15th September 2008 (Právo) – DEPUTY MINISTER OF INDUSTRY AND TRADE, MARTIN TLAPA, FOR THE FIRMA (supplement to the daily Právo):

Engineering and related branches make up more than half of our exports. Where, in your opinion, is this area heading?

More and more engineering companies operating in the Czech Republic are moving parts of their production to China and to other Asian countries. They have kept at home management, research and development, which are the most valuable parts of the company. This is the way in which to succeed in the global economy. From the perspective of a critical view of the future, it is necessary to have a think as to what is the actual share of production with high added value in its total volume. And then to look at whether our engineering is not too dependent on the car industry. About this I have some concerns.

Do have our engineering companies really have a realistic chance to assert themselves more strongly in China?

There are enormous opportunities not only in engineering as such, but also in the energy industry, in environmental technologies. China is just big and business there, for some companies, is very difficult. On the other hand, we are in negotiations with Chinese partners who are much less naive than they were five years ago. It starts with a perfect interpreter and thorough preparation; companies already know how to understand the Chinese NO. We need to enter there not as individual companies, but as a consortium. Chinese contracts are huge and as alliances our companies have a much greater chance.

Establishment of consortia, i.e. merger of companies for specific business goals, is prevented here by the considerable mistrust between companies. This will not be probably surmounted so easily...

Distrust between the companies is not as strong here as it was years ago. Previously everyone wrestled everyone, already now alliances are formed.

Aren’t they only on paper?

Although lots of alliances have already been established in the Czech Republic, still I would say that, in terms of their performance and success, there are significant differences between them ... It depends on what; something works and also sometimes something doesn’t. For example, the alliance of companies specialised in mining engineering is for me the proof that it works. On the other hand, alliances in the field of IT did not work as they were expected to at the beginning. One thing is clear: if companies enter into specific large contracts together, so they will obtain them - even in large and complex China. In this context the precise preparation of the financing of a specific contract is also vital, for example, with the participation of the Czech Export Bank (CEB), with insurance of loans by the Export and Guarantee Insurance Company (EGAP) and with the participation of some commercial bank. The thing is, how the risks are distributed. Sometimes I hear that the State does not need the Czech Export Bank; that loans can be provided by normal banks. I say that we need it, because the CEB already went to the difficult, risky territories before most of the commercial banks did. The CEB in this manner beat a path for companies to the more difficult markets. In that the CEB behaved very prudently. And even in the future we need to seek funding for major contracts as an alliance. Also other European countries have similar models. Commercial banks can go, if they ally themselves with the CEB and the EGAP in the financing of contracts, to much riskier territories than they would do by themselves.

Jindřich Ginter