KEY FACTS
Area 78,900 sq km
Population 10.5 million
Population density 131 persons/sq km
Official language Czech
Type of government Parliamentary Democracy

Czech Republic

Current Situation

Political Situation

The Czech Republic, established peacefully at the beginning of 1993 following the split with the Slovak Republic, is a parliamentary democracy. President Vaclav Havel, the head of state, enjoys a world-renowned reputation as a playwright and human rights advocate. The Czech Republic's coalition government is led by the Civic Democratic Party (ODS), a conservative, secular, pro-business party which is headed by Prime Minister Vaclav Klaus, generally regarded as the architect of the country's economic reform. The ODS has enjoyed popularity despite its implementation of tough economic reforms, many of which are near completion.

Economic Situation1

The Czech Republic is experiencing a steady expansion, and GDP is expected to expand by 4.4 -5.8 percent in 1996. The Czech inflation rate has been running higher than that of Western Europe but is expected to remain under 10 percent in the coming years. Industrial output should also grow by about 3 percent per year in real terms over the next two years.

The Czech economy continues to rely on three factors which have helped its economic recovery in the past: tourism, higher wages financed by capital inflows and exports of cheap goods to Western Europe. Exports to Western Europe are a priority of the Czech economy and have benefited from wage costs which are only around 10 percent of the German level. The ruling Civic Democratic Party (ODS) has been very successful with privatization, especially in telecommunications, health care and railways.

Environmental Expenditures

New environmental legislation has proven effective in inducing considerable environmental investment, especially from the private sector. Since 1992, the government estimates that total annual environmental expenditure has been higher than 2 percent of GDP and it is expected to increase in the coming years. If this trend continues, expenditures on environmental projects will exceed USD 1 billion in 1995, making the Czech market second largest behind only the Polish market. Table 20 presents the breakdown of environmental expenditures from 1992 to 1993.

TABLE 20
ENVIRONMENTAL EXPENDITURES (in million USD)
  Amount
Source of Funds 1992 1993 1994 (est)
State Budget 400 320 400
Private Sector/Municipalities 172 673 386
National Environmental Fund 56 107 135
TOTAL 628 1100 921
as % GDP 2.0 3.5 n.d.

Source: REC Report, National Environmental Protection Funds in Central and Eastern Europe, November 1994

Environmental Priorities2

Recently, the interest of the average Czech citizen in environmental issues has declined. According to opinion polls "to live in a healthy environment" was "very important" for 83 percent of citizens in 1990, for 76 percent in 1991 and for 67 percent in 1992. Issues such as the economic situation of families, increasing crime and Czech-Slovak relations have replaced environmental problems as top priorities of Czech citizens. People still consider environmental problems to be very urgent (50 to 60 percent of respondents) or reasonably urgent (30 to 40 percent of respondents). According to more recent polls, the environment ranked sixth, after problems in safety and crime, social insurance and family living standards. Thus, the perception of environmental problems in society is still quite strong.

During the years 1990-1993, the decline in environmental quality was either stopped or slowed down, and in some cases improved. For example, sulphur dioxide, nitrogen oxide and dust emissions were reduced by 24 percent, 23 percent and 30 percent, respectively. Greenhouse gases emissions decreased considerably. Surface water quality also improved as the Czech government built new waste water treatment plants and incorporated advanced technologies. In the Elbe River basin alone, new treatment plants serve about three million users.

The Czech government base their environmental policy on five basic principles:

The strategic goals of the policy are:

As an EU associate country, the Czech Republic has promised to meet European Union environmental standards by 1998. This will increase the demand for pollution control technology and equipment that meets EU standards. Specifically, the priority environmental targets in the Czech Republic are as follows:

  1. Air quality

  2. Water quality

  3. Energy

  4. Agriculture

  5. Transport

  6. Environmental education and public awareness

Regulatory and Enforcement Environment

The Czech Republic has many laws for environmental protection that include both command and control mechanisms and market-based incentives. However, enforcement of these regulations is still weak and enforcement audits are infrequently conducted. Therefore, most industrial institutions are not upgrading equipment due to environmental laws.

The current system of policy instruments is being completed, optimized and improved to increase its effectiveness. The following regulatory priorities have been set:

  1. Environmental laws

  2. Economic instruments

  3. Information instruments

Key Actors in Environmental Protection at the National Level

The key actors in the Czech environmental protection debate include the government, NGOs and businesses. Considerable media attention is given to NGO activists, who use "direct action" and similar methods to promote environmental protection: Greenpeace, Children of the Earth and The Rainbow Movement. Other NGOs trying to propose less radical solutions and alternatives have very restricted space in the media, and politicians seem to pay less attention to them. These NGOs are often specialized and their members are often very qualified experts in specific environmental issues. Some concentrate on energy efficiency issues (SEVEN - Center for Effective Energy Use, EkoWATT, League of Energy Alternatives), while others concentrate on waste management, environmental legislation, environmental advocacy (Institute for Environmental Policy, Union for Environmental Rights), nature protection (Czech Union of Nature Conservation, Brontosaurus), and environmental education (VITA, EVA).

The business community has recently increased its interest in environmental policy, which has both positive and negative effects. The development of "green businesses," especially in the area of waste management, is clearly a positive result of this process. Environment-friendly businesses bring new technologies, good ideas and imported know-how, and often promote long-term goals over short-term ones.

Status of the Czech Environmental Business Sector

The Czech environmental market is developing steadily with an estimated 600 companies providing environmental products or services. The 150 companies surveyed reported a combined annual turnover exceeding USD 40 million, making this market the second most attractive behind Poland.

Most environmental companies operate as private enterprises and more than 90 percent were created within the last five years. The sector is comprised of mainly small companies with more than half of the companies reporting less than 20 full-time employees. The high percentage of small firms resulted in low turnover figures as approximately one-third of the companies surveyed reported annual turnovers of less than USD 150,000.

The market is oriented towards the production of environment-related products, with this activity capturing 44 percent of total company revenues. The greatest market existed for environmental products related to the treatment of municipal and industrial waste water.

The second highest revenue generating activity was technical services (35 percent). The highest demand was for engineering and planning activities related to municipal water treatment. For general consulting activities, industrial solid waste management topped the list. Laboratory activities (testing and monitoring) were third, capturing about 12 percent of company revenues. Project management and research and teaching activities generated relatively low incomes.

When looking at media specific areas, water related activities generated the most revenues for Czech companies at 39 percent. This area was followed by solid waste-related activities at 21 percent and then air-related activities at 13 percent. Table 21 contains a matrix presenting the percentage of combined revenues generated by Czech environmental companies in the survey for each activity and related media.

TABLE 21
SOURCE OF REVENUES FOR CZECH ENVIRONMENTAL COMPANIES
(% combined annual revenues of surveyed companies by activity and media)
  ACTIVITIES
  General Consulting Research/ Education Engineering Design Environmental Products Testing/ Monitoring Project Management Total
WATER 3.2 0.4 7.8 21.2 4.6 2.4 39.1
Municipal Water 0.5 0.1 3.5 7.3 0.4 0.8 12.5
Surface Water 0.9 0.1 1.4 4.6 1.3 0.2 8.4
Industrial Water 0.7 0.1 1.4 6.5 0.9 0.7 10.1
Ground Water 1.1 0.1 1.5 2.8 2.0 0.7 8.1
SOLID WASTE 1.8 0.7 2.7 11.6 3.0 2.8 22.5
Industrial Solid Waste 1.2 0.5 1.6 5.6 0.9 1.8 11.4
Municipal Solid Waste 0.6 0.2 0.8 5.3 0.7 0.6 8.3
Soil 0.0 0.0 0.3 0.7 1.4 0.4 2.8
AIR 1.0 0.2 3.0 6.2 1.9 0.4 12.7
Air Protection 0.7 0.1 1.7 4.7 1.1 0.2 8.5
Gaseous Emissions 0.3 0.1 1.3 1.5 0.8 0.2 4.2
NATURE PROTECTION 0.6 0.1 1.2 1.3 0.6 0.2 4.0
Nature Conservation 0.3 0.1 0.3 1.2 0.3 0.1 2.3
Landscape 0.3 0.0 0.9 0.1 0.3 0.1 1.7
OTHER 4.0 0.1 0.5 3.8 1.4 1.2 11.0
Noise, Vibration Control 0.0 0.0 0.0 0.1 0.0 0.0 0.1
Other Environmental 4.0 0.1 0.5 3.7 1.4 1.2 10.9
Total 10.6 1.5 15.0 43.8 11.4 7.0 89.3

Note: Since companies provided estimates for their percentage of revenues for each activity, the total percentage may not sum to 100.

Czech companies were the most active in international markets as 7 out of 10 reported earning income from abroad. Furthermore, 60 percent of companies reportedly worked with foreign partners on joint projects and 15 percent were engaged in joint ventures with foreign partners.

The impact of the dynamic changes in this market was reflected in the high demand from Czech companies for environmental information and advanced professional training. The most requested topics included information on environmental regulations, financing environmental projects and new environmental technologies.

The following section presents the responses and selected correlations from the REC's survey of 150 Czech Environmental companies.

1. Source: Economist Intelligence Unit Country Reports, Eastern Europe, 1993 - May 1995, Silver Platter International, N.V.
2. Source: REC Report, Status of National Environmental Action Programs in Central and Eastern Europe, May 1995

REC * PUBLICATIONS * EMERGING ENVIRONMENTAL MARKET 1 * CZECH REPUBLIC

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