The Czech economy is by some measures the most competitive in Central and Eastern Europe. But productivity has not kept pace with the rapid wage growth of recent years. And without greater state support for applied research and to encourage innovation, the Ministry of Industry warns, long-term competitiveness – already now “frozen” – could plummet.
Following the publication of the latest World Economic Forum (WEF) survey on global competitiveness, Minister of Industry and Trade Marta Nováková noted a worrying trend, despite the Czech Republic having ranked in the 20th percentile worldwide in terms of overall competitiveness, on a par with or higher than several Western European economies.
“Czechia was ranked 29th in overall competitiveness, which I think is quite respectable. We’re top among (our Central European peers) in the Visegrad Four. But we should not be completely satisfied. Although we have an excellent position in terms of macroeconomic stability, we need to improve our innovative capabilities.”
That the Czech Republic is lagging behind in term of innovation is evident, for example, in the low number of global patents originating here. An internal analysis Ministry of Industry and Trade, not yet made public but leaked this week, says efforts to remedy the situation have fallen short:
“Despite the government’s efforts to date, it is clear that low innovation capabilities, burdensome government regulation, and a complex tax and subsidy system are undermining prospects for long-term GDP growth.”
To address the issue, in 2009 the government established the Technology Agency of the Czech Republic, or TA ČR, tasked with implementing state policy in the sphere of applied research, development and innovation and provide grants to companies excelling in these areas.
Prof. Petr Konvalinka, a material engineer by training who took over the agency’s reins in September, says the current government aims for the Czech Republic to become a leader in innovation by 2030. And it is putting its money where its mouth is, so to speak.
“Of course the national budget must also reflect this aim. The government plans to add a tenth of a percent of GDP annually to support basic and applied research. … But it also wants to greater efficiency in disbursing funds. In this regard, the Technology Agency has been tasked by the government research and development council with centralizing grant programs to support applied research.”
Prime Minister Andrej Babiš (ANO), as chair of that R&D council, will oversee implementation of a strategic plan to be unveiled in February which identifies 10 key areas requiring fundamental change. These include creating half a dozen development centres for making breakthroughs in artificial intelligence, laser technology and nanotechnology.
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