Czech firms seek greater government backing to boost Russian trade

12-02-2014

Czech exports to Russia have grown in value by more than ten times in the past decade. Czech companies see Russia as a key target territory, and are now seeking the backing of the new government in their efforts to further increase trade with the country. Visa issues, access to credit, and political lobbying are some of the areas where Czech firms believe the government could assist them, hinting that toning down the human rights agenda would also help.

Petr Kužel, photo: Šárka ŠevčíkováPetr Kužel, photo: Šárka Ševčíková In the Olympic Park on Prague’s Letná plain, set up for the duration of Olympics, the several hundred people on Tuesday afternoon watched Czech biathlete Gabriela Soukalová in the 10 km pursuit race at the Sochi Games. After an amazing performance, Soukalová climbed the field to finish fourth. A few dozen metres away from the huge TV screen and crowds, Czech exporters were discussing how they could better their performance and land gold in Russia.

Since 2003, Czech exports to Russia have grown tenfold, from 600 million to six billion US dollars. Czech companies see the Sochi Olympics as an opportunity to highlight Russia’s increasing importance for foreign trade. On Tuesday, the Confederation of Industry, the Chamber of Commerce, and the Industry and Trade Ministry hosted a seminar for Czech exporters to establish what exactly the companies are seeking to boost their sales in Russia. Petr Kužel is the head of the Czech Chamber of Commerce.

“The key issue is backing for small and medium-sized companies. We would also like to see more support from the Czech Export Bank for smaller projects of around 10 or 20 million crowns.

“But government support is extremely important because you need to lobby on the top level. Companies also want us to get more involved, and we are all ready to make sure we export even more goods to the Russian Federation.”

Another issue that came up in the debate was the complicated visa procedures facing Russian businesspeople interested in visiting their Czech partners.

Visa applications are all processed in paper form by the embassy in Moscow or at one of the Czech consulates. But that makes it difficult for people from other Russian regions to apply. The head of the Confederation of Industry, Jaroslav Hanák, hopes this will soon change.

“We have been able to introduce fast-track visa procedures for Chinese citizens and I believe we can also have fast track and electronic visa for Russian nationals.

Photo: Klára StejskalováPhoto: Klára Stejskalová “Both the new Czech ambassador in Moscow [Vladimír Remek] and his Russian counterpart in Prague have expressed interest in facilitating the procedures. So I believe this is something that can be done.”

Mr Hanák also says various parts of the Czech government and legislature should better coordinate their trips abroad, and pay more heed to the needs of the industry.

“We would like to know at least a year in advance which Czech official is going to travel to which country and which key foreign official is coming here. That would make everything easier for us.

“So we would like to more coordination in this particular area. Some time ago, the ministries of foreign affairs and industry and trade had those arguments and one did not know about the other’s plans. So this could bring about an important change.”

Most Czech exports to the Russian Federation, over 70 percent of it, consist of vehicles and machinery. The sales of these and other goods in Russia grew significantly despite the Czech Republic’s strong position on human rights, and the criticism of Russia’s poor record in this respectr. But Petr Zemánek, the head of the Association of Engineering Technology, says advancing the human rights agenda does hurt Czech business interests.

“I think it does play a role. At one point, it actually worsened our position in China. Due to these invectives, we did not really succeed on the central level there which means we now have a good position in the provinces. But in the capital, the problem continues and we are not one of the priority countries which is something we would deserve.”

I discussed some of the issues Czech exporters face in boosting their business in Russia with Peter Havlík, an economist with the Vienna Institute for International Economic Studies.

“Indeed, the Czech Republic has been extremely successful in increasing exports to Russia. In the European context, if look for instance at Germany or other Central and Eastern European countries like Poland, Slovakia, and Austria, Czech exports to Russia grew much more.

Peter Havlík, photo: archive of Vienna Institute for International StudiesPeter Havlík, photo: archive of Vienna Institute for International Studies “Between 2012, for which I have the latest comparable data, and 2000, Czech exports to Russia increased more than 10 times, compared to Poland for example whose exports grew about seven times while German about five times. Slovakia was perhaps even more successful in this respect because their exports expanded much faster than the Czech ones.”

Czech firms consider complicated visa procedures and access to credit as the two major issues hindering their further expansion in Russia. Do you agree these are the biggest obstacles?

“I would not say the biggest because there are many other obstacles in trading with Russia such as corruption, institutional problems and so on. But it’s a fact that all exporters from EU to Russia and also vice versa, Russian companies in the EU, are certainly hindered in doing their business by these very complicated visa procedures.

“They have been eased in recent years but there should definitely be much more progress which would facilitate trade and other contacts between EU countries and Russia.”

What other things can the Czech government do to help boost exports to Russia?

“Look, the Czech Republic has been extremely successful. That’s a fact. Like other former communist countries, the Czech Republic has a certain advantage: they know the market, sometimes they still have contacts with the past; they know the mentality and know the Russian language which is very important because not all Russian partners speak English or German. So there is a certain advantage.

“I don’t know if the government should or could do more than it has been doing. But certainly, there should be more efforts at the European level to ease these visa procedures and so on. So perhaps Czech diplomats within the EU should focus more on negotiations regarding the new strategic partnership agreement between the EU and Russia, a new trade area, and so on.”

“I should add foreign trade is one of the most integrated areas of the EU. Foreign trade issues are a matter of the European Commission which means that the Czech Republic as a single state can do relatively little in order to change some trading conditions with other countries including Russia.”

What role does politics play in all of this? The Czech Republic has been vocal in its human rights agenda and has criticized Russia’s poor record in the area; the Czech government also wanted to host part of the US anti-missile shield which Moscow did not like at all. How significant are these issues in doing business with Russia?

Photo: athewma / stock.XCHNGPhoto: athewma / stock.XCHNG “They definitely play role. They certainly do not help create a climate for doing business. On the other hand, I would not overestimate it. It has to be frankly said what some of the complaints are regarding the situation in Russia, human rights, corruption and things like that.

“But the media coverage is very often biased, to say the least, in reporting the Russian situation on the ground. So I think that a more balanced analysis would be instrumental in promoting business and other contacts.”

12-02-2014