High scores for Czech Republic

Despite the difficulty of capturing an accurate snapshot of a rollercoaster economic climate, an inaugural report has attempted to put the Czech Republic's competitiveness into focus, next to not only the European Union as a whole, but seven representative countries in the region.

A new competitiveness report for the Czech Republic was introduced March 18, created through the cooperation of several chambers of commerce and the lead of the American Chamber of Commerce, collectively called the Council on Czech Competitiveness. Within the six categories - general, legislative framework, public administration, physical infrastructure, human resources and fiscal/monetary highlights - the country came out favorably in most areas against other member states. Against an EU average, human resources is the sole competitive disadvantage, while public administration was at a disadvantage against the smaller group of seven countries.

The council's aim was to provide an idea of the business climate against similar economies, rather than the broader strokes given by established reports such as the World Economic Forum's Global Competitiveness Report and the IMD's World Competitiveness Yearbook, said Weston Stacey, executive director of the American Chamber and project leader of the council.

"Those reports cover the entire globe; ours is much more focused," he said. "We're not competing much against Kenya or Malaysia, so rankings against those countries don't mean a whole lot. It's also hard to say if the difference between No. 1 and No. 2 is greater or smaller than the difference between No. 2 and No. 7."

Instead of straight rankings, the council created an index that gives a clear measure of the differences between the countries included. Against the benchmark averages for economic competitiveness, the Czech Republic scored 0.99 against the European Union, 0.96 against the seven-country comparative group and 1.00 against a Central European cluster of six countries. Against a benchmark of 1.00, a score of less than 0.85 was considered a competitive disadvantage. A score of 0.85 to 1.15 meant competitive, and any score exceeding 1.15 denoted a competitive advantage. The scores were created using a statistical model coupled with an opinion survey of more than 300 business leaders in the Czech Republic.

But the difficulty in pinpointing just what makes a country competitive depends on the perspective of who is considering it, regardless of the accuracy or comprehensiveness of any report, Stacey added. The report's intended audience, both the government and the business community, likely have differing views on what makes a country competitive.

Self-reflection

"A lot of people in the business community tend to view competitiveness as low wages, while a government looking at competitiveness would value high wages if it's trying to create wealth," he said. Instead, the council offers the report as a neutral starting point to put the Czech Republic's economy in perspective, a view that has been obscured in recent months as Western investors lump the country in with the performance of the CEE region.

"So-called 'global experts' have been a bit lazy in definitions. I don't think you can say countries are the same because of geographic proximity. There has to be a more stringent analysis," Stacey said.

The report is meant for self-reflection as much as it is meant to be a guide for outside investors. The council worked closely with the ministries to compile much of the information and hopes the final product can be used as an indicator to the state on how to improve the business climate through legislation for labor laws and even education. That it provides in-depth research beyond simple statistics could be useful, said Stanislav Martínek, director of the investment project management department at CzechInvest, a state-owned agency that develops foreign investment opportunities.

"With investors, we don't just rely on statistics or surveys. It's more interesting to have hard figures for investors about the tax systems, the labor force - it depends on the sector," he said.

The biggest question for interested investors remains the country's labor force, Martínek said, which he believes remains highly competitive. But, whereas last year the problem posed by the labor force was the lack of it, especially in fields such as IT and research, that dynamic has changed as the unemployment rate has risen dramatically in the past few months.

"Half a year ago, it was a totally overheated region. There was a lack of labor. Now, it's a little bit different; the labor force is definitely not our biggest problem right now," he said, referring to the economic crisis that has thrown over all the usual considerations.

The recession has also meant the report's timeliness will be more difficult to maintain, but the council plans to begin work on next year's soon, to establish an annual publication.

"We used objective indicators to portray as best as possible the current state of affairs, but there's a lag when you collect data or statistics, especially when things have changed as dramatically as they have," Stacey said.

Claire Compton can be reached at
ccompton@praguepost.com