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Trade Policy in CEC Trade Policy in CEC

Question 9: Trade policy of Central European countries (Czech Republic, Slovakia, Poland, Hungary, Romania, Bulgaria, Baltic states) integration, interests, strategies, export promotion rules, tools and institutions, export opportunities CZECH REPUBLIC Integration The Czech Republic has been a WTO member since 1 January 1995. As of 1 May 2004 it is a member State of the European Union. All EU member States are WTO members, as is the EU (until 30 November 2009 known officially in the WTO as the European Communities for legal reasons) in its own right. Is a small but very opened and export-oriented economy. Since the EU entry, the Czech republic has a considerable trade expansion with a trade surplus since 2005. Last years there is an increase trade deficit with Russia, China and other Asian countries. The vision of Czech republic for the period 2006-2010 is to establish and drive CZ in the world via trade and investment through: Active and keen trade policy Better services for the exporters Increase of export capacity Key markets (territorial priorities of the Czech republic) Structural funds, soft loans, bileteral development cooperation Image of the CZ abroad, country-of-origin effect The export strategy defines 12 key projects that correspond to 4 goals: I. More opportunities for entrepreneurs Facilitation of the trade conditions - liberalization of trade in goods and services and elimination of trade barriers - protection of unfair trade and profit or making full use of the advantages from internal market. Important is also lobbying for companies interest abroad. These can be considered as the interests of the CZ within EU CCP. Activities in key markets (target countries): countries of particular interest (EU Member States) and territorial priorities (third countries). There is a difference between priority countries and countries of special importance: the countries having considerable potential for the increase of trade co-operation are regarded as priority ones1. The territories where there is currently already an intense commercial and economic co-operation under way, however, the potential for its extension is not as high as in the case of priority countries, are regarded as countries of special importance. For priority countries territorial strategies will be developed For China and India specific strategies have been already drawn up with a view to taking advantage of the opportunities and increasing activities of Czech entrepreneurs in both countries.
Following countries have been selected as priority countries: Argentina, Brazil, Bulgaria, China, Egypt, Chile, Croatia, India, Canada, Mexico, Romani, Russia, Saudi Arabia, the United Arab Emirates, Serbia and Montenegro, Turkey, the Ukraine, the USA and Vietnam.
1

Trade Policy in CEC


Motives for ad-territorial priorities: they are considerable and promising markets and they are in line with EU CCP preferences, most of them are prospective EU members, there is a historical background Czechoslovak brands, important trading partners and long tradition of development assistance (Vietnam). Moreover most of them are oil and gas exporters (stresses also in line with CCP preferences) To Building up of a brand name of the Czech Republic in the world through trade fairs and exhibitions abroad and through development assistance. The idea is to create a logo of the Czech Republic, to build a perception of Czech Republic abroad. The purpose is to increase the positive awareness of the CZ abroad and to enhance the image. Moreover important is to use effectively the funds allocated for the CZs presentation. II. Provide professional and efficient support Efficient assistance for exporters (implemented by embassies, Czechtrade, EGAP): Team work abroad and information, tailored consultancy (these will be foreign offices of state and agencies abroad). The implementation of the export strategy abroad is based on team cooperation and single management. The Ministry of Industry and Trade will ensure the management and the provision of back office services for employees abroad. This requires meeting the following essential prerequisites: o Professional team of competent experts who will promote interests of the Czech Republic in EU bodies and in countries in which we have economic interests. o Activities of embassies will be focused on the lobbying for interests of Czech companies abroad and assistance services according to the following general areas o Information Provision of information to entities (basic contacts for potential trade partners, recommendations of services of lawyer's offices, chambers of commerce, information about orders/contracts, projects and competitions in the territory). o Assistance Support in the process of establishing contacts, lobbying, assistance in problem solution, support for participation in competitions, projects and tenders, assistance in the searching for trade partners or trade contacts. o Presentations Sectoral and individual, support for companies' participation in trade fairs and exhibitions, support for the preparation of trade missions. Increase of exports of services: o Promotion of incoming tourists and liberalization of trade in services (this has to do with the imagine of CZ and its attractiveness for tourists) o More prepared and informed clients o Tailor-made education and consultancy o Goal-directed presentation of the Czech Republic's capacities in the area of services for interested parties abroad o Creation of the offer of competitive services intended for foreign markets Increase of direct investments and Development of export alliances among exporters o Search for investment opportunities: There is no system in place for the identification of investment opportunities abroad for Czech investors. Within this project, the institutions providing financial services (EGAP, the EB) will combine their capacities with Czech Trade and prepare a single (integrated) offer of services for Czech investors. The project will include the building up of the new system of support for investments and acquisitions

Trade Policy in CEC


which will be focused on four key groups of Czech clients: financial, production, consortia for projects and new companies entering the market. o Consultancy and assistance, in particular in the process of establishing contacts with potential partners abroad, in the preparation of investment plans, organization of negotiations with the local and regional administration or the identification of and contact with companies for the purposes of industrial co-operation, transfer of production o Financial services for investors (insurance EGAP which offer to investor insurance against the basic political risks, financing) o Export alliances abroad the main purpose is that Czech companies have better chances to succeed abroad as an alliance. Strong alliances of companies constitute an appropriate tool for the promotion of the building up of a positive image of the Czech Republic abroad in the area of trade and investments. III. Improve and extend the quality of services New system of services provided by the state to exports Coordination of services Customer Centre for Exports foreign offices abroad (targeting) Account managers in case of key customer IV. Increase capacities for exports Network for exports Extension of financial services for Czech exports The Export Academy INSTITUTIONS Export guarantee and insurance company (EGAP) is a state owned joint stock company which covers territorial, commercial non-marketable risks. Main types of insurance coverage: o Insurance of export sellers or buyers credit against the risk of nonpayment. o Insurance of pre-export financing of production for Exports o Ins. of confirmed L/C or bank guarantee o Ins. of credit for pre-export production o Ins. of foreign investments of CZ firms Czech Export Bank - It is a joint stock company owned by the state. Its main products are direct and refinancing buyers and suppliers credits, bank guarantee and pre-export credits.

Trade Policy in CEC


The interest rates that used are fixed (CIRR2) or floating (LIBOR, TIBOR, and EURIBOR) Trade promotion agency: Czech-trade It is an allowance organization of Ministry of Industry and Trade. Its scope of the activity is: o Network of foreign offices over 30 in 27 countries gather information from abroad markets and search for export opportunities for CZ firms o Head office in Prague focuses mainly on running of training courses o Information services and consulting o Organizes training courses and offers assistance services to exporters Other institutions involved in export promotion Czech centers around 21 foreign offices in 17 countries o Run courses of Czech language o Organize exhibition and festivals of Czech films o Lease business premises for conferences and business meetings o Provide interpreting and translation for Czech exporters Czech tourism around 28 foreign offices in 27 countries o Organizes trade fairs and workshops about tourism, carries out market researches, consultancy o Promote CZ as a tourist destination Commercial officers at 81 embassies in 69 countries that provide information and assistance Czech-invest with around 9 foreign offices in 6 countries o They provide investment incentives, promotion of inward investments
(integration, interests, strategies, export promotion rules, tools and institutions, export opportunities)

SLOVAKIA:

Slovakia has been a member state of the European Union and NATO since 2004. As a member of the United Nations (since 1993), Slovakia was, on October 10, 2005, elected to a two-year term on the UN Security Council from 2006 to 2007. Slovakia is also a member of WTO, OECD, OSCE, and other international organizations. It very opened economy with moderate investment inflow and stock. Actually Slovakia has poor outward investment performance and trade deficit remains even after EU entry. It has a high dependency on EU exports it absorbs 87% of EU exports Goal 1: better export opportunities
2

Commercial Interest Reference Rate - is the reference rate laid down by the OECD for its member states as the minimum interest rate for officially supported financing of exports

Trade Policy in CEC


Promotion of ease to export through liberalization of trade in goods and services and through elimination of barriers. Key markets: territorial priorities which are the target markets. But which are these target countries: countries of particular importance (the European economic area - 3 countries), countries with high export growth potential (Russia, Ukraine, Balkan Countries, East and SE Asia mainly China, South Korea, India) and other countries with export growth potential which are stressed also in conformity with EU CCP preferential agreements (USA, Japan, Canada, Australia, the rest of CIS countries, Latin America mainly Mexico and Chile, Gulf countries, JAR, North Africa) Goal 2: quality services for exporters Brand and imagine of SK through trade fair and exhibitions abroad (develop a logo of SK and increase the perception of SK abroad) Effective assistance to exporters through information, assistance, counseling services Better institutional framework of export promotion Goal 3: increase in exports of services Liberalization of trade in services within WTO and further liberalization of trade services within EU internal market. Goal 4: expansion of financial export promotion tools There will be financial support for exporters through benefits from EU structural funds mainly SMEs will receive these funds There will be more stress on insurance and export credit for export to territorial priorities Special tools for SMEs Long run export credits Goal 5: higher inflow of foreign investment (primarily high-tech) Emphasis put on foreign investments involving : high-tech for example nanotechnology, biotechnology, higher VA and higher labor productivity The tools used for this will be information for investors, lobbying in favor of SK firms, counseling, and assistance for investors.

Trade Policy in CEC

Export Import Bank of the Slovak Republic - the main types of insurance it offers: Ins. Of short-term and long-term export supplier credit against political & commercial risks Ins. Of export buyers credit against political and commercial risks Ins. Of manufacturing risk Ins. Of investments of Slovak legal entities abroad Ins. Of a confirmed export irrevocable documentary letter of credit Ins. Of export guarantees Main types of financing services that offers Export-Import bank of the Slovak Republic Guarantees payment, nonpayment guarantees Refinancing sellers and buyers credits loan Credits based on letter of credit Factoring and forfeiting Slovak agency for Tourism (SACR) main responsibilities Organizes trade fair and workshops about tourism abroad Carries out market researches Provides consultancy Promotes Slovak Republic as a tourist destination through mass media Foreign offices in 6 countries CZ, PL, HU, NL, AT and RU The Slovak Investment and trade development agency (SARIO) It is an allowance organization of Ministry of economy It provides information from abroad markets and search for export opportunities from Slovak firms

Trade Policy in CEC


Information on SK and its business climate for foreign investors Consulting for both businesses and investors, seminars Trade mission, trade fairs and exhibition abroad Benefits from network of commercial officers at embassies abroad (51 embassies)

EU structural funds in SK These are the main tool of aid to businesses (to also those business who export) EU budget is 11,6 billions EUR (cca 83%) and state budget co-financing They have the same or similar supported activities as in Czech Republic: transport, environment protection, support for participation in trade fairs abroad, overall business environment, energy efficiency, equipment, innovation, HR, R&D, ICT The maximum intensity of state aid: Bratislava region (0% since 1 January 2009), West Slovakia 40%, Central and Eastern Slovakia 50%. POLAND Basic information GDP per capita 56 % of EU 27 Export 2008: 175,3 bln USD Import 2008: 199,0 bln USD Share of trade in GDP (2007): 42,2 % FDI inflow: 161,4 bln USD FDI outflow: 21,8 bln USD Trade deficit (even after EU accession) High importance of agriculture products in export and economy EU absorb 79 % of export Dependency on oil and gas imports (Russia high trade deficit) Integration Member of WTO since 1st July 1995 Member of EU since 1st May 2004 Export strategy No official export strategy Not supervised by government Export promotion rules (Tools, institution) Promotion agencies Polish information and Foreign Investment agency Export and investment promotion Encouraging foreign firm to invest assistance (preparing investment project) Investment offers Database with Greenfield and brown field investment location Promoting Poland as attractive business partner Creating positive image of country Seminars, conferences, international exhibition Presentation of Polands achievements in technology, science

Trade Policy in CEC


Handling nationwide web of regional Investor Service Center

Polish National Tourist Organization Organizing trade fairs and workshops Carries out marketing researches Consultancy Promotes Polish culture Taking care about database of cultural events Promotes tourist destination Financing and insuring institution Export credit insurance corporation (KUKE) state own company Insuring: territorial and commercial non marketable Type of insurance: Insurance of short term credits (up to 2 years due date), leasing insurance Insurance of suppliers credit and buyers credit Insurance of pre-export financing Guarantees for banks confirming letters Contract bonds Insurance of market research costs Insurance of Polish direct investments (abroad) Guarantee department within Ministry of finance Export credits (OECD consensus) Tied-aid credits favorable conditions than 2 parts gift and repayable part List of eligible countries according GNI per capita Credits for investments that should are aimed for environmental or health protection, work safety, education or improvement of living condition not for project commercially viable Investment incentives From September 2008 For technologically advanced investments, creating jobs with high productivity Based on bilateral agreement between investor and Ministry of Economy Investment grant (1 -10 % of investment) Investment has to be in one of 14 special economic zone SEZ (Lodz, Krakow, Sopot, Katowice) shareholders of SEZ are usually: Treasury, City, Universities. Condition: Minimum employees (35-500), minimum investment (100 000 EUR), Permission from SEZ, minimal 25 % of entrepreneurs own share, at least 5 years live (workplaces) (in case of SME 3 years), annual admin fee to SEZ Forms: corporate tax exemption, free assistance in dealing with formalities, exemption for property tax Sectors: R&D, biotechnology, automotive, aviation, electronic. Export opportunities

Trade Policy in CEC


EU state: Germany (26 %), Italy (7,4 %), France (7 %), UK (6,3 %), Czech republic (5,6 %), Netherland (4,2 %) Others: Russia (3,6 %), Ukraine (2,5 %), Norway (2,3 %), USA (1,6 %) Products: Machinery and transport equipment (more than 40 %), Manufactured goods classified chiefly by materials (21,8 %), Food and agriculture p. (8,5 %) HUNGARY Basic information GDP per capita: 64 % Export (2008): 106,6 bln USD Import (2008): 106,5 bln USD Share of trade in GDP: 79,5 % FDI inflows (2008): 237,1 bln USD FDI outflows (2008): 159,7 bln USD Hungary is small and very opened economy (trade almost 80 % GDP) Increasing bilateral trade deficit with Russia (oil and gas), China and Japan Good performance in term of high-tech EU absorbs 79 % of export. Integration Member of WTO since 1st July 1995 Member of EU since 1st May 2004 Export strategy Hungarys external relations strategy Valid till 2020 It covers al foreign policy issues (not just for trade) Very general Accomplish the single European market use fully the opportunities of co-operation. - Russia, East Europe, South east Europe, USA, China and Middle East are priority directions in development of external economic relations - Government assist (especially to SME) with internationalization Export promotion rules (Tools, institution) Leading agencies Ministry of national development and economy Hungarian development Bank Promotion agencies Investment and Trade Development Agency (ITD Hungary) Leads on export opportunities in electronic and printed form Business network events Gathering and disseminating information in EU Advice on export procedures (legal, tax, custom) and promotional materials Manage governments trade promotion application programs Regional offices, project specific databases

Trade Policy in CEC


Financing and insuring agencies Hungarian Export-Import Bank Member of Hungarian Development Bank Export pre-financing loans Buyers credits Loans for Hungarian companies investing abroad Guarantees advance payment bond, bid bond, Purchase of export receivables Letter of confirmation of credit or guarantee Hungarian export credit insurance Ltd. (MEHIB) State owned insurance company Share the financial risk of export Strengthening the external competitiveness of exporters Cover pre-shipment risks, manufacturing risk Supplier or buyer credit, leasing insurance Bank guarantee, investment insurance Tied aid Investment incentives Condition: min. 10 mil. EUR R&D, manufacturing, service centres, logostic, bio energy facilities. OR 50 mil. EUR for tourist facilities Forms: cash subsidy, development tax allowance (80 % corporate tax for 10 years), - training subsidy (25-90 % of training costs) depend on nature of training and region of investment, job creation subsidy just in disadvantaged region (max. 260 mil HUF) From year 2004 incentive for film production Export opportunities EU countries (79 %): Germany, Italy, France, Austria, UK, Romania, Poland, Slovakia, Czech rep. Others: Russia (2,7 %), USA (2,7 %), China (1 %) Products: Transport equipment and machinery (62,3 %), Other manufactured goods (18,3 %), Agriculture (5,3 %)

ROMANIA - www.traderom.ro Basic information GDP per head in PPP in 2006(comparing to EU27) = 39 % Export in billions USD 49,4 bil. USD Import in billions USD 76,2 bil. USD Share of trade in GDP 24,3 % FDI inward stock (2008) 72,6 bil. USD FDI outward stock (2008) 0,9 bil. USD

Trade Policy in CEC


Growing trade deficit. Rare bilateral surpluses. Growing bilateral deficits with Russia, China, Germany. 72 % of Romania export absorb EU. Integration Member of WTO from 1st January 1995 Member of European Union from 1st January 2007 Open economy international trade is 24,3 % of GDP Strategy - Currently without any official export strategy Export promotion rules (Tools, institution) Leading institution Ministry of SMEs, Trade, Tourism and Liberal professions in cooperation with Ministry of Economy and Finance Ministries supervise and give funds to two types of institutions. First one is taking care about promotion and providing information (A), second one than help with financing and insuring (B). Promotion agencies Romanian trade promotion center Participation in foreign trade fairs, exhibitions Organization of trade missions Providing market and products studies Distribution of promotional materials (in cooperation with embassies) Administer the business promotional portal Training or assistance Romanian agency for foreign investment Consultancy for investors One step shop Romanian national tourist office Office abroad supporting the tourism Financing and insuring institution EXIM Bank Credits for exporters and foreign investment Guarantees for exporters credit Insurance of export credits and foreign investment Investment incentives Eligible sectors: manufacturing, agro-industrial, energy, IT, R&D Cash subsidies, job creation grants, interest rate bonuses. Export opportunities Members of EU: Italy, Germany, France, Hungary, United Kingdom, Bulgaria, Austria, Spain, Poland

Trade Policy in CEC


Non members of EU: Turkey, USA Product exported: Machinery, Textiles and clothes, Base metals, mineral products

BULGARIA www.sme.goverment.bg Basic information GDP per head in PPP in 2006(comparing to EU27) = 37% Export in billions USD 22,7 bil. USD Import in billions USD 35,6 bil. USD Share of trade in GDP 46,6 % FDI inward stock (2008) 42,9 bil. USD FDI outward stock (2008) 1,3 bil. USD Growing trade deficit only rare bilateral surpluses (Belgium, Malta), fast growing deficit with China. Integration Member of WTO 1st December 1996 Member of EU from 1st January 2007 Strategies Vision 2013 export policy for years 2008 2013 3 groups of measures 1. Selective support for perspective and export-oriented branches 2. Improvement of business climate 3. Export promotion tools they should expand import of machines for factories (for while) support of future export Export promotion rules Supervising institution Ministry of Economy and Energy Promotion agencies The Bulgarian Small and Medium Enterprises Promotion Agency Providing information and consulting services Participate on fair trades and exhibitions Transfer of experience Invest Bulgaria Attracting foreign investors Promoting Bulgarian culture and heritage Bulgarian State Agency for Tourism Promoting Bulgaria like tourist destination Financing and insuring institution Bulgarian Development Bank Export credits, loans for foreign investors Aim of loans is to import raw materials and produce goods for export Bulgarian Export Insurance Agency

Trade Policy in CEC


Providing guarantees for credits and investment abroad. Insuring export credits or letters of credit

Investment incentives Tax exception for 5 years just in disfavored regions, emloyees are 80 % residents, production sectors Free trade zones 6 - Convenient currency exchange - Possibilities to transfer profit overseas without restriction Export opportunities EU members (62 % of export): Italy, Germany, Belgium, Romania Others: Turkey (11,4 %), Serbia, Russia BALTIC COUNTRIES: LITHUAINA: Basic information GDP per head 56 % of EU Export in year 2008: 23,7 bln USD Import in year 2008: 29,3 bln USD Share of trade in GDP: 46,1 % FDI inward (2008): 12,9 bln USD FDI outward (2008): 1,7 bln USD Export strategy Approved in November 2009. Strategy for years 2009 -2013 Very large scope of territorial priorities Scandinavia, Baltic states, Germany, UK, France, Poland, Benelux, Russia, Arab states, Balkan, Italy, USA, China, India, Latin America Investment incentives Free zones more than 1 mil. EUR invest. -> corporate tax exemption for 6 year Job creation grants, requalification grants R&D tax credits and tax relief for fixed assets Tools and institutions Promotion agency Lithuanian Development agency Trade and investment promotion Tourist promotion Lithuanian Tourism Development Agency Tourism marketing activities development Promotion of tourism co-operation and standardization Organization of Lithuanian group stand at international tourism fairs Financing - INVEGA (Investment and Business Guarantees) Credit and guarantees for SMEs

Trade Policy in CEC


Export opportunities EU members 60,3 %: Latvia, Germany, Poland, Estonia, Denmark, United Kingdom Other: Russia, Belarus LATVIA GDP per head 54 % of EU Export (2008): 9,6 bln USD Import (2008): 15,7 bln USD Share of trade in GDP: 29,6 % FDI inward 11,2 bln USD Export strategy Export promotion program For years 2005 2009 Development of institutional basis for export Fostering the competitiveness of Latvian businesses Development of export capabilities Support to the export marketing and entering onto new markets Financial instruments for export promotion Investment incentives Tax reduction, depending on the sectors Special trade zones VAT exemption and customs duties exemption 80-100 % real estate tax exemption and rebate of 80 % on corporate tax Tools and institutions Promotion agencies LIDA (Investment and Development Agency of Latvia) Supplier searches, fairs and exhibitions, information, seminars and missions, consultancy Assistance to investors Tourist promotion Latvian Tourism Development Agency Promotes the possibilities of tourism in Latvia in local and international market Implements the tourism development projects Financing Latvia Guarantee Agency Loans guarantees for SMEs Export opportunities EU members (75%): Lithuania, Estonia, Germany, Sweden, Denmark, UK, Poland Others: Russia ESTONIA GDP per head 69 % of EU Export (2008): 12,6 bln USD Import (2008): 15,9 bln USD Share of trade in GDP: 52,2 %

Trade Policy in CEC


FDI inward: 18,6 bln USD FDI outward 5,9 bln USD Fast growth of FDI (inward and outward). From 2000 to 2008 grown FDI from 2,6 bln to 15,9 bln USD. FDI inwards were 73 % of GDP of Estonia in 2007. Most of the investments were in financial sectors (31 %). Biggest investors are from Scandinavia (Sweden, Denmark, and Finland). Export strategy: No official document concerned in complex export strategy Investment incentives No specific investment incentives Low tax Only distributed profits are subject to taxation Tools and institution Promotion agencies Enterprise Estonia Trade shows, training, marketing General assistance to investors Tourism promotion Visit Estonia (Estonia Tourist Board) Fairs, information, Estonia as destination for tourist Financing institution The Credit and Export Guarantee Fund (KREDEX) Export, pre-shipment and investment credits and guarantees Export opportunities EU members (70 %): Finland, Sweden, Latvia