Speech of Vice-Prime Minister Pavel Bělobrádek in Miami Dade, Florida (22nd March 2016)

Good institutions do good business

It is my honor to launch this block of presentations of the Czech economy. I am sure that the members of the business mission will fully vindicate the business aspects of collaboration between the Czech Republic and the USA, and in this case, the state of Florida. Let me talk about the political conditions and institutional settings of the business environment.

The Czech Republic is a country with a long industrial tradition, a third of our GDP and employment is generated by industrial enterprises. We also have quality and given the country’s size a large scientific and research base. These advantages have made us a country that attracts foreign capital and exports, and we can offer capacity both as a supplier of advanced components for global companies and high-quality research facilities.

Foreign businesses, including from the US, have long bemoaned our inefficient bureaucracy and a non-transparent public administration. One of the main priorities of our government has been to improve this situation.

We have adopted a Civil Service Act, which stabilizes and improves the quality of public administration and makes it more resistant to political pressures. We are fighting against corruption. We have adopted laws such as the act establishing a register of contracts, whereby all public institutions from the State to the municipal sector must be required to disclose details of the contracts they conclude. We have adopted a revised law on public procurement. We are preparing a new law on the funding of political parties that will allow anyone to look into a supporter of a political party’s accounts and it bans non-transparent methods of financing and management of political campaigns. We are making changes to the prosecutor's office with an emphasis on the prosecution of corruption and serious economic crime. Not only individuals but also companies can be punished for corruption and fraud, and in extreme cases the companies can be liquidated etc.

We really do consider institutional building as an essential condition for successful trade. In the Czech Republic we do not have excessively high corporate taxes or a disproportionately expensive labor force. Barriers to trade exist – or I hope existed - mostly at a political level. Less transparency, of course, poses a moral problem. Because the path to success is not only through capability, quality and performance. If a contract or business can be bought through acquaintance with politicians and officials, through bribery, or through other unscrupulous means, then that is wrong.

These are not the comparative advantages that someone should be able to boast about. In addition, economic problems can generate a moral issue because corruption prevents effective utilization of potential, both domestic and in particular foreign.

I am certain that we are able to change things for the better. The State Department will surely confirm that the Czech Republic has made good progress recently in building the institutions of a free market and transparent public administration.

People are the same everywhere. In the US as in the Czech Republic. But if institutions work, and if bad business practices are threatened by strict and certain penalties, then it clears the air. A good institutional background is perhaps even more important for trade between our two countries than other countries. Firstly, the United States is known for tough laws and rules for lobbying and corruption. Secondly, it is our strategic partner in NATO, which logically implies the potential for collaboration on strategic research and in the defense industry. And in these areas, corruption is particularly dangerous.

The quality of the institutional environment and political transparency is an eloquent parameter, which ranks a country either in the West or the East. Whether we consider Russia, the Middle East or China in the latter, surely we can agree that it is far better to do business in a country with a Western rather than an Eastern mentality.

Our aim is to be a member of an elite club. Whoever wants to get ahead in the United States must not only provide superior products and services, but also a certain corporate culture. This, of course, depends on each individual business. However, each company is growing in a particular environment. The free market did not arise spontaneously but is the result of purposeful effort and a long series of regulations whose objective was and is to ensure equal and fair conditions to everyone on the market. The market itself does not generate morals but on the contrary a functioning market is a product of high moral principles.

My opinion is that good governance and good rules for business and politics make the best support to exports that a country can provide its businesses. Because everyone when reading a sign saying “Made in ...” subconsciously recalls what kind of country it is, a country that has a bad reputation undoubtedly spoils trade for their businesses.

I very much hope that our government does not spoil trade for our businesses.

The trade delegation I have brought with me is undoubtedly of a very high quality. I am proud that my country has something to offer such a demanding market as the United States. Considering its size, the Czech Republic is not as capable of producing a wide range of products and services as the USA but when the Czechs do something, they do it well.

Even as a small country we have in a number of champions in the technology sector. The Czechs, for example, control one third of the market of antivirus programs, the Czech search engine seznam.cz leads Google in four countries; our electron microscopes are world-famous, as well as Wichterl’s invention of contact lenses, Janský’s discovery of blood groups, and Heyrovský’s polarography.

I believe that our trade mission has something to offer even Florida’s highly advanced aerospace, aviation and electronic industries, and that we can also develop scientific and research collaboration and innovation projects.

The Czech government can support this industrial and technological collaboration not only through institution building, but also by the fact that we are a reliable ally in NATO. The Czech government also consistently supports the expansion of transatlantic collaboration from a security and economic dimension. If will conduct more business, we will make the West stronger both economically and militarily.

Collaboration is already ongoing between the US and Czech researchers and companies that work for the US defense development. Undoubtedly, it is in our common interest to further develop these relations.

As the Deputy Prime Minister for science, research and innovation, what I would particularly like to see, of course, it is the ability to access developing cutting-edge technologies. Companies whose representatives are here with me certainly have the potential to succeed in this, and thereby open the door for others.

I would like to invite the Florida entrepreneurs and investors present here today to utilize venture capital. The Czech Republic, like any small country, feels quite a significant lack of investment in new and risky projects, start-ups and breakthrough technologies. It is logical that the law of large numbers - where losses from many failures can be recuperated from one great success - does not work in a small country. Therefore, we try to kick start start-ups using a government seed fund. However, private foreign capital would not only expanded our opportunities, but also bring much needed experience.

We have a number of small and medium-sized companies, whose founders came up with good ideas, they invested the little capital they had, found success and eventually sold their business to large companies for a huge profit. This is a common story of start-ups but a small amount of money is not always enough to begin with. Recently, for example, one firm led by prominent scientists developed a battery for energy storage, which is far lighter, more powerful, more durable and less expensive than those produced by Elon Musk and his company Tesla together with Panasonic. They needed to invest several tens of millions of dollars to build a factory but eventually they were helped out by the Chinese. Nothing against that, but why could it not be money from America? Or directly from Florida?

The companies represented today are long established companies, not start-ups. And I seriously recommend giving them your attention. But, among other things, I see them as a kind doorman. I see in them people who open the door to further collaboration between the Czech Republic and Florida. Those who can show that we are trustworthy and quality partners and many others may follow them or US investors may to come to them.

Of course, US investors are already present in the Czech Republic. But there is still a huge untapped area in our country, especially in terms of venture capital and new technology companies. These offer not only large profits. In addition, we are willing to support and guarantee private investment in research and development of new technologies, areas in which we have a huge deficit. While the level of Czech science increases, we are failing to ensure a greater inflow of private money into research institutions and thus a greater number of applied scientific research results in practice. In the meantime, the Czech Republic is among the most developed countries of the world, including the ability to produce scientific knowledge. However, we have far less investment for new businesses than in the US. In the case of the above-mentioned company with the hi-tech batteries, this is roughly one tenth of the money swallowed up by the Tesla factory on production of the same size.

I began my speech taking about the political aspects and institutional guarantees of entrepreneurship in the Czech Republic. The government is trying hard to curb corruption. Regarding international collaboration and investment, I definitely prefer to focus on the EU and NATO allies. The two things are closely related. Because US investors are, of course, far more sensitive to a corrupt environment than oligarchs from Russia or China. We do not want to be an economic colony of an authoritarian regime and I don’t think America wants us to be either. So shall we do something together? It is true that economic relations have an impact on politics and security. I admit that the pace with which China, essentially the State, is investing into our country fails to inspire my enthusiasm. I would much rather see German, British or American companies instead.

As the saying goes, good accounts make good friends. And money is not a neutral commodity. Cash and investments have influence. Just as no one wants to invest in a country in which they are not sure their money is safe or if it is a friendly country, we do not want money from those whose true intentions we have doubts about. We would be delighted if you increased the direct and indirect - in the form of business collaboration - inflow of investment from the US, which is our most important ally. The Dollar will always be better than the Yen or Ruble.

I began by mentioning the building of Czech institutions as a guarantee of equal and fair conditions for business, but I want to end by saying that friendship is also an institution. And even good friendships do good business.

Thank you friends for your attention!