IV. POLITICAL ENVIRONMENT

A. Nature of Bilateral Relationship with the United States

Bilateral relations with the United States are as good as they have
ever been.  Since the establishment of the Czech Republic at the
beginning of 1993, a series of high-level visit (including presidential
visits to both countries, top-level military and cabinet contacts, and
countless working-level meetings) have reaffirmed the breadth of
cooperation and mutual interest.  The United States is in the process
of phasing out assistance programs to the Czech Republic.  This
phase-out, expected to be completed by 1996, is a clear indicator of
the Czech Republic's role as emerging partner with the U.S.  That
partnership ranges from close bilateral military ties, cooperation in
combatting such transnational challenges such as organized crime and
narcotics, working together in the United Nations Security Council
(where the Czechs occupy a seat from 1994-1995), and working closely
bilaterally through a series of cultural, educational and legal
programs to deepen the Czech's progress in democratization and to
ensure better U.S. understanding of the Czech achievement.

B. Major Political Issues Affecting Business Climate

The political issues affecting the business climate are few.  The Czech
Government is committed to early entry into Western institutions, first
the Organization for Economic Cooperation and Development (OECD)
and then the European Union (EU).  Theirs is an export-driven
economy, and European markets are the first priority.  The U.S. has
expressed concerns about some elements of the Czech business
culture which are less than transparent, and sometimes too
bureaucratic.  There are only tangentially political issues, inasmuch
as they represent the ongoing transformation in the already-
established democratic institutions of the country.  Most problems of
business representatives are also widely acknowledged by
government officials, who are frequently cited by business as being
open and available to listen to business problems.  The U.S. makes its
concerns known to Czech officials and partners on a case-by-case
basis, and while conflicts in some areas continue to exist, we are
encouraged by the seriousness with which the Czechs take our
representations in commercial as well as other areas.

C. Synopsis of Political System, Schedule for Elections and
Orientation of Major Political Parties

The Czech Republic is a parliamentary democracy.  The coalition
government is led by the Civic Democratic Party (ODS), a conservative
secular free-market oriented party whose leader, Prime Minister
Vaclav Klaus, is the architect of the country's economic reform.
President Vaclav Havel, the head of state, is an internationally
recognized advocate of human rights and social justice.  The
parliamentary Chamber of Deputies is elected every four years; the
next election is scheduled for 1996.  The ODS and its coalition partners
-- Civic Democratic Alliance (ODA), Christian Democratic Union (KDU-
CSL), and Christian Democratic Party (KDS) -- represent a stable
right-of-center majority that is generally pro-business and shows no
sign of losing popular support despite its implementation of tough
economic reforms.  The opposition Social Democrats (CSSD) support
the reform process, although they emphasize the social cost of
transformation.  On the far left is the Communist Party (KCSM) and on
the far right, the Republicans (SPR-RSC), neither of which, as
present, poses a significant electoral threat to the coalition.