User-friendly neighbor offers one-stop shopping

While foreign investors have turned cautious on Poland's short-term prospects, project management firms in the Czech Republic say it's all they can do to keep up with demand. The high demand in Poland's southern neighbor is partly due to a well-tuned state marketing apparatus that sells investors on the country. The Czech Republic's edge is, at least for now, leaving Poland behind. "Czech is seen as very user-friendly for investors," said Charles Lewis, partner in the Prague office of project management firm EC Harris. "The talk is that the Czech Republic is marketed better than its neighbors, and pan-European investors, although each market is different, say Poland is hardening up." Lewis points to the efforts of CzechInvest, a state agency promoting the country abroad offering a "one-stop shop" for investors; from locating available plots of land, to arranging meetings between local authorities and potential foreign dealmakers. CzechInvest is credited with delivering some $2 billion - an increase of $454 million from 2000 - of the country's estimated $4 billion-$5 billion in foreign direct investment during 2001.

Official 2001 FDI totals for both the Czech Republic and Poland, the largest emerging market in Central Europe, will be released this month. With privatizations largely halted in Poland - accounting for about $4 billion of 2000's $10.6 billion FDI - officials project 2001 numbers in the area of $6.7 billion. Critics of CzechInvest's domestic counterpart, the Polish Agency for Foreign Investment (PAIZ), have said the group is underfunded and relatively ineffective. "I would be surprised if Toyota wasn't courted very hard by (CzechInvest)," said Lewis, referring to the automaker's selection of the Czech Republic over Poland for a E1.5 billion production plant east of Prague. "I don't think investors are coming here just because labor is cheaper than in Western Europe … Czech (labor) is known to be able to adapt well to (industry) shifts," said Vilem Marak, business development manager in the Prague office of Bovis Lend Lease.

Dotting the city center "Fairly buoyant" is how two Prague-based project management firms describe the Czech capital's construction market; the best conditions in years. "I don't think people here have seen as many tower cranes as there are now dotting the city center," said Prague's Lewis. Foreign-backed retail, office and commercial development - a strength of the Polish market in recent years - leads the building frenzy and accounts for much of the square meterage coming online in the next 18 months, Prague watchers said, adding that the growth extends beyond the city's center to its suburbs. As in Poland, costs are hiked due to the Czech currency's relative strength but hardly damaging city development. "It's about a 10% change factored into the contract price but I wouldn't say it has turned people away," said Ian Bayman, project manager at Prague branch of Hanscomb. On the regulatory side, government red tape eats up time and money. Depending on the scale and location of a proposed development, project management companies say obtaining permits takes six months to one year. "It's a laborious stage, with more than 50 different bodies that review the project, and each one returns with comments that have to be addressed," Bayman said. Still, it is hardly a deterrent for well-backed investors, he said. "It was more difficult a few years ago," Lewis said. "If you understand the process and expectations are not too high, then it's perfectly manageable. It takes longer in the historic areas, but moving out into the suburbs, people are more sympathetic to investment coming in."