Prague - The Czech government wants to help companies to increase exports to countries including Vietnam, China and Russia, which are not hit by the global crisis as much as western markets.
The Finance Ministry is considering increasing the registered capital of Czech Export Bank (ČEB), a state-run financial institution designed to support domestic exporters with favourable loans.
"We need to increase ČEB's capital to make it a stronger institution, which will in turn be able to secure higher export volumes," said Ivan Fuksa, deputy finance minister, for Aktuálně.cz. "I think it could be an extra CZK 200-500 million."
Reinforcing ČEB would help Czech manufacturers increase exports to riskier markets, including Vietnam, China or Russia. "The capital infusion would help firms move their focus from the west, which is hit by the financial crisis, to the east," Fuksa added.
According to Finance Ministry figures, 85 percent of Czech exports now head west and only 15 percent go east.
Helping the big ones
Czech exporters have welcomed the proposal, but they point out that increasing the amount of money available for loans will only help large companies.
"Large exporters will definitely benefit. Small and medium-sized firms won't," says Jiří Grund, head of Česká asociace exportérů (Czech Association of Exporeters). "The problem is that SMEs account for 90 percent of Czech exports."
After a meeting with Czech Banking Association on Monday, Prime Minister Mirek Topolánek backed efforts to support institutions including ČEB and the Export Guarantee and Insurance Corporation (EGAP).
Domestic companies exporting to western markets have suffered major financial losses in the past months, first due to the strong crown and later because of the financial crisis. A number of large companies in western Europe and the US reduced production, and hence started buying fewer components from its sub-suppliers.
The Czech Republic has hundreds of companies supplying parts for assembly in the west. These most typically include suppliers of car parts and producers of foods and chemicals. Another significantly affected sector is the glass industry.
