Industry Update: Czech Republic
R&D, the power industry, and more are being affected by the current the economic state of affairs in the Czech Republic. An insider in the automation and controls sector tells how.
Automation manufacturers still look to the Czech market as a means of lucrative contracts in Eastern Europe, but the economic impacts of the past year and a half are still evident in a persistent-but-mild pessimism among a number of industry players.
“Czech companies, mostly the companies in the hands of Czech owners, are still one step behind [their Western European counterparts], especially in regard to capital power,” says Bohuslav Vránek, general manager and acting executive of ATX, an industrial automation provider.
The current economic crisis is also impacting foreign companies operating in the Czech Republic. “The Czech Republic has long been a country with relatively low manufacturing costs, and that was not particularly favorable to new technology investment. In addition, costs for energy and a lack of regulations made the country a favorable place to do business. But all of these factors are now disappearing. The subsequent development of Czech industry, in particular its competitiveness, will depend on technology investment,” Vránek says.
ZAT, a significant local provider of control systems, has been weathering the influx of competition from multinational companies in the Czech Republic over the past several years. “Unfortunately, with the onset of the economic recession, we are again seeing the slowdown in local industry development and upgrades. The good news is that many long-term investments are still in progress and many manufacturers recognize the necessity to prepare for the post-crisis era,” says Jirí Vacátko, managing director for development and manufacture of ZAT’s control systems.
Vladimir Haasz, the co-chairman of governmental Research and Development Council is relatively critical of Czech company R&D spending. “Unfortunately, investment in R&D has become worse in the recent years,” he says. Recent data show that the R&D investments of Czech companies in 2008 was 0.76% of GDP, which is less than in 2007 when it was 0.83% of GDP. Though this may seem in line with EU spending, which was 0.87% of GDP in 2007, when this figure is expressed in purchasing power parity, the gap is wider. For example, Czech R&D spending was only US$168 per capita in 2007, while the average in the EU was US$235 per capita — 40% more,” says Vladimir Haasz.
The chairman of the Academy of Sciences of the Czech Republic, Jirí Drahos, also criticizes Czech company investment in technology research. “In 2008, when GDP growth in the Czech Republic stood at 2.5%, R&D investments plummeted by 3%. Conversely, in the EU, when GDP growth stood at 1%, R&D investments increased by 8%. This clearly illustrates that businesses in the Czech Republic do not see investing in R&D as being key to their future prosperity.”
One particularly bright spot for the Czech automation and control industry is in the power generation industries. Since the late 1980s, the level of industrial automation in Czech Republic power utilities has increased dramatically, thanks largely to technologies imported from Europe, Asia, and North America. However, local manufacturers have also been leveraging the growing power generation base and have been reaping the rewards.
In recent months there have been vivid discussions in the Czech Republic over the R&D financing promised by several local governments related to power industry advances. The disputes mostly center on the reallocation of funds from basic research to applied research, which lends greater support to scientific research rather than direct industry application development.
“Basic research is predominantly dependent on public funding — especially so in the Czech Republic — whereas applied research is open to a large share of business investment. This is why state support should preferentially go to basic research, which provides for the knowledge base necessary for a vast majority of technological innovations,” says Drahoš, under whose presidency the Academy of Sciences of the Czech Republic focuses in great part on basic research.
Drahos warns against the current overall Czech trend to reduce spending on research. “The anticipated stagnation of government support for Czech R&D, while other governments are planning to increase their investment in spite of the economic crisis, is particularly worrisome,” he says. “The main concern is that this lack of support will undermine the recruitment of young researchers and lead to stagnation (if not decline) of R&D in the Czech Republic.”
Petr Pohorský is the deputy editor-in-chief of Control Engineering Cesko. Reach him at email@example.com
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