

It will be all the more complicated in the coming years to follow the pace at which the Czech Republic increased the volume of investments received between 2012 and 2022. Important projects are won not only by Hungary and Poland, but also by traditional large European economies, which the Czech Republic has the ambition to catch up to at least in the long term.

It continues to lag significantly behind them, according to the World Investment Report. It states, for example, that the Czech Republic has so far accumulated over two hundred billion dollars in foreign investments – i.e. five times less than Germany or thirteen times less than Great Britain.

In 2022 alone, almost ten billion dollars flowed into the country. In the same period, Germany received 11 billion, France 36. “The main competitors in attracting investments are the comparable countries of the Visegrad Four, but even so we should increasingly look at the countries west of our borders,” says Michal.