How Czech Republic is attracting foreign investors

Foreign direct investment (FDI) is an increasingly important topic in relation to both the domestic and world economies. It is therefore good to know not only how FDI works, but also the circumstances connected with its flow.

The appeal of the Czech Republic, as with the other countries of the Visegrad Four region (Slovakia, Hungary and Poland), is based on the availability of a skilled workforce with good language skills and relatively low labor costs, as well as a favorable business climate and stable political environment.

The Czech Republic discovered that it had another competitive advantage. This time, not in the form of cheap labor but in the rising level of education standards among its population.

Furthermore, the country’s attractiveness is rooted in its dense, high-quality infrastructure as well as its geographical and cultural proximity to Western Europe.

Although the country’s labor costs are higher than in some Asian countries, the above-mentioned factors far outweigh any negative aspects and make the Visegrad Four region, and thus the Czech Republic, an attractive destination for foreign investors. Conversely, FDI positively influences the local market and local businesses, which operate as suppliers and subcontractors of services and products for foreign investors.

As at the time of writing, an amendment of the Act on Investment Incentives is being debated in the Czech Republic. The country finds itself at a crossroads, where it has the opportunity to change the long-term concept of its economic development and thus attract investments with high value added.

If the act is correctly formulated, it can have a positive, multiplying effect not only on the economic area of the Czech Republic. Investments with value added, for example in the form of research centers, not only bring forth an inflow of money to the Czech Republic, but also foster stabilization of the labor market and an increase in the country’s competitiveness.

The complete article was written by:

  • Ing. Miroslav Křížek, PhD
    General Director, CzechInvest - Investment and Business, Development Agency, Prague, Czech Republic

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