Foreign investment activities shifting from industry to technology and services

Although this country has become a favorite with foreign investors seeking to build production plants in Central Europe, experts say this trend is currently undergoing a dramatic change. Instead of car plants and smoke-belching factories, they say, in the near future the Czech Republic will become a haven for foreign companies hoping to expand in the technology and services sectors. In the last six months, investor interest has become increasingly focused on two sectors besides the traditional engineering and manufacturing fields: technology, media and telecoms; and health care/pharmaceuticals, according to research by Deloitte & Touche. Potential investors in these sectors are attracted for the same reasons as industrial investors: a skilled and low-cost labor force, a prime location in the middle of Europe and an improving economy. DHL, one of the world's largest logistics companies, plans to invest 500 million euros (16 billion Kc/$615 million) over five years in a new data center in Prague. The company has already started constructing the building and will launch trial operations in May. The center will employ 400 workers at first, a total that in two years will rise to 1,000. The company decided to move its IT operations from Britain and Switzerland to Prague because of this country's skilled and cheaper work force, as well as the nation's developed infrastructure, said DHL general director Stephen McGuckin. Labor costs in the Czech Republic are only 40 percent of those in Western European countries. U.S. oil giant ExxonMobil will follow DHL's lead and build an administrative center in Prague to service its European operations. The center will open next April with 300 employees. Although the company has not officially announced the move, local recruiters have already started their search for IT specialists and finance staff. DHL and ExxonMobil are not the only companies importing tech services. Indian IT firm Infosys is considering entering the Czech market in 2004. The company is mulling opening a center in Brno through a daughter company. The center would provide Infosys' services to European firms. The potential volume of the investment and the number of jobs it would create have not been made public.