Strengths

According to the SWOT analysis theory, strength is something that can be found in internal environment of the organization and, at the same time, adds value to the entity. Should this definition be followed, one can identify Czech republic´s strengths as:

• Strong macroeconomic environment

• Technological Readiness

• Financial Markets

• Health and primary education

Strong macroeconomic environment

At this place we should briefly revisit the economic indicators that were mentioned earlier in this chapter. The Czech economy seems to be very healthy. Over the last two decades, volume of trade and positive trade balance have been growing steadily.

It proves the openness of the Czech economy. An easy access to new technologies and transfer of technologies might be seen as the positive side effect of the openness of Czech economy.

Economic growth accelerated significantly in the last few years. Current unemployment rate is the lowest recorded in any EU Member State since 2002. Real GDP increased by 4.5 % in 2017 and keeps growing by around 3 % in 2018 and 2019.

The European Semester Country Report 2018 says that “whilst the Czech economy continues its shift towards more knowledge-intensive activities, several bottle necks still hamper the R&D system”. These included emerging shortages of skilled human resources, the low level of public-private cooperation and relatively low performance of the public science base. While foreign R&D funding is trending upwards, domestic firms reduced their R&D spending. (European Commission, 2018)

52

The previous analysis showed very good levels of gross savings where Czech Republic is performing better than the EU. Even productivity has been growing steadily. The intensity of growth, however, could be higher. Slovakia was performing much better in this area due to investments into value added industries and structural reforms. This should serve as a source of inspiration for the Czech Republic.

Technological Readiness

Czech Republic has made a great progress in the area of Technological Readiness.

This stands for the quantity of technologies that have been used during the production process. As was already mentioned above, Czechia has a small open economy which is a condition that supports easy transfer of technologies. Czech government approved the Industry 4.0 initiative. The program encourages industrial development and its very goal is to turn current factories into smart factories: by using IoT, IA, smart technologies with the goal to completely modernize the entire production process. The Ministry of Industry and Trade prepared an analytical document that is trying to describe, analyze and summarize all advantages and impacts of introducing the new generation of production process.

Financial Market

The European semester document reports that the Czech banking system is highly bank-centered. Bank hold 74 % of the system´s total assests and 84 % of total capital.

The Czech banking sector generally shows high levels of capitalisation, profitability and liquidity. Banks' capital adequacy ratio) appears to provide sufficient room for credit financing of the real economy. The current period of favourable profitability developments provides an opportunity to raise the capitalisation of the banking sector.

Banks were operating with the second-highest return on equity of the EU-28 in mid-2017. Capitalisation ratios have increased slightly over the past seven years, but because they improved more rapidly in the rest of EU, capital levels in the Czech banking system are now around the EU average.

53

The Czech capital market is thin compared to similar-sized economies. The overall trade value of shares, debt securities, structured products and investment funds was 16.2 % of GDP in 2016. Despite the household saving rate being the third highest in the EU and annual saving in the economy exceeding the market capitalisation of the Prague Stock Exchange, the ability to turn these into equity and long-term debt financing is limited. (European Commission, 2018).

Health and primary education

Health and primary education are both very accessible for general public. There is a Czech national health care systém that has been in place for decades. This systém provides health care and most of the medication for free or with very limited involvement from the side of patients. Primary, secondary and university education are all state-funded. There have been large discussion to change this systém, though.

4.4.2 Weakness

• Institutions

• Infrastructure

• Innovations

Institutions

According to international organizations, Czech Republic is not performing well in the term of Institutions. Good institutions are necessary for functional and competitive country. Public bodies should fully support entrepreneurship and business. One of the problems on the field of institution is the overall improvement of efficiency of state administration. The institutional environment is determined by the legal and administrative framework within which individuals, firms, and governments interact to generate wealth. The role of institutions goes beyond the legal framework. Global Competitiveness Report from 2017 – 2018 provide an insight into what areas are perceived as the most problematic: Diversion of public funds, public trust in politicians, favorism in decisions of government officials, efficiency of government spending,

54

burden of government regulation and finally efficiency of legal framework in challenging regulations.(World Economic Forum, 2018)

In the last couple of years, the Czech government has taken steps to modernize state administration and make it more interconnected. There are also projects for digitalization of state administration, project for proceeding in e-Government and initiatives to reduce / eliminate corruption in the system.

Also fighting corruption is yet another area that needs to be significantly improved.

Government adopted Action Plan for Fighting Corruption. One of the suggested solutions is to proceed in digitalization of public affairs and make decision-making transparent and all information accessible for general public.

Infrastructure

Infrastructure is very important for country´s competitiveness. From the point of view of the Czech Republic, it is crucial especially due to the geographic location of the country. From the perspective of GCR, into this category falls not only physical infrastructure, but also information and telecommunication networks and their coverage. Czech Republic is falling behind Western Europe especially in the area of quality of roads and highways. Certain parts of national highways seem to be under reconstruction almost permanently. The EU is involved in improving physical infrastructure on its territory. Therefore, there are funds that are available for modernisation roads or highways corridors.

In the field of information and telecommunication network, there is project called

“Digital Czechia”. The aim is to bring the Czech Republic closer to the “Information society”. The government will support high speed internet connection and the overall digitalization of the country.

55 Innovation

Czech Republic should belong to the group of countries that are already driven by innovation. However, in this case innovation seem to be rather slow. The GCR points to low demand for innovation from both businesses and public sectors. Another reason seems to be low transfer of knowledge between Research and Development and business sector. (World Economic Forum, 2018)

This year, the government prepared a new plan called Innovation strategy for the Czech republic 2019 – 2030. This project seems to be very courageous as the government wants to attract not only innovative talents but also open new research centers and platforms that will operate in this field. It should have intersectional character.The main pillars of this program are: Polytechnical education, Support for national start-ups and spin off projects, Digital Czechia, Smart investments and Research centres, etc.

The document follows Summary Innovation Index and aims to reach the “Strong Innovators” category till 2025 and till 2030 reach the status of Innovation Leaders. This initiative is also reaction to Europe 2020 strategy that invites all member states to increase budget available for R&D. (Rada pro výzkum, vývoj a inovace, 2019)