The Czech Republic is stagnating economically, and the industry is looking forward to the jump in energy prices in January. We have to make fundamental reforms that will survive several election periods, warns the head of the Chamber of Commerce, Zdeněk Zajíček.
The domestic economy was still the only one in the EU that failed to return to pre-pandemic condition. Representatives of companies and employees also pointed out to the government that we are starting to lose significantly to other European states and called on the cabinet to act immediately.
According to the head of the Chamber of Commerce, Zdeňko Zajíček, several steps need to be taken to get the country off the ground. And he points out that these are steps that should last several election periods. “We need far more rental apartments so that banks, pension funds and other financial institutions can deposit their deposits there,” Zajíček said in I’m asking. Then, according to him, it is necessary to simplify the recruitment of workers from abroad and focus on education reform.
Experts predict weak economic growth next year as well, and the industry is expecting a jump in energy prices from January. “Companies are capable of handling many things. But there are price shocks that will really mean that it can be absolutely critical for them,” pointed out Zajíček.
You can listen to the entire interview in the audio player, in your favorite podcast app, or in the video below.
What should change in the Czech economy in the near term so that we can realistically monitor some results or successes?
We are looking at a horizon of 10, 20, 30 years. And some of those things won’t be seen tomorrow. We have to make the assumptions, but neither this government, nor most likely the next government, and maybe the next one, will not be praised for costing anything. We would need the political representation to find a broad consensus on the fact that some things must survive the election period. What we need to create is the stability of that environment. So that foreign investors know that they can rely on an environment that will not change every election period. And that is a big task for political representation.
Can you tell me three specific goals that you would like to achieve within the horizon of two years, before the mandate of the current government ends?
We would like to open up the building code, specifically we need to supplement the housing infrastructure in the Czech Republic, we need far more rental apartments. We need to create the conditions for banks, pension funds and other financial institutions to place their deposits precisely in rental apartments that could be built quickly and that could go on the market. On the one hand, it will help the market and at the same time it will help the mobility of the workforce, because today we have to get used to the fact that there will be a commute to work and either the high-speed line that we will build, or I will have to move for work, but today that is not an option. We have a large proportion of owner-occupied housing here, and this of course limits us in the movement of the workforce.
The first part of the interview with Zdenek Zajíček:
We need workers from abroad to be able to come to us far more easily than it is now. Of course, this is related to the security risk. But from some states we think we can recruit workers much more easily than individually harming each individual. Well, the last thing is education. We need to look at how we prepare our graduates for the jobs of the future. On behalf of the business sector, we say that we would very much like to take over part of the responsibility, start dual education, i.e. so that companies can already work with those students, future workers in their companies after their studies, whether it is in high school or university. Because the connection with practice and technology, which changes almost from day to day, is extremely important.
Are these all tasks for the current government?
It is for political representation. (…) I think that for these things we should say that we will look for the widest possible political agreement and the optimal thing is that maybe 150, 180 MPs vote for such proposals.
But that doesn’t happen too often in the current Chamber of Deputies…
That’s why I think the challenge is so great. Try to move this perception somewhere further. Education, for example, has enormous inertia. There, any change you make now, you will see it in four, five, maybe 10 years at the earliest, but you have to make it now. This government won’t say either, that’s how we proved it, because the changes will be visible in maybe five years. And that is the responsibility of all of us, to look beyond this horizon, not just from year to year. Now we are building our future, the future of our children.
What is the condition of large Czech companies at the moment?
I think they will be under a lot of pressure from energy prices now. If what is currently leaking from other states in Europe is true, that governments are starting to significantly subsidize their industry due to high energy prices, then this could greatly slow down our companies, or make their situation enormously more complicated. In addition, of course, the pressure to increase wages could bring our businesses to their knees. Just because we make a product and actually work on it doesn’t mean we’ll sell it. Because we have to sell it at the price for which someone will buy it on the world or European market.
The middle income trap, as they say, is precisely related to the fact that we do sell products, but with relatively little added value. And that doesn’t give us the opportunity to get more money into our budget for our needs, for our salaries, for our investments. We need to change the structure of our industry: to modernize much more, to incorporate new technologies precisely so that we can sell goods and services with higher added value.
You mentioned energy prices and subsidies planned by other European countries as one of the risks for companies. But Czech companies want it too. They are calling for help…
They call for help, but they are capable of many things. But there are price shocks that will really mean that it can be absolutely critical for them. Yes, if we are operating within a common European framework, such government support in other states should not be normal and should not be overused. Precisely because it impairs the competitiveness of others within Europe. Our state is not in such condition, among other things, because we did not start the change and at the same time we did not find a vision for the next period. And that’s why we may be tightening our belts a lot now, and it may be a very difficult time for many companies. The help that should come from the state should be targeted, not general.
When you say that the times will be hard and we will have to tighten our belts a lot, are we going to have anything worse than what we are going through now?
Rather, we will have to realize that the better economic situation in the next year looks more positive, but of course the news about the price of labor or energy goes against this. Which, of course, can dampen the desire to invest and develop your business in the future.
In other words, businesses won’t be very willing to add if, if I’m listening to you…
We did a survey among our businesses and 6 out of 10 are considering raising salaries. From three to eight percent, but it is by no means across the board. Thanks to the fact that we have low unemployment and a hunger for workers, companies have to consider this in order to keep their workers. And with inflation expected to ease next year to three percent for the full year 2024, this should lead to an increase in real wages. But on the face of it, I think that in some cases, for example from the point of view of energy prices and the addition of employees, companies will have to reconsider at the end of this year.
It is necessary to remove barriers in the legal system and create a stable investment environment.
Isn’t it time to rethink our economy, which is heavily focused on energy-intensive industries?
Most of the energy intensive businesses have already started the energy changes and now it has slowed down. It was covid, it was a price shock in energy prices, and the investments they had planned, of course, cover the losses that occurred during covid. And this is the third year in a row, so the external influence is very strong. Perhaps we should have thought it through better, and it can be seen that in other countries they went about it differently: it was precisely the use of European money that should have been more focused on the transition of those key business operations that could be automated, robotized or change your energy sources.
And shouldn’t the industrial enterprises themselves have called for it much earlier?
Certainly. On the other hand, they take a risk and you always move within some social, but also legal framework. There is no reason to look back and look for specific culprits. Undoubtedly, part of the work can also be on the part of the entrepreneurs, for example, they did not start to think in time that digitization and automation were taking place. Now we have to take a very bold view. Just saying, yes, we’re going to go with our belts tightened for a while now, but it’s worth it because it’s going to bring us that added value. Let’s focus on that and it can’t be 1000 goals, it has to be precisely selected goals where there will be broad social and political consensus. And at the same time, businesses will be able to invest in it. That is why we are talking about the need to remove barriers in the legal system, to create a stable investment environment.
Where does the Czech economy have a chance to be in, say, 10, 15 years, if the challenges you are talking about are managed well?
What I said, I say so that one can bounce back. In order for him to be in a good mood, he has to tell himself how he is, in what condition he is. This is nothing depressing, this is the rational reasoning of anyone who wants to live a happy life. And I believe that we have a huge opportunity, a huge energy. We have a lot of inspiring people, a lot of energy, a lot of ideas that can reach the world. And many of our entrepreneurs are conquering the world. We are Europe’s top in many cases: artificial intelligence, cyber security and more. We have a huge potential, we need to wake it up. And we need to tell ourselves that the direction is where the light is. Let’s not stop and let’s give each other the courage and strength to do it. We’ve got it.