“Czech government interested to boost bilateral trade & investment”

India's Ambassador to The Czech Republic Mrs. Narinder Chauhan with Mr. Andrej Babis, Prime Minister of the Czech Republic
India’s Ambassador to The Czech Republic Mrs. Narinder Chauhan with Mr. Andrej Babis, Prime Minister of the Czech Republic

H.E. Mrs. Narinder Chauhan is a seasoned and dynamic diplomat with more than three decades of active service in various key assignments, both in India and abroad. She is presently posted as Ambassador Extraordinary and Plenipotentiary of the Republic of India to The Czech Republic, in which capacity she recently played host to the visit of Hon’ble President of India Shri Ram Nath Kovind to The Czech Republic. The Hon’ble President’s visit to The Czech Republic was also accompanied by a delegation of businessmen wherein some TPCI members accompanied the Hon’ble President to The Czech Republic. Publicity Division of TPCI interviewed this experienced and talented Indian face in The Czech Republic and sought her views on bilateral historical relations between India and The Czech Republic and ways and means to increase the bilateral trade relations between the two countries. Present here are H.E. Mrs. Narinder Chauhan’s views on the highlighted subject:

1. Bilateral Historical Relations : India-Czech Republic

India’s trade and cultural relations with Czech Republic have a long history. In the medieval ages the Kingdom of Bohemia (now a part of Czech Republic) traded with India. There are records stating that precious goods including Indian spices were brought to Czechoslovakia from east through marine and land routes as early as 9th and 10th centuries. During the Austro-Hungarian Empire, the Charles University in Prague, the second oldest university in Central Europe, had many Sanskrit scholars.

India’s relations with the former Czechoslovakia, and with the Czech Republic, have always been warm and friendly. Gurudev Rabindranath Tagore visited Czechoslovakia in 1921 and 1926. A bust of Tagore is installed in an exclusive residential area in Prague named after Tagore. The Indian leader, who visited Czechoslovakia the most times between 1933 and1938 was Netaji Subhash Chandra Bose. He founded the Indo-Czech Association in Prague in 1934 and met Edvard Benes several times as Foreign Minister and President. Pandit Jawaharlal Nehru accompanied by his daughter Indira Gandhi visited Prague in 1938, and subsequently influenced the strong condemnation of the 1938 Munich Pact by the Indian nationalist movement.

Diplomatic relations with Czechoslovakia were established on November 18, 1947. Since then high level visits have been exchanged with Prague, the most recent being the State visit of Rashtrapatiji Shri Ram Nath Kovind in September, 2018 and that of Shri C R Chaudhary, MoS(C&I) in October 2018.

2. Bilateral Trade relations

India’s trade links with Czech Republic, formerly Czechoslovakia, predate our independence. Czechoslovakia established its Consulate in Bombay (October 1920) and in Kolkata (December 1929). The famous Czech shoe company Bata Works had 120 Czechoslovak nationals employed in Batanagar in the 1930s. For almost four decades after India’s independence, Czechoslovakia was one of the leading trading partners of India among the East-European countries. Czech companies established a number of major industrial projects in India in the fields of Energy, metallurgy, machine tools and transportation and had about 60 major projects in India before 1990.

With the formation of the Czech Republic from January 1, 1993, our trade with the country was switched to freely convertible currencies. The change over and the transformation in economic policies and practices both in India and the Czech Republic resulted in initial slowing down of trade and economic activities between the two countries. New mechanisms and diversified interaction thereafter have resulted in revival of bilateral trade to around USD 1.5 Billion in 2017 from just USD 86 million in 1993.

Since 2008, bilateral trade amounted to more than one billion U.S. dollars. In 2013, for the first time in our long history of economic relations, the balance of bilateral trade tilted in India’s favour when Indian exports reached USD 642 million against Czech exports of USD 563 million.

Year India’s Exports to CR India’s Imports from CR Bilateral Trade
2014 USD 692 mi USD 589 mi USD 1281 mi
2015 USD 667 mi USD 541 mi USD 1208 mi
2016 USD 734 mi USD 624 mi USD 1358 mi
2017 USD 797 mi USD 670 mi USD 1467 mi

(Source: Czech Statistical Office)

3. Factors that could lead to further expansion of trade ties?

 We consider CR as a leading economic partner. India’s growth story and Czech technological expertise and manufacturing prowess make the two natural partners.

Significant Complementarities in economies:  India has expertise in fields of IT, Infrastructure, Pharmaceuticals, automobiles and services. Czech companies have expertise in heavy engineering, defence, advanced manufacturing, automotive and energy fields.

Technology building: The Czech Republic has niche technological competencies in industrial machinery and plants, machine tools and engineering, and has extensive research and development in areas like nanotechnology, robotics, cybernetics, and lasers.  We must also take advantage of these opportunities, through technology tie ups in applied science and engineering fields with the institutions of Czech Academy of Sciences and leading universities.

Our Government’s bold reforms that include ‘Make in India’, ‘Skill Development’, ‘One Nation, One Tax’, Simplification of procedures and Removal of obsolete laws, GST should be leveraged that have led to ease of doing business in India

India’s huge consumer based market is a factor that would drive the expansion of trade. The recent visit by Rashtrapatiji to the Czech Republic has further provided a platform for expansion of trade ties since both countries have committed to strengthen the economic partnership between India and EU, both countries have committed to oppose trade protectionism, expressed readiness to work together in favour of a fair, transparent and rule-based multilateral trading system and agreed to enhance awareness of existing business opportunities and build B2B contacts through undertaking business missions, participating in trade fairs and exhibitions (like in Brno Engineering Fair). These measures should form the bed rock for further trade engagement.

 Opening of direct flights, negotiations on which are under way is expected to be a major factor in expansion of trade ties and tourism.

Czech government’s decision to create a special window w.e.f 1st October, 2018 to facilitate the movement of highly qualified Indian professionals will substantially widen the market for trade in services and further technical collaboration. The Czech Government also aims to strengthen the preferential regime on long term study visas through Project Student, to listed Czech Universities.

Czech government’s desire to engage with India in Civil nuclear energy cooperation holds potential growth in trade, investment and technology.

The proposed establishment of “Czech Industrial Cluster (CIC)” in Bengaluru will support new investments in India especially with a focus for creating infrastructure for small and medium enterprises. The CIC will be composed of administrative and production units and should serve as a hub for Czech companies that intend to settle down in India. The CIC may also serve as a base of inter-academic cooperation between both countries. The investment development agencies on both sides viz. Czech invest and Invest India have entered into a MoU to facilitate investment inflow to India and boost cooperation in assisting Czech companies investing to India.

The recent signing of visa waiver agreement between India and Czech Republic for diplomatic passport holders will open doors for greater interaction with senior officials who are policy makers and decision makers.

Czech government’s decision to establish 16 VFS visa centres in India and addition of two Honorary Consulates in Bengaluru and Chennai is expected to accelerate trade ties.

The deliberations during the recently held 11th session of the Joint Commission on Economic Cooperation between India and Czech Republic which covered potential cooperation in the fields of Engineering and Industrial Machinery, Energy including Renewable Energy, Mineral Resources and Mining Industry, Defence Industry, Information Communication Technology (ICT), Pharmaceuticals, Medical Equipment and Chemicals, AYUSH, Infrastructure Development, Agricultural Products, Environmental and Agriculture Technologies, Scientific and Technical cooperation and a commitment on both sides to increase bilateral trade and investment, will be an important factor in further expansion of trade ties.

4. Factors that provide favorable business environment?

Political Stability: The Czech Republic is a parliamentary democracy and formally joined the European Union on May 1, 2004. Since then it has adopted new laws in virtually every area of regulation and its legal system continues to develop in line with European norms. Hence, Czech legislation is in accordance with the regulations of the EU.

Economic Stability: Economic policy is consistent and predictable. An independent Central Bank (the Czech National Bank) has maintained a high degree of currency stability since 1991. The Czech koruna is fully convertible. Czech commercial, accounting and bankruptcy laws are compatible with Western standards.

Well-developed Infrastructure: It is one of the most advanced CEE countries with a well developed infrastructure.  The country boasts of a highly skilled and educated workforce and foreign direct investment has increased each year, especially since the introduction of large-scale investment incentives by the Czech government in 1998.

 R&D edge: The Czech Republic has a solid system of funding and with its access to EU structural funds, the country has even surpassed the EU average of R&D spending, with nearly 2% of GDP.  Investors can benefit not only from targeted R&D-funding programs, but also from tax deduction of R&D-related expenses and from R&D investment incentives. The Czech Republic is home to some of Europe’s oldest and largest technical universities, with strong focus on R&D.

Well-defined Laws, Regulations and Tax structure: Under Czech law, foreign and domestic entities are treated identically in all areas, from protection of property rights to investment incentives. The government does not screen any foreign investment projects with the exception of those in the defence and banking sectors. The Czech Republic is committed to nondiscrimination against foreign investors in privatization sales, with some exceptions. Taxation is administered by district “Financial Offices” which report to “General Financial Directorate.” The decisions of tax authorities may be reviewed by administrative courts. A decision from regional administrative courts may be reviewed by the Supreme Administrative Court. Czech tax authorities do not issue any individual legally binding tax rulings (with minor exceptions). Furthermore, legally binding guidelines are not issued regarding individual bodies of tax law. The General Financial Directorate issues general guidelines interpreting some provisions of tax law. These guidelines should be binding for tax administrators, though not for taxpayers, but are also practically followed by taxpayers. No stamp/registration duties or capital increase/contribution duties currently apply in the Czech Republic. Environmental Taxes (excise duties on some other fuels (coal, gas, electricity) were introduced as of January 1, 2008.

 Ease of business: The Czech Ministry of Industry and Trade has opened offices across the globe including in India (in Mumbai) named Czech Invest, which guide you through the process of setting up business and laws and regulations on doing business with the Czech Republic.  The credit worthiness of Czech Republic have been rated by Standard & Poor’s and Fitch at AA- with stable outlook and by Moody’s at A1 with positive outlook.

Some Major Investment Examples:

The two sides have promising prospects for two-way flows of investment. In this connection, some of the examples that may be noted are those of Tata Group, LEEL Coils Europe, Alok Industries, Infosys, Glenmark Pharmaceuticals etc. in the Czech Republic or Skoda Auto, Home Credit, Skoda Doosan Power, Gearspect, LIKO-S and Bonatrans in India. The support of both governmental and non-governmental institutions can encourage expansion of trade and investment.    Czech Invest, an office of Czech Trade in Mumbai and Invest India a non-profit venture under the DIPP have entered into an MoU and can support the two way investment flows.

Skoda Auto was granted investment approvals in 1999 to establish a wholly-owned subsidiary for a passenger car manufacturing/assembly project in Aurangabad. Skoda thereafter established in India in the year 2001 and was registered under the name of Skoda Auto India. Skoda India has four models on sale in India – Superb, Octavia, Rapid and Fabia. The company currently employs around 1000 people with the direct recruitment of 623 employees. The total turn-over in 2017 is estimated to be around 646 million USD and it has reportedly invested 8.29 million USD in India.

In one of the largest investments in Indian Automotive sector, Volkswagen group announced an investment of One billion euros into the new project INDIA 2.0, which will be supervised by Skoda Auto company. Together, Skoda Auto and Volkswagen will develop new models specifically for the Indian market from plant in Pune, with the first model being a mid-sized SUV to be showcased in 2020. The technological development of these products will be conducted in India. The Skoda project INDIA 2.0 is expected to create 4,000 – 5,000 jobs in Pune and in Aurangabad.

Skoda Power [which had been purchased by a South Korean company Doosan in 2009] had set up a 100% Indian subsidiary Skoda Power Pvt Ltd to bid for Indian power projects.  Over the past years, Skoda Power has supplied equipment to India for a combined capacity of 8000 MW. Doosan Škoda Power had successfully commissioned a 171 MW single-body steam turbine at the coal-fired Gummidipoondi Power Plant near Chennai in India during November 2015.

Bonatrans, a major manufacturer of railway wheel sets in Europe and has about 35% share in European market, has already been supplying wheel sets to Indian Railways. The Czech firm’s products are used in locomotives, coaches and EMU units of Indian Railways. Besides, most of the new rolling stock for Metros uses Bonatrans’ wheels.  In 2013, Bonatrans India Pvt limited was founded. Their plant for the wheel and axle machining and assembly of complete become operational from April 2016.

 Vitkovitce, a major industrial group, involved in heavy engineering, wind turbines, thermal, hydel and nuclear, power station equipment has set up a subsidiary in India, Vitkovitce India Power Pvt. Ltd., with its office in Delhi. It is a Czech engineering group with a strong position in selected segments of machinery production and in the area of supplies of large investment assemblies. It incorporates approximately thirty companies. It is currently a European leader in steel cylinder production. Vitkovice India Power Pvt. Ltd. is a supplier and manufacturer of CNG cylinder, boiler drums, nuclear power plant components, hydraulic turbine component, hydropower plant components.

 Tatra trucks specially suited for off-road civilian and defence applications, are manufactured (since 1998) by Tatra joint venture with an Indian company. BEML is engaged with Tatra Trucks for procurement of vehicle aggregates, components and spare parts. Both sides signed an MoU for a relationship in the nature of strategic alliance at the Business Forum in Prague on 7th September, 2018 to explore the possibility of entering into a collaboration for joint manufacturing of components, aggregates and spare parts of Tatra vehicles, joint designing and development of new products, exports of products jointly manufactured in India to other countries and global customer service support.

5. Commodities for more business and Scope to enhance India’s trade?
The major items of India’s export to Czech Republic presently are Iron and Steel, articles of apparel and clothing accessories, Textile yarn, fabrics, made-up articles, medical and pharmaceutical products, Road Vehicles, electrical machinery, apparatus and appliances, Power-generating machinery and equipment, Miscellaneous manufactured articles, footwear, General industrial machinery and equipment, Organic chemicals.

The major items of India’s imports presently are Roads vehicles (including air-cushion vehicles),  Electrical machinery, apparatus and appliance, Power-generating machinery and equipment, General industrial machinery and equipment, Specialized Machinery, Textile and leather machinery Automatic Data Processing machines and units,  Pumps for liquids, Metalworking machinery.

 The Czech government has expressed interest to boost bilateral trade and investment in several areas like Power Generation, Metallurgy, Engineering, Mining and Chemical Equipment, Machine Tools, Textile and Printing Machinery, Measuring and Controlling Equipment, Defence Products, Health Equipment as well as in Environment Protection (Management and Treatment of Water Resources), Transport Infrastructure, Food Processing, Consumer Goods, Wood Products and Glass.

 We are interested in enhancing export of Products of Iron and Steel; Readymade Cotton Garments and Accessories; Drug Formulations, Biologicals; Electric Machinery and Equipment; Residual Chemical and Allied Products; Auto Components/Parts; IC Engines and Parts; Other Misc. Engineering Items; Manmade Yarn, Fabrics; and Electronics Instruments etc.

The current investment climate in the country includes the target sectors of  Nano-technologies and Advanced Materials, Automotive Industry, Aerospace, Energy and Environment, Life Sciences, High-Tech Mechanical Engineering, ICT, Business Support Services and Green Mobility, Intelligent Transport Systems etc. which may be explored.

There is considerable scope for increasing cooperation in a number of areas in the  engineering sector like Machine Tools, Industrial Automation, Power Engineering, including challenges of smart grids, Metallurgy, Heavy Engineering, Mining Industry (equipment for surface and pit mines) and Geological Survey, Construction and Modernization of Transport Infrastructure (railway, aeronautical, e-mobility), Electrical Equipment , General Engineering Industry, Conformity assessment, certification and testing in the above areas, Electrical Equipment (Boiler, Turbine, Furnace), Measuring and Control Equipment, Renewable Energy Utilization, Smart Grid Technology,  Power Electronics, cooperation in the power sector.

There is a large unutilized potential for cooperation in electronics and software/information technology between the two countries;Environment and agricultural technologies; developing cooperation in medical and laboratory equipment designated for hospitals, health-care facilities and university laboratories; medicine and pharmaceuticals since we are a a world leader in generic medicine and can provide low cost lifesaving drugs; Cooperation in Traditional Medicine for promoting AYUSH based medical tourism by inviting Czech authorities to visit renowned AYUSH Institutes/Hospitals/Wellness Centres, and by inviting the Czech investors to invest in AYUSH Health & Wellness industry since 100% FDI is permitted.

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