Monday, December 11, 2006

From Hanoi to Praha

From Prague Monitor 3 Dec 2007

Právo: Germany fears influx of Vietnamese from ČR
By ČTK / Published 3 December 2007

Accusations of corruption against the Czech embassy in Hanoi have become stronger with the approaching Czech entry to the Schengen area and the German Intelligence Service BND even mentioned it in its internal report warning against a possible influx of Vietnamese to Germany, the daily Pravo wrote Friday. Foreign Ministry spokeswoman Zuzana Opletalova told CTK the ministry had no information about corruption at the embassy

The ministry has repeatedly said that numerous inspections at the embassy failed to prove any cases of corruption, adds Právo.

The Czech embassy in Hanoi at present faces a new wave of complaints about corrupt practices of its employees.

According to the Saxony daily Freie Presse, the BND pointed to the corruption at the Czech embassy in Vietnam in its secret report.

The report allegedly warns German authorities against an influx of Vietnamese to Germany from the Czech Republic after it joins Schengen, Pravo says.

"We have registered the fact, but we cannot comment on the working relations between Czech authorities and our German colleagues," Bohumil Srajer, spokesman of the Czech civilian intelligence UZSI that exchanges information with BND said.

"The biggest danger is that the issuing of non-transparent visas to Vietnamese threatens the implementation of the project of green cards that the Czech Republic plans to introduce for foreigners," lawyer Marek Sedlak who deals with the problem told Pravo.

"The system of green cards will not function if the people who would like to work in the Czech Republic would have to pay an additional up to 2500 crowns in bribes to obtain visas," he said.

According to the information from the Vietnamese embassy in Prague, Czech companies have asked for about 4000 workers from Vietnam, but these people are unable to obtain visas, Sedlak said.

"These are old anonymous complaints and our ministry's General Inspection has found no proof on the spot," Czech Foreign Ministry spokeswoman Zuzana Opletalova said.

"We have not received any proof from the intelligence service. In addition, Schengen will only change the practice of short-term visas while issuing of long-term visas will remain in the jurisdiction of Schengen member states," Opletalova said.

Nevertheless, the office of the Czech ombudsman is dealing with the situation at the Czech embassy in Hanoi.

"The reports are alarming. I would not view them as pressure exerted on the embassy by Vietnamese," lawyer Jan Chodera told Pravo.

He said he had sent a letter to Foreign Minister Karel Schwarzenberg, proposing to change the procedure of issuing of Czech visas for the Vietnamese.

"Vietnamese applicants for Czech visas should first send written inquiries to the Czech embassy in Hanoi and the applicant should be invited to come to the embassy at a fixed day and at fixed time in written," Chodera proposed in his letter to Schwarzenberg.

Previously, Pravo wrote about the growing number of Vietnamese visa applicants' complaints about bribery of Czech embassy clerks.

At present, about 40,000 Vietnamese work and do business in the Czech Republic.

According to Pravo, 7,839 applications for long-term visas were submitted by Vietnamese last year, which is twice as many as in 2005.

Thursday, April 20, 2006

Carmaking in Eastern Europe

This isn't about the Czech Republic in fact, but about the more general issue of shifting car production to the East as outined in this FT article. As I said in this post, this is a normal pattern to expect as these new EU members move up the value chain, but many in Western Europe still need to face up to this reality I feel.

If the 2,300 workers at Peugeot's Ryton plant are the past, then the future may lie in Slovakia, the country of just 5.4m people that will soon be making more cars per head than anywhere else in the world.............Carmakers from General Motors' Opel subsidiary through to Renault, the Volkswagen group and Ford have set up manufacturing capacity or established joint ventures with Russian and other local carmakers at more than a dozen sites in central and eastern Europe.

By 2008 Slovakia will be turning out 1m cars a year – compared with 1.6m in Britain this year. The reason is simple. The average gross wage a month for a car worker in Slovakia is £350 – compared with about £2,000 for assembly line workers at Ryton.

Slovakia has shot from nowhere to pole position during the past three years as both PSA Peugeot-Citroen and Kia of South Korea followed Volkswagen's early example and chose to build assembly plants there to take advantage of the country's low production costs.

The tabular content relating to this article is not available to view. Apologies in advance for the inconvenience caused.Peugeot claims that production at Ryton is costing it €415 (£287) more per car than at the company's Poissy plant in France and almost €1,000 more than at its joint venture factory with Toyota in the Czech Republic.

Peugeot will invest a total of €1.1bn in its Trnava plant in western Slovakia, which will start producing the new 207 model in June and turn out 450,000 cars a year by 2009.

Kia will invest €835m in Zilina in north-west Slovakia, where production should start in December.

The economic benefit will be tremendous. Automotive production has grown from 14.3 per cent of industrial production in 1998 to 24.8 per cent last year and it now represents 29 per cent of exports and employs 65,000.

Labour costs are not Slovakia's only advantage. It has a strong manufacturing tradition, having being one of the biggest arms producers in the Soviet bloc, and these skills have been transferred to the automotive sector. Weak unions and a liberal labour code mean that labour is more flexible than in western Europe.

VW's Bratislava plant – the only plant running at the moment – specialises in off-road models such as the Touareg but it has also produced other models when required; when VW's Spanish workers refused to work extra shifts in 2002, Bratislava turned out Seat Ibizas.

Tuesday, March 28, 2006

The Czech Car Growth-Engine?

News today which is of more than passing interest from the Czech Republic. The South Korean industrial group Hyundai has announced that it is going to build its first European car plant at Nosovice. The factory - which is scheduled to cost around one billion euros - should begin production in October 2008 with full capacity of 300,000 vehicles a year being reached in 2009. This new output, when added to added to the 600,000 cars or so produced annually by Volkswagen's Skoda Auto and the Franco-Japanese joint venture, TPCA, will bring the Czech Republic into the front line - along with Germany, France and Italy - of the European automotive industry.

As elsewhere this will have its good and its bad side.

The investment will obviously give an enormous push to Czech skill-cluster accumulation. As the AFP article notes Hyundai was attracted to Czechia by the existence of an already established network of auto suppliers, good transport communications, low wage costs and a skilled, adaptable workforce. Since in this industry more feeds more this new impetus could then attract even more car and car component manufacturers, especially anyone who is trying get a foothold in the European market.

On the downside the Czech economy will now become even more heavily car dependent. The car production and components sector already accounts for around 20 percent of total industrial production and it constituted 18 percent of total exports in 2005, so any real downturn in the European car market would now hit them especially hard. And again, very few goodies come for free. The impact of the new investment on the domestic currency - the koruna - is likely to be to nudge it upwards, and as some are noting, this may hit other lower-wage-lower-skill areas like textiles. But this is a price which needs to be paid as Czechia moves up the 'value-component' ladder, and it is nice to see that they are making such rapid progress.

The inward investment could attract an inflow of labour too, and this will only help them better address their low fertility and ageing problems. Some suggest that the only brake to further auto industry development in the Czech Republic would be if companies found it hard to recruit sufficient skilled and re-trainable workers. With this in view it is interesting to note that the plant is to be sited in the East of the country, within striking distance of the Slovak and Polish borders.

Indeed it seem that Poland looks to be one of the big losers here. New Economist had an interesting post last week about how the London-based Centre for European Reform recently put Poland at the bottom of its competitiveness league vis-a-vis the entire group of 25 European Union nations (The report also put Italy as low as 23rd out of the 25 EU members, down in the same league as Bulgaria and Romania).

So here there will be winners and losers, and, just as the New Trade Theorists would predict, there will be a considerable interplay of networking and other 'increasing returns' effects.

Which brings me to my last point: is the Czech Republic about to become a minor EU growth engine, another Ireland? I first raised this point in this post, where I make a comparison with slow growth Portugal (which is, it will be remembered, inside the euro system, and suffering from all kinds of negative consequences following on from its initial dramatic entry). Certainly Czechia's demographics are very different from those of Ireland, but it does have a large number of young people who are able, willing and under-employed, and if it can get those network effects rolling and continue the forced march up the value chain, then being a small country it may be able to attract inward migrants in sufficient quantities to make all the difference. Who knows. As the Spanish like to say, que sera, sera.

Friday, January 20, 2006

The Czech Growth Engine?

Interesting news from the Czech Republic in this week:

The Czech republic has joined Slovenia among new member states with higher levels of wealth per capita than old member Portugal, according to European Commission statistics.

The central European country enjoyed gross income per capita of 73 percent of the EU 25 average last year compared to 71 percent in Portugal, according to the latest estimate by the commission's statistical wing, Eurostat....

The results have left Slovenia and the Czech republic chasing Greece, on 83 percent, as the next old member state to overtake, with Slovenia set to draw level with Greece by 2007 and the Czech republic to narrow the gap further in the next two years, the study predicts.

This now raises some interesting questions. How will Slovenia's future growth compare with that of the Czech Republic (remember Slovenia is about to join the eurozone on 1 January 2007 while the Czech Republic is in no particular hurry to join)? What is the relation between Portugal's low-growth and eurozonemembership? Will the Czech Republic now overtake Greece?

We can also, I think, see more clearly some appropriate comparisons for testing the 'euro has been a spectacular success' hypothesis: we can look at the UK vs France, Finland vs Sweden and Denmark, and we can look at the Czech Republic vs Portugal.