Country Report / Czech Republic . Growing Hub of Europe With the rapid growth of free enterprise in the Czech Republic has come the rapid growth of mobile communication. According to the IMD World Competitiveness Yearbook in 2004 the country was ranked 8th in market penetration of mobile phones, with around 84% of the population owning a mobile phone. Ambassador of the Czech Republic to Korea Tomas Smetanka added to this by saying, "Now you have in the Czech Republic more mobile phones than people. So you have more than 100% penetration of mobile phones in the Czech Republic." It is reported that text messaging has become a social phenomenon, with Czechs sending what is called "esemesky" to each other frequently, even for no reason at all. Wireless mobile communication is proving a suitable replacement in the country, as traditional land-based Internet access is not so common for the average consumer. While in comparison with the countries of Central and Eastern Europe, the Czech Republic is among the best equipped for Internet access by businesses, Internet usage in the home is still below the European Union average. Three major mobile operators in the country have made such an extreme penetration possible. Eurotel, recently acquired by Telefonica S.A., had 4.42 million customers in the second quarter of 2005. T-Mobile came in stronger with 4.463 million customers. Former Oskar, now Vodafone, had the smallest share of the market with 2 million customers that time last year. Benefits, Incentives, and Low Costs The Czech Republic is in the geographic center of Europe, surrounded by other EU member countries. This centralized location has been the determining factor in several companies' decisions to open branch offices in Prague, the capital city, or to move their central headquarters to the Czech Republic. Most notably, the global company DHL decided in October 2003 to locate their IT Operations Centre for all of Europe in the country. Previously the global logistics company had two separate operations centers, one in Great Britain and one in Switzerland. They are consolidating these two centers in a 2,500 square meter data warehouse capable of housing up to 5,000 servers capable of handling more than 65 terabytes of information per day. Highly qualified local engineers that are trained in the top 3 technology universities in the Czech Republic provide corporations with a highly skilled workforce. In 2000 LogicaCMG, an international company in IT services and wireless telecoms, established an office in the Czech Republic. Originally the company prepared a very thorough and intensive training program for new employees. However, it soon became apparent that the training program was not necessary for most of the new hires. Within six months over 100 new employees took over full responsibility of supporting LogicaCMG's SMS centers which successfully handled more than half of the world's text messages on New Year's day in 2001. According to Joe Walsh, LogicaCMG Global Telecoms vice president for the Prague Product Centre, the following expectations have been confirmed in the Czech Republic: strong technical skills, truly committed staff, very good work culture and discipline, high flexibility, and staff ambitions that are in line with global business needs. Czech Republic and Korea The Czech Republic is 80% of the size of South Korea. Both countries are very mountainous with flatter land in the western section of the country. The population of the Czech Republic stands at approximately 10 million, which is much less than Korea's 50 million inhabitants. Korean exports to the Czech Republic amount to about 500 billion won ($ 500 million) annually, while Czech exports to Korea are only 20 % as much. "Number one is Korean electronics and number two is Korean cars," said Ambassador Smetanka. Notable Czech exports include Skoda automobiles, machinery, chemicals, and beer. When asked about the reputation of Korean electronics and other goods within his home country, the ambassador remarked that Korean companies have made big progress in establishing a positive reputation especially in the past few years. The most recognizable products were flat screen panels and mobile phones. The Ambassador also believes that Korean brands will become even more recognizable in the Czech Republic soon. He noted that LG Electronics has established their Czech subsidiary in the capital city of Prague in 2003, and Hyundai Motors is building a manufacturing plant in the Czech Republic to produce cars for the European market. This October 28th marks the National Day of the Czech Republic. The nation of 10 million people commemorates this day as the anniversary of the creation of Czechoslovakia in 1918 after some three hundred years of being a part of the Austro- Hungarian Monarchy. Although Czechoslovakia ended in 1993 by a peaceful separation of Czechs and Slovaks, its anniversary is celebrated as a day that is very much connected to the basic values of the Czech Republic - liberal democracy, the rule of law and human rights. The Czech Republic's economy has grown by 6.7% last year, which is higher than average for other countries in the EU. In 2005, the country experienced its first export surplus since the transition. This growth and export increase has been driven in no small part by a large influx of foreign investment. According to Ambassador Smetanka, before World War II Czechoslovakia was one of the ten most industrialized countries in the world. Foreign investors such as SAP, Sun Microsystems and EDS quickly modernized this existing infrastructure to adapt to their business demands.

The following are excerpts from an interview with the Ambassador of the Czech Republic, Tomas Smetanka. Q: So since that time [1990], economically speaking and technologically speaking, how has the Czech republic grown A: The Czech Republic went through a radical economic transformation. As you know, it was part of the bloc of communist countries until 1989 and since 1990 it started a process of deep economic transformation with largescale privatization, liberalization and opening of the economy. There was almost no private enterprise in the communist Czechoslovakia, so the change towards a free market economy was indeed dramatic. In the same time, we had to face the collapse of our traditional markets in Eastern Europe and the manufacturers had to re-orient towards more demanding market of EU and other developed economies. However, most of the reform steps were introduced rather quickly and were generally well accepted by the public. The open economy in the very center of Europe attracted substantial foreign investment, which brought up modernization and improved competitiveness. The service sector grew considerably and tourism became an important source of national income. Soon after the basic political changes in 1990 we knew that we would join the European Union and economic legislation was done with that perspective in mind. The need to adopt EU standards, especially after we started negotiating our membership in 1998, shaped the economic environment. This all led to the current economic growth of about 6-7 %. Q: You said electronics were being exported. How is the electronics and technological industry in the Czech Republic A: The Czech Republic is a traditionally industrial country and before WWII it was one of what would be the G10, one of the ten most industrialized countries in the world. Then during the 40 years or so of communist rule the technological development lagged behind. And after the economic changes in the beginning of the 1990s there was quite a large influx of foreign investment that used the old industrial infrastructure. That was being modernized and combined with good skill and also the position of the country in Europe was advantageous for investment. So quite a lot of these investments went to microelectronics and the IT industry. For example, there is a rather big producer of computers, the FoxConn Company of Taiwan, which bought a Czech electronics manufacturer five years ago. They now produce computers for some of the main brands like Dell for the European market. A new plant for LCD panels is being built by a consortium of Japanese companies. Interestingly enough, there is a big portion of the electronics industry that comes from Taiwan and Japan. Not from Korea, but definitely there are East Asian countries that know the advantages of the Czech Republic. Actually, the FoxConn Company became the second largest exporter of the Czech Republic. Q: So what would you say would be the reputation of Korean electronics and other goods like that in the Czech Republic A: I think it's getting stronger. Especially LG Electronics made big progress in the last 2 or 3 years in the Czech Republic, since they established their subsidiary in Prague. And they are going quite aggressively into the Czech market. And Samsung of course is also a very visible brand in the Czech market. I think they advanced strongly in the last 2 or 3 years, especially in the mobile phones and also in the flat screen panels. Actually there is an LG-Philips factory in the Czech Republic. But this one is the conventional CRT screens which seems to be rather a problem then an asset with the increasing demand for LCDs.