Ministry of Industry and Trade

Transcription

1 Ministry of Industry and Trade

2 : In behalf of MIT prepared: Branch development section, Administrative section, Policy section, Energy sector section, Trade economic relations and services section External collaboration: Ministry of Agriculture Translation: Jan Kraus, Dipl. Ing. Design and pre-press: Radix Co. Ltd. Printing: Ekon, družstvo Jihlava 2

3 Dear distinguished readers, You are opening the nineth edition of the yearbook, which has been for you prepared by the Ministry of Industry and Trade in collaboration with the Ministry of Agriculture, however, this time under modified title Panorama of the manufacturing industry and associated services of the Czech Republic As it already follows from the title, the publication has passed again through some major changes this year, which do not relate to the publication structure of its own, for it remains the same as in the foregoing year. It concerns its enlargement, which seems to be in connection with the manufacturing industry well-founded, for it is the question of publication complement by the selected branches from the sector of services. The sector of services is quickly developing area of the world economy. It makes up a principle share in the creation of GDP and employment. For illustration, in the Czech Republic the sector of services is employing around 65% of workforce and participates by almost 60% in the total production. Thus it is meaningful for economic development in the country. The services are a driving force of the economic growth and employment in most of the Member-States of the EU and their mutual interconnection with the industry is very close. And they are just industry and services, which contributed mostly to the growth of gross value added in The Czech industry had proven a dynamic growth in 2005, similarly as in a couple of the foregoing years, namely in all basic indicators. The Czech industrial firms are highly competitive and so participate by a fairly big extent in the current excellent results of the entire economy. The industry is also significantly contributing to decreasing unemployment, when only during the last year it created altogether 20 thousand new jobs. A part of the industry, which we are talking about as the manufacturing industry, plays also an essential role in the developed economy, for it belongs in the advanced economies among the decisive resources of the creation of the Gross Domestic Product. The publication contains a brief analysis of the manufacturing industry for the period from 2000 to 2005 and analysis of the selected services for the period from 2000 to Attached is then CD, on which you will find the detailed information about each of the listed manufacturing branches. The detailed information will be simultaneously published at Internet web-sides of the Ministry of Industry and Trade. Experience of the last years and your response as readers present the credible evidence that the publication Panorama of the Czech Industry takes a considerable concern. It is namely giving to the wide expert community in our country as well as in abroad a possibility to acquaint with the reached level of the manufacturing industry. At the same time it awards the opportunity to present results of the Czech firms internationally. I believe that the publication furthermore remains to be an indispensable resource of information and acquisition for all of you, be connected with the manufacturing industry occupationally or it presents just a sphere of your interest. Ing. Milan Urban Minister of Industry and Trade 3

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5 CONTENT List of used abbreviations / 10 Manufacturing industry according to valid Branch Classification of Economic Activities (NACE) / 11 MANUFACTURING INDUSTRY NACE D / Main production indicators / Employment / Foreign trade / Investments / Perspectives / 17 MANUFACTURE OF FOOD PRODUCTS, BEVERAGES AND TOBACCO PRODUCTS DA / Manufacture of food products and beverages NACE 15 / Main production indicators / Employment / Foreign trade / Investments / Branch perspectives / 21 MANUFACTURE OF TEXTILES AND TEXTILE AND CLOTHING PRODUCTS DB / Manufacture of textiles and textile products NACE 17 / Main production indicators / Employment / Foreign trade / Investments / Branch perspectives / Manufacture of wearing apparel, dressing and dyeing of fur NACE 18 / Main production indicators / Employment / Foreign trade / Investments / Branch perspectives / 30 MANUFACTURE OF LEATHER AND LEATHER PRODUCTS DC / Tanning and dressing of leather, manufacture of handbags, saddlery and the like goods and footwear NACE 19 / Main production indicators / Employment / Foreign trade / Investments / Branch perspectives / 34 MANUFACTURE OF WOOD AND WOOD PRODUCTS DD / Processing of wood, manufacture of products of wood, cork, wicker and straw except furniture NACE 20 / Main production indicators / Employment / Foreign trade / Investments / Branch perspectives / 38 5

6 MANUFACTURE OF PULP, PAPER AND PAPER PRODUCTS; PUBLISHING AND PRINTING DE / Manufacture of pulp, paper and paper products NACE 21 / Main production indicators / Employment / Foreign trade / Investments / Branch perspectives / Publishing, printing and reproduction of recorded media NACE 22 / Main production indicators / Employment / Foreign trade / Investments / Branch perspectives / 46 MANUFACTURE OF COKE, NUCLEAR FUELS, REFINING OF PETROLEUM DF / Manufacture of coke, nuclear fuels, refining of petroleum NACE 23 / Main production indicators / Employment / Foreign trade / Investments / Branch perspectives / 50 MANUFACTURE OF CHEMICALS, PREPARATIONS, PHARMACEUTICALS AND MAN-MADE FIBRES DG / Manufacture of chemicals and chemical products NACE 24 / Main production indicators / Employment / Foreign trade / Investments / Branch perspectives / 55 MANUFACTURE OF RUBBER AND PLASTIC PRODUCTS DH / Manufacture of rubber and plastic products NACE 25 / Main production indicators / Employment / Foreign trade / Investments / Branch perspectives / 59 MANUFACTURE OF OTHER NON-METALLIC MINERAL PRODUCTS DI / Manufacture of other non-metallic mineral products NACE 26 / Main production indicators / Employment / Foreign trade / Investments / Branch perspectives / 63 6

7 Content MANUFACTURE OF BASIC METALS AND FABRICATED METAL PRODUCTS DJ / Manufacture and processing of basic metals NACE 27 / Main production indicators / Employment / Foreign trade / Investments / Branch perspectives / Manufacture of structural and fabricated metal products NACE 28 / Main production indicators / Employment / Foreign trade / Investments / Branch perspectives / 71 MANUFACTURE AND REPAIRS OF MACHINERY AND EQUIPMENT DK / Manufacture and repairs of machinery and equipment NACE 29 / Main production indicators / Employment / Foreign trade / Investments / Branch perspectives / 75 MANUFACTURE OF ELECTRICAL AND OPTICAL EQUIPMENT DL / Manufacture of office machinery and computers NACE 30 / Main production indicators / Employment / Foreign trade / Investments / Branch perspectives / Manufacture of electric machinery and equipment NACE 31 / Main production indicators / Employment / Foreign trade / Investments / Branch perspectives / Manufacture of radio television, and communication equipment and apparatus NACE 32 / Main production indicators / Employment / Foreign trade / Investments / Branch perspectives / Manufacture of medical, precision, optical and time measuring instruments NACE 33 / Main production indicators / Employment / Foreign trade / Investments / Branch perspectives / 92 7

8 MANUFACTURE OF TRANSPORT MEANS AND EQUIPMENT DM / Manufacture of motor vehicles, manufacture of trailers and semi-trailers NACE 34 / Main production indicators / Employment / Foreign trade / Investments / Branch perspectives / Manufacture of other transport equipment NACE 35 / Main production indicators / Employment / Foreign trade / Investments / Branch perspectives / 100 MANUFACTURING DN / Manufacture of furniture; manufacturing not elsewhere classified NACE 36 / Main production indicators / Employment / Foreign trade / Investments / Branch perspectives / Recycling of secondary raw materials NACE 37 / Main production indicators / Employment / Investments / Branch perspectives / 107 INTRODUCTORY COMMENTARY ON PILOT PROJECT within the framework of the yearbook Panorama of the Manufacturing Industry and Sector of Associated Services / Selected services (NACE and 55, and 71 74) / Characteristics of the branches of selected services / The main production indicators of the branches of selected services / Employment in branches of selected services / Investments / Perspectives of the branches of selected services / Distribution services G and H (NACE ) / Main economic indicators of the NACE G and H / Employment in NACE G and H / Investments / Perspectives of the NACE G and H / 118 WHOLESALE AND RETAIL TRADE, REPAIR OF MOTOR VEHICLES, MOTORCYCLES AND PERSONAL AND HOUSEHOLD GOODS / Sale, maintenance and repair of motor vehicles and motorcycles; retail sale of automotive fuel NACE 50 / Main production indicators / Employment / Investments / Branch perspectives / 121 8

9 Content 27. Wholesale trade and commission trade NACE 51 / 122 (except of motor vehicles and motorcycles) 27.1 Main production indicators / Employment / Investments / Branch perspectives / Retail trade, except of motor vehicles and motorcycles; repair of personal and household goods NACE 52 / Main production indicators / Employment / Investments / Branch perspectives / Hotels and restaurants NACE 55 / 128 (services in the area of accommodation and boarding) 29.1 Main production indicators / Employment / Investments / Branch perspectives / Business related services NACE K / Main production indicators / Employment / Investments / Branch perspectives / 132 REAL ESTATE, RENTING AND BUSINESS ACTIVITIES / Real estates activities NACE 70 / Main production indicators / Employment / Investments / Branch perspectives / Renting of machinery and equipment without operator and of personal and household goods NACE 71 / Main production indicators / Employment / Investments / Branch perspectives / Computer and related activities NACE 72 / Main production indicators / Employment / Investments / Branch perspectives / Research and development NACE 73 / Main production indicators / Employment / Investments / Branch perspectives / Other business related services NACE 74 / Main production indicators / Employment / Investments / Branch perspectives / 147 9

10 LIST OF USED ABBREVIATIONS joint-stock co. IPT cur. p. CEFTA CMGDB CNB CZ CSO EIA EC EFTA EU EUR GATT HCCP GDP TFA HIGH-TECH n.e.c. MIT NACE OECD OKEC OPIB VA const. p. SEA SEVESO CPA SOP Ltd. USD own P&S WTO M USD WTO R&D BRS approx. resp. Joint Stock Company Inward Processing Trade current prices Central European Free Trade Agreement (Poland, Czech Republic, Slovakia, Hungary, Slovenia, Romania, Bulgaria) Czech-Moravian Guarantee and Development Bank Czech National Bank Czech Republic Czech Statistical Office Environmental Impact Assessment on the level of the individual plans European Community European Free Trade Association European Union (Austria, Belgium, Czech Republic, Cyprus, Denmark, Estonia, France, Finland, Germany, Great Britain, Greece, Hungary, Ireland, Italy, Latvia, Lithuania, Luxembourg, Malta, Netherlands, Poland, Portugal, Slovakia, Slovenia, Spain, Sweden) European Crrency Unit General Agreement on Tariffs and Trade Hazards and Critical Check Points Analysis Gross Domestic Product Tangible Fixed Assets technically very demanding products not elsewhere classified Ministry of Industry and Trade Statistical Classification of Economic Activities in the European Community Organisation for Economic Cooperation and Development Czech Branch Classification of Economic Activities Operational Programme Industry and Business value added constant prices Strategic Environmental Assessment accidents prevention Standard classification of products, which is practically equal to the international Classification of Products by Activities Sector Operational Programme Limited Liability Company US dollar own products and services World Trade Organization manufacturing industry US dollar World Trade Organization research and development business related services approximately respectively 10

11 Manufacturing industry according to valid Branch Classification of Economic Activities (NACE) Section Subsection* 1 Division* 2 D DA DB MANUFACTURING INDUSTRY Food and tobacco industry 15 Manufacture of food and beverages 16 Processing of tobacco Textile and clothing industry 17 Textile industry 18 Clothing industry DC 19 Leather industry DD 20 Wood-processing industry DE Paper and printing industry 21 Manufacture of pulp, paper and paperboard 22 Publishing, printing and reproduction of recorded media DF 23 Manufacture of coke and refining of petroleum DG 24 Chemical and pharmaceutical industry DH 25 Rubber and plastic industry DI 26 Glass, ceramics, porcelain and building material industry DJ Manufacture of basic metals and fabricated metal products 27 Manufacture and processing of basic metals 28 Manufacture of structural and fabricated metal products DK 29 Manufacture of machinery and equipment DL DM DN Manufacture of electrical and optical equipment 30 Manufacture of office machinery and computers 31 Manufacture of electric machinery and equipment 32 Manufacture of radio, television, and communication equipment and apparatus 33 Manufacture of medical, precision, optical, and time measuring instruments Manufacture of transport means and equipment 34 Manufacture of motor vehicles, manufacture of trailers and semi-trailers 35 Manufacture of other transport means and equipment Manufacturing N.E.C. 36 Manufacturing of furniture; manufacture n.e.c. 37 Recycling of secondary raw materials Note: for the purpose of this publication are used also titles * 1 sector; * 2 branch In the table are listed only abbreviated titles of sub-sections and divisions. In the publication are listed the title of sub-section and divisions in compliance with the valid branch classification of economic activities. 11

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13 NACE D MANUFACTURING INDUSTRY NACE D The manufacturing industry in the Czech Republic (CZ) takes a significant share in creation of the gross domestic product. In 2005, after correction made by the Czech Statistical Office, its share on GDP amounted to 25,2% (by 0,2% less than in 2004). In total receipts of the industry the manufacturing branches shared 91,5% (+ 0,3% as compared with 2004), whereas the production and distribution of electric energy, gas and water participated by 6,4% (- 0,1% as compared with 2004), and mining of raw materials by 2,1% (- 0,2% as compared with 2004). The highest growth rates of the main production indicators showed, similarly as in 2004, the subsections, which are based on the knowledge economy and are creating higher value added. On the contrary the branches, which are labour and raw materials intensive, were stagnating. The Czech economy belonged also in 2005 among dynamically developing countries and its performance gap behind the average of the EU-25 has again decreased. In 2005 GDP per capita in the CZ achieved about 73% of the average of the EU-25 and thus among initial memberstates we have already got ahead of Portugal. 1.1 Main production indicators As it is obvious from the detailed overview at the beginning of this publication, the manufacturing industry is divided into 14 subsections (sectors), 23 divisions (branches) and 103 groups (lines). The share of individual branches in main production indicators in 2005 (in current prices) is presented in Figure 1. Figure 1: Share of the branches in main production indicators of the manufacturing industry in 2005, in current prices % Number of employees Value added Source: CSO, MIT estimate, 2005 = preliminary data The main production indicators of the manufacturing industry are shown in Table 1. As it follows from the more detailed analysis of the Table 1, the decisive share in receipts (in current prices) of the manufacturing industry have four subsections: DM 16,4%, DJ 16,3%, DL 14,3% and the fourth place has been maintained by the subsection DA 10,6%. Clearly the lowest share in receipts in 2005 was recorded in the subsections DC (0,23%) and DB (2,47%), thus it concerns the branches, which are most affected by intense competition, namely from Asia, and belong among suppressing ones. Furthermore Table 1 shows that the receipts of the manufacturing industry (in constant prices) in the last six years have increased by 52% and the biggest inter-annual growth was recorded in 2004 (+ 12,6%). We may positively assess the growth in 2005 (+ 9,6%) as well. The more considerable slow-down of the growth rate was reported in value added (the 2004/2005 index 105,2), even in spite of high growth in the subsections, which are export-oriented on the advanced industrial world. 13

14 Table 1: Main production indicators of the manufacturing industry, in , in constant prices (Mill. CZK, employees) * Receipts from sales of own P & S , , , , , ,3 Year-on-year index x 110,8 105,4 105,6 112,6 109,3 Cumulative index ,8 116,8 123,3 138,9 151,8 Value added , , , , , ,2 Year-on-year index x 108,1 101,3 105,3 109,3 105,2 Cumulative index ,1 109,5 115,3 126,0 132,5 Labour productivity from VA 353,1 369,6 385,7 412,4 454,6 471,3 Year-on-year index x 104,7 104,4 106,9 110,2 103,7 Cumulative index ,7 109,2 116,8 128,7 133,5 Number of employees , , , , , ,0 Year-on-year index x 103,3 97,0 98,5 99,1 101,4 Cumulative index ,3 100,3 98,7 97,9 99,3 Source: CSO, MIT estimate; *preliminary data, const. p. of 2000 The indicator of labour productivity from value added was developing favourably in the entire period under review, while enhancement in 2005 amounted to 3,7% (in 2004 it was by more than 10%). Clearly, the subsection DF (CZK thousand per employee) has taken the first position in the ranking of this indicator. However, also the subsections DM (CZK 893 thousand per employee) and DG (CZK 892 thousand per employee) reported high values, on the contrary the lowest values showed the subsections DC (CZK 170 thousand per employee) and DD (CZK 233 thousand per employee). In general, we may say that substantially higher productivity has been achieved by the enterprises with foreign capital (by 60 to 80%) than that ones with Czech owners. 1.2 Employment Figure 2 shows that most of the workers in 2005 were employed in the category of medium-sized enterprises with employees (26%, in 2004 it was less by 1%) and in the category (25%, similarly as in 2004). Else 31% of the employees of the manufacturing industry were employed in the category of micro-enterprises (0 9 employees) and small ones up to 49 employees, however, their share in the receipts was only half (16,5%). Figure 2: Employment structure, according to the size of enterprises, in the manufacturing industry, in and more 18 % % % % Source: CSO, MIT estimate; 2005 = preliminary data % 14

15 NACE D As it follows from the detailed analysis, the number of employees reached its peak in 2001, when exceeded 1,4 millions, after it started declining. Only last year it grew up again, it was inter-annually by 1,3%, though the development in individual subsections was diverse. Whereas relatively high increases in 2005 were reported in the branches, which are experiencing economic boom, i.e., subsections DJ ( ), DM ( ), DH ( ) and DL ( ), the most considerable employment decline took place in the subsections DB ( ), DA ( ) and DC (- 771). By the Resolution of the CZ Government No. 566/2004 Coll., the Programme of support to creation of new jobs in the regions mostly affected by unemployment was approved. From the statistics of MIT it follows that as on 15th December 2005 altogether 35 applications were submitted, where the companies declared to invest in total more than CZK 1,4 billions and create new jobs. Most projects are to be located in South Moravian region (12) and Moravian-Silesian region (8). Generally, it may be assumed, and some outside institutions like OECD and European Commission have also confirmed it, that business environment in the CZ is successively improving with dynamically developing economy. However, considerable weaknesses henceforth exist, which is valid namely for small and medium-sized enterprises. These enterprises have quite difficult access to finances and are without qualified management. Energy intensity is still high and some old ecological burdens remain to be unsolved. A number of enterprises must meet with additional costs on implementation of the new chemical legislation REACH, the enterprises are annoying with excessive and non-functional administration, etc. A positive role accordingly can be represented also by the state administration and to the improvement of state of affairs could contribute financial means from the structural and other funds as well. 1.3 Foreign trade The trade exchange belongs in the CZ among the main driving forces in economic development, which is documented in Table 2. Table 2: Foreign trade development in CPA products, in (Mill. CZK) Export , , , , , ,4 Import , , , , , ,6 Balance , , , , , ,8 Year-on-year index 00/99 01/00 02/01 03/02 04/03 05/04 Export x 113,9 98,9 109,1 125,7 108,3 Import x 112,4 96,8 108,8 122,2 102,6 Source: CSO, data available as on As it is obvious from Table 2, the foreign trade turnover (export + import) in the period from 2000 to 2005 increased by 58%, out of which export by 67,3% and import by 48,5%. In 2005 the positive trade balance increased 2,5 times as compared with 2004 and it has already approached to CZK 153 billions. The positive balance in 2005 was recorded with a majority of the main trade partners Germany, Slovakia, Austria, France and Poland. On the contrary the largest unfavourable balance was with China, then with Japan, Russian Federation, Italy, Switzerland, and so on. The export performance of the manufacturing industry is ranging in recent years within 50 to 55%. In 2005 the highest level of this indicator was recorded in CPA 30 (110,4%), CPA 32 (85,5%) and CPA 34 (76,1%). On the contrary the lowest export performance occurred in CPA 19 (4,4%), CPA 22 (13,6%) and CPA 15 (13,4%), which follows, with the exception of leather industry, from character of the production, which is largely determined for domestic market. Also in this year the foreign trade with products of the manufacturing industry shows a favourable develop- 15

16 ment as its balance for January through March 2006 has attained positive value of CZK 25,5 billions (+ CZK 1,7 billions, when compared with the similar period of 2005). The export during those three months has increased by 17,5%, however, import by 18,2% and we may therefore expect that the positive balance could be again within a range of CZK billions, i.e. roughly in the level of As to the territorial structure, the more significant changes were not registered in the last year. The key trade partner of the CZ remains to be henceforth Germany, where 34% of all manufacturing industry products are exported to, and the share of import is 33%. The turnover with Germany amounted in 2005 to CZK billions, thus it is on the level of The second place, as to the turnover volume, is occupied by Slovakia, followed by Poland and France. 1.4 Investments The gross tangible investments into the manufacturing industry in 2005 increased more slowly than in 2004 (+ 5,9% in comparison with 16% in 2004) and achieved less than CZK 144 billions. The largest investments were channelled into the subsections DM (CZK 39,3 billions), then DJ (CZK 16,8 billions) and DK (CZK 16,8 billions), i.e., mostly into the branches, which are currently experiencing economic boom. The system of investment incentives has proven to be good in the CZ. The incentives significantly contribute to dynamic growth of the CZ economy, growth of competitiveness and labour productivity from value added. Within the framework of the system, by the end of 2005, in total 249 incentives in the overall volume of investments of CZK 307 billions were afforded. These projects will create new jobs. In the very year 2005 MIT 16

17 NACE D decided on 57 investment incentives in the overall volume over CZK 40 billions, while they will create new jobs. During the period of most of the investment incentives received the companies from Germany (60), CZ (39), Japan (32) and Netherlands (21). The main destinations of these incentives were Region of Ústí nad Labem, Central Bohemian and Moravian-Silesian region, i.e., with the exception of Central Bohemian region, the regions mostly affected by high unemployment rate. A subject of growing liking is also a number of supports, which are established for small and medium-sized enterprises. It concerns, for example, the support of industrial zones development green field sites and brown field ones. Altogether 92 industrial zones were supported from the state budget by the end of Another activity is the Programme for support of creation and enlargement of technological centres. In case of technological centres 37 entrepreneurial subjects received the support and 19 firms involved in the area of strategic services. Among them there is also a number of the companies recognized internationally (e.g. Panasonic, Rieter, Honeywell, ExxonMobil, etc.). Also the Programme of support to creation of new jobs, mentioned already in the chapter concerning employment, is successfully continuing. Besides that, in 2005 within the Programme Záruka altogether 333 guarantees were afforded to industrial production amounting to CZK billions. It related from a great part to price-preferred guarantees. In 2005 the total influx of foreign direct investments attained the second highest amount, over CZK 263 billions, which is more than double of the value in The reason behind is a number of large privatisation projects (e.g. Telefonica, Vítkovice Steel, UNIPETROL etc.). The predominant share in the foreign direct investments is related to the countries of the EU-25 (over 94%). The volume of indigenous investments in abroad declined inter-annually, namely to CZK 20,5 billions (approx. CZK 900 millions) on the contrary. It concerned mainly the projects in the area of energy and pharmacy. 1.5 Perspectives The Czech economy has been recently in a very good shape, best during the last 16 years. GDP in 2005 increased by 6% and indicator of GDP per capita in the parity of purchasing power achieved 73% of the average of the EU. It is clear that the CZ, but also other new member-states, have undoubtedly benefited from the accession to the EU. The CZ is taking advantage of the wave of interest of foreign investors, relatively stable economic environment, from better access to unified EU market and removal of trade barriers connected with it. The legislation is gradually approaching West standards. Also the situation in research and development is slowly improving, though the share of GDP provided for this purpose is still strongly lagging behind industrially advanced world. There exist reserves in business undertaking, namely in relation to medium class (access to funds, large administration, etc.). The nearest perspectives of the CZ economy as well as the manufacturing industry of its own have been assessed positively by most of the experts. GDP growth forecasts for 2006 are ranging from 5,5% (International Monetary Fund) to 7,5% (some representatives of the government). The development should be supported by continuous influx of foreign direct investments (FDI), which are channelled not only to automotive industry, but also to manufacture of screens, foodstuff industry, enlargement of net of pumping stations and so on. The position of the CZ economy will be undoubtedly strengthened by utilization of financial means from the structural funds, but also by proven system of investment incentives and by the system of other supports (small and medium-size business undertaking, clusters, export support, etc.), respectively. In general, it is expected that the CZ along with Slovakia will remain this year as well as in the next year the main drivers of the economy in the region of the Central Europe with the highest dynamics of GDP and other indicators. 17

18 MANUFACTURE OF FOOD PRODUCTS, BEVERAGES AND TOBACCO PRODUCTS DA 2. Manufacture of food products and beverages NACE 15 The foodstuff industry processes production of traditional agriculture in particular, namely both for nutrition of the population, which is the basic mission of this branch and for non-food use. Ensuring of foodstuff safety, at surplus of foodstuffs in the EU and accession of the Czech Republic (CZ) into the unified market, has been the main priority in the manufacture of food products and beverages in recent years. The strategy focused on foodstuff safety is related to all elements of the food chain. The manufacture of food products and beverages NACE 15 is, however, also important product segment of the manufacturing industry. With a 10,2% share in receipts in current prices in 2005, the industry under review is one of four decisive manufacturing branches. At the same time the decisive shares in receipts, in current prices, in the manufacture of food products and beverages belong to the four groups. It concerns the manufacture of other food products, in which dominates mainly the manufacture of bakery and confectionery products (26%), production, processing and preserving of meat and meat products (22%) and then manufacture of beverages (20%), processing of milk and manufacture of ice-cream (16%). In the period the manufacture of food products and beverages was not attaining such a high growth rate as within the entire manufacturing industry. The indicator of value added of the NACE 15 reported relatively fluctuating level and in total, stagnation in the course of the said period. Only number of employees in the monitored branch, which is still under restructuring, was declining more quickly than that one within the entire manufacturing industry. 2.1 Main production indicators From the development of the main production indicators of the manufacture of food products and beverages presented in Figure 1 and Table 1 it follows that more considerable decline of employment took place in 2005, whereas within the entire manufacturing industry the number of employees, thanks to quickly developing branches, increased on the contrary. Figure 1: Main production indicators in NACE 15, in constant prices, in Index 2000 = Number of employees Value added Receipts from sales of own P & S Labour productivity Source: CSO, MIT estimate, 2005 = preliminary data; const. p. of

19 NACE 15 A successive reduction of the number of employees in the manufacture of food products and beverages in the period under review contributed to overall trend of enhancement of labour productivity from value added, with the exception of 2001 and 2005, when the indicator of labour productivity declined as a consequence of reduction of value added. Within the group structure of the assessed production, the NACE 15 is reporting a quite favourable development trend in the indicator of value added of the manufacture of beverages, however, in current prices only. Table 1: Main production indicators in NACE 15, in , in constant prices (Mill. CZK, employees) * Receipts from sales of own P & S , , , , , ,2 Year-on-year index x 101,7 104,2 99,2 102,5 101,8 Cumulative index 100,0 101,7 105,9 105,1 107,7 109,7 Value added , , , , , ,1 Year-on-year index x 97,1 100,3 103,3 103,2 96,9 Cumulative index 100,0 97,1 97,4 100,6 103,9 100,7 Labour productivity from VA 355,7 348,2 354,2 372,5 394,4 393,6 Year-on-year index x 97,9 101,7 105,2 105,9 99,8 Cumulative index 100,0 97,9 99,6 104,7 110,9 110,7 Number of employees Year-on-year index x 99,2 98,6 98,2 97,5 97,1 Cumulative index 100,0 99,2 97,8 96,1 93,7 91,0 Source: CSO, MIT estimate; * preliminary data, const. p. of Employment From the Figure 2 indicating the size structure of employment in NACE 15 branch in 2005 it follows that the largest number of the employees, almost one third (32%), is occupied in middle-sized enterprises ( employees). One-fourth (25%) of employees is employed in the large enterprises ( employees) and about 21% in small-sized ones. Even smaller share (14%) is occupied in very large organizations (1000 and more employees). The smallest share of the employees of the branch (8%) is employed in micro-enterprises, which usually deliver only various regional specialities on the local markets. Figure 2: Employment structure, according to the size of enterprises, in 2005 NACE and more 14 % % % % Source: CSO, MIT estimate; 2005 = preliminary data % 19

20 The level of wages and labour costs and dynamics of their growth in NACE 15 branch is lower than in the manufacturing industry. In 2005 as compared with 2004, the labour costs in NACE 15 grew up by 1,4%, whereas in the manufacturing industry by 7,4%. Higher dynamics of wages growth in 2005 was recorded only in the large enterprises, which also more significantly increased growth rate of receipts in the said year, unlike other size categories of enterprises of the branch. With respect to importance of middle-sized enterprises in the company structure of the branch under review, which occupy the largest share in the number of employees, it is efficient to establish for these companies a favourable business environment including a possibility of participation in suitable support programmes drawing down financial means from the national sources and the EU funds as well. It is also desirable to support small-sized firms, which are undertaking from a greater part in the countryside and creating necessary jobs there. A rather stronger economic position is occupied by important enterprises of the branch, whose competitive advantages are usually underpinned by the size of the company, foreign capital and export performance. The largest enterprises in the size category with and more employees in NACE 15 branch are, according to the number of employees, as follows: Plzeňský Prazdroj, joint-stock co., Plzeň (beer production), PENAM, Ltd., Brno (manufacture of pastry), Nestlé Česko, Ltd., Praha (manufacture of confectionery), MADETA, joint-stock co., České Budějovice (milk and dairy production), DELTA PEKÁRNY, joint-stock co., BRNO (manufacture of pastry), Kostelecké uzeniny, joint-stock co., (production of meat and meat products), Opavia-LU, joint-stock co., Praha (manufacture of confectionery), UNILEVER ČR, Ltd., Praha (manufacture of fats) and Coca-Cola Beverages, Ltd., Praha (manufacture of alcohol-free beverages). Important foodstuff enterprises are involved in different groups of the branch and in a number of regions, however, some of them picked Capital of Prague as their place of business. 2.3 Foreign trade The balance of the foreign trade with food products and beverages (Table 2) has been permanently worsening since 2002, and in 2005 it attained negative value of almost CZK 19 billions also at significant growth of the export since Development in the foreign trade of the branch under review remains all the time under strong impact of the import, advantageous conditions of which have been created for. From the analysis of the commodity structure it followed that a considerable deteriorating of negative balance had become evident especially in meat and meat products, namely thanks to faster rate of the import of these products into the CZ, when compared with the lower growth dynamics of their export. Dairy products and beverages have been permanently the sole product groups with positive balance of the foreign trade. Table 2: Foreign trade development in CPA 15 products, in (Mill. CZK) Export , , , , , ,4 Import , , , , , ,1 Balance , , , , , ,7 Year-on-year index 00/99 01/00 02/01 03/02 04/03 05/04 Export x 116,8 91,1 107,2 128,9 114,5 Import x 107,8 101,0 108,6 125,1 112,1 Source: CSO, data available as on Investments With regard to the size structure of the entrepreneurial base in NACE 15 branch, investment support in 2005 was applied mainly in small and medium-sized enterprises. It concerns contributions granted in the volume of CZK 2,1 millions, which presents, however, only 1,1% out of their overall paid volume, credits in the amount of CZK 125,5 millions, while their share amounted to l10,0% from the provided credits, and then guarantees amounting 20

21 NACE 15 to CZK 175,7 millions at preferential treatment amounting to CZK 42,3 millions, which presents a 5,3% share from the volume of this kind of supports. However, in comparison with the foregoing years, this kind of support of NACE 15 branch is declining and does not correspond with importance of small and medium-sized undertakings in the branch. It also does not correspond with the need to make permanently investments with the aim to ensure foodstuff safety and enhancement of their competitiveness on the unified EU market. The volume of foreign direct investments in the CZ within NACE 15 branch as on 31st December 2004 increased to CZK 45,3 billions, which represents a 8,8% share in the manufacturing industry. Also indigenous investments in abroad as on 31st December 2004 increased and attained CZK 1,3 billions, which is the share of 12,4% in the manufacturing industry. 2.5 Branch perspectives Development in the branch of the manufacture of food products and beverages NACE 15 has been recording a relatively low growth rate since With respect to saturation of the EU unified market in the segment of foodstuffs, we can expect neither in medium-term horizon more considerable growth rate of the branch production. Therefore it is desirable to pay attention especially to factors, which will bring about an enhancement of quality of foodstuffs and enrichment of their assortment including utilization of effective marketing and an enlargement of branded products. In order to strengthen the position and competitiveness of the monitored branch, it is necessary to create a favourable business environment, to maintain suitable programmes of the support focused on foodstuff safety, quality and higher grade of production processing, and innovating activities connected with. It is also desirable to achieve closer interconnection of science and research with business practice. The utilization of these factors will furthermore enhance branch export performance of the manufacture of food products and beverages and its broader joining into the EU unified market and world trade, where the most notable enterprises of the branch can penetrate, in particular. The small and medium-sized enterprises of the branch can contribute to development in business undertaking and maintain employment in the countryside in individual regions of the CZ in compliance with their conceptual plans. 21

22 MANUFACTURE OF TEXTILES AND TEXTILE AND CLOTHING PRODUCTS DB 3. Manufacture of textiles and textile products NACE 17 The textile industry is an export-oriented branch with a short innovation cycle of the products replacement. According to the type of processed raw materials, it is divided into the cotton, linen, wool and knitwear industries. Most of the textile industry manufacturers operates in more technological stages. In 2005 the manufacture of textiles and textile products participated by 2,0% in receipts of the manufacturing, by 4,2% in number of employees and by more than 2,5% in value added. The share of the given indicators in the manufacturing industry had been permanently decreasing in the time series since 2000 to The reason is the growing competition of the Asia countries, in particular, furthermore the liberalization of trade with textile products, exchange rate effects and the growth of costs, especially the growth of energy prices. 3.1 Main production indicators The development in the main production indicators of the textile industry in the period from 2000 to 2005 was manifested by stagnation of receipts from sale of own products and services with a slight increase of value added in constant prices and by the decrease of the number of employees by almost 18,4 thousand. The strengthening competition, accompanied by the gradual liberalization of the world market, evoked the need of manufacture restructuring associated with a closure of non-effective plants and limitation of the manufacture of standard products. The growth of labour productivity from value added, when compared with 2000, was the largest in the groups 17.5 Manufacture of other textile products except wearing apparel, namely by 81,6% and 17.4 Manufacture of Manufacture of made-up textile articles, except apparel with an increase by 32,0%. Within these groups the textiles designed for technical use have a significant share in enhancement of labour productivity, where the largest development of sophisticated manufactures has been reported. 22

23 NACE 17 Figure 1: Main production indicators in NACE 17, in constant prices, in Index 2000 = Number of employees Value added Receipts from sales of own P & S Labour productivity Source: CSO, MIT estimate, 2005 = preliminary data; const. p. of 2000 Table 1: Main production indicators in NACE 17, in , in constant prices (Mill. CZK, employees) * Receipts from sales of own P & S , , , , , ,4 Year-on-year index x 107,4 89,9 98,9 100,5 100,5 Cumulative index 100,0 107,4 96,6 95,5 95,9 95,9 Value added , , , , , ,2 Year-on-year index x 104,4 89,0 104,5 102,2 102,2 Cumulative index 100,0 104,4 92,9 97,1 99,2 99,2 Labour productivity from VA 243,7 255,4 249,2 285,2 323,8 323,8 Year-on-year index x 104,8 97,6 114,4 113,5 113,5 Cumulative index 100,0 104,8 102,3 117,0 132,9 132,9 Number of employees , , , , , ,0 Year-on-year index x 99,6 91,2 91,3 90,0 90,0 Cumulative index 100,0 99,6 90,9 83,0 74,7 74,7 Source: CSO, MIT estimate; * preliminary data, const. p. of 2000 Stagnation or moderate decline of the productivity was recorded in the manufacture of knitting and crocheting products (NACE 17.7) and textiles finishing (NACE 17.3). 3.2 Employment Employment structure, according to the size of enterprises, is given by character of the industry, its technological and innovation intensity. The major companies with implementation of the new technologies are decreasing the number of employees (in 2005 the share declined by 4% as compared with 2004) and more small and mediumsized companies are emerging (inter-annual increase of the share by 3%). 23

24 The branch does not have an important representation in the regions touched by high rate of unemployment. The branch attained the highest share in employment in Region of Hradec Králové, namely almost 7,2%. The average monthly wage in 2005 in organizations with 20 a more employees amounted to CZK , which is an increase by 4,9% as compared with the foregoing year. The average wage in the branch of the textile industry represents 73,1% of that one in the manufacturing industry. New jobs in the branch of the textile industry are being created in a limited way, mostly by use of the Act No. 72/2000 Coll., on investment incentives in the valid wording, and by participation of foreign capital. Figure 2: Employment structure, according to the size of enterprises, in 2005 NACE and more 19 % % % Source: CSO, MIT estimate; 2005 = preliminary data % % The business environment of the branch is currently mostly influenced by termination of the force of WTO Agreement on textiles and clothing (as on 31st December 2004), by trade liberalization and by import of standard products in lower price relations from Asian countries. Business environment is furthermore negatively influenced by the growth of energy prices and minimum wages, which are enhancing costs. The state administration is taking a significant share in preparation of measures, directed to the EU common market protection against sinister practices in trade with the textile products, and has adopted measures to an effective implementation of the market inspection by the supervision bodies of the Czech Commercial Inspection (ČOI) under participation of the police and custom service servants. An important position within the branch of the textile industry is occupied by the manufacture of other textiles, except apparel (NACE 17.5), which includes the manufacture of technical textiles. The foreign capital is involved in the group, whereas a successful restructuring and modernization of the production is being under way by use of the act on investment incentives. The group has been recording an important increase in receipts from sales of own products and services (by 62,0% in const. p.), value added (by 68,7% in const. p.) and labour productivity from value added (an increase by 81,6% in const. p.) since The expenditures on research and development in this group in 2005 were exceeding two-times the value of incurred costs on research and development per employee in the textile industry. On 14th March 2006 under co-participation of the regional institutions and Technical University Liberec, the cluster of technical textiles CLUTEX was established in the area with the largest share of the textile industry, i.e., in North-East Bohemia, the main objective of which is to speed up implementation of innovation changes and results of science and research into the industrial production. 3.3 Foreign trade The direct export of the textile industry products into the EU (25) inter-annually increased by approx. 3% in 2005 and its share in the total direct export amounted to approx. 82,5%. The average export price per kilogramme inter-annually increased by 4,9% in 2005, thanks to change of export products structure in favour of the products designed for technical application and more demanding products designed for ready-made processing. 24

25 NACE 17 Table 2: Foreign trade development in CPA 17 products, in (Mill. CZK) Export , , , , , ,3 Import , , , , , ,5 Balance 4 054, , , , , ,8 Year-on-year index 00/99 01/00 02/01 03/02 04/03 05/04 Export x 109,5 88,9 104,6 109,2 97,9 Import x 104,7 96,7 99,7 112,6 96,8 Source: CSO, data available as on Less than 18% of the direct exports of the textile industry products are from the CZ channelled into the EU non-member countries and almost 21% of products, mainly materials for production consumption, cotton yarns, bedding, table, wash-room and kitchen linen, are imported into the CZ from the EU non-member countries. As to the territories outside the EU, the textile products were mostly placed into Turkey, USA, Russia and Switzerland. 3.4 Investments Investments into the machinery and equipment are on a low level and do not correspond to the needs of production restructuring and implementation of the new technologies. In spite of the fact, that a few important modernization projects in the recent period were running in the textile industry under the support of investment incentives, which concerned both the organizations under foreign capital control and the domestic investors, the investment activity in the Czech textile industry is low as compared with that one in the EU countries. As on 29th May 2006 altogether 12 projects of the textile industry companies were supported in compliance with the Act No. 25

26 72/2000 Coll., in the valid wording. The aim of these projects was to support implementation, enlargement or modernization of the production. The foreign investors are interested in the textile industry branch. The reasons are low production costs, proximity of advanced markets and qualified workforce. In 2005 altogether 40 active units represented the organizations under foreign control (with 100 and more employees), which is 37% of the total number of active units. The companies under foreign control shared 38,5% in outcomes of the textile industry organizations with 100 and more employees and 37,3% in value added. To the support of business development in the textile and clothing industry branch, mainly in small and medium-sized enterprises, financial means both from the state budget and the EU resources are released through programmes published by the Ministry of Industry and Trade. It concerns namely Operational Programme Industry and Business (OPIB), programmes to the support of research and development, investment incentives etc. The small and medium-sized enterprises of the textile and clothing industry branch received altogether 37 supports in Branch perspectives Strengthening competition on the world markets (after termination of force of the WTO Agreement on textile and clothing (as on 31st December 2004) has caused problems to the Czech manufacturers in placing the products on these markets. Market opening decreased the prices of a number of standard textile products and the companies, which did not respond in time on this fact, did not succeed in placing their products on these markets. Consequently, it manifested in limitation of the manufacture of standard products, eventually in its termination as well. On the contrary the companies, which took advantage of available supportive tools for the production restructuring and which were implementing new modern technologies, manufacture of special kinds of products or products with the new use properties and higher value added, have succeeded in placing these products on the world markets. Such a development is in compliance with the conclusion of the Strategy of the textile and clothing industry, which was conducted by the Association of the textile, clothing and leather industry under cooperation with the member enterprises and under coordination with the Ministry of Industry and Trade. A vision of the textile and clothing industry for the period till 2010 has become a gradual change from the manufacturer of the textile and clothing products, having a character of low value added commodity, to the branch manufacturing intelligent products for personal and production consumption. The target group of the products and technological innovations have become the products included among three pillars of the European technological platform for the textile and clothing industry: Fashion and functional clothing Progressive fibres and processing technologies Technical and industrial textiles. 26

27 NACE Manufacture of wearing apparel, dressing and dyeing of fur NACE 18 The branch of the manufacture of wearing apparel, dressing and dyeing of fur is a labour intensive thanks to high share of manual labour in the product. It belongs among an export oriented branches with a high grade of cooperations with external contractors, mainly from the EU member countries. It prevails the manufacture in small series and in the recent years ready-made manufacture on order has been of use. The clothing industry belongs among sensitive branches, which are exposed to great competition pressures mainly from countries with own resources of raw materials and low labour costs. In 2005 the manufacture of wearing apparel, dressing and dyeing of fur shared 0,5% in receipts of the manufacturing industry, 0,8% in value added and 2,3% in number of employees. Participation of the clothing industry in the manufacturing industry has been else declining since 2000, however, its importance for employment, mainly in the regions with the clothing industry tradition (Region of Olomouc, Vysočina region, South Moravian region and others), remains furthermore considerable. 4.1 Main production indicators From development in the main production indicators, i.e., number of employees, value added and receipts from sale of own products and services it follows that the branch in 2005 did not achieve the level of This status quo has been influenced by the growth of imports of the clothing industry products from countries with lower production costs, namely from Asian ones (China and India) associated with the completion of trade liberalization with the textile and clothing products. Furthermore there were other factors e.g. exchange rate effects, decrease of newly concluded orders especially on the domestic market and enhancement of costs, the growth of energy prices, in particular. A decline of receipts from sale of own products and services in 2005, based on qualified forecasts, will be apparently more moderate as it follows from the completed results of the branch statistical survey in organizations with 20 and more employees (a decline by 3,8%, inter-annually). Employment reached in % of that one in Reduction of the number of employees is given by the need to downsize enterprises and to enhance labour productivity at decreasing costs. It is being furthermore supported by implementation of a new technique and technology into the production. Labour productivity from value added in the monitored period from 2000 to 2005 recorded the growth in Figure 1: Main production indicators in NACE 18, in constant prices, in Index 2000 = Number of employees Value added Receipts from sales of own P & S Labour productivity Source: CSO, MIT estimate, 2005 = preliminary data; const. p. of

28 Table 1: Main production indicators in NACE 18, in , in constant prices (Mill. CZK, employees) * Receipts from sales of own P & S , , , , , ,9 Year-on-year index x 95,5 112,8 84,1 105,4 93,1 Cumulative index 100,0 95,5 107,7 90,6 95,5 88,9 Value added 9 244, , , , , ,1 Year-on-year index x 86,1 116,7 89,4 118,0 78,8 Cumulative index 100,0 86,1 100,4 89,8 105,9 83,5 Labour productivity from VA 154,1 138,9 173,8 172,3 232,0 205,1 Year-on-year index x 90,2 125,1 99,2 134,6 88,4 Cumulative index 100,0 90,2 112,8 111,8 150,6 133,1 Number of employees , , , , , ,0 Year-on-year index x 95,5 93,3 90,1 87,7 89,1 Cumulative index 100,0 95,5 89,0 80,3 70,4 62,7 Source: CSO, MIT estimate; *preliminary data, const. p. of 2000 constant prices by 33,1%, which was achieved both by the decline of the number of employees and partially also by the implemented production modernization and restructuring focused on the products with higher value added and use properties. Nevertheless, a great part of the clothing industry still remains in the manufacture of the standard kinds of products, where exists a keen competition from the third countries. 4.2 Employment Employment structure, according to the size of enterprises, follows from the entire character of the branch. The small, medium-sized and micro enterprises (0 9 employees) in 2005 shared more than 75% of the total employment in the branch. The average monthly wage in the clothing industry is the lowest average wage in the CZ industry. In 2005 it amounted to CZK , which presented 58% of the average wages in the manufacturing industry. New jobs in the branch are created at a minimum level. Business environment in the branch is currently mostly influenced by the keener competition on the world markets with the textile and clothing products due to termination of the force of the Agreement on textile and Figure 2: Employment structure, according to the size of enterprises, in 2005 NACE % 1000 and more 18 % % Source: CSO, MIT estimate; 2005 = preliminary data % % 28

29 NACE 18 wearing apparel as on 31st December 2004, by legal growth of minimum wage and by an increase of energy prices. As a consequence the non-effective productions are closed down and the less demanding manufactures are transferred to countries with low production costs. From the regional aspect the highest representation, as to the employment, was reported in Region of Olomouc (approx. 4,5%). In 2005 out of 364 organizations with 20 and more employees, 20,6% of organizations operated under foreign control. In the size group with 100 and more employees there were 14 companies under foreign control. 4.3 Foreign trade The trade exchange of the branch achieved a top turnover in the last two years. In 2005 the turnover amounted to CZK 54,4 billion and was influenced both by growth of export and import. At the same time export in 2005 increased both into the EU countries and the countries outside the EU as well. A share of direct export of clothing products into the EU in the total direct export amounted to 91,5% in The most important trade partners among the EU countries were Germany, United Kingdom of Great Britain and Northern Ireland, Slovakia, Poland and Austria. The total imports were growing by quicker rate from the third countries (China, India, Bangladesh, Turkey). Development in the foreign trade in the period from 2004 to 2005 had been also influenced by the accession of the CZ into the EU. It was manifested by the change of foreign trade statistics, simplification of custom proceedings and further development of collaboration of the manufacturing enterprises in the EU. The production transfers from some EU member countries with higher costs to the CZ were influencing development in foreign trade as well. The foreign trade in CPA items was influenced by the high share of commercial goods both in export and import. It is witnessed in high increases of imports of some assortments, e.g., women s and men s trousers manufactured from cotton (denim type), tricots and so on, with their simultaneous partial export. The kilogramme price of direct export of CPA 18 products into the EU in 2005 increased by more than 20% as compared with Import kilogramme price, both in imports from the EU and also from the third countries, remained on the level of Table 2: Foreign trade development in CPA 18 products, in (Mill. CZK) Export , , , , , ,5 Import , , , , , ,6 Balance 7 918, , , ,1-774,1-864,1 Year-on-year index 00/99 01/00 02/01 03/02 04/03 05/04 Export x 98,8 86,3 95,2 132,7 113,4 Import x 110,6 101,6 97,9 158,0 113,3 Source: CSO, data available as on Investments The manufacture of wearing apparel, dressing and dyeing of fur does not belong among investment intensive branches, nevertheless, the investments into the branch are small with regard to insufficient capital possibilities of the enterprises. They are also one of the reasons, why the production productivity is lagging behind that one of the EU countries. The total tangible investments amounted in 2005 to CZK 267 millions and they decreased by 18%, inter-annually. In the period under review any major investment project in the manufacture of wearing apparel, dressing and dyeing of fur had not been implemented and any company of the clothing industry has not used yet the Act No. 72/2000 Coll., on investment incentives in the valid wording. 29

30 The branch is typical for a high grade of co-operation relations. Within these relations the needed technical equipment is being loaned out and all documentation is being transferred. The state of affairs of foreign direct investments in the branch of the manufacture of wearing apparel, dressing and dyeing of fur is low. In 2004 it amounted to less than 0,2% of the total foreign direct investments in the manufacturing industry. To the support of business development, namely in the small and medium-sized enterprises (SMEs), financial means both from the state budget and the EU resources are being released through programmes published by the Ministry of Industry and Trade. It concerns mainly the Operational Programme Industry and Business (OPIB), programmes to the support of research and development, investment incentives etc. In 2005 within the framework of the programmes on development of small and medium-sized enterprises the contributions to 14 organizations of the textile and clothing industry were provided, 18 organizations received guarantees and 4 organizations credits, respectively. The textile and clothing industry got about 5,4% of the total supports. Within the framework of the OPIB the decision on granting of the subsidy was made for two enterprises of the clothing industry and for 16 applications of the textile industry branch. 4.5 Branch perspectives Appraisal of the clothing industry perspective is difficult and will depend on a number of the factors, which are particularly as follows: Manufacture of the new kind of products of higher generation with fast implementation of the research results into the production and the higher innovation grades. Within the clothing manufacture it concerns mainly fashionable and functional clothing, technical and industrial clothing but also a rising of new offering groups (readymade manufacture on order, fashion for young customers with fast assortment alteration /a few days/ and so on.); Ability of the enterprises to continue in the commenced production restructuring in favour of the products with a high share of value added, with new use and functional properties and of high quality; Speed of implementation of the results of R&D into the production not only in the clothing industry but especially in the textile one; Focus on model manufacture and designing activity and development of industrial services due to a possibility of the transfer of less demanding manufactures to the countries with lower production costs (Asia and newly also the countries around Mediterranean Sea); Improvement of the access on the markets of the third countries, enforcement of the rules of honourable trade, including protection of rights of mental property, within the framework of next round of the many-sided commercial negotiations of the WTO; Effective and efficient use of the support provided to the industry from the state budget means and resources of the EU. Nevertheless, we may say that the clothing industry of the CZ is maintaining its position within the EU, which is also witnessed in the fact that the largest clothing company Oděvní podnik, joint-stock co., Prostějov is ranking among the first Europe Five of the clothing manufacturers. 30

31 NACE 19 MANUFACTURE OF LEATHER AND LEATHER PRODUCTS DC 5. Tanning and dressing of leather, manufacture of handbags, saddlery and the like goods and footwear NACE 19 The leather industry branch is divided on the basic manufacturing, which presents tanning and dressing of leather, and final manufacturing. The importance of the basic manufacturing is decreasing in relation with a decline of the manufacture of footwear. The branch is an export intensive one, when the receipts from export forms approximately a half of receipts from sale of own products and services (own P&S). In 2005 the branch within the manufacturing industry shared approx. 0,2% in receipts from sale of own products and services (in current prices), 0,3% in value added and approx. 0,8% in number of employees. Unfavourable development in most of the main production indicators of the NACE 19 branch was influenced by the great competition on the world market with the standard kinds of footwear and trade liberalization including termination of quantity quotas imposed on import of some kinds of footwear from Asian countries, especially from China. Also the small ability of the companies to change production structure because of the shortage of financial capital leaded to the current unsatisfactory status quo. 5.1 Main production indicators The largest drop of receipts from sale of own products and services in the period from 2000 to 2005 were recorded in the groups 19.1 Tanning and dressing of leather (by more than 69%, while a decline by approx. 31,8% is expected as compared with 2004) and 19.3 Manufacture of footwear (less than 45%, a decline by approx. 6,6% is expected compared with 2004). In 2005 it succeeded to reverse a negative development in the group 19.2 Manufacture of handbags, saddlery and the like goods. As compared with 2004, it is expected that receipts from sale of own products and services in this group will increase by approx. 14,3% and of the number of employees by approx. 11,9%. Within the monitored period from 2000 to 2005 the number of employees in the branch decreased by almost 10 thousand persons, out of which more than three-fourths of the employees were working in the manufacture of footwear. Figure 1: Main production indicators in NACE 19, in constant prices, in Index 2000 = Number of employees Value added Receipts from sales of own P & S Labour productivity Source: CSO, MIT estimate, 2005 = preliminary data; const. p. of

32 Though the largest representation in receipts from sale of own P&S according to assumed results in 2005 was reported in the group 19.3 Manufacture of footwear, namely 52%, nevertheless, its importance is permanently decreasing. In 2000 its share in this indicator amounted to approx. 59,8%. On the contrary the share of the group 19.2 Manufacture of handbags, saddlery and the like goods increased from 27,5% to 42%. A positive development in the labour productivity from value added during the last two years of the period under review had been achieved by closure of non-effective plants and limitation of standard products manufacture. A prominent position in the production structure is occupied by the manufacture of men s walking shoes with leather upper part (approx. 43,2%) and waterproof footwear with rubber upper part (approx. 14,5%). Among the products of handbags, saddlery and the like goods the largest part was represented by the manufacture of diminutive fancy goods (purses etc) with 26,2% and luggage (24,1%). Table 1: Main production indicators in NACE 19, in , in constant prices (Mill. CZK, employees) * Receipts from sales of own P & S 9 675, , , , , ,7 Year-on-year index x 88,8 82,5 83,0 98,6 98,9 Cumulative index 100,0 88,8 73,3 60,9 60,0 59,4 Value added 3 280, , , , , ,2 Year-on-year index x 84,9 77,9 86,9 101,7 95,5 Cumulative index 100,0 84,9 66,1 57,5 58,4 55,8 Labour productivity from VA 158,2 140,7 130,6 146,2 166,4 170,4 Year-on-year index x 89,0 92,8 112,0 113,8 102,4 Cumulative index 100,0 89,0 82,5 92,5 105,2 107,7 Number of employees , , , , , ,0 Year-on-year index x 95,4 83,9 77,6 89,3 93,3 Cumulative index 100,0 95,4 80,1 62,1 55,5 51,8 Source: CSO, MIT estimate; *preliminary data, const. p. of Employment Figure 2: Employment structure, according to the size of enterprises, in 2005 NACE % % % Source: CSO, MIT estimate; 2005 = preliminary data % 32

33 NACE 19 The largest share in employment of the branch in 2005 was reported by the organizations having from 50 to 249 employees (approx. 49%). When compared with 2004, their share increased by 5%. The regions of Zlin and Vysočina and South Moravian region represented the largest share of the branch in employment. The share of the branch in the overall employment in Region of Zlin was approx. 1,9%, in Vysočina region approx. 1,1% and South Moravian region approx. 0,5%. The average monthly wage in the branch (in organizations having from 20 and more employees) amounted in 2005 to less than CZK (by more than 5,2% as compared with 2004), which presents approx. 64,6% of the average monthly wage in the manufacturing industry. Among the largest companies within the leather industry belong: KAZETO, Ltd., Přerov manufacture of the like goods, PRABOS plus, joint-stock co., Slavičín manufacture of footwear, NOVESTA, joint-stock co., Zlín manufacture of footwear, BAŤA, joint-stock co., Dolní Němčí manufacture of footwear. 5.3 Foreign trade Table 2: Foreign trade development in CPA 19 products, in (Mill. CZK) Export 9 081, , , , , ,0 Import , , , , , ,9 Balance , , , , , ,9 Year-on-year index 00/99 01/00 02/01 03/02 04/03 05/04 Export x 103,8 78,2 89,2 127,6 105,6 Import x 111,9 98,6 94,5 113,9 106,6 Source: CSO, data available as on The foreign trade with leather products has been long-term recording negative balance, which is to a great extent caused, even in spite of certain custom limitations, by excessive imports from China. In 2005 as compared 33

34 with 2004, the volume of imports of footwear from China increased by 23,7 million of pairs, while the average declared price declined by CZK 8,0 at CZK 46 per pair. The EU member countries present the decisive market for the Czech exporters. In ,5% of direct exports were channelled into these countries, when compared with 2004, the share of the EU in direct exports dropped by approx. 1,5%. The situation on the internal EU market is influenced by the considerable increase of import of footwear from the third countries, which increased in the period from 2002 to 2005 by 57,8%. In 2005 the largest share in imports to the EU countries was recorded by China (39,4%) and Vietnam (17,1%). Within the framework of the EU the largest customers of the Czech leather products are Germany (CZK 1,4 billion) and Slovakia (CZK 1,3 billion). The structure of the exported goods is being furthermore improved, which manifests in the growth of the kilogramme prices. 5.4 Investments The investment activity in the leather industry is lagging behind the claims and requirements, which are being posed on the modern production facilities and also behind the need of the manufacture restructuring. The lack of financial resources for implementation of the investment plans as well as the fact that the structure of the production base is concentrated in the small and medium-sized enterprises with limited investment possibilities are also in a great extent contributing to the situation. Within the framework of the support to the small and medium-sized business undertaking two companies have utilized a contribution within the Programme TRH certifikace in the total amount of CZK 0,2 millions and two companies have received the guarantees within the Programme ZÁRUKA amounting to CZK 4,8 millions with price-preferred treatment of CZK 900 thousand. 5.5 Branch perspectives We may suppose that the competition in trade with the leather industry products will be furthermore enhancing mainly from the side of manufacturers with low costs of workforce, i.e., mostly manufacturers from Asian countries. As an answer to this situation, some advanced countries of the EU are and will be responding by a transfer of the manufacture of the standard goods into these countries with low costs. If the manufacturers of the leather goods want to face to this disadvantage, they must also specialize in the future on implementation of manufactures of certain kind of goods with higher share of value added, specific use properties, qualitative parameters and so on. Such products may arise by interconnection of the manufacturers with the scientific and technology base, with the suppliers of raw materials and with the distributors of goods. For this reason, establishing of the footwear cluster with use of the support from the Operational Programmes Industry and Business (OPIB) is being prepared in the Region of Zlin. Within the framework of the collaboration inside of the cluster the companies intend to focus especially on: Support of specific innovations and new technologies, Support of export, Enhancement of markets knowledge, Training, education and human resources. 34

35 NACE 20 MANUFACTURE OF WOOD AND WOOD PRODUCTS DD 6. Processing of wood, manufacture of products of wood, cork, wicker and straw except furniture NACE 20 The processing of wood belongs among the export oriented branches of the Czech Republic (CZ) manufacturing industry. It concerns the branch, which is reasonable environment friendly and utilizing firs-rate renewable domestic raw material wooden mass. The share of the branch in GDP amounts to 0,8%. There is sufficient number of raw wooden mass in the Czech forests and growth reserves are increasing. Nevertheless, either in 2005 it did not manage to halt a certain tension and uncertainty in supplies of wooden mass to the manufacturing organizations, which is valid mainly for small and medium-sized enterprises. The branch within the CZ manufacturing industry in 2005 shared 2,8% in receipts from sales of own products and services, 3,2% in created value added and 5,6% in number of employees. Positively may be evaluated the enhancement of the manufacture of products with higher value added, which confirms a decline of the share of saw-milling and impregnation of wood (by 5%), and the strengthening of the position of the manufacture of builders carpentry and joinery (by 2%) in receipts from sales of own products and services within the NACE 20 branch as compared with The branch is healthy, also in 2005 it maintained its export character. In 2005 as compared with 2004, receipts from sales of own products and services increased by 7,5% and foreign trade attained positive balance of CZK 13,3 billions. 6.1 Main production indicators In 2005 the branch was taking advantage of the favourable development in the Czech economy and of the creation of new jobs on the domestic market (construction industry, automotive industry, agriculture, packing industry etc.). It was supported also by an enhancement of the demand of the main customers on the internal EU market Germany and Austria. Within the branch the largest share is occupied by micro enterprises (more than 96%). Investment possibilities of small and medium-sized enterprises are limited because of difficult access to financial resources and insufficient mutual collaboration. In spite of moderate drop in labour productivity from value added in 2005, dynamics of its addition from the past years remained high and it was being ensured mainly Figure 1: Main production indicators in NACE 20, in constant prices, in Index 2000 = Number of employees Value added Receipts from sales of own P & S Labour productivity Source: CSO, MIT estimate, 2005 = preliminary data; const. p. of

36 Table 1: Main production indicators in NACE 20, in , in constant prices (Mill. CZK, employees) * Receipts from sales of own P & S , , , , , ,8 Year-on-year index x 111,3 107,6 104,8 104,8 107,0 Cumulative index 100,0 111,3 119,8 125,5 131,5 140,7 Value added , , , , , ,2 Year-on-year index x 127,2 102,1 97,6 102,9 99,3 Cumulative index 100,0 127,2 130,0 126,9 130,5 129,6 Labour productivity from VA 184,8 216,7 236,8 219,0 234,7 232,5 Year-on-year index x 117,3 109,3 92,5 107,2 99,0 Cumulative index 100,0 117,3 128,1 118,5 127,0 125,8 Number of employees , , , , , ,0 Year-on-year index x 108,5 93,5 105,6 96,0 100,3 Cumulative index 100,0 108,5 101,4 107,1 102,8 103,1 Source: CSO, MIT estimate; *preliminary data, const. p. of

37 NACE 20 by medium-size and large enterprises with foreign participation, in particular. Establishing and activity of cocalled clusters is becoming a potential contribution. The number of employees in the branch in 2005 increased in a moderate way as compared with 2004, which may be evaluated positively from the social point of view, in particular. 6.2 Employment Due to its employment possibilities the processing of wood is contributing namely in distant regions, in places, where the population has minimum opportunities to find a job, respectively. It concerns quite often a family manufacture within the size category of micro enterprises up to 9 employees. The contribution of this activity can be seen especially in social direction ( people have a job ), because labour productivity and attained technical level as well as products quality are universally lagging strongly behind the medium-sized and large enterprises. The additions of wages in the branch in 2005 were substandard ones and the average monthly wage (CZK ) is lagging behind that one in the Czech manufacturing industry by more than CZK The business environment is with respect to the existing number of entrepreneurial subjects highly competitive one. In the branch there are small and medium-sized enterprises (from 10 to 249 employees), out of which 911 small-sized enterprises and 142 medium-sized ones, respectively. This group of enterprises is participating mainly in the manufacture of builders carpentry and joinery (NACE 20.3). The large enterprises, due to demanding and expensive production technology, are ensuring especially the saw-milling (NACE 20.1) and the manufacture of agglomerated wooden products (NACE 20.2). From the regional view on employment the dominant position is occupied by Vysočina region, where employment is exceeding the average of the CZ by 24,7%. The share of this region in receipts from sales of own products and services is approx. 20%. Other strong regions, as to employment, are South Moravian region, Region of Plzeň and South Bohemian region. Figure 2: Employment structure, according to the size of enterprises, in 2005 NACE % % Source: CSO, MIT estimate; 2005 = preliminary data % % 6.3 Foreign trade The decisive volumes of supplies from the branch were in 2005 channelled into Germany (in total 36% of overall export) and Austria (15%). Among other EU countries the high share was still taken by Italy (8%) and Slovakia (6%). Except Italy, the above-presented countries are also the main exporters into the CZ (Germany 30%, Austria 14%, Slovakia 10%). In spite of moderate decline in foreign trade as compared with 2004, favourable trends have been recorded in export structure in the direction to higher participation of sawn wood, where higher prices are being recorded. It concerns namely export of needle-leaved sawn wood, which increased in 2005 by approx. 9% as compared with Enhancement was also recorded in export of agglomerated products. Among the main manufacturers of these products in the CZ belong KRONOSPAN CZ, Ltd., in Jihlava and 37

38 Dřevozpracující družstvo (co-operative) Lukavec in Lukavec. Also the main manufacturers of the wooden constructions in the CZ were running successfully RD Rýmařov, Ltd., and Haas Fertigbau, Ltd., Chanovice (district Klatovy). This company was executing successfully the order from Italy for the manufacture and supply of wooden houses for Winter Olympic Games. Table 2: Foreign trade development in CPA 20 products, in (Mill. CZK) Export , , , , , ,1 Import 9 856, , , , , ,7 Balance , , , , , ,4 Year-on-year index 00/99 01/00 02/01 03/02 04/03 05/04 Export x 104,3 90,6 106,2 119,2 98,9 Import x 102,0 101,7 109,9 115,9 99,1 Source: CSO, data available as on Investments Investment activity in the branch was in 2005 higher by approx. CZK 1 billion as compared with 2004, and it attained the value of CZK 3,3 billions. The largest investment project in 2005, which was supported by investment incentive, was a start-up of the plant for the manufacture of agglomerated boards with oriented wood chips (socalled OSB boards) in the company KRONOSPAN CZ, Ltd., in Jihlava. It concerns perspective kind of boards with a broad use mainly in the building industry, but also in interiors. Among other investment projects, which are being prepared, it is necessary to mention the construction of a new capacity for the manufacture of construction and building sawn wood of the company Haas Fertigbau Ltd., Chanovice in the period , an enlargement of the manufacture of board materials in the company DESK FORM in Újezdeček, district Teplice in the period and implementation of the manufacture of threelayer wooden boards in the company Czech Lana Ltd., in Ždírec nad Doubravou, district Havlíčkův Brod in the period It concerns implementation of the investments projects supported by investment incentives. The NACE 20 branch within the framework of the support of small and medium-sized enterprises has received the guarantees for the credits in the amount of CZK 53,1 millions, whereas the volume of supports amounted to CZK 15,3 millions. The contributions, which were provided within the Programme TRH (18 projects), amounted to CZK 1,5 millions. 6.5 Branch perspectives With regard to the need of further enhancement of competitive ability of the branch, it will be necessary in the upcoming years to adjust existing production structure of wood processing to that one of the EU countries so that it may be achieved an enhancement of the share of the manufacture of products with higher and high value added. It will be needful accordingly to increase the manufacture of agglomerated materials and products of the group of builders carpentry and joinery, in particular. Also concentration of the manufactures into the larger units will be important in the years to come. Permanently extending capital interaction among forestry industry companies and the manufacturers from the branch is also contributing to the perspective development and needful stabilization in the branch. The Czech manufacturers processing renewable wood mass are from the view of quality as well as price the required suppliers of their products both on the domestic and on the markets of other EU countries and elsewhere in the world. The branch has preconditions to attain the level meeting the highest qualitative requirements. It should also match the challenges, which are being presented by globalisation of the world market. 38

39 NACE 21 MANUFACTURE OF PULP, PAPER AND PAPER PRODUCTS; PUBLISHING AND PRINTING DE 7. Manufacture of pulp, paper and paper products NACE 21 The pulp and paper industry belongs among the perspective and competitive branches of the Czech Republic (CZ) manufacturing industry with a good environmental performance. Its products are penetrating in all other branches not only of the manufacturing industry. It is based on the renewable raw materials largely of domestic origin and the recyclable material is always in a greater extent participating in the inputs. The branch has been implementing the strategy of permanently sustainable development for a couple of years. It belongs among investment intensive branches, also with use of investment incentives. The manufacture of pulp and paper is running in closed cycle. It is greatly energy intensive one in spite of the fact that energy consumption is mostly covered from the renewable resources. The branch in 2005 participated within the CR manufacturing industry by 2% in the indicator of receipts from sales own products and services (own P&S), 2,5% in created value added and 1,5% in number of employees. 7.1 Main production indicators Figure 1: Main production indicators in NACE 21, in constant prices, in Index 2000 = Number of employees Value added Receipts from sales of own P & S Labour productivity Source: CSO, MIT estimate, 2005 = preliminary data; const. p. of 2000 From analysis of the main production indicators it follows: Permanent growth of receipts from sales of own P&S in the period from 2000 to 2005, Permanent growth of value added (in 2004 by 18,6% and in 2005 by 13,4%, inter-annually), Number of employees is changing in dependence on implementation of the new automatized capacities into the manufacture accompanied with simultaneous enhancement of the production, Permanent growth of labour productivity from value added in the period from 2000 to 2005 (the highest interannual increase was recorded in 2004, namely by 17,4%, in 2005 then by 12,1%). 39

40 Table 1: Main production indicators in NACE 21, in , in constant prices (Mill. CZK, employees) * Receipts from sales of own P & S , , , , , ,8 Year-on-year index x 106,2 103,8 102,0 111,1 105,6 Cumulative index 100,0 106,2 110,2 112,4 124,8 131,8 Value added , , , , , ,7 Year-on-year index x 112,4 97,3 103,5 118,6 113,4 Cumulative index 100,0 112,4 109,4 113,1 134,2 152,1 Labour productivity from VA 675,5 727,1 701,7 746,3 876,1 981,9 Year-on-year index x 107,6 96,5 106,4 117,4 112,1 Cumulative index 100,0 107,6 103,9 110,5 129,7 145,4 Number of employees Year-on-year index x 104,5 100,8 97,3 101,0 101,2 Cumulative index 100,0 104,5 105,3 102,4 103,4 104,7 Source: CSO, MIT estimate; *preliminary data, const. p. of Employment In the size structure of employment within the branch the dominant position belonged in 2005 to the large companies with the share of 49% and to medium-sized companies with the share of 32%. The branch attained in 2005 the average monthly wage in the amount of CZK , which presented an increase by 1,7% as compared with the foregoing year, and it was slightly above the level of the average wage in the manufacturing industry. From the regional point of view the branch has reported the largest share in employment in the regions of Olomouc (1,6%), Ústí nad Labem (1,5%) and South Bohemia (1,3%). Out of the total number of 147 enterprises with 20 and more employees there are 35 subjects under foreign capital control (28,3%). The highest share of the subjects under foreign capital control is presented in the large enterprises, out of which 11 enterprises present 52,4% of the organizations of the size category above 250 employees in the branch. Figure 2: Employment structure, according to the size of enterprises, in 2005 NACE % % Source: CSO, MIT estimate; 2005 = preliminary data % % 40

41 NACE 21 41

42 7.3 Foreign trade In the period from 2000 to 2005 export of CPA 21 products was reporting a permanently growing trend, which was brought by the enhanced demand for pulp and products of paper and paperboard. There was also enhanced interest in first-rate packing. Import in the last three years was increasing in a faster way due to the growth of demand for special kinds of products of paper. In spite of these facts the adverse balance of foreign trade has been decreasing. The traditional and the largest trade partner is Germany, which shares 22% in export and 34% in import. In export Germany is followed by Slovakia (13%), Poland (12%) and Italy (8%), and in import by Austria (9%), Slovakia and Poland (8% both), respectively. Table 2: Foreign trade development in CPA 21 products, in (Mill. CZK) Export , , , , , ,3 Import , , , , , ,6 Balance , , , , , ,3 Year-on-year index 00/99 01/00 02/01 03/02 04/03 05/04 Export x 102,4 98,5 105,4 108,5 109,4 Import x 105,4 98,7 106,0 110,5 101,8 Source: CSO, data available as on Investments The volume of foreign direct investments in the pulp and paper industry branch attained the level of CZK 22,5 billions, which is an increase by 10,7% as compared with the foregoing year. Foreign direct investments within manufacturing industry amounted to CZK 513,3 billions, with an increase by 10,5% as compared with foregoing year. Two companies have submitted an application for investment incentives. The Czech pulp and paper companies invested in abroad in the similar year CZK 543,4 millions. 7.5 Branch perspectives The pulp and paper industry branch is competitive one, at the same time it is the largest manufacturer and user of energy generated from the renewable resources. A sufficient number of the basic raw material (wood) is the decisive factor determining competitiveness. The pulp and paper industry has been permanently reducing negative impact of its production activity on environment. All manufacturers have established environmental management systems. Since 1992 the significant reduction of all kinds of pollution has taken place, namely as many as by 90%. The consumption of paper and paperboards, in spite of the dynamic growth in the CZ, has not yet reached the level of the EU advanced countries. However, further growth of this indicator, up to the amount of consumption around 200 kg per citizen, can be expected. Achievement of this level by enhancement of import would not be economically effective. There is a possibility to build up a new super-duper factory for the manufacture of paper, where the plant will be meeting the most severe environmental rules. The perspective outlooks of the branch are also underlined by the fact that it concerns the branch based on the permanently renewable resources of the raw materials, which is utilizing possibilities of the easy recycling of its own products, i.e., the branch, which is generally being kept for an environment friendly one. 42

43 NACE Publishing, printing and reproduction of recorded media NACE 22 The publishing and printing industry differs by its character from the other branches of the manufacturing industry, for it is processing information to tangible products, which have the form of newspapers, journals, books, mercantile and recorded sound and video media. Its products are interfering with all areas of our life. The branch consists of the publishing activities, printing and reproduction of recorded sound and video media. The NACE 22 branch shared in ,8% in receipts from sales of own products and services (own P&S) within the manufacturing industry, 2% in value added and 1,8% in number of employees The publishing and printing industry branch was reporting permanent dynamic growth in all indicators under review in the period from 2000 to In 2005, a slight decline was recorded, which was caused especially by decline of the demand for recorded sound media. 8.1 Main production indicators In 2005 receipts from sales of own P&S in constant prices recorded a slight decline (0,3%) as compared with the foregoing year. The decline by 5,4% was reflected in the manufacture of recorded sound and video media, the sales of which is inter-annually decreasing. The sale of the classical LPs in 2005 was maintaining in the level of around 4 millions pieces as compared with the foregoing year, on the contrary the sale of the CD media is declining. The reason of this status quo is especially widely spread pirate recording of sound records from internet to MP 3 recorders, which are replacing CD and MC walkmans. In the Czech Republic (CZ) in 2005 more than thousand pieces of DVD media were sold, which is an increase by 26% as compared with the foregoing year. Sales enhancement accordingly was supported by the significant reduction of prices of DVD media. Since May 2005 ever the larger number of the distributors has become to use shops of newspapers and journals as alternative sales network and to offer discs separately, not only in journal s enclosures. The manufacture of commercially non-successful SACD and DVD audio formats, which require highly firstrate and thus expensive reproduction system, was basically completely terminated. Sales ability has been also influenced by expectations of the customers from new HD DVD and Blue-ray formats and their compatibility with the existing recorders. A new trend in CD and DVD media is the manufacture Figure 1: Main production indicators in NACE 22, in constant prices, in Index 2000 = Number of employees Value added Receipts from sales of own P & S Labour productivity Source: CSO, MIT estimate, 2005 = preliminary data; const. p. of

44 of larger quantity of titles, but with smaller number of copies. In 2005 altogether 956 new titles on DVD were introduced on the market in comparison with 932 titles in foregoing year. The monitored indicator of value added decreased by approx. 1% in 2005 as compared with This decline was reflected in the indicator of labour productivity from value added. A favourable development in employment of the branch was influenced especially by implementation of new capacities into operation, namely both printing ones and capacities for the manufacture of CD and DVD media. Table 1: Main production indicators in NACE 22, in , in constant prices (Mill. CZK, employees) * Receipts from sales of own P & S , , , , , ,0 Year-on-year index x 109,9 102,0 105,3 102,9 99,7 Cumulative index 100,0 109,9 112,1 118,1 121,5 121,2 Value added , , , , , ,0 Year-on-year index x 98,1 107,4 109,2 109,7 99,0 Cumulative index 100,0 98,1 105,4 115,1 126,3 125,0 Labour productivity from VA 335,2 344,6 348,7 371,9 428,6 420,0 Year-on-year index x 102,8 101,2 106,7 115,3 98,0 Cumulative index 100,0 102,8 104,0 111,0 127,9 125,3 Number of employees Year-on-year index x 95,4 106,2 102,4 95,2 101,0 Cumulative index 100,0 95,4 101,3 103,7 98,7 99,8 Source: CSO, MIT estimate; *preliminary data, const. p. of Employment From the size of enterprises point of view the micro-enterprises kept in 2005 similarly as in foregoing years the dominant position with 32% of employees from the total number of employees in the branch, followed by smallsized enterprises with 24%. The size structure of the production enterprises has been changing from long-term view in a minimum way, only. In the branch there are 61 enterprises under foreign capital control, i.e., more than 18% from the total number of enterprises with 20 and more employees. Within these enterprises 10 of them belong among the large enterpris- Figure 2: Employment structure, according to the size of enterprises, in 2005 NACE % 1000 and more 4 % % Source: CSO, MIT estimate; 2005 = preliminary data % % 44

45 NACE 22 es with 250 and more employees. From the regional aspect the NACE 22 branch occupies the largest share in employment in South Bohemian region (approx. 1,2%), in the Capital of Prague (approx. 1,1%) and Central Bohemia (approx. 1%). In 2005 the average monthly wage in the branch amounted to CZK , which is an increase by 7% as compared with The average monthly wage in the NACE 22 branch is exceeding by 22,7% that one of the manufacturing industry. 8.3 Foreign trade Table 2: Foreign trade development in CPA 22 products, in (Mill. CZK) Export , , , , , ,7 Import , , , , , ,4 Balance 424,6 861, , , , ,3 Year-on-year index 00/99 01/00 02/01 03/02 04/03 05/04 Export x 124,0 108,4 129,9 107,6 97,2 Import x 120,8 106,2 116,3 120,1 96,9 Source: CSO, data available as on

46 The foreign trade with products of the publishing and printing industry was showing a permanent growth in the period from 2000 to A turn became in 2005, when a slight drop in export occurred. The reason can be seen in strengthening Czech Crown and exchange rate movements associated with it. Import of the products decreased as well. The publishing and printing industry has been long-term maintaining the favourable trade balance. Traditionally, the largest trade partner of the CZ is Germany, which shared in % in export and 67% in import, respectively. The other important trade partners are Austria, Slovakia, Great Britain and Poland. 8.4 Investments In 2005 five companies within the publishing and printing industry applied for investment incentives. The expected amount of investment means amounts to CZK 2,4 billions and it reckons with creation of 208 new jobs. The foreign direct investment within the branch attained the level of CZK 9 763,6 millions; indigenous investments in abroad CZK 190,4 millions on the contrary. 8.5 Branch perspectives For the current period a close collaboration of the Czech subjects with partners in the EU is characteristic. It concerns mainly the large publishing and printing industry enterprises, the major part of which has foreign owners. A classical structure of the branch has been created, similar to that one existing in the most advanced countries. A few large firms on industrial base are manufacturing a considerable part of the printed products such as books, publications, magazines, advertising printed matters, sound and video media and so on. They are closely linked 46

47 NACE 22 with foreign customers, because the national framework of market is too tight for them. The medium-sized firms are able, partially also in the form of co-operation, to manufacture all standard publishing and printing products and have their customers across the entire territory of the state and often in abroad as well. Some of these firms are focused on the selected market segments, which require specific technology equipment. A specific group within the publishing and printing industry form the newspaper printing plants. In the course of the last years all the important publishers of the newspaper titles had built up their own printing capacities equipped by the most modern technologies. Under the pressure of advertising side the fully coloured press started prevailing in the newspapers. The publishing and printing machines, equipment and systems are going through fast technical and technology development. The recent trend in the publishing and printing industry is digitalisation of the publishing and printing production process. It is mostly manifested in the area of the ready-made press. Computer to Plate (CtP) technology enables ready-making of the printing forms by help of direct laser exposure of the printing plates, which is significantly enhancing the press quality and speeding its ready-making. The companies of the Czech publishing and printing industry accordingly have caught entrance of the new technologies and the newspaper and other large printing plants have been already from a great part equipped by these facilities. CtP technology is quickly penetrating into the medium-sized and small printing plants. Another trend in the publishing and printing production presents the interconnection of the three main phases of the publishing and printing production process, i.e. pre-press operation, the proper press on the printing machine and the finalizing post-press processing. Interconnection among all these phases of the publishing and printing production in one unit is based on the uniform data standards, by help of which are controlled all the publishing and printing machines, equipment and systems. Application of the uniform standards in the foreseen future will lead also in the enterprises of the publishing and printing industry to utilization of fully automatized management systems. 47

48 MANUFACTURE OF COKE, NUCLEAR FUELS, REFINING OF PETROLEUM DF 9. Manufacture of coke, nuclear fuels, refining of petroleum NACE 23 A characteristic feature of the branch, which presents a matter of activity in all three groups of this branch according to the branch classification of economic activities (NACE), is a processing of raw materials. It concerns specifically the manufacture of coke products, refinery processing of petroleum and processing of nuclear fuels. Economic results of the entire branch are being mostly influenced by the strategically important group of the industry NACE 23.2 Refinery processing of petroleum, the share of which in receipts from sales of own products and services amounts to 94%. 9.1 Main production indicators The decisive impact on receipts of NACE 23 branch has the group of refinery processing of petroleum, in the resultant indicators of which is reflected the fluctuation of the world prices of crude oil, namely first of all fuels in the period from 2000 to 2005, in particular. In inter-annual comparison between 2005 and 2004 the considerable increase of receipts from sales of own products and services was recorded. Because of work rationalization the declining number of employees and successive growth of value added has been recorded since 2002, which was positively manifested in enhancement of labour productivity, that has been reporting an increasing trend since 2000, namely due to the gradual improvement of the economic situation as well. Figure 1: Main production indicators in NACE 23, in constant prices, in Index 2000 = Number of employees Value added Receipts from sales of own P & S Labour productivity Source: CSO, MIT estimate, 2005 = preliminary data; const. p. of 2000 In 2005 receipts from sales of own products and services (own P&S) increased as compared with 2004, which was also influenced by the growth of refinery products prices, which resulted from the dramatic enhancement of the world crude oil prices. The decisive share in receipts from sales of own P&S was created by the processors of the company Česká rafinérská, in which the most important processor Unipetrol rafinérie, joint-stock co., mostly participated. In contrast, the value added due to reduction of the level of refinery margin decreased. The results of 2005 and deepening of commercial policy of the processors of Česká rafinérská, joint-stock co., on the market, confirmed justification of the transition of this company to re-doing regime. The above-presented brief assessment of NACE 23 branch is synoptically illustrated in the following table. 48

49 NACE 23 Table 1: Main production indicators in NACE 23, in , in constant prices (Mill. CZK, employees) * Receipts from sales of own P & S , , , , , ,7 Year-on-year index x 97,0 100,7 108,8 88,3 147,0 Cumulative index 100,0 97,0 97,7 106,2 93,8 138,0 Value added 7 055, , , , , ,1 Year-on-year index x 113,2 86,8 127,2-17,8 259,9 Cumulative index 100,0 113,2 98,2 124,9-22,2-57,6 Labour productivity from VA 1 916, , , ,3-515, ,4 Year-on-year index x 120,6 94,5 130,0-18,2 259,6 Cumulative index 100,0 120,6 113,9 148,1-26,9-69,8 Number of employees Year-on-year index x 93,8 91,9 97,9 97,7 100,1 Cumulative index 100,0 93,8 86,2 84,4 82,4 82,5 Source: CSO, MIT estimate; *preliminary data, const. p. of Employment Figure 2: Employment structure, according to the size of enterprises, in 2005 NACE % % % Source: CSO, MIT estimate; 2005 = preliminary data 1000 and more 43 % % The NACE 23 branch in the period from 2000 to 2005 was reporting a slight decline in the number of employed persons, which is distinct especially in the group 23.2 Refinery processing of petroleum as a consequence of the technology modernization of crude oil processing and implementation of the new control processes. Reduction of the number of employees was also influenced by transition of the company Česká rafinérská to re-doing regime, which witnessed particularly in reduction of administrative employees. The size categories from 250 to 999 and and more employees, which are mostly influencing the distribution of the employees in the enterprises of the group 23.2, make up the largest share in employment of NACE 23 branch. 9.3 Foreign trade Development in foreign trade with CPA 23 products is significantly influenced mainly by trade with refined petroleum products (CPA 23.2), namely both in the area of export and import as well. Trading in the said group is 49

50 Table 2: Foreign trade development in CPA 23 products, in (Mill. CZK) Export , , , , , ,7 Import , , , , , ,6 Balance , , , , , ,9 Year-on-year index 00/99 01/00 02/01 03/02 04/03 05/04 Export x 109,4 93,6 98,9 110,8 130,1 Import x 100,5 72,5 108,8 134,9 109,8 Source: CSO, data available as on being objectively influenced by the situation on the European market, where the prices are derived from the quoted prices of the refinery products and crude oil on the Rotterdam bourse. With respect to full long-term liberalization of this trade in the CZ, this fact has a decisive impact on the results of export and import and on the total balance. An impulse for the considerable increase of exports in 2005 was an expansive commercial policy of exporters and partly also increasing interest in the selected refined petroleum products in the neighbouring countries. Yearon-year increase of export in the period from 2004 to 2005, which was higher by approx. 43% in value term, was resulting from the growth of prices of the basic refined petroleum products, enhancement of export ability of the processors and consumption growth in the Central-European region, in which fuels mostly participated. It is assumed that in the next years the export performance as a consequence of larger interconnection of the business firms will be furthermore growing. With regard to the growth of fuels consumption their import will be, however, enhancing as well. 9.4 Investments In 2005 the NACE 23 branch participated by only small part in the volume of foreign direct investments implemented in the CZ, namely in the amount of 1,6%. The total volume of the investments into the group of refinery processing of petroleum in the period from 2002 to 2005 amounted to CZK millions, out of which 3% were made up by import. The foreign direct investment were not put into this group in the said period. After completion of the modernization of units for crude oil processing in refineries of the company Česká rafinérská, further investment activity was focused on implementation of necessary technological innovations within the action Čistá paliva (Pure fuels) for ensuring a wide manufacture of the sulphur-less fuels from The needful arrangements for the manufacture of the sulphur-less diesel oil in the company Paramo will be completed in In 2005 the large investment action in the companies Čepro and Česká rafinérská for implementation of adding of bio-fuels into the fuels was initiated. It should be completed at the beginning of It is expected that the total investment costs accordingly will exceed CZK 1 billion. 9.5 Branch perspectives With respect to the principle importance of the group of refinery processing of petroleum in economic results of NACE 23 branch, we may assess year 2005 in a positive way both for the petroleum industry and trade and also for the entire NACE 23 branch. The indigenous refinery industry reached the largest volume of crude oil processing in the CZ history at non-problematical ensuring of the market needs. Economic results were influenced mainly by the world crude oil prices and level of refinery margins and to a certain extent also by an important organizational change, the consequence of which was a new owner of 63% equity share of the company Unipetrol the Polish company PKN Orlen, which by means of further purchase of the stocks of the minority shareholders currently owns approx. 69% of stocks of Unipetrol. 50

51 NACE 23 The valid directives and resolutions of the European Community relating to this area were and are being gradually transferred into the Czech legislation and adaptation on the new regulations are running without any problems both in the production and commercial sphere. A quality of the manufactured fuels in the CZ corresponds to qualitative indicators determined by the EU directives and legislative regulations of the CZ linked to them. It is assumed in the medium-term horizon that the dynamic development in crude oil processing and the manufacture of fuels as well as petrochemical raw materials will be continuing, whereas it will be supported by the growth of economy, consumption of fuels and development in petrochemical production. Economic position of the group, and thus also of the entire NACE 23 branch, will depend especially on development in the world crude oil prices, competitive ability of the domestic refineries and level of their margins. 51

52 MANUFACTURE OF CHEMICALS, PREPARATIONS, PHARMACEUTICALS AND MAN-MADE FIBRES DG 10. Manufacture of chemicals and chemical products NACE 24 The chemical and pharmaceutical industry plays an indispensable role within the entire manufacturing industry, because its products find their use practically in all areas of the Czech economy. In compliance with international classification NACE Rev. 1, the branch consists of seven product groups, where in 2005 approx. 60% belonged to the manufacture of basic chemicals (NACE 24.1), 17% to the manufacture of pharmaceuticals (NACE 24.4), 10% to the manufacture of cleaning and cosmetic preparations (NACE 24.5) and 9% to the combined group of the manufacture of other chemical products and fibres (NACE 24.6 and 24.7). The share of two remaining groups the manufacture of paints, varnishes and mastics (NACE 24.3) and agro-chemicals (NACE 24.2) was, when compared with the above-presented, a relatively low (4% and 1%, respectively). In 2005 the branch shared 5,9% in the created value added of the manufacturing industry (it was 6,4% in 2004), 5,6% in receipts from sales of own P&S (in 2004 the share amounted to 6,1%) and 3,1% in number of employees (in ,1% as well) Main production indicators Development in the main production indicators of the branch in the period from 2000 to 2005 is documented in Figure 1 and Table 1. 52

53 NACE 24 Figure 1: Main production indicators in NACE 24, in constant prices, in Index 2000 = Number of employees Value added Receipts from sales of own P & S Labour productivity Source: CSO, MIT estimate, 2005 = preliminary data; const. p. of 2000 Table 1: Main production indicators in NACE 24, in , in constant prices (Mill. CZK, employees) * Receipts from sales of own P & S , , , , , ,5 Year-on-year index x 100,1 101,0 101,4 116,6 105,6 Cumulative index 100,0 100,1 101,2 102,6 119,7 126,4 Value added , , , , , ,6 Year-on-year index x 97,4 106,8 106,3 103,4 101,1 Cumulative index 100,0 97,4 104,0 110,5 114,2 115,6 Labour productivity from VA 719,7 709,8 755,0 829,5 893,1 891,7 Year-on-year index x 98,6 106,4 109,9 107,7 99,8 Cumulative index 100,0 98,6 104,9 115,3 124,1 123,9 Number of employees Year-on-year index x 98,8 100,4 96,7 96,1 101,3 Cumulative index 100,0 98,8 99,1 95,9 92,1 93,3 Source: CSO, MIT estimate; *preliminary data, const. p. of 2000 In 2005 the growth rate of receipts (in constant prices), when compared with the foregoing extraordinarily successful year, slackened (year-on-year increase by 5,6%). Even the lower growth was achieved in value added (+1,1%), whereas the number of employees in the period under review slightly increased (+1,3%). The labour productivity from value added even slightly declined (minus 0,2%), nevertheless it belonged henceforth, beside the subsections DF and DM, among the highest one within the entire manufacturing industry at all Employment Employment structure in the NACE 24 branch, according to the size of enterprises in the period from 2000 to 2005, is presented in Figure 2. 53

54 Figure 2: Employment structure, according to the size of enterprises, in 2005 NACE and more 37 % % % % Source: CSO, MIT estimate; 2005 = preliminary data % It is obvious from the figure that the dominant role in the branch is played by the large chemical enterprises with 250 and more employees. In 2005 they shared 65% of the total number of employees, similarly as in In 2005, after longer period, the number of employees increased, namely by 1,3% (i.e. by 541 persons). At the same time the large enterprises above 250 employees shared in % in the total receipts of the branch and even 76% in the created value added. The large enterprises were getting better also in the indicator of the volume of value added per employee, namely in the size category and more employees CZK thousand/ employee and CZK 920 thousand/employees in the size category with 250 to 999 employees. In April 2006 altogether 219 entrepreneurial subjects with 20 and more employees were acting in the branch. In NACE 24 branch the decisive share is kept by Region of Ústí nad Labem (28% in receipts, 25% in value added and 17% in number of employees), where the largest chemical plants CHEMOPETROL, joint-stock co., and SPOLCHEMIE, joint-stock co., have their place of business. The strong chemical industry is also concentrated in Central Bohemian region (the share in receipts 22%, in value added 15%), the lowest representation of the chemistry have the regions of Plzenˇ, Liberec, Hradec Králové and Vysočina on the contrary. The average monthly wages per employee are considerably above the average of the manufacturing industry. In April 2006 they achieved CZK (in the manufacturing industry CZK ), and in comparison with the similar month of the foregoing year, they grew roughly by 7% Foreign trade Development in foreign trade in NACE 24 branch in the period from 2000 to 2005 is illustrated in Table 2. In 2005 the trade exchange of NACE 24 branch reached a top turnover of CZK 300 billions (export CZK 108,9 billions, import CZK 191,1 billions), and in comparison with foregoing year, it grew by 7,8%. It is good to say that Table 2: Foreign trade development in CPA 24 products, in (Mill. CZK) Export , , , , , ,9 Import , , , , , ,4 Balance , , , , , ,5 Year-on-year index 00/99 01/00 02/01 03/02 04/03 05/04 Export x 102,6 89,1 108,8 130,4 113,4 Import x 108,4 97,2 110,3 119,5 104,8 Source: CSO, data available as on

55 NACE 24 for the first time after many years the adverse balance of foreign trade decreased by CZK 4,1 billions at minus CZK 82,3 billions. Export was namely growing in higher rate (+13,4%) than import (+4,8%). Petrochemical holding UNIPETROL, joint-stock co., ranked in 2005 on the second position among the largest exporters in the CZ, right behind Škoda Auto, joint-stock co., when it exported the products amounting to CZK 34,5 billions (however, within this volume exports from refineries are included as well). Export performance approached in 2005 to 40%, whereas the highest values were reached in the groups 24.6 (71%) and 24.7 (63%). This indicator depends in a great extent on crude oil price and development in the area of investments. In April 2006 export kilogramme prices of NACE 24 branch reached the value of CZK 26,5/kg, while in import it was CZK 42/kg, thus higher by 58%. The territorial structure of foreign trade in the branch was reporting only minimum changes in the last years. In 2005 our masterfully largest trade partner was Germany (the turnover amounting to CZK 80,2 billions was by 8,3% higher than in 2004), which shared almost 27% in the total turnover of NACE 24, followed by Slovakia (the turnover CZK 25,4 billion) and Poland with CZK 21 billions. Among major countries of the former EU-15 the adverse balance was recorded, beside Germany (minus CZK 26,8 billion), also with France (minus CZK 11,9 billions) and Netherlands (minus CZK 10,6 billions). On the contrary the highest positive balance in 2005 was recorded with Slovakia (plus CZK 4,8 billion) and Poland (plus CZK 3,4 billions) Investments The volume of the gross domestic investments in the last years has been reporting a declining trend, however, this decline was in 2005 very moderate one (-1,9%). Among important investment projects in the last year belong, for example, a completion of the new capacity of alkyd and polyester resins in Ústí nad Labem, intensification of the manufacture of aniline in Ostrava and construction of several smaller pharmaceutical plants. In the period from 2003 to 2005 a couple of investment incentives were approved in the branch, which concerned the manufacture of pharmaceuticals, bio-products, technical gases etc. On the basis of available sources we may find out that the influx of foreign direct investments in 2004 again strengthened and in a cumulative way, when compared with foregoing year, grew by 19,4% to the level of CZK 33,7 billions. There was a certain recovery in the field of indigenous investments in abroad, which achieved CZK 3,5 billions, mainly thanks to acquisition of Zentiva, joint-stock co., of loss-making Romanian pharmaceutical firm Sicomed Branch perspectives Crude oil prices are the topic number one for the world chemical industry in the nearest perspective as well as in more distant one. Just these prices along with the growth of energy prices are negatively influencing competitive ability of the branch. Furthermore currently very much frequented topic is the new chemical legislation REACH, which is being considered as the largest reform in this area during the last thirty years, and which shall come to force in Obligation of registration, testing, authorization (permitting) and limitation of chemical substance will bring about additional costs both for manufacturers, importers and distributors of their own and also for linking manufacturing branches and at least during the transition period it will disadvantage the EU-25 against competitors from the rest of the world. It is also good to say that the chemical industry, just with respect to more rigorous legislation and increasing production costs, has noted the largest capital outflow among all European manufacturing industries. The companies are being forced to focus on product specialization with higher value added and on such market segments, where is the biggest chance to be successful on international market. However, in spite of the above-presented problems, the nearest perspectives of the chemical industry are being evaluated, both in the CZ and abroad, as hopeful ones. This fact was confirmed both by outlook of CEFIC (Council of European Chemical Industry) and results in receipts and value added for the period from January through March 2006 as well. Further development will also depend to a great extent on the decision of the new owner of petrochemical holding UNIPETROL joint-stock co., that makes up the basis of the Czech chemistry, which way to go, namely both in the area of the manufacture of high-tonnage plastics and in the field of chemical specialities. 55

56 MANUFACTURE OF RUBBER AND PLASTIC PRODUCTS DH 11. Manufacture of rubber and plastic products NACE 25 The manufacture of rubber and plastic products (DH) has been belonging for a number of years among the most dynamic elements within the manufacturing industry of the Czech Republic (CZ). It is made up by two large product groups achieving many-billion receipts: in the group 25.1 there is the key manufacture of tyres and tubes; the assortment of the semis and finished products from plastics in the group 25.2 is far the more wider one and among its items belong foils, packing materials, profiles, boards, various parts and components etc. The branch belongs among the decisive suppliers for automotive and electro-engineering industry, mechanical engineering, building industry, foodstuff industry, agriculture etc. Its increasing importance for the Czech economy is witnessing also in the fact that its share in receipts of the manufacturing industry (in constant prices) increased from 4,5% in 2000 to 6,7% in 2005 and the share of value added from 4,9% to 7,6%. A specific feature of the branch is permanently high investment activity, which was in a number of cases supported by investment incentives and also by absolute increase of number of employees in the period from 2000 to 2005 by 22,2 thousand persons, which was raised by annual rise of several tens of the new entrepreneurial subjects Main production indicators Development in the decisive production indicators in the period from 2000 to 2005 is documented in Figure 1 and Table l. Figure 1: Main production indicators in NACE 25, in constant prices, in Index 2000 = Number of employees Value added Receipts from sales of own P & S Labour productivity Source: CSO, MIT estimate, 2005 = preliminary data; const. p. of 2000 As it is obvious from the above-presented table, all decisive production indicators were growing in the monitored years by above the average pace and this trend was continuing in 2005 as well. In the period from 2000 to 2005 receipts from sales of own products and services (in constant prices) increased by 124%, out of which in the group 25.1 by 153% and in the group 25.2 by 108%. It is good to mention also high dynamics of the growth of labour productivity from value added (+48,4%), which is highly above the average of the manufacturing industry (+33,5%). Also year-on-year indices of the production indicators 2005/2004 confirm that thanks to automotive industry the branch belongs among the main drivers of the successful economic development and participates actively in the creation of the GDP. 56

57 NACE 25 Table 1: Main production indicators in NACE 25, in , in constant prices (Mill. CZK, employees) * Receipts from sales of own P & S , , , , , ,4 Year-on-year index x 130,0 108,6 120,6 114,2 115,2 Cumulative index 100,0 130,0 141,1 170,1 194,2 223,8 Value added , , , , , ,1 Year-on-year index x 111,8 109,7 125,3 116,0 115,9 Cumulative index 100,0 111,8 122,7 153,7 178,3 206,7 Labour productivity from VA 413,8 411,5 447,9 530,0 570,2 614,3 Year-on-year index x 99,4 108,8 118,3 107,6 107,7 Cumulative index 100,0 99,4 108,2 128,1 137,8 148,4 Number of employees Year-on-year index x 112,4 100,8 105,9 107,8 107,6 Cumulative index 100,0 112,4 113,4 120,0 129,4 139,2 Source: CSO, MIT estimate; *preliminary data, const. p. of

58 11.2 Employment Employment structure, according to the size of enterprises in NACE 25 branch, is illustrated in Figure 2. The figure confirms an importance of small and medium-sized enterprises for the branch. In 2005, in compliance with preliminary data, 47,4% of receipts (in current prices) went to three categories of enterprises up to 249 employees, which was roughly on the level of foregoing year and more than 60% of the total number of employees. Currently altogether 621 entrepreneurial subjects with 20 and more employees have been already involved in the branch and only in 2005 their number increased by 86 units. The branch as one of a few branches in the manufacturing industry has been recording the permanent growth in number of employees and thus it helps partially resolving unfavourable situation, mainly in the regions touched by high unemployment. The branch is mostly concentrated in Region of Zlín, where the large manufacturer of tyres Barum Continental Ltd., and Fatra, a subsidiary of Aliachem joint-stock co., and other firms have their place of business. This region shares one-third in the total receipts of the branch. The branch is also strongly represented in Central Bohemian region (11% share in receipts) and in the Region of Plzeň (9% share in receipts). The dynamic development has been effectively supported by investment incentives, which brought to the CZ a number of renowned foreign investors and top production technique and technology. It was favourably reflected both in the growth of employment in the regions and in the average wages, which achieved in April 2006 CZK , and in comparison with the similar month of the foregoing year, they increased by almost 5%. Figure 2: Employment structure, according to the size of enterprises, in 2005 NACE and more 17 % % % Source: CSO, MIT estimate; 2005 = preliminary data % % 11.3 Foreign trade The table shows that export grew up in the period from 2000 to 2005 by almost 77%, out of which in the group 25.1 by less than 81% and in the group 25.2 by almost 73%. Import in the course of the similar period increased Table 2: Foreign trade development in CPA 25 products, in (Mill. CZK) Export , , , , , ,3 Import , , , , , ,4 Balance , , , , , ,1 Year-on-year index 00/99 01/00 02/01 03/02 04/03 05/04 Export x 110,9 110,4 107,6 126,1 106,4 Import x 109,1 101,1 110,6 122,1 101,4 Source: CSO, data available as on

59 NACE 25 by 51%. Positively may be appraised the fact that export was growing in the last years in a quicker pace than import and thus the adverse balance was gradually decreasing (in 2005 it decreased by CZK 4,2 billions). Export performance of the branch was fluctuating in the last years mostly around 54 to 55%, however, in 2005 it declined to 50,3%. The branch was recording in the last years high export kilogramme prices (in 2005 it was around CZK 95 to 100 per kilogramme), which were a slightly higher than kilogramme prices in import. On the basis of the analysis of the territorial structure we can find out that by far the largest trade partner is Germany, which shared 47% in the total import of the CZ and 37% in export in 2005, respectively, whereas the turnover with Germany exceeded CZK 81 billions. The other decisive trade partners are Slovakia (the turnover amounted to CZK 11,9 billions in 2005) and France (the turnover CZK 10,9 billions in 2005) Investments Though the volume of the gross tangible investments declined in 2005, nevertheless, the branch belonged among more active ones as it invested CZK 8,9 billions (it shared 6,2% in the total investments into the manufacturing industry), out of which CZK 6,3 billions in machinery. Most of the investments were channelled into the construction of the new capacities and modernization of the existing ones, mostly of sub-suppliers for the needs of automotive and electro-engineering industry. A number of foreign companies are permanently interested in making investments in the CZ. According to the recent available data, only in 2004 the volume of foreign direct investments increased by CZK 4,7 billions as compared with 2003 (i.e. +16,1%). A couple of recognized foreign firms, for example, Siemens, Valeo, SAI Automotive, Robert Bosch and others, have their branches in the CZ Branch perspectives The rubber and plastic industry has been already belonging for a number of years among the manufacturing branches achieving above the average economic results. Its permanently dynamic growth, which has been supported by a couple of investment incentives mainly in the area of plastics, is closely connected both with a stormy development in the manufacture of automobiles in the CZ, electrical machinery and equipment manufacture and also with the manufacture of plastic packing, development in the building industry, engineering industry and other areas, which are taking in all the time larger volumes the products of rubber and plastics, but also with favourable development in export The future perspectives of NACE 25 in the CZ are more than promising and the branch has all premises for further dynamic development. It has had a firm raw material base already built-up, it became an extraordinarily attractive one for domestic and foreign investors, it offers always broader possibilities of implementation of rubber and plastics and, thanks to permanently high demand and rise of all the time new enterprises, it helps resolving employment in the regions affected by high unemployment rate as well. 59

60 MANUFACTURE OF OTHER NON-METALLIC MINERAL PRODUCTS DI 12. Manufacture of other non-metallic mineral products NACE 26 The branch altogether consists of nine production groups, out of which a part is represented by the manufacture of glass, ceramics and porcelain and a part by the manufacture of building materials. The glass, ceramics and porcelain are determined especially for export, whereas the products of building material industry are placed on the domestic Within the manufacturing industry the share of the branch in receipts from sales of own products and services (own P&S) amounted to 4,8%, in value added to 7,5%, and in number of employees to 5,9% in Main production indicators Figure 1: Main production indicators in NACE 26, in constant prices, in Index 2000 = Number of employees Value added Receipts from sales of own P & S Labour productivity Source: CSO, MIT estimate, 2005 = preliminary data; const. p. of 2000 The favourable results of the economic development in the period from 2000 to 2005 were reached by manufacture restructuring (e.g., manufacture of flat glass, glass fibres, tiles and some building materials) connected with modernization of the technological equipment and with the entry of foreign capital. The largest share in receipts from sales of own P&S in 2005 were recorded by the groups 26.1 Manufacture of glass and glass products (37%) and 26.6 Manufacture of articles of concrete, plaster, lime and cement (27%). The manufacture of building materials as a whole reported in 2005 an increase of returns as well as profit, namely even despite of slow-down in dynamics of the building manufacture, which is a dominant demand circle in a number of the groups. The volume of receipts from sales of own P&S in the building materials grew in 2005 by 3,1% to almost CZK 62 billions as compared with the foregoing year. The state of affairs in the area of financial situation of the enterprises has slightly improved, which can be assumed from the growth of current liquidity as well as reduction of the total indebtedness of the enterprises in 2005 by 1,5% at level of 43,3%, when compared with As far as the labour productivity is concerned, the branch belongs within the manufacturing industry to above the average ones. Within the groups of the manufacture of glass and porcelain (NACE 26.1 and 26.2) the labour 60

61 NACE 26 Table 1: Main production indicators in NACE 26, in , in constant prices (Mill. CZK, employees) * Receipts from sales of own P & S , , , , , ,4 Year-on-year index x 103,9 104,0 102,8 108,8 103,4 Cumulative index 100,0 103,9 108,0 111,0 120,8 124,9 Value added , , , , , ,6 Year-on-year index x 101,8 103,8 109,3 110,2 107,0 Cumulative index 100,0 101,8 105,6 115,5 127,2 136,1 Labour productivity from VA 474,0 484,9 513,0 595,8 662,4 713,0 Year-on-year index x 102,3 105,8 116,1 111,2 107,6 Cumulative index 100,0 102,3 108,2 125,7 139,8 150,4 Number of employees Year-on-year index x 99,5 98,1 94,1 99,1 99,4 Cumulative index 100,0 99,5 97,6 91,9 91,0 90,5 Source: CSO, MIT estimate; *preliminary data, const. p. of 2000 productivity decreased in 2005 by 0,5% as compared with 2004, but within the building material industry as a whole it increased by 1,4%. The highest increase of the labour productivity was attained in the manufacture of other non-metallic mineral products (NACE 26.8), namely by 8,3%. The absolute value of the productivity among the groups was significantly differentiated. The highest productivity in 2005 was again attained by the group 26.5 Manufacture of cement, lime and plaster, namely approx. CZK 2,7 millions in constant prices, which presents 272% of the total average of the productivity in the branch. This fact became evident thanks to the productivity, which was being attained in the manufacture of cement, in particular Employment Due to continuing trend of decreasing of number of employees in the large enterprises, the share of employment in the size category of the production organizations with 50 to 249 employees grew in 2005 in the groups manufacturing glass and glass products (NACE 26.1) and articles of concrete (NACE 26.6.), particularly. Figure 2: Employment structure, according to the size of enterprises, in 2005 NACE and more 26 % % % Source: CSO, MIT estimate; 2005 = preliminary data % % 61

62 In the enterprises with 100 and more employees of the manufacture of building material, the number of employees decreased in 2005 by 1,2%, by 291 employees (from at employees), respectively. The average monthly wage in the branch amounted in 2005 to more than CZK , i.e., the growth by 3,9% as compared with In comparison with the average of the manufacturing industry it was higher by CZK 400, roughly. The positive development is being taken place mainly in the building material industry, where it achieved the inter-annual increase by 3,2%, which presents the amount of CZK Among important enterprises in the branch belong the following manufacturers: Flat glass Glaverbel Czech, joint-stock co., Teplice, AGC Automotive Czech, joint-stock co., Chudeřice; Utility glass Preciosa, joint-stock co., Jablonec, Crystalex, joint-stock co., Nový Bor, Sklo Bohemia, joint-stock co., Světlá nad Sázavou; Technical glass Sklárny Kavalier, joint-stock co., Sázava, STV Glass, joint-stock co., Valašské Meziříčí; Container glass Avirunion, joint-stock co., Teplice, Vetropack Moravia Glass, joint-stock co., Kyjov; Glass fibres Saint-Gobain Vertex, joint-stock co., Litomyšl Cement Lafarge Cement, joint-stock co., Českomoravský cement, joint-stock co.; Concrete ZAPA beton, joint-stock co., ŽPSV, joint-stock co.; Bricks WIENERBERGER cihlářský průmysl, joint-stock co., CIDEM Hranice, joint-stock co.; Roofing KM Beta, joint-stock co., TONDACH ČR, Ltd., Hranice; Floor tiles Lasselsberger, joint-stock co., Plzeň Foreign trade In the course of 2005 the favourable development in foreign trade was continuing, mainly in export of some products of the manufacture of glass, ceramics and porcelain, which have been largely exported to the EU countries for a long time. In 2005 the value of exported goods amounted to approx. CZK 45 billions, which presented an increase by 1,4% as compared with On the contrary the import of the glass and porcelain industry decreased by approx. 5,7% in Table 2: Foreign trade development in CPA 26 products, in (Mill. CZK) Export , , , , , ,8 Import , , , , , ,7 Balance , , , , , ,1 Year-on-year index 00/99 01/00 02/01 03/02 04/03 05/04 Export x 105,3 94,2 105,4 111,8 99,6 Import x 115,6 106,9 106,0 115,2 94,3 Source: CSO, data available as on Export possibilities in the branch are being facilitated also by the fact that a number of manufactures of building material industry is nowadays fully competitive one on the foreign markets with a perspective of the further gradual intensification of these activities within the framework of economic structures of the EU. From export point of view there are suitable traditionally successful items, for example, tiles, kaolin, roofing, plaster cardboards, but also pre-fabricated reinforced concrete constructions. Important indicators in foreign trade with the products of the building material industry are: relatively high share of export in the total production (approx. 26,2%), the share of import (approx. 20%) and permanently favourable balance of foreign trade Investments The costs of investment nature, which were spent by some production companies in the group of glass and ceramics, were moving on the level of CZK 110,7 millions in

63 NACE 26 In compliance with the Act No. 72/2000 Coll., on investment incentive, in its consolidated wording, a project on the manufacture of car glasses was supported in the branch (Saint-Globain Sekurit ČR, Ltd., Beroun). The company Wienerberger opened on 10th June 2005 not far from Lipník nad Bečvou, district Přerov, the largest and currently the most modern brickworks in the CZ Cihelna Jezernice. The total volume of the investments of the project achieved more than EUR 23 millions, which amounts to approx. CZK 710 millions. The Ministry of Industry and Trade provided to the said project investment incentive in the forms of income tax relief according to the 1, section 2 a) of the Act on investment incentives and 35 and the Act No. 586/1992 Coll., on income taxes, furthermore financial support for the creation of new jobs pursuant to 1, section 2 c) on investment incentives, the Act No. 9/1991 Coll., on employment and the Directive of the Government of the CZ on financial support within the framework of investment incentives. In 2005, within the support determined for the small and medium-sized business undertaking, altogether 17 applicants gained CZK 68,6 millions within the programmes published by the Ministry of Industry and Trade Branch perspectives In the branch of glass and ceramics all the time the bigger emphasis has been devoted to the quality of environment. The glass industry accordingly is not loading environment too much, for most of own wastes are furthermore processed. With respect to continuing entry of foreign capital into the automotive industry, there is a premise for further development in the manufacture of flat glass and modernization of the existing machinery. On the contrary it is expected deepening problems in the manufacture of illumination glass and utility glass and porcelain, where the sales of the products are decreasing due to the increasing competition. From the economic point of view it is important a distribution of raw material resources and production capacities, which are found, except the enterprises for the manufacture of cement and reserves of kaolin, practically in all regions of the CZ. Similarly like all Czech economy, also the groups of building material industry had gone through considerable changes, which were witnessed in the volumes and the production structure as well. The main objective of the industrial manufacture of building materials in the nearest period henceforth remains to cover the needs of the domestic building industry, flexible response on the altering requirements of the market and ability to penetrate on the EU markets. 63

64 MANUFACTURE OF BASIC METALS AND FABRICATED METAL PRODUCTS DJ 13. Manufacture and processing of basic metals NACE 27 The metallurgy makes up a base for the linked manufacturing groups. One job in the metallurgy bounds another 3 4 jobs in the related groups. The metallurgy in the Czech Republic (CZ) is dependent on import of input raw materials and belongs among the largest consumers of energy. The main consumers of steel are engineering industry and building industry. Major enterprises concentrated in Moravia Silesian region due to the ferrous metallurgy occupy the decisive position (almost 68% of receipts, 64% of value added and 52% of the number of employee). The ferrous metallurgical industry is distributed in three regions, whereas the dominant position is held by Ostrava area (Moravian- Silesian region), where more than three-fourths of the manufacture and production capacities are concentrated. The enterprises of non-ferrous metallurgy are distributed in Central Bohemian region, Region of Plzeň, Region of Ústí nad Labem and Moravian-Silesian region. The foundries are distributed relatively in uniform manner within the regions. In 2005 the branch shared 6% in receipts and 3% in the creation of value within the entire manufacturing industry in constant prices. Although the decisive part of value added was created in the linked branches, in connection with efforts of the metallurgical manufacturers to enhance use values and finalization of the manufacture, the share of value added was growing in own production of the branch as well Main production indicators After economic activity fall in 2002, since 2003 the growth of the consumers demand for metallurgical materials has renewed. It was manifested by the inter-annually growth of receipts in comparable prices, which continued in 2004 as well. The year 2004 was characteristic by the excessive growth of prices of metallurgical products as well. Also production rationalization and financial restructuring of the large enterprises was acting positively. In 2005 the growth of the production in the branch halted and within the entire year 2005 the manufacture of basic metals and fabricated metal products dropped by 2,1% inter-annually (the total industrial production +7,1%), however, with symptoms of the repeated recovery at year end, when during 4th quarter of 2005 the manufacture Figure 1: Main production indicators in NACE 27, in constant prices, in Index 2000 = Number of employees Value added Receipts from sales of own P & S Labour productivity Source: CSO, MIT estimate, 2005 = preliminary data; const. p. of

65 NACE 27 increased by 6,2% inter-annually. The decline of the manufacture and receipts was obvious in 2005 in the drop of value added as well. In spite of another inter-annual reduction of the number of employees in the branch by 2,6%, the labour productivity from value added declined. It manifested in the worsening of the total profitability, however, savings of wage costs and focus on the manufacture of products with higher value added minimized the decline of the operation profitability. The growth of the nominal average earnings in 2005, in compliance with the lower achieved labour productivity (+2,9% as compared with a 3,3% growth within the industry as whole), slackened at maintaining the growth of real earnings. All comparisons are, however, strongly influenced by the high comparing base of the year The improving results of the branch at the end of 2005 were based on the growth of the domestic demand in the groups connected with the engineering and automotive industry. Table 1: Main production indicators in NACE 27, in , in constant prices (Mill. CZK, employees) * Receipts from sales of own P & S , , , , , ,2 Year-on-year index x 106,1 94,9 113,3 114,0 98,1 Cumulative index 100,0 106,1 100,7 114,1 130,0 127,5 Value added , , , , , ,8 Year-on-year index x 100,7 95,5 113,9 74,1 81,6 Cumulative index 100,0 100,7 96,2 109,5 81,2 66,2 Labour productivity from VA 397,7 405,0 432,2 530,0 401,0 336,1 Year-on-year index x 101,8 106,7 122,6 75,7 83,8 Cumulative index 100,0 101,8 108,7 133,3 100,8 84,5 Number of employees Year-on-year index x 98,8 89,5 92,9 98,0 97,4 Cumulative index 100,0 98,8 88,5 82,2 80,5 78,4 Source: CSO, MIT estimate; *preliminary data, const. p. of Employment Organizations with and more employees, which employ 48% of the total number of employees, are producing 62% of receipts and create 61% of value added. It concerns largely the major steel enterprises, i.e., the Figure 2: Employment structure, according to the size of enterprises, in 2005 NACE and more 48 % % % % Source: CSO, MIT estimate; 2005 = preliminary data % 65

66 mass production with higher labour productivity and lower share of the costs per unit of the production. Among the enterprises, which are involved in the manufacture of non-ferrous metals, the dominant position is kept by medium-sized enterprises. In case of the smaller enterprises it concerns mainly foundries and the firms, which are focused on commercial-technical services. Development of the employment and wages in the branch corresponds with development in labour productivity. The real wages are growing, however, the wage intensity is not, at savings of labour forces, enhancing, but decreasing respectively. The dominant position is held by Moravian-Silesian region, which shares almost 68% in receipts from the production and 72% in value added, at 51% share of the number of employees. Its dominant position is being furthermore strengthened. With respect to the restructuring process and concentration of the production by means of mergers, the process of the dismissal of workers in the metallurgy, especially in Ostrava area, cannot be observed as terminated Foreign trade The growth of the CPA 27 products export by 7,2% inter-annually in value term, in current prices, was recorded in 2005, in spite of the fact, that in the volume term, it enhanced by 0,6%, only. The difference is given by the change of the assortment composition of the products and by the growth of export prices (by approx. 15%). The CPA products share almost 85% in the total volume of export, out of which the largest share belongs to long and flat rolled products. The steel tubes mostly participated in the year-on-year increase. From the monitored period point of view, export was permanently increasing. The largest growth was recorded in 2004 (by 42%), i.e., after the CZ accession to the EU. In total, export increased by 72%. In 2005 the total value of import of the CPA 27 products, in current prices, enhanced by 11%, while in the volume term it was by 13,3% as compared with the foregoing year. A slight difference is given by the assortment composition of the products and by the growth of import prices by only 0,5%. The share of the CPA products makes up 67% in the total volume of import, which is substantially less than in export. The CPA 27.4 products (i.e., non-ferrous metals) share 33% in the total import. However, also in import the CPA 27.1 products keep the largest share. From the view of the overall assessment, import was being enhanced, while the largest growth of import was recorded again in 2004 (by 43%), i.e., after the CZ accession to the EU. In total, import enhanced in the period under review by 65%, out of which mostly import of the CPA 27.1 products (by 110%). In spite of the fact that the average price of export and import of the CPA 27 products is permanently balancing, the adverse balance of foreign trade of the branch in the value term is gradually growing. This fact is influenced especially by the group of the CPA 27.4 products and by the group of the CPA 27.3 products as well. In 2005 the adverse balance was also recorded in foreign trade with the CPA 27.1 products, namely due to a significant growth of import of flat products. Other products of the groups CPA 27.1 and CPA 27.2 are maintaining favourable balance of foreign trade. Almost 80% of the volume of export of the CPA 27 products is determined to the EU countries and almost 90% of the volume is imported from the EU countries. From the view of the export growth dynamics, the more Table 2: Foreign trade development in CPA 27 products, in (Mill. CZK) Export , , , , , ,1 Import , , , , , ,4 Balance , , , , , ,3 Year-on-year index 00/99 01/00 02/01 03/02 04/03 05/04 Export x 108,5 92,7 112,2 142,3 107,2 Import x 104,8 92,0 107,6 143,3 111,0 Source: CSO, data available as on

67 NACE 27 significant trend of export to the new EU countries is being reported, whereas in import the higher dynamics is being recorded from the old EU countries Investments The largest part of investments in the metallurgy was made in the form of foreign acquisition investments. Investment incentives are used in a minimum extent. The decisive part of the investments, from the amount of spent costs point of view, is realized in the major steel enterprises, which are able to ensure their financial coverage even in case of the long-term return of the deposited means. The main emphasis is put on the ecological investments. In relation to the privatisation, the growth of foreign direct investments into NACE 27 branch was recorded; its dynamics is more significant than within the entire manufacturing industry. Both are corresponding to the globalisation of the market, when a significant concentration of the capital has been taking place in hands of the largest world companies. This is the case of the company Mittal Steel as well, currently the world Number 1 in the steel industry, which acquired Nová huť, joint-stock co., and the company Evraz Holdings, which acquired the state equity share in the company Vítkovice Steel Branch perspectives Favourable results of the past years enabled to the major enterprises by means of investments to enhance quality of their products, to shift to the assortment with higher value and to strengthen accordingly their competitive position. Also the medium-sized enterprises, which are focused especially on the finished production, were purposefully investing. Competitive ability of the branch is proven by almost 80% export share to the EU countries. If we want to compare a level of labour productivity in parity of GDP, we might estimate it in approx % of the EU-15, in dependence on the assortment. The lower productivity is connected with lower level of wages, which has been witnessing until now as a comparative advantage and balancing factor. The metallurgy keeps on being more concentrated and the globalisation is contributing to match technical level and productivity. The CZ accession to the EU has brought a positive effect into the economy. For many companies their situation has improved by enlargement of the market (see, for example, earlier running so-called antidumping proceedings), namely even at the need to respect new custom measures on the external border of the EU. The process of globalisation, mainly then consolidation is taking new dimensions and character. The steel industry is in comparison with its supplier and customer branches not yet consolidated in a sufficient manner. Whereas the supplies of iron ores are being nowadays controlled in worldwide by the three companies (or six aluminium companies represent a half of the world production of aluminium), ten the largest steel companies, having altogether 250 millions tonnes of the steel production, represent just approx. one-fourth share in the worldwide steel production. For this reason it is necessary to see the trends and future development of the metallurgy in the process of consolidation. Nowadays it is being made especially by means of mergers and strategic alliances. Only upcoming stage of the creation of multinational giants with annual production of 100 millions tonnes of steel will facilitate a negotiating position. Development in the branch has been also significantly influenced by the EU legislation accepted in the area of environment. For fulfilment of the requirements, resulting from this legislation, the considerable resources are being deposited by the metallurgy every year. It is expected that for ecologic measures in the metallurgy it will be necessary to deposit CZK 4 to 6 billions every year until Also the area of assortment will move henceforth to the products with higher use value as necessary precondition for maintaining competitiveness. Due to privatisation, made by the global investors, the product as well as technological portfolio will be more and more subordinated to the strategy of these investors. In the nearest period the decisive factor will belong to the addition of demand for steel products, especially from the area of China and South-East Asia, which in 2005 temporarily decreased. 67

68 14. Manufacture of structural and fabricated metal products NACE 28 The production of the branch of structural and fabricated metal products is linked to traditional assortment, exploiting domestic material resources of metallurgical production and qualification of the workers. Thus it is enhancing value added of material inputs to more sophisticated production of the structures, machinery and equipment for the capital goods, general and transport goods engineering. A part of the production is of use in electroengineering industry as well. The manufacture of structural and fabricated metal products has permanently an important place within the sphere of the entire manufacturing industry. The branch organizations share 10,2% within the manufacturing industry in total number of employees, 10,1% in wages, 6,5% in receipts from sales of own products and services and 8,1% in value added. A significant share (24,1%) within the branch under review is occupied by the group 28.6 Manufacture of general hardware including also manufacture of tools for general engineering and automotive industry. Also the group 28.5 Surface treatment of metals finds its application namely in automotive industry. A positive feature is development in deliveries of construction steel structures resulting from implementation of the large investment projects (additional construction in Ruzyne Airport, hypermarkets, construction of TCPA automobile plant, overhead parts of subway construction). On the contrary the share of the group 28.3 Manufacture of steam generators, influenced by paralysing of investments into power sector, has been permanently decreasing. Also the group 28.2 Manufacture of tanks, reservoirs and containers of metals reported stagnation. The reason behind is the fact that booming in construction of the pumping stations network for fuels has passed and necessary modernization of chemical industry is being delayed. However, in total within the entire monitored period from 2000 to 2005 the branch of structural and fabricated metal products was recording favourable development trends 14.1 Main production indicators From Figure 1 and Table 1 we may monitor development in the main production indicators of the branch in the period from 2000 to 2005 in constant prices. There is a significant dynamics in development not only between 2000 and 2005 but also between 2004 and However, the growth of labour productivity is slackening. Else it is reporting enhancement by 19,5% as compared with initial year, however, year-on-year index between 2005 and 2004 amounted to 100,6, only. Figure 1: Main production indicators in NACE 28, in , in constant prices Index 2000 = Number of employees Value added Receipts from sales of own P & S Labour productivity Source: CSO, MIT estimate, 2005 = preliminary data; const. p. of

69 NACE 28 Table 1: Main production indicators in NACE 28, in , in constant prices (Mill. CZK, employees) * Receipts from sales of own P & S , , , , , ,1 Year-on-year index x 113,4 101,5 101,7 112,7 109,4 Cumulative index 100,0 113,4 115,1 117,1 132,0 144,3 Value added , , , , , ,7 Year-on-year index x 111,0 104,7 102,7 108,8 107,7 Cumulative index 100,0 111,0 116,2 119,4 129,9 139,9 Labour productivity from VA 284,9 292,7 317,1 320,1 338,7 340,5 Year-on-year index x 102,7 108,3 101,0 105,8 100,6 Cumulative index 100,0 102,7 111,3 112,4 118,9 119,5 Number of employees Year-on-year index x 108,1 96,6 101,7 102,9 107,1 Cumulative index 100,0 108,1 104,4 106,2 109,3 117,0 Source: CSO, MIT estimate; *preliminary data, const. p. of 2000 When monitoring development in qualitative indicators in the period from 2000 to 2005, which are presented in Table 1, we may see apparent significant dynamics of the branch development in all indicators under review. Within the whole period the number of employees increased by persons. In the course of the similar period the value added grew up by CZK millions. Receipts from sales of own products and services enhanced by CZK millions. A positive feature is also development between 2005 and Retardation of dynamics in the indicator of value added was influenced by commissioning of the new capacities associated with an increase of the number of employees Employment From Figure 2 we may assume that a half of the branch production is manufactured in small-sized organizations up to 50 employees. A share of the large organizations, with 1000 and more employees, was influenced namely by stagnation of the group Figure 2: Employment structure, according to the size of enterprises, in NACE 28, in % 1000 and more 3 % % Source: CSO, MIT estimate; 2005 = preliminary data % % 69

70 In comparison with foregoing year, the number of organizations within the branch increased by 4,6%. At the same time on the labour market grew up supply of working opportunities, which enabled to enhance employment. The average number of employed persons increased by 6,3% as compared with 2004, and of new jobs were created. Thus the branch was employing employees. Favourable trends were also manifested in wage development. The average monthly wage amounted in 2005 to CZK When compared with foregoing year, it increased by 2,7%. The total wage costs grew up interannually by 9,1%. The growing interest in the branch production, namely in activities assigned to the groups 28.4 and 28.5, enabled to enhance employment in structurally affected regions of North-West and Moravia-Silesia. In the period from 2002 to 2004 the number of employees within the branch in Moravian-Silesian region increased by 976 persons, in Region of Olomouc by persons. Region of Ústí nad Labem reported an enhancement of the number of employees by 603 persons. In compliance with the approved documentation of the Regional Programme for the period from 2004 to 2006, implementation of the Programmes of economic and social development in economically weak regions was continuing as well. The construction of industrial zones for new investments, either foreign or domestic ones, brings specific results in development of economically weak regions. Booming in the branch of the manufacture of structural and fabricated metal products has had a positive impact on employment development, namely not only in economically weak regions. The branch production is in a great extent diverse. It includes a wide production from diminutive products to capital goods units. Different factors are influencing individual product groups Foreign trade The results of the foreign trade in the period from 2000 to 2005 are illustrated in Table 2. In spite of a certain decline of import in 2002, we may assume favourable development dynamics. Export in the period under review grew up by CZK 42 billions, with an increase to 152% of the value of The branch was reporting considerably higher growth rate of export as compared with that of one of import, with increasing positive balance of the foreign trade. The balance grew up in 2005 to 146% of the level of initial year. More than half of export was made up by the production of the group 28.7 (connecting materials, ropes, chains, springs, electrodes). Nevertheless, the group is characterized by relatively high import intensity, it shares 34% in the creation of foreign trade balance. Table 2: Foreign trade development in CPA 28 products, in (Mill. CZK) Export , , , , , ,5 Import , , , , , ,6 Balance , , , , , ,9 Year-on-year index 00/99 01/00 02/01 03/02 04/03 05/04 Export x 108,8 93,3 111,7 125,4 107,2 Import x 112,9 100,8 110,4 121,7 101,9 Source: CSO, data available as on Investments Development in production base within the branch of metal industry is also facilitated by the system of investment incentives in compliance with the Act No. 19/2004 Coll. However, the conditions for receiving the support for existing manufacturers in the period under review were relatively tough (minimum value of the investment is 70

71 NACE 28 assumed in the amount of CZK 200 millions). The main reason behind not taking advantage of investment incentives is apparently a sufficient number of existing production capacities within the branch, in addition not optimally utilized. With linkage to investment development in automotive and electro-engineering industry (e.g. TPCA plant in Kolín), the investment incentives have been metaphorically utilized in the groups 28.4 Forging, pressing and other forming of metal, 28.5 Surface treatment of metals and 28.1 Structural metal products. Implementation of the Policy of support to small and medium-sized undertaking, which was adopted by the CZ Government Resolution No. 1257/2000, helps strengthening positive development trends in the sector of small and medium-sized entrepreneurs. The policy contains long-term and medium-term development targets of small and medium-size enterprises. The branch mostly utilized contributions for gaining certificates of quality according to the standards ISO 9000, ISO and implementation of the Programme EMAS. The NACE 28 branch also efficiently took advantage of financial contributions for creation of new jobs in the regions mostly touched by unemployment. The metal industry belongs among the branches with a great influx of the foreign investments. The volumes of investments have been permanently growing since 2000, bringing both new technologies and new sales possibilities as well. By the end of 2004 the value of foreign investments into the branch amounted to almost CZK 32 billions. The branch is also indirectly participating in implementation of the large investments, particularly into automotive and electro-engineering industry, bringing progressive technologies also into the metal industry (especially into the groups 28.4 and 28.5) Branch perspectives The metal industry branch belongs among the leading groups of the metal-processing industry of the CZ, in which it occupies one of the prominent places. Development in the branch was in 2005 characterized by significant growth dynamics in all monitored indicators. Also development trends in all production groups were positive. Time schedule of implementation of the CZ Energy Programme may be taken as an important factor influencing the future development of the branch. The programme has the decisive impact on development and perspective in the group 28.3 Manufacture of steam generators, which belonged in the recent past among the carrier programmes of the capital goods engineering. The intended investment activities of the ČEZ company in Romania and Bulgaria may significantly influence the actual results of the said branch. Based on development in export in the period from 2004 to 2005 we may assume that the strong exchange rate of Czech Crown did not witness in the results of the foreign trade of the branch. On the contrary it favourably damped down the price enhancement of raw materials and energies. In the nearest future, with regard to the results of the Czech economy, we cannot really expect weakening of the local currency. All the manufacturers will be forced to include the growth of world prices of raw materials and energies into their costs. Development in the sales of automobiles can influence the branch, namely in both directions. Nevertheless, that the branch is being influenced by many common factors, thanks to product diversification, the development and perspective of individual groups will distinguish in medium-term perspective. 71

72 MANUFACTURE AND REPAIRS OF MACHINERY AND EQUIPMENT DK 15. Manufacture and repairs of machinery and equipment NACE 29 The branch NACE 29 Manufacture and repairs of machinery and equipment, which is often called general engineering, is an important branch of the Czech manufacturing industry. It incorporates very wide range of production and repairing activities on the facilities, which are indispensable for any investment into production technology. However, an integral part of the branch is also manufacture of weapons, their parts and ammunition, but also household instruments and appliances. For just these reasons it belongs among the most important branches of the manufacturing industry. In the manufacturing industry receipts from sales of own products and services in 2004 NACE 29 shared 8,0% and in 2005 almost 8,5%. Since 2002, which was the least successful year in the new millenium, most of the monitored production indicators have grown monastically as many as by tens of percentages Main production indicators The branch in the period from 2000 to 2005 had shown a gradually growing development in receipts from sales of own products and services. A considerable increase was registered in 2004 and the growing trend was continuing in The similar course showed the amount of value added and labour productivity as well. This favourable process was resulting from a number of favourable effects the CZ accession to the EU, termination of the world economic recession and not at last, termination of the restructuring and transforming processes in a number of the subjects of the branch. With respect to the continuous setting of the new technologies into the manufacturing processes within the entire branch, the trend of the gradual decrease of the number of employees has been registered. Since 2003 it has been compensated by implementation of the provisions resulting from the National Action Plan of Employment. The development is bringing a stabilization of the number of employees within the branch (see Figure 1 and Table 1). The growth of industrial production (measured by industrial production index) in 2005 continued, while the second highest increase took place just in the branch of manufacture and repairs of machinery and equipment (by Figure 1: Main production indicators in NACE 29, in , in constant prices Index 2000 = Number of employees Value added Receipts from sales of own P & S Labour productivity Source: CSO, MIT estimate, 2005 = preliminary data; const. p. of

73 NACE 29 Table 1: Main production indicators in NACE 29, in , in constant prices (Mill. CZK, employees) * Receipts from sales of own P & S , , , , , ,6 Year-on-year index x 110,9 104,4 110,2 116,0 116,4 Cumulative index 100,0 110,9 115,8 127,6 148,0 172,2 Value added , , , , , ,8 Year-on-year index x 108,0 91,0 106,3 117,3 107,9 Cumulative index 100,0 108,0 98,3 104,5 122,5 132,2 Labour productivity from VA 311,2 346,5 318,0 335,5 396,5 419,5 Year-on-year index x 111,3 91,8 105,5 118,2 105,8 Cumulative index 100,0 111,3 102,2 107,8 127,4 134,8 Number of employees Year-on-year index x 97,0 99,1 100,8 99,2 102,0 Cumulative index 100,0 97,0 96,2 96,9 96,2 98,1 Source: CSO, MIT estimate; *preliminary data, const. p. of

74 13,3%). The decisive factors of industrial development (in general) in 2005 were: entry of other foreign investors, commissioning of the new production capacities (in automotive industry, particularly), significant growth of export of industrial products, stable supplies of fuels and energy for existing as well as new production capacities, overall stability of employment within the industry accompanied by adequate growth of wages, considerable growth of labour productivity especially in the new capacities and smooth order coverage of the industrial industry Employment Employment structure of the branch, according to the size of enterprises, is presented in Figure 2. The centre of its gravity consists in the enterprises with 50 to 249 employees and 250 to 999 employees, respectively, which is given by the fact that the manufacture in the branch is mostly technically as well as technologically demanding, so the smaller firms are involved in the less technically demanding manufacture or deliver sub-deliveries or cooperations. Generally, the companies with more than 1000 employees have already operated in a lower number in the manufacturing industry. The industrial base of the branch was in 2005 made up by altogether enterprises with the total number of employees exceeding Enterprises of the group 29.5 Manufacture and repairs of other special purpose machinery were recording more than employees (i.e. 33,7% of employees in the branch). On the contrary the lowest number of employees was in 2005 recorded in the groups 29.7 Manufacture of household appliance and equipment (almost employees, which is 5,1%) and 29.6 Manufacture and repairs of weapons and ammunition (about employees, i.e. 3,3%). The average salary within NACE 29 was in 2005 CZK /month. The highest average salary was reported in the group 29.1 Manufacture of machinery for the production and use of mechanical power (CZK / month) and the lowest average salary was recorded in the group 29.7 Manufacture of household appliances and equipment (CZK /month). The foreign direct investments have had the positive impact on the branch development. The preservation of the concern of foreign investors is supported by favourable business environment, which is co-created by the stable and transparent legislation, tax preferences, transport attainability, quality and a sufficient number of the labour force. The favourable impact on the results of the branch has had the system of supports to small and mediumsized enterprises (SMEs), provided within the framework of the MIT, which is being conducted through a broad range of differently focused programmes. Figure 2: Employment structure, according to the size of enterprises, in NACE 29, in and more 11 % % % Source: CSO, MIT estimate; 2005 = preliminary data % % 15.3 Foreign trade The foreign trade of the CPA 29 branch had reported a negative balance before 2002 (see Table 2), which was among others substantially influenced by the running world economic recession. Beginning 2003 the balance 74

75 NACE 29 came to positive numbers and was dynamically growing, so between the balance of 2004 and 2005 it was attained the growth by more than 245%. Due to the influx of foreign investors, use of new know-how, effective technologies etc., the competitiveness of the branch products has been enhancing. After the CZ accession to the EU substantial changes of conditions for export into the member-states were taking place, namely both by elimination of the custom tariffs and the custom measures of the EU, which prevent imports of goods for the dumping prices into the EU, give opportunity for the Czech goods to compete on the market. The positive balance of the foreign trade with the EU attained in 2005 record level (CZK 278,1 billions), thus it was almost seven times higher than the total trade surplus. The enhancement of the surplus with the EU was caused namely by the trade with machinery and transport means. Out of the total export of this group 84% was channelled into the countries of the EU and 70,7% of the total import was imported. The highest surplus was achieved in the trade with road vehicles and office machinery and equipment for automatic data processing. The significant improvement occurred in the foreign trade with the machinery generally used in the industry (by CZK 18,1 billions). The CZ succeeded to increase positive balance by CZK 12,8 billions with the EU in industrial consumer goods to CZK 54,6 billions. Table 2: Foreign trade development in CPA 29 products, in (Mill. CZK) Export , , , , , ,4 Import , , , , , ,2 Balance , , ,3 450, , ,2 Year-on-year index 00/99 01/00 02/01 03/02 04/03 05/04 Export x 114,8 99,2 116,2 127,2 111,6 Import x 116,2 91,8 111,5 118,3 93,4 Source: CSO, data available as on Investments By implementation of the system of investment incentives an important condition was given for enhancement of the influx of the foreign investments into the Czech manufacturing industry. A strong impulse accordingly has been given for development of the domestic investments. Within NACE 29 in the course of 2005 altogether other 6 projects were supported in the total investment amount of almost CZK 46 millions, which will create more than 840 new jobs. The investment incentives are further resource for creation of the new jobs in the regions mostly affected by unemployment Branch perspectives Economic activity of the branch NACE 29 has had a long tradition in the Czech Republic and the CZ is famous by its export of the capital goods units, the essential components of which are mostly just the CPA 29 products. The above-mentioned development in the production indicators, investment activities and foreign trade is creating a pre-requisite for continuation of the trend already commenced. Development in the competition ability of the branch must be ensured by a continuous enhancement of the technical level of the final products, technologies but also pre-manufacturing stages, by thorough monitoring of quality, by flexible response to demands of the customers, by complexity of deliveries, by achievable and quick service and by total solidity of the firm. There is another condition that cannot be thought apart, namely ensuring of qualified labour force through first-rate education at schools of all stages. 75

76 MANUFACTURE OF ELECTRICAL AND OPTICAL EQUIPMENT DL 16. Manufacture of office machinery and computers NACE 30 Transformation of the manufacturing industry in the Czech Republic (CZ) has brought considerable changes. In the period from 2000 to 2006 new production centres had been built up with use of foreign direct investments in the form of implementation of more than 400 green-field investment projects. In 2005 the performance of the manufacturing industry was influenced by the growth in the branches having a considerable share of foreign capital. In ,1% of the manufacturing industry products and 74,9% of export of the CZ production of goods were realized in the organizations under foreign control. There are already almost enterprises under foreign control in the CZ manufacturing industry, which are employing more than 400 thousand employees. Currently the electro-technical industry belongs among the decisive branches of the manufacturing industry. According to the character of the production programme, it includes the manufacture of office machinery and computers, electric machines and equipment, electronic parts and equipment and the manufacture of instrumental and automatization technique. Export of the export oriented electro-technical industry production (NACE DL) in 2005 reached CZK 404 billions and was making up 21,6% of the production of goods in the CZ. Electro-technical production was one of the main drivers of the growth dynamics of the manufacturing industry production in The share of the subsection DL in receipts from sales of own products and services in constant prices in the amount of CZK 391,1 billions reached in ,3% of the total manufacturing industry receipts. Commissioning of new production capacities in the subsection DL was continuing. The foreign direct investments in this subsection at implementation of more than 70 projects have reached CZK 72,4 billions. The share of the electro-technical industry in foreign direct investments has reached 14,1% Main production indicators The NACE 30 branch includes the manufacture of office machinery and computers and other facilities for data processing. The manufacture of office machinery and computers does not include maintenance and service, deliveries of software, manufacture of electronic components and manufacture of electronic games either. In the period from 2000 to 2005 new centres of the manufacture of computers on order had been built up in the CZ at utilization of foreign direct investments in the form of implementation of green field investment projects. It concerns mainly projects, which were implemented by the companies Hon Hai Precision Industry, First International Computer, Celestica and ASUSTeK COMPUTER. The Czech TOP 100 Association has published the results of already the 12th anniversary of the overview of TOP 100 most important companies in the CZ for Among the first ten of the companies having the largest receipts belongs FOXCONN CZ Pardubice, with receipts amounting to CZK 51,4 billions. According to the reached receipts, the companies FIC CZ Rudná u Prahy with receipts amounting to CZK 21,1 billions, ed _systém Czech (CZK 8,9 billions) and AT Computers (CZK 5,5 billions) were ranked among the Czech TOP 100 for From the results of the Czech Top 100 it follows that in the first ten largest exporters of the production of goods in the CZ the four companies of the electro-technical industry were placed. In the branch of the manufacture of computers it concerns the company FOXCONN CZ Pardubice with export of computers in the amount of CZK ,3 millions and the company FIC CZ Rudná u Prahy with export of computers amounting to CZK 21,0 billions. Top 10 of the largest exporters attained in 2005 the volume of export amounting to CZK 389,7 billions. Development in the main production indicators in the NACE 30 branch in the period from 2000 to 2005 is presented in Figure 1. Performance of the branch in the period from 2000 to 2005 was influenced by the commissioning of new production capacities in the companies under foreign control. The decisive part of receipts was realized in the 76

77 NACE 30 Figure 1: Main production indicators in NACE 30, in constant prices, in Index 2000 = Number of employees Value added Receipts from sales of own P & S Labour productivity Source: CSO, MIT estimate, 2005 = preliminary data; const. p. of 2000 organizations having 1000 and more employees. Receipts from sales of own products and services in the group of organizations with 20 and more employees (in constant prices) in 2005 reached CZK 107,1 billions. The 2005/ 2004 index is documenting year-on-year growth of receipts from sales of own products and services of NACE 30 branch by 26,1%. The receipts in the branch enhanced in 2005 twelve times as compared with Development in the main production indicators in NACE 30 branch is documented in Table 1. Also during the first quarter of 2006, in the structure of industrial enterprises in distribution according to institutional sectors, the private enterprises under foreign control recorded a strong increase of receipts (in constant prices) by 26,3%. Their share increased inter-annually by 4,9% to 58,9%. The favourable development in private enterprises under foreign control, which are commissioning new production capacities into operation, was manifested in the growth of employment by 4,7%. They share 41% in employment. Table 1: Main production indicators in NACE 30, in , in constant prices (Mill. CZK, employees) * Receipts from sales of own P & S 7 136, , , , , ,4 Year-on-year index x 348,5 260,3 117,1 116,4 103,1 Cumulative index 100,0 348,5 907,1 1061,8 1235,8 1274,0 Value added 1 092,3 822, , , , ,7 Year-on-year index x 75,3-134,8 975,6 58,0 169,3 Cumulative index 100,0 75,3-101,5-990,0-574,2-972,0 Labour productivity from VA 311,6 129,4-128, ,5-713, ,6 Year-on-year index x 41,5-99,0 1002,2 55,6 160,0 Cumulative index 100,0 41,5-41,1-412,2-229,1-366,6 Number of employees Year-on-year index x 181,3 136,1 97,4 104,3 105,8 Cumulative index 100,0 181,3 246,7 240,2 250,6 265,1 Source: CSO, MIT estimate; *preliminary data, const. p. of

78 During this period the production of electro-technical industry grew up by 24% and receipts (in constant prices) by 23,1%. From the individual sections of the electro-technical production the manufacture of office machinery and computers dynamically increased (by 52%). The growth of receipts from sales of own products and services (in constant prices) reached 30,2% Employment Commissioning of new capacities in the companies under foreign control enabled the rise of approx new jobs and the growth of the number of employees in the period from 2000 to The 2004/2005 index is documenting year-on-year growth of the number of employed persons in the branch of the manufacture of office machinery and computers by 5,8%. The cumulative index is documenting the growth of the number of employees by 165,1%. As to the size structure of industrial enterprises, the high growth of receipts was achieved in the organizations with and more employees. In this group namely the companies under foreign control are acting with good export possibilities, which is manifested in the growth of receipts from the direct export. The share of the size structure of the organizations in the NACE 30 branch is illustrated in Figure 2. Figure 2: Employment structure, according to the size of enterprises, in 2005 NACE and more 41 % % % % Source: CSO, MIT estimate; 2005 = preliminary data % 16.3 Foreign trade Export of the computers production from the CZ reached CZK 121,8 billion in The export intensive branch of computers contributed to the favourable trade balance of the CZ. Table 2: Foreign trade development in CPA 30 products, in (Mill. CZK) Export , , , , , ,8 Import , , , , , ,1 Balance , , , , , ,7 Year-on-year index 00/99 01/00 02/01 03/02 04/03 05/04 Export x 199,7 197,9 111,7 121,2 115,5 Import x 145,3 110,8 97,5 125,0 104,1 Source: CSO, data available as on

79 NACE 30 The 2004/2005 index is showing the growth of export by 15,5%. The share of export of computers in export of the production of goods of the CZ has reached 6,7%. The share of computers in export of the production of goods of the electro-technical industry amounts to 30,1%. Development in foreign trade with the CPA 30 products in the period from 2000 to 2005 is presented in Table 2. In 2005 export of the production of computers consisted of the economic tariffs items HS 8471 Machinery for automatic date processing, units, readers in the amount of CZK 97,4 billions and HS 8473 Parts of the type writers, computing machines etc., automatic data processing amounting to CZK 22,7 billions. The significant growth of export of computers was continuing also in the first quarter of During this quarter the goods in the amount of CZK 35 billions was exported. The 2005/2006 index is documenting the growth of export by 65,5% Investments In the period from 2000 to 2005 new centres of the manufacture of computers had been built up in the CZ at utilization of foreign direct investments. It concerns the projects implemented by FOXCONN in Pardubice, FIC in Rudná u Prahy, ASUS in Ostrava and Celestica in Ráječek. Another phase presents creating preconditions for the development of technological centres and centres of strategic services. The Government of the CZ by its Resolution No. 1238/2003 accepted the framework programme to the support of their establishment. The high-tech repair and service centre of FOXCONN CZ in Pardubice has launched its activity. ASUS Czech Co. is implementing the high-tech repair centre for computers and electronic devices in Ostrava. ACER Co. is implementing a repair centre and centre to the support of ACER IT products clients in Brno and SPC International is implementing the high-tech repair centre for repairs of automatic teller machines, computers and line code readers in Tábor. The most important investors, which in 2005 decided to invest in the CZ, took over valuations called INVES- TOR OF THE YEAR For the largest economic contribution of the investment into strategic services were appraised the companies Sun Microsystems Czech in Praha, TietoEnator in Ostrava and Computer Associates CZ in Praha. For the investment with the largest innovation potential was appraised the company TC INTER INFOR- MATICS Branch perspectives By the Act on investment incentives the preconditions of the credible environment had been created in the CZ for foreign investors. The influx of foreign direct investments positively influenced development in the manufacture of computers. Next phase presents development of the strategic services. The CZ was selected by the hightech companies, which have been implementing more than 40 projects in the CZ. The competition ability of the office machinery and computers production in the period from 2000 to April 2004 may be quantified by comparison of the position of the countries with transition economy (CEFTA) on the EU countries market. In 2004 export of computers from the CZ to the EU countries reached 43,4% of export of the countries within CEFTA. In the period from May to December 2004 export of computers attained EUR 1 551,7 millions. Export of computers is making up more than 50% of export of the high-tech production from the CZ. This export item had also in 2005 the highest favourable balance in the amount of CZK 31,4 billions. The branch of the manufacture of the computers, which is in a great deal oriented on export, significantly contributes to favourable balance of trade of the CZ. 79

80 17. Manufacture of electric machinery and equipment NACE 31 According to economic activities (NACE) the branch is distributed into six groups. The traditional main groups with regard to the production and export volumes are electric motors, generators and transformers, electric distribution and control apparatus as well as cables and insulated wires. Supplementary and completing character of the products and equipment is typical for this branch. Particularly due its completing character the entire branch is an inevitable part of the manufacturing industry. Approx employees are employed in the branch, which represents 8,1% of the entire manufacturing industry. From the share in number of employees of the entire manufacturing industry point of view the NACE 31 branch ranks on the fourth place and in value added on the sixth place, respectively. The branch has been recording permanent growth of receipts from sales of own products and services, namely already since Main production indicators Comparison of the main production indicators in NACE 31 branch in the period from 2000 to 2005 in constant prices is presented in Figure l. Figure 1: Main production indicators in NACE 31, in constant prices, in Index 2000 = Number of employees Value added Receipts from sales of own P & S Labour productivity Source: CSO, MIT estimate, 2005 = preliminary data; const. p. of 2000 When comparing the year 2000 with 2005, it is obvious that receipts from sales of own products and services of the entire branch significantly increased, mostly in the group 31.5 Manufacture of lighting equipment and electric lamps, where receipts from sales of own P&S more than doubled. In the absolute scale the largest growth was recorded in the group 31.6 Manufacture of electrical equipment, when its receipts within the monitored period grew up by almost CZK 27 billions. Due to increasing manufacture of the automobiles in the CZ, we may expect another growth in this group. Inter-annually the highest growth in the absolute scale was reported in the classical group 31.1 Manufacture of electric motors, generators and transformers. Positively may be evaluated the permanent growth of all significant indicators, namely labour productivity, which inter-annually increased by more than 6%. The value added and number of employees were significantly influencing labour productivity, in particular. This very important economic indicator, even if it keeps growing, is in comparison with the advanced countries still lagging behind. Development in the main production indicators of NACE 31 branch in constant prices in the period from 2000 to 2005 is presented in Table 1. 80

81 NACE 31 Table 1: Main production indicators in NACE 31, in , in constant prices (Mill. CZK, employees) * Receipts from sales of own P & S , , , , , ,7 Year-on-year index x 118,2 100,5 109,2 121,4 107,7 Cumulative index 100,0 118,2 118,8 129,7 157,3 169,5 Value added , , , , , ,6 Year-on-year index x 129,3 98,5 111,9 115,0 108,5 Cumulative index 100,0 129,3 127,3 142,5 164,0 177,9 Labour productivity from VA 312,0 358,7 369,6 413,5 483,5 516,0 Year-on-year index x 114,9 103,0 111,9 116,9 106,7 Cumulative index 100,0 114,9 118,4 132,5 154,9 165,4 Number of employees Year-on-year index x 112,5 95,6 100,0 98,4 101,7 Cumulative index 100,0 112,5 107,5 107,6 105,8 107,6 Source: CSO, MIT estimate; *preliminary data, const. p. of Employment The medium-sized enterprises with 250 to 999 employees have the largest share both in employment and in receipts from sales of own products and services. The large enterprises (with and more employees) are achieving bigger value added and higher labour productivity. From the view of employment in the branch also the enterprises and physical persons with less than 50 employees are playing an important role. As it is illustrated in Figure 2 the group is employing 25% of the persons in the branch. The salaries of the employees in the branch are rather below the average, in spite of the fact that the occupation in the branch is demanding mostly minimum technical education at least. The salaries in 2005 were lower by approx. 5% than the average in the manufacturing industry. In comparison with the entire industry the difference of average salaries was even a little bit higher. The working opportunities are being created by the enterprises mostly by means of production enlargement, namely both in the existing premises by implementation of the second and third shift, and of the construction of new production capacities. Within the framework of investment incentives it is also possible to take advantage of the programme to the support of creation of new jobs, especially in the regions mostly touched by unemployment. Figure 2: Employment structure, according to the size of enterprises, in 2005 NACE and more 20 % % % Source: CSO, MIT estimate; 2005 = preliminary data % % 81

82 Economic situation of the enterprises is good, though the tough competition is forcing the enterprises to reduce prices and thus to minimize costs as well as the number of employees. The companies under foreign control have mostly the sales of their products ensured. They accordingly create in a sufficient manner a great profit and have sufficient number of financial funds for their development. As an example the firm Siemens might be mentioned, which is acting in four groups of the branch, but also in other groups of the manufacturing industry Foreign trade Development in foreign trade with CPA 31 products in the period from 2000 to 2005 is documented in Table 2. Table 2: Foreign trade development in CPA 31 products, in (Mill. CZK) Export , , , , , ,5 Import , , , , , ,7 Balance , , , , , ,8 Year-on-year index 00/99 01/00 02/01 03/02 04/03 05/04 Export x 113,6 93,6 111,5 125,4 98,8 Import x 117,6 85,5 110,5 124,2 98,6 Source: CSO, data available as on In the period from 2000 to 2005 the NACE 31 branch achieved the growth of export by 46%. The largest volume of export was recorded in the distribution and control apparatus and in electrical equipment (mainly for automobiles). Import of the branch grew in the said period as well, namely by more than 35%. Also in this case the largest volume was achieved in the products and parts of the group 31.2 Distribution and control apparatus. In inter-annual comparison a slight drop in export occurred, namely thanks to the lower trade with electrical equipment, for some production capacities were transferred outside the territory of the CZ. Reduction in import took place especially in accumulators and galvanic cells, but also in electrical equipment Investments From the force of the Act No. 72/2000 Coll., on investment incentives, altogether 217 companies from all branches of the industry had received investment incentives by the end of In 2005 the Ministry of Industry and Trade decided to provide incentives to 57 firms in the total volume of more than CZK 40 billions, out of which only two incentives were provided to NACE 31 branch. That is to say that some investors consider as sufficient impulse an offer of new areas for the construction of objects in industrial zones without old ecological burdens, which have infrastructure already ensured. Availability of the qualified workforce presents an indispensable part of the construction project of new production capacities Branch perspectives The CZ keeps on in being interesting territory for investments of foreign companies because of lower production and transport costs, and also thanks to first-rate and at the same time cheap workforce. The future develop- 82

83 NACE 31 ment in this branch is accordingly connected with interests of multinational companies and is also supported by enhancing importance within the entire manufacturing industry. Output elements of this branch might be found nowadays in all products of the manufacturing industry, in power sector, but in the transportation as well. Basically, we cannot find nowadays a machine or equipment, in which some electrical device would not be used. Investments, especially into research, development, innovation or technology centres, will be more stable in the future. That is to say that simple manufactures can be transferred within a short time to other cost preferred countries. Under conditions of mass production and globalisation of the world trade the production costs play in this case the decisive role. The significant growth rate in this branch has been already taking place for a couple of years. Therefore, a certain slow-down of the growth mainly in the groups, which are not a part of the equipment of the automobiles or buildings, can be expected. 83

84 18. Manufacture of radio television, and communication equipment and apparatus NACE 32 Development of the production of electronic parts and equipment was in the CZ conditioned by the entry of foreign direct investments of multinational companies, which ensured the transfer of the production base into the country possessing an advantageous territorial position, satisfactorily built up infrastructure and available human resources. Transformation of the Czech manufacturing industry has brought important changes. In the period from , at utilization of the foreign direct investments, new centres of the manufacture of electronic components and devices had been built up in the CZ by implementation of investment projects on green field. It concerns mainly the implemented projects of the companies Panasonic AVC Networks CZ Plzeň, Panasonic Mobile & Automotive Systems CZ Pardubice, AVX CZ Lanškroun, ON Semiconductor CHC CZ Rožnov, Celestica CZ Kladno, ALPS Electric CZ Boskovice. Currently the electro-technical industry belongs among the decisive branches of the manufacturing industry Main production indicators Export of the production of an export oriented branch of electronic parts and equipment attained in 2005 the value of CZK 102,7 billions. The share of export of the production makes up 5,7% of the CZ production of goods. The share of NACE 32 branch in export of the electro-technical production is 25,4%. In the branch of electronic parts and equipment the commissioning of the new production capacities was continuing. The foreign direct investments in the subsection DL reached CZK 72,4 billions at implementation of more than 70 projects. The Czech TOP 100 Association has published the results of the list of TOP 100 most important companies in the CZ for In the ranking of the Czech TOP 100 for 2005 from the standpoint of the achieved receipts the companies Panasonic AVC Networks CZ Plzeň with receipts amounting to CZK 27,5 billions and STROM Telecom with receipts in the amount of CZK 5,0 billions were placed. From the results of the Czech TOP 100 it follows, that in the first ten largest exporters of the CZ, the Panasonic AVC Networks from Plzeň ranked on the 6th place with export of the colour TV receivers in the amount of CZK 27,5 billions. This company achieved a 32% increase of export inter-annually. Export enhancement was connected with implementation of the manufacture of the colour TV receivers with LCD and plasma picture tubes. First ten of the largest exporters achieved in 2005 the volume of export amounting to CZK 389,7 billions. Figure 1: Main production indicators in NACE 32, in constant prices, in Index 2000 = Number of employees Value added Receipts from sales of own P & S Labour productivity Source: CSO, MIT estimate, 2005 = preliminary data; const. p. of

85 NACE 32 Table 1: Main production indicators in NACE 32, in , in constant prices (Mill. CZK, employees) * Receipts from sales of own P & S , , , , , ,3 Year-on-year index x 119,1 127,2 111,9 156,2 94,0 Cumulative index 100,0 119,1 151,5 169,6 264,8 248,8 Value added , , , , , ,8 Year-on-year index x 111,4 122,9 97,6 143,4 68,7 Cumulative index 100,0 111,4 136,9 133,6 191,5 131,6 Labour productivity from VA 334,4 338,8 446,8 440,5 613,2 424,1 Year-on-year index x 101,3 131,9 98,6 139,2 69,2 Cumulative index 100,0 101,3 133,6 131,7 183,4 126,8 Number of employees Year-on-year index x 109,9 93,2 99,0 103,0 99,3 Cumulative index 100,0 109,9 102,4 101,4 104,5 103,7 Source: CSO, MIT estimate; *preliminary data, const. p. of

86 Development in the main production indicators in the branch of electronic parts and equipment in the period from 2000 to 2005 (in constant prices) is presented in Figure 1. Performance of the branch of electronic parts and equipment was in the period from 2000 to 2005 influenced by the commissioning of the new capacities in the companies under foreign control. The share of the branch in receipts from sales of own products and services in the amount of CZK 111,5 billions in 2005 achieved 4% of receipts of the manufacturing industry. The share of the branch in receipts of the electro-technical industry achieved 26%. The 2000/2005 index is documenting the growth by 149%. Development in the main production indicators of the branch is presented in Table 1. Also in the first quarter of 2006, in the structure of industrial enterprises in distribution according to institutional sectors, the private enterprises under foreign control recorded a strong increase of receipts. Their share in receipts increased to 58,9%. In the electro-technical industry the production grew up during this period by 24% and receipts (in constant prices) by 23,1%. From individual sections of the manufacture of electro-technical production the manufacture of electronic parts and equipment dynamically grew (by 35,4%). The growth of receipts from sales of own products and services (in constant prices) achieved 35,2%. The production of electronic parts and equipment is largely oriented on export. The newly concluded orders significantly enhanced, in total by 33%, out of which orders from abroad by 32,9% Employment In the size structure of the industrial enterprises, the high growth of receipts was achieved by the companies under foreign control, which are possessing good export possibilities. It is witnessed in the growth of receipts from the direct export. The share of the size groups of organizations in employment within NACE 32 branch in 2005 is illustrated in Figure 2. Favourable development in the private enterprises under foreign control implementing into operation new production capacities was manifested in the 1st quarter of 2006 by the growth of employment (by 5,0%). Figure 2: Employment structure, according to the size of enterprises, in 2005 NACE and more 41 % % % % Source: CSO, MIT estimate; 2005 = preliminary data % 18.3 Foreign trade In 2005 export of electronic parts and equipment reached CZK 102,7 billions. The share of export of electronic parts and equipment in export of the CZ production of goods achieved 5,7%. The share of export of NACE 32 branch in export of the production of electro-technical industry amounted to 25,4%. Export of electronic production in 2005 represented a double of electronic export in

87 NACE 32 Table 2: Foreign trade development in CPA 32 products, in (Mill. CZK) Export , , , , , ,3 Import , , , , , ,6 Balance , , , , , ,3 Year-on-year index 00/99 01/00 02/01 03/02 04/03 05/04 Export x 133,8 93,2 101,2 161,8 92,0 Import x 111,5 100,5 110,9 120,1 95,2 Source: CSO, data available as on Development in foreign trade with the CPA 32 products in the period from 2000 to 2005 is presented in Table 2. The significant growth of export was continuing in the 1st quarter of 2006 as well. During this period the goods in the value of CZK 27,7 billions was exported. The 2004/2005 index is documenting the growth of export by 27%. The newly concluded orders in the course of the 1st quarter of 2006 considerably enhanced, in total by 33%, out of which from abroad by 32,9% Investments In the period from 2000 to 2006, at utilization of the foreign direct investments, new centres of the manufacture of electronic parts and equipment had been built up in the CZ. It concerns mainly the projects of the companies Panasonic AVC Networks CZ in Plzeň, Panasonic Mobile & Automotive Systems CZ in Pardubice, AVX CZ in Lanškroun, ON Semiconductor CHC CZ in Rožnov, Celestica CZ in Kladno and ALPS Electric CZ in Boskovice. Audio and video technique Bang & Olufsen is characteristic by above the standard quality and original design, in particular. The company has built up the production base in Kopřivnice, where the manufacture of audio products commenced in 2nd quarter of In April 2006 the technological centre commenced its activity for development of audio-video and telecommunication products. The company Changhong has decided to build up in the CZ a plant for assembling of the colour TV receivers with LCD picture tubes. The plant in Nymburk shall produce 1 million pieces of TV receivers per year, which will be delivered largely on the West-European markets. In the industrial zone Triangle the Japanese consortium IPS Alpha will build up a plant for the manufacture of LCD displays. The companies Hitachi, Panasonic and Toshiba have formed a consortium IPS Alpha. These companies are furthermore considering a construction of other three plants for the manufacture of the colour TV receivers with LCD picture tubes. Subsequently from the zone Triangle the products of the renowned brands Hitachi, Panasonic a Toshiba would be delivered to the European shops. Next phase is a creation of the preconditions for development of the technological centres. The Government of the CZ by its Resolution No. 1238/2003 accepted the framework programme to the support of their rising. The CZ has already possessed a very strong position in the area of foreign direct investments for a couple of years. Credibility of the investors, positive experience and references are an important precondition for gaining the projects in the area of the technological centres, the number of which is permanently enhancing. The project on enlargement of the technology centre for development of the colour TV receivers in the Panasonic AVC Networks Czech in Plzeň is one the first projects in the field of high-tech centres in the CZ. The project is creating preconditions for the rise of new jobs with high requirements on qualification. ON Semiconductor CHC in Rožnov pod Radhoštěm is going to enlarge the centre focused on optimising and transfer of the production processes. The intention of the group ALPS is to transfer the development activities, which are currently for the European production plants carried out in UK, into the company ALPS Electric Czech in Boskovice. The centre will be focused on development and innovations of TV tuners and satellite convectors, in particular. The AMI Semiconductor CZ in Brno is one of the development centres of the multinational group focused on design, 87

88 development and testing of the custom-made integrated circuits and standard integrated circuits. The technological centre of the Tyco Integrated Systems in Brno will focus on development of pick-ups and detectors, control devices and sensors Branch perspectives The investment intensity presents a common symptom of the technological processes in the manufacture of electronic parts and equipment, where the production technologies are lagging behind by a quicker way than in the traditional groups of the manufacturing industry. By the act on investment incentives the preconditions of the trustworthy environment for foreign investors had been created in the CZ. The influx of foreign direct investments subsequently influenced favourably development of the branch of electronic parts and equipment. The competitive ability of the production of electronic parts and equipment from the year 2000 to 4th quarter of 2004 can be quantified by the comparison of the position of the countries with transition economy (CEFTA) on the EU market. From the data of EUROSTAT it follows that export of electronic production from the CZ in the period from January through April 2004 to the EU countries amounted to EUR 719,7 millions, i.e., 21,1% of export of the CEFTA electronic production. In the period from May to December 2004 export of electronics from the CZ on the EU internal market achieved EUR 1 848,4 millions. It made up accordingly 18,8% of export from the newly accessing countries to the EU. 88

89 19. Manufacture of medical, precision, optical and time measuring instruments NACE 33 The main traditional groups, with respect to financial volume of the production and export, are the measuring and control equipment, medical equipment and optical instruments, where optical lenses occupy the largest share, in particular. The branch is characteristic by its special technologies for the manufacture of heterogeneous goods from the simple devices, over optical lenses up to complicated instruments and equipment with a major share of mental labour. Approx persons are employed in the branch, which is 2,6% within the entire manufacturing industry. From the share in the number of employees of the entire manufacturing industry point of view, the NACE 33 branch is ranked on 15th place and in the value added on 13th place, namely with share of 2,5%. The branch has been long-term reporting the growth of receipts from sales of own products and services, with the exception of only 2003, when, due to previous floods, the reduction in the group of measuring and control equipment took place, particularly. 89

90 19.1 Main production indicators The comparison of the main production indicators in NACE 33 branch in the period from 2000 to 2005 in constant prices is illustrated in Figure 1. When comparing the years 2000 and 2005, the receipts from sales of own products and services of the entire branch in constant prices significantly grew up. The largest increase of receipts in the absolute scale was during this period registered in the group measuring and control instruments with the growth by CZK 12 billions. Also the group medical instruments went up considerably, namely by more than CZK 4 billions. Within the framework of the comparison of the years 2004 and 2005 it is necessary to stress the large growth of value added (by 25%). The group of the measuring and control instruments had again the largest merit in it. This Figure 1: Main production indicators in NACE 33, in constant prices, in Index 2000 = Number of employees Value added Receipts from sales of own P & S Labour productivity Source: CSO, MIT estimate, 2005 = preliminary data; const. p. of 2000 Table 1: Main production indicators in NACE 33, in , in constant prices (Mill. CZK, employees) * Receipts from sales of own P & S , , , , , ,3 Year-on-year index x 117,6 112,8 90,6 127,9 115,5 Cumulative index 100,0 117,6 132,7 120,2 153,7 177,5 Value added 9 611, , , , , ,3 Year-on-year index x 107,8 111,2 112,0 114,1 125,3 Cumulative index 100,0 107,8 119,9 134,3 153,2 192,0 Labour productivity from VA 313,2 328,8 380,6 406,6 447,3 525,6 Year-on-year index x 105,0 115,8 106,9 110,0 117,5 Cumulative index 100,0 105,0 121,5 129,8 142,8 167,8 Number of employees Year-on-year index x 102,7 96,0 104,9 103,7 106,6 Cumulative index 100,0 102,7 98,7 103,4 107,3 114,4 Source: CSO, MIT estimate; *preliminary data, const. p. of

91 NACE 33 group recorded inter-annually the largest increase of receipts as well, even though the receipts were growing in all five groups of the branch. Positively should be assessed the growth of labour productivity, for in this indicator the branch still keeps on its lagging behind the advanced countries. It is necessary to appreciate the fact that this growth was achieved at simultaneous small growth of the number of employees. Development in the main production indicators in NACE 33 in constant prices in the period from 2000 to 2005 is presented in Table Employment The medium-sized enterprises with 250 to 999 employees have the largest share in employment. These enterprises are also achieving higher value added and higher labour productivity. The large enterprises (with and more employees) have higher receipts from sales of own products and services. The natural persons (tradesmen) and enterprises with less than 50 employees are playing from the view of employment in the branch an important role. As it is shown in Figure 2, this group is employing 40% of the persons within the branch. For execution of jobs in the branch a vocational education, training in the group or secondary school education is largely needed, but even university degrees are necessary. For this reason the higher salaries are being here achieved than in some other branches. The average salary in 2005 was by approx. 6% higher than in the foregoing year and only slightly higher than the average within the manufacturing industry. In comparison with the entire industry, the average salaries in the branch were a little bit lower. The number of employees in NACE 33 branch grew in 2005 by approx. 10% as compared with the foregoing year. This enhancement was caused mostly by a simple enlargement of the production, but also on the basis of the programme of the support to the creation of technology centres and strategic services. The most jobs are being created by the enterprises, which are implementing new, more progressive and economically more advantageous production technologies. The structure of employment, according to the size of enterprises in 2005 in NACE 33, is illustrated in Figure 2. Figure 2: Employment structure, according to the size of enterprises, in 2005 NACE and more 16 % % % % Source: CSO, MIT estimate; 2005 = preliminary data % Also this branch faces to strong competition, be it the firms manufacturing on the territory of the CZ or only importing its products. It is manifested mainly by stagnation or decreasing of prices in some commodities (control and measuring instruments). Subsequently the enterprises are forced to reduce their costs, sometimes by means of dismissal of the employees as well. The economic situation of the enterprises differs, namely according to the fact, how the enterprises have sales of their products secured. The companies under foreign control on the first place, which have sales of their products secured, are creating sufficiently large profit, and so have also enough financial means for its own expansion and development of new progressive products. For example, we may mention the largest firm in the branch Siemens VDO CZ, which is largely producing measuring devices as well as other equipment for the automotive industry. 91

92 19.3 Foreign trade Adverse balance of foreign trade is typical for this branch. It is due to increasing import of the sophisticated products of the renowned firms in particular as well as semis and special parts. Import decline in 2005 cannot be overestimated, for it could concern only a seasonal sway. Export of NACE 33 branch products has had a growing trend with the exception of 2002, when it had slightly dropped. Since 2000 export has increased by 108% and import by less than 25% only. Thanks to that fact, the adverse balance has dropped by more than 40%. The largest volume of foreign trade was registered with the products of the group of control and measuring instruments and devices. Development in foreign trade with the CPA 33 products in the period from 2000 to 2005 is documented in Table 2. Table 2: Foreign trade development in CPA 33 products, in (Mill. CZK) Export , , , , , ,6 Import , , , , , ,9 Balance , , , , , ,3 Year-on-year index 00/99 01/00 02/01 03/02 04/03 05/04 Export x 121,4 99,7 120,5 139,5 102,3 Import x 109,8 97,9 106,8 111,1 97,9 Source: CSO, data available as on Investments As it will be obvious from the following text, the foreign direct investment in NACE 33 branch make up all the time an important part for the growth of this branch. According to available data, more than CZK 9 billions was invested from abroad into this branch in In compliance with the Act No. 2/2000 Coll., the Ministry of Industry and Trade made a decision on providing investment incentives to 57 firms in the total volume of more than CZK 40 billions in 2005, out of which only two incentives were provided to NACE 33 branch. Some investors prefer the prepared infrastructure of the industrial zone without old ecological burdens to the financial advantages, which are mostly accompanied by the enhanced paper handling. A part of the industrial zone, which they are entering, is also the qualified workforce availability, transport accessibility and another infrastructure Branch perspectives The products of this branch are determined for the consumption in the entire number of applications, production lines, machinery or equipment. The level of the products of the branch is being already now based on development of new, progressive, economically advantageous technologies. A considerable development is so still being recorded in the measuring and control instruments and devices, and in medical instrumentation. On the contrary the group of the manufacture of time measuring instruments fell in the past years in recession and now it is rather stagnating. Its eventual growth under tough competition of the multinational companies will be very difficult. It is expected that investors will be shifting from the construction of largely production capacities to the construction of centres of strategic services and technological centres, in particular. So the requirement on quality and qualification of the workers will grow, in which the university graduation will be more and more demanded. 92

93 NACE 34 MANUFACTURE OF TRANSPORT MEANS AND EQUIPMENT DM 20. Manufacture of motor vehicles, manufacture of trailers and semi-trailers NACE 34 The automotive industry has been belonging among very powerful and extraordinary important branches of the Czech economy for a couple of years. The development was definitely positive in all manufactured commodities. In general, the growing trend is giving good preconditions for development of the branch in the future as well. The dominant position without any doubts in the manufacture of vehicles occupies the manufacture of passenger cars (the share of more than 80%), followed by the manufacture of buses and trucks. In 2005 again the production of accessories, as to the total receipts, overtook the manufacture of vehicles, though it was manufactured by more than pieces of passenger cars, when compared with In the same time the automotive industry is forming almost one-fifth of the domestic export and its representation in foreign trade will be ever growing. In 2005 the share of the manufacturers of the spare parts and accessories by 2% declined at 51%, by which the share of the manufacturers of vehicles increased (47%) on the contrary. The remaining 2% present receipts of the manufacturers of bodies, trailers and semi-trailers, though in the course of the last two years their increase of receipts was by 75%. Altogether more than pieces of vehicles were manufactured in Beside the growth of the production of the passenger cars, which grew up by 34,77%, the growth was recorded also in the manufacture of light utility vehicles (8,73%) and in the manufacture of buses by 11,46% Main production indicators This branch has had long-term the growing character both in the area of receipts and labour productivity as well. In 2005 a new TPCA automobile plant commenced series manufacture, which was manifested especially in the growth of receipts. The manufacturers of auto-accessories and auto-parts remain the main drivers in the area of number of employees. In the future we reckon with enhancement of their share both in receipts and in the total enhancement of number of employees as well. The influx of the new firms into the area of the automotive industry Figure 1: Main production indicators in NACE 34, in constant prices, in Index 2000 = Number of employees Value added Receipts from sales of own P & S Labour productivity Source: CSO, MIT estimate, 2005 = preliminary data; const. p. of

94 Table 1: Main production indicators in NACE 34, in , in constant prices (Mill. CZK, employees) * Receipts from sales of own P & S , , , , , ,1 Year-on-year index x 117,2 105,0 107,1 115,1 124,3 Cumulative index 100,0 117,2 123,0 131,7 151,7 188,5 Value added , , , , , ,6 Year-on-year index x 119,6 105,7 113,3 118,8 131,5 Cumulative index 100,0 119,6 126,5 143,2 170,1 223,7 Labour productivity from VA 585,3 649,1 655,2 744,7 822,9 999,1 Year-on-year index x 110,9 100,9 113,7 110,5 121,4 Cumulative index 100,0 110,9 111,9 127,2 140,6 170,7 Number of employees Year-on-year index x 107,9 104,7 99,6 107,5 108,3 Cumulative index 100,0 107,9 113,0 112,6 121,0 131,1 Source: CSO, MIT estimate; *preliminary data, const. p. of 2000 henceforth continues. During the last years many foreign companies built-up their branches. Most of the production of these companies is exported largely to the EU countries. All manufacturers in the automotive industry are being permanently under big pressure for cost decreasing and productivity enhancement Employment From Figure 2 it is obvious that the largest representation is occupied by the medium-sized and large enterprises, when more than 80% of the employees are employed by these enterprises. Currently it is given by an effort to maximize series manufactures of individual components, and by technical intensity of the manufactured products. In the automotive industry the decisive role is played by the multinational companies, which have their representation in individual continents. Also in the CZ most of the foreign companies built-up the plants, which are included in the category of the medium-sized and large enterprises, and they are furthermore enlarging the manufacture and enhancing the number of employees. Business environment is influenced both by customs of the foreign companies and by permanently enhancing requirements on quality and reliability of the deliveries and their delivery on time. There exists a great competition in this branch. Figure 2: Employment structure, according to the size of enterprises, in 2005 NACE and more 53 % % % % Source: CSO, MIT estimate; 2005 = preliminary data % 94

95 NACE Foreign trade The automotive industry is the branch, which is more and more oriented on export. The total export of this branch is enhancing as well as its representation within the export of the CZ. Also positive balance of this branch confirms its competitiveness on the foreign markets. The traditional important trade partner of the CZ, also in the automotive industry, remains to be Germany. In spite of the decline both in export and import by 2%, more than one-third of export keeps on being channelled to this country and almost one-half in import, respectively. The largest increase of import was recorded with Japan, and it exceeded 3%, which is connected with the manufacture at TPCA automobile plant. The Slovak import dropped below the level of 3%, so it achieved the level of the other import countries. After start-up of the manufacture at Hyundai automobile plant in Nošovice, we expect the growth of import from Slovakia, for 60% of parts should be imported from the Slovak branches of this company. The largest exporter is traditionally the ŠKODA Auto, joint-stock co., with its share in the total export of the CZ exceeding 9%. The manufacturers of this branch rank among the largest exporters. The total export of vehicles was again higher than export of auto-parts and accessories. The Škoda Auto, joint-stock co., as well as TPCA exported more than 80% of their production, which represents more than pieces of the passenger cars. In the next year it will be more than pieces of vehicles. The total surplus of foreign trade reached almost 30% of its total receipts. The share of the automotive industry in the total export grew up by 1,23%. Table 2: Foreign trade development in CPA 34 products, in (Mill. CZK) Export , , , , , ,2 Import , , , , , ,8 Balance , , , , , ,4 Year-on-year index 00/99 01/00 02/01 03/02 04/03 05/04 Export x 115,5 99,6 106,8 122,0 117,4 Import x 119,9 103,5 109,5 122,4 104,8 Source: CSO, data available as on Investments This branch gained the largest share of investments in the CZ among all branches. The most important investment presented the TPCA automobile plant in Kolín. In 2005 altogether 21 investment incentives into the automotive industry were provided. Among the most important new investments belong the projects of the companies Grupo Antolin Turnov, Ltd., and Škoda Auto, joint-stock co. Most of the investments will exceed a level, which is needed to provide investment incentive and so also newly rising plants of the foreign companies can be included into the small and medium-sized enterprises by the number of their employees utilizing advantages from the law. In 2006 another important investment was agreed upon; it concerns the construction of the new automobile plant Hyundai in Nošovice with the planned amount of the investment amounting to CZK 21 billions Branch perspectives The CZ is becoming an important manufacturer of the passenger cars in the Central Europe. In 2005 more than pieces of the new passenger cars were manufactured. Also the companies Karosa and SOR Libchavy recorded an increase of the production. They will reckon with further important growth of the production in the future. In 2006 the agreement on the construction of a new automobile plant was signed. Thus at the plant, at full capacity of the production of passenger cars and gearboxes in 2010, altogether persons will 95

96 be employed. Also the manufacturers of auto-parts, which would deliver to the new automotive plant, consider building of a new plant in the CZ. In 2006 it is assumed to manufacture pieces of the passenger cars, out of which export will present more than ones. In the future, the Škoda Auto, joint-stock co., and TPCA will represent 12 15% of the total export, and with another automobile plant Hyundai the manufacturers of the passenger cars will have onefifth share in export of the CZ. Every year the receipts were enhancing. In 2005 the manufacturers of vehicles recorded the growth of receipts by 25%. In 2006 it should be more than 40%, whereas the new automobile plant TPCA in Kolin will mostly participate in it. The manufacturers within the EU must observe the ever more stringent ecological acts concerning the operation of vehicles. For the time being the discussions are being held about further toughening of the standards related to air pollutions arising from vehicle operation. In the future it is reckoned with enhancement of the share of recyclable parts of vehicles. Currently the price of vehicles is being influenced by development in steel prices on the world markets. Steel price has been continuously growing and as a law it is being reflected in the enhanced costs in the production of vehicles. In the last time we are monitoring a permanently increasing prices of crude oil, which makes more expensive the manufacture and then it mostly manifests in the enhanced operation costs of the end user. 96

97 NACE Manufacture of other transport equipment NACE 35 The NACE 35 branch by its assortment structure belongs among considerably an export oriented branches. The group of railway vehicles trams, subway cars, electric locomotives, motor passenger cars, trucks and electrical suburban units is significantly participating in the modernization of rolling stock of České dráhy (Czech Railways) and MHD (city mass transport). The largest share in receipts from sales of own products and services in the branch was in 2005 occupied by the group of manufacture and repairs of railway and tramway locomotives and rolling stock (61%) followed by the group of manufacture and repairs of aircrafts (25%). The share of the branch in the main production indicators within the manufacturing industry is relatively low. The share in receipts from sales of own products and services was ranging from 1,1% in 2000 with a decline to 0,1% in the years 2004 and Main production indicators Figure 1 and Table 1 present an overview of the main production indicators of NACE 35 branch in the period from 2000 to 2005 in constant prices. Economic study of the branch is derived from the demand both on the domestic and foreign market. In the past years, also in the overview, there are stable supplies of the floor electric units from ČKD Vagonka Ostrava for suburban transport of the Czech Railways. For the regional transport of the Czech Railways the modernized motor railway sets Regionova from the company Pars nova, Šumperk have been delivered since In three years it reckons with a delivery of altogether 100 sets. In tram traction the modernization of tram rolling stock of MHD (city mass transport) is enhancing, which is being ensured by a number of railway repair shops and engineering plants. A delivery of new low-floor trams from Škoda Transportation, Ltd., Plzeň is being prepared. Italy was also interested in these modern trams. It is a great success that Škoda Transportation defeated two important competitive multinational concerns Alstom and Bombardier, which are producing the trams in Poland. Technical level of Škoda trams is documented, amongothers, by sale of license and know-how of low-floor trams to the U.S. company Oregon Iron Works (OIW). Body casings and mechanical parts will be manufactured by OIW, the complete electric equipment will be delivered by Škoda. Sales perspective is expected, just within the framework of ecological measures in transport, from implementation of tram transport in a number of the American cities. Figure 1: Main production indicators in NACE 35, in constant prices, in Index 2000 = Number of employees Value added Receipts from sales of own P & S Labour productivity Source: CSO, MIT estimate, 2005 = preliminary data; const. p. of

98 Table 1: Main production indicators in NACE 35, in , in constant prices (Mill. CZK, employees) * Receipts from sales of own P & S , , , , , ,6 Year-on-year index x 124,1 93,3 111,1 91,8 103,0 Cumulative index 100,0 124,1 115,8 128,6 118,0 121,6 Value added 8 810, , , , , ,4 Year-on-year index x 113,0 68,4 104,9 108,7 90,5 Cumulative index 100,0 113,0 77,3 81,0 88,1 79,7 Labour productivity from VA 375,3 408,6 283,3 325,8 383,7 348,9 Year-on-year index x 108,9 69,3 115,0 117,8 90,9 Cumulative index 100,0 108,9 75,5 86,8 102,2 93,0 Number of employees Year-on-year index x 103,8 98,6 91,2 92,3 99,5 Cumulative index 100,0 103,8 102,4 93,3 86,2 85,8 Source: CSO, MIT estimate; *preliminary data, const. p. of 2000 Modernization of original Russian sets is being ensured for Prague subway. Currently a new subway car with stainless body casing and modern electric equipment is making operation tests. Beyond orientation on Western markets the company wants to penetrate significantly on it its own in the past successful territories of the countries of the former Soviet Union and Eastern Europe. The manufacture and export of ultra-light aeroplanes, which have had in the past years a dominant position within the Czech aeroplane industry, is permanently enhancing. Currently there are 19 manufacturers of these aeroplanes in the CZ, which manufacture approx. 500 aeroplanes per year. North America is the main sales market, where the CZ occupies the dominant position (41%). The sales increase is expected from the newly originated category of light sport aeroplanes (LSA), when in the USA since the middle of the year 2005 it is possible with minimum administrative obstacles to pilot aeroplanes, the take-off mass of which does not exceed 600 kilogrammes. According to estimates, the American market will present a demand around sport aeroplanes. The firm Aircraft Industries, new owner of the former firm Letecké závody Kunovice, reopened the manufacture of aeroplanes L 410, the manufacture of which was dumped in The Brazilian transport firms expressed their interest in the new aeroplanes. The firm Evektor Aerotechnik is preparing into series production a single-engine 4 5 seats transport aeroplane VUT 100 Cobra, with sales outlook of approx. 100 pieces per year. In spite of a number of running negotiations, up to now it has not managed to find foreign client for the main representative of the production programme of the company AERO Vodochody, i.e., light jet fighter L 159 ALCA and training two-seats aeroplanes L 159B. The co-operation manufacture of the helicopters for the American firm Sikorski is currently dominating in the production of this enterprise. Together with the Taiwanese firm AIDC the development of single-engine transport aeroplane Ae 270 Ibis was completed in 2005 and all necessary certificates were gained for start-up of the series manufacture. On the basis of the requirements of potential foreign customers the negotiations are being held with the firm AIDC on development of upgraded version of the aeroplane with lower weight and longer flying range. The key problem of the company AERO Vodochody is a delayed privatisation of the company Employment Figure 2 documents employment in the NACE 35 in The dominant position in the size category and more employees belongs to the firm Siemens Kolejová vozidla, Praha Zličín having employees. 98

99 NACE 35 Figure 2: Employment structure, according to the size of enterprises, in 2005 NACE and more 8 % % % % Source: CSO, MIT estimate; 2005 = preliminary data % Together with the growth of the manufacture and sale of ultra-light aeroplanes we expect an increase of employment in the main representatives of this segment of aeroplane manufacture as well as in a number of the manufacturers of railway vehicles in the nearest future Foreign trade Development in foreign trade with the CPA 35 products in the period from 2000 to 2005 is presented in Table 2. Table 2: Foreign trade development in CPA 35 products, in (Mill. CZK) Export , , , , , ,7 Import , , , , , ,3 Balance , , , , , ,6 Year-on-year index 00/99 01/00 02/01 03/02 04/03 05/04 Export x 121,8 82,3 122,5 111,4 105,0 Import x 99,2 81,5 150,8 91,8 147,2 Source: CSO, data available as on The highest adverse balance of foreign trade in the amount of CZK 5 231,6 millions was recorded by the branch in The largest share in this balance reported the group of aircraft industry, where the main item is an enhancing export of ultra-light aeroplanes and complementary parts of the large transport and military aeroplanes. Import presented the volume of CZK ,6 millions, where the main items are transport and sport aeroplanes, helicopters and parts for repair and service of these aeroplanes. The largest share in export was in 2005 recorded with Germany (19%), where the main items belonged to complementary parts of the aeroplanes and railway vehicles, river-sea ships (kaska), ultra-light aeroplanes and bicycles. The second place (15%) was occupied by the USA, where the main items were helicopters for the company Sikorsky, complementary parts for the large transport and military aeroplanes, ultra-light aeroplanes and turbo-propeller and piston type aircraft engines for small transport aeroplanes. The share of export into Austria amounted to 9%, and mainly complementary parts of railway vehicles, ultra-light aeroplanes and bicycles were channelled to. The share of 6% was channelled to France and presented export of the components for the large aeroplanes, ultra-light planes and bicycles. Export to Netherlands amounted to 3% and was dominated by river-sea ships (kaska) and bicycles. 99

100 The largest share in import in the amount of 38% belonged in 2005 exclusively to leasing deliveries of the fighters Gripen for the Czech Army. The second place with the share of 11% was then occupied by the USA, followed by Germany (9%), France and Austria (equally 6% both) Investments Investment plan of the company Letov Letecká výroba, Ltd., the majority owner of which is the French firm Latecoere, to build up a centre for research, development and the manufacture of the composite parts for the large transport planes, was approved within the programme to the support of the technological centres in Within the framework of the similar programme the investment project for development of the existing repairing base for maintenance and repairs of the large transport planes, made by the Technical section of the Czech Airlines, was approved. The investment project of the company Siemens Kolejová vozidla, Ltd., for enlargement of the technological centre for development, innovations, designing and construction of the railway rolling stock, was approved. Investment incentive was recommended to a newly established company CSSC České loděnice, Ltd., for the construction of the plant for inland river ships manufacture. In 2006 the Škoda Transportation, Ltd., Plzeň submitted an investment plan to enlarge the production capacities of railway vehicles. Ostravské opravny a strojírny, Ltd., submitted an investment plan for enlargement and modernization of the manufacture of railway rolling stock. ČKD Vagonka Ostrava, joint-stock co., submitted an investment plan for enlargement and modernization of the existing manufacture of railway vehicles and components for trams. The company Mora Aerospace, joint-stock co., has received investment incentive for enlargement of the existing manufacture of aircraft turbine engines and auxiliary power units Branch perspectives We may say that the development of the foreign commercial activities and permanently enhancing technical level of the products give real preconditions that the branch will furthermore strengthen its position on the world markets, namely in the countries of the EU and Asia. With respect to the fact, that most of the branch groups is after the year 2000 permanently focused on the Western markets, and that the indigenous manufacturers are from the designing and production point of view fully adaptable on the requirements of the foreign customers, we cannot expect in the future any substantial negative impacts, which would jeopardize penetration of the Czech production on the foreign markets. 100

101 NACE 36 MANUFACTURING DN 22. Manufacture of furniture; manufacturing not elsewhere classified NACE 36 The NACE 36 branch manufacture of furniture; manufacturing not elsewhere classified, includes six different industrial groups. The decisive share in the branch belongs to manufacturing of furniture. The remaining five groups have a specific product focus; the group 36.6 then includes the whole range of different manufactures, e.g., bijouterie, brushes, school and office tools, matches, lighters and so on. Most of the groups are using wood-mass as the decisive raw material in manufacture, which is usually pre-processed according to the given purpose or products of wood, for example, agglomerated products, cut sizes of wood, plywood and veneers. The branch is characteristic by the high material intensity, which presents even more than 80% of costs. On the basis of the used highly first-rate ecological techniques and technologies the products do not contain dangerous and health endangering harmful substances and they do not jeopardize environment either. In the period from 2000 to 2005 development in the branch economy was running without any major variations. In 2005 the branch shared 3,6% in receipts from sales of own products and services (own P and S) of the manufacturing industry, 4,1% in the created value added and 5,7% in number of employees, respectively. The most important participation in these results (approx. 70%) was recorded by the manufacture of furniture. There are altogether 103 enterprises under foreign control in the branch, which is approx. 18,2% from the total number of enterprises with 20 and more employees being involved in the branch Main production indicators In the Czech Republic (CZ) the decisive size category for the main production indicators in the branch is that one of medium-size enterprise. The enterprises of this size manufacturing furniture have the largest growth dynamics of outputs as well as value added and along with the large enterprises ensure approx. 77% of the production volume. In spite of an increase of the main economic indicators (receipts from sales of own P and S, value added, labour productivity from value added) there is negative news for 2005 as compared with 2004, namely a slackening of the Figure 1: Main production indicators in NACE 36, in constant prices, in Index 2000 = Number of employees Value added Receipts from sales of own P & S Labour productivity Source: CSO, MIT estimate, 2005 = preliminary data; const. p. of

102 Table 1: Main production indicators in NACE 36, in , in constant prices (Mill. CZK, employees) * Receipts from sales of own P & S , , , , , ,9 Year-on-year index x 108,2 109,9 95,0 107,0 110,8 Cumulative index 100,0 108,2 118,9 112,9 120,8 133,8 Value added , , , , , ,6 Year-on-year index x 110,5 118,5 90,5 112,6 105,2 Cumulative index 100,0 110,5 130,9 118,5 133,4 140,4 Labour productivity from VA 228,4 238,5 300,1 281,2 329,7 352,2 Year-on-year index x 104,4 125,8 93,7 117,3 106,8 Cumulative index 100,0 104,4 131,4 123,1 144,3 154,2 Number of employees Year-on-year index x 105,8 94,2 96,6 96,0 98,5 Cumulative index 100,0 105,8 99,7 96,2 92,4 91,0 Source: CSO, MIT estimate; *preliminary data, const. p. of 2000 growth rate in value added and labour productivity. The number of organizations in the branch with 20 and more employees in 2005 amounted to 584 subjects and remained on the level of Outputs, including trade margins, in these organizations were enhanced by CZK 6 billions (the 2004/2005 index is 109,3). A significant enhancement of receipts from sales of own P and S was in 2005 recorded in the manufacture of games and toys (year-onyear index 158,3), even though the number of employees increased by 16,5% only Employment The total employment within the branch decreased in 2005 by approx persons (i.e., by 3,4%), when compared with The decline of employment was resulting especially from limitation of non-effective manufactures, but at the same time it was positively reflected in enhancement of labour productivity. Almost 30% of employees in the branch are working in the medium-sized enterprises. The average monthly wage amounted in 2005 to CZK and it increased only by 4,2% as compared with It presents less than 80% of the average monthly wage in the manufacturing industry, which increased by 4,6%, inter-annually. Figure 2: Employment structure, according to the size of enterprises, in 2005 NACE % 1000 and more 8 % % Source: CSO, MIT estimate; 2005 = preliminary data % % 102

103 NACE 36 The important enterprises from the employment point of view are concentrated mainly in the manufacture of furniture, e.g.: Jitona, joint-stock co., Soběslav: kitchen, bedroom and family room furniture; ALFA Říčany, joint-stock co., Říčany u Prahy: office, kitchen and family room furniture; Koryna nábytek, joint-stock co., Koryčany: kitchen and office furniture; Tusculum, joint-stock co., Rousínov: bedroom and family room furniture; TON, joint-stock co., Bystřice pod Hostýnem: manufacture of bentwood furniture. From the regional standpoint, the manufacture of furniture is placed mainly in regions of South Moravia, Vysočina, Pardubice and Hradec Králové. For enhancement of competitiveness and speeding of implementation of innovation changes into the manufacture altogether 35 firms have established a furniture cluster. The main cluster activity will be focused on strengthening export areas, science and research. The participation of the Mendel Agriculture and Forest University in Brno is accordingly important for the cluster. Its mission will be among-others education of experts and help in research and innovations and their transfer into the manufacture Foreign trade Foreign trade with CPA 36 products in 2005 was successful. Export increased by almost CZK 8 billions (in the CPA category), which presented even at higher imports (by approx. CZK 4,7 billions) in the similar period, an increase of favourable balance by more than CZK 3 billions. By the decisive manner in this successful result participated the manufacture of furniture (NACE 36.1), where export increased by CZK 5,3 billions as compared with 2004, and the manufacture of games and toys (NACE 36.5) with an increase of export by almost CZK 2,5 billions. Among the main customers of the branch products were in 2005 Germany (42% of the production), Great Britain (10%) and Austria (9%). The products of the branch were mostly imported into the CZ from Germany SRN (23%), China (16%) and Poland (14%). Table 2: Foreign trade development in CPA 36 products, in (Mill. CZK) Export , , , , , ,9 Import , , , , , ,8 Balance , , , , , ,1 Year-on-year index 00/99 01/00 02/01 03/02 04/03 05/04 Export x 112,0 99,1 103,3 116,4 112,7 Import x 102,5 102,8 108,7 127,4 112,8 Source: CSO, data available as on Investments More significant investment activity in NACE 36 branch was not recorded in The indigenous firms, due to insufficient number of the resources (capital), were investing only in a small extent. The situation did not change as compared with In case that the firms had the financial means, they invested mainly into machinery and technologies with eventual utilization of the supports within the framework of the respective programmes of the Operational Programme Industry and Business and the Programme of the support to small and medium business undertaking as well. 103

104 22.5 Branch perspectives In order to strengthen competitiveness of the branch, it will be necessary to intensify implementation of innovations into the manufacture and continue in implementation of the structural changes. As needful it seems to be the quicker implementation of new information and communication technologies. This process will demand a considerable quantity of financial resources. In this association so-called clusters can be suitable means for easing and speeding of implementation of innovation changes into the manufacture. The clusters incorporate manufacturing enterprises along with the scientific-research and university base with the aim to resolve jointly the selected objectives. From export activities point of view the main concern is to re-discover earlier abundantly utilized markets of the Russian Federation, Hungary, Bulgaria, Romania, etc., which were left after New possibilities of furniture sales are emerging mainly in the Russian Federation, where the expenditures of the population for furniture are approx. six times lower than the average in Europe. For further perspective of the branch it will be decisive its more intensive gearing within the framework of the scientific-technical development to the transfer of new technologies into the manufacture and establishing of the closer relations within international collaboration. 104

105 NACE Recycling of secondary raw materials NACE 37 The branch of recycling of secondary raw materials in the Czech republic (CZ) plays long-term an indispensable role in processing metal and non-metal waste and other kinds of used as well as non-used products to the quality suitable for further material utilization in the manufacturing industry. The branch is traditionally interconnected with European as well as worldwide market, the share of which is increasing. As an important part of ecoindustry, it enables closing of material cycles and contributes to enhancement of the material productivity of the entire CZ economy. The total mass of the processed waste per year in the enterprises of NACE 37, i.e., processed to the quality suitable for further utilization in the manufacturing industry, was attaining in recent years around 5 millions tonnes. The prevailing part of the processed wastes was made up especially by wastes with Fe-content (more than 2 mill. tonnes), construction and demolition wastes (almost 2,0 mill. tonnes), salvage paper (0,6 mill. tonnes), then from view of mass of the processed waste non-ferrous metals, scrap glass, wastes of plastics etc. Manufactures of steel and cast-iron, non-ferrous metals, glass, paper and other products of the manufacturing industry of the CZ have been permanently dependent on materially utilized wastes. Importance of the group 37.1 is furthermore stressed by the fact that due to exhausting of natural resources of non-ferrous metals in the CZ, the secondary resources are the sole domestic resource of non-ferrous metals (including precious ones) in industrial scale, in particular. A part of the enterprises of the group 37.1 operates also technologies of primary metallurgy, eventually also technologies of secondary metallurgy, the enlargement of which significantly influences economic weight of the branch as well. As in other branches, also recycling and trade with secondary raw material are fully dependant on the market changes both on side of wastes supply and on demand for raw materials, eventually also for finished products on domestic as well as on foreign market, with which the branch is importantly connected. The overall branch development has been, after the CZ accession to the EU, positively influenced by legal pressure to enhancement of the level of recycling both at traditionally processed wastes and mainly by more emphatic enforcement of the principles of material utilization of wastes and enhancement of the range of obligatory take back of selected groups of the products with terminated service life (e.g. waste oils, batteries and accumulators, waste lighting equipment, packing, car wreckages, electric and electronic equipment). The basic tool for enhancement of recycling level in the CZ is namely Raw Material Policy in the area of raw materials and their resources approved by the Resolution of the CZ Government No dated 13th December 1999 and No. 639 dated 30th June 2003 and recently also Waste Management Plan of the CZ issued on 4th June 2003 through the Directive of the Government No. 197/2003, the impact of which on the economy with wastes has been permanently increasing by means of determined objectives and smoothly adopted programmes of implementation, in particular Main production indicators At first, after 2000 number of employees of the NACE distinctly grew, subsequently it gradually dropped until 2003 at 95% of numerical status quo of In the years 2004 and 2005 we may monitor a slight increase almost to initial values of The changes in number of employees in NACE 37 were practically copying development of this indicator within the entire manufacturing industry. 105

106 Figure 1: Main production indicators in NACE 37, in constant prices, in Index 2000 = Number of employees Value added Receipts from sales of own P & S Labour productivity Source: CSO, MIT estimate, 2005 = preliminary data; const. p. of 2000 Table 1: Main production indicators in NACE 37, in , in constant prices (Mill. CZK, employees) * Receipts from sales of own P & S , , , , , ,1 Year-on-year index x 116,9 92,0 90,5 148,8 87,6 Cumulative index 100,0 116,9 107,5 97,3 144,7 126,8 Value added 1 982, , , , , ,6 Year-on-year index x 114,6 96,6 82,7 193,2 81,3 Cumulative index 100,0 114,6 110,8 91,6 177,0 143,8 Labour productivity from VA 350,3 347,1 356,1 337,8 649,3 511,0 Year-on-year index x 99,1 102,6 94,9 192,2 78,7 Cumulative index 100,0 99,1 101,7 96,4 185,4 145,9 Number of employees Year-on-year index x 115,7 94,2 87,1 100,5 103,3 Cumulative index 100,0 115,7 109,0 95,0 95,5 98,6 Source: CSO, MIT estimate; *preliminary data, const. p. of 2000 The value added in NACE 37, expressed in constant prices of 2000 (with the exception of 2003), was reporting an increase, which was substantially higher than the changes of this indicator within the entire manufacturing industry. The recorded value added in NACE 37 is the result of a great span of value added in partial commodities and their specific representation as per the situation on domestic as well as on foreign market in respective year. The receipts from sales of own products and services to external customers were indicating rather an upward trend even under partial decline in The changes in receipts from sales of own products and services have in principle a similar character as receipts from sales, which were recorded within the entire manufacturing industry. The high increase of receipts in 2004 was significantly influenced especially by favourable situation in the foreign trade on steel and cast-iron waste market and by technological changes focused on higher grade of products finalization in other commodities. 106

107 NACE 37 The value of the indicator of labour productivity of NACE 37 in the period from 2000 to 2003 recorded only minor fluctuations. However, in 2004 as compared with 2000, more considerable positive increase (185,4%) was attained. Nevertheless, more considerable growth trend was not quite maintained in All numerical values of the indicators (with the exception of the number of employees) had achieved their maximum in 2004, subsequently then apparently declined. Nevertheless, they were remaining above the level of foregoing years Employment The principal share in treatment and processing process have had largely only the subjects with higher number of employees, which are also equipped by more complicated technological equipment, represented by physical and mechanical treatment and processing, in particular. The smaller and medium-sized enterprises are involved rather in waste management in technological stages of take back, purchasing and distribution with generally lower share on treatment and processing. The character of undertaking in NACE 37 enables also a significant participation of the smallest subjects in the size group of organizations with 0 9 employees, which represented 22% of the total number of branch subjects in The volume of paid wages was gradually increasing from CZK 564 millions in 2000 to CZK 729,2 millions in 2004, i.e., the growth of 7,3% per year, approximately. Figure 2: Employment structure, according to the size of enterprises, in NACE 37, in % % Source: CSO, MIT estimate; 2005 = preliminary data % % 23.3 Investments The investments, acquired in the area of waste management in the period from 2000 to 2003, exceeded CZK 7 billions. The total amount of state support to small and medium-sized undertaking, provided by the MIT at development of NACE 37 in the period from 2000 to 2004, exceeded CZK 200 millions in the form of granted guarantees of the credits, direct financial contributions and credits of their own. The total amount of foreign direct investments (FDI) was gradually increasing since 2000 and exceeding the amount of CZK 500 millions. Then in 2004 FDI exceeded the amount of CZK 860 millions. The growth rate of FDI in NACE 37 was basically (with the exception of 2001) copying the rate within the entire manufacturing industry. Among important investments we may list, for example, a new line for processing of electrical waste, enlargement of production assortment of metallurgical processing of copper and so on Branch perspectives Most of entrepreneurial subjects in NACE 37 has been reporting a permanent enhancement of competitiveness both on domestic and world market. It is thanks to impact of deepening technological as well as capital relations 107

108 with foreign subjects in the advanced countries and traditional interconnection with international non-governmental organizations of bourse or entrepreneurial nature. We may expect that owing to natural pressure on standardized quality of products, minimum standards of processing, economic effect of undertaking and to creation of authorized companies, the existing processing base, which is fragmented into diminutive and small capacities, will be in linkage to material and technological character of respective commodities successively abandoned. Interconnection with collective take back system in Europe will be increasing as well. The future development in the branch is dependent especially on international strengthening pressure on nonrenewable raw material resources management, based on the principles of sustainable development. Therefore, for international benchmarking the indicator of share of secondary raw material inputs in the overall material inputs on nation-wide level is all the time more and more enforcing. These pressures, derived from the activities of the United Nations, are unambiguously formulated not only in updated Strategy of sustainable development of the EU countries but also in its application in Strategy of sustainable development of the CZ. A specific motivation role is then represented by the Framework programmes of sustainable consumption and production in 10 years period, which was adopted by the Governmental Council for sustainable development in 2005, the part of which is also Programme of sustainable utilization and productivity of resources, being prepared within competency of the MIT. The enterprises of the NACE 37 branch respond with a great flexibility both on the new conceptual and legislative requirements, and also take advantage of impulses of domestic and foreign (European and worldwide) market and capital connection with foreign companies or multinational profession associations in question. The natural objective of a number of entrepreneurial subjects is to strengthen product competitiveness and position on the market including deepening of collaboration with trade partners. Implementation programmes to the Waste Management Plan of the CZ also show potential possibilities of development that have not been utilized up to now, and which are characteristic, for example, for management with waste oils, car wreckages, construction and demolition wastes and other commodities. Development in enterprises of the NACE 37 branch would be certainly supported by reduction of some nonappropriate barriers evoked by legislative arrangement of waste management as well as by other administrative obstacles. 108

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