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Czechia for Finns – December 2021 1

CZECH REPUBLIC

as Business Environment for Finns

Background information material for Team Finland Prague

P. Kopec, M. Lilja 22 December 2021

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Czechia for Finns – December 2021 2

List of Contents

1 CHARACTERISTICS AND STRUCTURE OF CZECH ECONOMY ... 6

1.1 Characteristics of Czech economy ... 6

1.2 Structure of Czech business sectors ... 7

1.3 International trade ... 9

1.4 Current economic situation ... 10

2 SECTORS UNDER MAJOR DEVELOPMENT IN CZECHIA ... 12

2.1 R&D funding in Czechia ... 12

2.2 Allocation of RRF funds... 13

2.3 Allocation of other EU funding ... 14

3 FINNISH –CZECH BUSINESS RELATIONSHIPS ... 15

3.1 Recent trade development ... 15

3.2 Entering Czech markets ... 16

3.3 Finnish companies in Czechia ... 17

3.4 How to succeed in Czechia ... 18

4 FOCUS BUSINESS SECTORS IN CZECHIA FROM FINNISH VIEWPOINT ... 20

4.1 Opportunities for foreign companies and Finns ... 20

4.2 Smart Cities ... 22

4.2.1 General overview ... 22

4.2.2 Market size and structure ... 22

4.2.3 Market trends ... 23

4.2.4 Key market players ... 24

4.2.5 Trade events ... 24

4.2.6 Associations and clusters ... 25

4.2.7 Web resources ... 25

4.2.8 Opportunities for Finns... 25

4.3 Industry 4.0 ... 26

4.3.1 General overview ... 26

4.3.2 Market size and structure ... 27

4.3.3 Market trends ... 29

4.3.4 Key market players ... 30

4.3.5 Trade events ... 31

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Czechia for Finns – December 2021 3

4.3.6 Associations, institutes and clusters ... 31

4.3.7 Web resources ... 31

4.3.8 Opportunities for Finns... 31

4.4 Healthcare & Life Sciences ... 33

4.4.1 General Overview ... 33

4.4.2 Market size and structure ... 33

4.4.3 Market trends ... 33

4.4.4 Key market players ... 34

4.4.5 Trade events ... 35

4.4.6 Associations and clusters ... 35

4.4.7 Web resources ... 36

4.4.8 Opportunities for Finns... 36

4.5 Energy ... 37

4.5.1 General overview ... 37

4.5.2 Market size and structure, market trends ... 39

4.5.3 Key market players ... 43

4.5.4 Trade events ... 43

4.5.5 Associations and clusters ... 43

4.5.6 Web resources ... 43

4.5.7 Opportunities for Finns... 43

5 BUSINESS RELATED ORGANISATIONS IN CZECHIA ... 45

5.1 Ministries ... 45

5.2 Investment, Promotion, and Commercial Agencies and Organizations ... 45

5.3 Statistics ... 45

5.4 Professional Associations ... 45

5.5 Test and Inspection Institutions ... 46

5.6 Fairs, exhibitions ... 46

APPENDIX 1:BASIC INFORMATION ABOUT CZECHIA ... 47

Map ... 47

Basic data ... 47

Geographical facts ... 48

Population ... 48

Infrastructure... 48

Economic data ... 49

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Czechia for Finns – December 2021 4

Labour force and related costs ... 50

Taxation ... 52

Technical education ... 52

Country ratings ... 53

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Czechia for Finns – December 2021 5

List of Figures

FIGURE 1 CZECHIA: Driving Distances Between Selected Major European Cities and Ports ... 6

FIGURE 2 CZECHIA: Gross Value Added by Industry Sector, 2020 (% Share on All NACE activities) ... 7

FIGURE 3 CZECHIA: Size of Manufacturing Industries, 2019 ... 8

FIGURE 4 CZECHIA: Structure of Imports, 2019... 9

FIGURE 5 CZECHIA: Apparent Labour Productivity, 2019 ('000s of € / person employed) ... 10

FIGURE 6 CZECHIA: Doing Business 2020 – Topic Scores ... 11

FIGURE 7 CZECHIA: R&D Expenditures (in CZK; EUR 1 = CZK 25.5) ... 12

FIGURE 8 CZECHIA: Finland trade with Czechia (in EUR 1000s) ... 15

FIGURE 9 CZECHIA: Finland’s export potential ... 16

FIGURE 10 CZECHIA: Finnish Production Locations ... 17

FIGURE 11 Smart City Strategies in County Towns of the Czech Republic ... 22

FIGURE 12 CZECHIA: EIBIS Digiatalisation Index ... 27

FIGURE 13 CZECHIA: Big Data Analysis, 2020 (% of enterprises) ... 28

FIGURE 14 CZECHIA: Internet of Things and Its Application, 2021 (% of enterprises) ... 28

FIGURE 15 CZECHIA: Selected Companies in Industry 4.0 ... 30

FIGURE 16 CZECHIA: Adoption of Different Digital Technologies (in % of all firms), By Sector ... 32

FIGURE 17 CZECHIA: Foreign Investors and Key Players in Life Sciences ... 35

FIGURE 18 CZECHIA: Changes of Primary Energy Consumption by Source ... 37

FIGURE 19 CZECHIA: Final Energy Consumption by Sector, 2000-2019 ... 38

FIGURE 20 CZECHIA: Energy Consumption in Industry – Breakdow by Subsectors, 2019 ... 38

FIGURE 21 CZECHIA: Electricity Generation by Source, 2000 - 2020 ... 39

FIGURE 22 CZECHIA: Map of the Country with Road Network ... 47

FIGURE 23 CZECHIA: Macroeconomic Indicators ... 49

FIGURE 24 CZECHIA: Unemployment Rate in 2020 ... 50

FIGURE 25 CZECHIA: Average Hourly Wages – International Comparison... 50

FIGURE 26 CZECHIA: Social and Health Insurance Contributions ... 50

FIGURE 27 CZECHIA: Number of Technical Students and Graduates ... 52

FIGURE 28 CZECHIA: Corruption Indices in Selected Countries, 2020 ... 54

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Czechia for Finns – December 2021 6

1 C HARACTERISTICS AND S TRUCTURE OF C ZECH E CONOMY 1.1 Characteristics of Czech economy

When considering Czech Republic as a potential business environment, the Finnish companies need to take the following aspects into consideration:

• The Czech Republic is part of the European Single Market and the Schengen Area, but uses its own currency, the Czech koruna.

• Czechia is an EU and NATO member, located practically inside the German speaking Europe.

• Due to its logistic proximity, Czechia has successfully placed both domestic and foreign owned businesses which benefit from the relatively short distances to the main markets.

FIGURE 1 CZECHIA: Driving Distances Between Selected Major European Cities and Ports

Source: Processed based on Google Map data and Wikipedia picture.

• Since the mid 1800’s, when the Habsburg empire let its weapons to be manufactured there, Czechia has been strong in manufacturing industries and advanced engineering skills.

• Another traditional industry in Czechia is electromechanical and electrical engineering.

• During the last 30 years the German, Korean and Japanese owned car industry has educated the Czech workshops and engineers to absorb the most modern quality management practises. This expertise is well spread from automotive to other manufacturing industries.

• There is a political consensus in the country to support the industrial work and maintain good education in those.

• In parallel, new expertise have been encouraged, especially ICT and nanotechnologies.

• The economy has been growing very fast in the last three decades, only the global economic downturns, including or the Covid pandemic, have slowed the pace of growth.

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Czechia for Finns – December 2021 7

• According to OECD, after contracting sharply in 2020, GDP is projected to grow by 2.5% and 3% in 2021 and 2022, respectively, and 3.9% in 2023.

• Exports and manufacturing activity are expected to have a boost until mid-2022, fuelled by previous supply bottlenecks, and unemployment is expected to continue to fall even further, and the labour market will tighten.

1.2 Structure of Czech business sectors

• The Czech Republic is a more industrialized economy than most EU countries.

FIGURE 2 CZECHIA: Gross Value Added by Industry Sector, 2020 (% Share on All NACE activities) CZECHIA FINLAND

Source: Processed based on Eurostat data

• Contribution of various sectors to an economy is measured by Gross Value Added (GVA), which is conceptually the same aggregate as GDP.

• Czech industry in general accounted for 28.1% of GVA in 2020 (compare it to 37% in Finland).

• By industry we mean not only manufacturing, but also such sectors as mining and quarrying, production and distribution of electricity, gas, steam, and air conditioning as well as water supply and activities related to wastewater, waste, and remediation.

• Manufacturing industry is dominating in Czechia, about 25% of the GVA. Less labour-intensive process industries are not that important than e.g. in Finland.

• Especially the following manufacturing industries:

o motor vehicles (5.2% GVA),

o metal structures and metal products (2.9%) and o machinery and equipment ( 2.1%).

Agriculture, forestry & fishing 2,1%

Manufacturing 24,1%

Other industry (mining, energy, water, waste,...)

4,1%

Construction 5,7%

Wholesale and retail trade, transport,

HORECA 17,5%

ICT 6,6%

Financial and insurance sector 4,1%

Real estate 9,8%

Business services 7,0%

Public services 16,8%

Arts, entertainment and recreation, etc.

2,2%

Agriculture, forestry & fishing 2,8%

Manufacturing 16,7%

Other industry (mining, energy, water, waste,...)

20,3%

Construction 7,5%

Wholesale and retail trade, transport,

HORECA 14,0%

ICT 6,3%

Financial and insurance sector

3,0%

Real estate 13,3%

Business services 9,1%

Public services 20,6%

Arts, entertainment and recreation, etc.

2,9%

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Czechia for Finns – December 2021 8

FIGURE 3 CZECHIA: Size of Manufacturing Industries, 2019

Industry Turnover

(in €M)

No, of persons employed

Number of enterprises Total business economy; except financial & insurance activities 561 841.6 3 789 469 1 058 776

Manufacturing 193 964.7 1 317 420 180 520

Manufacture of motor vehicles, trailers and semi-trailers 52 724.8 181 862 1 098

Manufacture of fabricated metal products 16 219.8 197 304 48 663

Manufacture of machinery and equipment n.e.c. 15 446.9 132 414 4 819

Manufacture of computer, electronic and optical products 14 352.5 43 401 3 256

Manufacture of electrical equipment 13 552.9 110 116 10 781

Manufacture of rubber and plastic products 12 578.8 91 659 3 565

Manufacture of food products 12 442.8 99 587 8 773

Manufacture of chemicals and chemical products 11 382.6 32 399 1 786

Manufacture of basic metals 7 817.4 43 790 1 103

Manufacture of other non-metallic mineral products 6 326.0 57 199 6 011

Manufacture of wood and of products of wood and cork 3 868.7 51 383 27 188

Manufacture of paper and paper products 3 439.0 21 052 1 035

Manufacture of beverages 3 111.1 17 463 2 544

Other manufacturing 2 872.6 42 626 9 894

Manufacture of other transport equipment 2 749.8 23 783 864

Manufacture of textiles 2 138.8 24 278 2 223

Manufacture of basic pharmaceutical products and preparations 2 111.7 11 020 92

Manufacture of furniture 1 760.4 24 613 5 539

Printing and reproduction of recorded media 1 634.4 23 770 9 609

Manufacture of wearing apparel 810.6 26 322 14 294

Manufacture of leather and related products 180.9 4 593 595

Manufacture of tobacco products confidential confidential 7

Manufacture of coke and refined petroleum products confidential confidential 22 Source: Eurostat

• In 2020, construction accounted for 5.7% of GVA, while agriculture, forestry and fishing formed only 2.1% of Czech GVA, which is similar to other advanced economies. In the construction sector figures, one has to keep in mind that the lower salary level de facto means bigger building volume in Czechia than the GVA share indicates.

• The share of construction remains on about the same level since the recession in 2010, but the share of agriculture has dropped significantly since 1993 (in 1993 it was 4.9%).

• The share of services in the Czech economy is low compared to the EU average, since services have an average of more than 70% share in GVA in the E.U. Also here, the salary level difference

hampers the comparison.

• Services in total contributed to the creation of 64.0% of GVA in 2020, and their share of GVA has been growing in recent years.

• By services we mean trade, ICT, financial and insurance activities, real estate, business services, public services, arts, entertainment, and recreation, etc.

• Wholesale and retail trade; repair and maintenance of motor vehicles (11.0% GVA) have the greatest weight in services, followed by real estate activities (9.8%) and public administration and defence and compulsory social security (6.0%).

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Czechia for Finns – December 2021 9

1.3 International trade

• Import of goods and services formed 64.2% of Czech GDP (only 35.8% in Finland).

• Czechia imported goods and services worth €138B in 2020.

• The top imports of Czechia are Broadcasting Equipment, Vehicle Parts, Office Machine Parts, Computers, and Cars.

• And the country is importing mostly from Germany, China, Poland, Slovakia, and Italy.

FIGURE 4 CZECHIA: Structure of Imports, 2019

Source: OEC

• Czechia is very dependent on its exports (some 71 % of the GDP, meaning almost double of that of Finland), and therefore there is a political consensus to prevent major changes the economy, inflation, or salary levels. Also, the currency CZK follows euro with care.

• In 2020, the Czechia exported a total of €153 000 million, making it the number 27 exporter in the world (Finland is 41).

• Czech top exports include Cars, Vehicle Parts, Computers, Broadcasting Equipment and Office Machine Parts.

• And the country’s main export destinations are Germany, Slovakia, Poland, France, and United Kingdom.

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Czechia for Finns – December 2021 10

1.4 Current economic situation

• The living standard in Czechia is pretty good, the PPP based GDP is on the same level as in Italy, or somewhat higher than in Estonia, however the regional differences are quite wide.

• The good living standard of Czechia can be seen in many special and even luxury shops in major towns (gourmet, home appliances, clothing, etc.) and in the activity of the tourism business.

• Czechia’s unemployment rate is lowest in EU (forecast for 2021 is 3.6 %), but this also means that the industries suffer of shortage of qualified workforce.

• Czechia has a better apparent labour productivity, which represents value added per person employed, than Slovakia or other CEE countries.

• The Czech Republic’s apparent labour productivity, by business sectors, is depicted below.

FIGURE 5 CZECHIA: Apparent Labour Productivity, 2019 ('000s of € / person employed)

Czechia Slovakia Finland

Mining and quarrying 38.4 46.3 100.0

Manufacturing 33.4 28.2 83.1

Electricity, gas, steam and air conditioning supply 136.2 136.1 328.8 Water supply; sewerage, waste management and remediation

activities

30.0 25.9 120.4

Construction 21.8 14.6 55.8

Wholesale and retail trade; repair of motor vehicles and motorcycles

28.1 21.5 55.6

Transportation and storage 27.5 26.3 58.8

Accommodation and food service activities 14.2 10.2 32.4

Information and communication 58.6 44.5 100.8

Real estate activities 71.1 39.2 206.2

Professional, scientific and technical activities 27.7 21.1 62.6

Administrative and support service activities 19.5 17.4 37.3

Source: Eurostat. Note: Apparent labour productivity is defined as value added at factor costs divided by the number of persons employed.

• In the World Banks’s Doing Business ranking Czechia has the 41st rank (Finland is 20th) - see: https://www.doingbusiness.org/content/dam/doingBusiness/country/c/czech- republic/CZE.pdf.

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Czechia for Finns – December 2021 11

FIGURE 6 CZECHIA: Doing Business 2020 – Topic Scores

Source: The World Bank

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2 S ECTORS U NDER M AJOR D EVELOPMENT IN C ZECHIA 2.1 R&D funding in Czechia

The Czech state expends some 1 billion EUR on R&D each year through different funding schemes and programmes. In addition, EU funding is channels through Structural Funds and Horizon programme. Total expenditure on research and development in the Czech Republic in 2019 reached 1.94% of GDP, nominally EUR 4.4 bn, which is an increase by almost EUR 350 million year-on-year.

FIGURE 7 CZECHIA: R&D Expenditures (in CZK; EUR 1 = CZK 25.5)

Source: Czech Statistical Office

Business sector invested the total of 2500 million in 2019. National public investment into R&D reached EUR 1480 million. Resources from EU funds reached EUR 300 million. Most of the R&D funds (see Figure 7 ) were allocated on automotive and ICT, but also in manufacturing and electrotechnical industry. The most important ICT companies performing R&D are located mainly in Prague and Brno. These are mostly foreign- controlled businesses.

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Czechia for Finns – December 2021 13

2.2 Allocation of RRF funds

Czechia is set to receive a total of EUR 7 billion under the EU’s COVID recovery RRF mechanism. These funds will finance investments and reforms that are expected to have a deeply transformative effect on Czechia’s economy and society. Like:

• Securing the green transition gets almost a half of the funds. For example:

o large-scale renovation programmes to increase the energy efficiency of residential and public buildings – € 1600 million

o Renewable energy sources for businesses and households - € 480 million

o decarbonisation of transport through major investments in railway infrastructure o recycling infrastructure and support for circular economy solutions and water savings in

businesses - € 141 million

• Supporting the digital transition. For example:

o strengthening digital skills by revamping the digital curricula in education, providing digital equipment and training to schools, financing new university programmes with digital focus – € 585 million

o digital transformation and cyber-security of public administration, the justice system and health care - € 450 million

o supporting digital transformation of businesses, digital innovation hubs and the deployment of very high-capacity networks and 5G networks – € 650 million

• Reinforcing economic and social resilience: For example:

o increasing the resilience of healthcare like new medical facilities and equipment, including in the area of cancer prevention and care, rehabilitation care and cardiovascular

treatments - € 823 million

o improve the business environment through improved access to finance, accelerated licencing procedures and reinforced anti-corruption measures - € 222 million

o increasing access to affordable childcare, reinforced support for disadvantaged children, training for teachers - € 393 million.

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Czechia for Finns – December 2021 14

2.3 Allocation of other EU funding

The EU funding for Czechia in general is not anymore to minimise differences to older EU countries.

According to the Ministry of Regional Development, the prioritised areas in the 2020’s are:

● circular economy,

● energy efficiency and renewables

● clean urban mobility

● expanding strategic communication networks

● education development

● equal healthcare

● digitalisation in all sectors is promoted.

See more: https://dotaceeu.cz/getmedia/ca77dd1e-c85f-40dc-9243-5471cc647386/EU-funds-in-the-Czech- Republic-after-2020_6_2021.pdf.aspx?ext=.pdf

Both the RRF and other EU funding, and also domestic financing, seem to have quite the same type of preferences.

• Due to COVID impact on the Czech economy, also EBRD decided to re-open its funding for a

maximum of 5 years period. The Bank will invest venture capital to support innovative, high-growth local small and medium-sized enterprises that have limited access to finance. For example, it supports energy efficiency investments with dedicated credit lines.

• Meanwhile EIB finances Czechia continuously, in 2020 it supported investment with EUR 1.4 billion.

For example, healthcare, transport, social care, education, culture, and the energy efficiency of public buildings as well as water management, electricity networks. Also, SMEs get EIB financing through four partner financing institutions.

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Czechia for Finns – December 2021 15

3 F INNISH C ZECH B USINESS R ELATIONSHIPS 3.1 Recent trade development

The balance of trade between Finland and Czechia has been remarkably negative to Finland for years.

Czech exports to Finland almost double Czech imports. One of the reasons for this is the active automotive industry which exports Škodas, Toyotas, Hyundais, Peugeots, and Citroëns. In addition, many products manufactured in the Czech Republic are often supplied on a sub-contractor basis to Western European firms, then completed and sent to Finland.

FIGURE 8 CZECHIA: Finland trade with Czechia (in EUR 1000s)

Year Turnover Czech Export Czech Import Balance

2020 1 311 800 872 000 439 800 432 200

2019 1 401 800 940 000 461 800 478 200

2018 1 430 700 972 900 457 800 515 100

2017 1 309 000 905 000 404 000 501 000

Source: Czech Statistical Office; Nordic Chamber

When comparing the trade figures with those of other Nordic countries, Denmark succeeds to sell over two times more than Finland (1090 million euros in 2020). Remarkable is that the same-size Denmark’s exports have systematically increased (almost doubled) after the financial crisis while Finland remains on the same export level as before the financial crisis.

When looking from a macro-economic viewpoint (see Figure 9) , the products with greatest export

potential from Finland to Czechia are Flat-rolled products of stainless steel, hot/cold-rolled, width >=600m, Chemical wood pulp, soda/sulphate (coniferous, (semi-bleached), and Motor vehicles for the transport of persons.

Flat-rolled products of stainless steel, hot/cold-rolled, width >=600m show the largest absolute difference between potential and actual exports in value terms, leaving room to realize additional exports worth €18.9 million.

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Czechia for Finns – December 2021 16

FIGURE 9 CZECHIA: Finland’s export potential

Source: ITC

3.2 Entering Czech markets

When considering the business opportunities in Czechia, and a possible market entry, Finnish companies need to understand that today’s Czechia is definitely an integrated part of the Central European community rather than an offspring of the relatively short-time planned economy era. The business services are at least on the same level as in Finland, and close ties to neighbours are prominent.

• Czechia cannot be considered as a low-cost country anymore; the comparable salary levels are about 47% of that of Finland (average gross wage now is 1500 EUR/month).

• As an example, the purchasing power in Prague is over 20% higher than that in Helsinki. This means a good potential for higher-quality consumer goods and services.

• The good living standard of Czechia can be seen in many special and even luxury shops in major towns (gourmet, home appliances, clothing, etc.) and in the activity of the tourism business

• Czechia’s unemployment rate has been many years lowest in EU (forecast 2021 is 3,6 %) and, albeit regional differences, even the worst region has lower unemployment rate than Finland in average.

An often-heard comment is that in the “high unemployment” areas, the main problem is so called structural unemployment, i.e., the jobless people don’t necessarily qualify for any normal paid work.

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• Czechia still wants to exploit its manufacturing traditions and offers a place for workshops which are looking for reasonably priced but high-quality production. The same applies for sourcing opportunities.

• The downside of the low unemployment is a fact that the industries suffer of shortage of qualified workforce. Even in smaller towns, the typical production bottleneck is the lack of workers.

Therefore, the companies are obliged to strive to enhance the company loyalty.

• The transparency in the CEE countries is often a concern for Finnish businesses. Czechia ranks between Poland and Italy in the Corruption Perceptions Index. Foreign companies dealing with private Czech counterparts seldom face any corruption problems.

3.3 Finnish companies in Czechia

• Compared with other Nordic countries, there are not any huge number of Finnish companies with own production in Czechia. But practically all of them (like Tieto, Kone, YIT, Oras) seem to be happy and successful in their operations.

• Major Finnish origin employers in Czechia are Tieto, VexveArmatury, Kone, Stora-Enso, Metso Minerals, and Huhtamäki, all with hundreds or even thousands of employees in the country. Even service companies, like Lindström and Wolt are important employers.

• In consumer goods, Fazer, Fiskars and Koskenkorva are well-known and appreciated brands.

• Also Czech companies have entered Finland. Škoda Transportation owns a major rail vehicle factory and employs hundreds of people in Kainuu (now called Škoda Transtech Oy). Czechia’s biggest construction company Metrostav has been active in building tunnels in Helsinki area.

FIGURE 10 CZECHIA: Finnish Production Locations

Source: Own processing.

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Czechia for Finns – December 2021 18

3.4 How to succeed in Czechia

• When considering business in Central Europe, one must remember that Czechia is an EU member, located practically inside the German speaking Europe. The habits and mentality are very close to its neighbours, Bavaria and Austria.

• Because Czechia is not a low-cost country and its industries suffer of shortage of qualified workforce, most business opportunities lay in the high-added value and high-quality businesses. In these, the language barriers are neither that high.

• Basically, the Czech workforce is highly skilled and accustomed to industrial work; however, the unemployed persons often need intensive re-training

• Language skills still are a major challenge in Czechia. Younger generation and the ICT and other service sector is already quite fluent in English. But when dealing with traditional

manufacturing companies, one has to have a local partner, especially if management and owner-level contacts are sought. And the important decisions are still made by the top management. The same local language requirement applies also to technical documentation and emailing.

• Many companies use rented workers, and hire some of them on their own payroll step by step

• To establish a business or company in Czechia, is straightforward and fast. In practicalities, any law office can help. More information is on CzechInvest’s web page (see:

https://www.czechinvest.org/getattachment/Unsere-Dienstleistungen/Doing-business-in-the- Czech-Republic/Setting-up-a-business/FS-20-Setting-up-a-business.pdf)

• Concerning banking, there are many professional domestic and international banks on the market

• The taxation system structure of Czechia is quite close to that of Finland: income tax, VAT, corporate tax. Both employers and employees contribute to the social security system. (see more: https://www.czechinvest.org/en/For-Investors/Doing-business-in-the-Czech-

Republic/Taxation-system)

• Concerning investments, there are incentives available, mainly to support the lower-

employment areas or for technology centres, business support services centres, manufacturing industry and manufacturers of special medical products. (See more:

https://www.czechinvest.org/en/Our-services/Investment-Incentives)

• When considering investments in the country, foreigners need to remember that Czechs don’t move after the work, rather contrary. The shortage of manpower is a fact in practically all the regions. Therefore, local head-hunters and employment agencies usually can give a more realistic picture than the national or regional investment promotion agencies.

• Although the Nordic companies in Czechia have a positive reputation of being fair employers, the foreign investors, however, need to keep in mind that a new entrant is usually a “no-name”

for the locals (unless you are IKEA, Volvo, or Nokia)

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Czechia for Finns – December 2021 19

• When investments in buildings are needed, one has to respect the fact that in Czechia the rules are followed “by the book”. In most cases, it takes between one to two years to go from a completely vacant greenfield site to completion of a new facility. The permitting has three stages: EIA, Planning permit, and Building permit. Basically, a quite new legislation allows these to be processed in parallel, but reality may be different. A local civil permitting engineer is recommended in order to minimise document iteration needs.

• One field, where Finns and Czechs have not yet fully found the best of each other, is the R&D.

Finnish companies, in general, are very innovative while Czech engineers are best when they are let to improve, productise, and arrange high-quality manufacturing for existing and new technologies.

• Foreigners need also remember that Czechs are quite proud of their own expertise, usually for a good reason (one example, a leading global cybersecurity company Avast). And at the same time, there often is a general conception that all Czech made is cheaper than those from Nordics. Therefore, the added value has to be clearly analysed and communicated.

• The positive quality image of Nordic products and services is widespread, and it should be better used. Also, all the Nordic countries are considered as reliable counterparts and their technical expertise is highly valued

• The living standard in Czechia is good, the PPP based GDP is on the same level as in Italy.

Especially in in bigger towns of Czechia, this gives a space for higher-priced B2C products like gourmet, home appliances, clothing. Fiskars garden tools is a good example. On the Prague city centre streets, one can easily see that the purchasing power in Prague is over 20% higher than in Helsinki

• Foreign companies dealing with private Czech counterparts seldom face any corruption problems. When dealing with the public sector, allying with a professional local partner will protect any foreigner.

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Czechia for Finns – December 2021 20

4 F OCUS B USINESS S ECTORS IN C ZECHIA FROM F INNISH VIEWPOINT

4.1 Opportunities for foreign companies and Finns

Czechs are also accustomed to buy from and work with foreign companies, so they are quite open for business, albeit the language barriers still exist.

• Automotive, machine building and electrotechnical industries are the dominant ones in Czechia, and they are investing in the production machinery; Finns should rather focus on locally owned SMEs because their purchasing is more often in local hands

• The purchasing power in the capital region is also quite good, and it offers a market for higher quality consumer goods

• Numerous international companies (incl. StoraEnso) have found Czechia as a good basis for shared services; technology for those is a relevant opportunity

Concerning the new business development, Czechia, as most of EU countries, target RRF and other development funds to benefit the country’s own businesses. However, for Finnish companies which want to ally with local partners or bring such expertise which is anyway internationally sourced, we can see opportunities in:

● Increase the energy efficiency of residential and public buildings, especially in such projects which are not straightforward construction or repair activities but will involve a digitalisation and automated control aspect

● In the renewable energy it is recommended to offer technologies where local technology is not offering solutions; for example, exploiting low quality waste-based fuels or multi-fuel technologies

● Also, in circular economy solutions and water savings in businesses, innovative solutions will have their place, although in many cases proven domestic technologies might be sufficient

● Digitalisation of education, if the COVID era expertise leap could be productised in Finland, would be a real opportunity. Finnish education system namely enjoys a very positive reputation and image. The privately-owned schools and vocational schools can be a test base.

● Digital transformation and cyber-security of public administration is on a definitely lower level in Czechia than in Finland. The new government has promised to put a major effort to get one-stop shop solutions for public services. On the other hand, the ICT skills in Czechia are on a comparable level, so the Finnish companies with referenced solutions should actively search for local partners or make focused acquisitions.

● In medical facilities and equipment, some Finnish companies already are active in Czechia and work with local partners or employees. Those opportunities will now be even bigger.

● Digital solutions, especially related to Industry 4.0 (Big data, Industrial internet) is widely discussed issue in Czechia, and European players are already actively promoting themselves. Finnish niche suppliers can have a chance if they make proper local alliances.

According to European Investment Bank (EIB) 2020 Investment Survey, the COVID-19 will likely give rise to further investment needs in digital technologies in Czechia, notably in the areas of service or

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Czechia for Finns – December 2021 21 product portfolio and the supply chain, and manufacturing, service, and infrastructure firms are particularly likely to make more use of digital technologies. Finnish offering is strong in this field.

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Czechia for Finns – December 2021 22

4.2 Smart Cities

4.2.1 General overview

● In the Czech Republic, the Smart Cities concept is elaborated in the recommended document called

“Methodology of the Smart Cities Concept” (see: https://mmr.cz/getmedia/f76636e0-88ad-40f9- 8e27-cbb774ea7caf/metodika_smart_cities.pdf.aspx?ext=.pdf), which is followed by the

“Methodology of Financing Smart City Projects” (see: https://mmr.cz/getmedia/44a88eea-c83e- 4d17-b16a-f503ae173ee9/Metodika-financovani-Smart-City-projektu.pdf.aspx?ext=.pdf.

● Both documents are under the responsibility of the Ministry of Regional Development of the Czech Republic, which is the guarantor of the entire concept.

4.2.2 Market size and structure

• In the Czech Republic, smart governance has been processed by such cities as Brno (open data, computerization, participation, goodwill of the city, functioning metropolitan area), Hradec Kralove (open data, smart services), Ostrava (bureaucracy reduction, corporate governance, open data), Pilsen (effective management, open data, computerization) and Zlín (smart image, open data, public-private partnership, international projects, cooperation with universities), according to Jaňurová & Chaloupková (2018).

• Below is an overview of smart city strategies in county capital towns (points on the scale 0-6 indicate the number of smart areas covered by the strategy of the given city).

FIGURE 11 Smart City Strategies in County Towns of the Czech Republic

Source: JANUROVA M. et al.: Theoretical and Empirical Researches in Urban Management , Vol. 15, No. 2 (May 2020), pp. 5-21

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Czechia for Finns – December 2021 23

• In general, several large cities and even some smaller municipalities have already implemented smart city solutions in the Czech Republic.

• The city of Písek could be described as the first smart city in the Czech Republic, followed by Prague, Brno and other cities and municipalities.

• Prague ranks 78 out of 118 assessed capital cities in the IMD Smart City Rank 2021 (down by 34 ranks as against the previous year).

• Smart City Písek creates a suitable environment for the development of smart concepts and supports investment in innovation in the city and develops cooperation between the city government, academic and commercial partners, and the city's citizens.

• The capital of the Czech Republic, Prague has its smart city concept primarily focused on mobility, energy, information technology and the creative industries.

• Brno, the second largest Czech city, can be considered as the champion in the field of smart city for several reasons – Brno is the winner of ITAPA 2018 AWARD in the category of V4 countries, held the second year of URBIS (Smart city fair) and last but not least is known for practical application of the so-called Quadruple helix model; The concept of the project in Brno mainly concerns a smarter urban transport network, modern water supply, careful waste management or more efficient ways of lighting and heating buildings, and the city also wants to focus on more interactive and

responsive urban governance, the safety of public spaces and meeting the needs of an aging population.

• The city of Pardubice signed up to the Smart City concept in 2016, and their new strategy counts with using new technologies that will improve the functioning of the urban ecosystem.

• Other smart cities in Czechia include, e.g., Jihlava or Hrušovany nad Jevišovkou.

• Žďár nad Sázavou and Nové Město na Moravě also plan to develop technologies and elements of a smart city.

4.2.3 Market trends

• Sustainable mobility, ICT and effective territorial management are the key topics in Czechia, and Finland can help with these, especially with ICT.

o As regards past, successfully-implemented, smart concepts in Czech municipalities, the most frequently mentioned are projects in the field of ICT and effective land management - forming 45% of the total number of already implemented projects - and projects in the field of

sustainable mobility make up 31% of projects.

o Among the currently implemented Smart concept projects, projects for the target area of ICT and effective territory management represent 28% of the total number of currently

implemented projects, while currently solved projects in the field of sustainable mobility reach 44%.

• Smart public transport stops are becoming more popular; yet these are mostly only in testing phase and perhaps Finnish involvement in these projects could see its rise.

o A project of smart public transport stops started in 2015 in Prague and managed to successfully expand to other cities in the Czech Republic.

o In Prague, the project offered the possibility of charging a smartphone, Wi-Fi connection, LCD monitors with timetables and tips on the map for pedestrians and cyclists; The project was

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Czechia for Finns – December 2021 24 supported by the organization For a Better City with a design by Eduard Herrmann and Matěj Coufal; and in 2019, other prototypes were installed, this time by the Olgoj Chorchoj studio.

o A few years later, the first two smart stops were established in Brno on Moravské náměstí in cooperation with the city, the Transport Company and the energy company ČEZ ESCO; the stop includes sockets for charging electrical equipment or an LED screen, which contains all the necessary information about connections, weather, cultural events and includes a flying dust detector; In addition, it has a security feature with a camera system and SOS button; As in Prague, however, it is only a test mode.

o Jihlava implemented a bit simpler stops, where there were 20 markers with a small digital panel that shows current information about connections.

o A similar technology was used by Kladno, which, however, faced significant difficulties and eventually imposed sanctions of CZK 180,000 for technical malfunction.

4.2.4 Key market players

Examples of selected important smart city market players:

Axians redtoo s.r.o. (www.axians.cz) - offers a comprehensive range of ICT solutions & services spanning cybersecurity, smart solutions, professional services, analytics & data, cloud & edge computing, enterprise networking, managed services, and data centre & infrastructure.

Cross Zlín, a.s. (www.cross-traffic.com) – development and production of technological components for road electrical infrastructure, traffic control, meteorological systems, traffic telematics, and other solutions focused on easier parking, faster passage, freeing-up roads and motorways and controlling traffic effectively.

ČEZ ESCO, a.s. (www.cezesco.cz) - is a strategic partner for state administration, local governments and the corporate sector, industrial enterprises, and large companies, which provides

comprehensive solutions to energy needs, including energy optimization and energy supply.

DHI a.s. (www.dhigroup.com) - solutions for real-life challenges in water environments worldwide: e.g., water saving, sharing, improvement or flow management.

Galileo Corporation s.r.o. (www.igalileo.cz) - comprehensive solutions - such as websites, mobile applications, and electronic official boards - for the digitization of local governments, and

comprehensive services for municipalities and cities, schools, contributory organizations, social services, micro-regions and associations and other entities.

RoadTwin s.r.o. (https://roadtwin.com/) - offers an online web application for transport modelling, which creates an opportunity for a city or a region’s government representatives to test various traffic scenarios within seconds without installing and learning how to use desktop traffic modelling software or contacting traffic engineers every time new roadwork appears in the region.

4.2.5 Trade events

• URBIS Smart City Fair, Brno: https://www.bvv.cz/en/urbis/

• Smart City national competition: https://www.soutezchytramesta.cz/

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Czechia for Finns – December 2021 25 4.2.6 Associations and clusters

• Czech Smart City Cluster: https://czechsmartcitycluster.com

• Smart City Innovations Institut z.ú.: https://www.smartcityinstitut.cz/

4.2.7 Web resources

• Smart Cities Methodology – Methodology for the preparation and implementation of the Smart Cities concept at the level of cities, municipalities and regions: https://mmr.cz/getmedia/18a97abe- c17c-4b05-9910-f3eb41660481/Methodology-Smart-Cities_en_FINAL.pdf.aspx?ext=.pdf

• Modernisation Fund – Support of sustainable technology and the Green Deal projects:

https://www.sfzp.cz/en/about-the-modernisation-fund/

• Country for the Future: https://www.countryforfuture.com/en/

• Center of City of the Future: (www.ccflab.com) - a part of Czech Institute of Informatics, Robotics and Cybernetics of the Czech Technical University in Prague.

• 5G implementation in 5 cities: https://www.mmr.cz/cs/microsites/5g/5g-pro-5-mest See also: https://5gobservatory.eu/5g-launches-in-czech-republic/ and

https://cms.law/en/int/expert-guides/cms-expert-guide-to-5g-regulation-and-law/czech-republic

4.2.8 Opportunities for Finns

• Search for smart city strategic plans at the Strategy Database could help the Finnish smart city solution providers to identify smart city related plans of Czech cities and regions.

o The Strategy Database, www.databaze-strategie.cz (in Czech only), is a national register of strategic and conceptual documents, where one can search display national, regional and even local strategic documents, their goals and measures, responsibilities for compliance and indicators of success (hint: smart city in Czech = ”chytré město”).

• Sustainable mobility and effective territorial management dominate among the planned projects, and innovative ICT companies from Finland could offer solutions in these topics, too.

o The dominant target areas for the implementation of the Smart concept in the Czech Republic are sustainable mobility and effective territorial management.

o These two target areas maintain their dominant position even among the planned projects, with approximately one third of the considered Smart concept projects being directed to each of these areas.

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Czechia for Finns – December 2021 26

4.3 Industry 4.0

4.3.1 General overview

The public policy approach to Internet of Things in the Czech Republic is outlined in the National Initiative Industry 4.0., which plans to bring a significant boost to the Czech industry. Thanks to this initiative Czech companies can ask for a subsidy to transform the existing production facilities into modern robotic systems eliminating human assistance.

The Alliance Society 4.0 was formed in 2017 as a continuation of government efforts with the National Initiative. Led by the Czech Republic Digital Agenda Coordinator, it involves several ministers and key government councils. In September 2017, the Czech government the approved the Action Plan for Society 4.0, which is aimed at implementing the transformation of the country. The main pillars of the document include connectivity and mobility, education and the labour market, e-governance, security, industry, entrepreneurship, and competitiveness.

There are several universities and their institutes, which are involved in the Industry 4.0 related research.

Here are some selected examples of current Horizon 2020 projects that are being implemented:

• RICAIP: Research and Innovation Centre on Advanced Industrial Production.

o Duration: 2017-2018 (Phase I.) & 2019-2026 (Phase II.); Czech participation: CIIRC, CTU in Prague (coordinator) and CEITEC Brno University of Technology.

o Establishment of the Research and Innovation Centre on Advanced Industrial Production by leading research organisations from the Czech Republic and Germany.

o The centre will provide the EU’s first distributed, but virtually integrated experimental testbed.

• CloudiFacturing: Cloudification of Production Engineering for Predictive Digital Manufacturing.

o Duration: 2017-2021; Czech participation: VŠB – Technical University of Ostrava.

o Focuses on the usage of ICT for digitalisation of the manufacturing sector in SMEs and creation of a consolidated platform.

• DIH-World-Accelerating deployment and matureness of DIHs for the benefit of Digitisation of European SMEs.

o Duration: 07/2020 – 06/2023.

o The main goal of the DIH-World project is to accelerate the introduction of advanced digital technologies by European manufacturing SMEs.

• AI on-demand platform for regional interoperable Digital Innovation Hubs Network (DIH4AI) o Duration: 01/2021 – 12/2023; Czech participation: CIIRC

o The aim of the DIH4AI project is to extend the European "AI-on-demand platform" with the services of the Centres for Digital Innovation (Digital Innovation Hubs - DIH) focused on artificial intelligence.

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Czechia for Finns – December 2021 27 Within the RICAIP Centre, mentioned above, virtual robotic production lines will be developed for the whole world, and a testbed will be built in Brno and Prague, enabling verification of technologies for industry 4.0. The Centre will offer companies cooperation in the following areas:

• Sensors for data collection

• Vibro-diagnostics,

• Actuators for production lines

• Robotic applications

• Additive technology and machining, including a combination of both (so-called hybrid technology)

4.3.2 Market size and structure

• The Czech Republic is the “most industrialized” EU country, with more than 30 % of the GDP being generated by industrial production (the EU average is around 20%), and Czechia is home to manufacturers of many machine tools, which should be compatible with Industry 4.0 solutions.

Therefore, topics as the digital twins as well as cybersecurity are hot topics, and even SMEs are considering some smart solution.

• According to the European Investment Bank, the Czech Republic is among the frontrunners in digitalisation, and it is the best performing EU country in terms of investments in software and data as well as in organisation and business process improvements.

FIGURE 12 CZECHIA: EIBIS Digiatalisation Index

Source: EIB (2020). Note: The EIBIS Digitalisation Index is a composed index that summarises indicators on firms’ digital technology adoption as well as firms’ assessment of digital infrastructure and investments. It is based on firm level data collected by the European Investment Bank Investment Survey in 2019.

• According to Eurostat, 6% of Czech enterprises are using 3D printing, and 2% are using AI. And below is the use of big data in Czechia compared with Slovakia and Finland.

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Czechia for Finns – December 2021 28

FIGURE 13 CZECHIA: Big Data Analysis, 2020 (% of enterprises)

Czechia Slovakia Finland

Analyse big data from smart devices or sensors 2% 2% 9%

Analyse big data from geolocation of portable devices 5% 3% 8%

Analyse big data generated from social media 3% 3% 10%

Analyse big data from other sources 4% 2% 7%

Analyse big data internally from any data source 9% 5% 19%

Source: Eurostat.

• Use of IoT in general and in manufacturing is the demonstrated in the following table.

FIGURE 14 CZECHIA: Internet of Things and Its Application, 2021 (% of enterprises)

Use of IoT devices for

energy consumption optimisation

premises’

security

production processes

logistics manage- ment

maintenance optimisation

All enterprises, without financial sector 9 26 7 4 12

Manufacturing 14 31 15 5 14

Manufacture of food, beverages, tobacco, textile, leather,

wood, pulp and paper; publishing and printing 10 26 13 5 11

Manufacture of coke, refined petroleum, chemical & basic pharmaceutical products, rubber & plastics, non-metallic mineral products

18 40 21 9 19

Manufacture of coke and refined petroleum products 0 50 25 0 0

Manufacture of chemicals and chemical products 21 42 22 15 36

Manufacture of basic pharmaceutical products and

pharmaceutical preparations 58 60 83 44 62

Manufacture of rubber and plastics products, and other non-

metallic mineral products 16 39 18 7 14

Manufacture of basic metals & fabricated metal products

excluding machines & equipment 11 33 14 4 12

Manufacture of computers, electric & optical products, machinery & equipment, motor vehicles, other transport equip., furniture, other manufacturing, repair & installation

17 31 15 5 16

Manufacture of electrical equipment 25 34 14 3 15

Manufacture of machinery and equipment 19 35 18 5 18

Source: Eurostat. Note: Companies with 10+ employees and self-employed persons. Answers do not add up to 100% as there ware multi select multiple questions. Based on data from the survey among 8,156 Czech enterprises between 11 Jan. 2021 and 03 Sep. 2021.

• According to the Czech Statistical Office 2020 survey the robotic automation is the domain of mainly large companies (60%) in the Czech Republic.

• Around 18% of industrial companies in Czechia use robots, and robots are also used by 9% of small businesses. In the automotive segment, even 55% of entities used industrial robots.

• The survey also showed that more than 40% of companies in the Czech Republic use Internet of Things devices, while IoT is most significantly used by companies in the field of logistics to monitor the movement of goods or the operational status of vehicles.

• The Czech Republic is also home to several top-level research centres that have achieved

outstanding results and won awards in the area of information and communication technologies, such as the Artificial Intelligence Centre, the Czech Institute of Informatics, Robotics and

Cybernetics, IT4Innovations, the Research Centre for Informatics and the National Cybersecurity Centre.

• Nearly 6000 qualified students in ICT study programmes graduate from Czech universities every year.

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Czechia for Finns – December 2021 29

• According to CzechInvest, multiple IoT networks are already being established and ready for use in the country:

o In cooperation with T-Mobile Czech Republic, SimpleCell Networks is operating a nationwide IoT network based on Sigfox technology, which uses UNB (Ultra Narrow Band) technology and runs at a speed of 100 bits/sec. The network already covers more than 95% of Czech population and is ready for utilities, Industry 4.0, medical facilities, intelligent buildings, automotive

industry, consumer electronics, smart cities and other sectors.

o Another network, based on the LoRa technology, is being developed by the company České Radiokomunikace. All larger cities are already covered, while the network is still expanding. It is ready for all kinds of IoT devices and provides two-way communication. LoRa sensors have low energy consumption, are easy to install, use encrypted data, and run on the 868 MHz

frequency.

o Vodafone is the first operator in the Czech Republic and one of the first in Europe to finish building its own nationwide NB-IoT network. Narrow Band Internet of Things is one of the most secure low-power wide area (LPWA) technologies. It uses a licensed frequency and, thanks to the 3GPP standard, it employs standard LTE security mechanisms and also brings a high level of compatibility and synergy with other mobile technologies. NB-IoT technology is connected to the global Vodafone IoT platform and includes a web portal with access to relevant services and technical data.

4.3.3 Market trends

• Even SMEs with small or piece production in Czechia explore possibilities of digitization, and since the Finnish industry 4.0 industry is very advanced and innovative, it has a lot offer to Czech SMEs o According to the 3Q 2021 research of the National Centre of Industry 4.0 with 263 respondents,

a growing number of small and medium-sized enterprises and companies in small-scale or even piece production are beginning to see digitization as a means to improve their overall

functioning.

o The SMEs do not see digitization as something monstrous and expensive, suitable only for mass production, but are wondering in which areas it can benefit them, and in which it is not yet worthwhile.

o The directors of Czech SMEs think that a quarter of production and a third of administrative activities can be digitized.

o An overwhelming majority of directors (62%) plan to do digitization within three to five years.

One third (35%) of companies are more cautious and plan to digitize only partially.

o Companies expect that digitization could increase their labour productivity and a lower dependence on the workforce, which is missing in the Czech market, and that it could also reduce defectiveness.

• Five main trends dominating the Czech Industry 4.0, which the Finnish supplier could take advantage of:

o There are five main trends dominating not only in the Czech Industry 4.0 realm: Zero Defect Production, Explainable AI Solutions for Collaboration in Hybrid Human-Robot Teams,

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Czechia for Finns – December 2021 30 Integration of Machine Learning Methods Using Semantics, 5G Communication on the Factory Floor, and Standardization of Production System Software.

4.3.4 Key market players

Examples of some of the key or interesting players include:

Act-in CZ, s.r.o. (www.act-in.cz) - industrial maintenance and servicing of machines, medium and general repairs, retrofitting and modernization, removal; information systems development and consulting.

APPLIC s.r.o. (www.applic.cz) - comprehensive services in the field of development and production of single-purpose machines, including integration of machine vision systems, ID systems, robots, data collection and their evaluation and communication with superior production management systems.

Atos IT Solutions and Services, s.r.o. (https://atos.cz) – A global leader in digital transformation.

Brainz Immersive s.r.o. (https://immersive.cz) - an award-winning creative studio providing complex VR

& AR services, crafting premium VR & AR experiences for brands and building immersive products.

IQHUBS s.r.o. (www.iqhubs.cz) - IQHUBS has mainly developed and supplies the Machine Guard service, a tool for measuring production efficiency.

PHOENIX CONTACT, s.r.o. (www.phoenixcontact.com) - digitization of products, production techniques and processes.

Wikov Industry a.s. (www.wikov.com) - launched the remote diagnostic tool WiGuard for online monitoring of gearbox condition.

SprayVision s.r.o. (www.sprayvision.com) – spray pattern digitalization connected with AI, IoT and cloud computing, which allows precise control of production in Industry 4.0 standards.

Some other key Industry 4.0 solution providers are presented below.

FIGURE 15 CZECHIA: Selected Companies in Industry 4.0

Source: CzechInvest

And here are some examples of Czech cutting-edge manufacturing technologies:

Prusa Research a.s. (www.prusa3d.com) - is a pathfinder in 3D printing since 2012.

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Czechia for Finns – December 2021 31

Kovosvit Mas Machine Tools a.s. (www.kovosvit.cz) develops, in cooperation with RCMT, a hybrid manufacturing technology, which enables manufacturing with additive technology and welding of various combinations of materials; welding of functional surfaces, parts and details; repairs; creation of full parts with internal channels, shell parts and hollow parts - all in combination with machining.

Wikov Industry a.s. (www.wikov.com/cs/) – launched a remote diagnostic tool WiGuard for online monitoring of gearbox condition.

4.3.5 Trade events

• National Industrial Summit: https://www.ncp40.cz/aktuality/narodni-prumyslovy-summit-2020

• Robots conference: www.konference-roboty.cz

• EIT Manufacturing Summit: www.eitmanufacturing.eu

4.3.6 Associations, institutes and clusters

• National Centre Industry 4.0: www.ncp40.cz

• Industry Cluster 4.0: https://ic40.cz

• Czech Institute of Informatics, Robotics and Cybernetics (CIIRC) at the Czech Technical University in Prague (CTU): www.ciirc.cvut.cz

• Central European Institute of Technology Brno University of Technology (CEITEC BUT):

www.ceitec.eu

• Prg.ai – AI ecosystem for Prague: https://prg.ai/en

4.3.7 Web resources

• Ministry of Industry and Trade of the Czech Republic: www.mpo.cz

• National Centre Industry 4.0: www.ncp40.cz

• National initiative "Industry 4.0": https://www.mpo.cz/en/industry/manufacturing- industry/national-initiative-prumysl-4-0--169083/

4.3.8 Opportunities for Finns

• There is funding available for Czech companies for the introduction of Industry 4.0 solutions, and the Finnish suppliers could partner with local companies and offer comprehensive solutions to the Czech companies eligible for such funding.

o Projects related to Industry 4.0 can be supported by various funds.

o On the national level, those are mainly the programs of the Technology Agency of the Czech Republic and the TRIO programme of the Ministry of Industry and Trade.

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Czechia for Finns – December 2021 32 o The Operational Programme Enterprise and Innovation for Competitiveness is also relevant for

Industry 4.0, as is the EU framework programme Horizon 2020.

• As obvious from the EIBIS research outputs indicated below, IoT implementation in manufacturing sector exceeds the EU level, but there is still a big potential for Big Data and AI, Robotics as well as for 3D printing; and Finnish industry in general is strong especially in big data.

• One has to remember that Czech SMEs appreciate hands-on solutions, even in Industry 4.0

FIGURE 16 CZECHIA: Adoption of Different Digital Technologies (in % of all firms), By Sector

Source: EIBIS wave 2019. Note: IoI = Internet of Things; AI = Artificial Intelligence. Firms are weighted using value added.

• Our research indicates that the following service areas have the highest potential in Czechia, and the Finnish companies have strong competence in these:

o Remote monitoring / machine tracking and intelligent maintenance o Automation in logistics and warehouse management

o Visualization and simulation

o Digital twin, augmented or virtual reality, machine vision o Cyber security

o Human-robot cooperation / collaborative robots (cobots) o Supply chain optimization

o Artificial intelligence.

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Czechia for Finns – December 2021 33

4.4 Healthcare & Life Sciences

4.4.1 General Overview

● The state-subsidized Czech healthcare system consistently ranks among the most accessible, efficient, and affordable in the world.

● In fact, the Czech healthcare is the best in Central and Eastern Europe (CEE), and especially the R&D is significant and greatly exceeds that of other CEE countries.

● According to the 2018 Euro health consumer index, comparing healthcare in Europe, the Czech healthcare is ranked 14th, just behind Portugal and two positions ahead of the United Kingdom.

● The Czech Republic has a universal health care system, which is based on a compulsory insurance model, with fee-for-service care funded by mandatory employment-related insurance plans since 1992. The GP service is typically given by small private doctors’ offices which then charge the patients’ insurances.

● During the Covid-19 pandemic, however, the Economist Intelligence Unit’s Global Liveability Index 2021 saw Czechia take a considerable drop due to a negative evaluation of its public healthcare system.

● The development of the life science sector is supported by effective patent protection, adoption of GMP, GLP and GCP standards, relatively non-restrictive genetic engineering and the government’s support for R&D and knowledge transfer between the science and business communities.

4.4.2 Market size and structure

• According to OECD, health spending reached around €3,363/capita in 2020, which is below the level of Finland’s spending (€4,122/capita), but it is more than e.g., in Spain or Portugal.

• With around 4.1 doctors per 1000 inhabitants, Czechia ranks quite high globally, and so is with 16.1 medical graduates per 100 000 inhabitants.

• As regards the natural science in general, more than 50,000 students are enrolled in these study programs at universities.

• In 2017, the Czech Republic had some 32 080 healthcare facilities of various types.

• When it comes to hospitals, Czechia has a dense network of inpatient facilities, which results in one of the highest hospital bed ratios in the EU (6.6 compared to 5 per 1 000 population in 2017).

• The inpatient sector is diverse, with many specialised inpatient facilities spread across the country;

and the incremental reforms over the last 10 years have aimed to concentrate highly specialised care in designated centres (e.g., stroke and oncological centres).

4.4.3 Market trends

• Increasing demand for more complex and flexible customer service, and the Finish know-how in this field could also be applied in Czechia:

Kuvio

FIGURE 1  CZECHIA: Driving Distances Between Selected Major European Cities and Ports
FIGURE 2  CZECHIA: Gross Value Added by Industry Sector, 2020 (% Share on All NACE activities)                                          CZECHIA                                FINLAND
FIGURE 3  CZECHIA: Size of Manufacturing Industries, 2019
FIGURE 4  CZECHIA: Structure of Imports, 2019
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