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10 Questions

with Tomáš Hruda
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By František Bouc
Staff Writer, The Prague Post
April 11th, 2007 issue

VLADIMÍR WEISS/THE PRAGUE POST
Hruda says he knew things would get tougher for CzechInvest when Martin Říman was appointed industry and trade minister.
Rarely does a firing stir up bigger turmoil than the recent forced departure of Tomáš Hruda, general director of the government’s inbound investment agency, CzechInvest. Industry and Trade Minister Martin Říman, whose ministry supervises the agency, announced that mismanagement was the cause of Hruda’s dismissal March 30. Hruda received unprecedented backing from his employees when about 80 percent of the agency’s 313-member staff served notice in protest of his dismissal. In an interview with The Prague Post, Hruda talks about the reasons for his ouster and offers his take on criticisms directed at CzechInvest.
➊ You were dismissed from your position, virtually overnight, by Říman. Was this a shock?
The Hruda File
  • Job title: Worked until March 30 as general director of CzechInvest
  • Age: 30
  • Nationality: Czech
  • Education: Studied economy and international relations at Charles University
  • Family: Single, no children
Since the industry and trade minister took over this office, it has been clear that there was little chance that everything would remain intact. Other indications suggested it would have been surprising if I had stayed in my position. The only issue appeared to be the timing.
➋ Officially, the Industry and Trade Ministry announced that mismanagement and a lack of transparency in assigning advertising contracts were at the root of your dismissal. You said those reasons are untrue and that your tense relationship with Říman caused the dismissal. Why the tense relationship?
It’s about Říman’s long-term view of CzechInvest and its activities. He perceives investment incentives and supports for investment in general very negatively. And he compared our use of EU Structural Funds to giving away free lunches. So, one must admit that our starting position was not easy.
➌ Říman said CzechInvest was straying from its focus of attracting foreign investment and was instead administering grants from the European Union funds. Is there any truth to this?
Well, I can hardly understand this. According to a law that took force Jan. 1, 2004, CzechInvest transformed from an agency focused just on investments into an agency focusing on supporting investment and enterprise. So, if you take a look at the law, you’ll find out that we just fulfilled its requirements. Nothing more, nothing less.
I also have to reject the notion that we didn’t put a large emphasis on investments. The amount of investment that we secured last year was the best in the agency’s history. We secured investment projects worth 114 billion Kč [$5.4 billion], among them Hyundai and Hitachi.
➍ Another frequent criticism is that the investments were often made by assembly-line factories or unsophisticated production companies. Should the government be blamed for the Czech Republic being more attractive to such companies?
I don’t think this criticism stands. The quality, or rather the level of technology of new investments, has been rising. There has never been a bigger number of companies hiring local experts for research and development as there is now. Labor costs are already so high here that transferring a mere assembly line to the country no longer pays off. Every investment here must be supported by some comparative advantage of this country, be it advantageous logistics or its base of subcontractors.
However, it’s important to point out that we can only pick from what’s available. It’s true that the quality of investment products could be better if we had an improved education system and a more flexible labor market. For example, the demand for technically educated people on the local labor market is now higher than their actual supply. On the other hand, the unemployed are usually less qualified people for whom working at an assembly line could be an interesting option.
Either way, the structure of investments into the Czech Republic is remarkably better than other countries in the region.
➎ Under your guidance, what did CzechInvest do to improve the business environment for investors interested in more sophisticated production?
We set stricter criteria for investment projects, and we also adjusted marketing strategies so that they were less general and more targeted into particular fields and clients. Also, with our Aftercare programs, we appealed to our old clients, asking them to expand their investments into research and development.
➏ CzechInvest does not hesitate to offer lucrative investment incentives to foreign companies. This policy added fuel to Říman’s criticisms that CzechInvest effectively discriminates against domestic companies. Do you think investment incentives are nondiscriminatory?
This is an ongoing issue that requires wider discussion. It is, in fact, thanks to our past employment of this very successful system that we can now afford to adjust our incentives to better reflect the technology level of individual projects. Any government, regardless of its political ideology, should capitalize on this system.
➐ If Říman lives up to his promises and does away with all investment incentives, do you think the Czech Republic will be competitive enough for foreign investors?
The amount of investment in this country is now so high that we do not need to struggle for every single investor. More significant than investment incentives is the country’s overall business environment. The more transparent it is, the fewer incentives are needed. However, the business environment hasn’t improved much over the past 17 years. So investment incentives are needed.
➑ Earlier this year, the Industry and Trade Ministry publicized a plan to merge CzechInvest and CzechTrade into one international-business agency. What are the pros and cons of this project?
The biggest problem is the timing. Every structural change needs time and energy. I do not think saving a few million can balance the risk that an agency that directs about 14 billion Kč annually into the economy will stop functioning. Only after all transactions resulting from the 2004–06 EU Structural Funds are settled would contemplating a change to the system make sense. That won’t be before 2009. Until then, the project bears unnecessary risk.
➒ Looking back at your CzechInvest career, what were the most remarkable moments that you experienced dealing with investors?
I’ve got lots of experiences and memories, but not many of them can be publicized, unfortunately.
➓ If you could become a fly on the wall of Říman’s office, what would you like to find out?
No comment.

František Bouc can be reached at fbouc@praguepost.com


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