why Prague is not just for tourists
As far back as the late 19th century and into the early 20th century, the Czech Republic was recognised throughout the world as a country with a notable economy. In fact, in the 1930s it was one of the 15 most developed countries in the world.
Unfortunately, Communism gripped the country in its iron fist and redirected it down the road of industrialisation to meet the needs of the Soviet Union, while cutting off its economic ties to the rest of the world. Needless to say, the Communist regime retarded much of the country’s growth, as well as the people’s education about developments that were happening around the world.
When the Iron Curtain fell in 1989, the economic light was blinding and it only drew attention to the worst economic features of this country: from education to technology, Czechoslovakia was underdeveloped. But around the world, businesses were eyeing it as a ripe place to do business. Despite the status of the economy, Prague was still a viable place to make money and a liveable place in which to relocate or build a company, not to mention the advantageous geography of the country being in the very heart of Europe.
By 1991 (two years before the split between the Czech Republic and Slovakia), 60% of state-owned companies were in private hands, and foreign direct investment (FDI) was quickly gaining pace in the country’s economy. Today more than 80% of the economy is private. Telecommunications and the transport sectors account for the highest FDI, but the automotive, transportation and components sectors are growing. Since 1999, the Czech Republic has been the leader in FDI in Central Europe.
Important economic events were the sale of a stake in Skoda Automobile, the country’s darling national car, to Volkswagen, and the privatisation of the state’s share in Ceskoslovenska obchodni banka by the Belgian KBC Bank. FDI reached $1,161.8 billion in 2003, with 50% of that coming from the Netherlands and Germany, followed by Austria. The other major players are France, the United States, the United Kingdom, Belgium and Switzerland.
Today foreign investors are a major factor in the country’s business. About 3,900 companies are foreign owned and more than 70% are wholly owned by foreign investors. According to the Czech National Bank, in 21% of these companies the share of foreign capital exceeds 50% of the registered capital. Businesses keep coming and, although it is steadying, they are still interested in the country for sectors like high-tech engineering, electronics, software development, automotive and plastics. Prague is not just for tourists.