The hope spawned by 100,000 protesters packed into Wencelas square six years ago has diffused all over the Czech Republic.
The success of toppling one of the last Communist regimes in 1989 made most believe that days of fortune and prosperity were ahead.
But the layer of government insulation peeled back by poet-dissident Vaclav Havel and his polite revolution have revealed a country still running back in the pack in the industrial race.
The overstaffed, under-utilized industry mechanism designed by Communist officials now lays exposed to lean and efficient competition from both the West and the East.
To turn the tide, Czech officials seek foreign investment to bring in both capital and technology. The auto industry in particular has been courted heavily, but only modest results can be tallied.
On a comparative basis, however, investors are finding this small region situated conveniently next to Germany and Austria as one of the more attractive areas in east Europe for new manufacturing ventures. Those hoping to lure Western companies into the country are quick to point to a number of variables that make the Czech Republic more attractive than neighboring Poland, Hungary or any of the other former Comecon countries.
One of the most attractive issues is the country's surprising economic stability. The Czechs have both a balanced budget and a balance-of-payments surplus. This climate, officials maintain, gives companies a secure environment and a growing domestic market.
The country's political structure also is evenly balanced. In the recent separation between the Czech Republic and Slovakia, negotiators dissolved the former Czechoslovakia without the ethnic conflicts that continue in Yugoslavia. Both countries now hold full sovereignty, with Slovak controlling much of the region's natural resources and the Czech Republic receiving the lion's share of industry and foreign investment.
But labor costs are likely the most favorable factor for prospective investors in the region. In 1993, the average manufacturing wage in the Czech Republic was 18 times lower than Germany, 16 times lower than Japan and 14 times lower than in the U.S.
Unlike cheap labor in other regions, however, the Czech Republic's workforce is highly skilled. More than 63% of all Czechs have a secondary education, with 52% of those diplomas awarded in science and engineering fields.
On top of that, the Czechs have a surprisingly low unemployment rate. August 1994 figures put unemployment at 3.2%.
On the downside, despite a high education rate and a deep pool of skilled manufacturing employees, top management and administration personnel are in short supply. Years of communist oppression and its goal of eliminating the bourgeois class have left older, more experienced workers unwilling to make decisions and accept responsibility. This has forced foreign companies to import leaders skilled in administration but in most cases unfamiliar with the Czech people.
A combination of mildly unstable, economic variables, a retarded industrial infrastructure and a general perception of East Europe that tends to lump all countries together, has limited foreign investment.
Demand for automobiles is expected to grow dramatically throughout the region. Forecasts suggest increases of 160% across East Europe from 566,000 units now to 1.4 million by 2000. The proximity of the Czech Republic to emerging markets in Hungary, Poland, Romania and Bulgaria makes many observers consider the country a keystone in any East Europe automotive strategy.
The promise is there. But the reality is not quite living up to the promise. One of the first automotive ventures into the country, Skoda AS, is not proving to be the boom that investing partner Volkswagen AG had hoped. Labor and quality problems have promoted losses recently, and relations between the government and VW management have been volatile.
The limited success of existing companies combined with bureaucratic delays and fluctuating economic variables has stymied some major foreign investment moves. Mercedes-Benz AG pulled out of a joint venture with theAvia a.s. truck company in 1993 and Siemens AG yanked investment plans in Skoda-Pilsen engineering group as well.
However, the partnership list continues to grow, largely in the supplier industry where less involved manufacturing facilities continue to capitalize on the lower labor rates. Robert Bosch Gmbh, Lucas plc, Ford Motor Co., Packard Electric, TRW, Siemens AG, Kelsey Hayes, Rockwell Automotive, ITT, andRenault SA all have set up small facilities to produce automotive components.
