The Czech Republic economic boom
The Czech Republic economic boom
Business News

The Czech Republic economic boom

How the Central Europe country is becoming a sort of industrial Switzerland

It is the country with the lowest unemployment rate in Europe, without euro, with a GDP that grows by 4.5 percent, a public debt below 40 percent and inflation at 2.4 percent. No, it's not Switzerland. We are talking about the Czech Republic, the State of Central Europe which until 1989 was behind the Iron Curtain. And now she is getting to know "Riccioli d'oro" moment, as the manager JPMorgan Diana Amoa has said, referring to her fabulous economy.

Nothing to be surprised, actually. Although still today perceived as a distant Eastern European country that jumps to the headlines only when it elects a president (as happens in these days), for over a thousand years, Bohemia and Moravia have occupied a central place in the life of our continent. "In the twenties, at the time of the First Republic, Czechoslovakia was among the top 10 industrialized countries in the world," remembers Matteo Mariani, general secretary of the Italian-Czech Chamber of Commerce. A legacy that, after the Velvet Revolution of 1989 (and the separation from Slovakia in 1992), has made it return to its former glory. With a workforce of 5.3 million people, the Czech Republic is the European country with the highest percentage of manpower employed in industry.

A figure that, despite its small size (10.6 million inhabitants) has transformed it into the Mecca of international investors: 80% of its GDP is made up of exports. In the first place, the automotive sector. In the Czech Republic there are three car manufacturers: the local Skoda (Volkswagen group), the Korean Hyundai and a joint venture between the Japanese Toyota and the French Peugeot and Citroen. Not only. The BMW has just announced that it is building a facility to test unmanned cars in Sokolov, two and a half hours away from its Munich headquarters.

And there is no shortage of Italians: "Here there are at least 400 Italian companies and there is not one that does not go well" says our ambassador Aldo Amati. «In the industrial field, the Czech Republic is returning to an international hub» explains Giuseppe Giordo, the former Italian manager Finmeccanica, now president and managing director of Aero Vodochody, 2,000 employees, the leading aeronautical company in Central Europe.

Yes, because the Czech Republic is becoming a sort of industrial Switzerland. Placed along the border line between the Slavic and German worlds, it is a buffer State that has managed to treasure even its darkest period, communism. "This is the first Slavic people in the West. And the mixture of Central European heritage (Bohemia and Moravia were 300 years under the Habsburgs) and Communist legacy gives them the ability to speak both in the East and in the West, "continues Mariani of the Chamber of Commerce.

A synthesis capacity embodied in the parable of Marek Dospiva, the entrepreneur who with his childhood friend, the Slovak Jaroslav Ha??ak, controls almost 90 percent of the Penta group. Founded in 1994 by five friends (hence the name Penta), it is a conglomerate specialized in long-term financial investments. Dospiva, a forty-eight year old athletic in a white shirt and dark suit but without a tie, receives Panorama in his headquarters in the center of Prague, built on the site where Rudé Právo, the official newspaper of the Communist Party of Czechoslovakia, stood before the demolition.

Mark Dospiva, Penta group

Ironies of history aside, the sancta santorum of Dospiva is on the top floor of a glass and concrete complex, in front of which a building commissioned by the archistar Zaha Hadid is about to rise. With a contagious smile, Dospiva remembers his beginnings: «When studying in a high school , I decided to become a diplomat: basically to be able to travel. In 1987 I was admitted to the Moscow State Institute of International Relations, the Harvard of the Eastern Bloc. Here I met my current partner Jaroslav. Since I had studied Japanese at high school, in 1991 they sent me to study Chinese at the University of Beijing, the only one recognized in the USA. Jaroslav followed me the following year. In 1993 we graduated in Moscow ».

During their studying the two friends decided to seize the chances offered by the fall of communism. And they did it in a very creative way. The most famous Czech singer of the time, Karel Gott, presented himself with a silk jacket, an unattainable piece of clothing to the most bought in the West. But in the brains of the two rampant young men, a click clicked: China's equal silk. "My father lent us the money to pay for the first container of Chinese silk jackets like Karel Gott's. We made 1,000 percent margin. After a year of container, we earned the first 100 thousand dollars ".

From there it was a downhill path: with the help of a friend who worked in the bank, the two began to make investments in the stock market with very speculative instruments. Result: "In two or three years, those 100 thousand dollars became millions and millions of dollars. At the age of 30, I owned dozens of millions of euros. "

Now that he is 48 years old, he leads an empire with a turnover of $ 5.6 billion. Present in 10 European countries, 35 thousand employees, operates in various sectors: from pharmaceutical to real estate, from media to manufacturing. Its flagship is the aeronautical company Aero, which in its 100 years of history has built 11 thousand aircraft and is now about to launch a new model: the aircraft to train military politi L-39NG. However, its most profitable business is the Dr. Max pharmacy chain. The Dr Max group has almost 2,000 pharmacies in six European countries, for a turnover of over 2.3 billion euro. The group's chief executive officer is another Italian, Leonardo Ferrandino, 47. «After Slovakia, Poland, Serbia and Romania, we also landed in Italy. For now we have 12 employees for four stores, but this year we plan to invest 50 million euros ».

Always in the balance between East and West: the Penta group as the whole Czech Republic. On the occasion of the first round of the presidential elections, on January 14, the New York Times titled: «In the Czech elections, a choice between hanging in the East or in the West». Milos Zeman, the outgoing president who will seek re-election to the ballot on January 26 and 27, is a populist close to China and on good terms with Vladimir Putin. The former Rector of the Czech Academy of Sciences, Jiri Drahos, who defends democratic values ??and civilization, challenges him. But the politician on which the spotlight is aimed is Andrej Babis, controversial premier waiting for confidence (it is under investigation for irregularities in the use of EU contributions).

According to the richest man in the country, in 2012 he founded the anti-system party Ano (Action of dissatisfied citizens), which achieved 30 percent of the vote in the 2017 elections. Is it really the Czech Donald Trump, what do they call it? "No, Trump is more crazy," commented Martin Weiss, a political analyst with the weekly Echo. «I would compare it to Silvio Berlusconi: like him (and unlike Trump), he is a pragmatic entrepreneur who does not catalyze hatred against whole groups of people». Ambassador Amati also advances a credit opening towards Babis: "Be careful not to push him into a corner, causing him not to assume too many nationalist and sovereign positions. Because even if it does not like the Community institutions, it has no intention of following a path of repatriation of powers from Brussels".

The EU is the black beast of the Czechs, who have also abundantly drew on European funds. And now, for example, they do not want to know about the migrants' relocation plan, which also provides for the reception of only a thousand people (out of 10 million inhabitants). "It's better to do without European funding than to let the migrants come in," President Zeman roared. Coming from the extreme East, the wind of populism has begun to blow in the Czech Republic, which risks "slipping in the direction of Hungary and Poland," commented Jiri Pehe, the former political advisor to Vaclav Havel.

But if the country takes this drift, is there not the danger that economic growth will be affected? "Of course," Pirates Party leader Ivan Barto? replies to Panorama, while in his Parliament office he prepares for a lunch organized by Ambassador Amati. "The Polish nationalist Jaros?aw Kaczynski and the Hungarian premier Viktor Orbán do not represent the ideology that should inspire the Czech Republic". The pirate, who defines himself as a liberal and pro-European liberal, defends his country: "On the subject of migrants, the government has done its duty: it has sent soldiers and aid. But now the priority is to prevent unidentified people from accessing the Schengen area ".

For businessmen the real problem is, paradoxically for a country that does not want migrants, the shortage of labor force. "In the Prague area the unemployment rate is zero," explains Italian CEO Giuseppe Giordo. "The real challenge here is to hire and manage to keep the staff in the company. That's why the real goal is the increase in wages, which are 40 percent lower than in Italy ".

Ambassador Amati confirms: "The overall macroeconomic picture is rosy. But then there are structural bottlenecks: subalternity from the German economy, excessive dependence on the automotive and machinery sector and, above all, a serious lack of manpower, which prevents further growth ". It is no coincidence that the Bergamo-based company Brembo, which specializes in braking systems, has been forced to transfer some of its production lines to Poland due to a lack of workforce.

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