<TITLE: Applications of Economics: Czech Republic's Economy and Entrepreneurial Environment
ACADEMIC DOMAIN: economics and administration
DISCIPLINE: economics
EVENT TYPE: lecture
FILE ID: ULEC070
NOTES: continued in USEMP08A and USEMD170, seminar also includes presentation USEMP08B

RECORDING DURATION: 57 min 00 sec

RECORDING DATE: 25.4.2006

NUMBER OF PARTICIPANTS: 8

NUMBER OF SPEAKERS: 2

S1: NATIVE-SPEAKER STATUS: Czech; ACADEMIC ROLE: senior staff; GENDER: male; AGE: 51-over

S2: NATIVE-SPEAKER STATUS: Spanish (Mexico); ACADEMIC ROLE: undergraduate; GENDER: female; AGE: 17-23

SU: unidentified speaker

SS: several simultaneous speakers>


<S1> and er at the beginning i would like to revise er my presentation only briefly er yesterday i , yesterday i er gave an overview of basic facts on czech republic then i , i , characterised three main er goals during czech economic transformation , and here are main characteristics of czech economy er as i have said before i gave to you an overview of finnish projects and investments in czech republic and , the main (xx) i presented er it was macroeconomic environment using macroeconomic indicators er at the end of my yesterday's presentation i compared two papers the first paper was growth-invested product at purchasing power parity per capita for the year of 2004 and maybe some of you found total list of countries and maybe you know position of your country in this table and er the second paper was human human development index er that is based on growth domestic product per capita at purchasing power parity but this er , this table or this <SIC> criterium </SIC> was er was (built) to develop for developed for two other criteria er adult literacy and life expectancy , and you can compare both papers er , you can see that finland and czech republic er has have er better or higher position as regards human development index compare with er GDP per capita because both countries er er are better compare with rest of the world in adult literacy and (maybe) in life expectancy and er today i would like to continue faster and er maybe today or tomorrow we can revise again whole my presentation and then could be discussion based not only on my presentation but also on your presentations yes and er er you know i think you know er so-called , SWOT analysis you know it from management SWOT analysis and this er analysis could be used also fro- for macroeconomic strategy and here are some strengths strengths and weaknesses opportunities strengths weaknesses opportunities and threats and again i will i will try to explain main problems concerning the czech republic and you can try to er to apply it for y- for your national economy , as was mentioned yesterday the first er strengths that could be named is political stability and social cohesion er in june will be er general election and er whatever government er will be after general elections i think that er economic policy will be very similar the same bec- because we are member of the european union here are main main er main rules er common common legislature legis- legislature yes law and so on and so on therefore there would be only small changes after general elections political stability social cohesion it's interesting in our country er (there) maybe compared with france with italy compared with canada there is er less social turmoil social turmoil it means strikes of workers er maybe last month there was some turmoil or strikes er of er , offic- of do- of doctors doctors in slovakia also doctors went on strike er , the second item macroeconomic stability and broad economy it was described yesterday all macroeconomic figures are very very good but i i highlighted and er stressed that behind nice macroec- macroeconom- macroeconomic figures could be hidden some problems and er if i can use an example from mexico mexico <S2> yeah </S2> example mexico <S2> @@ </S2> all your countries are member of er of the OECD it's organisation for economic development and reconstrun- reconstruction <COUGH> (in) 30 33 countries and mexico and other countries officially denounce for instance rate of (na-) unemployment very low and official figure i don't know today or (one week ago and) i remember for instance er one year ago when i write an article there was written that official rate of unemployment in mexico is a- around three per cent rate of unemployment yes <S2> mhm </S2> it's official figure but maybe </S1>
<S2> (xx) the reality is </S2>
<S1> it is not reality <S2> no </S2> but estimation are the rate of unemployment real real real rate of unemployment is maybe 20 or more per cent is [it true there is] </S1>
<S2> [yeah yeah] because there are lot of erm how you call like economy on their illegal <S1> yes </S1> works <S1> yes yes </S1> so it is </S2>
<S1> it's underground <S2> [yeah] </S2> [economy] (shadow) economy </S1>
<S2> and it doesn't come in </S2>
<S1> and er er hidden unemployment in villages there are people people are unemployed but it is not officially er registered yes <S2> mhm </S2> yes and similar figures would be not so big difference but it would be also in our country in your country er (the-) you all study statistics and you know what statistic would show us or not and therefore er use some figures only for orientation er we er our country as a member of the european union we have to use er statistics er of european union its er (marked) , some differences would be also among er between official figures and reality the second or the third point er liberal labour market and relatively low labour costs liberal labour market it's true and low labour cost er i think when you compare er average average labour cost per work hour in the czech republic it's i think one eighth one tenth of er wages or s- and salaries in germany maybe , it er therefore labour cost is lower compared with other european countries but you have to compare you have to compare also er level general level of prices general level or prices in cz- in the czech republic is approximately 40 per cent of average of whole european union and er s- and in spain in greece and in portugal it's also lower 80 per cent but but in the czech republic it's 40 per cent in slovakia maybe 40 35 per cent and therefore lower labour cost is based on lower prices or and lower lower , expenditures er connected with foods er housing transportation and so on so on and er for your information for instance general level of prices in finland is approximately 25 per cent above the european average and it's one of many reasons why using official rate of exchange er between czech crown and euro yes our crown is under-valuated er finnish er euro is er er over-val- -valuated and therefore it's one reason and the second reason higher er level of prices two reasons why it's er looks very expensive to live in er in er in er er finland or in tampere and er <COUGH> and er as regards or in connection to foreign investors it's good low labour cost low er local pri- prices it's advantage and therefore it is er named as a strength amongst strengths next er next er er point higher qualified and skilled labour force er it's true that we have very long tradition and er very very (developed) education system good quality technical education tradit- tradition of czech industry er in the at the first half of 20th century we e- exported all over the world and czech arms for instance er rifles guns and so on it was very known all over the world and in 1930s we we were on the top of world's exporters of er machines er cars er cloth shoes and er maybe you know some traditional trademarks er for instance bat'a or bata it's producer of goods all over the world yes and czech er machines textile machines were and are very very known all over the world and er developed infrastructure it's true only partly because we have er not developed er roads it's it's traffic er traffic inf- infrastructure traffic yes compare with er the rest of europe we have to build up more highways er compared with european union er low taxation again was mentioned yesterday er one of , possibility how to measure ta- tax burden do you do you know do you understand what is it tax burden burden tax burden er is one of possibilities of how to measure it is so-called composed tax er quota composed tax quota and it is (count) as a formula numerator are total government revenues from taxation all kind of taxes direct taxes indirect taxes yes all taxation and these total revenues of government divided by GDP times times one hundred and you receive figure that cou- could be used for international comparisons other other possib- other measur- measurements it is it er er it er it is not good when you say our (corporation) tax is 24 per cent in slovakia 19 per cent in finland i don't know er for instance 30 per cent i don't know yes and you cannot compare these partial figures therefore the best solution is use compound tax er quota and for the czech republic this er tax burden is approximately 37 38 per cent , er government reven- revenues from taxation divided by GDP yes times one hundred an average for whole european union is approximately 40 41 per cent and the highest tax burd- burden is in scandinavia in sweden in finland in norway it's approximately 45 52 per cent it's very very high taxation but the er some people and most of people pref- prefer it because higher taxation higher government revenues and higher expenditures for educational system for health care system for transportation and so on so on and er there are some international er questionnaires or reser- er er research- (international) research and people in in our country more than 60 per cent of er respondents of people answered that they prefer higher taxation when will be higher social security higher government expenditures for young families and so on so on therefore we cannot er cannot say that higher taxation higher tax burden is better among the among among very developed countries we can find the we can find find er for instance finland norway you have very high tax burden and on the contrary there is also USA that their er its tax burden is approximately 28 30 per cent i think that this figure could be er underestimated because it's very complicated tax system yes but official figures say that in the USA in new zealand in (austria) they have lower lower er tax burden and they are developed countries too therefore we we cannot say that l- lower taxes is better or high taxes it depends on government because taxation it's political decision after elections government parliament decide and high (foreign) investments again it was mentioned and er explained yesterday that (xx) and improving business environment it will be explained and weaknesses abuse of social system and (higher salaries) it's true er we have longer er longer time our (workers) , one one of many figures er i remember that average attendance at doctor in our country it's average citizen in our country see a doctor 15 15 times a year in your country it's maybe only five times er five @times@ or seven times a year it's a <COUGH> such social system and health services that enables to use these opportunities it's opportunity er and people use it and er high secondary (labour) cost again remember social and health care contributions it payments to social fund to health care fund yes it's very very high but it's again decision we can lower it but we have er we have gained er sources for social and health care system from other tax- er taxes other taxes must be increased when this will be decreased and er mandat- mandatory government expenditures er there are for example social payments pensions mandatory it means it's it's given by a law for instance whatever government have to pay pensions yes it's given and it's problem not only (for the) czech republic but all over the world pensions then the last (xx) bankruptcy law (impossibility) it's problem and as a good example where this problem's well solved is again finland (er) sweden and and other countries bankruptcy er bankruptcy for instance er when some enterprise is in losses and has problems it last in our country for instance one two years when this procedure will be end and er and this enterprise er will be shut down it's very long long process and in your countries it is er shorter it takes shorter period from problems losses and bankruptcy it could last for instance (seven) months only and then er opportunities and again we can s- er we can say that similar problems must be solved in other countries reforms first o- o- first of all fiscal reform fiscal do you understand er fiscal in origin it was public (xx) public (xx) public and fiscal and fiscal policy it means er policy collected with er public finance public finance revenues and expenditures of government er budget the main the main instrument for fiscal policy is government budget revenues and expenditures the second reform pe- pensions it's big problem in europe also in the USA er you know maybe why because er during several years er number of pensioners will be in- increased dramatically it's er , it's er influenced by after the second world war generation it's my generation er it's called baby boomers after the second world war it was er baby boom yes all over the world and this generation is gradually coming er to retirement yes and number of people er number of retired peop- retired people pensioners will be increasing and therefore this problem we have to solve during five ten years health care system again big problems and erm today or er tomorrow we can discuss and compare er health care systems and er experience er with health care system in our countries EU opp- opportunities big opportunity when we entered the european union er it was strong incentive for economic growth and i think that behind good figures macroeconomic figures is er the EU entering yes because for us was open broad market without without barriers wi- without frontiers wi- without burdens yes we can export import without tariffs and quotas this european union it's one market single market and er it's i think it's strong incentive for economic growth and structural funds we can deplete or use er structural funds first of all first of all for er structural changes in industry and for for inf- infrastructural for instance for highways ro- roads and er first of all for this i- infrastructure counti- countu- continuing education again er as a good example is given in o- in our mass media finland or ireland yes you invested er great amount of money to education is it true er yes er @it's true@ <SU> @@ </SU> @@ and er continuing education it means also education (or) post-graduate ed- education when you you've finished your studies you can you can or you must er pass some post-graduate courses er rise of domestic (edit) value it's big opp- opportunity for instance it's better to export furniture or paper than than than than logs or how it is you right expression lumber lumber yes er instead of instead of er timber timber yes you cut you cut tree you have wood yes and er it's better export p- products made from wood than wood yes because there is higher (edit) value (edit) value er alternative sources of financing er it's er it is (known) public private projects yes we can use er sources from european union from international international institution and so on and and there are corporate governance again it's brink of opportunity how to er improve our national economy and now threats scepticism and er i thought that it's characteristic feature only in our country that people are s- pessimists pessimist yes but maybe similar it would be in your countries and in fin- in in finland i (have heard) in finland are pessimists too are you pessimists or optimists </S1>
<SU> [pessimists] </SU>
<SU> [scepticisms] </SU>
<SU> [we are realists] </SU>
<S1> realists <SS> @@ </SS> scepticism rise of total indebtedness again er our government debt er public debt er er it is below maastricht criteria but tendency is . @impro-@ increasing yes and for the future for for the future it's er it could be dangerous rise of total indebtedness debt public debt is increasing er government debt is increasing and er er foreign debt also but it could be prob- it could be problem during five ten years now it's no problem nowadays (appreciation) in energy prices again the same er it's er it could be mentioned for (your) countries in your presentation energy prices i remember that , price per one barrel at the beginning of 1970s it was i think three dollars per one US barrel one barrel is approximately 159 litres yes and then it was 20 dollars 40 dollars at the end of 1970s then it went down and nowadays maybe (it's er past) er 70 <SU> 70 </SU> 70 dollars per US barrel and it's it could endanger our economy but world economy maybe you have fresh information because i i watch on finnish TV only and i don't understand only i saw mr bush <SS> @@ </SS> that was er erm explaining some problems connected with er oil prices with oil prices and appreciation of currency again it's maybe five five years ago exchange rate between between dollar US dollar and crown it was 40 or 35 czech crowns per one US dollar 40 35 yes and then 30 and nowadays it's only 24 it means the czech crown is appreciated we we have to pay less and less for one US dollar and on the contrary US dollar dollar the real er innovation to the czech crown is depreciated yes the czech currency is appreciated and w- why it is named as a threat because depreciation of national currency it's big advantage for exporters it's er it's example of china of japan and other countries because when you export for instance one machine one machine or some what- er whatever commodity for one million dollars before appreciation the US exporter and producer you will receive one mill- one one million dollars times er 35 crowns and after appreciation of czech currency for the same commodity for the same machine you'll receive one hu- mi- million dollars times only 24 crowns therefore appreciation er promote and initiate import and export is less profitable and er er er (has) problems and our national currency is appreciated during last five ten years appreciating and it's one of advantages of chinese exporters chinese currency is very very depreciated yes undervaluated and therefore so- er therefore (xx) high export surpluses mostly to USA er big (xx) of car makers on GDP maybe you know er we have th- two and during several weeks it we we have big three car makers in our small country first of all volkswagen volkswagen produces approximately half a million cars a year the second big car producer is joi- joint venture do you know this expression joint venture of peugeot citroën french producers plus toyota it's er it is er , japan japanese company and this joint venture they will produce er three hundred thousand cars a year this year and the third producer er entered to our er market to our national market hyundai from south korea and during two years we will we will be on the top as regards number of cars per one per one (hab-) per one inhabitant yes again tomorrow we can discuss risks or advantages i i'm optimist i i think that cars it's other commodities than than for instance er clothe or furniture it it is something like food you we need it every day you can postpone investment for a new car but only half a year one year yes and cars it's it's very very important for for , for companies (th-) and also for personal life for households and therefore i'm optimist it's it is not problem i think and er world economy stagnation or recession again er world economy's is is based on big producers as the USA japan germany yes and first of all i mentioned yesterday first of all the US economy is very very vulnerable very very vulnerable yes because of very high deficit s- er deficit public finance astronomic huge deficit trade balance deficit and government deficit yes there are (im-) and it's problem when china stop er er stops financing through US government obligation shares yes and flow of money to china will be reduced only er it will <COUGH> change er r- rate of exchange between dollar and euro between dollar and other er world currencies and er it could be problem and i suggested only slightly that some analysts worry (at) er erm group analyst groups of analyst they are afraid of this situation on world market and in world economy and again it er it it it influences not only our economy but also all economies and er it's and er now , here are suggestions how to improve business environment in the czech republic efficient institution it's one way lower income taxation corporate taxes er i think it's er well er it's tendency in europe in in all over the world lower and lower corporate taxation and higher and higher indirect taxes as (xx) value added tax and consumption tax (see) on social and health care contribution in your country when you are you you earn er , you earn or you you have very high wage or salary you have to pay not only higher higher higher direct tax- taxes more income but also health care and social contribution and it is progressively increasing and therefore the richest people are against it and i think that next parliament will pass new law new bill on (sea- sealing) of social and health care contribution new bankru- new bankruptcy law again it can help , to clear off business environment yes because i mentioned in our country er there are hundreds thousands enterprises in (xx) bank- bankruptcy and it is not transparent yet there are some problems er tax evasion could be little behind it and so on so on single contract buys for entrepreneurs i i would like to inform that from the june this year it will be complete- completely changed erm it y- you as a as an entrepreneur you can go er to one contract place and you fill in only one form one paper and nowadays to june yes we have to fill in eight papers eight forms yes and er attend dozens various er places and it's it's very very good for entrepreneurs and for business environment and as you have reduced time required to set up business nowadays it last more than 80 days to start business in our country as an example is europe ireland or netherland it it last maybe one week two weeks er do you know how how how is it in your countries approximately yes again you can mention it er it's very very good and very important and strategy for ins- institutional business environment er it is er connected with former slide reorganise er judiciary to reduce the formal character of decisions and (opted by) (xx) or enact a new (xx) act er enhancing the role of (xx) including the legislative process an analysis of the impacts of new legislation eliminate opportunities for corruption in public administration and adopt new regulation on conflicts of interest and again corruption it's problem in our country er there are some er (letters) or lists of countries according perceived corruption it's er somebody can say that it's very , subjective because it is based on enquiries how foreign investors czech investors top managers how how they perceive er corruption in the czech republic yes but something in (xx) yes and again finland denmark er norway they are on the top countries with very low rate of corruption czech republic is i think around 40 40 35 37 i don't know yeah but again you can discuss it and i think that some investors are angry when they paid officially this (core) provision it is not written but approximate ten per cent of (xx) yes or of when you sign some agreement er you can get you can get for instance ten per cent eight per cent off turnover yes but er i think that some foreign investors are angry that they they will pay and after one month one year somebody can say (it) er you you you should (to) pay m- me not y- yes it er it is not transparent it is very complicated and er y- you can discuss this problem and now er , EU commission er elaborated a programme for czech national reforms and this programme is similar and very similar to programmes for finland for other countries it is repeated repeated im- improve regulation and the business environment finland is on high level as regards business eno- envi- environment (xx) yes and again you have to er you have to go and yes again to solve some problems in our country i i explained it set of measures to address potential shortages here in the labour market (especial re- regard to) particular groups such as the young people the elderly and foreigners public finance it was mentioned reforms of pension and health care system (you know) it faces whatever government in our country after general elections but it's very very sensitive problem health care system and also pensions and therefore it is postponed postponed to the future lifelong learning in former (a slide) it was named as continui- continuing education yeah lifelong learning or continuing continuing education and er policies to improve R&D and innovation you know er R- R&D it means research and development programmes again you are in your countries are better as regards expenditures for research and development and similar programme for finland EU commission recommends to finland it's similar similar recommendations but other oth- other levels other level sustainability of public finances the set of measures to promote entrepreneurship and improve the business climate look at figures er the ambitious investment target of four per cent by 2010 and move towards specialisation of research yes it is maybe research (for now) is dispersed is and therefore it must be concentrated on the main problems and safe money increase competition in service markets er it's problem of whole european union maybe you know that some attempts to liberalise er service market or competition in service market again it wasn't solved because there are strong strong national interest in france they are afraid of er workers from eastern europe in germany maybe further in- initiative to keep older workers longer in employment for instance in our country it's finland er but in our country er retired age for , for (me-) women for instance 55 years when you . when you when you has er two children and for men 60 years and nowadays it's 62 years for retirement ages for men 62 and for women it depends on number of children 58 57 yes but again in your countries it would be 65 68 70 maybe maybe and it's end er this er presentation is available and er you can download it during a break or <NAME> can send it by e-mail yes and i think here are er interesting internet sources czech government similar good source could be your national government czech national bank again very good websites are (here) CNB it mean it means czech national bank czech s- s- st- statistical office again millions figures and information very good er source of information are the EU websites and at the end OECD organisation for economic co- cooperation and development and all your countries are member , mexico is also mem- member yes it's 30 33 the most developed coun- countries in the world when you take into account that er in united nations there are organised approximately 200 nations yes and 30 most developed countries and there are very good er comments on national economies international compa- compar- <SIC> comparations </SIC> and so on you can use it and yesterday er yesterday er something was said about my university but here are additional information and you can can you can look at websites of our university or of our faculty and yesterday we (well) it will be time i can open (directly to) internet websites of our town hradec kralove and er you can get more information on hradec kralove and at the end there is presentation i have it also need my (last disc) and er there is official presentation of hradec kralove and er university of hradec kralove , (it's end) thank you for attention and er we can take a break if you want yes and after that break i suggest presentation some of you they have presentation and er we will continue tomorrow with presentations and when it's time and nobody wants to er speak yes we can go back to my presentation and er er discuss er some problems or you can ask me yes you can s- because some problems were only suggested slightly yes and therefore we can revise it repeat it and then could be discussion thank you and have a break </S1>
