Made in Czech. Investor s Guide for Manufacturing and Logistics Companies 2015

Made in Czech Investor’s Guide for Manufacturing and Logistics Companies – 2015

1

Made in Czech • Investor’s Guide for Manufacturing and Logistics Companies • 2015

Foreword The Czech Republic has a long and rich history as one of the world’s most successful manufacturing and logistics markets. We also believe that it has a very bright future. The Czech Republic is truly situated at the geographical heart of Europe and has the infrastructure in place to operate as the gateway between the East and the West. With its population at just a little over 10 million people, it is a relatively small market but, is a heavyweight in the manufacturing arena. It is a strategic location for numerous manufacturing and logistics companies planning activity throughout Europe, Central & Eastern Europe, Russia and other CIS countries. The well-established Czech highway and road network is continuously seeing further additions and improvements, particularly since the country’s economic outlook has improved over the past few years. These advantages, linked with the highly skilled workforce, low labour costs, the availability of investment grants and incentives and EU Membership, since 2004, make the Czech Republic a very attractive, business-friendly location. Local knowledge is key to making the most of the opportunities that the Czech market has to offer. For this very reason, JLL has prepared this report in co-operation with the following partners: PwC and Hays. This report aims to offer guidance to international manufacturing and related service companies that wish to establish or grow their presence

in the Czech Republic and provides an inside view of the country’s manufacturing landscape. It also offers key expertise on the Czech labour market with regard to the manufacturing sector and advice on important legal topics such as the structure of grants and incentives, setting-up a business and taxes. Insights into the manufacturing industry are demonstrated with sector analysis. Commentary on the real estate market provides a guide to the different acquisition and rental methods, timeframes and market practices and trends. We would like to thank all partners involved for their valuable input in preparing this report. We firmly believe that “Made in Czech” is a useful source of information for investing in this country. Tewfik Sabongui Managing Director Czech Republic JLL Harry Bannatyne Head of Industrial Agency Czech Republic JLL

Content Table 1. Executive Summary

3

2. Labour Market

5

3. Grants & Incentives

8

4. The Infrastructure Map of the Czech Republic

10

5. Key Manufacturing Sectors in the Czech Republic

12

Automotive sector

14

FMCG sector

18

Home Appliances, ICT and Electronics

22

Medical and Pharmaceutical Industry

24

General Machinery

26

6. The Czech Industrial Real Estate Market

28

7. Real Estate: Rent or Buy?

30

Rent a facility?

30

Buy a facility?

31

Overview of the permitting process

32

How quickly can you be operational?

32

Market practice for leasing space

33

Market practice for purchasing space

34

8. Real Estate Acquisition

35

9. Setting-up a Business

37

10. Czech Tax Structure

39

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1. Executive Summary The Czech Republic, with a population of just over 10 million people, is one of Europe’s and the World’s biggest success stories in terms of manufacturing. The Czech Republic’s close connection to Western markets, particularly the German market, and good cooperation with central European countries, provides it with a balanced position and excellent economic stability in both booming times, as well as crises. The Czech Republic mainly benefits from its unique location in the heart of Europe, representing a junction of trans European transport corridors, in addition to a highly educated population and a well ‑developed infrastructure. Numerous international companies have already identified the country’s potential and have taken advantage of the favourable conditions that we highlight in this paper. The following are our key rationale for investing in the Czech Republic:

Czech investment rationale Central European hub and favourable geographic location

Investment rating The Czech Republic has the strongest country ranking in CEE from all three major rating agencies. Moody’s have ranked the Czech Republic A1, Fitch giving the rank of A+, both of them confirming a stable outlook. S&P ranked the Czech Republic at AA–. Country

Fitch

Moody’s

S&P

Czech Republic

A+ (stable)

A1 (stable)

AA– (stable)

Hungary

BB (stable)

Ba1 (stable)

BB+ (stable)

Poland

A– (stable)

A2 (stable)

A– (positive)

Romania

BBB– (stable)

Baa3 (stable)

BBB– (stable)

Slovakia

A+ (stable)

A2 (stable)

A (positive)

Slovenia

BBB+ (stable)

Baa3 (stable)

A– (stable)

Political and economic stability, with one of the highest GDP growth rates forecasted in the EU in 2014/2015

Source: Fitch, Moody’s, S&P, 2015

Availability of a highly skilled workforce

Attractive labour market

Low labour costs vs. high labour productivity

The population of the Czech Republic reaches over 10.5 million inhabitants. The largest city is the capital city of Prague with more than 1.2 million inhabitants. Other large cities include Brno, Ostrava and Pilsen, all with populations of above 150,000 inhabitants.

Quality logistics / industrial real estate stock Favourable government investment incentives, mainly focused on hi-tech projects One of the densest highway networks in Europe One of the densest rail networks in the world Excellent business opportunities in the areas of R&D, Design and Innovation

Fast growing market In May 2014, the Czech Republic had its 10th anniversary of becoming a member of the European Union. Being a part of the single European market has certainly brought trading benefits along with reforms that have provided a relatively stable market environment, for today’s standards, and a reliable, safe business climate. According to Oxford Economics, The Czech Republic is forecast to experience one of the highest GDP growth rates in Europe with an average of 3.0% between 2014 and 2016. The country continues to attract a large share of Foreign Direct Investment (FDI), most recently with new investments from Nexen (tyres), Hyundai Mobis (automotive components) and Bell Helicopters.

The labour force of the Czech Republic, aged between 15 – 64 years, exceeds 7.3 million people, which is ca. 70% of the population. With 133.3 inhabitants per sq km, it has the highest density of inhabitants in the CEE region and the 13th highest density of inhabitants among European countries. According to Eurostat, the Czech Republic offers some of the most competitive labour costs in Europe at EUR 10.3 per hour. This rate is more than half of the EU 28 average and 3 times lower than in neighbouring Germany.

Educated workforce The Czech Republic offers a highly qualified workforce with wide ranging experience in the manufacturing sector. The well renowned and long industrial history of the country is supported by a network of universities, secondary technical schools and training centres, providing a significant number of graduates. The Czech Republic has 77 public and private universities, with a total of 375,000 students. The highest portion of students is, unsurprisingly, in the largest cities of Prague, Brno and Ostrava. On the other hand, in every single regional capital there is at least one university. The highly skilled workforce is therefore distributed across the regions and it is not concentrated purely in the largest cities.

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Favourable grants & incentives

Maturing real estate market

In addition to its attractive labour market and availability of workforce, another important draw factor for manufacturers assessing where to locate a new development, is the availability of investment incentives offered by the government. These are handled by CzechInvest, the Investment and Business Development Agency, a state agency created by the Ministry of Industry and Trade.

The real estate market is maturing, offering high quality manufacturing and warehouse space. Many large international developers are present in the market. The various options of buying or renting an existing facility or commissioning a built-to-suit production facility are outlined in this report.

Attractive investment incentives are granted through many forms of state aid, including: corporate income tax relief, transfer of land for favourable prices, job creation grants, training and retraining grants, and cash grants for the acquisition of long-term tangible and / or intangible assets.

According to the JLL Global Real Estate Transparency Index, based on a combination of quantitative market data and information gathered through a survey of the global business network of JLL and LaSalle Investment Management, the Czech Republic has a transparent real estate market which is closing the gap with Western Europe. The index is based on a review of the following categories:

The manufacturing sector is evolving The Czech Republic is an export oriented, open economy, with a strong emphasize on manufacturing. The country has shifted from an assembly production market to an added value manufacturing and high technology production zone, serving also as a transit station and distribution hub for goods from the east and south east to northern and western Europe. The Czech Republic has the most developed industrialized economy in Central and Eastern Europe. Its strong industrial tradition dates back to the 19th century when Czech countries represented the industrial engine of the Austro-Hungarian Empire. The manufacturing industry is one of the most important parts of the national economy, representing a substantial share of gross domestic product. The traditional industries are heavy and general machine-building, iron and steel production, metalworking, chemical production, electronics, transportation equipment, plastics, textiles, and pharmaceuticals. The long term leading sector is automotive production, which strengthen its position every year. On the other hand, we are recording a gradual decline of the mining sector. In the European, as well as global rankings of most industrialised countries, the Czech Republic always belongs among the top positions. Thanks to its strategic location, next to Germany, in the centre of continental Europe, the Czech Republic is an attractive place for manufacturers to near shore operations and also to progressively compete for cost-effective, value-added manufacturing, supported by a highly skilled workforce.

Performance Measurement Market Fundamentals Governance of Listed Vehicles Regulatory and Legal Transaction Process

Europe Real Estate Transparency, 2014 Highly Transparent Transparent Semi-Transparent Low Transparency

FI

Opaque

SE

Not Covered NO

GB

BE

RU

DK NL DE

IE

FR

ES PT

CH

IT

BY

PL CZ SI AT HU SL

KZ

UA RO

RS TR

HR

G R BG

IL

Source: JLL 2014

The Czech Republic is out of this world! The European Global Navigation Satellite Agency (GSA) has selected Prague as its headquarters for the Galileo navigation system project which is anticipated to attract a great deal of talent, knowledge and put a spotlight on the Czech Republic. This project will provide an opportunity, to both Czech companies and their partners, to push the boundaries in terms research and innovation into space related technologies and systems.

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2. Labour Market Section contributed to by Hays Czech Republic Human capital is a key element in the investment process. The three main areas to assess with regard to investment potential include employment costs, availability of workforce and quality of labour. A focus on Czech labour dynamics will be outlined in this chapter. From a human resources perspective, the Czech Republic offers a highly qualified workforce with wide ranging experience in the manufacturing sector. The well renowned and long industrial history of the country is supported by a network of secondary technical schools and training centres, providing a significant number of graduates. In addition, the presence of technical universities across the country including: Prague, Brno, Liberec, Ostrava, Pilsen, Ústi nad Labem and Zlín, allow for a sustainable flow of electrical, mechanical and manufacturing engineers. Although the Czech Republic has slightly higher employment costs, when compared to other markets in the region, this is offset by the high levels of technical education and the general above average language knowledge (English and German) within the CEE region.

Severance Employment lasted < 1 year employee is entitled to 1x average monthly earnings Employment lasted > 1 and < 2 years employee is entitled to 2x average monthly earnings Employment lasted > 2 years employee is entitled to 3x average monthly earnings Source: Hays Czech Republic

Other information Notice period:

2 months by law, or by agreement

Holidays/year:

20 days by law

Bank holidays:

13 (Fixed to specific dates)

Working hours/week: 40 (Typical) Sick Leave: 1st – 3rd day no reimbursement, 4th – 14th day reimbursed by employer, 15th + day reimbursed by the state

Combined with the countries geographical location and developed transport network, it makes the country a very attractive location for manufacturing companies and also those with added value production or R&D Centres.

Source: Hays Czech Republic

Labour law

Employment costs

A trial period of up to 6 months can be agreed with so-called managerial/leading employees entitled to determine and assign tasks and give instructions to their subordinates and to organise and control their work.

The two most significant components of employer costs are salaries and Social Security Contributions (SSC). According to Eurostat, the Czech Republic offers one of the lowest labour costs in Europe at EUR 10.3 per hour. This rate is more than half of the EU 28 average and 3 times lower than in neighbouring Germany.

40,0 35,0 30,0 25,0 20,0 15,0 10,0

Source: Eurostat, 2013

Romania

Hungary

Poland

Slovakia

Czech Republic

Slovenia

United Kingdom

Spain

0,0

EU (28 countries)

5,0

Germany

Previous employment for a definite period will no longer be taken into account three years after the end of the last employment for a definite period.

45,0

Austria

Employment for a definite period concluded between the same contracting parties may not exceed 3 years. From the day when the first employment for a definite period is concluded, this employment term may be repeated twice only. Extended employment will be considered repeatedly concluded employment.

Comparison of hourly total labour costs among selected European countries in the Industrial and Construction sectors (in EUR)

France

Employment for an indefinite period is the most common in the Czech Republic, preferred by both parties (employer and employee).

Sweden

The trial period of a maximum 3 months, is applicable to other employees, regular staff.

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Statutory employer costs

When assessing employment costs among the Czech regions, the variation between average salaries in each region should be considered. Salary levels mostly depend on the development of each region, as well as the type of industry situated in that particular area.

Social security Sickness insurance

2.3 %

Retirement / pension insurance

21.5 %

Employment insurance

Typical average gross monthly salaries for selected regions and general manufacturing positions (EUR)

1.2 %

Health security

9.0 %

Total paid by employer on top of salary

34.0 %

Source: Hays Czech Republic

Prague

Pilsen

Ostrava

Skilled workers

860 – 900

720 – 790

790 – 850

575 – 610

Unskilled workers

650 – 720

650 – 680

650 – 690

540 – 580

1,450

1,290

1,350

1,200

Engineers

Additional costs

Brno

Source: Hays Czech Republic / CNB FX Rate (13/3/15) 1 EUR = 27.30 CZK

Optional Benefits Costs – average annually CZK / per head 1 extra week of holidays (over Based on employees’ monthly gross 80% companies) salary Lunch Vouchers (over 76% companies)

6,000–12,000 (215–430 EUR) per employee annually (1 day average contribution is 40–60 (1.4–2.2 EUR)

Cafeteria / flexible benefits for culture etc. (around 30% companies)

6,000–15,000 (215–540 EUR) per employee annually

Health Care Benefits (common in organizations where expats are working)

0–24,000 (0–862 EUR)

Training and Development programs

5,000–40,000 (180–1,437 EUR) up to seniority level

Source: Hays Czech Republic / CNB FX Rate (13/3/15) 1 EUR = 27.30 CZK

Monthly salaries for manufacturing roles in the Czech Republic range from less than EUR 510 up to EUR 900 for blue-collar workers, from EUR 900 up to EUR 3,200 for white-collar staff (specialists) and from EUR 1,600 up to above 7,000 for management. It is worth noting that salary levels can be higher when seeking specialists with niche skills and/or when relocation is required.

Average gross monthly salaries in the Czech Regions (in EUR)

Availability of labour The labour force of the Czech Republic, calculated by the number of people aged between 15 and 64 years old, exceeds 7.3 million inhabitants which is ca. 70% of the population. At the end of February 2015, the Czech Republic’s unemployment rate was reported at 7.5 %, according to the Czech National Statistical office. When assessing unemployment across the country, the spread between regions can be significant, as shown on the map below. The more developed regions, such as Prague, Central Bohemia and the Pilsen region, have unemployment rates below 6.5%, whereas some of the less developed regions, such as the Usti nad Labem region, have unemployment rates above 10%. The unemployment map can indicate parts of the country where there is an accessible labour force, although it is worth considering that there are certain sub-regions in some of the most developed regions that also have a ready workforce. These regions can facilitate investment in proximity to a major hub, such as Prague, whilst also providing easy access and cheaper employment of the labour force, particularly when hiring blue-collar workers.

Average unemployment rate (%) in the Czech Regions > 1000

ÚSTÍ NAD LABEM REGION KARLOVY VARY REGION

> 10%

900 - 1000

LIBEREC REGION

7.6 - 10%

LIBEREC REGION

700 - 800 ÚSTÍ NAD LABEM REGION

HRADEC KRÁLOVÉ REGION

5 - 7.5%


PRAGUE REGION

PRAGUE REGION PARDUBICE REGION CENTRAL BOHEMIA REGION

MORAVIA-SILESIA REGION

KARLOVY VARY REGION

PILSEN REGION


PARDUBICE REGION CENTRAL BOHEMIA REGION

OLOMOUC REGION

OLOMOUC REGION

PILSEN REGION VYSOČINA REGION

VYSOČINA REGION

ZLÍN REGION SOUTH BOHEMIA REGION

SOUTH MORAVIAN REGION

Source: Czech National Statistical Office, Q3 2014, (1 EUR = 27.30 CZK)

ZLÍN REGION SOUTH BOHEMIA REGION


Source: Czech National Statistical Office, February 2015

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Skilled & educated workforce

Students at ISCED levels 5–6, – as % of all students

In the Czech Republic, there are 77 public and private universities with a total of 347,300 students (81,300 in technical fields) and 88,146 graduates (16,529 in technical fields). The highest proportion of students are, unsurprisingly, in the largest cities of Prague, Brno and Ostrava. On the other hand, in every single regional capital there is at least one university. Highly skilled labour is therefore distributed across regions and is not purely concentrated into the largest cities.

Number of Students / Number of Faculties in the Czech Regions

7,951 / 6

LIBEREC REGION

9,774 / 9

ÚSTÍ NAD LABEM REGION

467 / 1

12,263 / 6

144,486 / 74

KARLOVY VARY REGION

38,856 / 18

10,328 / 7 1,435 / 2

15,522 / 10


PRAGUE REGION

PARDUBICE REGION

CENTRAL BOHEMIA REGION

PILSEN REGION


22,887 / 10 OLOMOUC REGION

3,242 / 2

11,730 / 9

VYSOČINA REGION

ZLÍN REGION

17,987 / 12

SOUTH BOHEMIA REGION

78,382 / 35


Source: MŠMT 2014

The economic maturity of countries focused on hi-tech industries is determined by the quality of the tertiary education system and its share of students in technical fields. The Czech Republic has one of the largest proportions of students studying science, mathematics, computing, engineering, manufacturing and construction. Approximately 25.3% of all students are enrolled in the above mentioned fields of study.

Finland Germany Greece Portugal Romania Ireland Slovenia Spain Estonia Sweden Austria Czech Republic Bulgaria France Italy Croatia Switzerland Slovakia United Kingdom Macedonia Poland Hungary Liechtenstein Lithuania Latvia Malta Cyprus Japan Denmark Luxembourg Iceland United States Norway Belgium Netherlands

33.9 32.9 32.7 29.2 28.6 28.3 26.7 26.4 26.3 25.9 25.6 25.3 25.1 25.1 24.7 24.3 24.3 23.2 23.2 23.0 22.7 22.5 22.4 22.1 21.1 20.9 20.8 19.8 19.1 18.2 18.0 17.8 17.0 16.8 14.7

Source: Eurostat, 2014

Pavel Rufert TPG Powertrain Management

ŠKODA AUTO a.s.

“ŠKODA AUTO a. s. highly value the personal growth of our employees and provide regular training, as it is vital for our continuous progress. ŠKODA AUTO a. s. has also established effective cooperations with the technical universities in Prague, Brno, Pilsen and Liberec, supporting students on various research and development projects, conducting student trainee programmes, providing consultancy on student theses and sharing expertise. In addition, ŠKODA has founded its own Škoda Auto University as another opportunity for theory to meet practical experience. As ŠKODA contributes significantly to improving regional employment rates, supports sporting and cultural activities, operates employee health programmes and helps enhance the environment and infrastructure in ŠKODA’s locations, the Czech local authorities have always been keen to support ŠKODA’s production and its growth.”

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3. Grants & Incentives Section provided by PwC Legal Introduction

Job creation and training/re-training grants

Choosing the appropriate investment location relies on a thorough analysis of potential costs and benefits of the sites. One of the key factors influencing the decision on location is often the availability of state aid.

These grants can only be provided for investments made in certain regions (regions where the unemployment rate is at least 50 % higher than the average rate in the Czech Republic). For every newly created job a cash grant in the amount of CZK 200,000 (approximately EUR 7,200) can be granted. In addition to that, grants of up to 45 % of the amount of expenses spent for training and retraining, depending on the size of the enterprise, can be provided to the applicant.

Investors considering investment in the Czech Republic are able to benefit from various types of incentives. The amount of incentives provided depends on the location of the investment. The incentives are provided in the form of: (i) cash grants, (ii) tax relief and (iii) discounts on the purchase price of land. Incentive procedures are handled by CzechInvest, the Investment and Business Development Agency, a state agency created by the Ministry of Industry and Trade. CzechInvest acts as an intermediate in the incentive application process and for communications between an applicant and the relevant ministries.

Eligible Investments Investment incentives can be provided for the following investments: introduction or expansion of production in certain sectors of the manufacturing industry; construction or expansion of research and development centres;

These grants may be changed in the future as the Act on Incentives, amended in 2015, predicts also related regulations to be amended: the grants may be provided also for investments in regions where the unemployment rate is at least 25% and grants for job creations may be raised up to CZK 300,000 (approximately EUR 10,800).

Cash grant on capital investment The capital investment grant is provided for a strategic investment (as described further in the text) to launch or expand new manufacturing or technology centres. A cash grant is provided to the amount of 10 % of the eligible costs. This grant could be increased up to 12.5 % of the eligible costs if both manufacturing and technology centres are launched at the same time.

launch or expansion of technology centres; and launch or expansion of business support services centres.

Forms of the incentives being provided: corporate income and real estate tax relief; transfer of land for a favourable price; job creation grants; training and retraining grants; and cash grant for the acquisition of long-term tangible and / or intangible assets.

Amount of Incentive The amount of incentive is limited by a “ceiling” – the amount stipulated in the implementing regulation depends on the region. Currently, a ceiling varies from 30 % to 40 % of the eligible costs. In February 2014, the European Commission adopted a new map of amounts of state aid applicable for the Czech Republic, decreasing the amount of the incentive to 25 % of eligible costs. Investments in the territory of Prague are not eligible to receive any incentives.

Corporate income tax relief

Conditions

An entity can apply for corporate income tax relief for ten years or for ten consecutive tax periods. The first relief period can be drawn when the statutory conditions for the state aid are met but can be no later than within three years from the moment when the investment incentive has been granted. An entity can also apply for tax relief concerning land or real estates situated in the favourable industrial areas. Tax relief is subject to approval of the municipality and may be applied for 5 years at maximum.

Any entity that makes its investment in the Czech Republic is entitled to apply for an incentive. The applicant can be both Czech or foreign entities; whereas the recipient of the incentive can only be an entity with its registered seat in the Czech Republic.

Transfer of land for a favourable price The nature of this grant represents the possibility for the applicant to acquire land plots owned by the state or municipalities for favourable prices. The incentive is then represented by the difference between the purchase price and the market price of the particular land plots.

The Investment Incentives Act stipulates basic conditions for granting the incentive, among others: the investment must be implemented in the territory of the Czech Republic; the activity subject matter of the investment, construction or facility must be environmentally friendly; work connected to implementing the investment shall be started only after CzechInvest has approved the investment and incentives.

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Conditions for eligibility for incentives in the case of investment in manufacturing industry:

Strategic Investment:

General Conditions: the investment in long-term tangible and non-tangible assets shall exceed CZK 100 million of which the minimum of CZK 50 million is intended for investment into new machinery; creation of at least 20 new jobs. Strategic Investment: the investment in long-term tangible and non-tangible assets shall exceed CZK 500 million of which a minimum of CZK 250 million is intended for investment into new machinery and the creation of at least 500 new jobs;

Conditions for eligibility for incentives in the case of investment in technological centres:

investment in long-term tangible and non-tangible assets exceeding CZK 200 million of which a minimum of CZK 100 million is intended for investment into new machinery and the creation of at least 100 new jobs; In the case of an investment into a strategic development centre, an additional 20 jobs in the case of software development and 170 jobs in the case of other strategic development centres or, 500 jobs in the case of customers support centres, must be created by the investment as a condition for granting the incentive. The above criteria are reduced to half in case the investment is being made either in a district in which the unemployment rate is at least 50 % higher than the average unemployment rate in the Czech Republic or in the favourable industrial area. The above conditions must be fulfilled by the recipient of the incentive within 3 years from the moment when the incentive has been granted.

General conditions: the investment in long-term tangible and non-tangible assets shall exceed CZK 10 million of which a minimum of CZK 5 million is intended for investment into new machinery; creation of at least 20 new jobs.

Application process The application is filed by the applicant with CzechInvest who then elaborates an opinion on the investment and forwards the application to the Ministry of Industry and Trade. The Ministry will assess the intent of the investment in cooperation with other relevant ministries. The process usually takes from five to six months. In case the applicant and recipient are the same entity/person, the process is usually faster and should take from three to four months.

4. The InfrastructureMap Map Czech Republic The Infrastructure of of thethe Czech Republic Czech Republic - At a Glance

Y N A

RM

GE

Teplice

8

Ústí nad Labem

Most

Česká Lípa

10

8

Kladno

Sokolov 6

1

Cheb

5

Bayreuth

Náchod

PRAHA

Pardubice Kolín

Opava

35

Chrudim

Kutná Hora

3

5

Jihlava

Tábor

Třebíč 52

Jidřichův Hradec

2

Břeclav Bratislava Wien

Under construction/ Preparatory works

Cities 20,000 - 50,000 inhabitants Main International Airports Regional International Airports

City

Zlín Uherské Hradiště

A I K

VA

O L S

Existing network Under Construction

Source: JLL based on ŘSD, 2015

Prague Brno Ostrava Pilsen Liberec Olomouc Ústí nad Labem České Budějovice Hradec Králové Pardubice

Population

1,246,780 378,327 297,421 167,472 102,113 99,471 93,747 93,467 93,035 89,467

Source: Czech Statistical Office, 2014

Transport Infrastructure Motorways and Express Roads

Linz

Cities over 50,000 inhabitants

Largest cities in the Czech Republic

Žilina

Hodonín

AUSTRIA Regional cities

49

Kroměříž

Katowice

Frýdek- Třinec -Místek

Vsetín

3

In operation

Main roads

1

Český Těšín

48

Valašské Meziříčí

Přerov

BRNO

Znojmo

Key

Planned construction

Vyškov

České Budějovice

Y

Motorways and express roads

Blansko

1

55

55

Písek Strakonice

56

Kopřivnice Nový Jičín

Olomouc

46

3

AN

1

Prostějov

Žďár nad Sázavou

4

Klatovy

RM

43

Havlíčkův Brod Příbram

35

Karviná

Havířov

1

Svitavy

Nürnberg München

Bohumín Orlová

OSTRAVA

Šumperk

Source: (a) Czech Statistical Office, (b) Oxford Economics, 2015

Warszawa

Krnov

Plzeň

GE

D

Hradec Králové

1 4

Population (a) 10,538,275 Territory km2 (a) 78,866 GDP Volume in milllion USD (b) 212,688 GDP per Capita in USD (b) 19,552 Consumer Price Index (b) 0.4% Unemployment Rate as of February 2015 (a) 7.5% Government Gross Debt (as % of GDP) (b) 41.3% 10 Year Government Bonds (b) 1.6% Exchange Rate EUR/CZK, period average (b) 27.5 Exchange Rate USD/CZK, period average (b) 20.8

11

Jičín

11

1

6

Jablonec nad Nisou

10

7

Czech Republic - Facts and Figures

LAN

Wroclaw

35

Mladá Boleslav

7

PO

Economy

Trutnov

Litoměřice

Jirkov

Chomutov

Karlovy Vary

Děčín

Dresden Berlin

Litvínov

Liberec

Major roads planned till 2018

1,234 km 31 km

D1 Motorway (Prague - Brno - Ostrava) - Completion of the section Přerov - Lipník D3 Motorway (Prague - Linz) - Completion of the section Veselí nad Lužnicí - Úsilné D8 Motoway (Prague - Dresden) - Completion of the final section Lovosice - Řehlovice D11 Motorway (Prague - Wroclaw) - Completion of the section Osičky - Hradec Králové R4 Express Road (Prague - Písek) - Completion of the section Skalka - křižovatka II/118 (Háje) R6 Express Road (Prague - Bamberg) - Completion of the section Lubenec - Bošov R7 Express Road (Prague - Chomutov) - Completion of the section Postoloprty - Bítozeves R35 Express Road (Hradec Králové - Olomouc) - Completion of the section Opatovice nad Labem R49 Express Road (Hulín - Slovak border) - Completion of the section Hulín - Fryšták Airport Network 10 International Airports

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5. Key Manufacturing Sectors in the Czech Republic Successful then, successful now

Strong FDI influence

The Czech Republic is one of the most prosperous economies of the Central and Eastern European region. It benefits mainly from its unique location in the heart of Europe representing a junction of trans European transport corridors, as well as from a well-educated population and a well-developed infrastructure.

In the last fifteen years, the Czech economy has been significantly influenced by a strong inflow of foreign direct investment. The period between 2003 and 2007 saw the strongest inflow of FDI, as the incoming corporations and investors were significantly increasing the production capacity of country. Over the past few years, we have recorded more reinvestment of capital and expansions of existing investments rather than the inflow of new investors. A substantial number of corporations that set-up their production facilities in the Czech Republic several years ago, are now expanding their operations, mainly into Research and Development centres, IT centres, Central European or European distribution hubs, or even European headquarters. The Czech economy is thus gradually moving from the production and assembly part of the industry, to higher added value sectors.

The country also has the most developed industrialized economy in Central and Eastern Europe. Its strong industrial tradition dates back to the 19th century when Czech countries represented the industrial engine of the Austro-Hungarian Empire. During the interwar times, the Czechoslovakian Republic steadily ranked among the top ten most developed countries in the world. The manufacturing industry is one of the most important parts of the national economy, representing a substantial share of gross domestic product. The traditional industries are heavy and general machine-building, iron and steel production, metalworks, chemical production, electronics, transportation equipment, plastics, textiles and pharmaceuticals. The long term strongest sector is automotive production, which strengthens its position every year. On the other hand, we are recording a gradual decline of the mining sector. In the European, as well as the global rankings of the most industrialised countries, the Czech Republic always features among the top positions. Manufacturing, value added 2012 (worldwide ranking; % of GDP; trend 2012/2009)

Despite the relatively small size of the country, thanks to existing know how and technical excellence, sustaining cost effectiveness, excellent transport infrastructure and strategic location, it is still one of the major destinations of foreign investment in Europe. Foreign direct investment, net inflows 2012 (BoP, current bil. US$, trend 2012/2011) 1

China

253.5

2

United States

203.8

3

Brazil

76.1

1

Thailand

34%

2

Korea, Rep.

31%

7

United Kingdom

56.1

3

Belarus

25%

8

Russian Federation

50.7

4

Czech Republic

25%

13

France

28.1

5

Malaysia

24%

15

Germany

27.2

28

Czech Republic

10.6

9

Ireland

23%

32

Hungary

9.4

10

Germany

22%

36

Poland

6.7

12

Slovakia

21%

72

Romania

2.0

17

Switzerland

19%

82

Slovak Republic

1.5

19

Austria

18%

25

Poland

18%

30

Croatia

16%

Growing sectors in the Czech Republic

77

United Kingdom

10%

78

France

10%

The largest share in the Czech national production accounts is obviously covered by the services and trade & wholesale sectors, with a share of 61% of Gross Value Added in 2012. As depicted on the following graph, services and trade are followed by manufacturing (27% share), construction, utilities, agriculture and extraction.

Source: The World Bank, 2014

Source: The World Bank, 2014

13


Czech GVA Structure on National Accounts in 2012

Other dominating sectors, based on value added, are metal processing (3.8% of GVA), electronics and electrical equipment (2.5%), FMCG (2.4%) and general machinery (3.4%).

Manufacturing 24%

Agriculture 2% Utilities 5%

Services 51%

Based on economic forecasts, the value added on manufacturing in the Czech Republic is forecast to grow by more than 46% in the coming decade, leaving the estimated growth of the services sector (28% by 2023) far behind.

Czech Gross Value Added, real, LCU (billions CZK: 2010 prices) 3 000

Construction 6%

2 500 Extraction 1%

2 000 1 500

Czech GVA Structure in Manufacturing Industries 180000 1993

160000

2002

2012

1 000 500

Agriculture and forestry Industry incl. Manufacturing

2023

2021

2019

2017

2015

2013

2011

2009

2007

2005

2003

2001

1999

0 1997

The manufacturing sectors have grown in the past two decades by 260%. The fastest growing industrial subsector was the manufacturing of plastics and rubbers with a 1,261% growth of gross value added between 1993 and 2012. The plastics and rubber manufacturers’ key customers recruit mainly from the automotive, electronics and packaging industries. The next biggest industry jumpers were mainly the automotive and other transportation manufacturing industries with an 851% increase and the electronics & electrical equipment industries with a 737% increase.

1995

Source: JLL, CZSO, 2014

1993

Trade & Wholesale 11%

Manufacturing Services

Source: Oxford Economics, 2014

From the various different manufacturing sectors, five (FMCG, domestic appliances & electronics, automotive, medical & pharma and general machinery) are outlined in more detail in the following sections. Although we have selected these sectors as an example, great potential also exists in many other sectors.

140000 120000 100000

Mark Kelleher Vice-President, European Operations

80000 60000

Smiths Medical

40000

Fuels

Textile

Wood and paper

Non-mettalic mineral products

other

Pharmaceuticals and medical

Rubber and plastics

FMCG

Metals

Electronics and electrical equipment

Automotive and other transport

0

Machinery

20000

Source: JLL, CZSO, 2014

The production of automotive and other transportation vehicles with its 4.9% share on total GVA, is not only the largest manufacturing subsector, but also the sector with largest share growth on total GVA with an approximate growth of 3.2 percentage points in the past 20 years.

Smiths Medical, part of Smiths Group, is a leading global provider of medical devices and equipment for the healthcare industry. Worldwide the company employs over 7,500 people, with manufacturing concentrated in the US, UK, Italy, Mexico – and from 2013, the Czech Republic. ‘’Smiths Medical chose the Czech Republic to expand its operational base in Europe to serve our European customers and EU markets. The key benefits included the country’s stable economic base, its strategic location within Central Europe, the availability of highly skilled labour and the over cost effectiveness. After considering other locations in CEE and the Czech Republic, Smiths Medical chose to locate its CEE production base in Hranice, in northern Moravia, near the University cities of Olomouc, Ostrava and Brno. The location benefits from a combination of lower total operating costs, direct access to the European motorway networks and close proximity to skilled labour and a regional supply base.’’

14


Automotive sector The Czech Republic is currently the 5th biggest car producer in Europe and the 13th largest worldwide. In 2013, the number of passenger cars produced in the country reached almost 1.13 million units, which places the country as the second largest global car manufacturer (after Slovakia) in production per capita. In 2012, production per 1,000 inhabitants reached 111 car units. During 2013, the number of cars produced per 1,000 inhabitants decreased to 107 units; however, the latest data for H1 2014 (+10.3%) indicates another strong year for the Czech automotive sector. With such statistics, it is no wonder that automotive and automotive parts productions currently represent the most dominant Czech manufacturing industry. The automotive sector in the Czech Republic includes the production of a wide variety of vehicles ranging from passenger cars (Škoda Auto – Mladá Boleslav, TPCA – Kolín, Hyundai – Nošovice.), to trucks (Tatra – Kopřivnice), buses (Iveco (ex Karosa) – Vysoké Mýto, SOR – Libchavy), motorcycles (Jawa – Týnec nad Sázavou), trailers (Schwarzmuller – Žebrák, PANAV – Senice na Hané, Agados – Velké Meziříčí) and sport roadsters (Kaipan – Smržovka). As one of the most important industries in the Czech Republic, the sector boasts the highest inflow of FDI and currently employs approximately 120,000 people across the country in car plants or related services. In H1 2014, the Czech Republic accounted for over 7% of the total European car production market. In the past few years, the initial inflow of mainly large car producers has been accompanied by a significant inflow of automotive suppliers and research and development centres tied to these manufacturers. The strong automotive background is also attracting more and more distribution centres, usually for the central European or, the entire European market area. The main drivers behind other leading automotive manufacturers moving their production to the country include: the tradition of car production and access to a skilled labour-force, further supported by a large number of technical university graduates, the availability of relatively cheaper materials and the central location of the country which gives proximity to both growth and core markets.

Major Car Producers The tradition of car production in the Czech Republic is tied to Škoda Auto, one of the most famous and most valued Czech brands worldwide. Škoda Auto, a car manufacturer with over 115 years of tradition in motor vehicle production is the largest Czech exporter with nearly 600,000 cars produced per annum. Moreover, it is the only car manufacturer in the country who is involved not only in production, but also in actual car development. The company is based in Mladá Boleslav, north-east of Prague, with production situated in three locations (Mladá Boleslav, Kvasiny and Vrchlabí) where nine different models, including one of the most popular brands globally, within its category, the Škoda Octavia, are being produced. In 1991, Škoda Auto became part of leading car producer – Volkswagen Group. Its R&D centre in Mladá Boleslav, which was further extended by a new Engine centre this September, is the fourth largest of the entire group in the world.

Pavel Rufert TPG Powertrain Management

ŠKODA AUTO a. s.

“ŠKODA AUTO a. s. follows the tradition, success and expertise of more than 100 years of uninterrupted car manufacturing, technical development and customer after-sales care. In the Czech Republic alone, ŠKODA AUTO a. s. has been operational in three production plants: Mladá Boleslav, Vrchlabí and Kvasiny, employing a total of 24,500 employees (in 2013). It was mainly the company’s great potential, successful car models, skilled labour and other advantages of automotive production in the Czech Republic that sparked VW’s interest to connect the ŠKODA brand with the VW Group in 1991. The high quality and reliability of ŠKODA products has been the result of the introduction of new technologies, building on the expertise of skilled professionals and cooperating on common projects and platforms. VW Group’s confidence in ŠKODA’s technical know-how was proved by assigning ŠKODA with the full development of a new series of 3-cylinder 1.2l MPI engines for three VW Group brands, starting in 1998. Between 1991 and 2014, a total of 280 billion Czech crowns have been invested by ŠKODA AUTO a.s. in the Czech Republic. For example, the latest R&D activities have been endorsed by the investment into a new Engine Centre in Mladá Boleslav, where new development projects are integrated into the Group’s strategic programmes. The stable economic environment in the Czech Republic, cost-efficient production and human resources have not only been beneficial for ŠKODA but also for our suppliers who have been opening new plants, creating local automotive clusters close to our factories.”

TPCA (Toyota Peugeot Citroen Automobile) started production in their brand new manufacturing plant in Kolín, east of Prague, in 2005. The total construction cost, which amounted to 20 billion CZK, represented the largest greenfield investment in CEE at the time. The factory, which is focused on the manufacturing of small city cars (Toyota Aygo, Peugeot 107 and the Citroen C1) currently employs 3,200 people and its annual production reaches 300,000 vehicles. To date, the largest foreign direct investment in the history of the country is represented by the new production plant of leading Korean car producer Hyundai, who set up in Nošovice in the Moravia-Silesia region, close to the Slovak borders (another Korean car producer, KIA, is situated in Žilina approximately 80 km from Nošovice). It is the first manufacturing plant of Hyundai in Europe and the serial production started there in November 2008, after only 19 months of construction. The annual production of five car models, especially designed for the European market, totals 300,000. This major investment of the Korean producer initiated a huge inflow of OEM suppliers, first closely tied to Hyundai and KIA, but later reaching other producers within and also beyond the Czech Republic.

15


OEM parts suppliers

glass production. AGC Automotive Czech, a successor of a traditional glass producer from Northern Bohemia, Sklo Union in Teplice, is nowadays the largest producer of flat glass in CEE for the construction and automotive sectors. Fezko Strakonice, once a world recognised producer of hats, is now a part of Johnson Controls and a supplier of textiles for car interiors to leading car producers including Škoda Auto, Opel, VW and Ford.

It might sound like a bold statement but the spectrum of OEM parts production in the country indicates that almost every single part of a car is being produced in the Czech Republic. Out of 50 leading European OEM parts suppliers 36 are producing in the country. For example, TPCA uses 80% of spare parts for its car production in their plant in Kolin from Czech based producers. The manufacturers include both major multinationals who entered the country in the past two decades as well as traditional Czech companies.

Out of the Top 100 global OEM parts suppliers, there are 69 companies based and producing in the Czech Republic. The first and major inflow of automotive suppliers was originally connected to Škoda production in Mladá Boleslav, in the Central Bohemian region. The area around Mladá Boleslav and nearby Liberec region have attracted a number of leading companies from the sector, TRW in Řepov and Stará Boleslav, Mahle Behr in Mnichovo Hradiště, Continental in Brandýs nad Labem, Faurecia, Magna, Johnson Controls in Mladá Boleslav and FIAMM, an Italian producer who took over local company, Akuma. The establishment of the TPCA plant in Kolín, reinforced the interest of international OEM parts producers to enter the Czech market. The third major impulse represented the opening of the Hyundai production site in Nošovice. The strongest and most developed OEM parts manufacturing sector in the Czech Republic includes tyres, rubber and plastics production, which draws upon the long history of the Czech and Czechoslovakian companies active in this field, such as: Mitas, Gumárny Zubří and Barum, now part of the Continental group. The newest addition to this subsector is Korean tyre producer Nexen who will be investing 1 billion USD into a new plant in Žatec. Interior and seating producers, including: Faurecia, Hyundai Mobis and Johnson Controls, represent another strong group of manufacturers supplying parts not only to Czech automotive producers but, also to other manufacturers outside of the country. One recent, large investment, included Johnson Controls who decided to move its production of car seating from Germany to CTPark Bor in the Pilsen region. The plant will supply car seating to BMW factories in Germany and to domestic producers as well. Automotive electronics and brake systems production is another thriving part of OEM production in the country. Brembo, an Italian supplier of brakes systems to Porsche, BMW, Mercedes and Land Rover opened its 25,000 m2 plant in Ostrava, Northern Bohemia in 2011. This year, they extended their premises by another 30%. Lighting systems and HVAC are also represented by a large number of producers including strong players like Visteon Autopal and Mahle Behr. One of the largest, recent investments into the automotive sector included Hyundai Mobis who, in mid-2014, announced its decision to invest 120 million USD into a new factory for the production of lighting systems in Mošnov, in the vicinity of the Hyundai car production site in Northern Moravia. The booming automotive sector also represented an opportunity for once renowned but, recently subdued sectors; such as textiles and

Top 50 European OEM parts suppliers, based on 2012 European OEM parts sales (Manufacturing in the Czech Republic marked in red) Robert Bosch Continental Faurecia Magna International ZF Friedrichshafen Johnson Controls BASF Valeo Delphi Automotive TRW Automotive Lear Gestamp Automocion Magneti Marelli Benteler Automobiltechnik HELLA KGaA Hueck & Co. Denso BorgWarner Brose Fahrzeugteile Schaeffler Aisin Seiki Mahle Behr Autoliv Plastic Omnium Draeximaier Group Eberspaecher Holding GKN PLC Hyundai Mobis Leoni Visteon Federal-Mogul Grupo Antolin IAC Group Honeywell Tenneco Dana Holding Goodyear Tire & Rubber KSPG Webasto WABCO Takata JTEKT Cummins Leopold Kostal Alpine Electronics NTN Corp. TI Automotive TrelleborgVibracoustic Bayer MaterialScience Georg Fischer Automotive

0

5 000

10 000

15 000

20 000

Source: JLL based on Supplement to Automotive News, June 2013

25 000

Selection of Manufacturers – Automotive Sector Bakov nad Jizerou Faurecia Exhaust Systems

Čenkov KOSTAL Kontakt Systeme

Rudná L&L Products

Hořovice KOSTAL CR Saint-Gobain Sekurit ČR Kladno Keihin Thermal Technology Czech (Showa Aluminium Czech) Kněžmost Kautex Textron Bohemia Kolín Lear Corporation Czech Republic MC Syncro Kolín TPCA (Toyota Peugeot Citroen Automobile)

Krupka Auto-Kabel Krupka

Řepov TRW Carr

Holýšov Evobus Bohemia

Ústí nad Labem ArcelorMittal - Stainless Automotive- -Tubes Czech Republic KS Kolbenschmidt Czech Republic

Frýdlant Thermolast TRW Automotive Czech

Žatec Grammer CZ Gestamp Louny HITACHI Automotive Systems Czech HP-Pelzer JC Interiors Czechia Koito Czech Neturen Nexen Tire

Hrádek nad Nisou KSM Castings (CITIC Dicastal)

Frýdlant

Jilemnice BRANO GROUP

Plzeň Alfmieier CZ Boshoku Automotive Czech DAIHO Fuji Koyo Czech HP-Pelzer JTEKT Automotive Czech Plzen MTX Specialty Coating Systems Viza Auto CZ Yazaki Wiring Technologies Czech

Tachov Grammer CZ Johnson Controls

Dačice

Prachatice

Nejdek Metalis Nejdek Witte Nejdek

Chotěšov MD Elektronik

Ostrov u Stříbra Ideal Automotive Lear Corporation Czech Republic Neumatic CZ

Dolní Chrastava Grupo Antolin Bohemia

Hodkovice nad Mohelkou Tenneco Monroe Czechia

Nový Bor Brano Group Smržovka Kaipan

Chrastava Benteler ČR

Stráž nad Nisou Benteler ČR PEKM Kabeltechnik

Jablonec nad Nisou A.Raymond Jablonec Benteler ČR Megatech Industries Jablonec TI Group Automotive Systems TRW Automotive Czech

Louny Aisan Bitron Czech CIE Automotive CZ Fujikoki Czech NACHI Czech

Grupo Antolin-CML

Přeštice International Automotive Components Group (IAC)

Nýřany Faurecia Automotive Czech Republic

Rumburk

Teplice AGC Automotive Czech Snoeks Automotive CZ

Liberec CleverGlass DENSO Air Systems Czech Fehrer Bohemia Grupo Antolin Bohemia Inteva Products Czech Republic Knorr Bremse Systémy pro užitková vozidla ČR LIPLASTEC Magna Exteriors & Interiors (Bohemia) Matador Automotive ČR Sarnamotive Bohemia TI Group Automotive Systems

Stráž pod Ralskem Johnson Controls Automobilové součástky Turnov Grupo Antolin Turnov KAMAX Neumatic CZ

Hrádek nad Nisou Stráž nad Nisou Smržovka Nový Bor Chrastava Stará Boleslav Zákupy Liberec Stráž pod Ralskem TRW Carr International Automotive Adršpach Chabařovice Ústí nad Labem Zákupy Jablonec nad Nisou Vrchlabí Components Group (IAC) Krupka Turnov Týnec nad Sázavou Česká Lípa Trutnov Litvínov Jilemnice JAWA Mnichovo Hradiště Červený Kostelec Teplice Velké Dolní Kalná Březno Kněžmost Bělá pod Jirkov Jičín Lovosice Unhošť Bakov Bezdězem Most Chomutov nad Jizerou Furukawa Electric Autoparts Central Europe Jaroměř Roudnice Mladá Boleslav Řepov České Meziříčí Louny nad Labem Klášterec nad Ohří T.RAD Czech Libáň Kadaň Mělník Benátky nad Jizerou Kralupy Kvasiny Hanušovice Úvaly u Prahy Žatec Brandýs Nejdek nad Vltavou Rychnov Lysá nad Labem nad Labem Essa Czech Kostelec nad Orlicí nad Kněžnou Krnov Slaný Nymburk Podbořany Štíty Kladno Hranice u Aše Zdice Přelouč Pardubice Choceň Libchavy Rychvald Karviná Unhošť KOSTAL CR Úvaly Lanškroun Zábřeh Kolín Rakovník Rudná Moravany Hradec nad Moravicí PRAHA Český Těšín Ostrava Zruč nad Sázavou Vysoké Mýto Česká Žebrák Zdice Uničov Asmo Czech Mohelnice Frýdek-Místek Třebová TRW Autoelektronika Třinec Kopřivnice Hořovice Hlinsko Svitavy Týnec nad Sázavou Dýšina Třemošnice Nový Jičín Nošovice Komárov Litovel Tachov Moravská Třebová Žebrák Ostrov Frenštát pod Radhoštěm Hranice Plzeň Mubea u Stříbra Jevíčko Senice Zruč nad Sázavou na Hané Olomouc Havlíčkův Brod Nýřany Valašské Meziříčí Muramoto Manufacturing Europe Příbram Jiřice Chotěšov Valeo Climate Contro Bor u Tachova Lipník nad Přerov Zubří Rožnov pod Radhoštěm Bečvou Přeštice Holýšov Žďár Humpolec Mírovice Vsetín nad Sázavou Ivanovice Kroměříž Blansko Domažlice Tábor na Hané Jihlava Blatná Klatovy Zlín Batelov Otrokovice Velké Meziříčí Vyškov Soběslav Brno Písek Karlovy Vary Region Janovice nad Úhlavou Uherské Hradiště Bojkovice Okříšky Strakonice Oslavany Hranice u Aše Bzenec Uherský Brod

Dýšina Gerresheimer Wilden Czech

Janovice nad Úhlavou OLHO-Technik Czech

Litvínov INNO-COMP Bohemia

Slaný Mitsubishi Electric Automotive Czech

Vimperk

České Budějovice

Prague Region

Jemnice

Havlíčkův Brod Futaba Czech

Blansko BLATA

České Budějovice MOTOR JIKOV Robert Bosch České Velenice Magna Cartech Dačice TRW - DAS Kamenice nad Lipou Edscha Automotive Kamenice

Prachatice InTiCa Systems Soběslav BANES MOTOR JIKOV Strakonice ČZ DURA Automotive CZ Ideal Automotive Johnson Controls Fabrics Strakonice Mahle Filter Systems Metal Progress Strakonice

Písek Tábor Aisin Europe Manufacturing Czech BRISK Tábor Faurecia Automotive Czech Republic Greiner Perfoam Faurecia Components s.n.o.p. cz Vimperk Heyco Werk ČR SAK

Humpolec Valeo Compressor Europe Jemnice Motorpal Jihlava Automotive Lighting Jihlava Bosch Diesel Motorpal Kosyka Tesla Jihlava

Okříšky Fraenkische CZ Mann Hummel CZ Velké Meziříčí Agados Construct Czech Motorpal Žďár nad Sázavou Cooper-Standard Automotive Česká republika TOKOZ

Adršpach Continental Automotive Czech Republic Červený Kostelec Saar Gummi Czech

Brandýs nad Labem C.I.E.B. Kahovec Česká Třebová Bohm Plast-Technik Hlinsko Megatech Industries Hlinsko

Dolní Kalná Takata - Petri Parts Jaroměř KARSIT HOLDING Jičín Continental Automotive Czech Republic RONAL CR Tucker

Choceň Autoneum CZ Composite Components Rieter Automotive CZ Jevíčko GST Automotive Safety Czech Rehau

Kostelec nad Orlicí Federal-Mogul Friction Products

Lanškroun Schott CR

Kvasiny Škoda Auto

Libchavy SOR Libchavy

Libáň Magna Exteriors & Interiors (Bohemia)

Moravany Acerbis Czech

Nový Jičín Varroc Lighting Systems

Moravská Třebová ATEK Treboplast (Industrias Tajo) Rehau

Rychnov nad Kněžnou Assa Abloy Czech & Slovakia Johnson Controls Automobilové součástky Magna Seating Trutnov Continental Automotive Czech Republic Vrchlabí Škoda Auto (Volkswagen Group)

Hluk

Zlín Region

Jiřice Connaught Electronics CZ

Pardubice Region

Hradec Králové Region

Pardubice Faurecia Interiors Pardubice JTEKT Automotive Czech Pardubice KYB Manufacturing Czech Panasonic Automotive Systems Czech RONAL CR Přelouč Kiekert CS Svitavy Fibertex

Olomouc Region Hanušovice ZKL Hranice AVL Čechy Henniges Automotive

Třemošnice Electropoli-Galvia Vysoké Mýto Iveco Czech Republic Prostějov Maier CZ Mubea HZP Mubea IT Spring Wire Přerov PSP Speciální strojírna

Lipník nad Bečvou MetalPlast Lipník nad Bečvou Senice na Hané PANAV Litovel BRANO GROUP (Deltacol CZ) Štíty Klein & Blažek Mohelnice Hella Autotechnik Nova Uničov BRANO GROUP Olomouc Hexopol Compounding Koyo Bearings Česká republika OTSUKA-BRANO Zábřeh HDO

Břeclav

South Moravian Region Batelov Motorpal

Blatná DURA Automotive CZ Tesla Blatná

Mikulov

České Velenice

Vysočina Region

South Bohemian Region

Hodonín

Byňov

Praha PMP PAL Satrema TRW Volant Horní Počernice

Pilsen Region

Domažlice BEHR Thermot-tronik Czech

Lovosice Aoyama Automotive Fasteners Czech Fukoku Czech KOS WIRE EUROPE Tokai Rika (TRCZ) Most AFSI Europe Grammer CZ Nemak Czech Republic Recticel Automotive (RAI Most)

Kadaň Donaldson Industrial CR Oiles Czech Manufacturing Roudnice nad Labem Thermal Products Czech Republic Johnson Controls Automobilové součástky Klášterec nad Ohří Donaldson Czech Republic Rumburk Toyoda Gosei Czech Benteler Automotive Rumburk BOS Automotive Products CZ

Rakovník BRANO GROUP Eberspacher Rakovník Valeo Autoklimatizace

Březnice Zbrojovka Březnice

Bor u Tachova Autoneum CZ Eissmann Automotive Česká Republika Ideal Automotive Rieter Automotive CZ Technické pružiny Scherdel

Jirkov Hillside Plastics

Příbram AIR Čenkov DUVE ČR KARSIT HOLDING

Brandýs nad Labem Continental Automotive Czech Republic

Mladá Boleslav Autoliv B.V. & Co. Faurecia Interior Systems Grupo Antolin Bohemia HP-Pelzer Magna Seating Johnson Controls Recticel Interiors CZ SAS Autosystemtechnik Škoda Auto (Volkswagen Group) TI Group Automotive Systems Yapp Czech Automotive Systems SAI Automotive Bohemia Tower Automotive Czech Trelleborg Automotive Czech Republic Yapp Czech Automotive Systems

Chomutov Eaton Industries Magna Seating Chomutov

Nymburk Magna Exteriors & Interiors (Bohemia)

Benátky nad Jizerou LINDE + WEIMANN CZ UACJ Extrusion Czech

Mělník MTX

Chabařovice Magna Seating

Mnichovo Hradiště Hella - Mahle Behr - Plastic Omnium (HBPO Czech) Mahle Behr Mnichovo Hradiště

Bělá pod Bezdězem Tiberina Automotive Bělá

Lysá nad Labem LINDE + WEIMANN CZ

Česká Lípa EKOBUS Fehrer Bohemia Grammer CZ Johnson Controls Autobaterie Johnson Controls Automobilové součástky

Ústí nad Labem Region

Central Bohemian Region

Komárov BUZULUK

Liberec Region

Brno Daido Metal Czech IFE-CR IGE-CZ Mergon Czech Břeclav Gumotex LINDE + WEIMANN CZ Bzenec AVX Czech Republic Hodonín International Automotive Components Group (IAC) Ivanovice na Hané Fischer Automotive Systems Mikulov Gebauer A Griller Kabeltechnik Nichias Czech Oslavany Metaldyne Vyškov SMC Industrial Automation Lear Corporation Czech Republic

Bojkovice Zeveta Bojkovice

Moravia Silesia Region Uherský Brod Mann Hummel Innenraumfilter CZ Teknia Uherský Brod

Hluk Halla Visteon-Autopal Czech Valašské Meziříčí Republic Antolín-CIE Czech Republic CIE Automotive CZ Kroměříž PWO Unitools CZ Magneton Plastika Vsetín Indet Safety Systems Otrokovice Nippon Kayaku CZ Continental Barum MITAS Zlín Tomatex Otrokovice D PLAST - EFTEC Rožnov pod Radhoštěm Brose CZ Robert Bosch ZPV Uherské Hradiště Schlote-Automotive Czech

Zubří BRANO GROUP Gumárny Zubří

Český Těšín Donghee Czech Pyeong Hwa Automotive Czech

Nový Jičín Halla Visteon-Autopal Czech Republic

Ostrava Frenštát pod Radhoštem Cromodora Wheels Continental Automotive Czech Republic BRANO GROUP (Deltacol CZ) Siemens Automobilové Systémy Brembo Czech Cirex CZ Frýdek-Místek CTS Czech Republic Hanwha L&C Czech Daechang Seat Goodyear Engineered Products Frýdlant nad Ostravicí BATZ Czech Grupo Antolin Ostrava Hayes Lemmerz Autokola Hradec nad Moravicí HP-Pelzer BRANO GROUP ITT Corporation KES - kabelové a elektrické systémy Karviná Mahle Behr Ostrava Sejong Czech PLAKOR Czech Stant Manufacturing Rossignol Galvanik CZ Kopřivnice Schroeder CZ Brose CZ Sungwoo Hitech DURA Automotive Systems CZ UFI Filters Erich Jaeger Rieger Automotive International Rychvald Rochling Automotive Kopřivnice Halla Visteon-Autopal Czech Republic Tawesco Varroc Lighting Systems Krnov Třinec Erdrich Umformtechnik Daechang Seat Matador - Dongwon CZ Nošovice Hyundai Motor Manufacturing Czech Huyndai Dymos Hyundai Mobis Czech

18


FMCG sector Since the early 1990’s, when the country was undergoing an economic transformation, the long manufacturing tradition combined with a skilled workforce and local consumer base, attracted a large number of international investors to the then state owned companies. Some of the first pioneers included Procter & Gamble who acquired Rakona Rakovník, a traditional soap producer, in 1991 and Coca-Cola and Nestlé that entered Pražské Sodovkárny and Pražské Čokoládovny respectively in 1992. It was the same year when Phillip Morris bought the state-owned Tabák company in Kutná Hora through privatisation. The strategic location in the heart of Europe, favourable labour costs and the skilled and motivated labour pool, represented key drivers for brand new investment in the Czech Republic. Over the next twenty years, the number of foreign investors greatly increased and their initial investments were multiplied by upgrading facilities, building new plants, distribution and R&D centres. One of the best examples of a successful investment which grew over the years was the establishment of a production plant by Danish toy ‑producer LEGO, who opened in Kladno, near to Prague in 2000. Over the following years, the company further invested into three production plants, moving part of its production from Denmark to the Czech Republic. During this time, the company also set up a 100,000 m2 global distribution warehouse near Prague and have established an R&D centre. In 2015, they are planning to open a fourth factory and increase the number of employees from the current 2,000 up to 3,000.

Leading 25 FMCG companies worldwide in 2012, based on net sales (in billion U.S. dollars) (Manufacturing in the Czech Republic marked in red) Nestlé Procter & Gamble Unilever Pepsico Coca & Cola Company AB Inbev JBS Mondelez Archer Daniels Midland Tyson Foods Philip Morris International L'Oreal Danone British American Tobacco Heineken Holding Japan Tobacco Asahi Breweries* Kirin Breweries

The attractiveness of the Czech FMCG market is proven by the presence of eight out of the top 10 global producers on the local market. Besides those already mentioned, these include the large soft beverages producer Pepsico with two manufacturing sites, in Prague and Teplice nad Metují in Eastern Bohemia and Mondelez (ex-Kraft Foods CR), who is operating four plants in the country, two in Moravia – Opava and Valašské Meziříčí and two in Bohemia – Mariánské Lázně and Lovosice. The majority of the largest international producers have entered the market via the purchase of one of the traditional and well established local brands, including production plants and qualified staff. Gradually they have incorporated these production facilities into their own portfolio and have very often extended the line of products with their established brands. After the Czech Republic’s entry into the EU, the number of investments grew with green-field projects such as MARS Czech opening a new plant in Central Bohemia in 2006, Tivall (Nestlé) establishing a manufacturing site in Northern Bohemia in 2007 and Hill’s Pet Nutrition (Colgate Palmolive) investing into brand new production premises in Southern Bohemia in 2010. Other strong international FMCG brands producing in the Czech Republic include among others: cheese producers Fromageries Bel and Bongrain, Danone, Bidvest, La Lorraine, Kimberly-Clark, Euroserum, Tereos TDD, Lyckeby Amylex and pets food brands / producers Brit (Vafo) and Propesko (Provimi).

Kraft Foods Altria Group Colgate Palmolive Diageo SAB Miller General Mills

Net sales in billion U.S. dollars

Kimberly Clark

0

20 000 40 000 60 000 80 000 100 000

*Asahi Super Dry is produced in licence in Pivovary Staropramen of Molson Coors Brewing Company Source: JLL based on Statista, 2014

19


Location

The interest in Czech beer is also increasing abroad with export rising by 9% in 2013 and includes new markets such as South Korea.

FMCG manufacturing facilities are mainly concentrated close to the large cities of Prague, Brno, Pilsen, Olomouc and České Budějovice, due to proximity to large consumer bases and access to workforce. In addition, the excellent infrastructure of the country enables manufacturing sites to be close to natural sources. Parts of the country which are strong in agriculture, such as Southern Bohemia, Southern Moravia, Vysočina, Central Bohemia and the Olomouc Regions are well known for production of dairy and meat products. Southern Moravia is also famous for wine production and fruit and vegetable processing. The western part of the country, Karlovy Vary and the Pilsen regions, are well known for mineral waters (Mattoni, Korunní), destilates (Jan Becher – Karlovarská Becherovka Pernod Ricard, Plzeň Stock Božkov) and sparkling wine production (Bohemia Sekt Starý Plzenec).

Strong local producers In addition to the strong multinationals, domestic producers also play a very important role in the food and beverages industry. One of the strongest and largest producers is Agrofert holding which operates a wide spectrum of companies from meat processing and dairy and to bakeries and frozen food production. Among these are renowned Kostelecké Uzeniny, Vodňanská drůbež, Olma, Penam, Profrost and Mlekárna Hlinsko. Another important domestic player is dairy producer – Madeta, with plants situated in six different locations in Southern Bohemia. Hamé, a traditional Czech producer of tinned vegetables, ketchups, children’s food and paté has seven production plants in the south-eastern part of the country. EMCO is the largest Czech muesli producer with a more than 50% share of the local muesli market. Another strong local producer is Kofola, a manufacturer of a popular soft drink which was almost forgotten but, thanks to local investors, managed to successfully return to the Czech market.

Breweries A special category within the food and beverages sector in the Czech Republic is held by breweries. In 2013, the total beer production in the country rose by 0.6 % to 19.3 mil hectolitres. Czechs, according to some rankings, are the largest consumer of beer per capita in the world. Each inhabitant who drinks on average 144 litres per annum, has a large variety of different tastes and brands to choose from.

The long tradition and global reputation of Czech beer production was proven once again in early summer 2014 with two new entries of major investors from the brewery sector: Carlsberg announced its investment in Žatecký pivovar and Anheuser-Busch (AB inBev) acquired Pivovar Samson in České Budějovice, the town where the famous Budějovický Budvar (Budweiser), is produced in a state owned brewery and is a direct competitor to AB inBev. At the same time, the owner of Pivovary Lobkowicz brewery launched its IPO on the Prague Stock Exchange.

There are approximately 50 large and 215 micro‑breweries in the Czech Republic. Other large multinational investors active in the country include SABMiller, the owner of five breweries including the famous Pilsner lager (Plzeňský Prazdroj), Heineken (Královský pivovar Krušovice, Pivovar Starobrno and Pivovar Velké Březno) and Molson Coors Brewing Company (Staropramen Praha and Pivovar Ostravar). Small to mid-size local breweries continue to play a strong role such as Rodinný Pivovar Bernard in Humpolec which started out on a small scale and managed to develop in to one of the most important players on the market.

Retail distribution Hypermarket operators, mostly Dutch and German chains, were pioneers in the Czech retail market. The development of the first hypermarkets started in the mid-1990s, when international retailers were taking advantage of opportunities arising in the transitional booming Czech economy. The first hypermarket in the country was opened by German chain Globus. The first retail schemes were hypermarket anchored shopping centres consisting of a hypermarket and a service line. Dutch retailer Ahold, owner of the Albert chain, is currently the most active retail operator with regard to expanding its foodstore chain on the market. In 2014, Ahold acquired its competitor Interspar in the Czech Republic and currently operates more than 330 hypermarkets and supermarkets across the country, including the former Interspar units.

Major food operators in the Czech Republic Type

Chains

Hypermarkets

Albert (Netherlands), Globus (Germany), Kaufland (Germany), Tesco (UK)

Supermarkets

Albert (Netherlands), Billa (Austria), Tesco (UK)

Discounters

Lidl (Germany), Norma (Germany), Penny Market (Germany)

Selection of Manufacturers – FMCG Sector Central Bohemian Region Benešov Schreiber Foods (Danone)

Nelahozeves Wet Wipes International

Brandýs nad Labem United Bakeries Byšice Orkla ASA (Vitana)

Poděbrady Poděbradka Polabské Mlékárny

Liberec Region

Poříčí nad Sázavou MARS Czech

Hrádek nad Nisou Drylock Technologies

Radonice Němcova Selská Mlekárna

Lovosice Mondelez (Deli)

Dobrovice Tereos TTD (Lihovar Dobrovice) Tereos TTD (Cukrovar Dobrovice) Kladno La Lorraine Bakery Group LEGO Production

Liberec United Bakeries

Rakovník Procter & Gamble

Roudnice nad Labem Orkla ASA (Vitana)

Klášter Hradiště nad Jizerou Pivovary Lobkowicz (Pivovar Klášter)

Sedlčany Bongrain (Povltavské Mlekárny)

Svijany Pivovar Svijany

Kralupy nad Vltavou Bidvest Kralupy Krušovice Heineken ČR (Královský Pivovar Krušovice) Kutná Hora Philip Morris ČR

Velké Popovice SABMiller (Pivovar Velké Popovice)

Ústí nad Labem Region Hrdly Emco Hrobčice Shanghai MaLing Czech

Karlovy Vary Region Cheb Playmobil CZ Karlovy Vary Pernod Ricard (Jan Becher Karlovarská Becherovka) Klimentov PENAM Korunní Karlovarská Korunní

Rumburk United Bakeries Teplice Tivall CZ (Nestlé) Velké Březno Heineken ČR (Pivovar Velké Březno) Varnsdorf Orkla ASA (Vitana) Žatec Carlsberg (Pivovar Žatec) United Bakeries

Kyselka Karlovarské Minerální Vody (Mattoni)

Pilsen Region Horažďovice Lyckeby Amylex Klatovy Mlekárna Klatovy Mariánské Lázně Mondelez (Kolonáda) Plzeň SABMiller (Plzensky Prazdroj) SABMiller (Pivovar Gambrinus Plzeň) STOCK Plzeň-Božkov United Bakeries Starý Plzenec Bohemia Sekt Starý Plzenec

South Bohemian Region

Kyšice u Unhoště RYOR Městec Králové KOH-I-NOOR HARDMUTH

Blatná Frutana

Sušice SPAK Foods

Byňov Dobrá Voda

Strakonice United Bakeries

České Budějovice AB InBev (Měšťanský pivovar České Budějovice) Budějovický Budvar KOH-I-NOOR HARDMUTH Madeta PENAM Viscofan CZ Záruba Food

Tábor Friall Swallowfield

Jindřichův Hradec Fruko-Schulz Madeta Mírovice Vodňanská drůbež Pelhřimov Madeta Planá nad Lužnicí Kostelecké uzeniny Madeta

Dolany LN Group

Otinoves Mlekárna Otinoves

Budčeves Aveflor

Horní Moštěnice Molinari (Hanácká Kyselka)

České Meziříčí Tereos TTD (Cukrovar České Meziříčí)

Prostějov PENAM Profrost

Litovel Šumperk Kimberly-Clark Europasta (Zátkovy těstoviny) PENAM

Jaroměř Kimberly-Clark Nové Město nad Metují Detecha Teplice nad Metují PEPSICO CZ

Vysoký Chlumec Pivovary Lobkowicz (Pivovar Vysoký Chlumec)

Police nad Metují Merkur Třebechovice pod Orebem Union Cosmetics

Rumburk

Olomouc Region

Broumov KOH-I-NOOR HARDMUTH

Pardubice Region

Třeboň Pivovar Ťřeboň Veselí nad Lužnicí Efko cz Provimi (Propesko) Veselí nad Lužnicí - Řípec Madeta Velký Ratmínov Vafo (Brit) Vimperk Vimperská Masna Vodňany Vodňanská drůbež Vřesce Emco

Vysočina Region

Humpolec Rodinný pivovar Bernard

Prague Region Praha ASTRID Cosmetics Coca-Cola Česká republika HELLADA Mlekárna Pragolaktos Molson Coors Brewing Company (Pivovary Staropramen) PENAM PEPSICO CZ Shanghai MaLing Food United Bakeries Vafo (Brit)

Jemnice Tata Global Beverages CR (Jemča) Jihlava Pivovary Lobkowicz (Pivovar Jihlava) Kostelec Kostelecké uzeniny Polná Mlekárna Polná Přibyslav Bongrain (Pribina) Telč Krahulík - Masozávod Krahulčí Třebíč PENAM

Lobodice u Tovačova LN Group

Hlinsko Mlekárna Hlinsko

Vrbátky Olomouc Cukrovar Vrbátky Archer Daniels Midland Europasta (Zátkovy těstoviny) Zábřeh na Moravě Hamé (Apetit Hněvotín) OLMA Hanácký Masokombinát Nestlé (Zora Olomouc) OLMA PENAM

Chrudim Pivovary Lobkowicz (Pivovar Rychtář) Tereos TTD (Lihovar Chrudim) Jevíčko Czech Blades Letohrad

Žďár nad Sázavou Efko Želetava Fromageries BEL (Bel Sýry Česko)

Blansko Mlekárna Olešnice Pivovary Lobkowicz (Pivovar Černá Hora)

Brno Dermacol Emco Heineken ČR (Pivovar Starobrno) PENAM United Bakeries Břeclav Hamé (FRUTA Podivín) PENAM Saloos Bzenec Hamé (PIKA Bzenec) Zámecké vinařství Bzenec Hodonín Bongrain (TPK Hodonín) Hustopeče Hill's Pet Nutrition Lednice Chateau Lednice

Uničov United Bakeries

Helvíkovice Dibaq

Hamé (BAPA Letohrad) Varnsdorf Liberec Hrádek nad Nisou Pardubice Ústí nad United Bakeries Svijany Broumov Labem Mnichovo Hradiště Teplice nad Metují Teplice Velké Březno Kofola Vysoké Mýto Chabařovice Klášter Hradiště Police nad Metují Hrobčice Tomil Lovosice nad Jizerou Mnichovo Hradiště Hrdly Chomutov Nové Město nad Metují Jaroměř Dobrovice Budčeves Roudnice nad Labem České Meziříčí Byšice Korunní Nelahozeves Žatec Třebechovice pod Orebem Městec Králové Brandýs nad Krnov Kralupy nad Vltavou Karlovy Vary Labem Letohrad Krušovice Kladno Poděbrady Pardubice Kyselka Bohumín Radonice Karviná Opava Helvíkovice Šumperk Cheb Ostrava Rakovník PRAHA Kyšice Mariánské Lázně Vysoké Mýto Zábřeh Klimentov Uničov Kutná Hora Chrudim Velké Popovice na Moravě Nošovice Poříčí nad Sázavou Příbor Hlinsko Plzeň Jevíčko Benešov Stříbro Dolany Kunín Litovel Olomouc Sedlčany Starý Plzenec Valašské Meziříčí Přibyslav Vrbátky Žďár Vysoký Chlumec Horní nad Sázavou Prostějov Moštěnice Humpolec Polná Otinoves Holešov u Kroměříže Tišnov Mírovice Lobodice u Tábor Vřesce Jihlava Blansko Tovačova Blatná Horažďovice Planá nad Lužnicí Kostelec Kroměříž Zlín Klatovy Brno Rosice Strakonice Řípec Velký Uherské Hradiště Želetava Ratmínov Modřice Třebíč Sušice Protivín Uherský Brod Bzenec Veselí nad Vodňany Lužnicí Jindřichův Hradec Kunovice Hustopeče České Budějovice Třeboň Hodonín Jemnice Velké Pavlovice Znojmo Vimperk Lednice Boršov Velké Bílovice nad Vltavou Mikulov Protivín Břeclav Český Krumlov Valtice Pivovary Lobkowicz (Pivovar Protivín) South Moravian Region Byňov

Stříbro EUROSERUM

Český Krumlov Madeta Schwan Cosmetics CR Schwan-STABILO ČR


Moravia Silesia Region Bohumín Unilever (Bochemie) Emco Karviná United Bakeries Krnov Kofola Kunín Mlekárna Kunín Nošovice SAB Miller (Pivovar Radegast) SAB Miller (Pivovar Nošovice) Opava Bidvest Opava Mondelez (Opavia) Ostrava Molson Coors Brewing Company (Pivovar Ostravar) PENAM Příbor Amoené

Zlín Region

Mikulov Vinařství Mikrosvín Mikulov

Holešov u Kroměříže Nestlé (SFINX Holešov)

Modřice Vodňanská drůbež

Kroměříž Kmotr - Masna Kroměříž

Tišnov VITAR

Kunovice Hamé

Rosice PENAM

Uherské Hradiště Hamé (OTMA - Sloko) Hamé (Slovácká Fruta) Pivovary Lobkowicz (Pivovar Uherské Hradiště)

Valtice Vinné sklepy Valtice Velké Bílovice Vinařství Velké Bílovice

Uherský Brod United Bakeries

Velké Pavlovice České vinařské závody

Valašské Meziříčí Mlekárna Valašské Meziříčí Mondelez (Dadák CZ)

Znojmo United Bakeries Znovín Znojmo

Zlín Rudolf Jelinek Vizovice PENAM

22


Home Appliances, ICT and Electronics

Electron Microscopes

The Czech and Czechoslovak electrical engineering and electronics sector was one the most highly developed within the former Eastern bloc between the 1960’s and 1980’s. Its advances in technology and cutting edge were gradually weakened, compared to Western countries, by the lack of investment into innovation. However, the large technology base that was created by the thousands of engineers and state institution researchers employed in the industry, provided a strong base for future development potential of this sector in the country.

The Czech Republic was one of the first countries in the world to build an electron microscope back in the 1950’s and continues to be one of the world leaders of this high-tech manufacturing, supported by R&D activities. TESCAN, a Czech company that was established in 1991 by former highly qualified engineers of TESLA Brno, is today one of the global suppliers of electron microscopes. Brno, due to its tradition in electron microscope production, supported by the presence of technical universities, was selected as the local branch for FEI Company, a global leader in electron microscopes production, back in 1993.The Brno branch, supported by the local R&D Centre, has developed into one of the fastest growing divisions of FEI worldwide, increasing its capacity from 10% to 60% of the company’s total production.

ICT and Home Appliances In the past 20 years, ICT products have become one of the most important export commodities on the local market, covering ca. 1/7 of the total export (in 2012). This makes the Czech Republic not only one of the largest exporter of ICT in Europe but also worldwide. Based on numbers from 2012, the country was the third largest exporter of ICT products in Europe. The export of ICT is dominated by computers and peripherals with an almost 50% share, followed by consumer electronics, communication devices and electronic components. The largest local computer producers include AT Compus (member of AB) and eD’system Czech (producing brand LYNX) both located in Ostrava. Behind the growth of the ICT sector in the Czech Republic there is a long tradition of production, such as the Tesla group dating back to 1921, as well as strong foreign investments over the past 20 years from producers such as Panasonic in Pilsen and Pardubice, Changhong in Nymburk, Bang & Olufsen in Kopřivnice, Alps Electrics and Foxconn. These are only a few examples of Czech ICT industry development. FOXCONN CZ: established its operations in the Czech Republic in 2000, setting up a central regional production hub for Europe in the city of Pardubice;

in 2008, opened the second manufacturing plant in Kutná Hora after

Approximately every fourth electron microscope in the world is manufactured in Brno. Electrical Engineering (EE) and Electronics The history of production of EE/Electronics products in the Czech Republic is tied to TESLA, which before 1990, was one of the most renowned Czech companies in general, producing a wide spectrum of products varying from electric motors and consumer electronics to semi-conductors. It was in one of its divisions, Tesla Pardubice, where the renowned Tamara radar was developed and produced. Nowadays, the extensive technological know-how of the former Tesla group was transferred to both successors and newly established EE/electronic companies over the last twenty years. One of the direct successors is Metra Blansko, a producer of measuring instruments and ERA, a manufacturer of a new generation of the Tamara radar system, VERA. The Czech Republic has attracted all major players in the EE/ electronics sectors including: Siemens, Eaton, Honeywell, Schneider Electric, ON Semiconductors and ABB. In addition to a number of manufacturing sites, many investors have increased their initial investment by opening R&D Centres, Repair Centres or Service Centres.

moving production from Scotland;

Foxconn Global Services Division opened in 2002; one of the largest employers in the Czech Republic (nearly 8,000 employees);

one of the leading exporters in the country; in 2013 produced and exported goods worth ca. 100 billion CZK, ranking the third largest exporter of the Czech Republic; manufacturing for HP, Cisco and many others.

The long history of Czech home appliances production, represented by brands such as ETA, Romo and MORA, also has its place on the local market. Currently, the largest producers on the Czech market are represented mainly by Mora Moravia who is owned by Gorenje and produces in Mariánské Údolí, near to Olomouc, Miele a German manufacturer of washing machines, dishwashers and tumble dryers in Uničov, R-fin – successor of traditional producer Romo in Fulnek and ETA – who moved its production from traditional Hlinsko to Milotice nad Bečvou.

For example, Schneider Electric, a French world renowned producer of electro-mechanical instruments, originally entered the market by privatising the then state-owned firm Elektropřístroj Písek in Southern Bohemia. In 1998, the company decided to invest into the construction of a new production facility. Between 2002 and 2008, the company further expanded its manufacturing premises by 60% and moved its production from Ireland, France, Spain and Italy to the Czech Republic. Nowadays, their Písek production facility is one of the company’s largest production sites in Europe, manufacturing mostly for export. One of the most important parts of the Czech electrical engineering industry is the production of semiconductors. Building on the Czech traditions in the industry, a number of the well-known global as well as local producers have settled down in the Czech Republic to manufacture or design semiconductors here. Honeywell, ABB, Certicon, ON Semiconductors, HC Electronics, Unites Systems and Arsil Crystal are just a few examples of the local players.

Selection of Manufacturers – Consumer Electronics & Electrical Engineering Sector Selection of Manufacturers – Consumer Electronics & Electrical Engineering Sector Prague Region Praha Prague Region ABB Bosch Praha Elcom ABB Trafo Eximet Bosch Saltek Elcom Audiologicka Technika Siemens Eximet Praha Trafo SPEEL Saltek (POLL) Škoda Siemens Audiologicka Technika Tesla SPEEL Praha TTC Marconi ŠkodaEnergies (POLL) (Cegelec Praha) Vinci Tesla TTC Marconi Vinci Energies (Cegelec Praha)

Karlovy Vary Region

Aš Karlovy Vary Region MTG Montagetechnik Aš Rychnov Dolní MTG Montagetechnik Vishay Electronic

Ústí nad Labem Region Děčín KDP Ústí Assembly nad Labem Region Děčín Chomutov KDPElectronics Assembly JJS PULS investiční Chomutov JJS Electronics Klášterec nad Ohří PULS investiční ZF Electronics

Krupka Louny Auto - Kabel Krupka Materion Czech Rimaster AB Louny Materion Czech Teplice Rimaster AB Melecs ETS

Drásov Kladno Aveo Engineering Group Nkt Cables

Libušín Nymburk Helukabel CZ Changhong Europe Electric Nymburk Žebrák ChanghongManufacturing Europe Electric Muramato Europe Žebrák Muramato Manufacturing Europe

Liberec Region

Česká Lípa Liberec Region Johnson Controls Modus Česká Lípa Johnson Controls Jablonec nad Nisou Modus ABB

Dolní Rychnov Chyše Vishay Electric Electronic Lamela Chyše Vary Karlovy LamelaControl Electric Tronic

Jablonec nad Nisou Liberec ABBSystems CiS HOKAMI Liberec Laird Technologies CiS Systems HOKAMI Malá Skála Laird Technologies Schurter

Karlovy Vary Kynšperk nad Ohří Tronic Control Nexans Power Accessories (GPH) Kynšperk Ostrov nadnad OhříOhří Nexans Power Accessories (GPH) Konfektion E (KE Ostrov - Electrik) Ostrov nad Ohří Plesná Konfektion E (KE Ostrov - Electrik) ELROZ

Sokolov Svatava Wieland Electric ept connector


Kutná Hora Libušín Foxconn CZ Helukabel CZ

Teplice Melecs ETS

Malá Skála Stráž nad Nisou Schurter PEKM Kabeltechnik

Plesná Sokolov ELROZ Electric Wieland Krupka

Děčín

Česká Lípa

Králíky OEZ Pardubice Region

Drásov Aveo Engineering Central BohemianGroup Region

KladnoHora Kutná Nkt Cables Foxconn CZ

Klášterec nad Ohří Krupka ZF Electronics Auto - Kabel Krupka

Pardubice Region


Malá Skála

Stráž nad Nisou PEKM Kabeltechnik Vrchlabí

Trutnov

Hradec Králové Hradec Králové Region HC Electronics TL Elektronic Hradec Králové HC Electronics Jičín TL Elektronic AEG Components LAMIREL PCB Europe Jičín AEG Components Náchod LAMIRELelektromotory PCB Europe AMETEK Náchod Nová Paka AMETEK& elektromotory Quittner Šimek Nová Paka Trutnov Quittner & Šimek ABB Tyco Electronics EC Trutnov Trutnov ABB Vrchlabí TycoCables Electronics EC Trutnov Nkt Vrchlabí Nkt Cables

Králíky Lanškroun OEZCzech Republic (Kyocera) AVX Wendell Lanškroun AVX Czech Republic (Kyocera) Letohrad Wendell OEZ Letohrad Pardubice OEZ Commscope Eldis Pardubice ERA Commscope Flextronics International Eldis CZ Foxconn ERA Panasonic Automotive Systems Flextronics International Czech Foxconn CZ T-CZ Panasonic Automotive Systems Czech T-CZ

Olomouc Region Jeseník Olomouc Region Fenix Jeseník nad Bečvou Milotice Fenix ETA Milotice nad Bečvou Mohelnice ETA Autotechnik Nova Hella Mohelnice Olomouc Hella Autotechnik Nova Gorenje (MORA Moravia) Honeywell Aerospace Olomouc O&M Solar Gorenje (MORA Moravia) Honeywell Aerospace Postřelmov O&MPostřelmov Solar MEP Postřelmov Šternberk MEP Postřelmov Invesys Appliance Controls

Teplice Malá Skála Šternberk Česká Lípa Vrchlabí Náchod Šumperk Děčín Krupka Invesys Appliance Controls Jičín Trutnov EPCOS Chomutov Nová Paka Teplice Klášterec nad Ohří Jeseník Šumperk Louny Uničov Náchod Ostrov Jičín Hradec EPCOS Chomutov NováKrálové Paka Miele technika nad Ohří Nymburk Klášterec nad Ohří Jeseník Louny Libušín Svatava Králíky Uničov Karlovy Vary Aš Ostrov Hradec Králové Miele technika Plesná nadSokolov Ohří Rychvald Karviná Bruntál Chyše Šumperk Nymburk Letohrad Dolní Rychnov Kladno Libušín Svatava Králíky Karlovy Vary Aš Kynšperk nad Ohří Pardubice PRAHA Ostrava Postřelmov Sokolov Plesná Žebrák Lanškroun Rychvald Karviná Bruntál Uničov Chyše Šumperk Letohrad Dolní Rychnov Kutná Hora Nový Kladno Štemberk Třemošná Jičín Pardubice Kynšperk nad Ohří PRAHA Ostrava Postřelmov Milotice Planá Žebrák Lanškroun Mohelnice Uničov nad Bečvou Nový Kopřivnice Plzeň Kutná Hora Drásov Třemošná Olomouc Štemberk Stříbro JičínRožnov pod Radhoštěm Nové Město na Moravě Milotice Chotěšov Planá Mohelnice Sebranice u Boskovic Kopřivnice Valašské Meziříčí nad Bečvou PlzeňBlovice Drásov Olomouc Stříbro Nové Město na Moravě Ráječko Rožnov pod Radhoštěm Humpolec Chotěšov Přeštice Sebranice u Boskovic Valašské Holešov-Všetuly Meziříčí Velké Meziříčí Blansko Blovice Milevsko Jihlava Pilsen Region Kuřim Humpolec Ráječko Blatná Tábor Přeštice Holešov-Všetuly Brankovice Otrokovice Velké Meziříčí Telč Blansko Písek Buchlovice Blovice Brno Milevsko Jihlava Faiveley Transport Lekov Pilsen Region Kuřim Uherské Hradiště Blatná Tábor Nišovice Brankovice Otrokovice Čičenice Telč Písek Jemnice BuchloviceHluk Chotěšov Blovice Brno Jevišovice RSF Elektronik Faiveley Transport Lekov Uherské Hradiště Nišovice Čičenice Suchdol nad Lužnicí Znojmo Vimperk Mikulov Plzeň Jemnice Chotěšov Hluk Moravia Silesia Region Prachatice Jevišovice Asteelflash Plzeň RSF Elektronik Bruntál Daikin Industries CZ Suchdol nad Lužnicí Znojmo Vimperk Mikulov OSRAM GEMTEK.CZ Plzeň MoraviaČeská Silesiarepublika Region Prachatice GES - Electronics Asteelflash Plzeň Bruntál Panasonic AVC Networks Czech Daikin Industries CZ Karviná OSRAM Česká republika GEMTEK.CZ Dexon Czech Planá GES - Electronics Panasonic Works Czech Panasonic Electric AVC Networks Czech Karviná South Moravian Region Kopřivnice Dexon& Czech Vysočina Region Bang Olufsen Přeštice Planá Jevišovice Blansko Rexxam Czech Panasonic Electric Works Czech Humpolec Eximet Trafo Metra Blansko South Moravian Region Kopřivnice Vishay Electronic Nový Jičín HDEL Technology Vysočina Region RACOM Bang & Olufsen Přeštice Visteon-Autopal Jevišovice Blansko Kuřim Stříbro Rexxam Czech Jemnice Humpolec Eximet Trafo Metra Blansko Tyco Electronics Czech RSF Elektronik Vishay Electronic Nový Jičín Egston System Electronic Brankovice HDEL Technology Ostrava RACOM EMS-PATVAG Visteon-Autopal ABB Kuřim Třemošná Stříbro Sebranice u Boskovic Jihlava Jemnice Siemens EPIQ CZ Tyco Electronics Czech Brankovice RSF Elektronik AKI Electronic Egston System Electronic Brno ALPS Electric Czech Ostrava EMS-PATVAG South Bohemian Region ELSA ABB ABB Rychvald Třemošná Kosyka Sebranice u Boskovic Jihlava Mikulov ADC Czech Republic Siemens Písek Blatná EPIQ CZ Visteon-Autopal Tesla Jihlava AKI Electronic ALPS Electric Czech Brno Gebauer A Griller Andrew Corporation LOVATO Electric Tesla SouthBlatná Bohemian Region ELSA ABBOptronics Kabeltechnik Schneider Electric AU Rychvald Vishay Electronic Nové Město na Moravě Kosyka Mikulov ADCPraha Czech Republic SIBA PísekPísek Blatná Zlín Region Visteon-Autopal AŽD RACOM Tesla Jihlava Gebauer A Griller Andrew Corporation Pewtronic LOVATO Electric Tesla Blatná Ráječko Combustion Controls České Budějovice Rožnov pod Radhoštěm Buchlovice Kabeltechnik Schneider Electric AU Optronics Telč Vishay(Hellux Electronic Nové Město na Moravě TYCO Safety Products BD Sensors Commscope ZETT Elektra) Prachatice ON Semiconductor Czech SIBA Písek Zlín Region AŽD Praha Heiru CZ RACOM Daikin Device CZ InTiCa Systems Pewtronic Republic Ráječko Combustion Controls České Budějovice Znojmo ESKO Brno Rožnov pod Radhoštěm Buchlovice Číčenice Velké Telč Meziříčí TYCO Safety Products Hluk Commscope ZETT (Hellux Elektra) Suchdol Egston System FEI Czech Republic nad Lužnicí ON Semiconductor BD Sensors Prachatice Deutronic Nkt Cables Heiru CZ Hradiště Czech Visteon-Autopal Uherské Daikin Device CZ Eaton Honeywell Environmental Electronic InTiCaElektrotechnika Systems Republic Prysmian Group (Draka AVX Czech Republic Znojmo ESKO Brno Číčenice and Combustion Controls Hluk Kabely) Velké Meziříčí Milevsko (Kyocera) Holešov-Všetuly Egston System FEI Czech Republic Tábor Suchdol nad Lužnicí Deutronic Wistron InfoComm Nkt Cables Uherské Hradiště Visteon-Autopal AURA ELKO EP Brisk EatonTábor Elektrotechnika Honeywell Environmental Electronic Prysmian Group (Draka Inventec AVX Czech Republic Valašské Meziříčí and Combustion Controls Kabely) Milevsko Mesing (Kyocera) Holešov-Všetuly Codaco Nišovice Vimperk Tábor Electronic Otrokovice Wistron InfoComm AURA (Knurr) Nitto Denko Czech ELKO Control EP Rhode & Schwarz Czech Republic Emerson Brisk Tábor Schott Solar CR Tronic Inventec Brno TESCAN Valašské Meziříčí Mesing Nišovice Volary Vimperk Codaco Electronic Otrokovice Nitto Denko Czech Vishay Rhode &Electronic Schwarz Czech Republic Emerson (Knurr) Schott Solar CR Tronic Control TESCAN Brno

Svatava ept connector

24


Medical and Pharmaceutical Industry The Czech Republic not only has a long tradition in the field of pharmaceutical production and life sciences, but also in medical appliances manufacturing.

Medical technologies and devices The major development of the Czech medical devices industry started in the 20th century with international successes of the introduction of the first external cardio defibrillator and the invention of hydrogel contact lenses by Otto Wichterle, for example. On the contrary to the pharmaceutical market, where only a few companies have a dominant market share, the medical devices, materials and technologies sector consists of a large number of small producers. In the past few years, Czech companies, as well as international firms producing in the Czech Republic, have proven to be more than competitive and many of them are very active in the field of innovation. The competitive edge of Czech medical devices companies is based on its high quality of products, innovation, as well as competitive labour costs and excellent labour quality. In the past 20 years, the industry has grown by more than 140%. The production portfolio varies from technical gases, hospital beds and furniture, surgical instruments and x-ray machines, to sterilizers and other medical materials, appliances and devices. The large international producers have been entering the market since the early nineties. Traditional producers already operating on the market include: Arrow International / Teleflex manufacturing catheters in two plants in Hradec Králové and Žďár nad Sázavou, Hartmann Rico with three production plants in Veverská Bytíška, Havlíčkův Brod and Chvalkovice, Lohmann & Rauscher producing bandaging materials in Nová Paka and in Slavkov u Brna, Rodenstock, Gerresheimer and many others. Medical companies can also be very often located within industrial parks with a suitable background. In the logistics and production park CTP Hranice, there are currently two large international producers of medical devices: Medi Globe, manufacturing products for gastroenterology and urology and Smiths Medical, who produce a range of high-tech products at the plant, primarily single-use medical devices to support breathing and for drug delivery. It is not only international manufacturers that are active and successful on the local market. Many of the Czech producers have already established themselves as some of the world’s market leaders. Such companies, amongst others, include: Borcad, established in 1990 and focused on the development, construction and production of birthing beds, gynaecological, transport and dialysis chairs or, BMT Medical Technology (member of MMM Group), successor of the famous traditional Czech sterilisers’ producer – Chirana. The best recent example of a successful Czech company who expanded on a global level is one of the largest worldwide

manufacturers of medical beds and mattresses – Linet. The company was established in 1990 in Želevnice near Slaný and employs 600 people, producing around 40,000 beds per year. The majority of these are designated for export into 100 countries all over the world.

Pharmaceutical industry and life sciences Thanks to the Czech Republic’s superb academic background, in the field of chemistry and biochemistry, biotechnology, genetics and immunology, there are a large variety of research institutes, commonly tied to universities, as well as centres of excellence. Many of these belong under the Academy of Sciences of the Czech Republic. Productivity and scientific contributions of these institutions can be best illustrated by the global achievements and success of Dr. Antonín Holý and his team in the field of anti-AIDS and hepatitis B medicaments development. The reputation and high quality of this academic background, supported by educated and skilled local personnel has also attracted several international companies to invest into manufacturing or R&D centres in the Czech Republic. Examples of the largest global companies operating production and/or R&D centres include: Sanofi, who bought a 25% share in the largest Czech pharmaceutical producer Zentiva in 2006, Teva Pharmaceuticals, who entered the local market in 1997 and nine years later acquired production company Ivax Pharmaceuticals, successor of Galena company and Lonza Biotec, entering in 1992 via taking over the research institution SPOFA in Kouřim, and in 2006, investing into a new research and development centre there. Other large companies operating on the local research and manufacturing market include: Baxter BioScience in Jevany, Synthon in Blansko, Sotio in Prague, Interpharma, member of Otsuka group and many others. The area of health supplements is represented by one of the most dynamic local manufacturers, Walmark.

Strength of Czech medical and pharma industries: excellent quality and availability of university students and educated workforce from an industry specific area;

highly competitive salary and overall cost levels; close cooperation of universities and academia with pharmaceutical and medical business;

regulation and patent environment harmonised with European Union standards;

high quality of products; constantly developing R&D, educational and training activity; well-developed supplier network; long term commitment of the Czech government to invest into research & development and hi tech centres.

Selection of Manufacturers – Medical & Pharmaceutical Sector Central Bohemianof Region Selection Manufacturers – Medical & PharmaceuticalHradec Sector Králové Region Pchery - Theodor GALMED

Český Brod Dyntec

Central Bohemian Region Jevany

Baxter BioScience Český Brod Dyntec Jílové u Prahy BIOPHARM Výzkumný ústav Jevany biofarmacie a veterinárních léčiv Baxter BioScience Martin Bauer Group (Megafyt Pharma) Jílové u Prahy BIOPHARM Výzkumný ústav Kladno biofarmacie a veterinárních léčiv BEZNOSKA Martin Bauer Group (Megafyt Pharma) Kolín LONZA Kladno BIOTEC BEZNOSKA Kouřim LONZA Kolín BIOTEC LONZA BIOTEC

Roztoky u Prahy VUAB PcheryPharma - Theodor GALMED Řež RadioMedic Roztoky u Prahy VUAB Pharma Vrané nad Vltavou Martin Řež Bauer (Megafyt - Pharma) RadioMedic Želevčice Vrané nad Vltavou LINET Martin Bauer (Megafyt - Pharma) Želevčice LINET

Budčeves AVEFLOR

Hradec Králové Region Hradec Králové

Liberec Region

Jablonec nad Nisou PROFARMA-PRODUKT

Liberec Liberec Region

TRUMPF Česká republika Jablonec nad Nisou PROFARMA-PRODUKT Turnov Ontex LiberecCZ TRUMPF Česká republika Turnov Ontex CZ

Nová Jičín Paka Lohmann Biomag CZ& Rauscher Danaher (SpofaDental) Rudník u Vrchlabí MZ Liberec Nová Paka Lohmann & Rauscher

Kouřim Ústí nad Labem Region

LONZA BIOTEC Chomutov Mikron Chomutov

Ústí nad Labem Region Chuderov ImunomedicA Chomutov Mikron Chomutov Litvínov Primed-Halberstadt CZ Chuderov ImunomedicA Terezín Dyntec Litvínov Primed-Halberstadt CZ Terezín Dyntec

Pilsen Region

Rudník u Vrchlabí MZ Liberec Liberec Litvínov

Chuderov

Rokycany WAKE South Bohemian Region

South Bohemian Region Trhové Sviny

Vodňany Laminar Medica

Turnov

Rudník u Vrchlabí

Dolní Dobrouč Contipro

Pardubice Region Chrudim PENTA (Ing. Petr Švec) Dolní Dobrouč Contipro Pardubice Bionik Stapro Group Chrudim Herbacos Recordati PENTA (Ing. Petr Švec) Rybitví Pardubice VÚOS Bionik Stapro Group Herbacos Recordati Vysoké Mýto Glenmark Rybitví Pharmaceuticals VÚOS

Olomouc Region Hranice na Moravě Medi-Globe Smith Medical Czech Republic

Olomouc Region

Olomouc Hranice na Moravě FAGRON Medi-Globe FARMAK Smith Medical Czech Republic Přerov Olomouc Meopta - optika FAGRON Olympus FARMAK Medical Products Czech Přerov Meopta - optika Olympus Medical Products Czech

Jablonec nadNová NisouPaka Vysoké Mýto Jičín Rudník u Vrchlabí Glenmark Pharmaceuticals Chvalkovice Turnov Budčeves Hradec Králové Nová Paka Řež Krnov Roztoky u Prahy Jičín Terezín Pchery Chomutov Chvalkovice Pardubice Český Brod Bohumín Dolní Dobrouč Rybitví Hradec Králové Opava Bolatice Kolín Budčeves Kladno Karviná Želevčice PRAHA Řež Krnov Vrané nad Vltavou Roztoky u Prahy Ostrava Vysoké Mýto Třinec Kouřim Jevany Chrudim Pchery Odry Pardubice Český Brod Fryčovice Bohumín Dolní Dobrouč Rybitví Jílové u Prahy Opava Kolín Kladno Bolatice Karviná Hranice Rokycany PRAHA Kopřivnice na Moravě Vrané nad Vltavou Olomouc Ostrava Vysoké Mýto Třinec Valašské Meziříčí Jevany Kouřim Chrudim Ejpovice Odry Nové Město Fryčovice Rožnov Jílové u Prahy Havlíčkův Brod na Moravě pod Radhoštěm Přerov Hranice Žďár nad Rokycany Kopřivnice Sázavou na Moravě Jihlava Tišnov Blansko Slušovice Horšovský Týn Olomouc Valašské Meziříčí Ejpovice Zlín Havlíčkův Brod Velké Meziříčí Nové MěstoVeverská Bítýška Rožnov Klatovy pod Radhoštěm Přerov Žďár nad na Moravě Slavkov u Brna Sázavou Veverské Brno Jihlava Blansko Tišnov Slušovice Horšovský Týn Ševětín Knínice Vodňany Zlín Veverská Bítýška Velké Meziříčí Klatovy Strážnice Slavkov u Brna Veverské Brno Ševětín Trhové Sviny Knínice Vodňany

Pilsen Region Horšovský Týn Gerresheimer Wilden Ejpovice Rondo obaly Klatovy Rodenstock ČR Horšovský Týn Gerresheimer Wilden Rokycany WAKE Klatovy Rodenstock ČR

MEDISIZE Ševětín CZ Ardeapharma Vodňany Laminar Medica Trhové Sviny MEDISIZE CZ

Jablonec nad Nisou

Liberec

Chomutov Litvínov

Terezín Chuderov Želevčice

Strážnice

Ejpovice Rondo obaly

Ševětín Ardeapharma

ARROW BudčevesInternational CR (Teleflex) Dr. Kulich Pharma AVEFLOR Dr. Muller PHARMA ITEST Hradecplus Králové SVUS Pharma ARROW International CR (Teleflex) Dr. Kulich Pharma Chvalkovice Dr. Muller PHARMA Hartmann ITEST plus- Rico SVUS Pharma Jičín Biomag CZ Chvalkovice Danaher Pardubice Region Hartmann(SpofaDental) - Rico

Trhové Sviny

Zlín Region

Prague Region

Praha APIGENEX Beckman Coulter (Immunotech) Prague Region Biomedica Coopharma Praha Herbadent APIGENEX LEROS Beckman Coulter (Immunotech) Otsuka (Interpharma Praha) Biomedica PENTA (Ing. Petr Švec) Coopharma PRO.MED.CS Praha Herbadent SEVAPHARMA LEROS Sotio (Interpharma Praha) Otsuka Synthon(Ing. Petr Švec) PENTA UJP Praha Praha PRO.MED.CS VAKOS XT a.s. SEVAPHARMA Vysočina Region Zentiva Sotio (Sanofi Pasteur) Havlíčkův Brod Synthon Hartmann - Rico UJP Praha VAKOS XT a.s. Vysočina Region Město na Moravě Zentiva (Sanofi Pasteur) Nové MEDIN Havlíčkův Brod Hartmann - Rico Velké Meziříčí ALPA Nové Město na Moravě MEDIN Žďár nad Sázavou ARROW International CR Velké Meziříčí ALPA Žďár nad Sázavou ARROW International CR

South Moravian Region

Blansko Synthon

Rožnov pod Radhoštěm ENERGOAQUA MEDITES PHARMA

Zlín Region

Slušovice Rožnov pod Radhoštěm MEDIAP ENERGOAQUA MEDITES PHARMA South Moravian Region Brno Valašské Meziříčí Audy Blansko Medkotech Slušovice BioVendor Synthon MEDIAP BMT Medical Technology Zlín IMUNA Brno Noventis PrimeCell Theraupeutics (Národní Valašské Meziříčí Audy Medkotech Centrum BioVendorTkání a Buněk) BMT Medical Technology Zlín Slavkov IMUNA u Brna Lohmann &Theraupeutics Rauscher (Národní Noventis PrimeCell Centrum Tkání a Buněk) Strážnice LEROS Slavkov u Brna Lohmann & Rauscher Tišnov VITAR Strážnice LEROS Veverská Bítýška Bioster Tišnov Hartmann VITAR - Rico Veverské Veverská Knínice Bítýška RosenPharma Bioster Hartmann - Rico Veverské Knínice RosenPharma

Moravia Silesia Region Bohumín Bochemie

Moravia Silesia Bolatice Region

Medis International Bohumín Bochemie Fryčovice BORCAD CZ Bolatice Medis International Karviná Molnlycke Health Care Klinipro Fryčovice BORCAD CZ Kopřivnice FAVEA Karviná Molnlycke Health Care Klinipro Odry Medi-Globe Kopřivnice FAVEA Opava Teva Czech Industries Odry Medi-Globe Ostrava Ekocentrum Ovalab Opava Galenická Ostrava Tevalaboratoř Czech Industries GALMED MB Pharma Ostrava Ekocentrum Ovalab Třinec Galenická laboratoř Ostrava Walmark Česká GALMED republika MB Pharma Třinec Walmark Česká republika

26


General Machinery When we put automotive aside, which is nowadays the flagship of Czech industry, it is engineering in general that is one of the strongest, most traditional and globally recognized sectors of the Czech Republic. The spectrum of products manufactured in the country is overwhelming: from the smallest machine parts and tools like drills; to precise machinery equipment, military hardware, machinery tools, lifts, cranes, tractors, trams, aircraft, jet engines and turbines. Engineering production is evenly spread over the country and comprises all ranges of enterprises, from small companies to large holdings. Their location is usually determined by historical production. The synonym of the industry and one of the most famous Czech companies globally is Škoda which was originally established in Pilsen approximately 150 years ago. This world renowned producer of a wide range of transport vehicles including trams, trains, locomotives, metro wagons, trolleybuses as well as machine tools and turbines for power plants was recently divided into several companies. The division of Škoda that manufactures rail vehicles including locomotives and trolleybuses, currently employs approximately 4,000 people in a number of manufacturing sites: Pilsen (Škoda Transportation, Škoda Electric), Ostrava (Škoda Vagonka), and Šumperk (Pars Nova). The company is investing largely into innovation and operates its own R&D center. The Czech producer of turbines for power plants, Škoda Power, that separated from the original Škoda group, was acquired by Doosan Heavy Industries and Construction in 2009. The company has an 8% share of the global turbine market and its competitiveness will be further enhanced by a global R&D centre that opened last year in Pilsen. Another large producer, formerly part of the Škoda group, Škoda Machine Tools, now part of ALTA group, is one of the world’s leading manufacturers of machinery tools, based in Pilsen. The Czech Republic has also gained global recognition from the production of heavy agricultural and construction vehicles. Among the largest names belong Tatra, LIAZ, Avia and Zetor. TATRA Kopřivnice, a world renowned manufacturer of trucks, draws upon its’ more than 100 years of experience, combined with the implementation of the latest knowledge from its own R&D centre. In 2011, the company introduced a strategic partnership with Dutch automotive producer DAF Trucks. Zetor, a traditional tractor manufacturer with a 68 year history, is exporting over 90% of products abroad. Other successful Czech engineering companies include: Brano – mainly producing door systems and a wide range of components for the automotive industry, traditional weapon producer – Česká Zbrojovka, in Uherský Brod, one of the largest European train manufacturers – CZ Loko, ČZ Strakonice – producer of Desta forklifts and many others. One example of a recently established company who benefited from the Czech tradition in engineering combined with new high tech innovations is AROJA, a Czech producer of the largest 3D printer in the world.

The quality of local engineering talent, supported by education, expertise and the traditional background was recognised by international investors who have been coming to the Czech Republic since the early 1990’s. Many of these started by setting up local branches and commencing a co-operation with domestic manufacturers. Gradually, they have increased their initial investments by taking over local partners, developing new plants and in many cases setting up R&D centres. Such companies operating on the Czech market include for example: Bosch, Ingersoll Rand, Daikin Industries, Doosan Bobcat and Honeywell, who opened its first R&D laboratory outside of the USA in 1993 in Prague. Honeywell also set up a new R&D centre in 2003 in Brno, which was later upgraded to a European centre, part of Honeywell Technology Solutions. Robert Bosch entered the market in 1992 after a joint venture with Czech Motor Jikov. The factory focuses on production parts for the automotive industry. In 2005, it opened a new R&D and testing centre for almost 200 people and in 2013, relocated the production of Denoxtronics to the Czech Republic and extended the research centre capacity. Nowadays, it is one of the largest employers in the industry with manufacturing plants in Jihlava, České Budějovice, Brno, Krnov and Albrechtice. Another significant employer is Siemens who opened in 1990 and currently employs almost 10,000 people.

Aviation The Aviation sector in the Czech Republic, which has a long tradition dating back to the 1920’s, nowadays includes both manufacturers of final products (small planes, ultralights and jet trainers) and suppliers of OEM parts to large producers such as Boeing, Airbus and Embraer. Moreover, the industry that employs approximately 5,000 people is gradually growing with overall revenues increasing by 30% last year. One of the largest domestic manufacturers is Aero Vodochody, producing, among others, L-159 jet trainers and S-76 Sikorsky Helicopters. Aircraft Industries based in Kunovice, which was acquired in 2008 by Russian owner UGMK, is a producer of the legendary L-410 Turbolet. Other traditional producers for the aviation industry include: Jihlavan, Jihostroj, PBS Velká Bíteš, Technometra, Zlín Aircraft, Mesit, Mikrotechna, Znojemské Strojírny and a number of others. In the last twenty years, the sector has attracted a number of major international companies such as Honeywell, Latecoere, GE Aviation, SAAB, Driessen Aerospace, Mt-Propeller and Bell Helicopters who announced this summer, their new investment into upgrading its Prague facility into their European customization, delivery and aftermarket service centre. Another large investment announced this summer included the 200 million USD to be invested by Malaysian company Aspirasi Pertiwi SDN BHD to Evektor, a Czech producer of EV-55 twin-engine turboprop outback aircraft. The investment will be used for finalising the development and commencing the serial production of the plane which can carry 14 passengers or 1,800 kg of cargo. The development of the plane represents one of the most important projects of the Czech Aviation Industry in the last 20 years.

Selection of Manufacturers – General Machinery Sector Hradec Králové Region


Ústí nad Labem Region

Benátky nad Jizerou Družstevní závody Dražice

Chomutov Parker Hannifin Czech Republic Sandvik Material Technology

Komárov BUZULUK

Nymburk JDK Parker Hannifin Czech Republic

Čelákovice TOS Čelákovice

Most KSK Komořany - Slovácké strojírny M.Ward Manufacturing

Český Brod Technometra Český Brod

Ústí nad Labem ADOZ Black & Decker KONE Industrial

Odolena Voda AERO Vodochody Technometra Radotín

Dobříš Doosan Bobcat Manufacturing Kolín C&F Manufacturing Dirac Industries EMERSON Electric (Alco Controls) Ingersoll-Rand CZ

Varnsdorf TOS Varnsdorf Žatec Caterpillar (Solar Turbines )

Slaný Demag Cranes & Components F.X. Meiller Slaný Vlašim Magtech (Sellier & Bellot)

Česká Lípa Bombardier Transportation Czech TTS Tooltechnic Systems (Narex)

Praha Amcon Bell Helicopter (Textron) GE Aviation Czech (BGA Turboprops) LA Composite Latecoere Czech Republic (LETOV) LOM Praha Mikrotechna Praha Mt - Propeller (Avia Propeller)

Liberec Elitronic

Karlovy Vary Region Klášterec nad Ohří ZKL Rotava Rotas Strojírny Rotava

Chomutov

Ústí nad Labem

Most

Klášterec nad Ohří Žatec

Louny Slaný

Liberec

Mladá Boleslav

Semily

Vrchlabí Trutnov

Jičín

Dvůr Králové Hořice

Benátky nad Jizerou Odolena Voda Čelákovice Nymburk

Hradec Králové ZVU POTEZ

Lipník nad Bečvou Stojtos Lipník

Jičín Seco Group

Lutín Edwards

Náchod ATAS elektromotory Náchod Trutnov Siemens (Nízkonapěťová spínací technika) Vamberk ESAB Vamberk

Pardubice Region

Zábřeh Slovácké strojírny

Ústí nad Orlicí Rieter CZ

Česká Ves

Hradec Králové Holice

Postřelmov KARSIT HOLDING

Uničov Ingersoll-Rand CZ Unex

Jablonná nad Orlicí LUX

Vamberk

Olomouc BRANO GROUP Honeywell Aerospace Moravské potravinářské strojírny SIGMET

Šumperk Škoda (Pars nova) Pramet Tools

Hnátnice Autoneum CZ

Náchod

Mohelnice Siemens (Elektromotory Mohelnice)

Přerov DSP Přerov

Česká Třebová CZ LOKO

Holice Zbrojovka Holice

Semily Charvát AXL Česká Lípa

Hranice SSI Shafer

Vrchlabí Siemens (Nízkonapěťová spínací technika)

Liberec Region

Prague Region

Česká Ves Řetězárna

Hořice DAHER KARBOX

Mladá Boleslav Beroun Carrier Refrigeration Operation Czech Republic Seco Group

Louny Legios

Olomouc Region

Dvůr Králové KARSIT HOLDING

Jablonné nad Orlicí

Jeseník

Krnov

Bohumín Karviná Hradec Ostrava nad Moravicí Zábřeh Vítkovice Albrechtice Hořovice Česká Třebová Studénka Komárov Žebrák Frýdek-Místek Ledeč nad Sázavou Mohelnice Plzeň Kopřivnice Stříbro Nový Jičín Olomouc Mýto Hranice Dobříš Vlašim Chotěboř Valašské Meziříčí Lutín Lipník nad Žďár nad Sázavou Přerov Rožnov pod Radhoštěm Bystřice pod Perštejnem Bečvou Milevsko Vsetín Hulín Pacov Velké Meziříčí Drásov Domažlice Blansko Zlín Jihlava Slušovice Pilsen Region Sezimovo Ústí Kuřim Otrokovice Klatovy Okříšky Domažlice Velká Bíteš Uherské Strakonice Rosenberg Staré Město Říčany Brno Hradiště Třebíč Soběslav Slavkov Kunovice u Brna Hořovice Uherský Brod u Brna Hrotovice Tedom Vodňany Moravský Písek Strážnice Klatovy Znojmo Mikulov Vimperk Aerotech Czech Český Krumlov Břeclav Velešín Mýto Valtice Carrier Refrigeration Operation-Czech Republic Zlín Region Kaplice Uherské Hradiště Hulín Plzeň MESIT Toshulin Aliatech Metal Amagasaki Pipe Czech South Moravian Region Uherský Brod Kunovice Vysočina Region Daikin Industries CZ AIRCRAFT Industries (LET Česká zbrojovka Drásov Blansko Doosan Škoda Power Kunovice) Slovácké strojírny Siemens Electric Machines Bystřice pod Perštejnem ČKD Blansko GÜHRING Evektor Aearotechnik ADOZ Iscar ČR Meister Moravia Vsetín Kuřim Brno LOMA Systems MEZ Pohony Vsetín TOS Kuřim - OS (Alta) Hrotovice ADOZ Precision Castparts Corporate CZ TES Vsetín MICo Aguna Mikulov Škoda Electric Alstom Zlín Emerson Climate Technologies Otrokovice Chotěboř Škoda Machine Tools (Alta) ZLIN Aircraft BOMAR TAJMAC - ZPS Cheops Škoda Transportation Bosch Rexroth Moravský Písek TechnoCrane Slušovice Schmolz + Bickenbach Brno Rifles - Zbrojovka Brno Jihlava Zodiac Aerospace (Driessen Mould & Matic Solutions Bosch Diesel Daikin Device CZ Aerospace CZ) Říčany u Brna CZ LOKO Danaher Motion Staré Město Startech Jihlavan Jihlava DESTILA Ray Service Stříbro EM Brno Kermi Slavkov u Brna Ledeč nad Sázavou GKN Stromag Brno EPM DATEL Ledeč Moravia Silesia Region Honeywell Environmental and- SAAB Czech South Bohemian Region -Combustion Controls Krnov Albrechtice Okříšky Strážnice Krnovské opravny a strojírny Bosch Termotechnika ALFA IN IMI International - Norgren CZ Soběslav Český Krumlov Aroja Královopolská M belt Fronius Nový Jičín Bohumín Pacov Michel Precizní Technika MOTOR JIKOV Linde Pohony Valtice Muller Weingarten ČR BONATRANS Pacovské strojírny NTS Mauting Kaplice Poclain Hydraulics Strakonice Ostrava Frýdek-Místek Třebíč BRAWE Siemens, Industrial ČZ Znojmo DPO - INEKON Huisman Konstrukce Tedom Engel Strojírenská DENIOS Česko Znojemské Strojírny SE-MI Technology (Alta) Šmeral Brno Hauser Siemens Kolejová vozidla Hradec nad Moravicí Velká Bíteš Turbomachinery Škoda Vagonka BRANO GROUP PBS Velká Bíteš Velešín ZETOR Milevsko Jihostroj ZKL ZVVZ Machinery Studénka Karviná Žďár nad Sázavou MSV Metal Studénka Gates Hydraulics Vodňany K. Hartwal Břeclav Sezimovo Ústí A. Pöttinger Žďas Otis Kovosvit MAS Vítkovice Kopřivnice Vítkovice Holding TATRA Kopřivnice Beroun

PRAHA

Český Brod

Kolín

Ústí nad Orlicí

Hnátnice

Šumperk

Postřelmov Uničov

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6. The Czech Industrial Real Estate Market Given the size of the country and number of its inhabitants, the Czech Republic offers one of the most developed industrial markets in Europe. The first modern logistics/industrial park was developed in Prague in 1997. The strong retail boom, attractive government incentives and the entry of the Czech Republic to the European Union in 2004, further enhanced both construction activity and demand in the warehousing sector, spreading out to the regions. The total modern industrial stock in the Czech Republic (which is offered on the letting market), currently stands at 5.1 million m2 and consists of new, high quality buildings which meet the highest international standards. This comprises both distribution space as well as premises for light manufacturing purposes. In the last fifteen years, the pace of development underwent different stages. In the early years (2000–2004) the total new supply in the country reached over 400,000 m2. In the following five years (2005 – 2009), which can be referred to as the first boom period, the total level of completions amounted to 3 million m2. Between 2010 and 2014, additional new supply reached over 1 million m2. This represents an annual supply of between 200,000 m2 to 350,000 m2 in the last five years, out of which, over 80% was developed after binding lease contracts were signed.

Stock and Vacancy in the Czech Republic 5 500 000 5 000 000 4 500 000 4 000 000 3 500 000 3 000 000 2 500 000 2 000 000 1 500 000 1 000 000 500 000 0

25% 20% 15% 10% 5% 0% 04 05 06 07 08 09 10 11 12 13 14 20 20 20 20 20 20 20 20 20 20 20

Stock

Vacancy rate

Source: JLL, April 2015

The most interesting areas for warehouse facilities are those within close proximity of highway connections. The most developed area in the Czech Republic is within the Greater Prague Region where nearly half of the total modern warehouse space is concentrated, followed by Brno, Pilsen and Ostrava. Recently, Mladá Boleslav in the Central Bohemian region, the seat of the Škoda Car Company, has experienced rapid development and today represents the fifth largest industrial submarket of the country.

Industrial Supply in the Czech Republic

3%

2% 2%

Greater Prague

2% 1%

Brno region

5% 40%

7%

Pilsen region Ostrava region Central Bohemia region

8%

Ústí nad Labem region Liberec region Pardubice region

14%

Olomouc region 16%

Jihlava region Hradec Králové region

Source: JLL, Industrial Research Forum, April 2015

The largest logistics parks of the country are P3 Prague Horní Počernice with nearly 320,000 m2, in Prague, followed by CTPark Bor (270,000 m2) in the Pilsen region and Prologis Park Prague-Jirny (220,000 m2). CTPark Ostrava and CTPark Brno conclude the top five major industrial parks. These five parks account for about 25% of the entire modern industrial stock on the Czech market. The major developers of industrial parks in the country include CTP Invest, Prologis, VGP, Panattoni and P3. Other large international groups active on the market are Segro, Goodman and Amesbury. In addition, there are strong domestic players such as D+D Real, Uno and Outulný Group. Strong competition among developers, fuelled by growing demand in the booming years around 2006–2008, led to speculative construction which came to a halt at the beginning of the financial crisis. The oversupply situation, which was suddenly a new experience for the market, was gradually overcome by steady absorption combined with a restrictive, conservative approach of developers and financial institutions. A focus on pre-let and built-to-suit construction has prevailed on the market since 2009 and has had a positive influence on the vacancy rate. From almost 19% in 2009, vacancy dropped over the following years to the current (Q1 2015) level of 7.8% for the Czech Republic and 8% for Prague. The other large submarkets of Brno, Pilsen and Ostrava are all between 7% – 11%. The demand for distribution and light industrial space in the Czech Republic in the last five years was ranging between 0.8 million m2 in 2011, to over 1.3 million m2 in 2014, which was the best annual result in gross take-up in the markets history. The total volume leased to industrial tenants in the last 5 years amounted to over 5 million m2. The most demanded regions are Prague, Brno and Pilsen. The major drivers of demand over the last several years were predominantly manufacturing companies (mostly from the automotive and electronics sectors), followed by logistics companies (3PLs). For the past two years, manufacturing companies recorded more than a 35%

29


share of net take-up. Recently, a number of companies from the retail sector, especially internet retailers, have started to take a higher share on the take-up. This trend is expected to increase further in the near future.

Prime rents in the Czech Republic reflect the maturity of the market, predominantly with the evolution of supply and demand which has evolved considerably since 1997, when first industrial buildings were developed in the Greater Prague region. Since then, the market has registered a continuous stabilisation of prime rents reaching as high as € 6.5 per m2 / per month in 1997 and dropping to € 5.5 per m2 / per month towards the end of 2003. Increased competition from newly delivered projects, combined with the global economic downturn since 2008 led to a further stabilisation of prime rents to the current level of € 4.25 per m2 / per month.

0 6 000 38.1%

16 000 393 000 7.3%

Prime Industrial Rents and Yields in the Czech Republic 13 000 100 000 14.2%

PARDUBICE

OSTRAVA

OLOMOUC

JIHLAVA

0 8 000 0%

0 100 000 3.0%

116 000 692 000 11.2% SOUTH BOHEMIA

VACANCY RATE

HRADEC KRÁLOVÉ

CENTRAL BOHEMIA

PILSEN

TOTAL INDUSTRIAL STOCK (sqm)

2 000 828 000 6.7%

PRAGUE

0 381 000 3.6%

212 000 2 044 000 8.0%

0 0 0% KARLOVY VARY

UNDER CONSTRUCTION (sqm)

27 000 65 000 15.9%

LIBEREC

ÚSTÍ NAD LABEM

0 124 000 14.3%

6 000 233 000 6.4%

8 000 170 000 0%

Czech Republic Logistics Market Overview

ZLÍN

BRNO

Source: JLL, IRF, April 2015

70 €

10%

60 €

8%

50 € 40 €

6%

30 €

4%

20 €

Remon L. Vos CEO

CTP Invest

“Initially, multinationals came to the Czech Republic for low cost manufacturing projects. They soon discovered the strategic location of the Czech Republic in relation to Germany, Austria and the rest of central Europe, in addition to its well-developed road network and the availability of a highly qualified and motivated workforce. Nowadays many of CTP’s clients have full size factories with in-house R&D facilities in the Czech Republic. In many cases they have consolidated a number of their European operations with the Czech facility now operating as their main sites with long-term commitments. CTP’s key clients include: TNT, DHL, UPS, Schenker, Brembo, Valeo, IMI, Honeywell, ABB. CTP has been investing in premium class properties throughout the Czech Republic since 1998. CTP´s current portfolio includes more than 200 buildings, totalling 2.2 million sqm of let-able area and 400 clients who together employ 35,000 people. On average CTP constructs 200,000 sqm per year, 70% for existing clients which says a lot. A large portion of the network is strategically located in the regional cities close to the country’s well renowned technical universities and long-term traditional manufacturing and engineering hubs. CTP owns and operates the CTPark Network, consisting of full service business parks, offering 5 unique property types from 350 sqm for suppliers and start-ups, to custom built projects of 70,000 sqm and more. CTP itself employs 150 people who are always available on site to provide project management, asset management and development services. CTP is privately owned and the investments are financed through equity and bank loans. CTP clients wish to invest in things they know and where money is to be made, property is not their core business. CTP cooperates closely with the Czech authorities to ensure smooth procedures.”

2%

10 € 0€

04 005 006 007 008 009 010 011 012 013 014 2 2 2 20 2 2 2 2 2 2 2

Prime Annual Rent

0%

Mid Point Yield

Source: JLL, April 2015

Martin Polak Vice President & Country Manager

Prologis Czech Republic & Slovakia

“Located at the heart of Central Europe, the Czech Republic serves as a logistics hub with easy and efficient connections to key European markets, such as Germany, Poland, Austria and Slovakia, and, from them, to the rest of continental Europe. For producers and manufacturers with global supply chains, this ease of access is an essential factor in location strategy. Furthermore, manufacturers need to maximize their efficiency in every way, which means co-operating with all participants in the logistics chain. For that reason, the Czech Republic, which offers a skilled and experienced labour force in a central location, is a competitive solution. At Prologis we are mindful of the structural changes in consumer spending and technology, which lead to our customers needing to increase their requirements for logistics space. We receive demand from manufacturers to lease facilities in a variety of markets in the Czech Republic, especially Prague. With our global experience we are committed to meeting these requirements, by offering facilities that suit the needs of every customer in the Czech Republic and around the world. Our clients include: DHL, Globus, Raben, Gefco and Tesco.”

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7. Real Estate: Rent or Buy? The decision to rent or buy a production facility is one of the first which should be taken in terms of real estate. This decision largely depends on the goals of the manufacturing company, the time needed to be operational, expansion plans, and the desired flexibility. Consideration is also given to tax implications, the cash flow position and the availability of real estate in a specific location.

Built-to-Suit (BTS) in a Warehouse Park is a specific form of BTS project, where the specially designed facility is developed as a part of an existing or planned warehouse park.

Three rental and three purchase methods for real estate will be described in this chapter, as well as their implications and timeframe.

The main differences between a ‘classic BTS’ and a BTS in a Warehouse Park are:

Option 2: A Built-to-Suit facility in a warehouse park

shorter timeline for the process;

Rent a facility? Three main options Option 1: A Built-to-Suit facility on a greenfield site Built-to-Suit (BTS) is a dedicated building developed specifically to suit the particular needs of a given investor. The entire investment process is led by the developer, who: presents the site offers; proceeds with the ‘due diligence’ of the selected site; purchases the chosen site (subject to a binding agreement with the investor); finances and supervises the entire development process; hands over the building to the investor in the form of a leasehold. extracts the land from the agricultural fund, which is an additional cost based on a fee per m2 usually in Czech crowns. The investor acquires a building: in the form of a leasehold, based on a lease agreement (typically a minimum lease length of 7–10 years and usually a rent-free period is negotiated); designed and constructed according to the investor’s requirements (location, technical specification, shape of the building, purpose of the facility – e.g. heavy production, light production, warehouse ‑sorting plant). In this scenario the investor: does not have to commit any funds for the purchase and there are no initial payments; can benefit from additional incentives such as being located in a Special Economic Zone.

the selection of the site is determined by the developer’s portfolio; the construction of the premises can start almost immediately, as the site is typically equipped with the necessary infrastructure and connections. Usually the developer already holds all environmental and building permits required. The location of the BTS project: is determined by the developer’s site portfolio; is limited to the logistics hub/main industrial regions in Czech, next to motorways, national road junctions and by-passes, which does, however, improve the transport connectivity.

Option 3: Leasehold of an existing building In this scenario the investor becomes the lessee of a building in one of the parks located in the main logistics regions in the Czech Republic. The investor signs a lease agreement, with the typical minimum lease length being 3 years. The use of the space is determined by the developer (storage space, light production, etc). The leased premises have a standard technical specification. The space can be adapted to the lessee’s needs, although the scope of such change is limited. Adaptations can be financed by the lessee or by the developer; the cost may be paid as additional rent or offset against incentives and in most cases, can benefit from tax exemptions, subject to meeting formal criteria. This option is preferable for investors who: need the space as soon as possible; only require a small production space; need more flexibility can conduct their manufacturing services in a standard A-class warehouse which has been adapted to their needs.

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Buy a facility? Three main options Option 1: Fee development Fee development is a form of cooperation between an investor and a developer, where the developer takes all the responsibility in the development process and provides the investor (i.e. future owner) with a facility built on the Investor’s site and according to the investor’s technical specification. The developer:


Option 3: Acquisition of an existing building In this scenario the investor acquires an existing building, and the land it is on, according to technical specification and location preferences. The building can be adapted to meet all of the investor’s requirements and the Investor bears all the costs regarding any improvements.

proceeds with the due diligence of the site (which has already been purchased by the Investor or is purchased by the Investor as part of the process); is responsible for financing and leasing the whole investment process; negotiates with the general contractor, provides all environment and building permits, telecom connections, road access, construction, permit for use and all paperwork for authorities and contractors; delivers the building according to the exact timing and technical specification required by the investor; having finished the development, hands over the building to the investor in the form of a freehold title.

Tomáš Míček Country Head Czech Republic

P3 After completion of the whole process, the investor: is the owner of the site and the building; operates in a building, which has been designed and constructed according to the investor’s specific business requirements; can benefit from government incentives in a form of tax relieve.

Option 2: Own development The investor leads the whole development process. This involves: proceeding with due diligence and purchasing the site determining the technical specifications for the premises; being responsible for all paperwork and permits with regard to authorities and contractors; organising the tender for an architect and negotiating the conditions; organising the tender from general contractor among construction companies and negotiating conditions; supervising the whole development process. The funding of the project is the responsibility of the investor. The investor is the owner of the site and constructed building. The length of the project development is dependent on the investor.

“The Czech Republic’s industrial property market goes from strength to strength, reflecting how the country’s manufacturing sector has become a key part of the European supply chain. Reasonable labour costs, political and economic stability, plus its proximity to Western Europe continue to make the country an attractive location in which to set up a factory. These pull-factors are reflected in development activity in the industrial property sector last year, which matched the record levels of 2007. What we are seeing across our portfolio, which is one of the largest in the country following our purchase of 11 parks last year, is also the growth in higher value-add output, research and investment into new technologies and services by Czech manufacturers. This is a sign of how far the industrial property market has developed and matured. The Czech Republic’s central location in continental Europe makes it a key distribution centre in the supply chain to the West, particularly Germany, as we see with our auto component supplier customers such as Knorr-Bremse and Grupo Antolin. However, the Czech Republic also serves as a strategic location from which to distribute to Central Europe and Eastern Europe. We recently completed a 40,000 m 2 Build-to-Suit (BTS) project at one of our Prague parks for VF Corporation, the owner of premium designer wear brands Vans, Wrangler, The North Face and Timberland, which will serve as a distribution hub for the region, for example. E-commerce is another emerging trend in locations close to large cities, as we have found in the growing cluster at the Horní Počernice park on the outskirts of Prague. All these developments support the positive prospects for the Czech market, which we are responding to through our Build-to-Suit developments and ample land bank.”

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Overview of the permitting process Once the decision has been made as to how the property will be acquired, it is necessary to go through the steps of the various legal and technical procedures in order to obtain an occupancy permit and to be allowed to operate a constructed or refitted facility. The standard project delivery procedures are outlined in the table below with the provided average duration of each step being based on the typical project and typical location. The first step consists of the technical due diligence of the site and the investigation of whether the property is contained in the local

master plan or, if a planning decision will be required. In addition, utilities connection and various consents relevant to the development, need to be obtained together with the environmental decision. The second step is drawing up a building design suitable for the building permit in order to obtain a valid building permit which will allow the construction of the facility. Finally, the commissioning and occupancy permit procedure should be followed in order to receive the final, valid occupancy permit which will allow the operation of the facility.

Permit process and estimated timing Site selection Technical due diligence (audit) of the plot (2 to 5 weeks)

Step 1

Zoning (Planning Decision required if there is no Local Master Plan) (3 to 12 months)

Environmental decision

Utilities connection consents

Building permit design development

Additional consents which may be required for a particular development plot: – archaeological survey – tree cutting permits – rainwater discharge permit

(3 to 6 months)

(2 months)

(2 to 5 months)

(2 to 6 months)

Step 2

Obtaining a valid building permit (3 to 6 weeks)

Step 3

Construction (20 to 40 weeks)

Step 4

Obtaining a valid occupancy permit (3 to 6 weeks)

The above durations represent observed actual times of delivery for typical project in a typical location. In more complex situations the given forecasts might not be sufficient to complete the particular activity. Source: JLL, 2015

How quickly can you be operational? This largely depends on the option chosen, which is discussed in the previous chapter. The options involving BTS for renting or the fee development or, own development of a facility on a greenfield are the longest processes to realise and have to go through all four steps which are described in the above table. This takes approximately 62 to 92 weeks from the selection of a greenfield site to an occupancy permit being issued. The process of renting a facility that will be constructed according to the manufacturer’s needs (BTS) but, located in an existing park, will

take less time (33 to 65 weeks) as the different permits or work may, in many cases, already be available, including infrastructure work and environmental decisions. The building permit can also be obtained beforehand so the work can start as soon as the decision as to the particular site is taken and in parallel, modification to the existing building permit will be requested to incorporate the specific building requirements of the investor/manufacturer. Renting or acquiring an existing facility is the fastest way to become operational in the market. Only the modification of the existing premises (up to 10 weeks) and/or the request for the occupancy permit will be needed.

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Time frame of the different rental and sales options (based on zoned land)

Rent

BTS

from 62

BTS in Park

from 33

Existing Park

to 65

from 13

to 46

Buy

Fee Development

from 61

Own Development

to 92

from 62

Acquisition of Existing Building Weeks

to 92

from 13

0

10

to 92

to 46

20

30

40

50

60

70

80

90

100

Source: JLL, 2015

Market practice for leasing space Leasing space

Lease length

typically three to five years; seven to ten years more common for BTS projects.

Rental basis

paid monthly in advance with rents denominated in Euro but paid in CZK.

Lease agreement collateral

bank guarantee or cash deposit equivalent of three to six months’ rent and service charge, all increased by VAT. Along with parent company guarantee.

Rent increases

annually, according to Harmonised Index of Consumer Prices (HICP).

Repairs

internal, tenant; external/structural and common areas, landlord, although recovered through service charges.

Insurance

landlord covers costs of building insurance (recovered through service charges), tenant covers insurance of its own premises, contents and civil liability.

Agency fees

15% to 25% of the annual rent, increased by VAT, depending on the lease length. Fees are typically paid by the landlord. Remuneration may be also calculated as a percentage of monthly rent or a percentage of the total value of a lease contact. In case of renegotiations on behalf of the tenant, remuneration paid by the tenant may be based on the percentage of the savings secured for the tenant.

Service Charges

ranges between 30 and 85 Eurocent / m² / month. Calculated on an open book basis.

Reinstatement

negotiable lease by lease.

Other developers’ incentives

partial or full fit-out, and/or rent-free periods: common practice in the market, usually in the range of four to eight months’ rent (in the case of a 60-month lease). Rent-free periods and fit out contributions depend on the transactional volume and lease length.

Rental Cost

largely depends on the fit-out requests.


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Market practice for purchasing space Purchasing space

Asset sale: Transfer of plots of land is subject to VAT in the following cases: Transfer of plots of land on which there are buildings firmly affixed to the land Transfer of plots of land on which utilities (water, gas, electricity etc.) are built Transfer of plots of land on which a building can be constructed according to a building permit

VAT

Transfers of other immoveable property, including plots of land other than those listed above, will be VAT exempt after the expiry of three/five years from the first approbation (occupancy certificate) or from the date when the first use of the structure commenced, whichever occurs earlier. There is an option to tax the transfer of immovable property after the expiry of this period. Transfer of “Intangible” right to build (i.e. transfer of right to build on a plot of land owned by the third party) is subject to VAT. “Tangible” right to build (i.e. transfer of right to keep a building already constructed on a plot of land) is exempt from VAT after 3/5 years from the date of the issuance of the first permit to use. The 3 years period applies for Buildings or “Tangible” Right to build which were acquired before 2012, 5 years period applies for Buildings or “Tangible” Right that were acquired starting from 2013. The VAT rate of 21% VAT applies for buildings and land (commercial properties) with exception of the social housing. Sale of shares: is not subject to VAT.

Real estate transfer tax

4% of purchase price (typically payable by the Seller, but can be agreed otherwise)

CIT

Asset sale: 19% on the difference between tax book value of the assets and the agreed sales price Sale of share: is not subject to taxation, subject to meeting certain criteria

Real estate tax

Based on the size of the municipality and local coefficient. The basic tax rate is further increased by the number of floors in the building (e.g. RET on 100 m2 of office space located in Prague is approx. CZK 1,500)

Registration fee

Fee for the registration in the Cadastral Register is CZK 1,000 (approx. EUR 36.50)

Prologis Park Prague – Úžice

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8. Real Estate Acquisition Section provided by PwC Legal Definition of Property under Czech Law Under the principle “superficies solo cedit” which is effective in Czech republic from 2014 the space over and under the land, the buildings and other devices set up on land (except for temporary buildings), as well as everything embed in land or attached to wall of building, are parts of the land.

Cadastral Register All plots of land and, with certain exceptions set forth in the law, all construction thereon in the Czech Republic (including residential apartments and non-residential premises that have been categorized as separate assets/units) are registered in the Cadastral Register. The Cadastral Register is a record of rights to real property including, in particular: ownership rights, mortgages, easements and pre-emption rights (where the latter takes effect as a right in rem). Leases and option agreements encumbering an ownership right are not obligatory recorded in the Cadastral Register, however voluntary registration is possible. The Cadastral Register also contains a Collection of Deeds, which includes decisions of public authorities, agreements and other deeds based on which the record in the Cadastral Register was made. The Cadastral Register is publicly accessible; anyone is entitled to access it in order to make extracts, copies and notes. Limited fees are payable.

Owners of Real Estate Under Czech law, every individual and legal entity enjoys the same right of ownership of real property. The same applies to foreign citizens and foreign legal entities in the Czech Republic. There are no restrictions in acquisition a property in the Czech Republic for foreigners.

Transfers of Real Estate In order to transfer ownership title to real property, the following formal requirements and procedures must be met and followed: An agreement on the transfer of real property must be made in writing. Signatures of the transferor and the transferee must be affixed in the same document and must be officially verified.

Rights to Real Property Owned by a Third Party (Iura in re aliena) Right to build (právo stavby) Right to build enables the placement of a building/construction on a land plot of a different party. It is time limited for the maximum length of 99 years after which the building becomes the property of land owner for the monetary compensation. Servitudes obligation of the owner to act or refrain from action in favour of a third party Lease (nájem) Right to use a property for a definite or indefinite period of time subject to payment. Tenancy (pacht) the right to use and collect profits from real estate for a definite or indefinite period of time, subject to payment There is no obligatory registration of the lease or tenancy in any register in the Czech Republic. Right and obligations of the landlord from the lease and/or tenancy are automatically transferred to the acquirer with the transfer of the ownership right to the leased property.

Zoning Plan and Planning, Building and Use Permits Czech law generally requires planning and building permits for any property development. Any use of the development, when completed, must then be additionally approved by a building-use permit. A building ‑use permit must then additionally approve any use of the development, when completed. Planning permission, as a first stage permit, may be obtained only if the application for planning permission (i.e. the development project) complies with an approved urban study or zoning plan. If an urban study/zoning plan is not consistent with the intended development project, a change to the urban study/zoning plan is possible. This procedure would likely, however, be rather time-consuming.

The transfer agreement must contain a description of the real property to be transferred. For real property that is subject to registration, this will be the information recorded at the Cadastral Registry. For other real property not subject to registration, as detailed a description as possible is required.

The approval process for planning permission can be extremely complex and protracted, since a number of public authorities would be involved; these include the Fire Department, Department of Hygiene, Heritage Protection Office, Chief Architect’s Office, Transport Department, Environmental Office and others. Permission itself, when issued, comes from the relevant Building Office.

The transfer of real property that is subject to registration becomes effective on the date of registration of the new owner in the Cadastral Register. However, the transfer is effective retroactively as of the date of filing of the application for registration with the respective Cadastral Office. A transfer of real estate that is not subject to registration becomes effective on the effective date of the relevant transfer agreement. Since 1 January 2012 standardized forms are used for applications to the Cadastral Register.

For construction works, a building permit must be obtained from the Building Office. A building permit is required not only for new construction, but also for major reconstruction and renovations or alterations. Application for a building permit must be in compliance with prior planning permissions.

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What is the acquisition processes when acquiring from private or public entities?

Acquisition from a private party This acquisition process is straightforward and comparable to other EU countries. ‘Private party’ refers to a private individual or entity. Process when buying from a private party Negotiation process Preliminary Agreement (not obligatory) The period between the preliminary agreement and the purchase agreement can be used to obtain financing. The vendor is obliged to make certain that the title to the real estate is clear and capable of being conveyed to the buyer. Purchase agreement The purchase agreement must be signed in a written form and signatures of parties must be on the same deed. The signatures must be verified. Proposal to register the transfer to Land Cadastre In a period of time between proposal and permission to register (completion of registration) the custody of purchase is often used in order to eliminate the insecurity. Permission to register Usually within 2 – 3 month from the submission of proposal to the relevant Cadastral Office.

Acquisition from a public entity A significant proportion of real estate in the Czech Republic is owned by the state and local authorities. Such real estate can be sold: 1. Via direct purchase by the purchase agreement which must be confirmed by administrative body and the purchase price must be at arms-lengths principal in given place and time. 2. Via public tender. Tender process when buying from a public entity Initial contact public entity and investor The property assigned for sale is published by State representing office in property affairs (Urad pro zastupovani statu v majetkovych vecech). Valuation The public authority set the initial asking prices based on the valuation by an independent valuator. The initial asking price is mostly lower than usual price in given place and time Public tender process Announcement – at least 30 days before the planned date of the tender. Payment of deposit – as specified in the auction terms. Submission of offers. Assignment decision – the contract is formed by the assignment decision.

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9. Setting-up a Business Section provided by PwC Legal Introduction A major change of private law, as well as of the law of business corporations, took place in 2014 and simplified the process of setting up a business presence in the Czech Republic. All forms of business are accessible to foreign investors, entities and persons at the same conditions as those of Czech nationals. Below, we present the main features and requirements for setting up a business in the most frequent legal forms used in the Czech Republic.

Limited Liability Company (“společnost s ručením omezeným – s. r. o., spol. s r. o.”) A limited liability company is set up by a memorandum of association in the form of a notarial deed. Following that, the founder(s) deposit the registered capital in a special bank account or, hand the non-monetary contribution to the registered capital over to the entitled person. The minimum registered capital of a limited liability company is CZK 1 (approximately 3 Euro cents) An application for registering the new company must be filed with the relevant Commercial Register within a term of 6 months. Czech regulation also stipulates the possibility to directly register a newly established company through a notary who draws up the articles of association (please note that this system is not yet in operation).

shareholders are personally responsible for the debts of the company only up to the unpaid part of their share of the registered capital; shares can also be issued in the form of “certificates” (in Czech: kmenové listy) similar to shares in a joint stock company; Certificates are transferable by endorsement and handover and do not require a written contract; transfer or pledge of (ordinary) shares can be made if not restricted by the memorandum of association. For a transfer, a written contract with verified signatures is required; company is represented by one or more executives. Legal entity can also be appointed as an executive of the company, in that case the executive of such a legal entity represents the company; creation of a supervisory board is optional only.

Joint-Stock Company (“akciová společnost – a. s., akc. spol.”) Incorporation of a joint-stock company generally involves procedures similar to those used for a limited liability company. Setting up a joint-stock company involves the adoption of articles of association in the form of a notarial deed. Both natural and legal persons can participate in a joint stock company. The company can be established by a sole founder. A joint-stock company establishes registered capital which is divided into shares of their nominal value. Contribution to registered capital can be made via a monetary or non-monetary contribution. In the case of a non-monetary contribution, the contribution is evaluated by an expert chosen by the founder(s) or board of directors

Setting up a limited liability company includes: execution of a memorandum of association or, a deed of association in the form of a notarial deed; payment of registered capital in the amount of at least 30% of the registered capital in the case of a monetary contribution or the whole contribution in case it is non-monetary; registration in the Commercial Register; obtaining trade licences in accordance with the scope of business; and registration with a tax office. The main features of a limited liability company are: maximum number of shareholders is not limited; ownership of a limited liability company with one shareholder by another limited liability company with one shareholder is permitted; nominal value of one share is at least CZK 1; shareholder can own more shares of several types (if stipulated in the articles of association); preference shares can be issued by the company;

After that, the company then issues shares. The issue rate cannot be lower than the nominal value of the share. The establishment of a joint ‑stock company is effective when each founder has paid (i) the share premium and (ii) at least 30% of the nominal/book value of the issued shares. Shares company can issue either shares with a nominal value or, so-called no-par value shares, whose value is set as a proportion between the actual registered capital and the number of issued shares bearer shares can be unlimitedly transferred, whereas registered shares are transferred by endorsement shares can be either certified or book-entry only rights and duties of a shareholder differ depending on the nature of shares. A joint-stock company is based on ordinary shares but can also issue preferred shares.

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The main features of a joint-stock company are: shareholders are not personally responsible for the debts of the company minimum share capital is CZK 2,000,000 or, EUR 80,000 (the Czech legal system allows share capital to be in EUR if the company’s accounting is kept in EUR.) founders of a joint-stock company shall decide whether the company will be administered by the board of directors and supervisory board (dualistic management) or, by an administrative board and statutory director (monistic management)

Limited Partnership (“komanditní společnost – k. s., kom. spol.”) A limited partnership can be founded by at least two persons where one is responsible to an unlimited degree for the debts of the company (general partner) whereas the other is responsible to a limited degree,

CTPark Bor

similar to a shareholder in a limited liability company (limited partner). Profit and loss are divided between the company and the general partners. Part of the profit allotted to the company is distributed between the limited partners. Limited partners do not cover the losses of the company.

Branch of a foreign company (“Pobočka zahraniční osoby”) The presence of a branch of a foreign entity also requires registration in the Commercial Register. The branch needs to apply for trade licences. The branch of a foreign entity does not have a separate legal entity and it is represented by the head of the branch appointed by the foreign entity.

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10. Czech Tax Structure Section provided by PwC Tax Corporate – taxes on corporate income The 19% CIT rate applies to all business profits, including capital gains from the sale of shares (if not exempt under the participation exemption regime). There is a special tax rate of 15% levied on dividend income of Czech tax resident entities from non-resident entities (unless subject to participation exemption).

Capital gains Capital gains from the sale of shares in a Czech company may be exempt from Czech taxation if all of the following conditions are met: The Czech or EU parent holds at least 10% of the shares of the subsidiary for at least 12 months. The subsidiary is a tax resident of the Czech Republic, another EU member state and/or Switzerland, Norway, Island and Liechtenstein1. Both the parent and the subsidiary have one of the legal forms listed in the Annex to the EU P/S directive. The parent or the subsidiary are not exempt from corporate taxation or may not choose to be exempt, and the tax rate applicable to their income is greater than 0%.

Thin capitalisation Thin capitalisation applies only to related-party loans. The debt-to-equity ratio for related-party loans is 4:1 (6:1 for the financial services industry), Unrelated-party loans (e.g. bank loans) guaranteed by a related party are not considered related-party loans for thin capitalisation purposes. If, however, a bank provides a back-to-back loan to a Czech entity where the loan is provided to the bank by a related party, such a bank loan to the Czech entity is considered a related party loan. Interest on profit-participating loans is not deductible for tax purposes.

1

As of the relevant double tax treaty with Liechtenstein is effective.

Controlled foreign companies (CFCs) There is no CFC legislation in the Czech Republic.

Investment incentives Investment incentives are available only to Czech entities (including Czech subsidiaries of foreign companies). Incentives include income tax relief, financial support for the creation of new jobs, financial support for training or retraining of employees, cash grant on capital expenditures, and the transfer of land at a specially reduced price.

Research and development (R&D) allowance Up to 100% of specific R&D expenses (or costs) incurred in a given tax year may be deducted from the tax base as a special tax allowance. These costs are deducted twice for tax purposes: once as a normal tax-deductible cost and then again as a special tax allowance. An additional 10% may be applied from the difference by which the current year qualifying costs exceed those of the prior period.

Value-added tax (VAT) VAT is charged at 21% on the supply of goods and services within the Czech Republic, but certain supplies (such as groceries) are taxed at a rate of 15% or 10% respectively (e.g. books).

Real estate transfer tax Real estate transfer tax is governed by a separate law, but the rules have mostly remain the same, as well as the tax rate of 4% on the greater of the transaction price or the officially appraised value. The taxpayer may be contractually agreed (previously, it was the transferor with the transferee as a guarantor). Currently an amendment is discussed by the government, which, among others shifts the tax liability on the buyer.


Information on the content providers

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JLL Office Myslbek Na Příkopě 21 Praha 1 110 00 Czech Republic +420 224 234 809

JLL Contacts Tewfik Sabongui Managing Director

Harry Bannatyne Head of Industrial Agency

Ondřej Novotný Head of Research

Blanka Vačkova Senior Research Analyst

JLL Czech Republic +420 224 234 809 [email protected]




www.jll.cz www.jll.eu/cee_research www.warehousefinder.cz

COPYRIGHT © JONES LANG LASALLE IP, INC. 2015. All rights reserved. No part of this publication may be reproduced or transmitted in any form or by any means without prior written consent of Jones Lang LaSalle. It is based on material that we believe to be reliable. Whilst every effort has been made to ensure its accuracy, we cannot offer any warranty that it contains no factual errors. We would like to be told of any such errors in order to correct them.

Made in Czech. Investor s Guide for Manufacturing and Logistics Companies 2015

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