Czech Business and Trade 2/2010

CZECH PAVILION at 2010 EXPO INSOLVENCY LAW:HOW TO PROTECT CLAIMS? OECD’S GOOD EVALUATION OFTHE CZECH REPUBLIC HRADEC KRÁLOVÉ REGION PLZEŇWANTSTO OPEN ITS ARMSTO EUROPE 2 2010

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C Z E C H B U S I N E S S A N D T R A D E Czech Business and Trade Economic Quarterly Magazine with a Supplement is Designed for Foreign Partners, Interested in Cooperation with the Czech Republic IssuedbyPPAGENCYs.r.o.incooperationwith Ministry for Regional Development of the Czech Republic Ministry of Industry and Trade of the Czech Republic Ministry of Foreign Affairs of the Czech Republic Confederation of Industry of the Czech Republic Confederation of Employers‘ and Entrepreneurs‘ Associations of the Czech Republic Czech Chamber of Commerce Czech Export Bank CzechTrade EDITORIAL BOARD: Michal Bakajsa, Zdena Balcerová, Helena Bamba- sová, Martin Dvořák, David Füllsack, Josef Jílek, Ivan Jukl, Dagmar Kuchtová, Marie Pavlů, Martin Plachý, Pavla Podskalská, Josef Postránecký, Filip Remenec, Libor Rouček, Jiří Sochor, Miroslav Somol, Jan Špunda, Martin Tlapa, Zdeněk Vališ, Jan Wiesner MANAGING EDITOR: Šárka Kratochvílová EDITORS: Jana Pike, Jaroslava Bradová REGULAR COLLABORATORS: Ivana Šmejdová TRANSLATION: Vlasta Benešová, Alena Kenclová, Robert Krátký, Dagmar Šímová, Halka Varhaníková READ: Matthew Booth, Pearl Harris, Ivana Kadlecová GRAPHIC DESIGN: Art Director: Nina Nováková Graphic designer: Jiří Hetfleisch Production: Anežka Zvěřinová DEADLINE: 15/4/2010 © PP Agency Company with the ISO 9001 certified quality management system for publishing services ADDRESS: Myslíkova 25, 110 00 Praha 1, Czech Republic Phone: +420 221 406 620 Fax: +420 224 930 016 e-mail: journal@ppagency.cz www.ppagency.cz, www.doingbusiness.cz Press run: 10 000 copies. The number of printed and sold copies of the journal is verified by auditor, HZ Praha, s.r.o., member of PANNELL KERR FORSTER Worldwide. It is not allowed to reproduce any part of the contents of this journal without prior consent from the editor. Attitudes expressed by the authors of articles car- ried by CBT need not necessarily be consistent with the standpoint of the Publisher. MK ČR E 6379, ISSN 1211-2208„Podávání novinových zásilek povoleno Českou poštou, s. p., odštěpný závod Přeprava, č. j. 3468/95, ze dne 24/10/1995“ Cover photo: www.czexpo.com CZECH PAVILION AT 2010 EXPO The Czech Pavilion at the 2010 World EXPO in Shanghai welcomed its half a millionth visitor in the middle of May. Moreover, the Czech National Day at the Pavilion on 17th May introduced Czech culture in its many forms. The exposition entitled“Fruits of Civilisation”introduces the Czech Republic as the“crossroads of ideas, culture, and technologies”. The Czech Pavilion presents a levitating town with the use of tubes, which contain the various exhibits, all hanging above an open space, evoking the Czech undulating landscape. A highlight is the impos- ing “drop of gold”80 centimetres high, placed within a glass cube – which can be entered by every 500th visitor to the Czech Pavilion. An extraordinarily good idea was to display the bronze plaques from the statue of John of Nepomuk on Prague’s Charles Bridge, which tourists touch for good luck. INTRODUCTION Questions of the Month for Petr Kužel, President of the Czech Chamber of Commerce 4 ECONOMIC POLICY Czech Industry: From Peak to Bottom and From Bottom Up 5 OECD’s Good Evaluation of the Czech Republic 7 INVESTMENT FDI on Roller-coaster in CEE 8 Important Investment in Žatec Triangle Zone 8 Czech System of Investment Incentives Among Most Open Ones 9 Blu-Ray Discs Will Be Made at Loděnice 10 CZECH TOP Country Life, a Pioneer of New Lifestyle 11 LEGISLATION Insolvency Law: How to Protect Claims? 12 WE SUCCEED OHL ŽS to Build New Junction in Bosnia and Herzegovina 14 WE ARE INTRODUCING Plzeň Wants to Open Its Arms to Europe 16 KALEIDOSCOPE Czech SOLVIT – One of the Three Fastest Centres in the EU 18 The Czech Republic Has Been among the Best in Economic Endurance in the EU During the Crisis 18 First Hopeful Firms in Silicon Valley 18 AFSI in Most to Employ Almost 200 People 18 What is the Czech Republic’s Position on the EU Internal Market? 19 Financial Arbiter’s Services More in Demand 19 The Czech Republic has Opened an Exchange of Unused Chemicals Called NECHELA 19 Prague Hosted American and Russian Presidents 19 SERVICES All-embracing Methods of the Packaging Industry 20 Industrial Real Estate Market Stabilised Between Supply and Demand 22 RESEARCH Czech Scientists Unveil Another of Life’s Mysteries 24 FIRM ANNIVERSARY 15 Years of Quality and Tradition 25 REGION Hradec Králové Region 26– 34 PRESENTATION OF FIRMS J 4 s.r.o.; JIP - Papírny Větřní, a. s.; Hradec Králové Region; M.I.P. Advertising, a.s.; OHL ŽS, a.s.; SVITAP J. H. J. spol. s r. o.; TEAM SERVICE, s.r.o.

| 4 Petr Kužel I N T R O D U C T I O N One of the priorities of the Czech Chamber of Commerce is the support of exports and foreign relations. How can you assist foreign businessmen wishing to enter the Czech market? Foreign businessmen will find a host of useful information and contacts in English, concerning the possibilities of doing busi- ness in the Czech Republic, on our web- site: www.komora.cz. Besides giving infor- mation about the business environment in the Czech Republic, we organise profes- sional seminars and bilateral negotiations between Czech and foreign businessmen and entrepreneurs within the framework of “incoming” missions. We also publish foreign enquiries and offers, search out potential trading partners in the CR and supply fresh information about trade fairs and similar events to be held in this coun- try. Well-tried and tested informa- tive instruments for foreign businessmen are the forums organised as part of busi- ness missions to other countries and the presentations of Czech firms at selected international exhibitions. We co-operate closely with foreign Chambers, which are also a useful information source for those wishing to do business in the CR. You have launched a project called “Ensuring joint participation in special- ised exhibitions and trade fairs in other countries in the years 2010-2012”, the purpose of which is the strengthening of the competitiveness of Czech indus- trial firms on foreign markets. Which foreign markets are important to Czech enterprises and which events will you support? This year alone, together with the Ministry of Industry and Trade and the CzechTrade Agency, we are organising approximately fifty specialised fairs on four continents: besides Europe, also in America, Asia, and Africa. We are trying to meet the require- ments of Czech enterprises. Their interest in subsidised participation in specialised fairs exceeds all expectations. By the end of May 2010, about 300 Czech firms and associations had taken part in the 36 fairs thus far organised. Therefore, the planned number of 1400 participations within the framework of 100 foreign trade fairs over the three years during which the project will last is a realistic goal. The firms are es- pecially interested in engineering, arma- ment and technical fairs. Of the number of destinations that are being prepared, I’ll just mention, at random, Shanghai, Cairo, and Calcutta. We will also be in Iraq. The response of Czech exhibitors is absolute- ly positive. The importance of trade fairs has been proved by a survey carried out by the Czech Chamber of Commerce this year, which found that, according to 25% of Czech firms, they are the most impor- tant instrument for successful expansion to export territories. Foreign missions and the use of the services of specialised busi- ness companies were only placed second after trade fairs. The Czech Chamber of Commerce has started yet another project, “The Crisis Notwithstanding”, the purpose of which is to find modern business heroes. Can you tell us something about this undertaking? Besides a number of unpleasant impacts, for most businessmen the recession also had its positive features. This is what about two-thirds of the firms stated in our survey. For one-quarter of the firms, the main positive effect in production or serv- ices was the growth of efficiency, followed by the elimination of latent over-employ- ment, innovations, and the discovery of new markets. As far as we are concerned, the decision was taken, as part of the “Crisis Notwithstanding” project, to find and award the most successful “winners” in the crisis and to use their examples to show other firms the way. Our partner in evaluating the firms is the renowned in- ternational auditing company, Pricewa- terhouseCoopers. Those wishing to learn more about the project can find detailed information on the website: www.komora. cz/krizinavzdory. You have long been struggling against the bureaucratic burdening of enter- prises. How do we stand when compar- ing the Czech business environment with that in the other EU states? On the one hand, since 2005 the ad- ministrative burden of businessmen has been reduced by more than 10% which, for the business sector means, amongst other things, an approximate saving of 10 billion crowns (approx. EUR 400 mil- lion) per year. The process of entering business and starting a trade is now shorter, while a number of obligations towards the trade licensing authorities are in the process of being cancelled. On the other hand, in the standard business environment ratings published by the World Bank, the Czech Republic unfor- tunately, generally ranks 80th out of 180 countries. Within the European Union, I think only Poland and Greece lag behind us. As for tax bureaucracy, we are even worse off – on the global scale we rank 13th from the bottom. Only Bulgaria, out of the EU countries, lags behind us. The problem is that bureaucracy is like the mythical Hy- dra. You cut off one of its heads, and two more grow in its place. I am, nevertheless, confident that in the end we will triumph. Questions of the Month for Petr Kužel, President of the Czech Chamber of Commerce Photo:TheCzechChamberofCommercearchives;www.sxc.hu

5 | E C O N O M I C P O L I C Y Czech Industry: From Peak To Bottom and From Bottom Up The Czech Republic’s economic development has been recording an improvement in the last months, according to assessments by econ- omists and analysts. Compared to the commentaries and uncertainty of 6 - 9 months ago, we are now miles away.The Czech economy has re- bounded and is moderately growing. What do we owe this rebound to? A look at the regularly published monthly indicators shows that, besides the leading in- dicators of confidence, an improvement is re- cordedespeciallyinforeigntradeandindustry. Even without a detailed analysis of the causes, it can be said that industrial production in the Czech Republic is closely linked with foreign trade, in both exports and imports. Recovery abroad has increased demand, from which Czech industry has profited, and the import of production means and semi-finished prod- ucts has logically risen as well. CZECH INDUSTRY RECOVERING SINCE MAY 2009 What preceded this development? Czech in- dustry peaked at the beginning of 2008. By the middle of the year industrial production dropped slightly, during the summer its de- cline deepened, and from the autumn, and particularlyatthetimeofthegreatestshockto theglobalfinancialsystem,ittumbledina free fall. The downturn stopped at the beginning of 2009, when industry entered the phase of stagnation and stabilisation. In monthly data, the deepest bottom of industrial performance is May 2009. Since then, Czech industry has experienced a gradual recovery, and the first data show that it is entering the beginning of 2010 with rising dynamics. Interpreting the year 2009 is problematic – in year-on-year comparison it recorded a big fall, but this may be oversimplified. On month-by-month examination of the data, industry headed steeply to the bottom roughly at the turn of 2008-2009 and stayed there throughout the first half of 2009, but did not fall substantially deeper. From the peak at the beginning of 2008, Czech in- dustry fell to the bottom of the beginning of 2009 by approximately 20%. The average fall in the EU 27 during the same period was about 15%, and in the euro zone about 16%. This means that Czech industry was affected above average. This was important in terms of the economy as a whole. Czech industry creates about 30% of GDP, while the EU av- erage is approximately 20%. STRUCTURE OF INDUSTRY Let us have a closer look at the structure. About 90% of Czech industry is manufactur- ing, in the more detailed classification the largest share of industry is accounted for by the manufacture of motor vehicles (approxi- mately 20%). It is followed by the manufac- ture of food and metal products, electrical equipment, and electric power industry. The classification is somewhat misleading as the interrelation of the sectors is high. In terms of dynamics, the record holder of the decade is the manufacture of computers, which has achieved almost a magic 1 000% since the beginning of the millennium. The

| 6 E C O N O M I C P O L I C Y INDUSTRIAL PRODUCTION (2005=100; SA, WDA) Source: Raiffeisenbank a.s., Czech Statistical Office share of this segment is small, in the order of units of per cent, but has been steadily increasing. The year 2009 brought a 13.4% fall in industry. As we have said, Czech in- dustry fell by about 20% from the peak at- tained early in 2008 to the deepest bottom and now finds itself about 15% below the highest point. The car industry fell from the beginning of 2008 to its bottom by some 40%, but now finds itself about 10% below the peak. The highly cyclic character of car industry development is well known, and thus also a risk for the Czech economy. Of course, such a quick return to “mere“ 10% below the peak would be puzzling if the de- mand for cars was not boosted by the effect of the scrappage premium for the purchase of a new car while scrapping an old one in countries of the area, especially Germany. For comparison, a number of sectors with a similar cyclic character find themselves much deeper below the peak at present (end of March 2010). For example, the manu- facture of computer, electronic, and optical products fell from the peak by about 25% and subsequently rebounded by some 6%. But it is about 20% below the peak, which is much deeper than the motor industry. At the same time some sectors are not showing clear signs of a rebound yet. For instance, ma- chinery manufacture dropped by 30% from the beginning of 2008 to early 2009 and until now its fall has deepened to a chilling 34%. The closer is the interrelation of the differ- ent sectors with the car-making industry, the more similar is logically the course of its cy- cles. An example is the manufacture of plas- tics and rubber. In this case, the manufactur- ing finds itself approximately 10% below the peak, after an initial fall of 20%, which is com- parable with car production. Adjustment for the one-off effect of the scrappage money is naturally a problem, especially because of the interrelation with other segments. If the car-making industry found itself now where the manufacture of machinery is, then indus- try as a whole would stand approximately 3.5% lower than the present level, provided the other factors remained unchanged. If the negative effect was applied to other sectors, then the potential decrease could be twice as strong, about 6 – 7%. WHAT ISTHE OUTLOOK FOR 2010? Of course, this is merely a graphic theoretical construction. As we have said, adjustment in this case is very problematic. The fading of the effect of the scrappage premiums is a variable which is a nightmare to prog- noses for 2010. It is obvious that demand for vehicles which have had the advantage of the scrappage premium is likely to be weak- ened this year. However, for the time being it seems that the prospects of industry in the euro zone, the main market for Czech exports, are steadily improving. Also prom- ising is the growth in sectors which were not affected by the scrappage programmes. Examples include the manufacture of com- puters, metal products, the paper industry, or perhaps the food industry, which, how- ever, displays different features in terms of cyclic development. Adjustment for the scrappage schemes effect has other pitfalls. The competitiveness of the Czech car-mak- ing industry is high. A year-on-year com- parison is distorted by the start up of the Hyundai car factory and the presentation of new models of Škoda Auto with which the car maker seems to be scoring success. The Czech car-making industry has been af- fected by the crisis in its revenues, but it has probably gained a larger share of the global market. Thus it might pull off a surprise in terms of future yields. COMPETITIVENESS IS CRUCIAL Regardless of the recession, the question for the future is competitiveness, where the Czech economy has so far demonstrated a fairly good level. Compared to countries in the area, the Czech economy has the fast- est growing manpower costs after Bulgaria and Romania. In 2009, the average hourly labour costs in the Czech Republic were approximately EUR 9 per hour. In 2006 they amounted to EUR 7, about one euro above neighbouring Poland. Compared to the more developed and wealthier Germany, hourly wage costs in the Czech Republic are still at about one-third of this level, but a cause for concern is rather the growth rate than the present situation. Thus, if la- bour productivity does not rise adequately, Czech industry will face competitiveness problems in future. This might also hinder the trend of long-term strengthening of the Czech currency, the crown. Although industrial production has been slowly ris- ing in the last few months, a look at the structure of the recovery advises caution against strongly positive forecasts. In 2010 we expect Czech industry to grow by approximately 2% and next year by 4%. For Central Europe as a whole we expect 3.7% industrial growth this year and 5.3% in 2011, for euro zone 2.9% and 1.7%, respec- tively. The uncertainty is high, in the analysts‘ language: the confidence intervals of the prognoses are still much wider than what we had been used to before the crisis, but the scissors point rather to growth, while a year ago they were wide open on both sides. Michal Brožka Analyst Raiffeisenbank a.s. (e-mail: michal.brozka@rb.cz) 0 20 40 60 80 100 120 140 160 180 200 2000MO1 2001MO1 2002MO1 2003MO1 2004MO1 2005MO1 2006MO1 2007MO1 2008MO1 2009MO1 2010MO1 electrical equipment machinary and equipment computers food products motor vehicles Photo:www.sxc.hu

7 | C Z E C H B U S I N E S S A N D T R A D E OECD’s Good Evaluation of the Czech Republic During his April visit to the Czech Republic, Ángel Gurría, General Secretary of the Organisation for Economic Co-operation and Develop- ment (OECD), presented the OECD’s economic overview in which the organisation evaluates the current state of the Czech economy, analyses economic policy and makes several suggestions for further reforms. The OECD prepares this report individu- ally for all OECD member states. to catch up rapidly with the devel- oped economies of the OECD, in particular to restore public finance sustainability and enhance the business environment. In this area, the Czech Republic has made signifi- cant changes in the process of company establishment (for example, in the decrease of costs for company establishment) and in simplifying other legal procedures (from the registration of a company to insolvency procedures). BANKS REPRESENT THE STRONG POINT OF THE CZECH ECONOMY Despite all suggestions, the overall OECD balance has been favourable to the Czech Republic, even in comparison with 30 mem- ber states. According to Gurría, this is partial- ly due to the caution of Jan Fišer’s govern- ment. It was also stressed that, to emerge from the crisis soon, it is necessary for the Czech Republic to limit the country’s debt and also to make some changes in the areas which increase budgetary expense and dis- courage the unemployed from returning to the labour market. According to the OECD report, banks are the strong point of the Czech economy – according to the report, it was positive that banks did not become involved in risky business practices; and besides, the Czech Republic does not have a problem with loans in foreign currencies (income as well as loans are mainly in Czech crowns). The greatest problem is said to be the growing budgetary deficits. According to the forecast, in 2010 the Czech Repub- lic can expect revitalisation with a growth of 2%. Increased investments and foreign demand will be the main causes; on the other hand, low local consumption will be the greatest growth disincentive. The gov- ernment should also set a deadline for the country to join the Eurozone – i.e. the date of the adoption of the euro. The economic report summarises its suggestions for the Czech Republic in the following points: Implementation of an ambitious me- dium-term consolidation strategy. The government should formulate a clear medium-term plan to achieve a structurally balanced budget. The consolidation effort must be supported by structural reforms and it should balance the provision of the income base and the use of savings poten- tial in cost programmes by increasing their effectiveness and restraining their growth. It should become the foundation stone of a wider strategy in the preparation of the economy to join the Eurozone. Diversification of risks in health care and pension system Due to the pressure of expense caused by an ageing population, it is necessary to carry out further health care and pension system reforms to provide for their long-term fiscal sustainability. In both cases, the first promis- ing steps have been taken, but it is neces- sary to do more, especially to diversify the sources of pension income. In recent years, significant reforms in the tax system and social benefits system have been carried out. Even though many of the changes are welcome, there are still some unresolved issues: Transferring the tax burden towards less distortion-causing taxes. It is possible to use indirect taxation much more, especially excise, ecological, and property taxes instead of direct taxation levied on labour and capital. Better co-ordination of tax and ben- efit policy. Due to the fact that the policies in these two areas are not sufficiently co-ordinated, un- desirable interaction between the tax and benefit systems sometimes occurs. A more systematic analysis of their interaction could help to prevent these problems. Removal of further deformities in labour and capital taxation. Different treatment of employees and self- employed entrepreneurs deforms the be- haviour of labour market participants. The law on Corporate Income Tax, which gives preferential treatment to certain kinds of as- sets and investment financing resources, has a negative effect on investment allocation. Further lowering of rigidities on the product and labour markets. Despite recent reforms, it is still necessary to lower the barriers for entry on the product market, to strengthen economic competi- tion, especially in network sectors, and to liberalise labour market regulations. Further development of initiatives in the field of e-government. Greater use of e-government methods could significantly facilitate the attainment of these objectives. According to the OECD, the Czech economy has been affected by the global decline in economic growth, due to its high level of openness and participation in global production chains. Its fiscal position also suffered a loss and this situation required a quick change from stimulation policy to consolidation. The major medium-term challenge is the creation of conditions which would enable the Czech Republic

| 8 I N V E S T M E N T FDI on Roller-coaster in CEE The Central and Eastern Europe (CEE) has experienced a roller-coaster ride in foreign direct investment (FDI) in- flows since 2003. The strong growth that followed the last two rounds of EU expansion was halted by the global recession. FDI inflows in 2009 were 50% down on the amount in 2008. Two important factors to determine the recovery path of FDI flows to the region will be the speed with which investors’perception of country risk moderates, and how quickly the region’s wages - relative to countries like Germany - start to pick up again. During 2009, the CEE region experienced a collapse in inward flows of foreign direct in- vestment. Analysis of PricewaterhouseCoopers experts also suggests that FDI inflows will not immediately bounce back to previous highs. The bust which followed the long boom will have persistent effects in the region. Under our Centralscenario,itwilltakeuntil2014forthere- gion’s FDI inflows to surpass the 2008 level.The collapse coincided with the credit crunch and the economic recession. The intensity of the recession was not uniform across the region. Estonia, Latvia, and Lithuania are likely to have experienced double-digit rates of contraction in economic output in 2009; Bulgaria and the Czech Republic are expected to see milder de- clines of less than 5% of output. Poland’s econ- omy is estimated to have grown in 2009. KEY SECTORS: REAL ESTATE AND ALTERNATIVE ENERGY The Czech Republic, which historically has at- tracted around 10% of FDI inflows into the re- gion, experienced a much smaller 2009 decline than the region overall. In 2008, the Czech Re- public saw significant FDI from the automotive sector; investments from Daimler, Volkswagen and Peugeot-Citroen totaled almost US$1 bil- lion.Realestateandalternativeenergywerethe other key sectors for FDI in 2008. In 2009, total FDI into the Czech Republic declined by 19%. These key sectors experienced declines in FDI in 2009 of around 30% in real estate and alter- native energy, and 65% in automotive equip- ment and components combined. DOZEN YEARS OF GROWTH FDI inflows into Central and Eastern Europe grew remarkably in the dozen years to 2008. The growth was modest at first; FDI rose from US$20 billion in 1997 to US$30 billion in 2003. From this base, however, inflows leaped more than five-fold in five years, reaching US$155 billion in 2008. The increase in inflows coin- cided with the accession of the Baltic and central European states to the EU in 2004. The Czech Republic, Poland, and Hungary have been major regional destinations for FDI in- flows since the mid-1990s. These countries alsosawFDIrisefrom2003,althoughbya pro- portionately smaller amount than many of the other nations in the region. Jiří Moser Managing Partner PricewaterhouseCoopers Czech Republic Important Investment in Žatec Triangle Zone SolarTurbines, an American company andapartoftheworldknownCaterpil- lar Inc. conglomerate, has signed an agreement of intent in March 2010, which should result in the construction of a new high-tech repair centre for gas turbines of this brand in the Žatec Triangle strategic industrial zone. If the investor‘s plans pan out, the only Solar Turbines factory in the whole EMEA re- gion to be able to renovate key parts of turbines necessary for their subsequent general repairs will be built in northern Bohemia. 450 NEW JOBS WILL BE CREATED “In view of the current economic situ- ation and the competition of other Eu- ropean countries, we consider it a great success to persuade, with the help of the CzechInvest Agency, an important com- pany like Solar Turbines to announce their intention to invest in the Triangle industrial zone. We have been trying for a long time to make the zone more ac- cessible to smaller businesses that en- sure the creation of new jobs for the peo- ple of the region. Thanks to the planned investment by Solar Turbines, some 450 new qualified positions should be creat- ed. We plan to increase this number with the influx of other potential companies,” said Jana Vaňhová, the Governor of the Region of Ústí nad Labem. TECHNOLOGICALLY CHALLENGING PROJECT “A number of our turbines are deployed in the EMEA region today, which is why Solar Turbines decided to strengthen their global capacitiesfortechnologicallydemandingre- pairs necessary for general repairs,” explains Peter Taylor, Vice President of Solar Turbines Turbomachinery Products. “The Solar Tur- bines repair centre is a technologically very demanding project which perfectly utilises all the advantages of the Czech Republic – quality infrastructure, excellent geograph- ical location, experienced employees, and above all, our long tradition of top machine production,” recounts Stanislav Martínek, the Director of the Investments division at the CzechInvest Agency. More at www.czechinvest.org Photo:www.sxc.hu

9 | C Z E C H B U S I N E S S A N D T R A D E Czech System of Investment Incentives Among Most Open Ones Investment incentives earned the Czech Republic CZK 229.972 billion (approx. EUR 9.2 billion) from their introduction in 1998 until 2008. According to the results of a study by the Deloitte consulting firm, which described the benefits and costs of all investment incentives provided since the beginning of the system‘s operation, some 308 thousand new jobs have been created thanks to the incentives. This means that almost 10% of all employees in the Czech Republic today work in companies supported by the incentives, or for their suppliers. Altogether, the state had provided Czech and foreign investors with support in the amount of CZK 30.068 billion (approx. EUR 1.2 billion), and collected CZK 260.041 billion (approx. EUR 10.4 billion) in taxes and em- ployee payments from the same companies and their suppliers.The study proved that ap- proximately three quarters of new jobs, and state budget earnings as well, are created at the suppliers used by the investors who had been supported by incentives. “This proves that as the influence of the incentives mul- tiplies as they spread through the economy, many other companies benefit from them although they themselves have not been directly supported,” explains Luděk Nieder- mayer, the Director of the Consulting Depart- ment in Deloitte. 486 entities drew on invest- ment incentives until 2008. The investors put CZK 357 billion into the supported compa- nies. Almost one-quarter of all the promised incentives was acquired by Czech firms, with only German firms being more active, albeit by just one per cent. 308 THOUSAND JOBS By 2008, 308 thousand new jobs were cre- ated thanks to the investment incentives in the Czech Republic. Most of the jobs, 73% to be exact, were created by suppliers, the remaining 27%, or 83 thousand jobs, were opened directly by the supported investors. “The overall results of the study show that in the long-term, one job created by investors creates two jobs for suppliers,” says Alexan- dra Rudyšarová, the General Manager of the CzechInvest Agency. On top of that, the sup- ported investors and their suppliers create jobs in times when other industries let go of employees. While the years 1998–2000 and 2003–2004 saw the elimination of several thousand jobs in production, the supported investors, on the other hand, hired new peo- ple.“We can expect the number of positions newly opened by investors and suppliers to grow in the coming years. A record 265 companies acquired the promise of an in- vestment incentive between the years 2006 and 2008,” the study says. Employee wages have been climbing continuously in the supported companies over the last years. “However, average wages in the individual industries do not differ significantly from the wages of employees in companies that have not drawn on the incentives. Therefore it seems that the supported investors do not try to push their wages higher to attract employees from other companies,” adds Luděk Niedermayer. The key industries in which the incentive recipients conduct their business have shown such rapid growth of turnover that it was undoubtedly a case of a strengthening of the whole field, and not only a strategy based upon taking over con- tracts of existing firms. ONE -THIRD OF CZECH EXPORT THANKS TO INCENTIVES “Therealamountofmoneytransferredtoin- vestors‘ accounts from 1998 out of the CZK 30 billion (approx. EUR 1.2 billion) provided in the incentives from the state budget was CZK 6.432 billion (approx. EUR 256 million). It was used to support the creation of new jobs, employee retraining, or in the form of capital support of investments. The re- maining funds are composed of income tax abatement and price-cuts on the reduced prices of land in industrial zones. However, both of these sums are unrealised income – not expenditures, i.e. the state does not have to make any direct payments which means the funds do not represent any burden for the state budget. Investors sup- ported through incentives exported goods worth CZK 835 billion (approx. EUR 33.4 billion) from the Czech Republic in 2008, which is 29% of all Czech exports.

| 1 0 I N V E S T M E N T INVESTMENTS THAT REMAIN Foreign companies operating in the Czech Republic continuously increase the percentage of their profits they re- invest. According to data from the Czech National Bank, CZK 363 990 billion (EUR 14.6 billion) have returned in this way to the economy, which is 48% of the overall amount of direct foreign investments in the industry. “The collected data show that companies often increase their par- ticipation in the Czech Republic follow- ing their initial investment. Thus, their operation in the Czech Republic is prob- ably not based on an investment sup- ported by an incentive and an attempt to withdraw the profit to their home company as quickly as possible. The in- centive is used to make the initial invest- ment easier with plans to expand it later,” says Luděk Niedermayer. Three quarters of the supported investors also demand that their suppliers conform to quality certificates, such as ISO, and approxi- mately one-third of them has stated they cooperate with universities or the Acad- emy of Sciences. Both of these activities help to further improve the quality of the business environment in the Czech Republic. More at www.deloitte.com/cz (e-mail: tpergler@deloitteCE.com) Blu-Ray Discs Will Be Made at Loděnice Loděnice near Beroun is a Czech town where Central Europe’s first plant to manufacture Blu-ray discs will be based. The Czech company GZ Digital Media, a.s. will purchase technologies worth more than CZK 250 million (approx. EUR 10 million). In addition to optical discs, the company is known for the manufacture of conventional vinyl discs, and is actually the world’s largest manufacturer of those car- riers. The company is planning to increase its DVD pressing capacity and to enlarge the follow-up print- ing production – the manufacture of sleeves and all accompanying printed materials. The plant will create about thirty new jobs. GZ DIGITAL MEDIA, A.S. INTRODUCES ITSELF GZ Digital Media, a.s. is the largest CD and DVD manufacturer in Central and Eastern Europe, with an output of around 100 million optical carriers, of which ap- proximately 80% go for export, mainly to the UK, the USA, and to continental Eu- rope. Currently, the company is planning vast investments, the largest proportion of which will go into modern machines and equipment. All the equipment will be installed in the company’s existing premises, so that there will be no need to build new facilities on a green field. That is one of the reasons why the Czech com- pany GZ Digital Media has received state support in the form of partial corporate income tax exemption. “Naturally, our branch, too, was hit by the global economic slowdown. Fortu- nately, we reacted quickly and with our comprehensive offer we are prepared for new customers,” Zdeněk Pelc, Man- aging Director of GZ Digital Media, a.s., explains. “In the first phase we are planning the purchase of more advanced and more economical machines for the manufac- ture of DVD discs and for printing pro- duction, and Blu-ray technology will fol- low suit.” PREPARING FOR BLU-RAY DISCS The first new machines are already in op- eration at GZ Digital Media. All of them, including Blu-ray disc production facili- ties, will be fully operational in January 2012, at the latest. “Currently we have an about four-per-cent share of the EU mar- ket, and we hope that as a result of this investment, our share could increase by at least half a per cent,” Pelc said. INTEREST IN BLU-RAY DISCS IS GROWING According to Blu-ray Forum.cz, an organ- isation associating film distributors, car- rier producers and player manufacturers, the sale of Blu-ray film discs in the Czech Republic and in Slovakia in 2009 is esti- mated at 90 000. Interest in the discs is growing rapidly. In the first six months of 2009, viewers and video-distributors in the two countries purchased 25 538 Blu- ray films in the Czech language version; in the corresponding period one year be- fore, they purchased only 8 538. Demand for Blu-ray products is grow- ing worldwide. The sale of Blu-ray films in the USA last year is estimated at USD 89 million in comparison with USD 24 mil- lion the previous year. In Europe, Blu-ray film sales last year are estimated at around USD 9 million. The Blu-ray format makes it possible to store an incomparably larger volume of data than ordinary DVDs. A DVD can store up to 17 GB of data, but standard capacity is rather only 8.5 GB, while a Blu- ray disc can store up to 50 GB. More at www.gzdm.cz Photo:CountryLifearchives

1 1 | C Z E C H T O P Country Life, a Pioneer of New Lifestyle It is nearly 20 years since Country Life s.r.o. was founded, bringing the first organic food to the Czech market. Ever since its establishment, the company has not only been selling organic and health food, but has also been growing and manufacturing it, cook- ing with it, and simply looking upon health food in an all-inclusive man- ner. It has been trying to help people by offering them a practical change to their life style and inform and advise them in this area. And also to educate more specialists in the branch. organic farm or the bakery, lectures and a con- cert. Each year, thousands of people come to celebrate the Organic Harvest Festival. ORGANIC FARM AND ORGANIC BAKERY Country Life has been running the organic farm since 1992. On its fields it grows grain crops, vegetables and fruit, all organic. Each year it harvests more than 60 different kinds of crops, including the less well-known, such as topinambures, black root and yakon. It is also trying to cultivate its own organic seeds and young vegetable plants, organic cereals and potatoes. The organic bakery bakes bread and sweet pastries, which it sells in its own shops and res- taurants, and it also supplies them to organic shops all over the Czech Republic. The bakery uses grain from its own organic farm, which it grinds on a stone mill, so that all vitamins, min- eral substances and fibre are preserved in it. HEALTH FOOD WHOLESALE Country Life is the largest organic product importer and trader and one of the largest health-food suppliers in the Czech Republic. Its wholesale store offers about 2 000 differ- ent products, nearly 1000 of which are in organic quality. Its range comprises durable and cooled food, fruit and vegetables, bread, eco-detergents, and natural cosmetics. Country Life is an importer and distributor of world brand organic products and health food, such as Provamel, Oatly, Ekoland, Granovita, Eden, Molenaartje, Danival, Emile Noël, Voelkel, Monki, Muso, Ecover, etc. ORGANIC SHOPS AND RESTAURANTS The Country Life “organic family” also in- cludes four organic and health-food shops in Prague. The first was opened in the early 1990s. Another facility, besides organic shops, is a restaurant, which offers a self-service choice, a hot and cold cuisine, a salad bar and fruit and vegetable juices. The interiors of the restaurant and the shops in the centre of Prague are furnished in a natural style. HEALTHCARE AND EDUCATIONAL ACTIVITIES An inseparable part of Country Life’s ac- tivities is healthcare and educational pro- grammes. The company runs a Lifestyle Institute, which organises courses aimed at practical education in the area of ecology and healthy life style. The courses are ac- credited by the Ministry of Education of the Czech Republic. More at www.countrylife.cz AWARDS FOR COUNTRY LIFE: 1993 – Honourable Mention in the Eco- project of theYear Competition for Country Life’s organic farm 2005 – Melantrichova shop – Organic Shop of theYear Award.The winner is selected by a jury composed of renowned experts in marketing, food production, the media and consumer associations. 2006 –The Best Organic Farmer of theYear Prize. The prize is awarded each year by the Pro- bio Association of organic farmers.The prize is a challenge cup full of gold pieces. Country Life is attempting a comprehensive solution, at all levels of its activity – from or- ganic farm to wholesale and healthy lifestyle courses. Besides an organic farm, a health- food wholesale outlet store and an organic bakery can be found in the company’s eco- centre not far from Beroun, where a harvest festival is held each year. Also, the company runs several organic shops and restaurants at different locations in Prague. THE FIRST PASSIVE HOUSE IN THE CZECH REPUBLIC The Country Life eco-centre has been in operation at Nenačovice near Beroun since 2003. Part of it is an organic farm, a wholesale store, an organic bakery, a stone mill, a pack- ing department, and the Company’s offices. The office building is a reconstruction of the former cow-house. It is a low-energy building with an extension, which has the parameters of a passive house. It is the first passive house to be built in the Czech Republic. ORGANIC HARVEST FESTIVAL The eco-centre is a place where the Organic harvest festival is held each year. Since 2004, every second Sunday in September life in Nenačovice revives with a festive organic-style spirit. The programme prepared for visitors comprises the sale of organic food and other eco-products, food tasting, excursions to the Country Life office building

| 1 2 L E G I S L A T I O N Insolvency Law: How to Protect Claims? The number of business people facing financial difficulties in this current economic crisis is higher than ever before. Hence, a higher degree of diligence is required when doing business. Which are the basic principles of the Insolvency Law in the Czech Republic and the general recommendations to claim protection? The insolvency issue is regulated by Act No. 182/2006 Coll., on bankruptcy and the methods for its solution (the Insol- vency Act). This Act became effective as of 1 January 2008 and, contrary to the former regulation, it emphasizes the influence of creditors on insolvency proceedings and provides more possible insolvency solu- tions, namely enabling the sanitation of a debtor‘s business and the continuation of its business activities, if this is effective in a particular case. INSOLVENCY SOLUTIONS The Insolvency Act recognizes the fol- lowing fundamental insolvency solu- tions: (i) straight bankruptcy proceedings (“Konkurz”), the purpose of which is the proportionate satisfaction of creditors from the proceeds of the conversion of the debtor‘s assets into liquid financial means, (ii) restructuring (“Reorganizace”), which enables the subsequent satisfaction of creditors while continuing to engage in the debtor‘s business activities within the scope of the so-called restructuring plan made with the purpose of sanitising the debtor‘s business, and (iii) debt relief (“Oddlužení”), which is applicable only to non-business debtors and is therefore not the subject of this article. FILING A CLAIM After the commencement of insolvency proceedings and until the termination thereof, the satisfaction of claims towards a debtor is possible only through the proceedings and in a manner that is fore- seen in the Insolvency Act. A claim can be satisfied in insolvency proceedings only if it is registered within the proper time limit by an Insolvency Court and meets the ap- plicable formal requirements. This duty is imposed on most creditors. Only a small group of creditors, for example the debt- or‘s employees, are not obligated to file their claims. THE MAIN CLAIM REGISTRATION REQUIREMENTS Completion of a special Registration Form (which is available at http://insolvencni- zakon.justice.cz) and authenticated signa- ture thereon; Content – Claim Description, reason for its origination and its monetary value in Czech currency (claims in a foreign cur- rency must thus be calculated in Czech currencyinaccordancewiththeexchange rate of the foreign currency market, valid on the date of commencement of the in- solvency proceedings or their due date, if they became due prior to the insolvency proceedings‘ commencement). The value of non-monetary claims also has to be evaluated in money; Attachments – they differ in accordance with the kind of registered claim. In prin- ciple, they shall prove the existence and amount of the claim; diligent evidence of all claims is therefore recommended; Time limit – claims can be registered after the commencement of insolvency pro- ceedings. The latest time limit for registra- tion is set out by the Insolvency Court in the thus named Decision on Bankruptcy (“Rozhodnutí o úpadku”). This time limit is mostly 30 days from the date of publica- tion of the Decision on Bankruptcy. Failure to abide by this time limit leads to a refus- al of the application for claim registration and the creditor thereby loses the chance to demand satisfaction for its claim in the insolvency proceedings. All information about insolvency pro- ceedings, including the announcement of the commencement thereof and any given decision important for the course of time limits are published in an Insolvency Register maintained electronically at ht- tps://isir.justice.cz/isir/common/index/do. Gathering information from the Insolvency Register is free of charge and a particular debtor can easily be found, based on its company name or business identification number (“IČ”). Since creditors have prac- tically no other possibility of acquiring knowledge about the pending insolvency procedure, regular monitoring of this Reg- ister within due business management is recommended. SECURED CLAIM Whether his claim is secured (for example with a mortgage or right of retention) is decisive for the satisfaction of a creditor. Secured claims are settled prior to the proceeds of the sale of the assets or re- ceivables of the debtor to which they hold a security right, whereas the settlement can follow at any time during the insol-

1 3 | C Z E C H B U S I N E S S A N D T R A D E vency proceedings. Secured creditors are also deemed to be creditors who do not have a direct claim towards the debtor, i.e. creditors of a third person, whose claim is secured by the assets of the debtor. Contrary to the former regulation, ac- cording to which secured creditors were satisfied at a maximum level of up to 70%, the amount of satisfaction from secured assets is not limited. If the claim value is lower than the value of the security, the claim is for the difference considered as an unsecured claim. In determining the rank of secured creditors, what is decisive is the moment at which the respective security right was created. A secured creditor is obligated to exercise its right to the set- tlement of its claim from the security in its registration of the claim and to specify a particular security right and to prove it by respective attachments. UNSECURED CLAIM Unsecured creditors are satisfied depend- ing on the specific form of insolvency pro- ceeding involved (see above). In the case of straight bankruptcy proceedings, all of the assets of the debtor forming the in- solvency assets are sold with the approval of the creditors‘ council. After settling the costs of the insolvency proceedings and claims with priority settlement, the credi- tors are satisfied (usually in part) out of the rest of the sales proceeds. Unsatisfied claims or parts thereof can be enforced after termination of the insolvency pro- ceedings. Practically, there are no assets of the debtor left after termination of the insolvency proceedings and the debtor‘s business activity is wound up. The actual enforcement of such claims is therefore rare. If insolvency is solved by restructur- ing, debts are transformed according to the restructuring plan, i.e. into a share of the company, new debts, etc. GENERAL RECOMMENDATIONS Generally, when entering into a trans- action, security of the claim by a proper security right (for example a mortgage), is recommended. In doing so, it has to be borne in mind that some legal actions can be declared ineffective and consideration gained as a result must be handed over to the insolvency assets. These legal ac- tions are: legal actions with insufficient or non-existent consideration, preference – for example settlement of a debt before its due date, security of already existing debt, etc. and fraudulently disadvantag- ing transactions, i.e. transactions which intentionally disadvantage creditors, pro- vided that the other contracting party was aware of such intention. In the event of transactions between companies form- ing a holding group, it is assumed that the respective other party was aware of the debtor‘s intention. Hence, special dili- gence is required. Markéta Pechová Petr Syrovátko Wolf Theiss, Advokáti s. r. o. e-mail: marketa.pechova@wolftheiss.com, petr.syrovatko@wolftheiss.com

| 1 4 W E S U C C E E D OHL ŽS to Build New Junction in Bosnia and Herzegovina Bank for Reconstruction and Development (EBRD). The construction work is expected to take 24 months. It will be carried out by OHL ŽS together with Niskogradnja, a local company based in the town of Laktaši. We asked Zdeněk Zedníček, Head of the Foreign Trade Department at OHL ŽS, to tell us more. Why do you think you have been entrust- ed with this contract? In what way were you better than your competitors? The tender proceedings were made up of two rounds – prequalification and the ac- tual offer. We passed the prequalification thanks to our references, for example for the construction of a motorway in Azerbaijan. Then followed the actual tendering pro- cedure. In cooperation with Nizkogradnja, a local construction company, we man- aged to prepare the lowest price offer. We obtained the contract in competition with Croatian, Austrian, Slovenian, and Italian companies. What will this construction project entail? The project entails the construction of a mo- torway fly-over junction. This junction will serve as a connection between the motor- way currently under construction stretching from Banja Luka to the border with Croatia and the future motorway from Banja Luka to Doboj. The construction will include access ramps, a motorway segment and two main scaffold bridges (each approximately 500m in length), as well as the necessary relaying of engineering networks. Foreign contracts make up about 20% of your revenue. What challenges did you have to face abroad in the past? Each project we work on abroad has its own specifics, risks, and stumbling blocks. Our company has a relatively broad “cov- erage” of activities. From the mentioned far-off Azerbaijan to neighbouring Slovakia or Hungary. One of the greatest and most interesting of our projects is the project for the construction of a motorway worth USD 150 million, currently nearing the end of its execution phase. This project is financed by the Czech Export Bank and EGAP insurance. Which other interesting foreign projects await you this year? This year we will continue in our business activities. We are preparing and imple- menting a number of projects in a vari- ety of countries where we already have a “permanent” presence – especially Slo- vakia, Hungary, Bulgaria, Montenegro, and Bosnia and Herzegovina. At the same time, we are attempting to enter new territories such as Russia, Vietnam, Poland, Serbia, and so on. Among the most interesting of projects we have in the pipeline is a project for the construction of a new railway line in Russia in the Ural region. The specific element of the motorway junc- tion is a 580 m long bridge. It will be the first structure of its kind in Bosnia and Herzegovi- na. "We value greatly the trust the investor has bestowed in us. I believe motorists and future motorway junction users will also be satisfied with our work,“ František Leda- byl, Vice-chairman of the Board of Directors and Director of Marketing and Commerce at OHL ZŠ commented at the occasion of the signing of the contract. Construction is cofinanced by the European Commission, which provided the Government of the Re- public of Serbia with a financial donation of EUR 5 million. The remaining amount, i.e. EUR 6.5 million is a loan from the European In March 2010, a contract was signed between OHL ŽS and Serbian Motorways for the construction of a motorway junction worth EUR 11.5 million north of Banja Luka, the second largest city of Bosnia and Herzegovina. This motorway junction will link future motorways Banja Luka – Gradiška, a town on the state border between Bosnia and Herzegovina and Croatia, and Doboj – Banja Luka. Photo:OHLŽSarchives

www.ohlzs.cz Modern face of building industry

| 1 6 W E A R E I N T R O D U C I N G Plzeň Wants to Open Its Arms to Europe This is precisely the purpose of the project: to bring the Europeans closer togeth- er through culture. The question whether the title will be awarded to Plzeň or Ostrava will be decided by the international committee this September. “Becoming a European culture centre in five years‘ time means great prestige, and for Plzeň it is a challenge which will not be repeated for a long time. It is really worth to fight for“, says Petr Dvořák, the PR and Market- ing Manager of the Plzeň 2015 project. VISION IS IMPORTANT The European Capital of Culture event (ECoC) was launched by a decision of the EEC Coun- cil of Ministers in June 1985 and the title is awarded to European cities for a period of one year. Among Czech cities, Prague was the proud holder of the designation in 2000. The culturalandsocio-economicdimensionofthe event surpasses the present common simpli- fied conception of culture in all respects. The Art Director of the Plzeň 2015 project YvonaKreuzmannováconfirmsthis:“ThisEuro- pean project is not designed to acknowledge the reputation of the given city as a city of cul- ture.Thereismuchmoretoit–whatvisionthe city has for a period of five to ten years, what its concept of all-round development is“. Milan Svoboda, the Plzeň 2015 Project Director, who worked in the development branch of the municipal government of the West Bohemian metropolis from the 1990s, speaks in a similar tone.“I saw the city of Plzeň as an area with immense potential already then. Therefore, after the completion of the first stage of the city’s transformation focused mainly on the economic base, the vision was born in 2003 to develop Plzeň especially in the area of innovative enterprise, tourism, and cul- ture.AndthisispreciselywherethePlzeň2015 project offers a unique chance .“ PILSEN-OPEN UP! Although Plzeň presents itself rather as a conservative city, this does not mean that it is not opening to new trends. The Plzeň 2015 project and its motto – Pilsen-open up! – is a strong impulse for this place, which has an indisputably tremendous creative potential in the area of art and technologies. And the important thing is that in the prep- aration of the strategic document The City of Plzeň Culture Development Programme 2009–2019, its inhabitants have made it clear that they definitely desire a change in quality, expect new impulses, and are ready to participate in this change and revival. USEFUL INSPIRATION The best example in this respect can be the results achieved by Glasgow as the European Capital of Culture in 1990. It was probably the firstbreakthroughintheunderstandingofcul- ture – not as a consumer area, but as a motor for kick-starting a healthy development of so- ciety.This was the reason why the socio-econ- omicfactorsinGlasgowgreatlyimprovedafter 1990, and the level of the region as well as the gross domestic product rose by 20%. At present, the European Capital of Culture eventisgraduallymovingfromlargemetropo- lises to medium-sized cities which can greatly boost their development, provided they have the courage and enlightened town halls. In- spiration can be drawn from the experience of Lille in 2004 or Liverpool four years later. Their economic studies showed that every euro in- vested in culture brought 8 euros of profit in parallel effects. Indeed, if the event attracts tourists, the level of accommodation and res- taurant services, transport infrastructure, etc. inthecityrises.ItisthusclearproofwhytheEU is to support not only business, employment, and the environment, but also culture. Of course, there are many other inspiring examples from previous years for the candi- date city of Plzeň. They include Linz and Graz, where the organisers succeeded in building the necessary infrastructure, offering an ex- cellent programme and creating a generally Thanks to its history and tradition, the West Bohemian metropolis can be associated with various attributes. They do not have to be just the engineering industry, the world-famous beer, or business development. In addition, there is now a real chance that in five years‘ time the city may be graced with the title of European Capital of Cul- ture for 12 months. Plzeň (Pilsen) is one of the Czech candidate cities (the other is Ostrava) which want to open their imaginary arms to the European public within the broadly conceived event. Photo:TheCityofPlzeňarchives

1 7 | C Z E C H B U S I N E S S A N D T R A D E favourable atmosphere. “In the German town ofEssen,whichhasreceivedthetitleoftheEu- ropean Capital of Culture for this year together with Pécs in Hungary and Istanbul,Turkey, the project has great support from the federal government. In the Czech Republic we have not experienced this so far, although there is support from the city as well as certain po- litical support from the region. I believe that if the city of Plzeň succeeds in its candidacy and wins the title, it will arouse the interest of other possible partners“, the Plzeň 2015 Project Di- rector Milan Svoboda says. PLZEŇ METAMORPHOSES Sponsors will be needed without doubt. In- vestment in Plzeň will be required in several directions. “We are preparing the construc- tion of a new theatre, the Region is planning to build a new gallery, a new cultural centre is to be set up by the conversion of the former Světovar brewery“, Milan Svoboda lists the key plans.“There are also projects for the revitalisa- tion of public areas, for example the construc- tion of greenways for hikers and cyclists in the Štrunc Park, where a site is to be created for the presentation of works of art.The linking of public areas with art is actually one of our big themes“, Milan Svoboda emphasises. For Art Director Yvona Kreuzmannová, it will be interesting about Plzeň‘s candidacy to see whether and to what extent this conserv- ative provincial city will be able to open up to European culture. It is a fact that according to statistics, Plzeň is the second city in the Czech Republic in the number of foreign residents. The Plzeň 2015 project is a chance to extend the necessary dialogue with minority com- munities as well as other nations. And what cultural events would we see in Plzeň in five years‘ time? The principal themes to be highlighted are Art and Technology, Re- lationshipsandSentiments,TransitandMinori- ties,StoriesandSources.Thethemesreachbe- yond the dimension of culture, and we want to address as many people as possible. For example, in the Stories and Sources cycle we want to take up Plzeň’s past, which is unique and which has a strong transatlantic relation because the city was liberated by the Ameri- can army in the Second World War, and there are many events in its history that are worth recalling“, says the Plzeň 2015 project Art Di- rector. “We can promise already now that the themes of the programmes will be strong and the artists and performers will be remarkable“. PLZEŇ 2015 PROJECT WHAT COMPANY PLZEŇ WILL HAVE AS A CANDIDATE Athens (ECC title in 1985), Paris (1989), Madrid (1992), Lisbon (1994), Stockholm (1998), Helsinki (2000), Bruges (2002), Luxembourg (2007), Istanbul (2010). WHAT PRINCIPLES PLZEŇ WANTS TO PROMOTE AS A EUROPEAN CENTRE OF CULTURE Openness as courage for disputation and public dialogue. Openness to new ideas, innovation, and creativity. Openness to minority genres, trends, and ethnic groups. Openness, transparency, and sophistication of the candidacy process and public affairs. WHAT PLZEŇ WILL GAIN BY THE TITLE OF EUROPEAN CAPITAL OF CULTURE At present, Plzeň takes 356th place in the EU by its size. In 2015, it can be one of the two most important cities in all Europe. In 2009, Plzeň recorded almost three quarters of a million overnight stays of tourists. In 2015 the number may be much higher. At present, 15 new theatre performances a year can be attended in Plzeň, in five years the number may reach 365. A benefit in terms of sustainability will be the improvement of culture infrastructure. The city is motivated for buildings that would otherwise not be given such a high priority. Culture and art can bring important economic benefit. The year 2015 can show whether one euro invested in culture will bring at least two more euros to the budget of the city or the state.

| 1 8 K A L E I D O S C O P E First Hopeful Firms in SiliconValley BoldBrick, Cognitive Security and Imagemetry – these are the names of the Czech start-up companies which, by 30 June, were lodged in the CzechAccelerator of the CzechInvest Agency in California. CzechInvest has organ- ised office space for them free of charge in the unique business incubator, Plug and Play Tech Centre in Silicon Valley which is the seat of such giants as Microsoft, Google, and Sun Microsys- tems. BoldBrick is seeking new clients for their key product, Mossquito, and opportunities for financing further development in CzechAccel- erator. “CzechAccelerator is an ideal opportunity for us to start our business activities in the US, which is our key market,” says Ondřej Tučný, General Manager of BoldBrick. Imagemetry Company sent part of its trade and research team, which specialises in the area of digital image processing and artificial intelligence. It is seeking an opportunity in California for strategic support and expansion of their product, aimed at security aspects of visual data. CzechSOLVIT–OneoftheThreeFastestCentresintheEU tion is ten weeks. The Czech SOLVIT centre, with 126 cases resolved, is evaluated by the European Commission as one of the most successful in the EU. The SOLVIT system provides free and fast assistance in the case where an office of a member state violates the rights granted to a citizen or an entre- preneur by European law. The Czech SOLVIT Centre, active at the Min- istry of Industry and Trade, is a system of informal problem solving on the EU inner market. In 2009 the Czech centre was one of the three fastest centres, together with those of Ireland and Austria, which resolved issues within 28 days on average. The dead- line by which the centre should find a solu- AFSI in Most to Employ Almost 200 People Almost 200 people in North Bohemia will be employed by Advanced Filtration Sys- tems Inc.(AFSI), the American producer of filters and filter inserts. Production in the new plant in the Joseph Industrial Zone in Havraň in the Most Region was launched in March 2010. “We decided on the Czech Republic as the location of our first factory outside the United States, due to its excellent location in the heart of Europe, decent infrastruc- ture, and reliable employees. Another factor that influenced our decision was the good reference from our partner, the Donaldson company, which has been doing business in Kadaň and in Klášterec for 10 years,” says Radim Otipka, Head of the Havraň plant. The Most plant will manufacture filters and filter inserts for Caterpillar machines and engines in Eu- rope, Africa, Asia, and Australia. As of July, there will be a new generation of filters for the British Perkins company. The con- struction of the AFSI plant in the Czech Republic started in April 2008. To date, 142 people have obtained employment there and their number should grow to 185 by the end of the year. The Czech Republic Has Been among the Best in Economic Endurance in the EU during the Crisis The economic crisis revealed the deficien- cies, but it also confirmed the strong as- pects, of the Czech economy. As noted by the mid-year barometer of the Confeder- ation of European Business (BusinessEu- rope) representing 40 national employers’ federations from 34 countries, the evalua- tion of the Czech economy in comparison with the other 28 countries is relatively positive. The Czech Republic was placed relatively well and, together with Denmark, Germany, and Austria, it was judged the best at resisting the impact of the crisis. To- gether with Slovakia, Poland, and Hungary, it is approximating the average economic level of the EU and it retains an excellent level of external competitiveness. In com- parison with other European countries, the Czech Republic is judged relatively highly in export performance (4th among 29 coun- tries). Also in the area of public finance (10th among 29 countries), despite worsening in 2009 and the current worsening, the Czech Republic is among the countries with better results. As regards tax burden and budget- ary adjustment linked to ageing, our coun- try has attained average results (12th place in both factors). Labour costs are relatively higher (18th among 29 evaluated European countries) and information related to labour productivity is unfavourable (22nd place). In labour productivity, the Czech Republic is behind Slovakia, but ahead of Hungary and Poland. Photo:www.sxc.hu,EuropeanCommissionarchives,KarelPazderka

1 9 | C Z E C H B U S I N E S S A N D T R A D E Prague Hosted American and Russian Presidents US President Barack Obama and his Russian counterpart, Dmitriy Medvedev, signed the START treaty on nuclear arms reduction in Prague on 8 April of this year.The newTreaty has supplanted the strategic arms reduction treaty (START) of 1991, which expired in De- cember 2009. The negotiations for the new document took almost a year; Moscow and Washington could not reach agreement on certain points of the Treaty. Russia demand- ed that the treaty be relevant for all nuclear warheads and their strategic delivery vehi- cles (rockets, submarines, and bombers), while the US wanted to concentrate mainly on warheads. Obama and Medvedev jointly pledged to liquidate parts of their arsenals of nuclear warheads, after negotiations in Moscow on 6 July 2009. They agreed that they would reduce the number of nuclear warheads on vehicles from 1675 to 1500 on each side and the number of vehicles from 1100 to 500. Why have the two Presidents met in Prague? Mainly because Obama gave a speech on his vision of a world with- out nuclear weapons in Prague a year ago – on 5 April 2009. Thus, Barack Obama has visited Prague for the second time since his inauguration, while this was the first visit to the Czech capital for the Russian President Dmitriy Medvedev. Financial Arbiter’s Services More in Demand In 2009, the Office of the Financial Arbiter in the Czech Republic received a total of 757 suggestions and complaints from clients of local financial institutions, which is an almost 100% increase in comparison with 2007. Sug- gestionsweremainlyrelatedtoproblemswith money transfers, to bank and non-bank loans or incongruities in insurance. The Arbiter also granted several sanctions and imposed fines of CZK 254 000 (approx. EUR 10 000) on finan- cial institutions, of which CZK 115 000 (approx. EUR 4 600) was for not observing information obligations. More about the Financial Arbiter at www.finarbitr.cz/en/. The Czech Republic has Opened an Exchange of Unused Chemicals Called NECHELA The Internet auction exchange system of unused chemicals opened in March 2010. The Ministry of Industry and Trade sup- ported the establishment of an electronic auction market, the aim of which is to help small and medium-sized companies make use of the remains of chemical substances and products which they have left over from production after transformation or end of production. For a small company, it is more profitable to sell unused chemicals in time than to keep them stored and in the end pay for their ecologic removal or, in a worse case scenario, for their illegal storage. The NECHELA (NEspotřebované CHEmické LAtky = Unused Chemical Substances) allows the creation of the offer of chemicals on the In- ternet in the database of unused chemical substances and products, which is accessi- ble at www.cmkbk.cz. What is the Czech Republic’s Position on the EU Internal Market? The Czech Ministry of Industry andTrade has issued an Analysis of the Competitiveness of the Czech Republic. For almost six years, the Czech Republic has been a part of the EU internal market, which provides Czech companies with greater opportunities for business. The results show that, while the Czech Republic is successful in some areas, even when compared to the best countries (technological environment), in other areas of the comparison we are among the least successful (institutions and infrastructure). In the area of infrastructure, the Czech Republic has too low a share of the motorway trans- port network and an insufficient number of border crossings for transmission systems. The Czech Republic has a significant po- tential for change in increasing educational structure, especially in technical education. The necessity for better interconnectedness in research between public and private sec- tors is related to this. Czech Prime Minister Jan Fischer with US President Barack Obama

| 2 0 S E R V I C E S All-embracing Methods of the Packaging Industry An ever greater emphasis is placed in the Czech Republic, as well as globally, on the function of packaging from the view- point of design, which is seen as a feature that should correspond to the product brand and publicise it, attract consumers, and present its contents as sought-after merchandise. Czech customers look for the convenience brought on by developments in the packaging industry, whether it is, for example, the ergonomy of bottled drinks or the easy opening of tinned liver pâté. Ac- cording to surveys, one of the important factors for consumers, influencing their shopping decisions, has lately also been the aspect whether environmentally-friendly materials have been used in the manu- facture of the packaging. Indeed, when looking at a packaged product, Czechs also subconsciously wonder whether the item of packaging can be recycled. This is one reason why the Czech Republic ranks among the top European countries in terms of the amount of sorted packaging waste. In 2009, every Czech sorted on average ap- proximately 35.9 kilograms and 70.9% of all the packaging introduced on to the market. It is also important that the manufacture of packaging is dominated by cardboard and paper (42%), followed by plastics (32%), glass (11%), metals (10%), and other materi- als (5%). PACKAGING LAW If you decide to go into the packaging busi- ness in the Czech Republic, familiarise your- self with the Act on Packaging 477/2001 Coll., which came into effect in January 2002. A very good system has been put in place for the management of packaging, which ranks the Czech Republic every year among the most successful countries in Europe. For every packaging that you place on the market and sell, you must examine and prove that it does not negatively affect the living environment of the manufacturer. The Act binds the importers and distributors of pack- aging to ensure the collection of packaging and use of packaging waste, and defines the so-called authorised packaging company and its rights and duties, and states the duty to file for registration in the list of persons who introduce packaging or packaged products to the market or in circulation. The Act applies to business entities (corporate or individual), i.e. not to individual consumers - citizens and households. If, during your business activities, you introduce packaging, packaged goods or packaging materials on to the market or in circulation, you must proceed in accordance with the rules defined by this Act. AWARDS FOR DESIGNERS To demonstrate their best packaging ideas and technologies, as well as to publicise them, Czech designers were able to enter their packaging designs, by the end of May 2010, for the 16th competition organised by SYBA, the Czech Packaging Institute. This competition, Packaging of the Year, is intended not only for the manufacturers and users of packaging, but also for other participants in the creation of new pack- aging solutions, such as brand managers, graphic studios, engineers and designers. Any solution within one of the following six categories was eligible for the competition: consumer packaging, consumer gift pack- aging, sales packaging and displays, trans- port and handling packaging, packaging materials, and also labels, closures, affixation and other auxiliary packaging means. Sub- sequently, the winners can participate in the global WorldStar for Packaging Competition. Packaging is not only an important source of information for custom- ers (with its shapes and graphic features), but it also plays a role in manipulation (i.e. as storage space for products), and ensuring the protection of products. The “Fromin – Voda z doby ledové“ (Ice Age Water) bottles are manufactured at the client’s request to express, by their appearance, the uniqueness, purity, and age of the water they contain. Therefore, this globally unique design creates the impression of ice cubes melting away. The effect is enhanced by the choice of extra transparent PET. The use of a translucent polyethylene label, which does not distract from the intended appearance, is also unu- sual. The affixation of labels and the mate- rials used respect the maximum ecological requirements. Consumers also appreciate the wide bottle-neck which makes it easier to pour the water. (see Picture) Graphic purity, emphasis on product, original typography, accurately handled backdrop – these are the main attributes of this premium line of ethnic rice from the Vitana company. The quality of the graphic presentation in every detail, combined with perfect pre-press, makes this packaging line an exceptional product with a high poten- tial of addressing the target group. More at www.obalroku.cz FROM THE HISTORY OF THE PACKAGING OF THE YEAR COMPETITION OR EXAMPLE OF A PRIZE-WINNING PRODUCT Photo:SYBAarchives

inzerce SVITAPET – Introduction Svitapet is a highly resistant strapping band, which was designed as an extremely strong substitute for the steel and PP strapping bands and has become their natural successor. It is ideal for use in medium- and high- performance operations requiring the high protection of packed goods, such as corrugated iron, timber, concrete products, and printed matter. SVITAPET with Print We can offer our clients SVITAPET with black print, for which we use highly efficient ink-jet printers, which guarantee a high quality of print. The print is done by the final section of the production equipment. SVITAPET – Award Svitapet was awarded the GRAND PRIX for the best product at the FOR 3P Fair, held at the Prague-Letňany exhibition grounds on 15-17 April 2009. SVITAPET – FACHPACK We will be participating in the FACHPACK Fair in Nuremberg on 28-30 October 2010. We are looking forward to your visit. highly resistant strapping band SVITAP J.H.J. spol. s r.o. Kijevská 8, 568 02 Svitavy, Czech Republic Phone: +420 461 568 198 Fax: +420 461 568 300 E-mail: marketing@svitap.cz www.svitap.cz www.haly-svitap.cz

| 2 2 S E R V I C E S Industrial Real Estate Market Stabilised Between Supply and Demand The fall in the demand for industrial prop- erties rental was observed in the Czech Republic, especially in the first half of 2009, when the volume of concluded transac- tions declined to 150 000 sq.m, while in the second half the interest increased and 381 000 sq.m were leased. This is a 50% drop compared to 2008. The number of industrial properties under construction also went down significantly. At the end of 2009, only 63 000 sq.m were under con- struction, while the three-year quarterly average of space under construction is 150 000 sq.m. MASSIVE CONSTRUCTION DID NOT CORRESPOND TO DEMAND Unoccupied space rate has risen over the long term in the past years, which was due to massive building that contrasted with users‘ demand for industrial real estate. At the end of the year, the Czech Republic had approximately 600 000 sq.m of vacant A class industrial real es- tate, which means heated buildings with full thermal insulation, and usable height of 10 metres for logistics or 7 metres for manufacturing. The halls must have dust- proof flooring with loading capacity of at least 5 t/sq.m. Another parameter is light shafts, the presence of loading bridges with balancing ramps, and the possibil- ity to build in offices. The most affected areas in terms of unoccupied space are the regions of Plzeň and Ostrava, where the vacancy rate is up to 25%. In Prague, too, there are some 250 000 sq.m of unoc- cupied space, which is about 18%. How- ever, it should be noted that Prague and its surroundings still account for 50% of the industrial real estate market, in both supply and demand. Given the absolute The industrial real estate market experienced a robust development in the past years and has reached the line between a developing market and a saturated one. The massive speculative construction of the past years, when developers were building warehouses without a secured lease, was greatly slowed down by the global economic crisis in 2009. Paradoxically, this situ- ation has brought market stabilisa- tion in the supply-demand relation in this country. SHARE OF INDUSTRIAL AREAS PER 1000 INHABITANTS IN CENTRAL AND EASTERN EUROPE Source: CB Richard Ellis 324 159 154 186 0 50 100 150 200 250 300 350 sq.m/1000inhabitants Czech Republic Slovakia Poland Hungary Photo:www.sxc.hu

2 3 | C Z E C H B U S I N E S S A N D T R A D E INDUSTRIAL REAL ESTATE MARKET IN THE CZECH REPUBLIC Source: CB Richard Ellis scaling down of speculative construction and a stable interest, we expect the unoc- cupied space rate to decline over the long term and, in some regions, even demand to exceed supply. We have witnessed this situation in Brno for a long time. CHANCE IN RELOCATION AND FOUNDING OF NEW DISTRIBUTION CENTRES A great chance for the Czech Republic is the interest of investors-producers in the relocation of production lines from the west, which is accelerated by the availability of cheap but qualified labour force. A second trend is the establish- ment of new distribution centres for the region of Central and Eastern Europe. This increased interest is apparent espe- cially in the Plzeň Region, which is eyed by many international companies thanks to the perfect access for trucks, the short distance to foreign markets in the west, and the high unemployment rate. Lo- cal demand is generated by companies seeking alternatives for their existing older and to some extent inefficient real estate. This transfer of companies from old to new space will continue for many years to come. The average demand in terms of size is for 3 000-6 000 sq.m, and an increased interest has been recorded recently in smaller units of 1000-2000 sq.m. But modern space of this size is ex- tremely scarce in the Czech Republic. DEVELOPERS‘AMBITION:LETTING THE EXISTINGVACANT SPACE In the long term, the prices of a lease have been EUR 3-4.50/sq.m/month for storage space and between EUR 7-9/sq.m/month for office space or amenities. For the year 2010, we expect a similar result as in 2009, which means that we expect a total renting activity in the order of 400 000 sq.m. Devel- opers will endeavour to focus maximally on the lease of existing vacant space, and will build new halls only if lease contracts can be concluded with new clients. Also, we do not expect additional developers of industrial space to enter the market. Filip Kozák Head of Industrial Space Leases CB Richard Ellis s.r.o (e-mail: marcela.vesela@cbre.com) LIST OF MAJOR LOGISTICS PARKS CTPARK BOR CTPark Bor is one of the most successful parks in the Czech Republic. It is an area sought by tenants who locate their business near the German border (10 minutes from border), situ- ated close to the D5 motorway. CTPARK PLZEŇ CTPark Plzeň is quickly developing into a position of the best park focused on heavy indus- try. Its location makes it one of the most popular parks in the Czech Republic for foreign producers and logistics companies. The park is situated on the main Prague - Plzeň - Nurem- berg motorway. VGP PARK HORNÍ POČERNICE VGP Park Horní Počernice is an important industrial park, easily accessible thanks to being very close to the Prague - Mladá Boleslav - Liberec high-speed road R10, which has an ap- proach and exit at this place. Combined with the immediate neighbourhood of the capital city, the features of this location are considered very attractive. A regular bus line has eight stops in the park connecting it with the Černý Most metro station. PROLOGIS PARK D1 ProLogis Park D1 is situated about 11 km southeast of Prague, close to the Říčany/Jesenice exit from the D1 motorway. The history of ProLogis Park Prague D1, formerly known as D1 Logistics Park, was initiated in 1997, when the AIG/LINCOLN company launched its ambitious project to build a modern logistics complex. In September 2002, the project was taken over by the company ProLogis Czech Republic Management to continue its construction and operation. RUDNÁ LOGISTICS PARK Rudná Logistics Park is situated near the D5 motorway, exit 5 (Prague – Plzeň – Germany). It has excellent access to the Ruzyně airport (approx. 10 minutes) and 80 bus connections daily (Beroun, Zličín). CTPARK BRNO In the vicinity of the Brno-Tuřany international airport, this industrial park has an area of 2.2 million sq.m. Prague North/Northeast Prague Southeast PragueWest CentralBohemia Southwest Northwest Northeast Southeast CentralMoravia Moravia–Silesia 0 50 000 100 000 150 000 200 000 250 000 sq.m 0 5 10 15 20 25 30 35 40 45 50 % Total leasing activity in 2009 Vacancy rate at the end of 2009 Vacancy rate Czech Republic at the end of 2009New completions in 2009

| 2 4 Photo:MiroslavStrnadarchives,Böttcherarchives R E S E A R C H Czech Scientists Unveil Another of Life’s Mysteries A team of scientists at the Laboratory of Growth Regulators, a joint facil- ity of the Institute of Experimental Botany of the Academy of Sciences and the Faculty of Science at Palacký University in Olomouc, have made yet another discovery in the research of plant hormones.Within a group of so- called cytokinins, they have discov- ered an active substance that inhibits the skin ageing process and cures certain skin conditions.This modern elixir of youth goes by the name of Pyratine-6.We asked Miroslav Strnad from the Laboratory of Growth Regu- lators about the future of the project. 100%; however the age expectancy of human beings can be prolonged. How is such research actually conducted? At first we begin by synthesising a large number of substances, from which we se- lect the most effective ones by different bio-assays. Furthermore, we select several candidates from these substances that are studied more deeply on animal (human) cells to ascertain whether they are effec- tive but also cytotoxic, mutagenous, and so on. No substance can be dangerous to the human organism and at the same time ef- fective. Next follows the formulation of the preparation and then clinical testing. The development of substances is conducted exclusively in the Laboratory of Growth Reg- ulators. Only a part of the tests on animal cells were conducted in cooperation with Aarhus University in Denmark and clinical studies were carried out in dermatological clinics in California. The research is financed mostly by Senetek of the USA. Yourfindinghasbeenawardedanumberof patentsresultinginacommercialprepara- tionswithcosmeticandhealingeffects. Is thepreparationalreadyonsale? That is correct, these substances are the subject of several patent registrations. They have also been awarded a number of pat- ents in various countries. Some ten patents cover the finding at present. In the near fu- ture, there will be dozens of such patents as we are developing a number of other prep- arations right now – some of which have al- ready completed the clinical testing phase. The patents have been licensed to Senetek. Sales are underway successfully, especially in the USA. The company also intends to en- ter the European market this year. Do you cooperate with other companies on a commercial basis? Our Laboratory is developing several com- merce-based projects. Firstly, there is the traditional development of anti-tumour sub- stances,wherewecooperatewithCyclacel,C3 Bio, BioApex and BioPatterns. Secondly, there is the long-term development of plant growth regulatorsincooperationwithOlchemim.And lastly, we have been very successful in prepar- ing new growth regulators for agricultural and biotechnological purposes. Our results have attracted the interest of a number of compa- nies such as Fosfa, Sumimoto Chemicals, Bay- ern Crop Sciences, Syngenta, and others. Do you cooperate with other similar facil- ities abroad? Indeed, we cooperate with a large number of facilities, and it would probably be difficult to name them all. In order to achieve a high quality of research, it is necessary to cooper- atewithfacilitiesabroad.I wouldgoasfarasto say it is absolutely essential. We cooperate on a numberofverydiverseprojects,themajority of which focus on plant hormones and their use in all manner of areas of human activity, ranging anywhere from agriculture all the way through to healthcare. Do you also use EU funds to finance you projects? Of course. We are involved in a number of European projects. Most important of all I consider our involvement in an EU project for the Centre of the Haná Region for Bio- technological and Agricultural Research, launched in March 2010 and financed from Operational Programme Research and De- velopment for Innovations. Jana Pike In 2009 your facility, the Laboratory of Growth Regulators, developed an active substance that slows down ageing. What exactly is it? It is a substance of cytokinin origin. Cytoki- nins are plant hormones that, among other functions, slow down the ageing process in plants. Previously, it has been demonstrated that for instance the plant hormone kinetin prolongs the lifespan of skin tissue cultures, possesses antioxidation effects and destroys radicals. The long-term known anti-ageing effects of cytokinins on plant tissues and or- gans have led to further research and test- ing of their derivates. Eventually this has led to the discovery of a substance with a sev- eral efficacious properties that slow down the ageing process - so-called antisenes- cence activity - in tests on ageing of human fibroblast cells. The substance goes by the commercial name Pyratine-6, under which it is now also marketed. In your opinion, is Pyratine-6 really the elixir of youth? In my opinion, we cannot yet call it an elixir of youth. Human and animal organisms are made up of an enormous amount of cells. This substance displays effects on only one particular cell type. Therefore it may not function the same way with other cells in our body. We do, however, want to contin- ue studying it. Ageing cannot be stopped Team of scientists at the Laboratory of Growth Regulators

2 5 | F I R M A N N I V E R S A R Y 15 Years of Quality and Tradition them in Germany. We have gradually built a large network of agencies around the globe. We have made use of the changes on the political map that took place after 1989 to expand our markets in Central and East- ern Europe, and Böttcher Česká Republika was born. How has the range of products been changed and expanded during the com- pany’s long existence? Far back in history, in the first half of the 18th century, a certain Jacob Loosen founded his own tannery in Cologne. A century later, the plantlaunchedthemanufactureofglueand, later still, the manufacture of gelatine for press rollers. A second branch of the family enterprise was founded in Leipzig in the late 19th century, focusing on the manufacture of press rollers. The two branches merged in 1910 and the period of expansion com- menced. Although the two wars were diffi- cult times, the roller production continued. But the Iron Curtain divided both Germany and Böttcher, so the company was re-inte- grated when Germany was re-united. And as I have said, the détente of the 1990s al- lowed us to expand to the markets of the former East Bloc, and Böttcher Česká Repub- lika commenced the manufacture of rubber rollers in the newly built factory in Vyškov in Moravia. Please tell the uninformed what Böttcher actually produces and for what purpose. The parent company operating in Germany was in the past and is now the most impor- tant supplier of rubber-coated rollers, main- ly for the printing industry. The possibility of supplies to the Eastern countries naturally led to the establishment of the manufacture of these rollers in the Czech Republic. Due to success on the market, the factory in Vyškov was enlarged, and a commercial network of subsidiaries was formed in the countries of Eastern Europe, specifically in the Czech Republic, Slovakia, Hungary, Poland, the Baltic countries, Russia, and the Ukraine. At the same time, we became the most impor- tant supplier of equipment for the printing and other industries. As time went on, roll- ers for the printing industry ceased to be the only products and the assortment was expanded with so-called technical rollers, which are used everywhere that anything is transported, driven or pressed. With the development of packaging equipment and the flexo press, the Vyškov plant began sup- plying“sleeves”, which are actually the press formforprintingafterdirectlasergravitation. The Vyškov experience serves the whole Group and also manufacture in the USA. In the course of development, the range of products was expanded with pressroom chemicals and detergents for the washing and care of rollers, which have a noticeable share in the total turnover of the company. Last but not least, I want to mention offset blankets for the printing industry. What has recently been your pride, what successes have you had? We are glad when clients are satisfied, as they confirm the quality of our products. We also provide a complete service. Be- sides success at fairs, the best appreciation is the satisfaction of clients for whom we have created a service of consultations free of charge – within this service, our staff can solve technological problems of the press or processes directly on the spot. I believe that the combination of product-consultancy, suitable logistics of deliveries, and compe- tent co-operation with clients are our most important successes on the market. How has your branch been affected by the worldwide economic crisis and how are you tackling it? The confidence of clients, our position on the market, the company structure and positive balance were preserved during the crisis at the end of 2008, as well as in 2009, due to good and competent operations. How do you see the future, and what are your expectations? We are proceeding from a cautious estimate of market revival. We would like to gain new territories, and after the revival to make use of some adverse experiences from the cri- sis-ridden period. I think that I can proudly say that this period showed our capabil- ity to overcome adverse influences of the market, however strong they were. This is our most important information for clients – we remain a stable, competent supplier of high-quality products and a proficient pro- fessional service. Šárka Kratochvílová www.bottcher.cz Almost 300 years of flourishing operations is not a usual or frequent viewpoint when a production company looks back on its his- tory, but this is the case of Böttcher, a com- pany which came into being in Germany in the 18th century. Over the years which have elapsed since then, the company has been changing its appearance and range of products, and expanding on to European and world markets... and so Böttcher Česká Republika was established fifteen years ago. Its quality and size have gradually made it the most prominent enterprise in this Group which operates on all continents. We spoke to Jiří Volf, Secretary and Manager of Böt- tcher Česká Republika. Böttcher Česká Republika is com- memorating the 15th anniversary of the beginning of its production in the town of Vyškov in Moravia. The depth of the com- pany roots in the past is interesting... Yes, Böttcher Česká Republika was es- tablished fifteen years ago as a company whose service on the then new and de- veloping East European market supported the existing “parent” producers. Böttcher as such originated in Germany as a family firm whose roots reach back to 1725. At the present time, we have ten factories, four of Jiří Volf

| 2 6 R E G I O N Liberec Praha České Budějovice Jihlava Brno Zlín Ostrava Olomouc Pardubice Hradec Králové Ústí n/L Karlovy Vary Plzeň The Hradec Králové Region is one of the most often visited regions in the country. It can be described as predominantly agricultural and industrial, with thriving tourism. Hradec Králové, the capital of the Region, is a university city and its architecture and urbanism make it a European jewel. SLOVAKIA POLAND Jičín Hradec Králové Trutnov Hradec Králové Region Náchod Rychnov n.Kněž. The regional capital of Hradec Králové is situated 112 km from Prague. This metropo- lis, with over 160 000 inhabitants and a rich history, is an important transport junction, the seat of many authorities, state institu- tions, banks and significant industrial com- panies. A typical feature of the city is that it lacks predominantly industrial zones. The range of classical industrial sectors is represented mainly by medium-sized and smaller companies; among foreign inves- tors, we could mention the American Arrow, a manufacturer of medical devices. Hradec Králové is also a university city. It is also the venue for numerous inter- national congresses and symposia. The regional capital is not only the centre for congress tourism, but also the starting point of many interesting routes leading to attractions and sites of natural beauty in the close vicinity. Its unique 20th-century building complexes contribute to making Hradec Králové a textbook of modern ar- chitecture admired throughout Europe. Hradec Králové District The Hradec Králové District is the larg- est district in the Region regarding the number of inhabitants. It is known for many cultural and historical sites. The most significant is the historical centre of the regional capital. Industry and ag- riculture are mainly responsible for the economic production. Main industrial sectors include the engineering, electri- cal, chemical, wood-processing, and food industries. Jičín District Jičín profits mainly from tourism and in- dustry, followed by agriculture. The main industrial sectors are represented by the textile, engineering, and food industries. The production of the Genuine Hořice Rolls (with the certificate of a protected original EU product) is worth mentioning. The Jičín District has a deposit of first-class glass sand (Hrdoňovice – Střeleč). Náchod District The area of the Náchod District makes it the smallest district in the Hradec Králové Region. Sectors with the largest share in economic product formation are industry and tourism. The main industrial sectors are the engineering, textile and rubber in- dustries. Local mineral resources include mainly the mineral spring waters in Ná- chod, Běloves and Hronov, and the peat bogs around Velichovky, together with the spa town of the same name. Rychnov nad Kněžnou District The Orlické hory Mountains, which form part of the District, were proclaimed a pro- tected landscape area due to their unique topography. In total, there are two national nature reserves in the District, 12 natural sites and 20 nature reserves. Industry, tour- ism, and agriculture have the main share in the economic product formation. The main industrial sector is engineering. Trutnov District The Trutnov District lies in the northern part of the Region where it changes from the foothills to the Krkonoše mountain range. The whole length of the northern border is formed by the state border with Poland. Its area is the largest in the Region and it is the second largest district in the Region regard- ing the number of inhabitants. Sectors with the greatest share in the economic product formation include tourism, industry, and agriculture. The main industrial fields are represented by the textile, engineering, and electrical industries. Regarding mineral resources, the Trutnov District has deposits of black coal, to a lesser extent there is also copper ore and limestone. The Hradec Králové Region lies in the north- eastern part of the Czech Republic. Over one-third of the border of the Region lies on the national border with Poland. The Region in its current shape was established in 2000 and today it comprises five districts. The landscape of the Hradec Králové Re- gion consists of mountains, valleys, rocks, and woods. The southern part of the area is formed by the lowland area of the Labe River basin; the northern part by the highest Czech mountains, the Krkonoše (the Giant Mountains), together with the Orlické hory Mountains. The Krkonoše with the high- est mountain peak in the Czech Republic, Sněžka, are geologically unique and were proclaimed a UNESCO Biosphere Reserve. The natural potential of the Region is an excellent basis for the development of new types of tourism (Agrotourism, Ecotourism, Cyclotourism etc.) GERMANY AUSTRIA Photo:CzechTourism

2 7 | C Z E C H B U S I N E S S A N D T R A D E ECONOMIC POTENTIAL From the point of view of productivity and sector structure, the Region’s economy can be evaluated as semi-developed, with a large share of production and services hav- ing a lower added value.The Hradec Králové District is characterised by more activities and a higher added value. The majority of business entities are small and medium- sized companies (up to 250 employees). According to the number of employees, the prevalent industrial sector is the manu- facturing industry, and within its framework, textile production and the production of electrical and optical appliances and facili- ties. According to sector structure, the most prominent are companies focusing on trade and motor vehicle repairs, enterprises in the field of immovables, the manufactur- ing industry, construction and basic metal production, and the production of metallur- gical and metal-working products. A signifi- cant position on the market is also held by food, beverage, and tobacco production. In the field of wood processing, apart from the production of wood processing tools, the Regionalsohostsseveralsmallandmedium- sized furniture and interior manufacturers. A significant share in the list of significant industrial sectors and fields also belongs to the production of rubber and plastic prod- ucts, pulp, paper and paper products and, last but not least, publishing and printing. Heavy industry and the mining industry (with the exception of smaller mining loca- tions) are not present in the Region, which has proved to be a great advantage, espe- cially during the economic transformation of the 1990s. The Region was thus, to a large extent, not affected by structural unemploy- ment caused by the significant attenuation of this production, nor by a large number and extent of environmentally damaged NUTS Area (in sq. km) Population Municipalities Population density (persons/sq. km) LAU 1 – Hradec Králové 892 163 025 104 182 LAU 1 – Jičín 887 79 669 111 90 LAU 1 – Náchod 852 112 495 78 132 LAU 1 – Rychnov n. Kněžnou 982 79 299 80 81 LAU 1 – Trutnov 1 147 120 372 75 105 NUTS 3 - Hradec Králové Region 4 795 554 860 448 116 NUTS 1 – Czech Republic 78 867 10 506 813 6 249 133 Source: Czech Statistical Office (as of 30 September 2009), NUTS- territorial unit according to the EU classification, LAU 1 = district Latest data: Hradec Králové Region Inhabitants as of 31 December 2009 554 402 Gross wages 1st to 4th quarter 2009 CZK 20 621 (approx. EUR 780) Unemployment as of 28 February 2010 8.74% INTERESTING FACTS ABOUT THE REGION The highest mountain range in the Czech Republic – the Krkonoše – lies in the Hradec Králové Region. The Krkonoše Mountains hold several primacies: they are the most visited, highest, oldest, best known, they have a unique character, combin- ing highland and alpine vegetation, and a unique climate resembling northern tundra. The highest peak, Sněžka, is at the same time the highest mountain in the Krkonoše and in the Czech Republic, with an altitude of 1602 m. The Hradec Králové Region is the birthplace of the world renowned painter, František Kupka (1871-1957) areas, such as was the case in other indus- trial areas in the Czech Republic. TRANSPORT The Hradec Králové Region has a relatively dense transport network and the regional capital is conveniently situated. The progress of the economic attractive- ness of the Hradec Králové Region is condi- tioned by the finalisation of the construction of the D11 motorway and the successive R11 in all its length all the way to Královec and the R35 road. The density of the trans- port network is sufficient. What is missing are bypasses of towns and villages which are extremely affected by transit transport. The density of the railway network in the Region is above the average of the Czech Republic. The vicinity of the modernised 1st Railway Corridor in the neighbouring Pardu- The Krkonoše Mountains

| 2 8 R E G I O N bice Region, which provides a rail connec- tion with Prague, the capital of the Czech Republic, is strategically very important. The railway network in the main transport axis covers the decisive transport directions in the Region and thus its extension in the future is not being considered; only the re- construction and modernisation of selected sections. Air traffic has only a supplemen- tary function in the Region. There are eight public domestic airports in the Region. The international non-public airport in Hradec Králové has the potential for development. A significant factor is the proximity of the public international airport in Pardubice, which is one of the five backbone airports in the Czech Republic. Distance between Hradec Králové and other European cities: Prague 112 km Vienna 270 km Bratislava 280 km Berlin 450 km ment for International Relations of the Regional Office. Within the framework of its activities, it also administers grants for the support of international co-op- eration. The Hradec Králové Region has signed a contract of co-operation with these partnership regions: Lower Silesian Voivodeship (Poland), Banská Bystrica Re- gion (Slovakia), Seine et Marne (France), Sibiu (Romania) and Chuvash Republic. It also has unsigned contacts with the Region of Jögeva (Estonia) and it sup- ports Czech compatriots in South Banat in Serbia. Budapest 575 km Warsaw 750 km Brussels 1150 km EDUCATION The Hradec Králové Region has a dense net- work of secondary and apprentice schools. University education is provided by the Hradec Králové University with its three faculties (Fac- ulty of Education, Faculty of Informatics and Management, and Faculty of Arts). There are also the Faculty of Pharmacy and the Faculty of Medicine of Charles University and the Faculty of Military Health Sciences of the University of Defence. There is a great developing scientific and research base, particularly in the fields of Medicine, Pharmacy, and Science, with tech- nological parks being developed. This highly developed educational system represents a strong development potential for the Region. INTERNATIONAL RELATIONS International relations of the Region are in the sphere of the work of the Depart- “The Hradec Králové Region provides many op- portunities for future investors, thanks to which new directions in the development of villages and regions can be created. The Region is ready to provide the maximum support for the develop- ment of investment activities in this Region. I would like to invite you all to the Hradec Králové Region and I wish you all the best.” Lubomír Franc President of the Hradec Králové Region

2 9 | C Z E C H B U S I N E S S A N D T R A D E HRADEC KRÁLOVÉ REGIONAL AUTHORITY KRAJSKÝ ÚŘAD KRÁLOVÉHRADECKÉHO KRAJE Pivovarské nám. 1245 500 03 Hradec Králové Phone: + 420 495 817 111 Fax: + 420 495 817 336 E-mail: posta@kr-kralovehradecky.cz www.kr-kralovehradecky.cz HRADEC KRÁLOVÉ CITY COUNCIL MAGISTRÁT MĚSTA HRADEC KRÁLOVÉ Československé armády 408 502 00 Hradec Králové Phone: + 420 495 707 111 Fax: + 420 495 707 100 E-mail: epodatelna@mmhk.cz www.hradeckralove.org JIČÍN MUNICIPAL COUNCIL MĚSTSKÝ ÚŘAD JIČÍN Žižkovo náměstí 18 50 601 Jičín Phone: + 420 493 545 111 Fax: + 420 493 545 222 E-mail: posta@mujicin.cz www.mujicin.cz NÁCHOD MUNICIPAL COUNCIL MĚSTSKÝ ÚŘAD NÁCHOD Masarykovo náměstí 40 547 61 Náchod Phone: + 420 491 405 111 Fax: + 420 491 405 298 E-mail: podatelna@mestonachod.cz www.mestonachod.cz MĚSTSKÝ ÚŘAD RYCHNOV NAD KNĚŽNOU RYCHNOV NAD KNĚŽNOU MUNICIPAL COUNCIL Havlíčkova 136 516 01 Rychnov nad Kněžnou Phone: + 420 494 509 111 Fax: + 420 494 534 440 E-mail: podatelna@rychnov-city.cz www.rychnov-city.cz TRUTNOV MUNICIPAL COUNCIL MĚSTSKÝ ÚŘAD TRUTNOV Slovanské náměstí 165 Phone: + 420 499 803 111 Fax: + 420 499 803 103 E-mail: podatelna@trutnov.cz www.trutnov.cz SELECTED FIRMS IN THE HRADEC KRÁLOVÉ REGION Name Based in Sector Contact Veba, textilní závody, a.s. Broumov production of interior textiles www.veba.cz Farmet a.s. Česká Skalice production of agricultural machines www.farmet.cz KBA-Grafitec, s.r.o. Dobruška printing machines and accessories www.kba-grafitec.cz PZP Komplet, a.s. Dobruška production of heat pumps and modern industrial technologies www.pzp.cz Juta, a.s. Dvůr Králové nad Labem production of construction and insulation foils and textiles etc. www.juta.cz Arrow International CR, a.s. Hradec Králové production of medical equipment www.arrow.cz Bühler Motor, s.r.o. Hradec Králové production of electric motors www.buehlermotor.cz Cerea, a.s. Hradec Králové production of livestock fodder www.cerea.cz Excon Steel, a.s. Hradec Králové production of equipment for chemical and petrochemical industries www.exconsteel.cz Profimont, a.s. Hradec Králové sale of welding, bevelling, and cutting equipment, exhaust systems www.quelle.cz Rubena, a.s. Hradec Králové production of rubber, rubber products and semiproducts www.rubena.cz Technistone, a.s. Hradec Králové production and deliveries of cured rock www.technistone.cz KARSIT HOLDING, s.r.o. Jaroměř production of car parts – car seat metal structure, exhaust systems etc. www.karsit.cz Continental Teves Czech Republic, s.r.o. Jičín production of spare parts for cars www.contiteves.com LPM, s.r.o. Jičín production of plastic semiproducts www.lpm.cz PFT, s.r.o. Jičín production of plastic windows www.pft.cz Ronal CR, s.r.o. Jičín production of bathroom equipment and light alloy wheels www.ronal.cz Vk-Sped, s.r.o. Jičín car transport, shipping www.vksped.cz Federal-Mogul Friction Products, a.s. Kostelec nad Orlicí components for pro brakes and braking systems www.federal-mogul.cz Mados MT, s.r.o. Kostelec nad Orlicí building of bridges, roads, water management constructions www.madosmt.cz Deprag CZ, a.s. Lázně Bělohrad production of pneumatic and clamping tools, screws, and assembly systems www.depragindustrial.com Ametek elektomotory, s.r.o. Náchod production of electric motors www.ametek.com Atas elektromotory Náchod, a.s. Náchod production of electric motors www.atas.cz Ammann Czech Republic, a.s. Nové Město nad Metují production of construction equipment www.ammann-group.cz Verner Potraviny s.r.o. Nové Město nad Metují wholesale of groceries www.poverner.cz Avon Automotive, a.s. Rudník production of rubber car products www.avon-rubber.com Qpor, a.s. Trutnov production of building materials www.porobeton.cz Esab Vamberk, s.r.o. Vamberk welding and cutting equipment www.esab.cz Pewag, s.r.o. Vamberk production of strengthening and linking materials www.pewag.cz Vaspo Vamberk, s.r.o. Vamberk production of machines and equipment www.vaspo.cz Hašpl, a.s. Velké Poříčí production of nails www.haspl.cz AGO-HYTOS s.r.o. Vrchlabí filtration & fluid management www.argo-hytos.com Optrex Czech, a.s. Vrchlabí production of satellite and television equipment www.optrex.cz

| 3 0 R E G I O N The Hradec Králové Region has great potential for further economic development. Investors will find interesting opportunities and conditions for the expansion of their business activities in the Region. Hradec Králové Region – Ideal Site for Your Investment CONDITIONS IN THE REGIONAL METROPOLIS The regional capital, along with the whole region, sees its future in the industries with higher added value. Therefore, it focuses on attracting investments in the area of strate- gic services or ICT, which require a qualified workforce. As it stands, the Region can of- fer educated employees to investors. These are mostly graduates from local secondary schools and universities, the majority com- posed of graduates who have studied the development of Information Technologies, doctors and medics, and liberal education graduates.The City of Hradec Králové, in col- laboration with, among others, the CzechIn- vest Agency, has built a Technology Centre for firms with innovation potential. This property, which allows entrepreneurs to lease space, including accompanying serv- ices, under favourable conditions, is located on the premises of a former military airfield. CONDITIONS IN OTHER REGIONAL TOWNS Besides the regional capital, other important industrial centres include the towns of Jičín, Trutnov, Náchod, Rychnov nad Kněžnou, Vrchlabí, and Červený Kostelec. Industrial zones have been built and partially or fully occupied in some of them. For example, Taiwan‘s Textonnia Czech, s. r. o., a producer of synthetic fabrics and yarns, has its seat in Červený Kostelec. Saurer Czech, a. s., a mem- ber of the supranational Schlafhorst con- glomerate, manufactures textile machinery in Červený Kostelec in continuation of the Elitex tradition. Numerous companies today operate from the industrial zone in Jičín and, based on this success, the town has decided to invest in further expansion of the zone. However, other unoccupied localities are available to newly arriving investors. Cer- tainly worthy of mention is the newly built industrial zone in Nový Bydžov, which has become easily accessible to transport, due to the completion of the D11 motorway. Other industrial zones have been prepared in Dvůr Králové nad Labem, Hořice, and Po- lice nad Metují which, because of its loca- tion, is advantageous to investors with ties to neighbouring Poland. There is a strategic industrial zone for Škoda Auto in Solnice and Kvasiny. The company uses it to manu- facture the Škoda Superb, Škoda Roomster and the latest Škoda Yeti vehicles. BROWNFIELDS – ONE OF THE OPPORTUNITIES Another opportunity for investors is in those areas which were utilised in the past but, for various reasons, are not being used ef- fectively today. In the past, the CzechInvest Agency, in collaboration with the Regional Office of the Hradec Králové Region, put to- gether an analysis of unused localities, the so-called brownfields. There were over 250 located in the Hradec Králové Region. This study is available to investors. Our goal is to achieve the revitalisation of currently un- used premises or larger areas. USING CO-OPERATION AGAINST COMPETITION Both the traditional and new branches of in- dustry operate alongside each other in the Hradec Králové Region. The traditional indus- tries are still dominated by the textile industry, even though it must deal with the cheap and ferocious Asian competition. For this reason, textile companies, not only from the Hradec Králové Region, have formed an association SUCCESSFUL INVESTMENT PROJECTS IN THE HRADEC KRÁLOVÉ REGION Company Sector Country of origin Investor Year Location AEG Components s.r.o. electronic and electrical Germany AEG 1998 Jičín Alcan Packaging Skřivany s.r.o. plastics France Finnanciere Europeenne D'emballages Pechiney S.A. 2007 Nový Bydžov - Zábědov Continental Teves Czech Republic s.r.o. automotive Germany Continental Teves 2000 Jičín Ronal CR s.r.o. automotive Switzerland RONAL 2000 Jičín Kimberly Clark, a.s. other USA Kimberly Clark 2001, 2003 Jaroměř JUTA a.s. plastics CR JUTA 2007 Dvůr Králové SQS Vláknová optika a.s. electronic and electrical CR SQS Vláknová optika 2006, 2008 Nová Paka Škoda Auto a.s. automotive Germany Volkswagen 2004, 2007 Kvasiny-Solnice

3 1 | C Z E C H B U S I N E S S A N D T R A D E calledClutex.Theyusetheassociationtoshare information and experiences, co-operate with research institutions, and introduce new prod- ucts. This helps them to maintain their impor- tantpositionaheadoftheircompetition.Asso- ciation and co-operation between companies can also be seen in the new industries. The Region of Hradec Králové has great potential to become an important centre in the field of computers and software.With this in mind, ex- isting IT firms, along with the Faculty of Infor- matics and Management at the University of Hradec Králové, have started a project to build an IT cluster. TRANSPORT IS VITAL Any further development of the Region of Hradec Králové is closely tied to the develop- ment of the transport infrastructure. The last remaining part of the D11 motorway should be completed shortly. This motorway con- nects Hradec Králové to Prague and work has started on its extension towards the Polish borders. A convenient transport link, not only to the capital, but to the rest of the country and the whole of Europe is a good basis for the establishment of new companies and for the development of the tourist trade. As it is, the mountainous areas, such as the Krkonoše, the Orlické hory, and Český ráj, the chateaux in OpočnoandČastolovice,andthesafariZOOin Dvůr Králové nad Labem are all attractive tour- ist destinations. The easier it is to reach these attractions, the sooner tourists will flock to the Region. After all, who wouldn‘t want to enjoy the snow-covered slopes of the Krkonoše Mountains or a round of golf in the gardens of the manor in Hrádek u Nechanic after a mere two-hour drive from Prague? Martina Chamasová CzechInvest e-mail:martina.chamasova@czechinvest.org Entrance for Innovation Activities The project of the Hradec Králové TECHNOLOGICAL CENTRE (TC HK) was formed with the cooperation of the city of Hradec Králové, Hradec Králové University, and the EPIS Company with the goal to develop the innovative environment of the Region. SEAT OF CLUSTERS AS WELL AS INVESTORS During the relatively short period of its func- tioning, the TC HK has become a part of the national network of science and technol- ogy parks, a member of Omnipack clusters, Hradec Králové IT cluster, Hradec Králové Business Club, it started to cooperate with several Czech and foreign universities. The Centre is one of the pillars of the innovation business in the Hradec Králové Region, it actively participates on the Hradec Králové Regional Innovation Strategy and on the realisation of its pilot project called Czech- Polish Innovation Portal (www.czeplinn.eu), whose goal is to create a communication platform aimed at increasing the know-how about the innovation environment in the border regions. It also supports the entry of projects aimed at innovation in the Hradec Králové Region, to foreign investors it provides services relat- ed to their entry into the Region, assistance with the establishment of branches and new companies. In this respect, it cooperates with several regional and national institutions and partners in almost all sectors of business ac- tivities. At the moment (March 2010), TC HK is preparing in cooperation with the city and an unnamed multinational corporation an- other phase of its development with the aim to build 4000 to 5000 sq. m of top adminis- trative space in the very centre of the town intended for innovation activities of its future clients. It is a unique project within the Hra- dec Králové Region with the highest stand- ard.TC HK is already collecting demands from potential clients for various technological equipment. A significant advantage lies in the fact that the whole project is co-financed from the EU funds. MICROSOFT INNOVATION CENTRE The last but not least activity of TC HK is cooperation with Microsoft, which has resulted in the opening of the second Czech Microsoft Innovation Centre. As is the case with the first Czech MIC in Brno, the Hradec Králové Centre will offer start- ing entrepreneurs, students, designers, and researchers an access to top quality information. Prospective clients can also appreciate the top equipment for testing and development of the latest technolo- gies built on Microsoft platform, but they can also expect a wide range of activities in the field of training and consultancy. Those interested will also be able to ac- cess lectures and seminars around the world through a videoconference and thus they can communicate and share their ideas and opinions. Martin Dittrich Hradec Králové Technology Centre e-mail: martin.dittrich@tchk.cz For more information, go to www.tchk.cz The modern science and technology centre was ceremonially opened in June 2008, i.e. less than a year after the start of construc- tion. It immediately housed its first clients and since then TC HK has been offering its potential clients variable spaces for innova- tion activities. With the help of the provided services it supports technology transfer, in- novation processes in companies and at universities and it tries to merge these two worlds and to remove barriers between them. Accredited Science and Technology Park searches for talented students at uni- versities and using the business incubator, it helps starting entrepreneurs and compa- nies with innovation potential.

| 3 2 R E G I O N Just like many other countries, the Czech Republic has a system of busi- ness support, which is intended both for domestic as well as foreign busi- ness entities. This system includes support from national and European sources, but some are intended only for selected regions, the so-called regions with concentrated state aid. Services for Foreign Entrepreneurs CZK 100 million (EUR 3.85 million), of which at least 50% must be covered by own capital and 60% of the investment must go into machinery and equipment. The Operational Programme Enterprise and Innovation (OPEI) is a second and no less interesting area of business support. It is also aimed at companies in the manu- facturing industry, but in some cases other areas are also supported. The advantage lies in the fact that this support takes the form of non-repayable financial aid, i.e. funding. The minimum level of investment is from approx. CZK 0.6 – 1 million (EUR 23 000 – 38 500), depending on the programme and size of the applicant. This ranks among the most interesting programmes in the Hradec Králové Re- gion, under the OPEI, from which it is pos- sible to receive funding, for example, for investment in machinery and equipment for firms with innovation potential; fund- ing for the purchase or reconstruction (or construction of an annexed building) of a company’s property; for introduction of renewable energy sources, or the construc- tion of small water power stations; for the purchase of information and communica- tion systems; for the development of soft- ware, for investment into the infrastructure for Research and Development, for invest- ment into the infrastructure for education, for the support of establishing and further development of Science and Technology Parks, entrepreneurial incubators, centres for technology transfer and business an- gel network formation; for the support of formation clusters and technological plat- forms and other activities. EXAMPLE OF SUCCESSFUL AID APPLICATION INNO-COMP BOHEMIA, s.r.o. (Ltd.), Invest- ment Incentive for the Manufacturing In- dustries, budget CZK 298 million (EUR 11.5 million). INNO-COMP BOHEMIA, s.r.o. was considering starting its business activities in the Czech Republic. Apart from other fac- tors, the possibility of receiving support at the time of its entry into the Czech market was very important to it. In co-operation with Asistenční centrum, a.s. (Assistance Centre, PLC), it produced an application for aid in the form of investment incentive, which was granted to it at the level of maxi- mum CZK 119.5 million (EUR 4.6 million). This investment incentive was provided for the purchase of technologies, construction of a new factory, and job creation. Jiří Zapletal Asistenční centrum, a.s. e-mail: zapletal@asistencnicentrum.cz www.asistencnicentrum.cz Note: 1 EUR = 25.976 CZK (average monthly exchange rate announced by the Czech National Bank, February 2010) In the Hradec Králové Region, there are many opportunities to assist foreign busi- ness entities in developing their business in the Czech Republic. This support is aimed mainly at the manufacturing industry sec- tor, Research and Development and other hi-tech fields. The most significant forms of support can be structured into the fol- lowing tools: Investment Incentives for Manufacturing Industries, Operational Pro- gramme Enterprise and Innovation and other programmes. PRESENTING THE TOOLS FOR BUSINESS SUPPORT Investment incentives are an interest- ing support opportunity, intended for the manufacturing industry. Foreign companies can receive full or partial tax relief (up to five years). The main condition for obtaining an investment incentive is a minimum level of investment in the Hradec Králové Region of OFFICE SPACE FOR RENT (APPROXIMATE PRICES): Hradec Králové – centre: CZK 3 000/sq.m/year (without energies) (EUR 115.5) Hradec Králové – surrounds: CZK 1 000/sq.m/year (without energies) (EUR 38.5) Company of the Year: Farmet, a. s. Farmet, a. s., is a private Czech com- pany founded in 1992. Since then, the company has attained a leading posi- tion in the field of its activities. A small workshop has now transformed into a modern company with 200 employ- ees and some very modern equipment for the area of construction, design (all in 3D models), and its own production. The annual turnover is now EUR 20 mil- lion, 80% of which is from exports. Especially in the last few years, the company invested in the expansion of its production capacities and moderntechnologyequipment(CNCmachin- ing, laser processing, robotic welding, powder paintshop, etc.). Top of the line engineering technologies and qualified employees – spe- cialists,technicians,andworkers–arethebasis and the driving force of the company. The company‘s main business is the devel- opment and production of agricultural ma- chines for soil cultivation and sowing, espe- cially for large-scale agricultural productions. The company specialises in high-performance machines with wide reach that can work with the biggest tractors on the market (working reach up to 15 yards), and in design, develop- ment, production, and complex supplies of machines and devices for the extraction and further processing of vegetable oils. In this area, Farmet focuses on the continuous press- ing technologies of the so-called dry oil plants (rapeseed, sunflower, soya, flax, etc.).

3 3 | C Z E C H B U S I N E S S A N D T R A D E WE HAVE CLEAR PROSPECTS AND COMPETITIVE ADVANTAGE Czech Business andTrade asked Karel Žďárský, the only shareholder, board chairman, and chief executive about the future of the company. WHAT DOES WINNING THE COMPETITION MEAN TO YOU? It‘s a great pleasure and responsibility. It‘s a recognition of our work as compared to many other firms from various fields.The award has given me, personally, a lot of energy to further develop the company. WHAT PLANS DOES THE COMPANY HAVE FOR THE FUTURE? Our company has been, of course, also af- fected by the current economic crisis, and we had to cope with a decrease in demand for the investment products we sold.That was a big change after many years of growth.Today, we see a growth in demand again and we have started to realise our development projects with the support of European funds.The build- ing of new and modern production capacities, and especially the building of a research centre to find solutions for the screw press extrud- ing-expelling process for vegetable oils, give us a clear prospect and a competitive advantage. We will also continue to develop our business network and our products to make the Farmet brand a truly reputable European supplier of agricultural machines and pressing technolo- gies. In this regard, we have been successful in establishing partner relations with foreign companies with the aim of shared supplies of subsequent technologies for the processing of vegetable oils.We very much value our collab- oration with Alfa Laval, where we realised the technology for the degumming of vegetable oils and prepared a number of shared offers for the refinement of vegetable oils. Research and development as well as the collaboration with foreign companies must strengthen our engineering and supplier abilities. The company development dynamics has been recognised several times with awards in various competitions in the category of me- dium businesses (up to 250 employees), such as the second place in the Exporter of the Year competition. Farmet‘s top achievement was the first place in the Company of theYear 2009 competition in the Czech Republic. The com- petition is open to all companies with turnover not exceeding CZK 1.4 billion (approx. EUR 56 million). A professional jury decides accord- ing to gathered economic information and a personal presentation by each company‘s manager. Why has Farmet won? The jury es- pecially appreciated its clear business vision supported by investments into own research and development of products and technolo- gies, its ability to formulate development inten- tions and convert them into successful projects with the use of European structural funds (the company has succeeded in acquiring funding from programmes for the support of research and development, employee training, and in- vestments in production technologies), and its long-term efforts to build a good name for the Farmet brand on European markets. More at www.farmet.cz. PETROF: Year of Crisis and Seized Opportunity PETROF was founded by Mr Antonín Petrof in Hradec Králové in 1864. Five generations of the Petrof family have owned and managed the firm, which was awarded many prestigious prizes at international exhibitions and fairs thanks to the continuous technical development and quality improve- ments of its grand and upright pianos. The master instruments of the PETROF brand have accompanied the world‘s greatest artists, they are played in Milan‘s La Scala or at Sydney‘s opera. The PETROF brand is associated with such names as Duke Ellington, Ray Charles, Ella Fitzgerald, Charles Aznavour, Rudolf Firkušný, or Svjatoslav Richter. The world famous opera singer Peter Dvorský owns a PETROF grand piano and Paul McCartney, the famous ex-Beatle, bought one in 2000. The company has entered 2009 think- ing of both the 145th anniversary of its founding and fears of the world- wide economic recession. The company had been forced to adopt some crisis measures at the end of the year before last and it continued to observe them during the last year. The development of a new series of PETROF grand pianos had been completed in 2008, which then allowed the company to focus more on supplementary manufacture of special products. Besides musical instruments, Petrof now also manufactures high qual- ity custom furniture and interior accesso- ries, with emphasis on first class surface finish. INSTRUMENT WITH SOUL It was the quality of surface finish as well as the characteristic and noble sound of the PETROF master grand pianos that caught the attention of the audio legend and jazz musician, Mark Levinson. Levinson is leg- endary for his extraordinary auditory ca- pabilities and his feeling for music, which is why his nickname is “the Golden Ear”. For his project that includes an edition of recordings with “the natural sound of in- struments” which he has been dreaming about for a long time, he had been look- ing for a musical instrument that would, according to his own words, “have a soul and would be capable of arousing emo- tions. It all depends not only on perfect preparation but also on the selection of the right instrument, preferably acoustic. I had been looking for it for quite a long time but in the end I was lucky to find it in the PETROF piano.” The intensive collaboration between Mark Levinson and Petrof in 2009 resulted in a new series of high quality speakers of the Daniel Hertz brand, manufactured by Petrof. Mark Levinson says: “Every activity and every product from Petrof makes it clear that the people from this company are not just ordinary workers, business- men, or managers, they live for music. Petrof not only understands music, but also the importance of vibrations, sounds, and the quality of workmanship. All this stems from manual work and craft skills that are disappearing from today‘s world.” Jan Ryšavý Petrof, spol. s r.o. e-mail: marketing@petrof.com

| 3 4 R E G I O N Education is the key competitive fac- tor today.The pressure is increasing on a better education as one of the basic conditions for a career on the labour market and a better position in life. In the Hradec Králové Region, increasing the educational level of the inhabitants is an integral part of the regional development strategy.The University of Hradec Králové, and par- ticularly its Faculty of Informatics and Management, represents top quality in the field of university education. Top University Education in the Hradec Králové Region nies. The Faculty co-operates with numerous regional, national, and international compa- nies on conducting educational IT courses or communication and managerial skills. In co- operation with partners from the commercial sphere, interesting workshops are organised (Student Business Forum in co-operation with the Technology Centre, Hradec Králové, IT Full Power – IBM Technical Academy, Mi- crosoft Academic Conferences etc.), as well as competitions (Best Java Programmer in co- operation with FG Forrest, andTopTen ORTEX in co-operation with ORTEX Company). VARIOUS INTERNATIONAL PROJECTS The Faculty also co-operates with other Eu- ropean, Taiwanese, and American universi- ties in participating in various international projects. Every year, more than 60 students of the Faculty study at a European institu- tion under the Erasmus Programme, 18 students attend Taiwanese universities, and two students attend universities in the USA. Currently (in March 2010), co-operation is continuing during the summer months, working on the VitalMind Project with Cog- niFit Ltd., Haifa, Israel, and Philips Innovative Lab, Eindhoven, the Netherlands. The Faculty also fully supports a close link with the practical life sphere. Many seminar and Bachelor’s papers and theses deal with very practical topics - cloud computing and company solutions, modern tools for creat- ing context, help for company decision-sup- porting systems of the GIST Company, mod- ern open-source technology for Business Intelligence, Version Control of SW products in multiproject environment etc. Signifi- cant professionals are invited to lecture at the Faculty, for example, top managers of companies such as PricewaterhouseCoop- ers, SUN Microsystems, Microsoft, and Tesco Stores ČR. TheFacultyofInformaticsandManagement is a member of the Hradec IT cluster.The main activity of the cluster is to ensure beneficial services for cluster participants, with the aims of improving the quality of management, in- creasing innovation potential, reducing costs and developing commercial opportunities for individual companies. The University of Hradec Králové, nineteen companies, and the Hradec KrálovéTechnology Centre have since provided active co-operation. These days, several projects are being prepared, which the Faculty is participating in with other member companies, e.g. innovative meth- ods of performance analyses of database servers, research of tools, procedures and organisational structures which could be ap- plied in the process of product management optimisation with impact on managing the new ICT product development; research and application of tools for mutual integration of algorithms and data in Java and Micro Focus Cobol environments; proposal and definition of XMPP standards for the GIS area etc. Petra Poulová Vice-Dean of the Faculty of Informatics and Management of the University of Hradec Králové www.uhk.cz/fim The Faculty of Informatics and Manage- ment educates university-qualified profes- sionals for a broad range of opportunities in the private and state sectors. Apart from the programmes delivered in Czech, there are also two Bachelor’s degree programmes in Information Management and Applied Infor- matics, a follow-up two-year Master’s degree programme in Information Management and a Doctoral study programme in Informa- tion and Knowledge Management, delivered in English. Economic-management skills are an integral part of all fields of studies, along with a great emphasis on the effective use of modern Information Technologies. SEVERAL ADVANTAGEOUS PROGRAMMES TheFacultyofInformaticsandManagementis aware of the necessity of maintaining strong relationships with industrial and research in- stitutions. These links with the private sector help us to ensure that our students receive the most up-to-date education and that they work with academic staff who keep pace with changes. The valuable contact between the prospective employers of our graduates and our academic staff ensures that students benefit from a realistic learning environment. Therefore, the Faculty has developed several advantageous programmes with businesses and institutions in our region, e.g. the IT Clus- ter Project, including more than ten compa- Photo:FIMarchives

Hradec Králové Region place for investment opportunities Area. . . . . . . . . . . . . . . . . . . . . . . . . . 4 758 sq. km Population . . . . . . . . . . . . . . . . . . . . . . . .554 000 Centre . . . . . . . . . . . . . . . . . . . . . .Hradec Králové Division. . . . . . . . . . . . . . 15 municipalities with extended competences Contacts: Lucie Vomočilová Department of Regional Development, Tourism and Culture, Section of Regional Development, Hradec Králové Regional Authority Pivovarské náměstí 1245 500 03 Hradec Králové Czech Republic phone: + 420 495 817 450 e-mail: lvomocilova@kr-kralovehradecky.cz www.kralovehradeckykraj.eu www.kr-kralovehradecky.cz Jana Smetanová Special Consultant Centre for European Projects Development Regional Development Agency Centre for European Projects Development Regiocentrum Nový pivovar - Evropský dům Soukenická 54 500 03 Hradec Králové Czech Republic phone: + 420 495 817 815 GSM: + 420 724 971 702 e-mail: smetanova@cep-rra.cz www.cep-rra.cz Exampleofindustrialzone moreontheenclosedDVDorwebpages www.kralovehradeckykraj.eu www.kr-kralovehradecky.cz THE CURRENT INVESTMENT OPPORTUNITIES IN THE HRADEC KRÁLOVÉ REGION 2010

WRAPPING PAPER PRINTING PAPER PAPER BAGS CREPE PRINTED PAPER FOR FOOD PACKAGING The largest offer of paper and paper products on the market JIP – Papírny Větřní, a. s. Papírenská čp. 2 382 11 Větřní phone: +420 380 909 111 fax: +420 380 909 274 JIP – Papírny Větřní, a. s. plant Lukavice 21 789 01 Zábřeh phone: +420 583 030 111 fax: +420 583 030 333 www.jip.cze-mail: info@jip.czCzech Republic

CZECHECOLOGYANDAGRICULTURE SupplementofCzechBusinessandTrade 2 2010

| 2 Leaders in State of the Art machinery with a long tradition of excellen- ce in production. Built in the Czech Republic since 1793. Over 1000 machines currently in production throughout the world. Our machines are designed with reliable cast iron components and are built for longevity. We use precision, thin-cutting saw blades (as thin as 0.9 mm). Our machines produce accurate lamellas, ready for face-gluing directly after being sawn. High cost savings in both wood yield and energy use. Saw blade savings are up to 50% higher when compared to use with other systems because of our proven patented Orbit motion. Our customer’s will receive a quick return on their machinery investment. Wide range of industries use our machinery: flooring, parquets, multi- -layer boards, panels, doors, windows, furniture, sport or musical instruments and many more. www.neva.cz ONE CUT AHEAD THROUGHOUT THE WORLDWORLD LEADER SINCE 1793

3 | C Z E C H E CO LO G Y A N D AG R I C U LT U R E Czech Ecology and Agriculture Supplement of Czech Business and Trade 2/2010 CONTENTS Editorial 4 ANALYSIS Towards a Common European Policy in Food Production and Agriculture 4 Get Acquainted with Czech Agriculture 6 INVESTMENT Brownfields to Turn into Shopping Centres and Eco Farms 8 LEGISLATION Investments in Renewable Energy Sources in the Czech Republic 11 CZECH TOP Champion among Czech Vintners 13 WE ARE INTRODUCING Crisis Boosting Demand for“Green Buildings” 15 ENTERPRISE Together to Support Trade Opportunities 16 Surface Finishing under the Wings of CzechTrade 18 Agriculture Is Drawing Finance from Various Programmes 20 SURVEY Poll of Successful Companies Operating in the Areas of Ecology, Agriculture, and Wood Processing 21 PRESENTATION OF FIRMS: NEVA - TRADE s.r.o.; PP Agency s.r.o. MK ČR E 6379 This magazine is published as a supplement of the economic quarterly Czech Business and Trade. Managing Editor: Šárka Kratochvílová Graphic Design: Art director: Nina Nováková Graphic Designer: Jiří Hetfleisch Production: Anežka Zvěřinová Address: PP Agency s.r.o., Myslíkova 25, 110 00 Praha 1 Czech Republic, Phone: +420 221 406 622 Fax: +420 224 930 016, e-mail: journal@ppagency.cz www.ppagency.cz Deadline: 15/4/2010 Attitudes expressed by the authors of articles in this magazine are not necessarily consistent with the viewpoint of the Publisher. © PP Agency, Company with the ISO 9001 certified quality management system for publishing services Coverphoto:www.sxc.hu;page3photo:www.sxc.hu IN THE NEXT SUPPLEMENT TO CZECH BUSINESS AND TRADE The manufacture of machine tools and forming machines has been the main branch of Czech engineering for dozens of years. Export is essential for the sector as a whole. What is the present situation of the branch in the Czech Republic and what are its prospects? This is the theme of the next Supplement to Czech Business and Trade.

| 4 A N A LYS I S Dear Readers, Environmentally friendly agriculture, organic food, renewable sources of energy, low-energy “green” build- ings... these are themes very fre- quently discussed in the Czech Re- public, Europe, and other countries around the globe. It is not by chance that ecology has been at the centre of public interest for several years. Individuals, institutions, enterprises, and governments are facing the decision how to make our planet healthier, and how to change con- duct and habits and thus alleviate the impacts of inconsiderate treat- ment of nature. We, too, have been dealing with ecology and agriculture in this supplement. An analysis of the agricultural sector has been conducted by the ČEKIA agency. After you have read it, you shall know how this sector is supported by the Government, what it is focused on most of all, and also how agro-tourism is developing in the Czech Republic. The possibility of using brown- fields, i.e. dilapidating industrial com- plexes, deserted former agricultural co-operatives, former military areas and the like and their enumeration are contained in another article of this supplement. Export alliances facilitating foreign contacts of Czech enterprises have been established under the wings of the CzechTrade Agency in the last years. We are introducing two of them - Czech Water Alliance and the alliance České povrchové úpravy – in this supplement Šárka Kratochvílová Towards a Common European Policy in Food Production and Agriculture The future role of the common European policy in food production and agriculture in the globalised world is a basic issue in the current period, when debates on the future of European agriculture are com- plicated by the current economic crisis. Jakub Šebesta, Minister of Agriculture of the Czech Republic, has shared with us his view of the common European agro-food sector. What can we do for European food production and agriculture to flourish? An important thing is to promote regional specifics and quality, combined with in- novation and education. Globalisation is not a negative phenomenon, its benefits are rapid development and progress. We must keep pace with all that is new and adjust our activities to demand. We can- not expect that everybody will be satis- fied with current achievements for 50 years. Consumers are very demanding. If anyone opts for a conventional product, the product must be of the highest qual- ity. If people do not want tradition, they must be offered new things. A great challenge is the rising volatil- ity of agricultural commodity prices. It is therefore necessary to find correspond- ing market instruments that will help to mitigate the negative impacts of such fluctuations and see to it that the manu- facturer is in a position to maintain ad- equate income. The development in the past few years has shown that even a long period of rela- tive stability and good economic results can be followed by a sobering chill. What challenges and dangers are facing the agro-food sector? Definitely it is the current economic crisis and in the long run the pressure of cheaper imports. I am confident that we can face up to these problems by higher added value of production, based on innovation and top technology. Emphasis must be placed on high safety, quality, and tradition of Euro- pean production. This, in my opinion, is the way we must follow. With the accession of new member states, the European market has gradu- ally grown into a compound, which in 2009 comprised some 500 million peo- ple. Acute problems have emerged espe- cially in connection with the accession of new states in the past relating to the fu- ture form of the future common agricul- tural policy, which must now be tackled. As a result of joining the EU, a number of changes have taken place in the Czech Republic, such as restrictions in sugar and milk production, which have mark- edly affected us, while on the other hand a number of new opportunities have opened up for us, which Czech business- men have used to great advantage. What are the impacts of the economic crisis on food production and agriculture in the Czech Republic? In the current economically complicated situation consumers are rather looking for cheaper products, which is not a favourable Photo:MinistryofAgriculturearchives,EuropeanCommissionarchives Jakub Šebesta

5 | C Z E C H E CO LO G Y A N D AG R I C U LT U R E trend. It is to be expected that as soon as the situation starts improving, food buyers will once again be seeking better quality, which means higher added value. In the EU, the fall of agricultural trade in 2009 was not so sharp as in other parts of the world, which testifies to the ability of the EU to cope with the global economic crisis in agriculture. Two-thirds of EU exports are processed agri- cultural products, where the impact of price fluctuations is less in evidence. At the same time it has become evident that the global market needs to be liberal- ised to the highest possible degree. If the market opens up to such a degree, and I am persuaded that sooner or later this is what will happen, we must be prepared for it and be able to react to the supply of cheaper commodities. I am certain that the Europe- an market will be capable of such reaction only if European consumers become aware that domestic production is of a high stand- ard and will under all circumstances retain that standard. Great attention in the EU market liberalisation process, however, will have to be paid to ensuring the competi- tiveness of European producers in the face of third-country producers, especially as re- gards high standards in the area of hygiene, welfare, and quality of production, which EU manufacturers must meet. Can European food production exist without European agriculture, and vice versa? The only clear answer is NO, it can not. Not only because there are local and traditional links within the agro-food sector, but also that we cannot neglect the environmental and social aspects of the entire sector. What has been grown at home must also be pro- cessed at home. It can hardly be explained why we should import raw materials from across the world if we are able to produce them at home. I know, it is not the cheap- est way, but Europe sees to the observance of its traditions, so let us observe them also in agriculture and food production, only this is the way to top-standard production, to which we are all used and which consum- ers in third countries expect from European production. How active is the Czech Republic in this respect? I am pleased to say that it is very active indeed. The Czech Republic has 24 pro- tected geographic indications or appel- lations of origin, with several more ap- plications being in the pipeline. A great achievement was the registration last year of the Czech Beer geographic indication, which is of great commercial and econ- omic significance for traditional Czech beer brewers. Protected indications en- able better protection against abuse by other, rival trade or manufacturing part- SELECTED EXHIBITIONS AND FAIRS Flora Olomouc 19-22 August 2010 international gardening exhibition www.flora-ol.cz Earth the Provider, České Budějovice 26-31 August 2010 restoration and development of the countryside, crop and livestock production, farming equipment, food pro- duction, forestry and water economy, gardening and cultivation, services for agriculture www.vcb.cz Ekostyl, České Budějovice 26-31 August 2010 creation and protection of the environment, environ- mentally friendly technologies www.vcb.cz Pragolinga /Tooltex, Prague 4-6 November 2010 11th contracting and sales exhibition of machines, tools, equipment, and materials for the woodworking industry / 15th specialised exhibition of machines, tools, and hardware www.pragolinga.cz ners prone to sponge on the reputation of established indications. In the area of guaranteed traditional specialties, the Czech Republic co-operates closely with colleagues in the Slovak Republic – four joint Czech-Slovak applications for the registration of selected traditional meat products have been submitted in Brus- sels. In connection with traditional and regional foodstuffs, a project has just been launched in the Czech Republic, the aim of which is an information cam- paign and effort to raise consumer inter- est in regional products. Regional prod- ucts especially have a great potential as regards quality.

| 6 A N A LYS I S Get Acquainted with Czech Agriculture Vladimír Melichar, analyst, Czech Capital Information Agency, e-mail: melichar@cekia.cz, www.cekia.cz Before 1989, Czech agriculture was a strongly privileged sector within the country’s direc- tive system, which resulted in its dispropor- tionate size. In spite of this, its economic ef- ficiency was relatively high. The transition to a market economy system put high pressure to bear on farmers, forcing them to adjust to the new economic conditions and sales pos- sibilities as regards the size, structure, and ef- ficiency of their farming enterprise. Adjustment to EU Agricultural Policy Farming in the Czech Republic comprises all crops characteristic of the country’s geo- graphical position and its climatic condi- tions. In addition to all the main grain crops (wheat, barley, rye, oats, and maize), farmers grow sugar beet to make sugar, potatoes, oil bearing plants (rape), flax, hops, fruit, veg- etables, and grapevine. The livestock sector produces mainly cattle (for milk and meat production), pigs, and poultry. Products of the Czech agrarian sector are used for both final consumption and further processing, especially in the food industry. The Czech Republic’s agrarian policy has developed in two stages. The first stage (revitalisation), focusing on the recovery and stabilisa- tion of the farming sector, was terminated in 2001, while the second stage (adapta- tion) concerned itself with the institutional preparation of the country’s accession to the EU. The concept of the second stage (adaptation) was aimed at the fastest pos- sible general adaptation to the conditions of the EU Common Agricultural Policy in all its areas (structural, regional, environmental, and rural). Support to Agrarian Sector An important milestone in the development of the sector was the Czech Republic’s acces- sion to the EU (1 May 2004). For the agrarian sector, it meant a more than double growth of support it received and an important increase in the share of EU states in Czech agrarian trade (in exports, a rising share of raw materials, in imports, a growing share of products with higher added value). This was accompanied by greater interest in farm land, leading to changes in the structure of its ownership and to higher rentals, and the enlargement of the eco-farming area by ap- prox. 40% in comparison with the pre-entry period. At the same time, higher claims were placed on farmers resulting from participa- tion in the EU Common Agricultural Policy, while the structure of the Czech national economy was brought closer to that of the EU, which resulted in a reduced share of agri- culture, forestry, and fisheries in GDP genera- tion and employment. Analysis of Agricultural Entities At the end of 2009, altogether 115 674 busi- ness entities were registered in the Czech Republic, whose core business was agricul- ture, game keeping, and related activities. 79.4% of this figure was accounted for by natural persons and 36.2% by enterprises (dominated by limited liability companies), cooperatives and other entities. The core business of most enterprises (50.2%) ac- cording to the register was combined pro- duction. Engaged in pure crop production are 11.9% of enterprises and 9.5% enter- prises devote themselves to pure livestock production. The overwhelming major- ity (90.7%) of companies are controlled by Czech entities. Besides conventional agri- cultural primary production, a number of enterprises pursue additional activities, add- ing value to their own production, such as seed, fertiliser, and fodder mixture produc- tion and sale, slaughter-house operation, food production, agricultural services, rental of farm machinery, etc. In connection with environmentally friendly energy production requirements, Czech farmers have greatly increased the cultivation of crops suitable for that purpose, such as rape, which is also used for bio-fuel production. Another such crop is sugar beet. Competition Is Growing Since the beginning of the 1990s, the share of agriculture in the country’s economy and in total employment has been declin- ing, with a gradual dampening down of activity in certain manufacturing branches within the sector. The main causes are growing competition pressures and addi- tional investments needed for the observ- ance of standards applying to breeding equipment technology, environmental protection, and other hygienic regulations. After the country’s accession to the EU and the opening up of its market, Czech agri- culture was faced with growing imports of cheaper foodstuffs. Self-sufficiency in vegetable products, with the exception of rape, has greatly increased and in all these commodities domestic production ex- ceeds domestic demand. In livestock pro- duction, on the other hand, self-sufficiency has been reduced. Poultry Is Growing, Cattle Declining Livestock production covers commodi- ties such as meat, milk, and eggs, which are placed on both the domestic and for- eign markets. The animal category has also declined, especially as regards sheep and goat breeding. Cattle and pigs, too, have witnessed a decline in production. On the other hand, the poultry sector has been growing. Photo:www.sxc.hu

7 | C Z E C H E CO LO G Y A N D AG R I C U LT U R E Arable Land Is in the Lead Farmland in the Czech Republic covers an area of 4.2 million ha. The decisive part of this area is arable land, on which different crops are rotated depending on the specific production region and the farmer’s own choice. Permanent cultures are grass stands, grape vine and hops. The most widely grown crops are cereals, covering an area of approximately 1.6 million ha, the largest pro- portion of which each year is accounted for by wheat and barley. For the past few years, fodder crop, rape, and technical sugar beet cultivation has been on the decline. How- ever, despite the general decline, Czech ag- riculture as a whole is showing a production surplus. Development after Joining the EU After the Czech Republic’s accession to the EU, the share of EU states in Czech agrarian trade increased significantly. Logically, the country’s foreign trade turnover rose sub- stantially, with slightly lower dynamics of ex- ports; the overall balance of trade, however, remains unfavourable.Trade with third coun- tries has been limited. The Czech Republic’s accession to the EU also meant higher trade exchange in eco-farm products (by 40% in comparison with the pre-entry period). After joining, agro-environmental measures were introduced and money spent on eco-agro policy has practically trebled in comparison with the period before entry. Agro-tourism The number of people working in agricul- ture has dropped to one-quarter of the pre-1989 level. After joining the EU, year- on-year decreases stabilised at 2% to 3%, which means a faster decrease in farming jobs than in the rest of the EU. The compet- itive environment on the commodity mar- ket forces farmers in the EU to set up pri- mary production enterprises with the aim of raising their own competitiveness. Such entities hold an important position, there are strong marketing organisations linked horizontally and vertically (production – processing – marketing). In this respect, the Czech Republic is still lagging behind the EU, in a number of commodities mar- keting organisations are far from having a significant, let alone a decisive share of the market. Nevertheless, the situation is changing gradually. For domestic farmers, agro-tourism still represents a mere alter- native source of income and is developing very slowly. Domestic demand is limited primarily by the domestic phenomenon of holiday cottaging. Approximately one- third of agro-farm clients are foreign tour- ists (mostly from Germany, Poland, and the Netherlands), whose favourite destinations are the Šumava, South Bohemia, and the Krkonoše (Giant Mountains). Recommendations for the Future Czech agriculture will continue to be under the pressure of rising labour and land costs. Investments are needed in technological modernisation with the aim of raising pro- ductivity of labour and overall production efficiency, in addition to “non-productive” investments linked with the ever stricter cross-compliance requirements and other legislative restrictions. In the years to come, the land market will open up fully to buyers from EU states and third coun- tries. The most sensitive problem is live- stock production with all the scenarios of the EU Common Agricultural Policy giving absolute predominance to vegetable pro- duction and massive reduction of livestock production. The article is based on the Agriculture Sec- tor Analysis published by the Czech Capital Information Agency (www.cekia.cz), which concerns itself with supplying economic in- formation about firms.

| 8 I N V E S T M E N T Brownfields to Turn into Shopping Centres and Eco Farms Jiří Sochor, e-mail: jiri.sochor@czechinvest.org, www.czechinvest.org Abandoned and neglected brownfield lo- calities cover more than three hundred square kilometres on the map of the Czech Republic. Fortunately, not all lie next to each other – if they did, the three hundred square kilometres would be equivalent to a city of half a million. For an area of just this size, public support in the order of billions of euros can be drawn thanks to the European Union and national grants. Dilapidating industrial structures, aban- doned farmsteads of former agricultural co- operatives, derelict housing estates, former military areas, unused factories and old cas- tles falling apart. The list of brownfields scat- tered all over the Czech Republic would be very long indeed. After all, perhaps the same asinanyothercountry.IntheCzechRepublic, there are more than 11 000 such localities ac- cording to CzechInvest Agency, which is try- ing to manage their regeneration centrally. At least some of them, especially those near large city centres, provide interest- ing investment opportunities. Their sup- ply, however, has been declining in recent years. Large repaired brownfield projects, or projects still under reconstruction, are to be found in Prague, Brno, Ostrava and practi- cally in all larger cities across the country. The cooling down of global economy, however, has resulted in a slowing down of project re-generation or postponement until a later time. On the other hand, the burst of the property bubble made brown- field owners in the city centres speculating on further property price rises and reluc- tant at the moment to sell dilapidating buildings in attractive localities, start think- ing. Moreover, the property bubble was not extremely inflated in the Czech Repub- lic, and subsequently for the past two years property prices have been rather stagnant, as they did not have anywhere to fall. Billions from the EU Very interesting in this connection is the fact that the European Union has resources from which it makes generous contributions for the regeneration of abandoned cultural complexes, and from which projects in the Czech Republic, too, can benefit. Support can be obtained from 13 EU or national subsidy programmes. Dozen billion crowns can be obtained for projects ranging from railway siding reconstruction to the build- ing of new research and development cen- tres. When choosing a suitable subsidy pro- gramme, one has to decide first of all what purpose the brownfield should serve. The Business and Innovation Operational Pro- gramme can help investors wishing to use the recuperated area for manufacturing in- dustry projects, strategic services or applied research and development; for brownfields to be used in agriculture after revitalisation investors can draw support from the Rural Development Programme. In other cases, support can be obtained from Regional Operational Programmes. Projects in Prague are supported by the Prague – Competitiveness Operational Pro- gramme. Contaminated brownfield sites can draw support from the Environment Operational Programme. This programme also supports the decontamination of brownfields in protected areas. In addition, there are also national subsidies, such as the Programme for the Support of Business Property and Infrastructure Development, Photo:PavelKostelník Building of the Zlín Technology Centre after reconstruction

9 | C Z E C H E CO LO G Y A N D AG R I C U LT U R E administered by CzechInvest Agency. Each year, the Ministry for Regional Development also launches support programmes for army brownfields coming under commu- nity ownership. Helpful Administration A great advantage of abandoned industrial complex regeneration projects is that they are unlikely to run up against opposition from the authorities. This may be of key im- portance for certain branches of business. Squeezing a new foundry into the regional development plan would need a good deal of courage from the mayor. If, however, such a project is to be set up on a site where activ- ities in the same line of business were oper- ated maybe for decades except the past few years, the investor will not only find a quasi- developed infrastructure and trained and experienced employees, but also a warm reception from the local population. The essential problems of brownfields in the Czech Republic – as in any other coun- try anywhere in the world – is that dozens of owners may claim possession of one site. Of course even the claim by just one of them may be a problem, and the regeneration may come to nothing. The second problem is that physically it is not possible to describe in detail the more than 11 000 brownfields which can be found on the map of the Czech Republic. Brownfields Online CzechInvest Agency helps in solving both problems with its online database of Czech brownfields (ww.brownfieldy.org/). Cur- rently, the database offers several hundred brownfields described to the slightest de- tail, which are prepared for regeneration, with all property issues already solved. The database is freely available 24 hours a day from anywhere. It has been in opera- tion since 2008, when one of the stimuli for its launching was the experience of an en- terprise in the north-east of the Czech Re- public. The core business of the enterprise is metalworking. A few years ago, the enter- prise was faced with the problem of space, which at that time was not sufficient for it to cope with its new orders. Considering the line of its business, the brownfield was a clear choice. The firm’s managers spent several weeks searching for an ideal site to meet their expansion plans. In the end, they found an ideal brownfield completely by chance on their way home from one of their visits to another brownfield. Before setting up the database, CzechIn- vest undertook a study, the first ever to be compiled, which mapped all brownfields in the Czech Republic. One of the very positive conclusions of the study was that only 7% of Czech brownfields were provably affect- ed by an ecological burden. On the other hand, however, another 37% of such locali- ties may be assumed to have such a burden. Nevertheless, this means that not more than under 50% of brownfields in the Czech Re- public are contaminated, which in itself is an unexpectedly good result. Look for a Tractor on the Brownfield Most brownfields in the Czech Republic have their origin in agriculture, followed immediately by industrial activity. Taken to- gether, they account nearly to the dot for two-thirds of all brownfields in the country. Also important is the share of brownfields from abandoned houses of culture, stores and other such facilities. Together with housing, these two categories account for over 15% of all abandoned complexes in the Czech Republic. A scar on the map has been left by the army, which is responsible for 5% of all localities. As regards the area of the brownfields, the situation is considerably different. The share of army grounds, for example, will jump from the original 5% to nearly one-quar- ter. This shows that the former shooting grounds and barracks and other facilities of the former Czechoslovak People’s Army oc- cupied an absurdly vast area of the country’s surface at the time of the WarsawTreaty.The share of industrial brownfields, in terms of surface area, too, is very large, accounting for more than 40% of the total area. After 1990, a number of overgrown giants, fed by centrally-managed economy, went bank- rupt, and the brownfield areas left behind are beginning to be turned into industrial parks or are being re-built into residential quarters. About 20% of the total brownfield area remains for agriculture, which is still a very important figure. What Next with Czech Brownfields? Besides the original purpose of brownfields, the study prepared by CzechInvest also con- cerned itself with proposing their ideal new use in the particular locality. This was done on the basis of the history of the locality, previous activities pursued there, the geo- graphical position of the brownfield, and everything that could be important for the ideal new use of the site. It is not surprising that the new recom- mendations completely eliminated the army. On the other hand, the share of brownfields recommended for “mixed ur- ban functions”, a good technical term for PRAGUE: PALLADIUM The former owner of land on which the Palladium shopping centre was constructed a few years ago was, from the 1780s, the army, which built a vast bar- racks complex there, complete with spacious stables. A number of famous personalities of the Czech nation served at the barracks. Worth mentioning is Czech dramatist Josef Kajetán Tyl, actor, novelist, and jour- nalist, who composed the Czech anthem there. The army owned the former George of Poděbrady Barracks for the next two centuries until 1996, although in the latter half of the 20th century it did not practically use it and the whole compound went into decay. At the time when the barracks were used by the army, the compound was closed to the public. Finally, in the early 1990s, the Ministry of Defence decided on its more suitable use. BRNO: VAŇKOVKA Vaňkovka, since 2005 serving as a shopping and cultural centre, stands in the place of a former factory founded in 1865.The structure comprises some of the original build- ings of the former factory, to which new structures have been added. In the reconstructed building of the original machine plant in the eastern part of the original factory nowstandstheWannieckArtGallery.ThenameVaňkovka is the distorted name of the German founder and original owner of the former factory. The reconstructed buildings of the original factory are examples of neo-Gothic indus- trial architecture. OSTRAVA: KAROLÍNA Karolína is a vast regeneration project standing in the place of a former coal mine and coking plant. Histori- cally on the outskirts of Ostrava, the complex has become completely encompassed by the massive development of the city, so that on completion New Karolína will link up smoothlywiththenowhistoricpartsofthecity.Coalmin- ing in the locality started in 1837, and the coking plant was established in 1858. Both activities grew massively with time. Coal was brought to the plant by cable-cars from several galleries. In addition to coke, the plant also made briquettes. In 1905, an electric exchange was built there, which supplied the galleries with power. The cok- ingplantclosedoperationsin1964,theelectricexchange closed down ten years later. Two of the administrative buildings have been preserved and are protected as reg- istered monuments.

| 1 0 I N V E S T M E N T small businesses, gymnasiums, cinemas, theatres, cultural facilities, playgrounds etc., increased significantly. This indicates that originally a large number of today’s brownfields were located on the outskirts of towns. The dramatic town development over the past few years, however, has sur- rounded these localities by new construc- tion, and renewing former factories now standing in the middle of a residential quarter wouldn’t make much sense. On the other hand, somewhat surprising may be that the study has recommended an even larger number of brownfields for industry than the original number of such structures. At the same time, however, the recommended use for most of such surfaces is a combination of light industry manufac- ture and services, i.e. the combination of small-scale industrial production with shop- ping centres. A similar situation exists in agriculture. The centrally planned economy produced huge collective farms in agriculture, which associ- ated farmers from far and wide. This is where heaps of infrastructure were left behind, which could hardly be used for good ben- efit over the past twenty years. Here, too, the studyina numberoflocalitiesrecommended the combination of agriculture with other activities – eco-farms, accommodation in a natural environment, restaurants, and other such structures and activities. In the Czech Republic, as in other indus- trialised economies the world over, oppor- tunities for greenfield investment are be- coming scarce. As a result, brownfields are necessarily becoming increasingly attrac- tive. Ideally, in the long term, would be for brownfields to be equally attractive for new investments as greenfields. This of course is a very ambitious goal, so that a realistic tar- get will be bringing the attraction of brown- field investments as close to greenfield ones as possible. PREVIOUS USE OF BROWNFIELDS - NUMBER Region/use army housing tourism civic amenities industry agriculture other South Bohemia 21 20 1 32 62 68 8 South Moravia 19 1 0 17 72 64 9 Karlovy Vary 11 8 2 46 66 33 34 Hradec Králové 18 11 0 41 78 81 15 Liberec 2 9 7 30 79 52 23 Moravia-Silesia 9 2 0 29 116 50 26 Olomouc 10 9 5 24 35 105 18 Pardubice 11 13 0 12 60 79 6 Plzeň 24 5 0 26 62 95 2 Central Bohemia 11 1 0 8 35 34 3 Ústí nad Labem 9 12 7 18 87 100 24 Vysočina 1 4 0 21 22 43 7 Zlín 5 0 0 0 11 17 2 TOTAL 151 95 22 304 785 821 177 source:CzechInvestsource:CzechInvest PREVIOUS USE OF BROWNFIELDS - SURFACE Region/use army housing tourism civic amenities industry agriculture other South Bohemia 38.47% 8.04% 0.12% 1.57% 27.16% 22.49% 2.15% South Moravia 19.33% 0.17% 0.00% 3.37% 52.48% 23.11% 1.56% Karlovy Vary 17.78% 0.56% 0.06% 3.40% 43.00% 12.19% 23.02% Hradec Králové 44.24% 0.48% 0.00% 3.19% 27.10% 20.40% 4.59% Liberec 10.61% 1.07% 2.03% 6.27% 45.13% 29.35% 5.56% Moravia-Silesia 10.41% 0.26% 0.00% 4.02% 63.95% 6.71% 14.65% Olomouc 34.18% 1.54% 0.30% 1.97% 26.78% 28.87% 6.35% Pardubice 37.91% 1.14% 0.00% 0.71% 41.55% 13.43% 5.22% Plzeň 35.75% 0.13% 0.00% 2.65% 32.04% 24.47% 4.97% Central Bohemia 21.09% 0.48% 0.00% 6.37% 38.39% 28.49% 5.20% Ústí nad Labem 4.44% 0.55% 1.03% 0.77% 50.18% 15.15% 27.88% Vysočina 41.56% 0.06% 0.00% 20.70% 7.06% 12.42% 18.19% Zlín 17.65% 0.00% 0.00% 0.00% 55.52% 24.85% 1.99% TOTAL 23.10% 0.90% 0.22% 4.03% 42.64% 18.08% 11.04%

1 1 | L E G I S L AT I O N Investments in Renewable Energy Sources in the Czech Republic Jakub Adam, Markéta Pašková, Wolf Theiss Advokáti, s.r.o., e-mail: jakub.adam@wolftheiss.com, marketa.paskova@wolftheiss.com, www.wolftheiss.com In the EU Accession Treaty, the Czech Re- public committed itself to raise the propor- tion of electricity made from renewable sources to 8% of gross electricity consump- tion by 2010. Within the meaning of the law, renewable sources are renewable non- fossil natural energy sources such as wind energy, solar energy, geothermal energy, hydropower energy, soil energy, air energy, biomass energy, landfill gas energy, sewage gas energy, and biogas energy. FINANCIAL INCENTIVES TO PROMOTE ELECTRICITY GENERATION FROM RENEWABLE SOURCES Feed-in Tariffs or Green Bonuses As investment in renewable energy sources would most probably not be profitable for potential investors without further incen- tives, the Czech Parliament passed Act No. 180/2005 Coll., on the promotion of use of renewable sources (“Renewable Sources Act”) in 2005, to promote the use of renew- able energy sources and ensure continuous increase in the renewable energy share in the consumption of primary sources of en- ergy; the Act gives investors the option to choose between two incentives to renew- able energy generation: guaranteed feed-in tariffs for electricity supplied into the grid (feed-in tariff), or “green bonuses”, a sur- charge on the generated electricity which is used directly by the producer or sold di- rectly to the producer’s customer. The Act hereby transposes Directive 2001/77/EC of 27 September 2001, on the promotion of electricity produced from renewable energy sources in the internal electricity market. These two types of incentives may not be combined in a single calendar year. The producer of electricity is obliged to inform the transmission system operator by 30 No- vember each year of the incentive for which they opt for the following calendar year as of 1 January. In the case of newly built facili- ties, the notification must be made no later than one month before the launch of the production. The level of feed-in tariffs and green bo- nuses is set annually by the Energy Regula- tory Office (“ERÚ”) in its decrees (the current- ly applicable ERÚ Price Decisions are Nos. 4/2009 Coll. and 5/2009 Coll.).The green bo- nus consists in a premium on the electricity market price. A producer of electricity that sells electricity generated from renewable energy sources at an agreed market price to any end customer or electricity trader, or that directly uses the generated electricity, is entitled, upon the submission of relevant documents, to collect green bonuses on top of the price from the transmission system operator (TSO) or the regional distribution operator. The drawback of the green bonus system is its higher risk, as the producer has no guarantee of selling all the generated electricity on the market, and of the price. It must actively seek its electricity consumers and negotiate the purchase price. Interesting Investment Opportunity The minimum incentive period guaranteed to the investor for generating electricity from renewable energy sources is 15 years from putting the generating facility into opera- tion, which is an interesting investment op- portunity. The maximum incentive period is not explicitly specified by the Act. The ERÚ Regulation (a piece of secondary legislation of lesser legal force), however, stipulates that the feed-in tariff is guaranteed for the lifetime of the electricity generating facility. The life expectancy pursuant to the ERÚ Regulation is 30 years for small hydro-plants, 20 years for biomass, biogas, wind, geothermal, and pho- tovoltaic power plants, and 15 years for sew- age, landfill, and mine gas power plants. Investors receive feed-in tariffs or green bonuses in the amount set by the ERÚ Price Decision effective in the year in which the facility was put into operation; feed-in tar- iffs – except for biomass and biogas incin- eration plants – are indexed by a minimum of 2% and a maximum of 4% year-on-year depending on the industrial price index de- velopment. When designing a new facility, ,investors may take the ERÚ Price Decision as a guide, as the feed-in tariffs set by ERÚ for the following calendar year may not be less than 95% of the feed-in tariffs applica- ble in the year in which the decision on the new feed-in tariffs has been made. The Senate is currently debating a Govern- ment Bill to the Renewable Sources Act al- ready passed by the Chamber of Deputies of the Czech Parliament, which is to change the guaranteed feed-in tariffs for renewable en- ergy from those sources whose rate of return is less than 11 years.This change will concern especially photovoltaics, where, as a result of the reduction of photovoltaic panel prices by up to 40%, investment costs have declined Photo:www.sxc.hu

| 1 2 L E G I S L AT I O N significantly (their rate of return is allegedly estimated to be 8 to 10 years). Under the cur- rent legislation, ERÚ may reduce the feed-in tariff for electricity generated by new facilities by mere 5% year-on-year. ERÚ estimates that if the Government Bill is passed, solar electric- ity feed-in tariffs will be reduced by 30% start- ing from 2011. Tax Benefits Income from the operation of small hydro- electric power stations with an output up to 1 MW, income from wind power stations, heat pumps, solar facilities, facilities for the production and use of biogas and wood gas for energy purposes, biomass-based elec- tricity and heat generation facilities, facilities for the production of biologically degrada- ble substances defined by special regula- tions, and facilities for the use of geothermal energy are exempted from personal and corporate income tax in the calendar year in which the facilities were first put into opera- tion and in the following five years. Other Potential Advantages The Ministry of Industry and Trade and the Ministry of the Environment offer subsidies for “green energy”. The recipients of the subsidies, however, are restricted to private individuals and municipalities. Other incen- tives can be obtained for combined electric- ity and heat generation and for secondary sources of energy. LEGAL FRAMEWORK FOR RENEWABLE ENERGY GENERATION Conditions for running business in the area of electricity generation are regulated main- ly by Act No. 458/2000 Coll., on business conditions and public administration in the energy sectors and on other amendments (“Energy Act“). The Energy Act sets out con- ditions under which ERÚ may issue licences for energy generation, transmission, and distribution. This Act transposes Directive 2003/54/EC of the European Parliament and of the Council concerning common rules for the internal market in electricity and Direc- tive 2003/55/EC of the European Parliament and of the Council concerning common rules for the internal market in natural gas. The use of renewable sources is regu- lated primarily by the Renewable Sources Act mentioned above and by the ERÚ Price Decisions, which stipulate the level of feed- in tariffs and green bonuses. As mentioned above, the applicable decisions for 2010 are Decisions Nos. 4 and 5/2009 Coll. The electricity market rules are set out by ERÚ Regulation No. 541/2005 Coll. Decrees Nos. 475/2005 Coll., 51/2006 Coll., and 140/2009 Coll. were used as a basis for the implemen- tation of certain provisions of the Renew- able Sources Act, for setting the conditions for connecting the sources to the grid, and for electricity price regulation. Specific con- ditions for the use of biomass in electric- ity generation are laid down by Regulation No. 482/2005 Coll. of the Ministry of the Environment. Licensing Procedures The following steps must be taken be- fore electricity generation from renewable sources may start: 1. Prove the title to the land and buildings, if applicable, where the electricity generat- ing facility is to be built (ownership title to the property, tenancy). 2. Perform fact-finding procedure under Act No. 100/2001 Coll. on the Environmental Impact Assessment (“EIA“). The procedure is required especially for the following projects: Fuel incineration facility with rated heat output of 50 MW to 200 MW; Wind power plants with total installed output of more than 500 kWe or with tower height exceeding 35 m; Hydro-power plants with a total in- stalled output capacity 10 MWe and above; Hazardous waste disposal facilities; Projects that might affect bird protec- tion areas and natural sites of European importance. Facilities with outputs below the above- mentioned levels are subject to EIA only if the authority concerned has issued a de- cision to that effect. The actual procedure lasts 5-8 months; in case that special docu- ments have to be prepared, it may last up to two years. 3. Change of the zoning plan in case that the existing zoning plan does not allow for the construction of a power plant. 4. Obtain the zoning and building permits. The competent authority is the building Photo:www.sxc.hu

1 3 | C Z E C H TO P office of the relevant municipality. The building office, similarly to other admin- istration authorities, has to issue its deci- sion within 30 days from the opening of the proceedings; in more complicated cases the period may be prolonged by another 30 days. Binding positions of the respective au- thorities must be obtained for the issu- ance of the zoning and building permits. The respective authorities issue their posi- tions within the same statutory deadlines as the building office. Depending on the location of the land, the following author- ities may be involved in terms of public interest protection: Authorities of environmental protec- tion, nature and landscape conserva- tion, water management, farmland protection; Authorities of forest conservation, air protection, and waste management; Health-care authorities; Railway administration office; whereas the relevant state administration tasks are usually performed by respective departments of the concerned munici- pality authority. 5. Obtain the final approval for use of the electricity generation facility. The com- petent authority is the building office of the relevant municipality, whose deci- sions are subject to the above-mentioned deadlines. 6. Obtain the licence from ERÚ for electricity generation. In specific cases, the licence may be obtained before the issue of the final approval for use. Licences are issued for no more than 25 years. The preconditions for individuals to ob- tain the license are: (i) minimum age of 21 years, (ii) full legal capacity, (iii) integrity, and (iv) professional competence, or the appointment of an authorised representa- tive, where professional competence usu- ally means completed technical university education plus three-year experience in the field, or completed secondary technical ed- ucation plus six-year experience in the field; for smaller facilities, lower-level education is usually sufficient. For legal entities, conditions (i) to (iii) must be met by members of the statutory body. A condition for awarding a licence to a legal entity is also the appointment of an authorised representative. The person ap- plying for the licence is required to prove its ownership title to or the right of use of the power generation facility to be used for the licensed operation, or the consent of the fa- cility owner. The applicants must also prove their financial capacity for the operation for which the license is required, and the capac- ity to discharge their obligations for at least five years. 7. To have the facility connected to the grid, the producer must file (i) a written application, supported by (ii) the con- sent of the transmission or distribution system operator, and (iii) a contract on connection between the applicant and the transmission or distribution system operator. The operator is required to give priority to plants generating elec- tricity from renewable energy sources if the producer applies for connection and meets the conditions for electricity connection and transmission under the Energy Act. 8. The last step is a contract with the transmission or distribution system op- erator on electricity supplies or a con- tract on the payment of green bonuses (see above). Acquisition of Projects in Progress As it is obvious from the above, the li- censing procedure is not a simple affair. Potential investors in renewable energy may want to purchase a project already in progress, at a certain stage of comple- tion. In view of the current uncertainty regarding possible reductions of feed-in tariffs for electricity obtained from solar power stations beginning from 2011, an interesting alternative is the purchase of solar power stations already erected and connected to the grid, where the projection of future revenues is quite simple. Champion among Czech Vintners Miroslav Majer, Vinselekt Michlovský, a.s., e-mail: majerm@michlovsky.com, www.michlovsky.com Czech vintners know their 2009 champion. The wine-maker of the year is Vinselekt Michlovský, based in the well-known vine- growing village of Rakvice in South Mora- via. It persuaded the jury not only with the excellent taste of its wines, but also its sen- sitive approach to vine-growing. Vinselekt thus became the historically first winner of the new competition. Wine-maker of the Year – a Somewhat Different Competition The Wine-maker of the Year 2009 compe- tition was announced by the Wine-mak- ers’ Fund and the National Winery Centre in co-operation with the Association of Wine-makers of the Czech Republic. The prestigious title is awarded as an all-round appreciation of the winery which in the previous year best proved a steadily out- standing quality of its wines, carried awards from domestic and foreign competitions, participated in promoting Czech wines at trade fairs and exhibitions, organised dissemination activities and wine tourism events for the public, and used innova- tive technologies in vine improvement and cultivation and in wine making. The aim of the competition was choosing the best domestic firm which breaks rank in a positive way among wine-making com- panies. The wine-maker of the year com- petition differs significantly from standard competitions in the country, in which the competing wines are those selected by in- dividual makers. The Wine-maker of the Year 2009 competition assessed the vineries’ work throughout the year, using a number of criteria. In mid-January 2010, the assess- ing commission visited five vineries which had won the most nominations, awarded points to them, and finally chose the of- ficial winner.

| 1 4 C Z E C H TO P Vinselekt Michlovský a.s., established in 1993, in 2003 became a joint-stock company. Today it has about 60 employees. It has 120 hectares of vineyards, where cultivation strictly observes integrated production rules, with part of the area practicing ecological vine-growing. In addi- tion to its own grape production, it purchases about the same quantity from other suppliers under long-term contracts, who observe the same strict rules and instructions. The company’s annual production is more than one million bottles of wine. The highest production series is Premier, wines with a distinct taste of wines made from per- fectly matured grapes processed by the most natural technologies and bottled without filter- ing. The Premier series include Vinum Palaviense with certified origin of the grapes coming from Pálava’s limestone hills, Chateau Dowina – extractive wines with a characteristic bou- quet, ripening in French oak barrels. Other product series are Latitude 49, Harmony, Passio Christi, Standard, and Private Archive for collectors. A separate category are original bottle- fermented effervescent wines Crémant de Vinselekt . Bio Wine, Winner of Vinex Grand Prix Competition Vinselekt vinery is linked with the per- sonality of Miloš Michlovský, currently one of the most important Czech vine growers. A pioneer in biological vine cul- tivation, he farms 8 hectares of eco-vine- yards and sells not only wines, but also ciders made from grapes bearing the BIO label. For his wine Hibernal 2008 late col- lection BIO, he won the champion title at the Grand Prix Vinex competition. It is the first time in the seventeen-year his- tory of this competition that the cham- pion was a bio-wine. The untraditional Hibernal variety has minimum require- ments for chemical protection. With its primacy, Vinselekt Michlovský defended its last year’s victory in competition with another wine. Vinselekt Michlovský company is his- torically one of the most successful par- ticipants in this competition. It won its first Vinex title in 2006, and in 2010 gained the prize for the best single maker wine collec- tion. The competition was entered by 373 samples, with one in every ten samples being a foreign entry. Vinselekt Michlovský Collecting Prizes At the Wine-maker of the Year prize award ceremony,theownerofthecompany,Miloš Michlovský, commented on his remarkable success saying: “I am tremendously happy that the first title in history has been as- signed to our Vinselekt. Although accord- ing to the competition statutes, the award should have reflected our 2009 results, I think the Jury also took into account our ‘merits’ of the previous year, our continuing and unending innovations, the improvement and successful launch- ing into practice of new hardy varieties, the large number of wines we have been sending to the Wine Salon of the Czech Republic each year, and our successes in regional, national, and international wine competitions.” In the past few years, Vinselekt Michlovský wines have been cham- pions in probably all Czech competi- tions. At Austria’s Awc-Vienna, Vinselekt Michlovský a.s. figured repeatedly among the world’s 100 best vineries, Vinselekt wines were decorated with MUNDUS Vini gold and silver medals in Germany and at Vinalies Internationales in France. Pál- ava 2007 grape selection is the first wine in the history of Moravian viniculture to become absolute champion in a world competition – Terravino Israel – held un- der the auspices of O.I.V. Miloš Michlovský, owner of the compa- ny, appreciates the prestigious titles they have won, but at the same time says, in exaggeration, that they actually did not deserve the credit. “First of all I must thank the vineyard and the wine. The wine is the winner.” Wine is doing well in the Czech Repub- lic, its consumption over the past few years has been rising. While in 1993 wine consumption amounted to 12 litres per person and year, now it ranges around 17 litres. Even so, however, the Czech Republic is lagging behind the rest of Europe, where average consumption is between 25 and 32 litres. Miloš Michlovský, the founder of Vinselekt Photo:Vinselektarchives;www.sxc.hu

1 5 | W E A R E I N T R O D U C I N G Crisis Boosting Demand for“Green Buildings“ www.cbre.com These days, we are witnessing a growing demand for low-energy, or at least energy- saving residential building projects. In com- mercial construction, this trend is as yet not so much in evidence, but even there the number of “green buildings” is steadily ris- ing. A favourable feature is that the would- be tenants of those buildings are becoming increasingly aware that at the cost of higher rent they will save on energies. Interest in“Green Offices” It might be expected that at the time of economic crisis all firms looking for office space will only be interested in the locality – standard – price combination. Surprising- ly, it is not so. Recently, it has appeared that with the decline in commercial office space rentals would-be tenants and owners are increasingly willing not only to buy “cheap”, but also to invest in“green buildings”. Environmentally friendly buildings are in short supply, and so certain tenants and buy- ersarewillingtoinvestinre-buildingtheirinte- riors so as to create a better working environ- ment, but also to obtain a certain certification label used for energy-saving buildings, which can also be obtained for separate spaces. There is no uniform system in the world to assess buildings with regard to environmen- tal aspects. In a number of states there are non-government organisations dealing with this issue. In the USA, the best-known certifi- cation label is LEED (Leadership in Energy & Environmental Design), in the UK it is BREE- AM, in Germany DGNB. All these systems dif- fer from each other, but in principle all assess the“friendliness”of the building and its parts to the environment and its users. Purchase Costs To obtain the certificate, the building or the office spaces must meet specific require- ments, for which points are allotted and the total number of points then determines the particular category. The LEED certification system has three degrees, and to attain the highest – platinum – practically all require- ments must be met. The range of the areas concerned is very wide. Emphasis is placed notonlyonthelocationofthebuilding(good public transport accessibility), the materials used, which must be based on renewable sources and provided by local suppliers, the use of renewable energy sources and various saving measures, but also things such as the possibility of using a bike for transport. Thepurchasecostsofenvironmentallyfriend- ly buildings are somewhat higher, but in future they will yield considerable savings. Also, it is to beexpectedthatcompanieswillgivepriorityto “green buildings”and a good working environ- ment, that they will take the environment into consideration,andinreturnwillgainthebenefit of lower operating costs and other advantages. Low Energy Intensiveness In view of the global economic crisis and problems with developer project financing, the number of“green buildings”is not grow- ing so fast. The keen interest of investors in these buildings, however, is putting pres- sure on building them. The recently pub- lished survey carried out by Skanska Office Index reveals that in looking for new office space, Czech firms place emphasis on the following factors: satisfaction of employees and a good working environment, parking availability, and close vicinity of main roads. As regards cost saving in office spaces, the mostimportantconsiderationforCzechfirms is energy cost savings (58% of respondents). A full 79% of respondents said they accept- ed measures to reduce the environmental impact of their activities. The main eco-activ- ity of the companies, according to the survey, is “waste sorting”. The survey also showed that the lowering of energy costs is the most important factor for Czech firms in looking for and renting new office space. A full 77% of Czech respondents also said that in their opinion, energy saving was an indivisible part of every ecologically-minded building. Futurama Business Park An example of a“green”office building can be Futurama Business Park Administration Cen- tre in Prague’s Karlín District. It is designed as a complex of energy-saving buildings, which use the most up-to-date technologies. Ac- cording to the criteria laid down by Directive 2002/91/EC of the European Council on the energyperformanceofbuildings,theParkwas awarded Class A certification, acknowledging its high energy-saving standard.There are sev- eral ways of saving energies in the complex. For example, the glazing and shading system is design so as to prevent excessive heat losses in the winter season and on the contrary to limit by shading the penetration of outer heat into the interior in the summer months. The centrallycontrolledshadingofglazedsurfaces brings up to a 20% saving of energy for cool- ing in comparison with buildings, which have no shading system at all.The main heat source inthecomplexisa heatpumpincombination with an exchanger station. Heat losses will be prevented by the cooling and heating system, which will prevent the simultaneous cooling and heating of different spaces. The air-con- ditioning units are designed so as to use the heat from waste air by recuperation.

| 1 6 E N T E R P R I S E Together to Support Trade Opportunities http://czech-water.czechtrade.cz In2004,anexportaliancenamedCzechWater Alliance (CWA) was established with the help of CzechTrade government agency, which is entrusted with activities aimed at facilitat- ing Czech firms’ entry on foreign markets. Czech Water Alliance associates Czech firms with experience in all areas of water manage- ment; it currently has 14 members special- ising in investing, construction, designing, and planning projects concerned with water management, hydroelectric power stations, water reservoirs and other structures, pump- ing equipment, cleaning and revitalisation of water courses, diagnostics and the treatment of all types of water (communal, industrial, etc.), construction and reconstruction of civil engineering systems for whole residential quarters and separate units, geology, hydro- geology, waste-free technologies, control systems used in ecology and related branch- es across the entire water economy. The Alliance is a response to current trends of the world economy, such as internation- alising business, merging of competitors, production outsourcing and raising added value in procedurally managed companies. The principal aims of the Alliance are pro- motion of its members and enhancement of the reputation of the Czech Republic in water related issues and their solutions. The ways of supporting the members of the Al- liance include the organisation of seminars, publication of catalogues, overseas cooper- ation and ensuring participation in presen- tations and exhibitions, for example in Rus- sia, China, Libya, Romania, Kuwait, Croatia, Egypt, Italy, and Greece. The Alliance as a tool of raising the competitiveness of enterprises on foreign markets In 2004, Czech Water Alliance became one of the first parts of the Alliance Project of the Czech trade promotion agency CzechTrade. The Agency decided to choose the most advanced Czech export-oriented branches, which it associated in Export Alliances with the aim of promoting Czech firms, their products and technologies, and acquaint- ing foreign customers with them. “I am persuaded that Czech water management firms are absolutely legible to their foreign partners,” says CWA’s leader Ivan Nikl, direc- tor of MAEP, s.r.o. in Chomutov. What is the main aim of the Czech Water Alliance? We are trying to improve the position of Czechfirmsintheareaofserviceandtechnol- ogy exports in water management.Thanks to the firms associated in this alliance we are in a position to provide practically the full range of services, from the presentation of the firms and their technologies to the preparation of the project, its delivery and realisation. To ensure the success of any project, one has to choose the right strategy. What is actually your export strategy? Our strategy is in harmony with the Export Strategy of the Czech Republic for the years 2007-2011, i.e. promotion of Czech exports. Our intention is to raise the export share of services and technologies supplied by the firms associated in the Alliance. In pursuing this aim, we want to use primarily simple tools. As before, we want to provide services for potential foreign clients and furnish sup- port services to Czech exporters. I must not forget the efficient use of European funds available to firms operating in the area of water management. We are also taking ad- vantage of the valuable assistance provided by CzechTrade, which is helping us make the public aware of the benefits the firms asso- ciated in CWA bring to the Czech economy. Which are the benefits Czech water management firms can bring to foreign partners? I am convinced that Czech water manage- ment firms are absolutely legible to their foreign partners, mainly thanks to the coun- try’s membership of the European Union, its strategic geographic position in the centre of Europe, and in particular the wide range of its reference deliveries and realisations throughout Europe and beyond. I think that a great asset is the availability of highly educated and trained experts with a corre- sponding knowledge of foreign languages. The products and technologies are unequi- vocallyofthehighestworldstandard.If,how- ever, we do not make our foreign customers acquainted with those facts, there can be no talk of any expansion to foreign markets. The words which you have just said may be understood subjectively; can they be measured in an objective way? You are right. They may sound subjective. But they can be easily supported by facts. It is CWA’s aim that the firms it associates be continuously benchmarked against foreign competitors. We make our own surveys to CZECH EXPORT ADVANTAGES What is the potential of the Czech Republic in exports? The principal advantages are the country’s well-edu- cated manpower, reasonable cost of the work of technical specialists, strategic geographical position of the Czech Republic in the heart of Europe, and close relations with Eastern Europe. WHAT ARE EXPORT ALLIANCES? An export alliance is an association of firms operating in related branches of business, whose products or services complement each other and the aim of which is concerted action and op- eration on foreign markets. Export alliances are away of getting easier access to orders which smaller Czech firms have less of achance of winning.The point is to get together an association offirmsthatwillcompletelycoveralargeproject,fromdesigning andplanpreparationtothesupplyofallpartsandtheirassembly, andwithfollow-upservice.CzechTradeAgencyhassofarinitiated thecreationof21exportalliances. SERVICES AVAILABLE TO FOREIGN PARTNERS Czech consulates 33 CzechTrade offices Information service Help with choosing a partner Business trips and meetings Investment help and advice Ivan Nikl Photo:CWAarchivesp

1 7 | C Z E C H E CO LO G Y A N D AG R I C U LT U R E find out whether foreign companies are in- terested in firms associated in CWA. In this re- spect, we cooperate very closely with Czech- Trade, specifically with the agency’s offices abroad. We also promote cooperation with the economic and commercial sections of Czech embassies in other countries. You also mentioned services for foreign partners; which specific services can you offer? The character of such services is more or less informative. Nowadays, information is one of the most valuable and most expensive commodities. We want to offer foreign part- ners assistance in their search for suitable suppliers in the Czech Republic and offer them tailor-made business trips and meet- ings with Czech water management firms. Where, besides getting information for your surveys of interest, do you see the usefulness of CWA’s cooperation with CzechTrade offices abroad? The employees of CzechTrade’s foreign of- fices are the best ambassadors of the firms associated in CWA we can have abroad. Their experience and know-how are instru- ments that lead to the provision of services for foreign partners, as we said before. What achievements can CWA and the firms it associates pride themselves on? I wouldn’t speak of separate achievements. We are a team, and the firms associated in CWA look upon their achievements as the success of the entire Alliance. Confirmation of this is the export success, for example of ASIO, s.r.o. Other successful exporters are Tes- la, a.s., Centroprojekt a.s., Vapo, s.r.o., Rekuper Sychrov s.r.o., PRESSKAN system a.s. and Teco a.s., to name just some of them. Complete CWA deliveries to foreign markets are worth dozens of millions of EUR.These results could never be achieved if the firms’ experts were not prepared to put all their professional skills and experiences to work to ensure their com- mon success in meeting the highest – quality requirements placed on the technology they supply. Does CzechTrade also figure in these endeavours in some way? Of course it does. CzechTrade did not help us only to attain our good results. Recently, thanks to the Agency’s cooperation, in par- ticular to Mr Martin Hlavnička, we scored an export success at the presentation of water management firms in Petersburg, specifically the firms PRESSKAN and VAPO. We managed to address and win new customers, and now we are at the stage of preparing a project for the entry on the market by several members of the Alliance.With the support of the Minis- try of Industry and Trade, we are now prepar- ing for participation in exhibitions in Moscow, Munich, and Lyon. LIST OF CWA MEMBERS ASIO spol. s r.o. Supplier of container packed wastewater products i.e. wastewater treatment plants, oil separators, grease traps, shaft pumping, etc. www.asio.cz BKG úprava vody s.r.o. Leasing manufacturer of water treatment plants for process, drinking, and ultrapure water focusing primarily on the various de- velopments of membrane technology. www.bkg.cz CENTROPROJEKT a.s. Provider of professional design and consulting engineering services with more than 80 years experience in the civil engineering sector. www.centroprojekt.cz CINK Hydro-Energy k.s. One of the leaders in deliveries of technolo- gy for small and medium-sized hydropower stations. The goal of the development team of CINK Hydro-Energy is to change water potentials in cooperation with our custom- ers all over the world into profitable and en- vironment–friendly sources of energy. www.cink-hydro-energy.com ECOFLUID Group, a.s. Highly innovative organisation oriented to the realisation of the innovation project of UP- FLOW SLUDGE BLANKET FILTRATION (USBF) technology used in the chemical treatment of surface and ground water for municipal and industrial use as well as the biological treat- ment of municipal and industrial waste-water. www.ecofluid.cz HSI com s.r.o. Plzeň One of the Czech most noted solution work- places of Integraph and Bentley Systéme companies. Its activities are mostly targeted on geographical information systems. HIS COM develops CAD applications. www.hsicom.cz MAEP s.r.o. A leader of CWA, company developing busi- ness relations between the Czech Republic and the EU and the countries of the Russian Federation and Asia. www.maep.cz MARVES v.o.s. The company’s core business is the pro- vision of comprehensive services in the area of technological process automation. It manufactures a variety of electronics components. www.marves.cz MICO, spol. s r.o. The company provides services and under- takes repairs of all industrial valves including separators, pressure vessels and exchangers. www.mico.cz PRESSKAN system, a.s. The company offers its own know-how to design pressure systems and is the exclusive supplier of the PRESSKAN® low-pressure sewer system. www.presskansystem.cz REKUPER SYCHROV s.r.o. The company’s core activity is the manu- facture of ventilation units with heat re- cuperation, intended in particular for hall- type buildings, including their design and installation. www.rekuper.cz TECO, a.s. Is an important supplier of TECOMAT in- dustrial controllers used by water sup- ply and waste water plants. As TECOMAT is a powerful general purpose control system, it can be used in central heating plants, the food industry, the chemical in- dustry, and other sectors. www.tecomat.cz TESLA, a.s. The Water Treatment Solutions Division of the company has been successfully oper- ating for several years in waterworks en- gineering and in water supply and waste- water treatment plants. It supplies drinking and industrial water plants, including devel- opment, planning, production, and putting the units into operation. www.tesla.cz VAPO, s.r.o. VAPO specialises in two fields: rubberised fabric products and moulded mechanical rubber parts.The rubberised-fabric products include sealing bags for piping, lifting bags, sealing bags for fissures, sealing wedges and pipe rehabilitation packers. Other rub- berised-fabric products are made to the specific requirements of customers. www.vapo-sro.cz

| 1 8 E N T E R P R I S E Surface Finishing under the Wings of CzechTrade Martin Mokroš, Leader of Czech Surface Finishing Alliance, e-mail: mmokros@galatek.cz, www.galatek.cz The Czech Surface Finishing Alliance (CPU) was established in June 2006 with the aim of offering potential clients a strong group that will solve their problems in the area of surface finishing comprehensively, with the corresponding guarantees. It is an associ- ation of four firms – ALTA, EST+, GALATEK and OTECO – all supplying equipment for the surface protection of materials. The firms’production programmes are designed so as to complement each other, thus eliminating competition within the Alliance and strengthening its competitiveness as a whole, primarily on foreign markets. Czech Experiences These Czech firms offer their experience and know-how in dealing with surface fin- ishing issues. They have a strong intellectual and material potential and in co-operation with the specific customers they are in a position to realise the surface finishing of their products to a high level. All the associ- ated companies are certified in accordance with ISO 9001:2000 quality standard and ISO 14001:2004 environmental management standard. Comprehensive Execution of Orders As part of their engineering services, these Czech firms are in a position to meet the specific requirements of customers at all stages of the project. They propose the use of the most suitable technologies, with veri- fication, prepare the complete project, in- cluding its approval, evaluate the economy of operation, and prepare expert opinions. Under the Wings of CzechTrade CPU was established under the auspices of CzechTrade state-run agency, the main initi- ator of its establishment being its represen- tation in the Russian Federation, specifically Ekaterinburg. The Office has significantly influenced the development of the new Al- liance. It recommended that in addition to arranging exhibitions, it should also focus on the presentation of their supplier pos- sibilities, addressing potential customers, while taking advantage of the information backing and the experience of CzechTrade. Very successful, for example, were the pres- entations in the Russian Federation, specifi- cally in Chelyabinsk, Ekateringurg, and Pe- tersburg and in Zagreb, Croatia. Establishment of Trade Contacts The result of all these presentations is not only information about the possibilities of the Czech firms, but also the establishment of a large number of contacts, some of which have already led to the realisation of business deals. Much of the success of these presentations is due to CzechTrade Agency, which is well acquainted with the local en- vironment. Each of CzechTrade’s represen- tations – in Ekaterinburg, Petersburg, and Zagreb – has prepared for the Alliance, on Alta Concrete Works Kiev – a technological unit of ALTA company Photo:Firmsarchives

1 9 | C Z E C H E CO LO G Y A N D AG R I C U LT U R E the basis of its knowledge, a list of potential partners and customers. All of them have organised their own presentations, with the participation of representatives of the Czech State and local state organisations. Trade Fairs and Exhibitions Other important activities of CPU are its par- ticipation in selected trade fairs and exhibi- tions. The Alliance participates regularly in ExpoCoating in Moscow, as well as in other events, such as national exhibitions, mis- sions of businessmen, etc. All these activities are of great economic importance. Thanks to CzechTrade’s back- ing, greater attention is paid to the Alliance in various programmes, and jointly organ- ised events, such as participation in select- ed trade fairs, are subsidised financially. This brings valuable cost savings, especially in the area of marketing. MembershipofCPUhasa numberofother advantages. Besides the amalgamation of financial means for joint promotion the member firms benefit from the exchange of information about potential customers and the experiences gained in the realisation of joint projects. CPU Members Introduce Themselves EST+, A. S. BASED IN LEDEČ NAD SÁZAVOU Paint Shop Equipment with Accessories EST +, a.s. is the only manufacturer of pro- fessional spraying technology in the Czech Republic. It commenced development and manufacture of this equipment as far back as 1951. From the very beginning, its pro- gramme has been oriented towards the development and production of spraying equipment for the application of liquid and powder paints, with deliveries of sets for surface finishing. EST+,a.s.,Podolí1237,58401 LedečnadSázavou,CzechRepublic, Phone:+420569726097,+420569726094, Fax:+420569726096,e-mail:est@estplus.cz www.estplus.cz OTECO CZ, SPOL. S R.O. BASED IN BUČOVICE Shot Blasting Equipment OTECOCZ,spol.s r.o.wasestablishedin1992 as a manufacturing firm for Austria’s OTECO GmbH Wien, a company with a long shot blasting tradition. Today it manufactures the full range of blasting equipment in its plant in Bučovice. Its products comprise both compressed air shot blasting machines and shot blasting machines with impellers. The machines are manufactured serially or are “made to measure”, according to the specific requirements of customers. OTECO CZ, spol. s r.o., Slavkovská 853, 685 01 Bučovice, Czech Republic Phone/Fax: +420 517 383 506, +420 517 383 519, e-mail: oteco@oteco.cz www.oteco.cz GALATEK, A.S. BASED IN LEDEČ NAD SÁZAVOU Paint Shops and Accessories GALATEK, a joint stock company established in 1990, supplies complete paint shop equipment and surface finishing lines. Its machines and equipment for surface fin- ishing shops comprise surface preparation equipment, paint cabins for the application of liquid paints, cabins for powder plastic compound application, drying and burning furnaces, transport and handling machines and application equipment. GALATEK a.s., Na Pláckách 647, 584 01 Ledeč nad Sázavou, Czech Republic, Phone: +420 569 714 111, +420 569 721 121, Fax: +420 569 714 202, e-mail: lakovny@galatek.cz, www.galatek.cz ALTA, A.S. BASED IN BRNO Comprehensive Commercial, Financial, and Engineering Services in the Area of Engineering Since1991,Alta,a.s.hasspecialisedintrading with Central and East European countries. The company’s core business is engineer- ing. Its activities comprise comprehensive commercial, financial, and engineering serv- ices, which ensure the high competitiveness of the company. It has a network of foreign representations: in the Russian Federation (Moscow, Ekaterinburg, and Petersburg), the Ukraine (Kiev, and Komsomolsk), and Belarus (Minsk, and Zhodino).These representations are one of ALTA’s greatest assets. It special- ises in the export of whole plants, machine tools, engineering goods, and machinery for the heavy industry. Its main import items are metallurgical and power generating ma- chines and equipment. ALTA, a.s. – office, Štefánikova 41, 602 00 Brno, Czech Republic Phone: +420 541 550 111, Fax: +420 541 550 555, e-mail: office@alta.cz www.alta.cz GALATEK Continuous lines OTECO CZ machinery

| 2 0 E N T E R P R I S E Agriculture Is Drawing Finance from Various Programmes Communication Department, Ministry of Agriculture, www.eagri.cz In the Czech Republic, the agriculture sector does not account for the larg- est share of GDP and employment, but its role in supplying the population with foodstuffs and its importance for the so- cial area and the natural environment are irreplaceable. The primary sector creates about 3% of total gross added value and accounts for 3.8% of total employment. A characteris- tic feature of Czech agriculture is its large farming enterprises, whereby it differs no- ticeably from the structure of European agriculture formed mostly by small, often family farms. The average surface of tilled land per farming enterprise in the Czech Republic is 84.2 ha. The priority task of ag- riculture, besides supplying good-quality food, is to ensure environmental protec- tion, including good living conditions for animals, use of renewable energy sources, and care for the countryside. Rural Development Raises Competitiveness Not Only in Agriculture The Czech Republic’s Rural Development Programme covering the 2007-2013 period is an instrument for obtaining EU support from the European Agricultural Fund, which serves four rural development purposes: to improve the competitiveness of agriculture, food production, and forestry (axis I), raise biological diversity, protect the water and the soil and mitigate climate change im- pacts (axis II), improve the quality of rural life and support the diversification of the econ- omy of agriculture (axis III), and help the local population in rural micro-regions to prepare their own development strategies based on the“from bottom to top“ principle and support projects for their development – the LEADER method. The total volume of finance available for the Rural Develop- ment Programme, together with a contri- bution from the state budget, amounts to about CZK 100 billion (EUR 3.6 billion) for 2007-2013. The following measures are focused on business promotion outside the agricul- ture sector within axis III: Measure III.1.1 Diversification of non-agri- cultural activities. The measure supports farmers wishing to start activities in the area of production and processing, or en- large them. The support is available for selected areas of economic activity. An im- portant part of the support is reserved for the construction of facilities for renewable energy source processing and use. The budget for the entire period of the pro- gramme is approx. CZK 3.8 billion (approx. EUR 150 million). Measure III.1.2 Support for starting en- terprises and their development. The measure is aimed at supporting the start- ing of new enterprises of the smallest size – micro-enterprises and the development of existing ones in the area of production and processing. The aim of the measure is primarily to create new jobs and develop the economic structure of non-agricul- tural activities. The support is mainly fo- cused on small businesses and trades (e.g. joinery, carpentry, smith craft, upholstery, etc.), services for farmers (e.g. machine and equipment repair services), and retail trade. Support is also available for the con- struction of renewable energy processing Photo:www.sxc.hu,NEVA-TRADEarchives

2 1 | S U R V E Y More detailed information about the terms and con- ditions for obtaining a subsidy under the above meas- ures can be found on the web sites of the Ministry of Agriculture (www.eagri.cz) and the State Agricultural Intervention Fund – SZIF (www.szif.cz). facilities – the budget for the programme period amounts to approx. CZK 2.6 billion (approx. EUR 100 million). MeasureIII.1.3Tourismsupportisdesigned to support the promotion of agrotourism, especially the construction of low-capacity accommodation facilities, including cater- ing and sports surfaces. Support can be obtained for pedestrian path building and marking, with rest areas or riding paths; the budget for the programme period is approx. CZK 2 billion (EUR 80 million). Application Processing All the measures mentioned above ap- ply to projects submitted within applica- tion reception deadlines. The applicant requesting the subsidy must first prepare the project according to a binding project outline shown in the Applicant Rules (the Rules are available at www.mze.cz or www. szif.cz), to which the required annexes must be attached. As soon as the reception of applications opens (usually announced once a year), the applicant will complete the application form and submit his project to the regional department of the State Agricultural Intervention Fund, which is the financing agency. At that moment the applicant can start work on the actual realis- ation of the project. As in the case of most measures, the subsidies are paid in retro- spect. The applicant will first realise the entire project and pay for it, and after that will submit an application for payment, to- gether with the required documents. If all requirements are met, the subsidy will be paid. In the case of the above-mentioned measures, the subsidy is up to 60% of eli- gible expenses. Fisheries Operational Programme Another subsidy title for drawing money from EU funds coming under the compe- tence of the Ministry of Agriculture is the Fisheries Operational Programme 2007- 2013 (Fisheries OP). Under this programme money can be drawn from the European Fisheries Fund (EFF) for the years 2007-2013 for the fisheries sector. Subsidies made avail- able from the Fisheries OP amount to CZK 1 billion (approx. EUR 290 million). The sub- sidies are designed for micro-enterprises and small, medium-sized, and certain large enterprises. Subsidies are provided on the basis of applications to be submitted within the time limit announced by the Minister of Agriculture. Subsidy applications are to be addressed to the regional department of the State Agricultural Intervention Fund in the region, in which the project is realised. The subsidy amounts to 60% of the eligible costs of the project and is paid out after the payment application is approved. Poll of Successful Companies Operating in the Areas of Ecology, Agriculture, and Wood Processing NEVA-TRADE, s.r.o. Husova 537, 378 21 Kardašova Řečice Phone: +420 384 377 121 E-mail: neva@neva.cz, www.neva.cz Turnover: EUR 5 million Number of employees: 130 Export: 90% of production NEVA is a Czech engineering company with a long tradition of excellence in the manu- facture of thin-cutting machinery. The com- pany first opened its doors in 1793 and now NEVA machines are in production in over 30 countries worldwide. Neva machines are designed to cut wood into precision thin slats and are known world-wide for their quality, reliability, and longevity. We produce: Thin-cutting frame saws Thin-cutting band saws Saw blade and band grinders Stellite saw blades and bandsaw blades The machines and tools that we produce are designed for cutting very thin and accurate wooden lamellas. These lamellas can be used without further processing in a variety of ap- plications including flooring, parquets, multi- layer boards, windows, doors, furniture, sport equipment and music instruments. Your company is a regular participant in the various international exhibitions that occur throughout Europe. What do you expect to achieve by participating? Has your participation brought good results for sales? Our company participates in these events in order to get new contacts and trade part- ners. We frequently introduce new machin- ery and technology, and also use these oc- casions to strengthen our existing contacts. In recent years, our focus has been more about meeting with our current customers and enhancing our position in the market. How are you tackling the consequences of the economic crisis, and how do you see the future of the company? We have adjusted the capacity of pro- duction to meet the lower demands, and have reduced our costs, just as most companies are doing. We are seeking new markets and are being creative in our marketing in order to increase sales and reduce costs.

| 2 2 S U R V E Y TOP FIRMS IN CZECH AGRICULTURE, ECOLOGY, AND WOOD-PROCESSING INDUSTRY Name Based in Sector Contact Imos Brno, a.s. Brno construction of water-management, engineering and ecological structures www.imos.cz AGRICO s.r.o. Třeboň grain processing and storage, breeding www.agrico.cz ŽDB Group, a.s. Bohumín wire production, foundry, and metallurgy www.zdb.cz Dřevotvar - Řemesla a Stavby, s.r.o. Chýnov cabinet-joinery, special building work www.drevotvar-ptak.cz Veolia Voda Česká Republika, a.s. Praha water production and distribution www.veoliavoda.cz Živa zemědělská obchodní, a.s. Klášterec nad Orlicí machines sales and service, farming, wood production www.ziva.cz A.S.A. České Budějovice, s.r.o. České Budějovice waste disposal and communal services www.asa-cz.cz Beskyd Agro, a.s. Palkovice agricultural and forestry production www.beskydagro.cz Zemcheba, s.r.o. Vodňany agriculture, fruit-growing, livestock production www.zemcheba.cz GEOtest Brno, a.s. Šmahova 112, 627 00 Brno Phone: +420 548 125 111 E-mail: trade@geotest.cz, www.geotest.cz Turnover: EUR 16 600 000 Number of employees: 133 Export: Turnover of exported services rang- es around EUR 1.1 million; services are the same in the Czech Republic and abroad. GEOtest Brno, a.s., is one of the largest Czech companies operating in geology and envi- ronmental protection. It is a reliable partner with a tradition of more than 40 years and an established, experienced team of profession- als with a long practical international expe- rience. GEOtest Brno, a.s. provides services in the following branches: protection and remediation of groundwater and rock envi- ronment, disposal of old ecological burdens, hydrogeology, geotechnical work and engi- neering geology, geophysics, environmental studies (Environmental impact assessment – EIA, environmental audit, environmental risk assessment, feasibility studies), manage- ment systems (ISO 9001, ISO 14001 or EMAS, IPPC, OHSAS), waste management, landfills, cleaner production, hydro-chemical labora- tories, and soil-mechanics laboratories. Where do you see the main interest of your clients at this time? It is especially engineering geology research for motorways and roads. Can you mention some of the largest and most important projects of your company abroad? Very important are our operations in Bos- nia and Herzegovina – we are supplying technology for the introduction of an in- tegrated system of waste management in the Una-Sana Canton. Another large project is in Mongolia, where we are helping in ar- eas suffering from drinking water shortage; technology for water treatment and protec- tion of water resources. JIP - Papírny Větřní, a. s. Papírenská 2, 382 11 Větřní Phone: +420 380 909 231 Fax: +420 380 909 274 E-mail: info@jip.cz, www.jip.cz Turnover: EUR 80 million Number of employees: 750 Export: Exports go to Germany (16%), Slo- vakia (11%), the United Kingdom (8%) and other countries. JIP – Papírny Větřní, a. s. endeavour for long- lasting prosperity is based on tradition, high quality, flexibility, and super-standard rela- tions with our business partners. Due to suc- cessful sales around the globe, we have ex- tensive experience in the field of wrapping and printing paper and can offer a broad range of paper for all purposes. What are the advantages of the paper you make? What properties would you emphasise? How are they achieved? We are focused on special thin paper prima- rily designed for food wrapping. Our main segments include paper bag manufacture, paper waxing, lamination and printing, and other production includes ribbed paper, and wet-strength and grease-proof paper. JIP has equipment for the annual manufac- ture of 3 000 tons of paper bags, 10 000 tons of sheets, and 500 tons of paper with flexo- graphic print. The main advantages of JIP paper are super-standard quality and hygi- enic accreditation for food contact awarded by the renowned company ISEGA. Great emphasis is being laid on environ- mentally friendly manufacturing. How is your company taking care of the environ- ment in this respect? We are in compliance with all valid envi- ronmental standards. The most recent sig- nificant investment in this area included the construction of a new waste-water treat- ment plant, and the change of fuel from coal to natural gas. Reference must be made of the increasing share of recycled paper, which is coming close to 1/3 of the total fibre con- sumption. The planned strategic investment will be focused on ecology, specifically on further increase in the share of recycled pa- per and change of fuel to biomass. Photo:Firmsarchives

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