COUNTRYFOCUS8“Di er ge jia” for AsianentrepreneursSoon after Asian investors entered Europe through the “<strong>Czech</strong> gateway”, the <strong>Czech</strong>Republic has become their favourite manufacturing and service hub in the middle ofWestern and Eastern European markets. Here they found their second home (di er ge jia).“Having finished my lunch in a Chinese restaurant in Prague, close tomy office, and I still need to pack my things for a trip, not to forget totake enough business cards and to wear a tie – a gift from a Chinesefriend. I pull out my notepad full of notes from yesterday’s Chinese lessonfrom my bag so that it’s not so heavy and finish my cup of Oolong.When I leave the office, I notice a black plastic fashion bag in the corner,which I won in a Chinese restaurant a week ago in a drawing afterhaving lunch. I rush to pick up the Taiwanese investors that have justarrived at Ruzyne airport in Prague. I pass a group of Chinese touristsin the street heading for Prague’s historical centre... I get to the airportin time – I have to wait a bit and finally “my people” appear – insteadof the three confirmed there are four representatives of the Taiwaneseinvestor. I stay cool – I have a large Skoda Superb car....... My friendsget in the car and are curious what make it is, and I proudly pronounce“SKODA”. They seem to be jetlagged but in reality they probably arejust recalling their experiences with Skoda cars in China. We are nowleaving the airport for Rudna u Prahy where we have a reference visit toa private industrial park – home to three Taiwanese operations already.But this is not the final destination of our trip today..... We also attenda reference meeting with managers from Hon Hai Precision Industry inPrague....... After less than two hours’ drive from Prague to the east,during which I have been listening to a lot about <strong>Czech</strong> history fromAsians, we arrive in Brno, the <strong>Czech</strong> Republic’s second city, to have aquick stop at a developer’s park where other Taiwanese entrepreneurskeep a production hall...... Our final destination today is Ostrava, thecapital of the Moravian Silesian region, and headquarters of Asustek- one of the most renowned manufacturers of motherboards in theworld. We check into a hotel and my friends are looking a bit tiredwhen suddenly another group of Asians have come in. It is a group ofTaiwanese businessmen that have arrived from Austria to investigateinvestment opportunities in the Moravian Silesian region, too. I thoughtmy friends would continue upstairs but they have started a typical longbrainstorming session in the lobby, for which my knowledge of Chineselanguage from my last ten lessons is not enough. Fortunately, they arenot competitors and later both companies settle down in the <strong>Czech</strong>Republic.”As former head ofthe Department ofNew Technologiesand Innovations at<strong>Czech</strong>Invest, I assistedan increasingnumber of visits offoreign investors tothe <strong>Czech</strong> Republicduring recent years.It proves the ever risinginterest of foreignentrepreneurs in thiscountry, but not only from the members of the EU – our biggest tradingpartners – but also from a dynamic South East Asia region, especiallyfrom Taiwan and Korea, despite its long geographic distance. Accordingto A.T. Kearney’s study from July 2004, the <strong>Czech</strong> Republic isthe world’s fourth most attractive location for offshoring, behindIndia (1), China (2) and Malaysia (3), and ahead of Singapore (5) andthe Philippines (6), when comparing financial structure, businessenvironment and people skills and availability.From production lines to technology centresThe major Asian investors – from mainland China, Taiwan, Korea andSingapore – entered the European market back in the 1970s and 80swhen they established their manufacturing and later service operationsoften in Germany, the Netherlands and the UK, mainly due to the convenientcustomer base and - in case of Netherlands - due to its competitiveincentive structure for new logistics hubs.During the early 90s when the <strong>Czech</strong> Republic began its economictransformation, the first Asian private entrepreneurs started exploringthe investment opportunities in the country. The main reason was thesignificantly cheaper operating costs compared to their West Europeanlocations and still favourable logistic connections to their customers.Their first intentions were to establish production lines for finalassemblies and sub-assemblies mainly of consumer electronics to ship toWestern markets, but later while expanding they often added a serviceproject, such as a repair or technology centre. Annual inflow of FDIfrom SE Asia to the <strong>Czech</strong> Republic is estimated at around 60million USD. The biggest investors come mostly from Taiwan,Mainland China, Korea and Singapore. <strong>Czech</strong>Invest registers morethan 60 projects in different stages of development from this region.In recent years we have also registered a rising interest of companiesin joint-venture projects, for instance from large semi-private Chineseconglomerates in telecommunications and the shipbuilding industry.Completed investment projectsThe main incentive forAsia Pacific companies investingin Europe is theirincreasing market sharesand their success in buildinga global brand mainlyin electronics and microelectronics.1/5 of theworld’s Top 50 globalelectronics OEMs (OriginalEquipment Manufacturers)are from Koreaand Taiwan. This achievementcan also be seen inthe <strong>Czech</strong> Republic. Thereare so far eleven Taiwanese projects facilitated by <strong>Czech</strong>Invest and atleast another dozen in preparation.Electronic components and consumer electronics manufacturersThe result of the cooperation of LG Electronics from Korea and RoyalPhilips Electronics from the Netherlands was the founding of a jointventureproject: LG.Philips Displays <strong>Czech</strong> in the town of Hranice naMorave. The plant manufactures large TV screen picture tubes. The operationconsists of three manufacturing lines installed during 2001 - 2002and more than 95% of production is intended for export to WesternEU countries.Taiwanese Tatung has recently opened its new plant in Plzen BorskaPole to run two production lines for LCD TV and desktop PC semiassemblyand manufacturing. Tatung has invested some 20 million USDinto new technologies, machinery and equipment. This new Europeancentre will supply Western EU countries but later also Eastern Europeanmarkets including Russia.
9COUNTRYFOCUSIn late 2004, Taiwanese company Mustek acquired an existing facility inMesice north of Prague to start manufacturing DVD recorders and playersfor its customers from Western EU countries.Recently, the multinational Taiwanese brand manufacturer BENQ hasdecided to locate its new European project for LCD TV and monitormanufacturing to Brno. Before start-up BENQ has been meeting itscustomers’ demand through subcontractors in Hungary. Before thedecision, this investor shortlisted the <strong>Czech</strong> Republic and Slovakia. Brnowas chosen due to its unique transportation infrastructure, proximity tomajor markets, reasonable start-up costs and attractive environment forTaiwanese expatriates.Computing technologyThe <strong>Czech</strong> Republic is becoming one of the biggest producers of computersin Europe. Foreign direct investment in this branch significantlycontributed to the fact that nearly 40% of total European computerproduction capacities are estimated to be in the <strong>Czech</strong> Republic.Exports of computers from the <strong>Czech</strong> Republic create more than 50%of the exports of the country’s high-tech production.It is popular among Asian investors to rent an existing facility for initialstart-up. There is a good selection of private developers in the <strong>Czech</strong>Republic so the requirements of those investors are often met. Forinstance, the Taiwanese companies QUANTA COMPUTER andINVENTEC have kept existing production build-on-order capacities innew leased buildings in Prague and Brno since 2003.ASUSTeK COMPUTER opened in May <strong>2005</strong> its new European centrefor computer production and repair in the Ostrava Hrabova industrialzone. The production plant should be opened during this summer andthe centre’s production capacity should reach up to 200 thousandpersonal computers a month. The repair centre project for electronicequipment should be completed by late 2006. The company forecaststhat the repair centre in Ostrava will become a centre concentratingrepair activity of the holding in Europe.An increasing interest from Mainland China and KoreaCHINA STATE SHIPBUILDING CORP. has recently decided toestablish a joint-venture project in Decin Kresice to build river ships forcustomers in Germany and Belgium. The output is estimated to be morethan 50 new ships a year starting in 2006.KINLOON TECHNOLOGY is investing into their manufacturingproject in Litvinov to start production of small motorcycles initially forthe German market during <strong>2005</strong>.Korean multinational companies such as LG and SAMSUNG haveinvested heavily in Central and Eastern Europe in recent years into theirnew manufacturing and service capacities to supply consumer electronics,especially LCD TV and monitors, to all Europe. This trend shouldcontinue when considering their still increasing market shares. LG <strong>Czech</strong>with its headquarters in Prague announced double-digit growth in salesof brown- and white-goods just in Central Europe.New centres of computing technology manufacture were built on order,mostly in the form of greenfield investment projects. FOXCONNand FIC are among the pioneer projects in the early 1990s and soonbecame among the most important manufacturers of computers on orderand the biggest exporters. Not long after their start-up they werefollowed by other industry leaders, such as LITE-ON, TATUNG andASUSTeK.The Hon Hai PrecisionIndustry Groupwith headquartersin Taipei, whichpresents itself underthe business nameFOXCONN, boughtout the existing TES-LA Pardubice facilityand further investedinto a new centre tomanufacture desktopcomputers in Pardubice. A further investment plan is the extension ofits high-tech repair centre to include servers, work stations, desktops,notebooks and pocket computers.The company First International Computer (FIC) from Taiwan completedconstruction of its production base in Rudna u Prahy in 2001.Nowadays the company ranks among the top ten <strong>Czech</strong> exportingcompanies.Shortly after FIC set up its base in Prague, its vendor – the companyLITE-ON chose the <strong>Czech</strong> Republic to locate its production line to manufacturecomputer chassis. In April 2004, the parent company mergedwith SILITEK and LITE-ON TECHNOLOGY and the project in Opavaeven expanded to run production lines for desktop PCs on order.Taiwanese CHICONY is another supplier to computer manufacturers inthe <strong>Czech</strong> Republic. The company is known as a leading world manufacturerand marketer of input devices, especially in computer keyboardsand power supplies.Major Asian investment projects in the <strong>Czech</strong> RepublicCompany Country Sectorof originMARWI Taiwan bicycle pedal manufacturingHUALON Taiwan textilesAIDC Taiwan aviation – AE270 IBIS aircraftFOXCONN Taiwan electronics – computerFIC Taiwan electronics – computerLITE-ONTECHNOLOGY Taiwan electronics – computerCHICONY Taiwan electronics – computerINVENTEC Taiwan electronics – keyboardQUANTA Taiwan electronics – computerASUSTeK Taiwan electronics – computerASUSTeK REPAIR Taiwan electronics – computerFOXCONNREPAIR Taiwan electronics – computerTATUNG Taiwan electronics – LCD TV,computerVIVATEK Taiwan electronics – DVD recorderBENQ Taiwan electronics – LCD TVmonitorCHINA STATESHIPBUILDINGCORP. China river shipsKINLOONTECHNOLOGY China motorcyclesLG.PHILIPS Korea TV picture tubesINFOSYS India BPOFLEXTRONICS Singapore design servicesSYSTEM ACCESS Singapore software developmentAMTEK Singapore precision engineering
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