APPENDIX B: DATA ON BEST PROSPECT FOR AGRICULTURE AND INDUSTRY SECTOR EXPORTS These product and service categories are ranked in priority order. Following data are in million US$ and current prices. Best prospects for industry sector: 1. Pollution control equipment (POL) 2. Telecommunications equipment (TEL) 3. Medical equipment (MED) 4. Security and safety equipment (SEC) 5. Building products (BLD) 6. Machine tools and metal working equipment (MTL) 7. Electrical power systems (ELP) 8. Computer software (CSF) 9. Food processing and packaging equipment (FPP) 10. Insurance services (INS) 11. Franchising (FRA) 12. Aircraft and parts (AIR) 13. Process controls/industrial (PCI) 14. Computers and peripherals (CPT) 15. Financial services (FNS) 16. Travel and tourism services (TRA) Best prospects for agricultural sector: 1. Soybean meals (06) 2. Rice (11) 3. Raw cotton (04) 4. Tobacco and Products (21) Best prospects for industry sector: A. Rank: 1 B. Name of Sector: Pollution control equipment C. Code: POL 1993 1994-est. 1995-est. D. Total market size 555.531 440 475 E. Total local production 405.000 320 360 F. Total exports 5.000 7 10 G. Total imports 155.875 113 125 H. Total imports from U.S. 2.583 5 8 I. Exchange rate used: 29 CZK for 1 US$ (import statistics reflect current exchange rate in the time of custom process) Comments: Market size represents total sales of material and equipment for environmental construction. Imports cover 28% of the market. The U.S. share of imports is 1.7%. Competition comes mainly from Germany(83%), Austria(9%), Italy(2.3%). U.S. imports are comprised of centrifuges; filter machines for liquid or gases and parts (HS 8421, 92%).There have been 532 environmental projects (including those with a budget over $190,000) on which $410 million was spent (51% on water, 35% air, 15% solid waste purification). The Czech government has given priority to reducing serious air, water and solid waste pollution. Government donations amounted to 39% of total amount spent on environmental construction. The local production is comprised mainly of less advanced equipment and materials. The need to meet the European environmental standards in 1998 will create great demand for high technology equipment. Most promising subsectors: -air pollution control equipment -water pollution control equipment -recycling technologies. A. Rank: 2 B. Name of Sector: Telecommunications equipment C. Code: TEL 1993 1994-est. 1995-est. D. Total market size 290.901 384 460 E. Total local production 81.963 98 117 F. Total exports 21.921 28 34 G. Total imports 226.545 314 376 H. Total imports from U.S. 22.171 48 58 I. Exchange rate used: 29 CZK for US$ (import statistics reflect current exchange rate in the time of custom process) Comments: Imports cover 78% of the market. The U.S. share of imports is 9.8%. Competition comes mainly from Germany (23%), Austria (12%), Great Britain (7%). Further development and opportunities largely depend on passing the telecommunication policy proposal in government and opening of the local operators and networks markets. The Czech telecommunications company, STP Telecom, is being privatized in the second wave of privatization; its total income in 1994 is estimated at $733 million. According to the proposal, now considered by the government, a foreign partner will be offered 27% of the company's stock and will be allowed to increase asset value by investment up to 130%. The Czech telecommunications sector needs complete modernization. Since the political changes in 1989 the development of the business sector has been limited by the development of telecommunications. The aim of the modernization program is to double the capacity of the telecommunications network by the year 1998 (from 17 phones per 100 people to 34 phones per 100). The market is already competitive: Siemens and Alcatel seized the digital switchboards market; AT&T sells optic cable; Cortelco intends to manufacture local switchboards in CR. The Czech Republic's skilled work force, industrial capacity and location implies a good opportunity for manufacturing the equipment. Most promising subsectors: -microwave radios systems (radio local loops) -cable TV equipment -multi-functional communication equipment (voice, data, interactive TV, etc.) -investment in local operators -joint ventures with cable TV companies -fiber optic transmission equipment -telecommunication network switching equipment -telephone and fax equipment. A. Rank: 3 B. Name of Sector: Medical equipment C. Code: MED 1993 1994-est. 1995-est. D. Total market size 196.520 341 527 E. Total local production 48.666 39 39 F. Total exports 17.511 20 22 G. Total imports 156.777 318 510 H. Total imports from U.S. 20.113 40 65 I. Exchange rate used: 29 CZK for US$ (import statistics reflect current exchange rate in the time of custom process) Comments: Imports cover 80% of the market. The U.S. share of imports amounts to 13%. Competition comes mainly from Germany (34%), Austria (11%), Japan (6%).Imports from U.S. are comprised of medical, surgical, dental or vet instruments (HS 9018, 75%). The need for equipment is great, but means to pay are limited, especially in rural areas and smaller cities. Upcoming end of privatization will create chances for U.S. companies to establish joint ventures with new medical entities, which will need substantial investment. Most promising subsectors: -cardiological and cardiovascular equipment -surgical equipment -diagnostic equipment -anesthesia and resuscitation equipment -patient monitoring systems and apparatus. A. Rank: 4 B. Name of Sector: Security and safety equipment C. Code: SEC 1993 1994-est. 1995-est. D. Total market size 60.000 65 72 E. Total local production 10.000 13 14 F. Total exports 0.700 1 2 G. Total imports 49.326 53 60 H. Total imports from U.S. 3.317 5 6 I. Exchange rate used: 29 CZK for US$ (import statistics reflect current exchange rate in the time of custom process) Comments: Imports cover 83 % of the market. The U.S. share of imports amounts to 6.7%. Competition comes mainly from Germany (40%), Austria (11%) and Italy (12%). U.S. exports are comprised from electric sound or visual signaling apparatus and parts(HS 8531, 97%). The collapse of the police state has unleashed a wave of burglary and theft. Local production provides less advanced equipment; electronic security equipment and modern safes are mostly imported. Most promising subsectors: -alarm systems for homes and businesses -safes for businesses -auto alarm and immobilization equipment. A. Rank: 5 B. Name of Sector: Building products C. Code: BLD 1993 1994-est. 1995-est. D.Total market size 661.004 697 865 E.Total local production 559.049 604 725 F.Total exports 143.309 145 149 G.Total imports 130.760 177 248 H.Total imports from U.S. 8.161 6 6 I.Exchange rate used: 29 CZK for US$ (import statistics reflect current exchange rate in the time of custom process) Comments: The U.S. share of imports amounts to 6.4%. Competition comes mainly from Slovakia (30%), Germany (22%), Austria (11%). The amount spent on constructions in 1993 (not including wages and constructions abroad) was $3.23 billion; estimation of growth for 1994 is 17%. Imports from U.S. are comprised of civil engineering & contractors' plant & equipment (SITC 723, 32%); from pigments, paints, varnishes and related materials (SITC 533, 12%). A shortage of office space and attractive apartments has generated many renovations of individual buildings when they become free of rent controls. A small but growing middle class has created a demand for modern, comfortable, single family dwellings. Building products are also needed for roads, renewal of obsolete infrastructure projects, reconstruction/renovation and historical preservation. Most promising subsectors: -family houses and condominiums -paints and coatings -fabricated construct materials. A. Rank: 6 B. Name of Sector: Machine tools and metalworking equipment C. Code: MTL 1993 1994-est. 1995-est. D. Total market size 131.759 132 145 E. Total local production 107.276 102 114 F. Total exports 114.655 118 129 G. Total imports 107.690 118 124 H. Total imports from U.S. 3.552 4 4 I. Exchange rate used: 29 CZK for US$ (import statistics reflect current exchange rate in the time of custom process) Comments: Imports cover 75% of the market. The U.S. share of imports amounts to 2.09%. Competition comes mainly from Germany(45%), Austria(9%), Slovakia(7%). U.S. exports are mainly comprised of machine tools for forging, bending and stamping (HS 8462, 28%). In 1993 local production significantly dropped and sales were achieved through great decrease in inventory. Modernization and replacing obsolete equipment together with economic recovery and privatization will create great demand for high technology equipment. The Czech Republic had been a supplier of machine tools for other central and east European countries; it has capacity, skilled work force and tradition in producing machine tools - this means an opportunity for investment. Most promising subsectors: -machine tools for honing and finishing metal -parts for machine tools -CNC machine tools. A. Rank: 7 B. Name of Sector: Electrical power systems C. Code: ELP 1993 1994-est. 1995-est. D. Total market size 1216.713 1135 1270 E. Total local production 1056.066 1111 1210 F. Total exports 355.515 427 511 G. Total imports 304.582 239 263 H. Total imports from U.S. 15.667 13 15 I. Exchange rate used: 29 CZK for US$ (import statistics reflect current exchange rate in the time of custom process) Comments: Imports cover 25% of the market. The U.S. share of imports amounts to 5.1%. Competition comes mainly from Germany(26%), Slovakia(23%), Austria(9%). Imports from the U.S. are comprised of steam turbines, other vapor turbines(HS 8406, 58%). In 1993 production and distribution of electricity, gas and water sales less export were $6.4 billion; estimation of growth for 1994 is 1.2%. The CR seeks to upgrade its nuclear generating capability, modernize its traditional coal-fired generators and install gas-driven equipment. Expected total investments to the year 2000 amount to $220 billion of which 67 percent should be invested until end of 1996. Following are the main investment objectives: - installation of desulphurization technology - replacing old boilers by new technology such as fluid bed - upgrading of control systems - heat generating power plants - interconnection with the UCPTE system. The energy production and energy distribution sub-sectors offer opportunities for U.S. companies in participation in development projects. Most promising subsectors: -nuclear power plant instrumentation -modernization of thermal power plants -cogeneration equipment -power plant instrumentation. A. Rank: 8 B. Name of Sector: Computer software and services C. Code: CSF 1993 1994-est. 1995-est. D. Total market size 52.112 54 65 E. Total local production 25.228 33 40 F. Total exports 25.228 33 40 G. Total imports 26.884 21 25 H. Total imports from U.S. 7.265 5 7 I. Exchange rate used: 29 CZK for US$ (import statistics reflect current exchange rate in the time of custom process) Comments: The U.S. share of imports amounts to 27%. Competition comes mainly from Germany(34%), Great Britain(6%) and Ireland(6%). U.S. exports are comprised of recorded media for the use in computers (HS 85249091, 98%). The sector is mainly comprised of software (55%) and data processing services (39%). The whole sector grew 75% in 1993. Local production is concentrated mainly on accounting software, stock management software. There is a great demand for network communication software and management software. Intellectual property rights protection has improved, however further improvements are needed and expected. Most promising subsectors: -network communication software -data processing management and maintenance -financial software -database management -application software. A. Rank: 9 B. Name of Sector: Food processing and packaging equipment C. Code: FPP 1993 1994-est. 1995-est. D. Total market size 274.613 288 328 E. Total local production 56.966 74 96 F. Total exports 11.128 17 21 G. Total imports 218.722 231 253 H. Total imports from U.S. 2.580 2 2 I. Exchange rate used: 29 CZK for US$ (import statistics reflect current exchange rate in the time of custom process) Comments: Imports cover 80% of the market. The U.S. share of imports amounts to 1.2%. Competition comes mainly from Germany (50%), Italy (16%), Austria (13%). Imports from U.S. were comprised of dishwashing, cleaning, filling, can sealing machines (HC8422, 67%). In 1993 food production industry sales less export were $5.2 billion; 10% growth is expected in 1994. The food industry is oriented toward quantity, and while farm output is high, product quality, including processing and packaging quality is low. Modernization and replacing obsolete equipment will create high demand in this sector. Most promising subsectors: -meat and poultry processing equipment -bottling and container packaging equipment -beverages fpp machinery -dairy processing equipment -food processing plant storage facilities. A. Rank: 10 B. Name of Sector: Insurance services C. Code: INS 1993 1994-est. 1995-est. D. Total market size 1077.166 1769 2023 E. Total local production 879.366 1495 1707 F. Total exports 879.366 1495 1707 G. Total imports 197.800 274 316 H. Total imports from U.S. 10.100 12 14 I. Exchange rate used: 29 CZK for US$ Comments: Foreign owned companies cover 18% of the market. U.S. owned firms sales amount less than 1% of the market. Market size is total income of insurance companies, of which 70% is insurance fees collected. The growth 44% in 1993 and another 65% growth expected in 1994 has been and will be achieved through new insurance contracts that reflect escalating prices of real estate and cars. Yet the sector is still underdeveloped for the growing private business sector. There are 19 insurance companies - of which 6 are foreign - operating in the market in 1993 compared to 700 firms operating before 1948. Profit before tax increased 285% and amounted to $156 million. Most promising subsectors: -business insurance -life insurance -property insurance of individuals. A. Rank: 11 B. Name of Sector: Franchising C. Code: FRA 1993 1994-est. 1995-est. D. Total market size 1240 1607 2090 E. Total local production 1200 1560 2030 F. Total exports 1200 1560 2030 G. Total imports 40 47 60 H. Total imports from U.S. 23 28 36 I. Exchange rate used: 29 CZK for US$ Comments: Market size represents estimate of the potential market for franchising. In 1993 total amount spent on services (not including services run by the state) was $8.31 billion. 34% growth is expected in 1994 and even higher in 1995. Rapidly increasing consumption in services sector creates opportunities for business and personal services. Washing and dry cleaning services sales amounted to $9.6 million, yet the technology and equipment are obsolete and rapid growth is expected. Average disposable income is still low (avg. salary is $250 per month), but this hides growing middle class. Also, Wester tourist traffic remains strong. Good fast food restaurants are still in demand, and local food raw materials are good and plentiful. Most promising sub sectors: -business services such as quick print, mail handling, delivery and copy services -personal services such as quality dry cleaning -fast food franchises. A. Rank: 12 B. Name of Sector: Aircraft and parts C. Code: AIR 1993 1994-est. 1995-est. D. Total market size 246.875 287 295 E. Total local production 182.422 237 250 F. Total exports 21.193 22 25 G. Total imports 55.949 70 70 * H. Total imports from U.S. 15.370 20 20 I. Exchange rate used: 29 CZK for US$ (import statistics reflect current exchange rate in the time of custom process) Comments: Imports cover 24% of the market. The U.S. share of imports amounts to 27%. For 1993 weak competition comes mainly from Canada (16%) and Germany(2.5%). The two main competitors in the larger aircraft market include Boeing and Airbus. The total sales in regular air transportation sector grew 65% in 1993 and amounted to $7.5 million. * If the national airline procures new long range aircraft for its fleet, this estimate could exceed $200 million. Most promising subsectors: -executive/general aviation aircraft -aircraft jet engines for retrofitting -helicopters for emergency response and agricultural services. A. Rank: 13 B. Name of Sector: Process controls/industrial C. Code: PCI 1993 1994-est 1995-est D. Total market size 320.837 340 355 E. Total local production 131.953 136 142 F. Total exports 24.146 34 1184 G. Total imports 198.368 206 214 H. Total imports from U.S. 8.404 12 15 I. Exchange rate used 29 CZK for US$ (import statistics reflect current exchange rate in the time of custom process) Comments: Imports cover 62% of the market size. The U.S. share of imports amounts 4.2% competition comes mainly from Germany(39%), Austria(13%), Great Britain(4%). Imports from U.S. were comprised of instruments etc. for measuring or checking the flow or level of liquid or gas (HS 9026, 42%). A general decline in industrial production meant sales decreased 2% in 1993. Czech companies sought and achieved sales abroad; Czech exports grew 62% in 1993. Upcoming economic recovery should stimulate rapid growth, mainly in privatized industry. Most promising subsectors: -process control in the energy production sector -energy conservation processes for industry. A. Rank: 14 B. Name of Sector: Computers and peripherals C. Code: CPT 1993 1994-est 1995-est D. Total market size 646.538 806 1000 E. Total local production 52.170 55 60 F. Total exports 25.660 32 39 G. Total imports 614.231 781 953 H. Total imports from U.S. 117.265 166 224 I. Exchange rate used 29 CZK for US$ (import statistics reflect current exchange rate in the time of custom process) Comments: Imports cover 95% of the market size. The U.S. share on imports amounts to 19%. Competition comes mainly from Germany(21%), Taiwan(14%), Austria(8%),Great Britain(6%) and Japan(3%). U.S. exports are comprised of automatic data process machines and magnetic readers (HS 8471, 76%), parts for typewriters & other office machines(HS 8473, 13%) and electronic integrated circuits & microassembly and parts (HS 8542, 10%). Local production is achieved mainly through assembling imported components, which are included in local sales as well as in import statistics. The need for new modern computers and upgraded components remains high in new private businesses as well as in government functions. Most promising subsectors: -components -network systems. A. Rank: 15 B. Name of Sector: Financial services C. Code: FNS 1993 1994-est. 1995-est. D.Total market size 8801.345 11180 13400 E.Total local production 7040.300 9280 11100 F.Total exports 7040.300 9280 11100 G.Total imports 1760.045 1900 2300 H.Total imports from U.S. 260 285 345 I.Exchange rate used: 29 CZK for US$ Comments: Market size is comprised of total income of financial institutions (not including insurance companies; including investment funds and investment companies, 13%). The total banks' income was $7.76 billion, of which 72% was interest obtained. In 1993 income grew 35%, profit of financial institutions grew 55%. Total credit (value on 12/31/93) increased 20% and amounted to $24 billion; 26% growth is expected in 1994. Most of the new credit flows to private business sector. In 1993 number of banks increased from 32 to 47, of which 11 is foreign. The banking and financial services are underdeveloped for rapidly growing private business sector. Most promising subsectors: -banking services -finance management services -credit card services -electronic fund transfer system. A. Rank: 16 B. Name of Sector: Travel and tourism services C. Code: TRA 1993 1994-est 1995-est D. Total market size 161.696 190 220 E. Total local production 136.850 165 190 F. Total exports 136.850 165 190 G. Total imports 24.856 25 30 H. Total imports from U.S. 3 4 5 I. Exchange rate used: 29 CZK for US$ Comments: Market size is comprised of accomodation of foreigners sales ($153 million) and travel agency sales ($8 million). Accommodation sales were achieved mainly in Prague (63%). 71.7 million visitors came to the CR in 1993 (not including visitors from Slovakia). Expected growth for 1994 is 23%. Hard currency income from tourism (including income through exchange offices, check payments in stores, hotels and estimation of other hard currency spending) amounted to $1.56 billion. Expected growth for 1994 is 39%. Most promising subsectors: -hotels -travel services. Best prospects for agriculture sector: A. Rank: 1 B: Name of Sector: Soybean Meals PS&D Code: 06 (2304 0000) 1993 1994 1995 D. Total market size 64 64 64 E. Total local production 0 0 0 F. Total exports 2 2 2 G. Total imports 66 66 66 H. Total import from U.S. 12 12 12 I. Exchange rate used: 29 CZK for US$ Production of soybeans in the Czech Republic is minor due to unfavorable climatic conditions in most of the country's territory. Soybean meals are needed as an important part of feed mixtures produced domestically and must be imported. Major U.S. competitors are Argentine and Brazil. A. Rank: 2 B: Name of Sector: Rice PS&D Code: 11 (1006 ....) 1993 1994 1995 D. Total market size 12 12 12 E. Total local production 0 0 0 F. Total exports 2 2 2 G. Total imports 14 14 14 H. Total import from U.S. 12 12 12 I. Exchange rate used: 29 CZK for US$ Rice is not produced domestically because of unfavorable climatic conditions and must be imported. Per capita consumption of rice in the Czech Republic has been growing during the last several years and attract an attention of Czech packing plants. U.S. imports create a major part of total rice import to the Czech Republic, other major suppliers of rice are originated in Asian countries (Vietnam, India and Thailand). A. Rank: 3 B: Name of Sector: Raw Cotton PS&D Code: 04 (5201 ....) 1993 1994 1995 D. Total market size 87 88 89 E. Total local production 0 0 0 F. Total exports 8 8 8 G. Total imports 59 59 59 H. Total import from U.S. 4 4 4 I. Exchange rate used: 29 CZK for US$ Cotton processing plants create an important part of traditional Czech textile industry. Since cotton is not grown in the country, all supplies must be imported. Cotton has been traditionally imported from the countries of former Soviet Union (Uzbekistan and Turkmenistan). Other major competitors for U.S. cotton exporters are Greece, Turkey and Israel. A. Rank: 4 B: Name of Sector: Tobacco and Products PS&D Code: 21 (2401 ....; 2402 ....; 2403 ....) 1993 1994 1995 D. Total market size 210 210 210 E. Total local production 150 150 150 F. Total exports 30 30 30 G. Total imports 90 90 90 H. Total import from U.S. 4 4 4 I. Exchange rate used: 29 CZK for US$ Since the Czech Republic is not a tobacco producing country, tobacco must be imported from other countries. The major tobacco imports come from Brazil, Greece and Turkey, while the most of cigarette imports are originated in U.S.A. The Czech Republic tobacco processing industry is also an example of successful U.S. investment of Philip Morris to the Czech monopoly producer of cigarettes, Tabak Kutna Hora a.s.