By Ian Hibbard
The Czech Republic, along with other rising Eastern European economies such as Hungary and Poland, recorded impressive economic growth since their transition from a state-controlled socialist economy in the early 1990’s.
The country formerly known as Czechoslovakia was transformed during the 1989 Velvet Revolution when the communist regime collapsed and a multiparty parliamentary republic was formed. On January 1, 1993, the independent states of the Czech Republic and Slovakia peacefully dissolved. Czech Republic became a member of the European Union (EU) in 2004 and is the most stable and prosperous of the post-Communist states.
The Czech Republic grabbed global attention and attracted significant foreign investment as it emerged into a free market economy. However, that economic progress stalled out with the 2008 financial crisis. Nonetheless, Czech Republic continues to recover and recorded a US$208.8 billion GDP in 2013 (16th of 28 EU members). In 2015, the economy grew at 4.2% (4th highest in EU) with 5.9% unemployment (3rd lowest in EU). Competition and capacity continue to expand in all sectors of the Czech Republic, particularly in manufacturing where automotive is the largest single industry, accounting for 24% of manufacturing. The Czech Republic produced more than 1 million cars for the first time in 2010, over 80% were exported. The government must implement strategic improvements on infrastructure, institutions, and foster growth in the services/intellectual property industry. It must stimulate the labor participation of younger workers if it is to reach the next level of economic development.
Infrastructure and Urbanization
The Czech Republic has one of the most developed transportation grids in Central and Eastern Europe and trails only to Austria as the heaviest rail and road network in the European Union. The European Commission recently invested $4.7 billion in improving transportation infrastructure for the country. Strong Foreign Direct Investment in-flows continue to bolster the Czech economy (10th largest FDI recipient in EU) providing critical capital that has supported the country’s expanding employment and economic growth.
In the Czech Republic, 93% of adults between the ages of 25-64 have completed a secondary education, much higher than the average 76% OECD rate across other countries. Above-average education skills and the country’s relatively lower cost of living has played a major part in the country’s impressive attraction of foreign investment.
With a population just over 10.5 million, the Czech’s maintain a healthy life-work balance with an emphasis on family, church, education/skills, social connections and recreation. The official language is Czech, followed by the minority neighboring country’s language, Slovak. Czechs make up roughly two-thirds of the population. The Moravians consider themselves to be a distinct group within this majority. When doing business in the Czech Republic, be sure to take time for “non-business” conversion and be authentic in your interest. Then let the negotiations begin! Counter-offers are rare as Czech’s expect what they offer. Watch out, Czech’s are known for a dark sense of humor. The capital city, Prague, is known as “The most handsome city in Europe”. And new people are devoutly proud of their skiing and hockey hero’s, earning men’s ice hockey Olympic gold in 1998, along with six gold medals at the World Championships.
Culture & Coffee
If the Czech Republic sounds like the next market you or your company want to enter, then what better way to learn essential business and cultural practices than over coffee?
On July 21, the Van Andel Global Trade Center is hosting Culture & Coffee: Navigating Eastern Europe. There you can learn everything you need to know about communication, negotiation tactics, proper attire and other unique qualities of Czech Republic’s and neighboring Eastern European countries’ marketplace demands.
About the Contributor
Ian Hibbard is an Undergraduate Student Assistant at Van Andel Global Trade Center. He studies Business at GVSU, with a dual emphasis in Marketing Sales and Supply Chain. Outside of school, he enjoys hiking, fishing, and playing hockey.