International Business Project: The Czech Republic
The Czech Republic is a small, landlocked country located in Central Europe, southeast of Germany, bordered by Austria, Germany, Poland, and Slovakia. Slightly smaller than South Carolina, the Czech Republic covers 78.866 square kilometers (sq km): 77,276 sq km of land and 1,590 sq km of water. Following the First World War, the closely related Czechs and Slovaks of the former Austro-Hungarian Empire merged cultures to form Czechoslovakia. During the interwar years, the country's leaders were frequently preoccupied with meeting the demands of other ethnic minorities within the republic, most notably the Sudeten Germans and the Ruthenians (Ukrainians). After World War II, a truncated Czechoslovakia fell under the control of the Soviet Union. An unsuccessful invasion by Warsaw Pact troops in 1968 ended any efforts of the country's leaders to liberalize the Communist party's rule and create "socialism with a human face." As anti-Soviet demonstrations continued, a period of harsh repression was ushered in by the Soviets. With the collapse of Soviet Union in 1989, Czechoslovakia regained its freedom through a peaceful "Velvet Revolution." On January 1, 1993, the country underwent what historians have termed a "velvet divorce" and divided into two national components: the Czech Republic and Slovakia. In 1999, the Czech Republic became a member of NATO was accessioned into the European Union in 2004. Of the ≈10.2 million inhabitants of the Czech Republic, most are ethnically and linguistically Czech (95%). Other ethnicities include Germans, Roma, and Poles. After the 1993 division of the Czech and Slovak Federal Republic, some Slovaks remained in the Czech Republic, comprising roughly 3% of the current population. Laws establishing religious freedom were passed in 1989, lifting the oppressive regulations enacted by the former communist regime. Major denominations account for the following estimated percentage of population:
Roman Catholic 39%
Today, the Jewish populace numbers only a few thousand.
In comparison to the former communist countries of Central and Eastern Europe, the Czech Republic has one of the most developed and industrialized economies, dating back to the strong industrial traditions of the 19th century. The general population is well educated. Although the Czech Republic has a well-developed infrastructure, much of its industrial plant and equipment is obsolete, a carry-over from the days of communism. The country's strategic location in Europe, low-cost structure, and skilled work force have attracted strong inflows of foreign direct investment, rapidly modernizing its industrial base and increasing productivity. Economic Trends and Outlook
The Czech Republic has emerged as one of the most stable and prosperous countries of the post-Communist states of Central and Eastern Europe. Economic growth during the period of 2000 2005 was supported by exports to the European Union (EU) and a strong recovery from foreign and domestic investment. As interest rates decline, and the availability of consumer credit lines (mortgages, credit cards, etc.) increases, domestic demand for goods and services plays an important role in economic growth. Demand for Czech products in the European Union continues to increase resulting in declining account deficits, currently ≈ 5% of GDP. Inflation is under control. Recent accession to the EU gives further impetus and direction to structural reform. In early 2004 the government passed increases in the Value Added Tax (VAT) and tightened eligibility for social benefits with the intention to bring the public finance gap down to 4% of GDP by 2006, but more difficult and necessary pension and healthcare reforms will have to wait until after the 2006 elections....