In the last issue of The Business Soirée, we talked with President of the Chamber of Commerce Zdeněk Zajíček about the overall state of the Czech economy, the government savings package, and energy prices. We will now conclude this discussion on topics such as the automotive industry, unemployment, and wage levels.
Czechia is largely dependent on its automotive industry. What impact does the artificially accelerated ban on manufacturing cars with combustion engines have on it?
The automotive industry played an important role during the transformation of our economy because it’s more ecological and less energy-intensive than heavy industry, and it enabled further development of other sectors as well, be it electrical engineering, chemistry, plastics, glass, or textiles. Today, the automotive industry makes up about ten percent of the Czech GDP. In other words, it’s important for our export-oriented economy, and therefore for the living standards of our populace. That’s why the Chamber of Commerce approved the declaration of industrial and agricultural unions against the Euro 7 standards, which would tighten the limits of emissions for both personal and freight transport. The declaration became an important document that aided the Minister of Transportation Martin Kupka and MEP Alexandr Vondra in negotiating with the EU for more sensible rules for the automotive industry. The limits on exhaust gases were eased and companies gained more time to conform to the rules. But this goes hand in hand with another issue, which is the significant dependence of the Czech economy on exports to other EU countries, which are the destination of more than 80 percent of all Czech exports. This makes our economy vulnerable and insufficiently resistant to fluctuations in European countries, primarily Germany. If a third of our total production value falls on exports, foreign demand has a strong influence on the development of the Czech economy. And thus, economic issues in other European countries can easily spill over into the performance of our economy. Therefore, the Chamber of Commerce recommends improving the resilience of the Czech economy through the so-called territorial diversification. In other words – Czechia must, more than before, focus not only on commodities with higher added value, but also on non-European markets. But the prices of our products must be competitive, and this is where our energy prices and workforce shortages place us at a disadvantage. Simply put, tradition and quality with the “Made in Czech Republic (formerly Czechoslovakia)” brand are not enough to enable export into South America or Africa, but the price of the end product is important as well. And that’s where we’re starting to lag behind the competition.
Is it true that we are currently lagging behind even Poland when it comes to transport infrastructure? Does this also influence the decision-making of foreign investors?
It’s not just transport infrastructure that is a testament to how the Polish have improved. Poland is a good example of growing business investments. In 2010, Polish businesses invested the least out of the Visegrad Four countries, at 0.19% of GDP. In the following years, there was a significant increase in research and development investments, up to 0.91% of GDP in 2021, which might be one of the factors in the recent Polish labor productivity and GDP per capita growth. It’s the classic question of what came first, the egg or the chicken. It could have been the activities of private investors that induced pressure on the state to invest in the missing transport and energy infrastructure, but everything points more towards the activity of the state in strategic areas, which then attracted the interest of private investors and led to actual private investments. Either way, what Poland went through in the past decade is a massive change, and it took a crucial step in favor of its future competitiveness.
For a long time now, Czechia has had the lowest unemployment rate in the European Union and hundreds of thousands of vacant jobs. What’s the solution? Could it be labor migration? Did the Ukrainian migration wave help employers?
Our companies are currently missing up to 300 thousand employees, and according to available forecasts, the working-age population is set to shrink by more than 240 thousand by 2032. According to estimates of the Chamber of Commerce, this meant that the state lost around 150 billion crowns in taxes and levies just last year. Mitigating this undesirable development might be achieved by increasing the participation of unemployed domestic workforce resources, such as students, seniors, or mothers on maternity leave. The state’s measures should focus on making flexible labor arrangements, such as specific work agreements or part-time jobs, more attractive. Improving the accessibility of preschool education facilities – kindergartens and children’s groups – could help involve mothers in the labor market. Aside from that, let’s hire foreigners from safe countries for vacant positions that require medium to high levels of skill. But this is another area where we are competing with other countries. While here you could wait even two years for an employee, Poland will employ them within a couple of weeks. The workforce shortage is further underscored by the fact that the Czech labor market was able to absorb over 100 thousand workers from Ukraine who were granted temporary asylum. However, their employment in certain areas of the labor market, such as construction, is limited, because this workforce is made up mostly of women, who are also limited by childcare. Therefore, companies are forced to employ workers from other countries, but government quotas for this qualified workforce are insufficient, and the process of granting employment permits is far too tedious compared to neighboring countries. I’m glad we’re currently in close contact with Minister Marián Jurečka and his team at the Ministry of Labor and Social Affairs, where we’ve created a common concept of a flexible labor market. And along with the Minister of the Interior, we’re preparing changes for the employment of foreign workers that should jumpstart the labor market in the short term. But still, this is an area that requires constant care and cooperation with the private sector. Without sharing data and making sure it stays up to date, without cooperating when it comes to retraining and increasing qualifications, without openly establishing both threats and opportunities, without bold proposals regarding industrial relations legislation, without changes in the area of permit requirements for building schools and kindergartens, we will not succeed. We must find courage, and it’s certainly a shared responsibility. Wavering in place will get us nowhere.
According to some experts, Czech wages are lagging behind the GDP by up to thirty or forty percent. Is this the price for massive foreign investments in the past decades?
The post-revolution transformation established healthy economic development in Czechia and the country's standing and the living standards of its populace are all very solid today. Employee living standards are on the rise. When you subtract consumer price increases, employees have been doing better since the Velvet Revolution in real terms. The quality of life today in some of our cities surpasses even that of some Western European capitals or regional hubs to the west. But Czech wages are still below the average of the OECD – the median of the 38 most economically developed countries in the world – and that’s simply a fact. The reason is clear from our point of view – low labor productivity. Let’s please not interpret this as our people not working enough. Quite the contrary. In many cases, they work more and at a higher level than their counterparts from Western Europe. The difference is currently in the fact that we produce commodities and offer services with a lower added value than what we see to the west of us. We must change that. This is the challenge we’re facing. We must escape the middle- income trap, and we must invest in our shared future. Each of us must play a key role in that. Be it the state with the energy and transport infrastructure, removing the barriers for business and creating predictable investment conditions for private capital, or us as entrepreneurs, who will transform our energy-intensive processes and seek out new commodities and services with a higher added value, or the employees who will be more intense and systematic in their lifelong learning and will strive to continuously raise their qualifications, to find the high-paying jobs they desire. These are simply things no one else will do for you, and you can’t pass the buck to someone else. Simply put, the state, companies, and employees must all put in the work.
Were we to look into the future, what will keep Czechia sustained in fifteen, twenty years?
I’m not entirely sure, and I don’t think anyone can know with absolute certainty. I’m really happy that these topics have been making it onto the grounds of the Government Committee for Strategic Investments under the leadership of Prime Minister Petr Fiala, where many topics get developed into specific steps. But it’s also obvious that we must seek the broadest possible consensus on these steps across the political spectrum, among the representatives of entrepreneurs and employers as well as the representatives of employees, simply the entire society. But to get back to the question. I think that we can build on our industrial tradition as well as our natural creativity and flexibility, which we as a nation certainly possess, according to my observations. This combination of prerequisites might pave our way into areas where we can find new opportunities among the tough competition, and these could be very intriguing areas with high added value. Our people and businesses are already making a name for themselves in areas where we are or have the potential to be sharks in this tempestuous, ever-changing world. Semiconductors and chips, cryptocurrency, e-commerce, the gaming industry, cybersecurity, the space and aviation industry including unmanned aviation, the automotive industry, nuclear power, AI. There are a lot of things worth mentioning, a lot of things that could be the key mover of prosperity, the success of our people, and therefore the entire country. All we have to do is take a step at this imaginary crossroads. We need courage and willpower. And as my favorite quote goes, “Where there is a will, there’s a way.”
The author is a European editor of Deník
CV BOX
Zdeněk Zajíček (born on May 10, 1976, in Prague) is the president of the Chamber of Commerce of the Czech Republic. He is also a member of the Prague Assembly and sits on the CEVRO Institute supervisory board.
He graduated from the Faculty of Law at Charles University. Starting in 1991, he worked at the City Prosecutor’s Office in Prague, then at the Ministry of National Property Management, and the Land Registry.
In 1996 he was elected into the Chamber of Deputies for the ODS, but resigned the mandate two years later. After that, he was the director of the Prague City Hall, and worked in law as well. Between September 2006 and the summer of 2013, he was successively deputy minister of the interior, justice and finance.
He has been involved in projects such as CzechPOINT, the Data Box, the Treasury Bank Identity, and others. He is the founder of the eState association.
He’s been a member of the Prague Assembly since 2018. He’s been the president of the Chamber of Commerce since 2023.
He was once an active basketball player. He enjoys jogging, biking or rollerblading, he plays tennis, likes to ski and play golf. He is married, has three adult sons and two grandsons.
reklama
