CzechTrade, the government agency tasked with boosting Czech exports, has just gathered most of its around 50 top representatives from outposts all around the world together in Prague. The purpose was to give bosses from Czech companies the chance to be briefed about export opportunities and overall economic conditions in the countries where it’s located.
Around 310 representatives from Czech companies were expected over two-and-a-half days in Prague to seize the opportunity to be given a low down on export opportunities around the world. A smaller version of CzechTrade’s Meeting Point was to be staged in the second city, Brno, at the end of the week.
Company representatives have the chance to book five half hour sessions with different CzechTrade experts in what could look superficially as a sort of speed dating sessions. Basically, this is what the country is offering, are you a match or potential match? It’s often about local knowledge giving newcomers an introduction and established companies a helping hand with, for example, tips or contacts.
Expanding export markets is not just about boosting sales abroad, it’s also about diversify markets. The Czech Republic last year still depended on other European countries for around 84 percent of exports, a figure the Ministry of Trade and Industry would like to diminish.
In this feature we’ll give a quick tour of four continents and talk to CzechTrade representatives about how Czech companies are doing on their markets, what expansion plans there are, and how they are helping Czech firms deal with the problems. We’ll look at Britain first of all, an interesting choice perhaps given the looming exit from the European Union, the so-called Brexit. Martin Macourek is the director of CzechTrade’s London office.
We are seeing a growing value of Czech products which is the right way to go.
“At the moment we can describe the situation of Czech companies in the U.K as very good. Britain has just become the third export market for Czech companies, which is absolutely outstanding. It represents around 5.0 percent of Czech exports. We are mainly exporting industrial goods, engineering and industrial goods; components, sub-contracted products, but also finished products. There are also a lot of products in the electro-mechanical industries. In services, it’s a bit the opposite situation. We don’t export that many services though it is growing. That’s something that we mainly import from Britain. The British and Czech economies compliment themselves in a very good way, I would say.”
The auto and aviation industry have been singled out as areas where Czechs can boost their component exports to Britain. And perhaps in contrast to Germany, its felt that Czech firms might have a better chance of getting orders for components with a higher value added. Martin Macourek again:
“In general, growth is very promising in the automotive sector. And we are doing better with components with added value, I would say tier one companies trying to supply the vibrant British industry in the auto sector are really an opportunity. We have seen tremendous growth of Jaguar Land Rover and Nissan in the U.K. and we are more and more trying to be in the position of tier one suppliers rather than, say, supply German companies which are tier one and Czechs which are tier two’s or tier three’s. So we are seeing a growing value of Czech products which is the right way to go.”
Brexit, although it has clearly sown doubt about the future, has not so far had the damaging impact that some of the worst case scenarios might have expected, although it is still very early days.
“We have lost some business cases as CzechTrade, but marginally. On the aggregate, it’s still looking good. Generally, I think it will depend on how the relationship between Britain and the EU will be. I hope in the long term that It will be an FTA agreement [free trade area] and in the meantime let’s hope for a temporary agreement over customs. There will be some harm, but I don’t think it will be significant harm What we are seeing at the moment is that Czech goods, if we are in the position of sub-contractors only, are getting more and more expensive in Britain and cannot really compete.”
You need to establish a local presence and need to get the value added chain under control to get closer to customers.
Part of the reason for that is the low level of the pound. Another factor is higher and rising Czech wages. So Czech companies are having in any case to target higher value parts of the supply chain.
Let’s turn now to Thailand. Thailand for much of the 1960s, 70s and 80s, was developed as a major source of manufacturing by Japan to take advantage of lower wages. But Thai companies are also losing some of their competitive advantage to lower cost neighbours in the region while at the same time Thailand has become a centre for investment in the likes of Cambodia, Vietnam, and Laos.
Jan Lembas is the head of the CzechTrade office in Bangkok and describes the overall situation.
“We are doing quite good business in Thailand, but still the full potential is not fully utilized. We have been exporting all sorts of products, mainly machinery and transport equipment, but also food, for instance milk powder, and from the 4 billion crowns of Czech exports, almost 200 million US dollars, you don’t have one item which is prevailing. So, it’s a whole range of instruments, machinery, medical equipment. It’s very diverse.”
Mr. Lembas says a physical presence in the country is almost unavoidable to do business in Thailand and that is at the moment appreciated by only a handful of Czech companies.
“There is a handful of Czech entrepreneurs based in Thailand. But as a direct arm or subsidiary of a Czech company there are only a few. That is where I see the main potential for growth. To become successful in that region, and in Thailand it’s even more important than the rest of the region because of the cultural differences – and I have experience from the United States, to Siberia, through the Middle East and India – and it’s difficult to do business in the traditional way through local partners. You need to establish a local presence and need to get the value added chain under control to get closer to customers.”
In some cases, the local hands on touch has already proved a success. Glassmaker Bohemia Glass approached Mr. Lambas two years ago and he advised them to take things gradually by building up their presence in Thailand and not jumping in with a stand at the first trade fair that came along. He takes up the story:
“When we took them to the first fair a year ago, we already had a strategy in place. We already had a company in place, so that when people came like the architects or designers, we were already able to offer them local sales, after sales service and installation. That’s what you really need to do whether its crystal chandeliers or industrial machinery. You need to have local control because everybody does it this way.”
We can say that the Czech Republic, or Czechoslovakia as it was, has a very good reputation.
Now to Latin America, and in this case Peru. Not many Czech companies have set up there, but one that has is the arms producer Česká Zbrojovka. Emil Ulrych is director of CzechTrade’s Lima office.
“We have the important company Česká Zbrojovka. The company established the production of firearms in Lima and I can say it’s successful there. We also have other different companies for water and power plants, for construction, and for security, such as Sherlog.”
Sherlog provides tracking of cars and other vehicles to help prevent auto theft.
While Peru is one of the fastest growing economies in Latin America, Ulrych says it is still overlooked by many Czech companies looking to boost their exports.
And finally, to Lagos, Nigeria, one of CzechTrade’s most recent offices which has been up and running for just over a month now. Štěpán Beneš is director of the Lagos office.
“We can say that the Czech Republic, or Czechoslovakia as it was, has a very good reputation. We certainly want to build on this reputation. At the present time, Lagos and the whole of Nigeria is in trouble due to economic crisis and recession but we are expecting an improvement of the current situation.”
Nigeria is the biggest economy in Africa, largely thanks to its oil wealth and status as the 12th biggest oil exporter worldwide. But as Mr Beneš points out, South Africa still has a lot higher wealth per capita. Czech companies are for the most part in standby mode as regards Nigeria, attracted by the many possibilities but still cautious about whether to jump in.