The creation of industrial zones is the foundation of the government's plans to encourage foreign investment. Developers of these zones create electrical grids, sewage lines, public transportation and roads, and aid companies in the construction of new facilities.

But while the zones have enabled foreign companies lured by low wages and tax holidays to invest in the country, private companies have developed only four of the 92 zones currently in use; the state and municipal regions have created the rest.

Government sponsorship of industrial zones began to fill the void of reliable private developers available to work with foreign investors. Now, with land purchases and construction costs reaching up to 435 million Kč ($19 million) for larger zones — and the regional authorities well established as overseers of zone development — few private developers have seen the need to enter the field.

It can be done

CzechInvest named the Krupka Industrial Zone, privately developed by Investorsko inženýrská, the most economically beneficial zone of 2005 Oct. 12.

The zone, located near Teplice, north Bohemia, drew 7.6 billion Kč of investment from the beginning of 2005 to mid-2006, while its land and construction cost Investorsko inženýrská 180 million Kč.

The park is completely booked, with its corporate residents including Knauf, a Belgian insulation company, and Toyota, which last week began construction of a logistics center to distribute supply parts throughout central Europe.

This is the second industrial zone that Investorsko inženýrská has created, says Milan Doležel, commercial director of the company. After seeing the company's success in creating its first zone in Liberec, north Bohemia, where Investorsko inženýrská is based, the city of Krupka invited the company to develop there.

"We studied the possibilities," he says. "It was quite a good location: a region with high unemployment, location close to the [German] border and good support from local authorities."

While invited by the city, Doležel says, his company built the zone only with private money and no financial support from the government.

"We have a big disadvantage" compared to zones started by the government, he says. Most notably: "The price for land is higher."

According to CzechInvest, however, the government did sell 40 of Krupka's 77 hectares (190 acres) to Investorsko inženýrská at a below-market rate.

'Increased interest'

"Preparing industrial zones is a time- and finance-consuming activity," says Josef Řeháček, project manager of the business properties and infrastructure division of CzechInvest.

"Nevertheless, we have registered an increased interest from private developers," he says. "We would welcome it if most of these projects were completed by the private sector in the future."

CzechInvest considers projects like Krupka examples of how private development, with some state support, can be successfully accomplished. Such development, Řeháček says, relies on the intiative of planners and not the state. CzechInvest does not centrally plan zones, and instead gives grants based on developer-submitted applications.

However, the lack of private investment does not take away from the successes of the industrial zones, says Oldřich Koerner, deputy director of the economic and environmental policy department of the Confederation of Industry.

In its initial stages, he says, the program did not go easily.

"There was a period when it was very hasty," he says. "Some of the zones were invested and prepared without a direct and reliable connection to a real investment project," and so sat unused. Other zones were constructed without rail and road connections to the economic centers of the country.

But now the confederation rates the program as a positive, and recommends further zone development, especially of larger projects.

One such project is underway near Krupka: the Triangle Industrial zone.

The government and region have invested 435 million Kč in the 360-hectare park — more than four times the size of Krupka.

Created on the site of a retired military airport, the computer manufacturer Hitachi has committed 270 million Kč toward manufacturing flat-panel computer monitors and televisions and is expected to create some 4,300 jobs. Almost 330 hectares of the zone remain open to investors.

Koerner still wishes that large projects like the Triangle could be built closer to the economic centers of the country.

"They're a little far from Prague and middle Bohemia," he says.