Competitiveness within Czech Republic during

time of the Creative Destruction

Prof. Michal Mejstk
Charles University in Prague & chairman of EEIP, a.s.
Chairman of International Chamber of Commerce CR


Nmecko a esk republika:
Konkurenceschopnost obou silne exportne
orientovanch zem v mezinrodn soutei.
Prague Czech Republic
April 1, 2012


2
2
Contents
Introduction





Background of the crisis
Czech Republic in Europe
Consequences
Conclusion


Zdroj: EEIP, OECD, IMF, ICC, IFO
Global (?) economic crises accelerated
creative destruction of processes
Economic crises weakened
economic position of
matured economies and
expectations are poor.

In contrast, emerging and
developing countries have
not been affected by the
crisis so deeply yet and in
spite of their slowing down
they contribute the most to
the revitalization of the world
economy, their share has
increased.

The crucial risk seen in the
future eurozone member
countries development .

Economic growth of
emerging economies
increases global competition
among exporters, that is
multiplied by export slow
down.


GDP growth diversified
(IMF 1/2012)
Bad world business climate ICC-IFO
Probable slowing down of Eurozone
GDP in relative terms (IMF 1/2012)
Poor expectation of foreign trade
(IMF 1/2012)
| Strana
3
Source: IFO (2012): IFO Business Survey, March 2012
BUTIFO business development indices for Germany continued
to look well after previous improvement (March 2012)
4
Germany is still relatively highly industrialized country with 24
% of industry contribution to GDP in 2010 (no.14) as well as the
Czech republic with 29.5% (No.6)
http://w3.unece.org/pxweb/quickstatistics/readtable.asp?qs_id=11
Contagion of EU Public Sector
The efforts of national governments to mitigate the negative impacts of the
global financial sector led to a rapid growth of public debts currently, the
contagion of the private financial sector spilled over to the public sector
This situation unveils the long-lasting problems of both old and new EU
Member States with appropriate and prudent management of budget
deficits as well as EU divide in competitiveness (as suggest the case of
PIIGS countries, but also of Belgium, etc.)
Still no light at the end of the tunnel - huge governmental debt instruments
to be issued in 2012-15 again to cover structural budget deficits and lack of
banking capital to cover regulatory risks fierce competition among
countries (e.g.states in Eurozone vs non-eurozone countries making risky
public debts much more expensive) and private and public bonds.




5
6
What a cycle downswing ?
The same features of crises - cycles of abundant liquidity expanded by smoothing
monetary policy , rapid credit/indebtedness growth, and a low-inflation
environment followed by an asset-price bubble (and share-price buble)
The US imbalanced macroeconomic position in the LTerm
Clinton/Bush gmts (HUD) support of ownership housing / sub-primes politicians
forced bankers to make bad loans
Description of key investment banking and risk management practices going global
Mounting defaults in the US sub-prime mortgage market -> market instability ->
world economic upheaval
The failure of capital market regulation due to unregulated CDS , to what extent
Greek voluntary haircut does trigger CDS ?
Eurozone response to its periphery problems escalation etc.

What are the long-term (LT) structural problems ? Are they solved within a crisis
by the proper creative destruction ?
7
Contents
Introduction





Background of the crisis
Czech republic in Europe
Consequences
Conclusion


Background of the crisis
LT Current account balances and political regimes
8
Source: Roeller, Vernon (2008), www.bruegel.org
1: Transfer of wealth
2: Emerging economies
favor free trade(?)
over protectionism for
the first time
3: Developed economies
private & public deficits
financed by borrowings
from underdeveloped
countries
4: G20 new strategic set
up
MULTILATERAL
WORLD
West
Emerging east
and different levels of
productivity!
Learning from the crisis 2008 2009 who responded by trade?
9
Zdroj: NERV, EUROSTAT (2012)
Both CR and Germany in the situation : The trade figures were "in contrast" to the downward
trend in the economy, and the economy had been "flirting with a technical recession recently.
(Carsten Brzeski on Germany)
CR openness export quota -
ratio of export/GDP nearly
70%.
Over 83% share of intra
EU27 exports from CR,.
31.9% share of CR exports to
or via Germany No.1
partner with 33 bn. EUR,
then Slovakia 20, Poland,
France, UK, Italy etc.

German openness export
quota 41.3% .
Still 60% share of intra EU27
exports from Germany, and
71% within Europe.
Since 2009 German extra
Europe exports have grown
significantly both in absolute
and relative terms but
reached only 16% for Asia,
and 10% for America, while
Africa with 2% and
Australian/Oceania 1%.
Imports are similar 69%
Europe, 19% Asia and 9%
America. Top 3 Dutch,
China, France
Net Exports contribution to CR GDP growth, in 2011 positive again
Germany was unseated as the world's biggest exporter by China in 2009 and was
overtaken by the US in 2010, according to ifo.
China remained export champions in 2011 - accounting for 11 percent of worldwide exports to be
followed by the US with 8.4 percent and Germany with 8.3 percent.
However, Germany was in for a "strong comeback in 2012. Countries outside the European Union
drove the rising German figures, with the volume of non-EU exports rising by 13.4 percent in recent
few months. EU exports have grown as well.
In 2011 another export surplus of 158 bil. EUR and the highest total volume of exports (1060
bn.EUR) with No. 1 France (9.6%), No.2 US (7%), No.3 Netherlands (6.5%), No.4 UK (6.2%),
No.5 China (6.1%), No.6 Italy (5.9%), No.7 Austria (5.5%), No.8 Switzerland (4.5%), No.9
Belgium (4.4%), No.10 Poland (4.1%), No.11 Spain (3.3%), No.12 Russia (3.3%), No.13 Czech
Republic (2.9% with 30.6 bn exports), No.14 Sweden (2.1%),..No.19 Slovakia (1%)

Zdroj: EEIP, EUROSTAT (2009)
Export openness outside EU 27
CR extra EU openness
export quota - ratio of
export/GDP lower for
China and Latin America but
higher for Russia.

Since 2009 German exports
toward China has grown
significantly. Countries
outside the European Union
drove the rising German
figures, with the volume of
non-EU exports rising by
13.4 percent jus in last few
months of 2012.


ECAs role in the Czech
republic relatively smaller
than in number of other
neighbors.

Exports extra EU 27 excluding developed OECD countries in absolute terms (2009)
Export openness towards Latin America, Russia and China and share of ECAs
supported exports per 1000 EUR

LT tendencies in CA and disbalances rooted in competitiveness.
Zdroj: www.ft.com
12
2. Global net foreign debt context permanent ? Why ? Who ?
13
2. The global context of eurozone problem
Sovereign risk of EMU countries now reflected in interest rates!

Source: EEIP based on Kohutikova (2011)
2
4
6
8
10
12
14
16
4
.
9
0

4
.
9
1

4
.
9
2

4
.
9
3

4
.
9
4

4
.
9
5

4
.
9
6

4
.
9
7

4
.
9
8

4
.
9
9

4
.
0
0

4
.
0
1

4
.
0
2

4
.
0
3

4
.
0
4

4
.
0
5

4
.
0
6

4
.
0
7

4
.
0
8

4
.
0
9

4
.
1
0

4
.
1
1

Germany Spain Portugal Ireland
Greece Italy Belgium France
Virtual Euro
(Jan 2009)
FX rates fixed
to Euro
(May 1998)
Greeces entry to Eurozone
(Jan 2011)
Lehman Brosfall
(Sep 2008)
Greek debtsrevision
(Oct 2009)
1
0
Y

G
o
y

t

b
o
n
d

y
i
e
l
d
s

(
%
)


Sovereign risk =
FX risk + credit risk

No FX risk -> PIGS as
safe heaven
Underpricing risk!
Investors distinguish risk

Investors do not distinguish

Investors
distinguish
risk again!
In credit risk

Interest rates
convergence

14

Increase of Risk reflected by the financial market
Source: www.ft.com
15
Sourcce: www.ft.com
Now relatively low credit risk of CZE and SLK vs. PIGS!
10Y Bond yields
Sovereign Credit Default
Swap CDS- spreads (basis
points)
16

and importance of competitiveness
Zdroj: www.ft.com, NERV (2011)
17
also CEE heterogeneous status
In several countries borrowings in foreign currencies seemed
to be cheaper and FX risk was neglected by debtors (state,
households, enterprises)
But country-specific risk due to current account deficits,
foreign exchange indebtedness, fragile national CEE
currenciesCEE bank exposure to foreign currency risk has
grown then, risk premium has increased
Danger of quasi-homogeneous CEE risk bias to
detriment of less-risky countries such as Czech Republic
and what about shock adjustment by
BELL countries and future ?
18
CEE status
Rapid expansion and consolidation of CEE Banks due to CEE
rapid growth and attractive return : Upside vs. Downside ?
Source: CEE Banking Sector Report, Raiffeisenbank, 09/2008
What risk level accounted for in risk premium ?
19
Source: CEE Banking Sector Report, Raiffeisenbank, 09/2008
CEE status
Foreign owners are purely regional consolidators
CEE bank exposure to global banks is limited
Originally
both globally
& EU highly
integrated
banks
accountable to
their EU &
global
shareholders
but many
parent banks
received state
preferred
equity in fact
partially
nationalized
20
CEE heterogeneous bank and country status
Parent by parent exposed to CEE specific country/bank risks
Risky countries/subsidiaries add-up in
different bank portfolios. What response? 21
22
Contents
Introduction





Background of the crisis
Basel III status
Consequences
Conclusion


Source: The Economist 8/2009
Consequences
High expectations from state interventions
(over 60% in both China and the US!!!)
Temporary (!) nationalization of
banks, government stimulus
packages according to
economic openness (US vs.
Germany vs. CR)
creative destruction of the
current architecture
should not stop but fuel
structural changes resulting in
higher competitiveness
23




Source: www.bbc.com
Rescue packages
total interventions of
governments and central
banks
Consequences
Enormous state help/packages tax, revenue, legislative changes
24
Contagion of Public Sector
The efforts of national governments to mitigate the negative impacts of the
global financial sector led to a rapid growth of public debts currently, the
contagion of the private financial sector spilled over to the public sector
This situation unveils the long-lasting problems of both old and new EU
Member States with appropriate and prudent management of budget
deficits as well as competitiveness (as suggest the case of PIIGS countries,
but also of Belgium, etc.)
Still no light at the end of the tunnel - huge governmental debt instruments
to be issued in 2012-15 again to cover structural budget deficits and lack of
banking capital to cover regulatory risks fierce competition among
countries (e.g.states in Eurozone vs non-eurozone countries making risky
public debts much more expensive) and private and public bonds.





25
Consequences of the crisis
Lessons from History Cumulative increase in public debt
26
Source: Reinhart & Rogoff (2008)
(after 3 years from the banking crisis end)
2. Forgotten Consequences
Now sharp increase in loans from Bundesbank to the Eurosystem
Source: Bundesbank, Monthly Bulletins (- 2011) presented in http://www.voxeu.org/index.php?q=node/7391
based upon seminal work of H.W.Sinn (2011)

As we can see in Figure , the drastic decline in securities held by the Bundesbank tracks
closely the sharp increase in loans from the Bundesbank to the Eurosystem: the securities
of the Bundesbank declined from 268 billion in December 2007 to 21 billion in October
2011. Meanwhile, the loans to the Eurosystem increased by nearly 400 billion. The latter
number is larger because the Bundesbank also borrowed in the private capital market by
taking deposits. Any limit ?

27
2. Forgotten Consequences
Any Limit for Claims on the Eurosystem via TARGET 2 ? (up to September 2011)
Source: IFS and Bundesbank Monthly Bulletin, (November 2011) presented in
http://www.voxeu.org/index.php?q=node/7391 based upon seminal work of H.W.Sinn (2011)

In principle the sky is the limit. De facto, however, this monetary process may face a political limit
28
2. Inevitable Consequences - S&P downgrade 2012 after Creditwatch warning
Source: Standard & Poor 2012 January 13

While we see a lack of fiscal prudence as having been a major
contributing factor to high public debt levels in some countries,
such as Greece, we believe that the key underlying issue for the
eurozone as a whole is one of
a growing divergence in competitiveness between the core and
the so-called "periphery." Exacerbated by the rapid
expansion of European banks' balance sheets, this has led to
large and growing external imbalances, evident in the size of
financial sector claims of net capital-exporting banking systems
on net importing countries.
29
2. Inevitable Consequences - S&P sovereign downgrades 2012 after Negative
Creditwatch warning
Source: Standard & Poor 2012 January 13

RATINGS LIST
To From
Austria (Republic of) AA+/Negative/A-1+ AAA/Watch Neg/A-1+
Belgium (Kingdom of) (Unsolicited Ratings) AA/Negative/A-1+ AA/Watch Neg/A-1+
Cyprus (Republic of) BB+/Negative/B BBB/Watch Neg/A-3
Estonia (Republic of) AA-/Negative/A-1+ AA-/Watch Neg/A-1+
Finland (Republic of) AAA/Negative/A-1+ AAA/Watch Neg/A-1+
France (Republic of) (Unsolicited Ratings) AA+/Negative/A-1+ AAA/Watch Neg/A-1+
Germany (Federal Republic of) (Unsolicited Ratings) AAA/Stable/A-1+ AAA/Watch Neg/A-1+
Ireland (Republic of) BBB+/Negative/A-2 BBB+/Watch Neg/A-2
Italy (Republic of) (Unsolicited Ratings) BBB+/Negative/A-2 A/Watch Neg/A-1
Luxembourg (Grand Duchy of) AAA/Negative/A-1+ AAA/Watch Neg/A-1+
Malta (Republic of) A-/Negative/A-2 A/Watch Neg/A-1
Netherlands (The) (State of) (Unsolicited Ratings) AAA/Negative/A-1+ AAA/Watch Neg/A-1+
Portugal (Republic of) BB/Negative/B BBB-/Watch Neg/A-3
Slovak Republic A/Stable/A-1 A+/Watch Neg/A-1
Slovenia (Republic of) A+/Negative/A-1 AA-/Watch Neg/A-1+
Spain (Kingdom of) A/Negative/A-1 AA-/Watch Neg/A-1+
N.B.--This does not include all ratings affected.
30
Slide 31
IMF: Recapitalization of EU banks needed,
S&P downgrade warning
Source: IMF (2011). Global Economic Prospects and Policy Challenges, October 2011
Slide 32
IMF: Spillovers and higher spreads
Source: IMF (2011). Global Economic Prospects and Policy Challenges, October 2011
33
Contents
Introduction





Background of the crisis
Czech Republic in Europe
Consequences
Conclusion


GDP growth , Inflation, Current account and
unemployment
34
Source: IMF (2011)
2010 2011 2012 2010 2011 2012 2010 2011 2012 2010 2011 2012
Evropa 2.2 2 1.5 2.4 3.1 2.1 0.3 0.1 0.4 . . .
Vyspl Evropa 1.8 1.6 1.3 1.9 2.8 1.7 0.8 0.8 1 9.4 9.2 9.1
Eurozna 1.8 1.6 1.1 1.6 2.5 1.5 0.4 0.1 0.4 10.1 9.9 9.9
Nmecko 3.6 2.7 1.3 1.2 2.2 1.3 5.7 5 4.9 7.1 6 6.2
Rakousko 2.1 3.3 1.6 1.7 3.2 2.2 2.7 2.8 2.7 4.4 4.1 4.1
ecko 4.4 5.0 2.0 4.7 2.9 1 10.5 8.4 6.7 12.5 16.5 18.5
Portugalsko 1.3 2.2 1.8 1.4 3.4 2.1 9.9 8.6 6.4 12 12.2 13.4
Irsko 0.4 0.4 1.5 1.6 1.1 0.6 0.5 1.8 1.9 13.6 14.3 13.9
Slovensko 4 3.3 3.3 0.7 3.6 1.8 3.5 1.3 1.1 14.4 13.4 12.3
R 2.3 2 1.8 1.5 1.8 2 3.7 3.3 3.4 7.3 6.7 6.6
Dnsko 1.7 1.5 1.5 2.3 3.2 2.4 5.1 6.4 6.4 4.2 4.5 4.4
Rozvojov Evropa 4.5 4.3 2.7 5.3 5.2 4.5 4.6 6.2 5.4 . . .
Rst HDP Inflace Bn et Nezamstnanost
Deficit and Gross central government debt (as a percentage of
GDP)
35
Source: Minitry of Finance (2011)
2007 2008 2009 2010 2011 2007 2008 2009 2010 2011
EU27 0.9 2.4 6.8 6.4 4.6 59 62.3 74.4 80 81.6
EA17 0.7 2.0 6.3 6.0 4.2 66.2 69.9 79.3 85.1 87
R 0.7 2.7 5.9 4.7 4.2 29 30 35.3 38.5 41.4
Dnsko 4.8 3.2 2.7 2.7 3.8 27.5 34.5 41.8 43.6 43
Irsko 0.1 7.3 14.3 32.4 9.5 25 44.4 65.6 96.2 102.2
Itlie 1.5 2.7 5.4 4.6 3.9 103.6 106.3 116.1 119 120
Maarsko 5.0 3.7 4.5 4.2 2 66.1 72.3 78.4 80.2 75.5
Malta 2.3 4.5 3.7 3.6 2.8 62 61.5 67.6 68 67.9
Nmecko 0.3 0.1 3.0 3.3 2.5 64.9 66.3 73.5 83.2 81.8
Polsko 1.9 3.7 7.3 7.9 5.6 45 47.1 50.9 55 54.9
Portugalsko 3.1 3.5 10.1 9.1 . 68.3 71.6 83 93 .
Rakousko 0.9 0.9 4.1 4.6 3.9 60.7 63.8 69.6 72.3 73.6
ecko 6.4 9.8 15.4 10.5 7.4 105.4 110.7 127.1 142.8 154.8
Slovensko 1.8 2.1 8.0 7.9 4.9 29.6 27.8 35.4 41 44.1
Saldo (v % HDP) Dluh (v % HDP)
Gross national saving (as a percentage of GDP)
36
Source: Statistical Annex of European Economy Autumn 2010, Tables 43, 44 a 45,
http://ec.europa.eu/economy_finance/publications/european_economy/2010/pdf/ee-2010-7_en.pdft
0
5
10
15
20
25
30
1997-01 2002-06 2006 2007 2008 2009 2010
Germany
Greece
Slovakia
Finland
Czech rep.
Hungary
Poland
EU
Net Lending (+) or net borrowing(-) nation(as a percentage of GDP)
What was the quality of GDP growth ?
37
-20
-15
-10
-5
0
5
10
1997-01 2002-06 2006 2007 2008 2009 2010
Germany
Greece
Slovakia
Finland
Czech rep.
Hungary
Poland
EU
Source: Statistical Annex of European Economy Autumn 2010, Tables 43, 44 a 45,
http://ec.europa.eu/economy_finance/publications/european_economy/2010/pdf/ee-2010-7_en.pdft
World Economic Forum Global Competitiveness Index rankings
subjective measure but Germany back in Top 10, CR in Top 40 only
38
2011 38. place
place place
Competitiveness price and non-price

Source: NERV 2011 report on competitiveness
Unit labor costs processing industry only
Unit labor costs (full employee compensation
over labor productivity)
Main problems
Problem 3 i: inadequte institutions, infrastructure and underutilization of
inovation potential threatens competitiveness R
Another foreign trade threat koruna appreciation and excess growth of unit
labor costs in comparison to the slower productivity growth
Slovac example shows that eura is not a key
R:
STRATEGY MIX ?
Both traditional efficiency
factors and innovation
Here R competitive
3. Competitiveness in costs and price
source: Mejstk et al (2011)
http://www.vlada.cz/cz/media-centrum/aktualne/nerv-ramec-strategie-konkurenceschopnosti-82538/
Real effective exchange rate (rok 1999=100)
R
Polsko
Maarsko
Slovensko
Nmecko
Finsko
80
100
120
140
160
180
200
1
9
9
9
2
0
0
0
2
0
0
1
2
0
0
2
2
0
0
3
2
0
0
4
2
0
0
5
2
0
0
6
2
0
0
7
2
0
0
8
2
0
0
9
Unit labor costs (2000=100, upwards = cost
increase).
EUR/CZK
EUR/HUF
EUR/PLN
EUR/SKK
60
70
80
90
100
110
120
130
1
9
9
9
2
0
0
0
2
0
0
1
2
0
0
2
2
0
0
3
2
0
0
4
2
0
0
5
2
0
0
6
2
0
0
7
2
0
0
8
2
0
0
9
2
0
1
0
2
0
1
1
Exchange rate (january 1999=100, downwards
= currency appreciation )
Nmecko
ecko
panlsko
Irsko
80
90
100
110
120
130
140
1
9
9
9
2
0
0
0
2
0
0
1
2
0
0
2
2
0
0
3
2
0
0
4
2
0
0
5
2
0
0
6
2
0
0
7
2
0
0
8
2
0
0
9
Real effective exchange rate (rok
1999=100)
R
Slovensko
Polsko
Maarsko
Nmecko
90
100
110
120
130
140
150
160
1
9
9
9
2
0
0
0
2
0
0
1
2
0
0
2
2
0
0
3
2
0
0
4
2
0
0
5
2
0
0
6
2
0
0
7
2
0
0
8
2
0
0
9
2
0
1
0
40
Competitiveness supported by the innovation
Different levels of productivity support of zombies!!!

Source: Mejstk & Chytilov (2008) based on Gretschmann (2006),
The Economist 11/2009

-2%
-1%
0%
1%
2%
3%
4%
5%
6%
7%
Most
prod.
2nd
prod.
3rd
prod.
Least
prod.
EU
USA
Growth of Employment by Productivity Quartiles is a Long-Term Signal
(China and CEE show a similar pattern as the US)
Some un-wise bail-outs and state subsidies might block necessary
structural/ innovation changes and fix old problems
Old EU member states might lag behind China and US in terms of
productivityCEE growth might not!!!
41
CR Energy intensity too high
Gross domestic energy consumption (summ of kgoe coal, power,oil, gas, renewables) divided by GDP (kg of oil equivalent per 1000 Eur)
(2009)








R sice snila z 1208 (1991) na 514 kgeo/1000 Euro HDP v roce 2009
Ale stle mnohem vy (4,5krt) ne prmr energetick intenzity starch lenskch zem EU-15 - 148 kgeo/1000
42
3. competitiveness
nonprice factor pyramide



source: Mejstk et al (2011)
http://www.vlada.cz/cz/media-centrum/aktualne/nerv-ramec-strategie-konkurenceschopnosti-82538/
43
4. Problem 3I
Global Competitiveness Index: problems R


44
Zdroj: WEF (2011): The Global Competitiveness Report 20112012
44
4. Problem 3I
Global Competitiveness Index: problem 3i


Zdroj: EEIP



R is close to the
average levels, but
there is visible
difference in
inovation,
infrastructure, and
mainly in institutions
(problem 3I).




Source: WEF (2011)
45
Coordination towards utilization of
our global comparative advantages
Full utilization of CR
comparative advantages
potential, (adaptation of
business environment
3i including strategic
location rent)
Strategic vision, where
CR should go and be
willing to go
Orgware - co-
ordination of strategies
and politicies (incl.
Foreign policies) that are
often autonomous
without synergy efects
See NERV report on
competitiveness (2011)
46
The Competitiveness Strategy 2011 and its tools
nine pillars
43 specific projects
250 measures in 4 implementation programs
Public sector
Education and employment
Business environment
Economy of global innovation
two links to other strategic documents (cohesion
policy, export strategy)
Interaction with other conceptual documents and
policies (Energy Policy, National Reform
Program, National Innovation Strategy)
OECD Report on the CR (2011) highly appreciated Czech
Competitiveness Strategy (20122020) adopted by the government. We
have entered the implementation phase
Key measures
Running projects
Pilot projects of overview of public budgets via the internet (few
ministries, Prague municipality; www. wheredoesmymoneygo.org - UK)
New law on public tenders
Creation of single points of payment - Central management of social
benefits , Labor office
Introduction of RIA and CIA for concepts, Parliament initiatives and law
amendmends, new RIA working committee of Legislative council of
government

The implementation mechanism

Implementation : Public Sector examples
Czech republic as a small player with huge potential, niches ?
Source: HSBC
49
Sensitive teritorial structure: keep competitive in Europe and expand
outside
Source: NERV (2011)
50
Source: NERV (2011)
Comparative advantage fragile structure of product and service structure



Czech foreign trade with
growing concentration in
several custom duty items

Exports of goods dominated
by the automotive industry
and electronics (locally
assembled) relevant
subdeliveries also imported.

Export of services dominated
by the travel and tourism.
The more sophisticated
services (such as finance,
science and research, design)
often imported.

Development of CR foreign trade with goods in goods classification (HS-6)
Development of CR foreign trade with services by groups (HS-6)
| 51
Required move of Czech enterprises in value chains
Source: EEIP
52
To fix the dynamic, competitive position of Czech enterprises
in global value chains
53
An important feature of globalization is that enterprises split their production processes into
a number of business functions which they then move around the world to gain efficiency
and/or new markets. This subscribes to the well known concepts of global value chains and
international sourcing.
Destination of international sourcing - Share of core and or support functions sourced
internationally (%), 2009
Segmentation of focus oriented foreign trade strategy
54
55
Contents
Introduction





Background of the crisis
Czech Republic in Europe
Consequences
Conclusion




Success in global trade can be influenced by changes in
parameters:
Old EU Member States might lag behind China and US in terms of
productivityNMS growth might not, but the post-crisis financial
cuts mostly in the research and innovation field
But still high share of nonR&D innovators in NMS (technology
adoption) than technology creation
Structural changes and further modifications of European Social
Model needed given the level of debt created in the course of
crisis and the need of flexibility of labor market
Revision of the whole Lisbon agenda structural funds should be
more oriented for development, no exclusion of centers of
excellence such as Prague
Corporate governance in the era of creative destruction more
demanding
Trade as a joint interest of EU citizens
56
BCG (2008): Get ready for private shakeout, www.bcg.com
ICC (2011): Financing of Investment and Trade, Paris
IMF (2009-12) reports www.imf.org
CR Gmt Strategy of International Competitiveness, www.vlada.cz
McKinsey (2008): Mapping global capital markets: Fifth Annual Report, McKinsey
Global Institute, October 2008
NERV (2011) Mejstk M.et al: Framework of Competitiveness Strategy for CR,
http://www.vlada.cz/assets/ppov/ekonomicka-rada/aktualne/Ramec_strategie_konkurenceschopnosti.pdf
Mejstk M., (2004): Cultivation of Financial Markets in CEE, Karolinum press,
Czech Republic
Reinhart C.M., Rogoff K. S. (2008): The Aftermath of Financial Crises, paper
prepared for presentation at the American Economic Association meetings in San
Francisco, January 3, 2009
Sinn H.W., Wollmershaeuser T., (2011), TARGET loans, current account balances
and capital flows:The ECBs Rescue Facility, NBER http://www.nber.org/papers/w17626
www.bbc.com


Useful sources

57
Prof. Michal Mejstk
Chairman
EEIP, a.s.
esk Republika
E-mail: michal.mejstrik@eeip.cz
www.eeip.cz


International Chamber of Commerce R
Chairman
Thunovsk 12
110 00 Praha 1
esk Republika
E-mail: mejstrik@icc-cr.cz
www.icc-cr.cz

Or
http://ies.fsv.cuni.cz

Contacts
58