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Key take-aways of the CzechInvest panel discussion on “Industry 4.0 and the digitalisation of production”

On 9 October 2019, during the International Engineering Fair (MSV) in Brno, we participated in a panel discussion about Industry 4.0 and the digitalisation of production. This event was organised by CzechInvest as an official part of the Czech Presidency of the Visegrad Group.

The aim of the discussion was to introduce the future direction of investment agencies and planned, or existing forms of support for investment projects.

The speakers from right to left: Patrick Reichl, CEO of CzechInvest, Robert Simoncic, CEO of SARIO – Slovak Investment and Trade Development Agency, Istvan Kolozsvari, Counsellor Economic Affairs with the Hungarian Embassy in the Czech Republic, and Marcin Fabianowicz, Head of Location Advisory at the Polish Investment & Trade Agency. The discussion was moderated by Lukáš Kovanda, main economist of CzechFund (not in the picture).
The speakers from right to left: Patrick Reichl, CEO of CzechInvest, Robert Simoncic, CEO of SARIO – Slovak Investment and Trade Development Agency, Istvan Kolozsvari, Counsellor Economic Affairs with the Hungarian Embassy in the Czech Republic, and Marcin Fabianowicz, Head of Location Advisory at the Polish Investment & Trade Agency. The discussion was moderated by Lukáš Kovanda, main economist of CzechFund (not in the picture).

The panel participants started with a short macro-economic situation of their country.

According to Patrik Reichl, the Czech economy can be summarised with one number: 2.6%. There is 2.6% unemployment, 2.6% GDP growth and 2.6% Inflation. At the same time, Mr. Reichl mentioned that the Czech Republic is still in a transformation state from a centrally led economy to an innovation led economy.

The EUR is not an issue according to Mr. Reichl: "The Czech Republic does not need the EUR at the moment".

Labour Market

Even though labour is no longer cheap, unemployment is at record lows in all four Visegrad countries.
Even though labour is no longer cheap, unemployment is at record lows in all four Visegrad countries.

As cheap labour is no longer a competitive advantage internationally, the key question is how to develop a new model and become competitive again?

The answer is twofold: Education and Innovation.

Attracting and importing foreign workers is not a long-term solution (the Czech trade unions are against attracting Ukrainian workers, for example). The long-term solution is to educate these workers and make sure they stay.

The existing workforce needs to be trained for digitalisation and for a different structure of economy: "E-mobility".

Will subsidies for e-mobility help or hinder?

According to Slovakian Robert Simoncic, nothing will stop new inventions.

Istvan Kolozsvari from Hungary commented that the jump from an on average 14-year-old car to a new, electrical car is big and there is no spare parts market yet. Shouldn't car manufacturers figure out the business model?

Marcin Fabianowicz from Poland added that electrical mobility requires a solid infrastructure. Every 150km a charging station that charges your car in 20 minutes, during a coffee break, is what is needed. This might require support from the government.

In the Czech Republic, a Mobility Innovation Hub has been established to support innovation, which includes supporting innovations based on 5G.  

R&D and Human Resources

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The number of patent applications in the Visegrad countries is small compared to the EU.

According to Patrick Reichl, investors and FDI should be better connected to research and to universities. In addition, the structure of the economy is largely based on Small and Medium-sized Enterprise (SME) for which the process of getting a worldwide patent is just too complex and expensive.

Marcin Fabianowicz added that universities should start thinking outside their own walls and commercialise their own inventions.

How to incentivise universities and companies?

Marcin Fabianowicz from Poland is of the opinion that parties need to help each other. Government should provide subsidies to companies specifically to approach universities.

Istvan Kolozsvari of Hungary added that royalties for new inventions should go to universities more instead of to the investor only.

According to Robert Simoncic of Slovakia it is about connecting companies and universities. Regional platforms to connect SME and universities are a practical solution to make this happen.

Patrick Reichl mentioned that the Czech Republic provides cash grants for creating new jobs in the R&D sector (approx. EUR 8,000 per created job), combined with other incentives.

In CR dual education (schools and companies) is missing especially for technical professions and skills. The Czech Republic (and other countries) had it 30 years ago but it takes a long time to build it back up, perhaps in 10 years. "We have to, because we are The Country For The Future", Patrick Reichl added.

Supporting smart investments

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Robert Simoncic of Slovakia is all for innovation in services. They identify innovative SME and introduce them to large companies. They have connected roughly 100 companies this way, through workshops and internal – trade mission-style - international travels. The diversification of the Slovak economy focuses on aerospace, cosmic research and creative industries.

The Czech Republic has just launched a new investment incentive focused on R&D and high-value added manufacturing. The aim is to try to attract smart investments, also meeting the requirements of the regions. In addition, the Czech Republic operates five programmes to support start-ups and SME to become successful abroad. Talent attraction to support Czech business development is one of its aspects.

Hungary is pushing cities to invest in smart technologies. For example, from 2030 only electric buses will be allowed in cities with a population of more than 25,000 people.

Poland is offering a 15-year tax exemption in special economic zones. There is no longer a need for SME to move to be able to get investment. In addition, investments are no longer just bound to the number of jobs created and capital expenditure. Eco-friendly, meaningful jobs, cooperating with universities are all new criteria that are being considered.

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