E15 weekly 21. 11.

Monday, 21 November 2016 Issue 140 l newsstand price CZK 24/¤ 1 l www.e15.cz Super surplus Finance minister Andrej Babiš dispels three ‘falsehoods’ about his budget triumph TOP STORY pages 8–9 Beijing’s game plan One-fifth of everything is now made in the Middle Kingdom. The patient strategy is for much more FEATURE pages 12-13 9 771803 454314 0 0 1 4 0 Tereza Zavadilová China and the Czech Repub- lic should look to intensify their cooperation in the financial sector, agreed participants on a banking panel at the China Investment Forum 2016 held at Prague Castle. “The Czech Republic has an excellent geographi- cal position and with the right time now having arrived we could begin to build a European financial hub for China in this country,” said Tao Juan, president of Kaiyuan Securities Company. Naturally, progress on the objective is not yet far advanced, as the necessary infrastructure, services and strengthened financial sector promotional work must be created first. But, for instance, Bank of China, the fifth biggest bank in the world according to assets, and already boas- ting a Prague branch, has expressed its determination to strengthen its Czech market position. Continues on page 4 Chinese firms’ interest in the Czech Republic has shot up to such a level that there is talk of creating a financial hub for China here Hub club Photo: ČTK facebook.com/ e15weekly

POLITICS Pavel Otto The junior ruling coa- lition Christian De- mocrats [KDU-ČSL] could become the nationwide partner of the opposition Mayors and Independents [STAN] party, which climbed to the highest levels of poli- tics thanks to its cooperation with the centre-right TOP 09. That conclusion can be rea- ched from comments lately made by STAN leader Petr Gazdík and a KDU-ČSL boss Pavel Bělobrádek. Gazdík is refusing to further cooperate with TOP 09 on an exclusive basis as he intends to create a wider bloc of allied parties before next year’s parliamen- tary elections. “We’ve succeeded in knitting together some re- gional movements. Within them are some real talents who should long ago have made it into Parliament or the Senate,” Gazdík recently stated. He identified TOP 09, the Christian Democrats and the Civic Democrats [ODS] as the most natural parliamen- tary allies of STAN. Bělobrádek, meanwhile, identified only TOP 09 and STAN as his preferred part- ners. “TOP 09 and the ‘Ma- yors’ are with us affiliated in the same European Parlia- ment party group. I am able to picture a future election alliance with them,” he said. He baulked, however, at the creation of such a formation before autumn next year. It is only so far certain that the cooperation pact linking STAN and TOP 09 will de- finitively end in December. “The Mayors have unambi- guously told us that any form of two-party agreement is for them unacceptable,” said TOP 09 chairman Miroslav Kalousek. Both sides will by the end of this year settle their commitments to each other, with Gazdík in the process departing the leadership of their lower chamber repre- sentation in Parliament. Gazdík will meanwhile make preparations for dis- cussions with all potential general election allies, dispen- sing with any idea of exclusive arrangements. Kalousek has been urging the creation of a right-wing bloc of parties intent on batt- ling the centre to centre-right ANO movement. While ODS is ready to discuss his pro- posal, KDU-ČSL is sceptical about it as it is unhappy that Kalousek is TOP 09’s leader. Kalousek said he was convin- ced that STAN is determined to get into government with the Christian Democrats. “Ei- ther someone has the target of winning an election, or they want to be in government at any price,” he remarked. news 2/3 ‘Mayors’ plan wider political alliance Parties jostle for best deal to fight for centre and get into government Photo: ČTK Analysts ponder slowest growth since 2014 Childhood home of genius behind Porsche restored The renovation of the childhood home of automotive engineering great and Porsche car company founder Ferdinand Porsche (1875-1951) has been completed. The house in Vratislavice nad Nisou, North Bohemia, now looks from the outside as it did at the end of the 19th century, where the genius car designer lived, attending classes at Liberec’s Imperial Technical School at night and helping his master panel-beater father in his mechanical shop by day. Inside the building is an interactive exposition. When he turned 18, Porsche obtained a job with Vienna’s Béla Egger Electrical company Photo: ČTK Jaroslav Bukovský The summer saw the Czech economy experience its weakest quarterly growth rate in two years. Preliminary esti- mates show that year on year just 1.9 percent of growth was achieved in the third quarter. As we approach the mid-point of the fourth quarter, the eco- nomic revival thus seems to be losing steam. Low investment and the apparent industrial slowdown of late seem to be impacting on the country. The economy, meanwhile, is ha- ving to cope with the effects of less than impressive growth rates being experienced by neighbouring countries. “Looking at the low growth in the third quarter, we are going to re-evaluate our full- -year prognosis for the Czech economy downwards from the current 2.6 percent,” said Mo- ody’s Analytics’ analyst To- máš Holinka. The cooling, he added, could be attributed to less favourable developments in Germany, where around one-third of Czech exports are absorbed, and decele- rated growth in Poland and Hungary. The Czech Republic’s more restrained performance could also prove a headache for the Czech National Bank [ČNB]. The central bank’s outlook issued in early November counted with growth for the third quarter coming in at nearly one-third up year on year. The unfulfilled ex- pectation could result in the bank’s weak crown policy being extended. “If the eco- nomy was to also grow more slowly across the subsequent quarter, the arrival of price growth could be more gradu- al and there would be an inc- reased likelihood of a further shifting of the target date for abandoning the exchange rate commitment,” said Deloitte Czech Republic chief econo- mist David Marek. Read more at E15 weekly.cz Creating a wider bloc. Gazdík recently identified TOP 09, the Christian Democrats and the Civic Democrats [ODS] as the most natural parliamentary allies of Mayors and Independents party

Jan Šindelář Transport firm Leo Express is not content with laying on only trains and buses for passen- gers. In recent days, company entrepreneur Leoš Novotný has started providing electric kick scooters. For takers they are designed to solve the there and back dilemma of the “last mile” between the train or bus station and the destination. Leo Express has launched a pilot service in which the kick scooters are offered at Pragu- e’s Hlavní nádraží [Main Train Station] and on trains. With an investment reaching into the millions of crowns, it has bou- ght 100 of the small platform vehicles. “In future we will have availability on buses and at all ticket offices,” company director Peter Köhler told E15 daily. Users had so far “respon- ded very favourably” to the new service, he added, noting that the scooters were mainly being used by younger people without handheld cases, such as man- agers using one-day travel ar- Photo: Leo Express Study to crunch costs for a cableway to the zoo A viability study on using a cableway to connect Prague Zoo with the Podbaba quarter westward across the river Vltava is to be commissioned by Ropid, the body responsible for organising integrated public transport in and around Prague. Ropid (a Czech acronym for “Regional Organiser of Prague Integrated Transport) is searching for a study author. “We have to see first that it makes financial sense. If it does, and the city council decides to build the cableway, it would form part of Prague’s integrated public transport system using the same single and season tickets as the rest of the city,” said Petr Tomčík, CEO of Ropid. A chair lift (pictured) that connects the lower and upper parts of Prague Zoo started operating in 1977 Leo Express rolls out ‘last mile’ kick scooters Photo: Profimedia.cz Criticism is not defamation No holding his tongue The timing of a proposal by 60 MPs to bring in a jail sentence of up to a year for defamation against the president could not have been more opportune. The move from deputies spanning the Social Democrats, Communists, ANO and Dawn came just two days before the 27th anniversary of the Velvet Revolution. And yes, this year’s 17 November events were primarily a time of demonstration for precisely those people opposed to Miloš Zeman. Zeman’s supporters are rubbing their hands with glee over the prospect of a law which would finally rein in those who have dared to point out the president’s numerous mistakes, court-affirmed lies, inappropriate words and untoward behaviour. Fine, but let the proposed law apply not just to the current head of state, but also to his predecessors. For many of Zeman’s proponents have for years been doing their level best to besmirch and defame our first post-revolution president Václav Havel with the worst vulgarities. Incidentally, Zeman too, will one day have to bid adieu to the Castle. At which point his supporters will no doubt relish pointing out the flaws and failures of his successor. German Chancellor Angela Merkel evidently likes to give herself plenty of time to make major decisions. And then she believes it is up to her, and her alone, to decide when and where to make announcements about the verdicts. Those who follow Merkel, largely understand and respect that. But not Norbert Röttgen, chairman of the Bundestag\'s Committee on Foreign Affairs – and also a former environment minister, thrown out of the federal government by Merkel back in 2012. But time is a great healer and Röttgen has again got the craving. Especially judging by a recent interview given by Röttgen to CNN, in which he declared that Merkel intends to run for a fourth term as chancellor. The comments caused an immediate storm. Röttgen deigned to speak for Merkel, something the chancellor detests and is unlikely to forget. And the consensus from German politicians is also: if anyone has a mandate to speak for Merkel, then it is most certainly not Röttgen. The CDU member may be a lot of things, but he’s hardly a close confidant of his party leader... German Twitter users also mocked the leak under the hashtag #röttgenpacktaus (“Röttgen unpacked it”). “Night is colder than day,” said one user sarcastically. “Bruce Wayne is Batman,” said another – the idea being that Merkel’s fourth term announcement is pretty much viewed as inevitable. Dušan Kütner’s notebook rangements to attend a meeting and students. The electric kick scooters can travel at up to 25 km/h, me- aning, for instance, the journey from Hlavní Nádraží to Prague’s Lesser Town can be made in 10 minutes. Leo Express plans to next year purchase another 200 of the vehicles. “The interest is also partly there because of the ban on Segways in Prague,” Köhler suggested. Another at- traction is that it is permissi- ble to carry the scooters on to city metros, trams and buses. It costs from CZK 250 to hire a scooter for six hours, but until the end of the year an introduc- torypriceofCZK99isavailable. Leo Express seems to be ad- dressing the “last mile” diffi- culty faced by passengers more extensively than rival travel ope- rators. Among its cooperations are one with the Uber taxicab service and a venture with bike- sharing firm Rekola. It has even created a specific Door 2 Door Manager job position. Igor Záruba’s notebook

business 4/5 TECHNOLOGY Daniel Novák The door has been un- locked for emerging Czech technology and online business owners who wish to access some Chinese funding. Central Bohemian Innovation Centre [SIC] re- cently inked a strategic co- operation agreement with a  major startup incubator based in China’s Sichuan province. The deal is part of a giant project that is rolling out a modern version of the ancient Silk Road. It aims to put in place infrastructure to support trade links between China and Europe. “The cooperation’s fundamental objective is to exchange ex- perience in supporting and in- cubating startup businesses,” said Ivo Říha, head of SIC. Without turning to official bodies, Prague-based start- -up Sphericam 2, a developer of cameras used in the crea- tion of virtual reality, lately secured an inflow of Chinese capital. The startup recei- ved USD 5m from Chinese investment fund Kignet Tech- nologies, specialised website CzechCrunch reported. However, its success is ra- ther the exception than the rule. “There are preciously few Czech startups making an appearance here. Every once in a while someone does come but we are yet to see a business wanting to esta- blish an office and run a bu- siness here. What is needed is an official representation, an institution backed by the go- vernment that would be able to see things through,” said Jan Šmejkal, a section head at Startup Grind, a China-based international community. Things could move for- ward at a greater pace with the recently bolstered fire- power of Chinese venture capital funds. The Chinese government has invested more than USD 300bn in the funds this year as part of its Startups get a leg-up from China Central Bohemian Innovation Centre among first to take advantage of ‘Silk Road’ incubator Scramble to see the ‘true original’ Cuba before it vanishes The travel industry is enjoying sharp growth when it comes to Cuba. The first six months of this year saw a year on year 11.8-percent increase in the number of tourists travelling there. Receipts grew around 15 percent to USD 1.2bn (nearly CZK 30bn). The majority of tourists were Canadian, while second and third places were taken by Cuban Americans and other Americans, respectively. Many tourists said they wanted to experience the “true original” Cuba which they fear may fade away and vanish as more and more travellers and holidaymakers take advantage of the relaxati- on of restrictions aimed at the country to journey there Photo: ČTK Continued from page 1 Branch manager Hou Wenbo said the bank wanted to serve Czech clients along with its Chinese customers. “Bank of China has come here because the Czech Republic has huge potential for cooperation. Our bank has resources and a ne- twork which we want to also offer here, including to local firms,” he said. Other parties that hope to capitalise on the intensified Czech-Chinese cooperation are also being lured into the picture. Advisory firm Central European Trust[foundedbyNigelLawson, the former British chancellor of the exchequer and father of TV cooking show personality Nige- lla Lawson –Ed.] was present at the forum offering both sides consulting and the arranging of investments. Last year the advisor mediated private equity investments worth EUR 250bn in Central and Eastern Europe (CEE) projects, according to manager David Keresztes. “Investment goes hand in hand with economic growth, andwiththehelpofinvestment it is possible to prevent finan- cial crises. Private equity capi- tal goes into start-ups, smaller firms, assisting expansions and improving corporate perfor- mance and management,” he added. Investment funds in which the state has a minori- ty holding function the most impressively, Keresztes said. China’s Everbright Group, established in 1983 in Hong Kong, also wants to offer its expertise in this country. The firm has assets valued at CZK 12bn.“Ifa firmperhapsdesired to list its shares on the Hong Kong bourse, we are capable of providing the support,” said company vice-president Cai Yunge. Everbright Group hopes to invest in “better co- nnectivity” between CEE and China. Given that objective, it has acquired a stake in an airport in Albania. “We want to attract more visitors to your region,” said Cai. Hub club attempt at shifting the core of the Chinese economy from industry to consumption and the service sector. There are however some sceptical voices when it comes to Chinese support for startup businesses. “They dream about creating entre- preneurs if they pour enough money in. But it can also end up with the [Chinese] gover- nment facing a  huge bill,” Bloomberg news agency re- ported Gary Rischel, founder of leading Chinese venture capital company Qiming Ven- ture Partners, as saying. Global village. The Central Bohemian Innovation Centre opened last year in Dolní Břežany on the southern outskirts of Prague. Its strategic cooperation deal is with a major startup incubator based in Sichuan, China Photo: ČTK

Jan Stuchlík It’s increasingly clear that con- cerns voiced by EU funding ex- perts were justified: Czech busi- nesses are unable to absorb the full amount of European energy efficiency subsidies. Six months after the closing of the call for proposals under the Operatio- nal Program for Enterprise and Innovation for Competitiveness, the Czech industry and trade ministry has allocated subsidies to 427 applicants, worth a total of around CZK 2bn. Reviews of only 18 more applications are pending. The overall allocations will thus fall considerably short of the CZK 5bn available to the ministry to support energy effi- ciency and energy savings. “We received 575 applicati- ons, 46 of which were subse- quently either withdrawn by applicants or rejected due to formal shortcomings. The 18 applications still pending will be processed by the end of No- vember,” said ministry spoke- sperson František Kotrba. If all the successful applicants realise their projects as proposed, ove- rall energy consumption should Firms fail to absorb EU energy efficiency money Photo: Profimedia.cz up and down Jan Mládek Czech industry and trade minister Three billion crowns may have gone begging as his ministry has failed to allocate substan- tial EU subsidies available under an operatio- nal program for enterprise and innovation. Alexandr Pavlov Owner, Alexandria Group The company has taken a foray into Poland where it has snapped up travel agency Net Holiday for around CZK 100m. One of the biggest Polish holiday operators, it offers 19 destinations via flights from seven Polish airports. Alexej Ulyukayev Russian economy minister He’s under house arrest charged with having taken a $2m bribe for endorsing a takeover. Investigators alleged he threatened to create obstacles for Rosneft when it was pursuing a 50-percent stake in another state oil company. Rumen Radev President of Bulgaria The Moscow-friendly Socialist general beat his pro-EU and centre-right rival Tsetska Tsacheva by more than 20 percentage points in the poll for the presidency. PM Boiko Borisov’s centre- -right minority government resigned. Dan Ťok Czech transport minister Rumours swirled that Social Democrat Prime Minister Bohuslav Sobotka might push hard to give him the boot as part of his post-elections cabinet shake-up, but as it turned out the ANO minister was simply given a list of priorities to sort out before the general election. Funds acquire stake in Amsterdam houses of ill repute In this longrunning era of ultra-low interest rates, investors can be persuaded to look around for some rather risky, or risqué, investments with higher returns. Managers of two pension funds – one grouping Dutch farmers, the other employees of Holland’s Rabobank Group – have plucked up the courage to pay €60m to acquire a 35-percent stake in 133 buildings in Amsterdam’s red light district. The stake is more specifically in public-private company 1012 Inc (named after the buildings’ postcode) set up by the mu- nicipality and housing corporation Stadgenoot. It plans to use the financial injection to help transform the area into an attractive residential neighbourhood and vibrant hub for creative firms and retailers Photo: ČTK be reduced by 1.1 petajoule, or half a percentage point of the total energy savings the country has pledged to achieve by 2020. The ministry itself is begi- nning to sound the alarm bells as the projects with approved EU subsidies are insufficient to ensure the Czech Republic achieves its intended energy savings. Terms and conditions attached to the subsidies have also this year caused heating plants to put modernisation in- vestments on the back burner. But Martin Hájek, director of the District Heating Associati- on of the Czech Republic, said: “If the ministry succeeds in re- viewing the new applications, investments could be revived once again come next year.” Sadly, the results achieved in the Czech Republic under the Operational Program Enterpri- se and Innovation for Compe- titiveness are not the worst in utilising available funding. The Integrated Regional Operatio- nal Programme that provides funding for apartment building renovations has fared even wor- se. As much as CZK 1.35bn was available to property owners under this year’s first call for proposals, yet the regional de- velopment ministry has so far allocated a meagre CZK 61m. E15 weekly, economic and business news magazine | www.e15.cz Igor Záruba, Executive Editor, igor.zaruba@cninvest.cz; Marian Hronek, Editor, marian.hronek@cninvest.cz | Translation: TextMasters, textmasters@textmasters.cz Contact: Adéla Nová, Secretary | Call (+420) 225 977 668 Postal address: Komunardů 1584/42, 170 00 Praha 7 | Published CN Invest a. s., Pařížská 130/26, 110 00 Praha 1 Josefov, IČ 04312945 Advertising: Šárka Kamarýtová, Sales Manager, sarka.kamarytova@cncenter.cz Production: vyroba@cninvest.cz | Distribution: distribuce@cninvest.cz Registration: E 21420 E15 weekly, ISSN 2464-711X Reprints & Permissions: The Publisher will consider requests for reprints or any other reproduction | Printed by EUROPRINT a. s. facebook.com/ e15weekly Steven Harman Director of Amazon Europe The online retailer is now sending Czech custo- mers to the German part of its business, instead of offering various roads to European sites.

Lately, Prime Mi- nister Bohuslav Sobotka’s sense of political direction has seemed a little muddled. But now, the Social Demo- crat leader’s inten- tions are becoming increasingly clear After the Social Demo- crats’ poor showing in October’s regional and Senate elections, the PM spoke of the need to appeal to young, urban liberal voters in the style of the Pirates party. But that appeared to be merely a kne- ejerk reaction to the electoral drubbing. And perhaps Sobot- ka is kicking himself now; many of the more intellectual online social networks took him at his word, expressing genuine high hopes for such an outstretched hand. But, in reality, these were mere musings. Since the elections, Sobotka has not taken a single step to raise his party’s appeal to such urban liberals. Nor does it even seem that he wants to. In fact, he appears to be distancing his party away from them. Repla- cing human rights minister Jiří Dienstbier was just one such step. In a  TV debate a  few weeks ago, Sobotka indicated that in a presidential election runoff involving Czech lyricist and writer Michal Horáček, he would back the incumbent Mi- loš Zeman. That is viewed by many as another stab in the back in terms of lifting appeal to liberal voters. Sobotka is seeking to at least be able to do honest battle with ANO leader Andrej Babiš in the upcoming parliamentary elections. And he has decided to do that not by seeking supp- ort among educated urban vo- ters, but rather by wrestling left-wing working class voters away from Babiš – the kind that just voted for ANO in local elections. To achieve this, asi- des from normalising relations with the Castle, Sobotka needs two things: ending his party’s internal strife, and a singular leftward (in the old-fashioned sense of the word) party focus. His post-election reshuffle mo- ves towards both of these ends. Much has been written about Sobotka’s attempts to soothe intra-party strife by bringing in “new blood”. But the larger context is worth exploring. A member of the Social De- mocrats’ liberal wing, Dienst- bier – a Kladno senator and fai- led 2013 presidential candidate – has allies in Prague, but for many party members outside of the capital he has remained an elusive, even grating figure. His departure as minister will likely not cost the party too many votes. Conversely, the fact that Michaela Marksová – close to Dienstsbier in poli- tical outlook – stays on as la- bour and social affairs minister shows that Sobotka grasps the key role of her policies in rela- tion to those voters who utilise state support, from pensioners, to welfare recipients, to public sector workers. Unlike the ur- ban liberals, this voter bloc is crucial for his party. From Sobotka’s point of view, his attempts to broaden the party appeal represent a bold gambit. But with his sacrificial cows, the PM also plays into Babiš’s hands; the ANO leader can now point to Social Democratic weaknesses inside the coalition, bolstering ANO’s image as “flawless” by comparison. It’s risky and could easily backfire. But one can hardly call it confused. No, Sobotka is undertaking a cold and calculated piece of power play ahead of the general elec- tion. He isn’t acting with rose- -tinted glasses and, given the cold political realities, that is understandable. It also repre- sents a more realistic approach than expanding appeal from the left to the political centre. Such a move cannot be achie- ved in the year left to make an impact. Even the much vaun- ted British New Left (or New Labour) was not built in a day. Never mind what eventually became of it. opinion 6/7 joke Jana Havligerová’s diary Zeman’s brush with the truth President Miloš Zema- n’s spokesperson Jiří Ovčáček has once again ruffled through evidence to defend his master. And this time, he even found something! Specifically evidence affirming the attendance of US amba- ssador Andrew Schapiro at the 28 October celebrati- ons held at Prague Castle (Zeman had claimed Schapiro failed to attend). The evidence was incon- trovertible, and included a photograph taken during a ceremony in the Castle’s Vladislav Hall, as well as testimony by German ambassador Arndt Freytag von Loringhoven, who sat next to Schapiro. But an apology by Ovčáček on behalf of the presi- dent was never going to be so straightforward. And so the wording, very carefully, states: “If the information about Amba- ssador Andrew Schapiro’s non-attendance at the Castle on 28 October was incorrect, then the presi- dent apologises.” Former Social Democrat PM Jiří Paroubek, who left the party leadership – and soon after the party itself – after a big electoral de- feat in 2010, is back on the political stage, posing as an unofficial adviser to his former party. Almost daily now Paroubek comments on events in the party, and specifically steps taken by PM Bohuslav Sobotka. And, given recent election results, no doubt some So- cial Democrats will listen. Is some kind of political comeback in store? The Civic Democrats want to lower VAT rates on beer as compensation for pubs and restaurants cau- ght by the impact of the government’s introduction of mandatory electronic receipts [EET]. Haven’t we heard that idea somewhe- re before? Yes, for it was touted by none other than ANO leader Andrej Babiš a few months back. Surely the Civic Democrats know that plagiarising other people’s ideas is wrong. What some parties will do to increase their popularity ahead of parliamentary elections. Tut-tut. Photo: ČTK “The last person who tried to pay with his phone accidentally paid $2125558080.“ Martin Čaban Sobotka is undertaking a cold and calculated piece of power play ahead of the general election Sobotka’s clinical logic 255869/155  inzerce CHECKOUT

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8/9 top story Record year

It was back in 1995 that the Czech Republic was last able to keep its state budget in the black, in that case to the order of CZK 7bn. Since then, deficit spending has been the rule. Until this year. Surprising even the government, a projected CZK 70bn deficit is now forecast to be a surplus of nearly CZK 100m. Is the economic cycle responsible, or do we have prudent government oversight of the treasury to thank? Here finance minister Andrej Babiš presents his view. Writers from Reflex will next week present an opposing perspective Andrej Babiš OK, so maybe it’s not the kind of news that will lead to crowds jumping for joy. But it’s worth noting that this year only a couple of EU countries will have budget surpluses. Possi- bly Germany and ourselves – great news. There’s been a lot written of late about the surplus actually being a result of a lack of investment by the state. Or that it’s a result of simple economic growth, or that it stems from the treasury benefitting from dividends paid out by state-owned firms. Permit me to explore, and ho- pefully disprove, some of these ideas: THREE FALSEHOODS Falsehood one: The surplus is a result of the state failing to spend on crucial investment Every driver must have noticed a sizable upsurge in investment in our Czechs roads and highways. Critics argue that October’s year- -on-year investment expenditures are down by CZK 58bn. And that supposedly means that the Czech Republic’s investment activities have stalled. But that simply isn’t true. In reality, lowered expenditu- res are not a result of decreased investment, but rather because at the end of 2015, the government was rushing to use up allocated EU funds as one grant allocation bloc expired. Those failing to commission the necessary work would simply not have been paid. Co-expenditu- res (investments) by the state on EU projects reached record levels. In 2015, the state spent a total of CZK 175.8bn on investments, which was up CZK 64.3bn on 2014 levels, and CZK 73.5bn higher than in 2013. One reason for this year’s lower expenditure levels is that since 2010 the Czech state has curtailed investment into our transportati- on infrastructure, ceased buying up eminent domain land, and more time is now taken before motorwa- ys are planned and ultimately built. But despite all this, in 2016, the state will still spend CZK 80bn on transportation infra- structure investments, which is more than in the years 2010, 2011, 2012, 2013 and 2014. And in last year’s re- cord year, only CZK 11.46bn more was spent for a total of CZK 91.46bn. Falsehood two: Only increased econo- mic growth is responsible higher tax revenues Asides from economic growth, more effective tax collection me- thods – something lacking in the past – are also responsible for our current surplus. This is not a pri- ority because I have some kind of objective of increased state control over everyone and everything, but rather because hitherto those not wanting to pay their fair share simply found a way of doing just that. It is no coincidence that since I took over, tax revenue collection has increased across the board. October’s signifi- cant budget surplus is partly also down to improved tax collection. In October, tax revenues grew year-on- -year by CZK 56.9bn. Falsehood three: The treasury- ’s finances were improved via dividends and also because regions and municipalities only received education grants in Novem- ber During the months of October and November, both dividends from state firms, and also allocation of grants for education, represented enormous sums in terms of public revenues and expenditures. However, they do  not account for the overall strong surplus figures for October. Altogether, dividends (revenues) and education (expenditures) yield a net CZK 22.7bn “plus”. Compared with the total surplus, which represents an overall swing to the black against last year of CZK 127.5bn, such a  figure is hardly decisive. Even once this figure is deducted, we are still left with next o CZK 105bn compared with 2015. I said that I would do everything to ensure that this year’s budget ended with a surplus. That has not occurred since 1995. Today, I have strong hopes that we will be able to achieve this. You may therefore be asking why, if this year is breaking records, we aren’t also planning a balanced budget for next year. That is simple to explain. I would personally love to have a balanced budget. But sadly this matter is not exclusively in the hands of the Ministry of Finance under the leadership of ANO, but it also down to the coalition government, led by the Social Democrats. And this party’s policies don’t pay too much heed to budgetary responsibility. In fact, in Parliament they even voted against a  so-called debt brake, and also against our proposed constitutional amendment which would prevent our country sliding into debt. I am glad that I succeeded in resisting spending requests by the Christian Democrats and Social Democrats, thus reducing our forecast deficit from CZK 85bn to CZK 60bn. The finance minister is exclusively tasked with, and responsible for, the collection of tax revenues, while other members of the government only spend such funds. Permit me to make one final point: Asides from a  balanced budget, we are also reducing the national debt. Since I  became finance minister, the national debt has already been reduced by CZK 23bn. I assume that by the end of 2016, that figure will be even higher. At least as far as the budget, debt and overall atmosphere, things are already getting better. Taken from the magazine Photo: Profimedia.cz Asides from a balanced budget, we are also reducing the national debt. Since I became finance minister, it has already been reduced by CZK 23bn

10/11 face to face Photos: Jiří Koťátko Jan Stuchlík With the big opportunities having sli- pped through your fingers, how do you plan to maintain growth? Our strategy does not stand and fall with a single big transaction. And we intend to keep the strategy in place for ČEZ – meaning the traditional part of the holding – for as long as possible. In addition, we are also working on mo- ving forward in terms of our business orientation. However, this latter aspect is also not built solely around a limited number of major transactions. Instead, we are working meticulously on crea- ting a comprehensive range of services for our customers. Taking advantage of acquisition opportunities is only the third component of our strategy. Big opportunities, such as Vattenfall or Slovenské elektrárne, tend to be few and far between. The smaller ones, on the other hand, support a general shift towards the future configuration of the energy sector. These involve com- panies that can install solar panels on buildings’ roofs, deliver power storage solutionsordealinenergymanagement for properties. Smaller acquisitions will hardly help you to fulfil your plan to record an operating profit of CZK 6bn in 2020. That is why you attempted to acquire Vattenfall. We eventually decided against bidding once we had assessed the risks associ- ated with a possible decline in brown coal production as too big to take on. You’ve also been planning to acquire stakes in big wind farms in Western Europe. Are you getting any nearer to concluding a  significant transition in this sphere? Our sights are set mainly on Germany. Once again, we are not interested in followingthepathofa singlebigtransac- tion.OurcolleaguesintheDevelopment unithavehadtheirfingersinseveralpies and have already succeeded in conclu- dinganacquisition.Butwewanttofocus more on the Czech Republic in the near future. We are interested in certain as- setsinthecountryeventhoughtheyare not yet on the market. Which assets are they? We are thinking about a comprehensive approach to collaborating with the City of Prague. Quite understandably, one asset we are interested in is Pražská plynárenská or at least its business part. The company is currently in the sole ownership of the City but we would like to become a partner. What other activities would you like to pursue in the Czech Republic? We are also looking very intently at the water supply business in this country, it is an area we feel very close to. But we have yet to reach the stage when we are able to bring an actual offer to the table. DANIEL BENEŠ ČEZ’s ambitions now extend to water supply Plans for major acquisitions abroad by ČEZ Group – the energy holding in which the Czech state holds a near-70 percent stake – have not worked out. The conglomerate has given up its pursuit of Slovenské elektrárne in Slovakia, assets in Germany owned by Sweden’s Vattenfall and heating plants in Poland. Instead it is redirecting efforts at achieving growth with smaller incremental steps. ČEZ would, for example, like to establish a closer collaboration with the City of Prague

ČEZ recently sold the Tisová coal-fired power station. Do  you plan to conti- nue with the trend of selling off power plants nearing the end of their service lives? It is not in our plans to sell power generation plants. Speaking of a pe- riod post-2020, we have plans for our Ledvice station, an upgraded Pruné- řov station, and the power station in Tušimice as well as the Mělník facility that heats Prague. Other stations that are not worth further investment will be gradually decommissioned around 2020. Of course, I won’t rule out the possibility of selling any of them in the final stages of their life spans. The sale of Tisová was one part of an answer to our rather specific relationship with Sokolovská uhelná where we needed to resolve a longstanding dispute. The European Commission is to release a  draft of a  new directive on energy efficiency stipulating objectives for energy savings by 2030. You want energy efficiency to become a  major part of your business. What potential do you see in this area for the period up to 2030? It is an immense opportunity because the system will receive a huge financial boost. It will not just involve thermal insulation for properties but extend into modern energy management. That is precisely what our subsidiary ČEZ ESCO does. If we succeed in growing it into a well-established business by then it will create excellent opportu- nities for us. When you commented on the Commissi- on’s plans during the October meeting of the Confederation of Industry of the Czech Republic [SP ČR], your speech sounded more like a  warning against a looming economic catastrophe. That is because I was speaking in my capacity as the Confederation’s vice- -president and looking at the Czech eco- nomy as a whole. The country should be extremely careful not to cross the line where increasing energy efficiency turns from opportunity into a risk for the economy. The Commission is currently mulling two figures: whether to go for savings of 27 percent or 30 percent compared to a  baseline scenario. Nearer which of the two values does the opportunity become a risk? The values are a good way to make eve- ryone realise that we are dealing with a serious issue. According to what the Commissions says, savings of 30 per- cent by 2030 could cost the country up to CZK 880bn over a decade. That figure should startle politicians enou- gh into saying, damn, that it is a huge sum of money; they’ll see they are to approach the issue with the utmost responsibility. But the same calculation also says that the overall figure could be as low as CZK 130bn. The Commission’s analysis, to be offi- cially released in December, says that savings of one petajoule [one quadrilli- on joules] of energy can cost anywhere between three and 15 billion crowns. We think the total cost will actually be somewhere above the midpoint of the range, costing the Czech Republic some six hundred billion crowns in all. It would only be fair to subtract from the CZK 600bn the reduction in outlay resulting from both decreased de- mands on investment into energy infrastructure and lower energy con- sumption. This net investment is esti- mated for the Czech Republic at about CZK 13bn a  year. Does it not improve the figures enough? The problem is that while we are able to estimate the overall cost of the ne- cessary investment, the net impacts on the other hand are so complex that estimations for the period up to 2030 let alone 2050 are virtually impossible to make with any degree of reliability. You have to take into account the cost of operating the complete energy supply system, from power generation throu- gh distribution systems to consumption points including home appliances and electromobiles; you must also include all forms of energy, investment into efficiency measures, the list goes on. What is more, the data that the Com- mission works with should be taken with a grain of salt. The overall impacts are calculated for the Commission’s needs by a university in Athens using a proprietary model unknown to anyo- ne else so the calculations cannot be independently verified. What do you expect from the govern- ment? There must be a more accurate cost analysis for each group of [energy efficiency] measures. The outlay will be different for thermal insulation of buildings and for changing energy management in metallurgical fields. Decisions must therefore be made as to which of the measures are econo- mically viable and which will never bring about corresponding savings. When the costs of economically viable measures are added together we will get a sum total that the country’s go- vernment should stand by and defend. But the country still lacks any such detailed analysis. Are you still convinced that the Czech Republic will not be able to manage a more ambitious target? Yes, I am. If it were necessary to invest CZK 880bn, or 19 percent of the coun- try’s GDP, it would mean investing be- tween 1.3 and 1.8 percent of GDP every year in energy saving measures. That is almost all of the current GDP growth. In a situation in which ČEZ is striving to be a leading force in energy efficiency shouldn’t you, as the company CEO, be an advocate of energy efficiency? It doesn’t stop me from feeling a sense of responsibility for bringing up the associated risks. I do not want to see ČEZ being labelled the villain who planned something for the market in secret, telling no-one, and then set about minting money from it. I have had that experience already a few years ago in the support for solar po- wer case. Back then we also said that under the conditions proposed there would be too many solar parks, thus causing trouble in economic terms. But everyone was happy to dismiss that as scaremongering with a wave of the hand. And now they say you own the five lar- gest solar farms in the country. We hold six percent of the market, having bought projects that anyway would have been created without our involvement. Besides energy efficiency, you are also basing your strategy on the decentra- lisation of the energy supply chain. However, greater decentralisation has so far been hindered by distribution networks lagging behind. ČEZ operates the largest power distribution network in the country. How fast can you get it ready to let you and others properly cash in on decentralisation? We sing by the government’s National Action Plan for smart networks. All our investments are planned in sync with the action plan. We devote plenty of energy to it and we are certainly not lagging behind. Daniel Beneš (46) Worked as head of sales at Bohemiacoal from 1993 to 1997, followed by a stint as CEO of Hedviga Group. From 2000 to 2004, was CEO at Tchas, an importer of fuels and merchant. In 2004, became chief procurement officer at ČEZ, then moved over to the position of the holding’s chief administration officer in 2006. Appointed deputy chair of the board of directors at ČEZ in May 2006 and in September 2011 became chairman of the board. Daniel Beneš also acts as the vice- president of the Confederation of Industry of the Czech Republic [SP ČR]. I do not want to see ČEZ being labelled the villain who planned something for the market in secret, telling no-one, and then set about minting money from it

12/13 feature China’s deadly embrace The Celebrated Cases of Judge Dee is an anonymously written 18th-century Chinese detective novel which offers many an insight into the mindset of the Chinese. Even though the books were later translated into English in the mid-20th century (by the Dutch orientalist Robert van Gulik), today it’s highly unlikely that many study these tales, set during the era of the old Imperial dynasties. Consequently, many in the West, including Czechs, are failing to comprehend the new Chinese game plan Viliam Buchert The Chinese plan to “take over the world” is actually far more sophistica- ted, detailed and long-term than we in theWesternworldcanpossiblyimagine. It certainly exceeds the electoral man- dates of two or three of our democratic governments.Andifweacceptitsdicta- tes, then there is a very real danger that wewillneverbeabletowrigglefromthe clutches of China’s grasp. A strategy for a millennium Possibly no foreigner or western tourist has ever visited the Jingxi Hotel in Western Beijing. Since its opening in 1959 it has been decidedly off-limits to such visitors. It was here in Decem- ber 1978 that the 3rd Plenary Session of the 11th Central Committee of the Communist Party of China made a de- cision which would affect the entire world, the Czech Republic included. But very few knew that at the time. Deng Xiaoping became paramount leader of China, and the Party em- braced a policy of so-called “Reform and Opening Up”. This led to a se- ries of rapid changes in the world’s most populous country. China beca- me wealthier, more influential, more powerful, and managed to implement a curious mix of capitalistic commu- nism. And with that it also changed the world. CHINA SHANGHAI

The reason why it’s useful to look back to that Plenary Session in 1978 at the Jingxi Hotel is that China clearly has put in place a long-term strategy to take over the world. Sure the strategy may have been subject to revision and adaptation over the last 40 years, but the fundamentals remain the same. And Czechs seem almost entirely oblivious. So let’s take a look at the details of this plan to rein in the world. No going back The Chinese approach is two-prong: combining a snake-bite (first stalk, then pounce) and secondly the creating of a dependency similar to alcohol or narcotics. Beijing governments at first repe- atedly asserted that theirs was a poor country, in need of investment, and that the local market represented a huge, inexhaustible and highly pro- fitable opportunity for foreign firms. Last year alone, foreign investment into China amounted to more than USD 135bn. In 1991, the figure was a mere 5bn. The result of this is that over the past 25 years, the entire manufactu- ring capabilities of key industries spanning numerous countries have been shifted to China. That may seem like a beneficial idea at first glance, nesses are being founded; infrastructu- re built; mines and land bought up. In Europe and the US, however, interest has tended to be focused on more tech- nically and technologically advanced fields. But sooner or later, Western companies learn that products they invented are now also being produced in China. Another trick is to promise in- vestments in the order of tens, or even hundreds of billions of dollars. Only to produce a far lower sum down the road. We, too, will very likely experi- ence this. But in China’s case we actually also find an additional two unique practices not found anywhere else on quite this scale. Economic cooperation is made conditional on making political con- cessions. And those not willing to play ball for the long-term end up shunned by Beijing. China also “exports” people. Some as economic migrants, others simply as business figures. But a num- ber of these Chinese come funded by their own government, and act in essen- ce as a covert fifth column. And with that, the circle is complete. given the lower wages and production costs, and improving education levels among the workforce. But a deeper analysis exposes structural problems back home: the death of entire bran- ches of the manufacturing base, which causes unemployment and thus a re- duction in tax revenues. Furthermore, China conditions the founding of joint businesses via a stipulation that its people and its companies must play a role in such arrangements. The end result? Twenty percent of absolutely everything is now manufactured in China. Heavy domestic and foreign in- vestments, technological advance- ments, seemingly endless high GDP growth, and a large accumulation of capital have subsequently led China to make even greater investments across the world. That is now occurring in various ways. In Africa, various assorted busi- High-speed transport. Within a mere 20 years, China has gone from an outsider to a major manufacturer in this field Taken from the magazine China conditions the founding of joint businesses on its people and its companies playing a role in such arrangements. The end result? Twenty percent of absolutely everything is now manufactured in China

14/15 coffee break with… This approach saves both money and time as the premises are subsequent- ly adjusted according to the specific requirements of the new owner or tenant. The trend has become very popular in the Czech Republic in recent years and is applied by pr- operty developers in non-residential properties to let as well as in regular residential houses and flats. The shell & core approach was first used in the US in the sphere of rental office space. The expectations and needs of tenants often differed significantly from the arrangements and facilities on offer resulting in considerable amounts of requests for interior modifications causing extra costs and delays. Developers therefore came up with a simple concept that quickly spread around the world. A good example of shell & core done well can be found in the ByTy Malešice project in Prague 10. Here, a residential property includes a non-residential part making use of the shell & core principle. We contacted Jan Pustina (pictu- red), business and marketing direc- tor at ByTy Malešice, to learn why businesses seek this kind of pre- mises and to hear about the latest trends on the commercial premises market. king environment. In any case, shell & core premises are the more sou- ght-after alternative. The ability to arrange the premises from start to finish according to one’s needs and desires is too attractive to pass on. However, there is another important aspect to it as it can also save money since there is no need to remove any existing structures before applying one’s own design. As a general rule, the bigger the client, the greater the demands on both the spatial arrange- ment and interior synergies as they seek to fulfil their needs. Why are shell & core premises in such high demand in this country? The main reason for this system ta- king off so well in the Czech Republic lies in its solutions in terms of issues of costs and the efficient use of the space available. The initial outlay to acquire the desired premises is redu- ced for the customer while they can determine the office sizes and arrange the whole working environment according to their particular needs. Some customers prefer bigger spaces while others seek smaller individual offices. What we offer is unlimited variability with which they can work to achieve exactly what they need. How does this approach work in practice? It is all very simple, really. After a po- tential customer enquires about sui- table premises we show them their options and agree subsequent steps by specifying how much space and floor area they require, what their business needs are and their vision of the final premises. We can offer spaces with floor areas from 16 square metres to 303 sqm. As soon as the client makes their decision they receive from us all the necessary documentation as well as support in obtaining all re- quired permits. Commercial spaces in ByTy Malešice are mostly used by businesses and entrepreneurs in the service sector. They benefit from the proximity of residential properties that bring a broad range of potential customers underpinning the growth of their business. When is it better to make use of rea- dy-made premises and when does shell & core make more sense? This depends entirely on a client’s priorities and expectations, and the degree to which they wish to become involved in the design of the final wor- JAN PUSTINA Why are firms so persistently seeking shell & core premises? Properties in the shell & core category are offered with only basic modifications, largely without affecting the existing design in terms of interiors and partitions. Both of those parameters are adjusted only upon a specific request made by the buyer or tenant. Companies seek these types of premises for their clear economic and practical benefits. 262469/12  inzerce

society JUVE awards place Rödl & Partner in ‘league of champions’ Integrated professional services firm Rödl & Partner was named Law Firm of the Year 2016 in the tax law category at the JUVE awards. JUVE, a publisher of legal information, presented the award at the Alten Oper opera house in Frankfurt. Christian Rödl, managing partner at Rödl & Partner, said: For some time, we have purposefully, and in a targeted manner, been further developing our tax law practice with the aim of providing our clients with expert solutions worldwide from a single source.” Rödl & Partner was also recognised with “Comes highly recommended” titles in employment law and commercial company law Photo: ČTK Photo: Rödl & Partner Toy construction kit fans spoilt for choice at Zlín fair Few complaints of boredom went up at the Toy Construction Set Festival held at the Baťův Institute in Zlín, southeastern Moravia. Visitors big and small were invited to get stuck into play time with Sluban plastic bricks, Geo’s magnetic construction stick systems or perhaps wooden building sets from Zlín-based producer Walachia, known for its terrific toy model castles. And of course, the organisers did not forget the legendary Merkur brand metal construction kits. Santa, in plain clothes, was no doubt among the event’s attendees advertising 257504/45 You can subscribe securely via e-mail Use the e-mail address weekly@predplatne.cz, State your name and delivery address. Use the code WEEK 1116 as the message subject You can also subscribe online at our website www.predplatne.cz To subscribe on a toll-free number, call 800 248 248 Simply call to provide your personal details and cite the code WEEK 1116 Full-year subscription: CZK 650 and as a gift you will receive a voucher worth CZK 1 000 The shopping voucher can be used for the product offers on Friendly Suits website www.friendlysuits.cz until 30 June 2017. Get your subscription! Monday, 21 November 2016 Issue 140l newsstand price CZK 24/¤ 1l www.e15.cz Super surplus Finance minister Andrej Babiš dispels three ‘falsehoods’ about his budget triumph TOP STORY pages 8–9 Beijing’s game plan One-fifth of everything is now made in the Middle Kingdom. The patient strategy is for much more FEATURE pages 12-13 9 771803 454314 0 0 1 4 0 Tereza Zavadilová China and the Czech Repub- lic should look to intensify their cooperation in the financial sector, agreed participants on a banking panel at the China Investment Forum 2016 held at Prague Castle. “The Czech Republic has an excellent geographi- cal position and with the right time now having arrived we could begin to build a European financial hub for China in this country,” said Tao Juan, president of Kaiyuan Securities Company. Naturally, progress on the objective is not yet far advanced, as the necessary infrastructure, services and strengthened financial sector promotional work must be created first. But, for instance, Bank of China, the fifth biggest bank in the world according to assets, and already boas- ting a Prague branch, has expressed its determination to strengthen its Czech market position. Continues on page 4 Chinese firms’ interest in the Czech Republic has shot up to such a level that there is talk of creating a financial hub for China here Hub club Photo: ČTK facebook.com/ e15weekly EW16112101.indd 1 18.11.2016 13:21:02 This subscription offer is valid until 27 November 2016 This offer is available to new subscribers only and applies while stocks last. The publisher reserves the right to provide a substitute gift if stocks are exhausted. The offer is only valid for subscriptions taken out with a delivery address in the Czech Republic. 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16 diversions And the winner of the stompetition is... Japan’s ON-ART Corp’s eight-metre-tall “mechanical suit robot” Tyrannosaurus Rex made quite an entrance at its unveiling in Tokyo. ‘TRX03’ emerged from mist, roared loudly and stomped towards the audience. The world’s biggest moving dinosaur robot – the brainchild of company CEO Kazuya Kanemaru – then pretended to bite the head of a staff member, swinging him to the floor. Other dinosaurs, including an Allosaurus and Raptors, joined the T-Rex in roaming the hall, growling. Kanemaru wants to create a “Dino-a-park” invitations picture of the week Photos: Archive Photo: Reuters GIG B-Real of Cypress Hill B-Real, aka “Dr. Greenthumb”, is on his way to Prague to give all his fans a proper medicine. The celebrated leader of one of the best hip hop bands in history –the legendary Cypress Hill – performs at Prague’s Roxy on 22 November. EXHIBITION Historical attire at Old Times Museum The Old Times Museum boasts a unique private collection of Victorian and Edwardian clothes, accessories and curiosities, as well as romantic floral arrangements. Valdštejnská 4, Prague 1. GIG Ignite at Lucerna Music Bar Ignite, a melodic hardcore band from Orange County, California, return to Prague after many years to present their new album A War Against You. Much of their music is socially and politically tuned in. 26 November. FILM The Accountant (2016) Christian Wolff (Ben Affleck) is a maths savant with more affinity for numbers than people. Behind the cover of a small-town office, he works for the most dangerous criminal organisations. Then investigators start to close in. Various cinemas. TRIP TIP Prokop Valley A short journey from central Prague is a surprisingly beautiful area called Prokop Valley, where you can easily forget all the turmoil, hustle and bustle of city life. Streams and a lake that has settled in a former open-cast lime mine feature. About us. E15 Weekly is one of a group of business and economics-oriented publications printed by CN Invest a. s. It is a sister title to the E15 daily. Both periodicals, as well as a number of others, came under new ownership in the spring of 2016 when part of a portfolio formerly published by Mladá fronta a. s. was acquired. CN Invest a. s. publishes a broad range of print and online titles. In addition to other business-minded titles, the company also publishes lifestyle and women’s magazines (Maminka, Dieta, Moje psychologie) and children’s titles (Mateřídouška, Sluníčko). The publishing house also enjoys a considerable presence in the segment of technical and men’s online titles. CN Invest, and its sister company CZECH NEWS CENTER a. s. (the biggest publishing house in the Czech Republic, with titles such as Blesk, Reflex, Svět motorů, ABC), are members of the media concern CZECH MEDIA INVEST a. s.