A booming economy, relatively low corruption and widely spoken English make the Czech Republic an easy place to do business, but mixed messages from the government and growing Euroscepticism could discourage some investors.
It’s great to be back in Prague. The city has become more polished and cosmopolitan than when I first visited a few years ago. Gone are the rowdy stag parties; these days bars and restaurants are filled with well-heeled tourists. Prague no longer feels like a step across an imagined barrier between West and East but a place firmly located in the very centre of Europe.
Compared to its European neighbours, business in the Czech Republic is booming. Although remnants of the Soviet-era political elite are still entrenched in the system, the country’s close economic ties to neighbouring Germany make Czech Republic, and particularly Prague, an attractive investment destination. Many Western companies have chosen to establish their bases here because corruption is low, there’s a well-educated professional cadre and it is easy to get by speaking English. And with the Central Bank keeping inflation near zero since 2012, you will get more for your koruna than for a euro further to the west, even though salaries in the Czech Republic are relatively low.
The Czech economy has been going from strength to strength and the country is seen as a success story in post-Communist Eastern Europe. Manufacturing and exports, benefiting from the weak koruna, are strong. According to the Ministry of Industry and Trade, virtually all European car manufacturers use parts made in the Czech Republic. The Czech Republic is the only recipient of funds from the European Bank of Reconstruction and Development to have turned into a donor.
However, developments since the summer – particularly the mass movement of migrants across Europe – have given rise to protectionist political rhetoric and Euroscepticism. Greece’s parlous financial state has also taken its toll on Czech public opinion, with some voicing fears that Czech’s vibrant economy may be jeopardised by financial burdens imposed by Brussels. President Miloš Zeman has even ruled out adopting the euro unless Greece leaves, in spite of the views of the vast majority of the business community that further integration with the European market would greatly reduce transaction costs. In echoes of the rise of populism across the continent, Far Right politician Tomio Okamura, ironically born in Tokyo to a Japanese-Korean father, has been gaining popularity with repeated calls for immigrants to be repatriated.
Although potentially troubling, especially given the political shift to the right in neighbouring Poland and Hungary, these changes are broadly mirrored across Europe and shouldn’t sway anyone’s decision on investing in the country. The country in general, and Prague in particular, have made significant strides in the past 25 years and the Czechs take pride in their achievements. With Europeans flocking to Prague in ever increasing numbers and the success of the country’s heavy industry, it would be wrongheaded to both sectors and pull up the drawbridge.