Editorial Features
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Key Economic Indicators

Setting the scene

The Czech Republic's central location in Europe and sizeable (US$2 billion in 1995) foreign investment bode well for the future. Under a free-market Government, the economy has recovered well from problems caused by the division of Czechoslovakia (the 'Velvet Divorce') in January 1993. Initial contraction had, by 1995, become an estimated growth of six per cent by 1996. The country became the first post-Communist state to join the Organisation for Economic Co-operation and Development.

But the Czech Republic has faced upsets. Elections in June 1996 resulted in political stalemate as Prime Minister Vaclav Klaus' ODS lost its parliamentary majority. Several weeks of political wrangling led to the formation of a coalition Government between the ODS and the social democratic ODA. The ODS still dominates, but the presence of social democrats is a clear sign that Czechs have become uneasy at the swift pace of reform under the free-marketeer Klaus.

The economy too has come under strain, most notably in the banking sector: in August 1996 a series of small-scale banking collapses culminated in the failure of Kreditni Bank under the weight of losses incurred by bad lending and suspected fraud. The incident has led investors to call for regulatory and legal reforms to the country's complicated capital market.

Nevertheless, the Czech Republic is Eastern Europe's brightest prospect for economic success. New laws allow foreign business to operate under the same conditions as domestic enterprises, workers are largely well-trained and wages low. The Czech Republic has more viable firms than neighbouring Slovakia - which is overburdened with obsolete heavy industries - and its geographical proximity to western Europe makes transport costs attractively low for business.

Key economic indicators
Capital PRAGUE
Area (Sq km) 78,864
Population (m) 10.3
GDP/Capita (1995) US$4, 340
President Vaclav Havel
Currency koruna /: 1US$ 32.9 (FT 29/05/98)

Interview with Prime Minister Vaclav Klaus
Continued reform

Ivan Pilip, Minister of Finance
Politics and economy in the Czech Republic

Prague Stock Exchange
Striving for market standardisation

Dr Ivan Angelis, Secretary-General, Association of Banks, Prague
Developments in the banking sector

Dr Richard Salzmann, Chief Executive Officer and President of the Board, Komercni banka
The Czech economy and banking sector in the second half of the 1990s

Jan A Havelka, Chair, CzechInvest
Foreign direct investment in the Czech Republic

Prof Ing Vladimir Pilny CSc, Komora Auditoru
Present state of auditing within the Czech Republic

Czech agriculture and foreign investment opportunities
Jan Fencl, Minister of Agriculture

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