RESTRICTED
WORLD TRADE G/SCM/Q2/CZE/12
6November 1996
ORGANIZATION(96-4687)
Original: English Committee onSubsidies andCountervailing Measures
SUBSIDIES
Replies oftheCZECH REPUBLIC1to
Questions posed byTURKEY2
Thefollowing communication, dated 30October 1996, hasbeenreceived fromthePermanent
Mission oftheCzech Republic.
_______________
Q1. What isthenature ofthe"discretionary" power given totheExport Guarantee andInsurance
Corporation (EGAP), onpage2,withregard tothedetermination oftheterms ofthesubsidy? Could
theCzech authorities givedetailed information onthisissue?
Answer
Theinterest rateslosses equalization scheme tocompensate fordifferences between theforeign
lendingratesofexportersandtheircostofrefinancingfromthedomesticcommercialbankswasdesigned
tomitigate theextreme costs incurred byexporters andtomaintain theircompetitiveness.
ThebasiceligibilityconditionswereapprovedbytheMinistryofFinance.TheExportGuarantee
andInsurance Corporation (EGAP) wasresponsible fortheadministration ofthescheme. EGAP
examined whether applications wereinconformity withthecriteria foreligibility forofficial support
andmade necessary subsidy calculations. TheBoard ofDirectors ofEGAP (composed ofthe
representatives oftheGovernment) wasauthorized todecide ondisbursement ofthesubsidy, whereby
theChief Executive Officer ofEGAP hadtheauthority todecide onminor amounts onhisdiscretion.
Therequired amount ofinterest subsidy wasalways beentransferred expostsothattherewas
clear evidence oftherealborrowing andlending costofeach applicant. Thebottom limit for
determination ofthelending ratedepended ontherespective OECD Consensus CIRR rate.TheOECD
ratesserved asabasis forcalculation ofthesubsidy eveninthose cases inwhich exporters extended
credits withinterest ratesbelow theapplicable CIRR rates. Asarule,thesubsidies werecalculated
anddisbursed onanannual basis, i.e.based onrealinterest ratesrelated tothefinancing ofanindividual
contract.
1G/SCM/N/3/CZE.
2G/SCM/Q2/CZE/6.
./.G/SCM/Q2/CZE/12
Page2
Q2. Onpage3,recital 5,theGovernment oftheCzech Republic reports towhom andhowthesubsidy
isprovided concerning state guarantees onbank loans. Could theCzech Republic specify the
Government 'sassessment ofthestateguarantees onbankloans asdiscretionary?
Answer
Theprogramme provides stateguarantees fortheborrowing ofenterprises incertain areas of
nationwide impact andimportance -infrastructure, environment improvement andindustry (e.g.
desulphurization ofcoal-fuelled power plants orupgrading ofthetelecommunication network).
Q3. Withregard topage3,recital 7,inwhatrespect isthematurity ofguaranteed credits determined
under theStateLoan Guarantees Programme? Please givedetails ontheduration oftheProgramme.
Answer
Until theendof1994, 12projects werecovered bythestateguarantees onbankloans ofwhich
threewerenewones. Theduration oftheguarantees varied according tothenature ofindividual projects
andwasdependent onthematurity ofguaranteed credits.
Q4. Onpage4,recital 5,regarding theconsiderations intaking decisions forproviding subsidies,
could theCzech delegation clarify whatismeant bythephrase "social importance ofaproject"?
Answer
Intheevaluation ofthe"social importance ofaproject" itisconsidered whether theproject
contributes totheprogress inother branches ofscience andtechnology, whether theresult could be
usedinbasic orapplied research andwhether suchaproject might serve asaninput fortechnological
improvement orcontribute tothesolution ofnationwide problems.
Q5. Under thePromotion ofSmall andMedium-Sized Enterprises Programme Czechomoravian
Guarantee andDevelopment Bank hasdiscretion inrespect oftheterms ofthesubsidy, onpage 8,
recital 5.Could theCzech authorities explain thespecific criteria, ifanyexists, inusing discretion
andclarify thesituation ofthecompanies withforeign origin onthatmatter?
Answer
Theobjective oftheprogramme forsmall andmedium-sized enterprises istosupport theprocess
oftheirestablishment anddevelopment, toconsolidate theireconomic position andtoassist them in
facilitating theiraccess tocredits. Theprogramme iscarried outthrough different types ofassistance
themost important ofwhich aretheprice-supported guarantees andsubsidies tointerest payments.
Theprogramme isintended forSME'shaving theirseatsintheterritory oftheCzech Republic.
There isnodiscrimination amongst theSME'sandnodistinctions between different types ofownership.
TheCzechomoravian Guarantee andDevelopment Bankisentrusted toadminister theprogramme upon
thesupervision oftheMinistry ofEconomy. TheCzechomoravian Guarantee andDevelopment Bank
isentitled todecide onthegranting oftheassistance based onthefulfilment ofconditions andcriteria
ofdifferentsub-programmes,quantityandqualityofotherprojectspresentedandonfinancialpossibilities
oftheprogramme.