WORLD TRADE
ORGANIZATIONWT/TPR/M/89/Add.1
29 November 2001
(01-6087)
Trade Policy Review Body
17 and 19 October 2001
TRADE POLICY REVIEW
CZECH REPUBLIC
Minutes of Meeting
Addendum
Chairperson:  H.E. Mr. Pekka Huhtaniemi (Finland)
This document contains the advance written questions and replies provided by the Czech delegation to
these questions and to other questions raised during the meeting.WT/TPR/M/89/Add.1
Page 3
ADVANCE WRITTEN QUESTIONS AND REPLIES PROVIDED BY THE
CZECH DELEGATION TO THESE QUESTIONS AND TO OTHER  QUESTIONS RAISED
DURING THE MEETING
I. ECONOMIC ENVIRONMENT
I.1. Macroeconomic situation
Question (Discussant): It would be very useful  for the members if the Czech delegation could
shed further light on the root-causes of this recession (between 1997-99)?
The recession had its roots in a combination of a number of internal and external factors on
macroeconomic and microeconomic levels. On the domestic front, it has to be noted not always
efficient ownership and management structures, a slowdown in restructuring and privatization (in
particular of large enterprises and state-owned banks) and  imperfections of capital and financial
markets. The Czech currency was  appreciated due to unchanged nominal  exchange rate for a numberof years and inflation differential between the Czech Republic and other market economies. Together
with increasing labour costs  in  manufacturing and agriculture, these factors weakened a competitive
stance of domestic companies, led to stagnation of exports and excessively high imports and brought
about external financial disturbances. Finally, in ternal financial imbalances appeared (budgetary
deficits) and started growing rapidly.
Question (United States): The Secretariat's report notes that the fiscal situation may deteriorate
even further. The reliance on uncertain financing sources (i.e. privatization receipts) in a
weakening global external enviro nment could pose a threat to macroeconomic stability.   In this
regard, the authorities' efforts in the area of public finance transparency are important
measures to address the fiscal situation.  What is the Czech Government doing to improve the
transparency of the fiscal situation?
One of the most important steps to improve the transparency in fiscal policy was the adoption of new
Act No. 218/2000 Coll., on Budgetary Rules which entered into force in January 2001.  The Act
brings several substantial changes in comparison with previous budgetary regulations and recodifies
budgetary rules governing the budget perfomance within the State Administration as well as thecreation of a comprehensive financial control framework. The new regulations are aimed at the
improvement of budgetary discipline at all levels and, at the same time, they are called to ensure the
consolidation of all off-budgetary funds.  The Act also introduces medium-term decision-making
instruments in the public finance system. The new budgetary rules represent a major cornerstone of
future fiscal reforms.
Another significant contribution to the transparency of public finance is the adoption of the Act on
Ceská Konsolidacní Agentura, a specialised agency for the centralised management of non-
performing assets. The newly established Ceská Konsolidacní will manage more effectively the
accumulated bad assets through the combination of all available methods of debt liquidation, e.g.restructuring, judicial proceedings, sales, including internet sales, and write-offs. In doing so, it will be
laying down the groundwork for selling off all debt s in four to five years period ahead. The Agency
was established on 1 September 2001 for a period of ten years (all activities are supposed to be
completed till 2001). The status of the Agency gives the Government better possibility of controlling
it.WT/TPR/M/89/Add.1
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I. 2. Investment regime and incentives
Question (Switzerland): With interest we have taken note of the new foreign investment regime
adopted in May 2000 offering a package of incenti ves to foreign investors. How do you evaluate
so far the impact of the incentive package on  the investment volume? How are your first
experiences with regard to the costs and the be nefits of the incentive package? Do you have
plans for additional measures to promote foreign investment, for example with regard to thefacilitation of temporary entry for key perso nnel and/or the acceleration of administrative
procedures?
The promotion of investment has been increasingly recognised as an important policy objective. An
attractive package of investment incentives, which was approved in May 2000 and is applicable toforeign and domestic investors  alike, testifies to that recognition. The package was adopted to
complement the necessary legal investment conditions entailing predictability and transparency. Its
objective is to boost investment activities, in particular inflow of foreign direct investment,  and thus
to promote structural adjustments, enhance restructuring of the economy and speed up the
privatization.
The Czech experience with regard to the impact of  the package is predominantly positive.  Its benefits
substantially outweigh the costs.  44, vastly foreig n investors have received incentives. Their foreign
direct investments bring capital, that is lacking,  and modern corporate governance. They enhance
access to new technologies and know-how, have positive impact on employment and channel
production into certain sectors or regions.    Investor s companies  generate substantial multiplication
effect for other economic operators and  hereby enhance the performance and competitiveness ofsubcontractor companies.  Last but not least, FDI help to finance the deficit of the current account.
Question (United States): Are the investment incentives available equally in all regions or areas
in the Czech Republic? Or are some investment incentives only to specific regions. If so, what
are these regions?
Generally, investment incentives are available in all regions of the Czech Republic. It contains two
employment-related elements: job-creation grants ranging from CZK 80 thousand to CZK 200
thousand and re-training grants covering up to 35% of training costs per employee.  The purpose of
both categories of grants is to offer investors the maximum benefits in area of relatively highunemployment.
Question (Discussant): It would also be interesting to hear what makes the Czech Republic so
attractive for FDI?
We believe that it is a combination of factors  the most important among which pertain to political and
macroeconomic stability,  appropriate legal framework and favourable business environment.
Investment incentives have proved to be very helpful, not to forget about certain comparative
advantages in the form of lower wages and skilled labour force.
I.3. Privatization, public enterprise restructuring, State aid and competition
Question (United States): The Secretariat's rep ort notes that other reforms, which are crucial
for the success of Czech companies to compete on the European market, include enterprise
restructuring and privatization. What is the Czech Government doing to move forward on
restructuring and privatization?WT/TPR/M/89/Add.1
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The Government is taking a wide range of bold  measures aimed at promoting enterprise restructuring
and privatization. It concentrates its efforts on cultivation of  sound business environment, enhancingstructural changes and entrepreneurship and entailing transparency and predictability.
Privatization is of the cornerstones of this effort. It has been re-launched with a new vigour and with
the objective of reducing the Government involvement in strategic enterprises. The banking sector and
the telecommunications sector belong to those segments in which the concerted effort started bearingfruit. In banking sector, the basic restructuring and privatization have been completed by sell off the
state-owned stare in the remaining large commercial bank  - Komerÿní banka. In telecommunications
sector,  the Government and  the minority foreign owner  have agreed  to sell their shares  in Ceský
Telecom by  offering  the majority stake to  a strategic investor. In September 2001,  the Government
brought to a successful  end the sale of the majority share in Ceské Radiokomunikace toTeleDanmark  and Deutsche Bank.
The restructuring and privatization in the field of energy and  chemical industry is progressing
rapidly. Recently, the  National Property Fund   invite d potential investors to take part in privatization
of  Energy,  Gas  and Petrochemical  companies. A special  intergovernmental  commission hasalready  disclosed a  "short list” of  potential buyers that  have just started due diligence in the
respective companies.
The Government has  also approved   the  restructuralization of  the Czech  steel industry and is in
process of preparing public tender. Restructuring is under way also in manufacturing industry  under
the Government Sectoral  Operational  Program for the years 2001 and 2002. The primary objective
here  is to  restructure and streamline the companies concerned for subsequent privatization.
Question (Discussant): On the ot her hand, a package called "Big Bang" plan, has been proposed
with a view to direct spending to economically depressed regions through construction of
infrastructure as well as housing and the restructuring of state-owned mining and metallurgy
enterprises and heavily indebted industrial firms.  We learned that this plan relies heavily on
privatization receipts as its ultimate funding source. I hope this plan works effectively and
would like to have more information abou t this interesting plan and its progress.
The "Strategy to enhance Economic Growth" of the Czech Republic (sometimes called as "Big Bang"
plan), which is an economic and political document, was discussed by the Government on 2 April2001 and further elaborated on 9 July 2001, when the Government endorsed the Timing, Content and
Funding Schedule for Implementing the Strategy.
The Strategy puts under one umbrella programs and act ions the preparation of which has been going
on in various sectors of the economy, according to the rules and schemes implemented by respectivebodies of state administration. This also goes for the rules for granting a state aid in keeping with Act
No. 59/2000 on public support.
The basic pillar of the Strategy is to enhance the performance of the economy through a series of
measures consisting of the ongoing programs to support investors, like investment incentives and
development of industrial zones, through export promotion, removal of administrative obstacles to
trade and its facilitation and through support for enterprise restructuring and innovation and in
selected industrial sectors. The Strategy builds on links, synergies and multiplication effects that exist
among various policy objectives in areas of development of industry, small and middle-sized
enterprises, in particular in socially and economically handicapped regions, regional development,
support for employment and housing and infrastructure development.WT/TPR/M/89/Add.1
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Due to the fact that the entire Strategy was adopted only in July 2001, it is still premature to evaluate
its impact on the development of the Czech economy.
Question (United States): We note that the last subsidies notification provided by the Czech
Republic was G/SCM/N/25, dated July 7, 1999.  As indicated by the Czech Republic in its TPR
documents, it maintains several subsidy and state aid programs.  Please indicate when an
updated subsidies notification will be provided to the WTO Subsidies Committee which willinclude these subsidy and state aids programs.
Question (United States): Can you please notif y, as appropriate, the following programs which
were noted in the table and which did not seem to be included in your last subsidies notification:
Investment Incentive Package
1. Tax holiday
2. Job-creation subsidy
3. Training and re-training subsidy
4. Property/infrastructure support5. Duty & VAT exemptions
Export Promotion
1. International trade fairs by the Ministry of industry and Trade
2. International trade fairs by Czech Trade
3. Export financing
4. Export promotion and marketing assistance
5. Export subsidies
Small and Medium-Sized Enterprises Programs
1. Guarantee
2. Credit
3. Market
4. Capital5. Mobile shop
6. Co-operation
7. Region
8. Community
9. Preference10. Operation
11. Border
12. Regeneration
13. Special
Agriculture
1. Operation
2. Farmer
3. Processor
4. Sales organization
5. Young farmers6. Exports
7. Support of sale of diesel for farmers
8. Irrigation of arable land
9. Genetic sources
10. Old Kladruby horse breeding
11. Production of potato starch
12. Donation  of milk to primary schools
13. Vineyards, hop gardens and fruit orchardsWT/TPR/M/89/Add.1
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14. Bee keeping
15. Support for dairy cows16. Aid to sheep breeders
17. Growing of flax
18. Maintenance of agricultural land
19. Beef-cattle farming
20. Support for ecological agriculture21. Calcification with the help of limestone powder
22. Crop-production restructuring through afforestation
23. Pest and disease control services
24. Consultation
25. Support to the foundation and activity of producer marketing
organisation
Cinematography
1. Cinematography
Tourism
1. Fund for support of development of tourism in the Czech Republic
Other
1. Corporate tax discounts
2. Real estate tax relief
3. Insurance
4. Regional employment programs
Question (United States): Can you please provide updates to the following programs which were
listed in the table and it appears were notified in your last subsidies notification:
Export Promotion
1. Export credit insurance
State Guarantees
1. State loan guarantee program
Research and Development
1. Research and development grant
Environment
1. Environment support
Mining Industry
1. Mining
Transport
1. Transport
Agriculture
1. Support and guarantee fund for farmers and forestry
Updated notifications under Article 25 of the Agreement on Subsidies and Countervailing Measures
are being finalised  and will reach the Committee on Subsidies very soon. All notifiable subsides
falling within the perimeter of Article 25 will be included. Regarding agricultural-related subsidies, allprogrammes that were in place till 1999, have been duly notified. Notification for the year 2000 is just
about to be forwarded to the Committee on Agriculture.
Question (Discussant):  It could be interestin g to receive comments on positive effects of
competition rules on the Czech economy.
Since the very beginning of its economic transformation, the Czech Republic has been deepening its
awareness of the importance of an efficient competition legal framework. The first Act on theWT/TPR/M/89/Add.1
Page 8
Protection of Economic Competition was adopted in 1991 and a new Office for the Protection of
Economic Competition, as an enforcement authority independent in its decision making, wasestablished.
The strict enforcement of competition rules in the last ten years contributed significantly to the
creation of a functioning market economy based on the fair competition of market players, not
distorted by illegal practices.
The Czech Republic has shared its positive experience regarding the  role of a sound competition
regime through an active participation in the Working Group on Interaction between Trade and
Competition Policies. Based on this positive experience, we have been supporting the inclusion of the
interface between trade and competition on the agenda of a new round of trade negotiations.
Question (United States): The Secretariat’s report notes that although the Czech Republic's
privatization program improved the firms' management and profitability, the needed restructuring
of enterprises has not been forthcoming.  The norm al entry and exit of firms seen in a functioning
market economy was not taking place to the same extent in the Czech Republic.  What is the CzechGovernment doing to  improve privatization and public enterprise restructuring?
I.4. Bankruptcy law and practice, dispute resolution systemQuestion (United States): The Secretariat’s report notes that weaknesses in the dispute
resolution system continue to be a factor impeding the business environment.  What is the Czech
Government doing to strengthen the dispute resolution system?
Question (United States): The Secretariat's repor t notes that while the legal environment is good
on paper, it appears that weaknesses in the dispute resolution system continue to be a problem.
The slow functioning of the overburdened commercial courts and weak enforcement have been
identified as factors hampering the business environment.  What is the Czech Government
doing to improve the commercial courts and improve enforcement?
Question (United States): The Secretariat’s repor t notes that weaknesses in the bankruptcy legal
framework (such as delays in the bankruptcy process) have discouraged banks from
implementing bankruptcy proceedings against many  insolvent enterprises.   What is the Czech
Government doing to improve the bankruptcy process?
Question (Switzerland): Notwithstanding the improvement of the bankruptcy law, the report of
the Secretariat states that the present law suffers from some weaknesses. Do you have plans to
strengthen creditors rights and in particular to speed up the court procedures?
Questions regarding steps to improve the court system have also been asked by the Discussant
and India.
Important changes of the Civil Procedure Code aimed to speed up and simplify the civil judicial
proceedings (including commercial disputes) have been put in place through Act No. 30/2000 Coll.,
which entered into force on 1 January 2001. The Act strengthens the principle of concentration of the
procedure and modifies the institutes which previously allowed  to delay the proceedings. One of the
most striking changes is that the appellate courts  cannot rehear the case as to the facts. The rules
related to the Commercial Register were simplified and clarified. As preliminary statistics show up to
now, the length of the procedure seems to be effectively reduced.WT/TPR/M/89/Add.1
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Additional steps are being taken in the area of training of judges whose skills and professional ability
are necessary to be successful in genuine efforts aimed at improving dispute settlement system in theCzech Republic. Another track, which is followed, has to do with specialization of judges in areas
such as corporate law, bankruptcy law etc. In these days,  the Czech Parliament deals with a
governmental draft of the Courts and Judges Act. The draft contains completely new system of  the
lifelong education of judges to increase  their professional skills.
The judicial reform and especially the reform of judicial education should bring the required
improvements in the dispute resolution system in the Czech Republic.
The above mentioned changes in the Civil Procedure Code have also contributed to  strengthening of
the bankruptcy law.
On 3 October 2001, the Government adopted a draft of the Substantive Aims of an Act on Insolvency
and Procedures for Addressing Insolvency (the Insolvency Act). The concept of the new Act is based
on American and German bankruptcy law as well as  on the principles of bankruptcy law worked out
by the World Bank.
The draft's  aim is  to strengthen  the position of creditors and to simplify and shorten the insolvency
proceedings in many directions. It is worth mentioning that according to the draft:
1) insolvency proceeding will be initiated on the basis of a petition that will be common
to all procedures for addressing a debtor's insolvency;
2) basically, it will be possible to deal with insolvency through a) bankruptcy,
b) reorganization or c) settlement;
3) creditors will have the final word in the process of selection of the administrator;
4) the value that can be recovered by secured (separate) creditors should be 100% of
realized assets;
5) procedural rules related to insolvency proceedings allow for courts to continue
proceedings  without delay and administrative barriers and
6) there will be a “Central Electronic Record” containing information on insolvency
proceedings. It could be permitted to use such Record as a means of communication
between the court and creditors and other parties participating in the insolvency
proceedings.
The position of creditors before the commencement of bankruptcy proceedings has been already
reinforced by the changes which have been in force since 1 January 2001 and the changes adopted this
year.
In the judicial execution procedures, the most important modification consists in the introduction of
liable's party statement of property (under criminal  sanction) and the new method of  execution - a
sale of enterprise. On 1 September 2001, Act No. 120/2001 Coll., on Execution Procedure Code,
entered into force. This Act enab les executing an enforceable decision through a private executor. The
enforcement of the secured claims was reinforced through the establishment of the "Register of
Collaterals" under  Act No. 317/2001 Coll., (entry into force on 1 January 2002). The pledges of the
immovable (which are not registered in the Land Register), of collective assets, of collection of thingsWT/TPR/M/89/Add.1
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and of movable assets, will be inscribed in this register in the case that the pledge will not be
transmitted to a secured creditor or a third person.
I.5. Transparency of the legal framework
Question (United States): The Secretariat's rep ort notes the principle of transparency was
reinforced in 1999 by providing the right of access to administrative documents.  Moreover, the
Czech authorities increasingly use the Internet to publish draft regulations or decrees.  An
electronic gateway, providing a common access to all sources of information, was introduced in
2001.  How is this electronic gateway working?
In terms of improvement of transparency and streamlining administrative procedures, an electronic
gateway - so called Portal of state administration, has been introduced in 2001. The gateway should
serve as an integrated contact point where anyone can obtain necessary information from government
authorities and take advantage of services granted by these authorities as well.
The Portal is divided into the following sections: Central Address, Entrepreneurship and Business,
Employment, Transport, Travel, Housing and Regi onal Development, Family, Science and Education,
Health, Culture, Legislation, Authorities, Regional Information, European Integration.
There are two sections of major importance for detailed information:
(i) Section Entrepreneurship and Business contains detailed list of relevant government
authorities, Register of Small Businesses, Commercial Register, Administrative Register ofEntrepreneurship and Business, File on Bankrupts, Trade Marks, Forms, Economic Chamber
of the CR, Enterprise Support, Business Support, Statistical Data and Analyses, Information
System on Government Procurement and Auctions, Phare in the CR;
(ii) Section Legislation contains list of relevant government authorities, information registers
within the competence of Ministry of Justice, Copyright, Collection of Laws of the CR
(provides with connection to all relevant servers enabling access to regulations), Constitution
of the CR and Constitutional Court of the CR.
The address is www.centralniadresa.cz.
I.6. Multilateral and regional issues: participat ion in the WTO, position with regard to the
4th Ministerial, regional and bilateral trade agreements and negotiations,  particularly
with the EU
Question (the European Union): The European Community shares with the Czech Republic the
need to negotiate a multilateral agreement on transparency in public procurement. Paragraph
71 seems to restrict the scope of this agreement  “depending on types of trade, administrative
levels of management and other factors”. Could the Czech Republic please confirm that they are
in favour of obtaining a broad mandate to negotiate an agreement on transparency in
government procurement?
Yes. The Czech Republic confirms that it has been seeking a broad mandate to negotiate an agreement
on transparency in government procurement.
Question (Korea): As para 17.18 (page 17-18) of the Secretariat’s Report indicates that the
Czech Republic is concerned by a number of measures maintained by importing countries.WT/TPR/M/89/Add.1
Page 11
What is the Czech Republic’s position on the amendment of the Anti-Dumping Agreement in
relation to the upcoming new round?
The Czech Republic recognises that the inclusion of anti-dumping on the agenda of a new round is
very sensitive and we do appreciate all concerns that are at stake. On our part, we stand ready to
negotiate on anti-dumping agreement on condition that the objective will be to clarify and strengthen
the existing rules.
Question (Discussant): The Czech Republic has provisionally closed 19 of 29 negotiating
chapters, and is considered to be among the fr ont-runners toward EU accession. What is the
latest status in this accession process? I understand that the progress report of 2001 is in the
offing.
First of all, the authorities  should like to reiterat e that the Czech Republic continues  to stick to the
objective of completing negotiations on terms of accession to the European Union in the course of
2002. It is her firm belief that accession will be beneficial  to countries directly involved and will also
contribute to strengthening the multilateral trading system.
The negotiations are well under way. They reached a point when 19 chapters  of the acquis
communautaire have been preliminary closed. Six of them were set aside during the Swedish
Presidency in the first half of 2001 – Free movement of services, Corporate law, Free movement of
capital, Social policy and Employment, Environment and Culture and Audiovision. For the second
half of this year (during the Presidency of Be lgium), the authorities remain equally ambitious. We
shall continue to negotiate eight chapters with a view to closing maximum of them. We stand ready topresent our negotiation position as to the chapter regarding "Institutions" in order to be able to start the
negotiations next year during Spanish Presidency.
To illustrate the situation in some of the areas under negotiations, we can mention the chapter on
"Energy", which is in principle ready for closure co ntaining two transitional periods on the Czech side
for strategic stocks of crude oil and on the full liberalization of the gas market. The only remaining
issue to be solved is the attitude of one EU member state concerning the Czech nuclear power plant,
which is now in the pre-launch texting stage. In the field of "Taxes", we are negotiating five
transitional periods, including lower rate of consumer tax for cigarettes and tobacco.  We are in a final
stage of negotiations on a sensitive chapter dealing free movement of persons. Most of theabove-mentioned periods are linked to the specific domestic conditions, with a certain social or
political relevance for Czech citizens and are not likely to have a substantive impact on the cohesion
of the common market.
Question (United States): Do the regulations coordinated with the Slovak Republic regarding
state aid, and agricultural policies, including export subsidies, prices, and domestic support,
differ from regulations that pertain to trade rela tions with the other countries? That is, do the
regulations coordinated with regard to the above mentioned categories create a common
external position for the Czech and Slovak Republics?
The Czech Republic and the Slovak Republic have established mechanisms providing for mutual
exchange of information, consultations and agreed procedures in the categories mentioned in the
question. Both countries also coordinate their participation in international negotiations pertaining to
these issues. However, this cooperation does not necessarily imply common external positions.
Regulations regarding  trade relations between the Czech and Slovak Republics differ in certain areas,
like agricultural polices and export subsidies, from those applied in relations with third countries.WT/TPR/M/89/Add.1
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Question (European Union): With regard to the application of Czech Republic for EU membership
and the effective implementation of the acquis of the EC a PECA agreement (Protocol to theEurope Agreement on Conformity Assessment and Acceptance of Industrial Products) has been
successfully concluded between the parties. The purpose of the PECA agreement is to facilitate the
elimination of technical barriers to trade in resp ect of industrial product s between the EU and the
Czech Republic. Furthermore, it provides for a progressive adoption and implementation by the
Czech Republic of national law equivalent to Community law. The Agreement is not only a verypositive step towards EU membership by the Czech Republic but also towards enhanced market
access by other WTO members. The Agreement was no tified to the WTO on the 1st week of October
this year.
Question (Hong Kong, China): It is noted that Cz ech Republic is negotiating free trade agreements
with the economies having similar agreements with the European Union. Would lice to know if the
coverage of these agreements has to be the same as those concluded by the EU. Is it a prerequisite
for accession to the EU?
I.7. Technical assistance, experiences in the context of transitionQuestion (United States): We therefore would welcome the views of the Czech Republic on how
to best use technical assistance to help developing countries and transitional economies
implement WTO obligations to support structural changes, strengthen their economies, improve
competitiveness and increase living standards.
The Czech Republic appreciates all the work that has been undertaken by the United States to assist
developing countries and transitional economies in their strive for fuller integration into the
multilateral trading system. Technical assistance is not only about compliance with respective
obligations but also about enhancing the ability to take effective advantage of new market openings.
To preserve its credibility, technical assistance should remain available to all who need it, with special
focus on interests and concerns of developing countries and in particular least developed ones.
Technical assistance must be well targeted, have its roots in specific and well identified  needs of
beneficiary countries  and must be a result oriented.
The Czech Republic stands ready to work closely with the United States with a view to  promoting
WTO functions in the area of technical assistance and capacity building.
II. TRADE POLICIES AND MEASURES
II.1. Tariffs : concessions and exemptions, difference between MFN and preferential rates,
elimination of tariff on ITA products
Question (Japan): In the future , EU membership is likely to raise the level of protection in
agriculture, as the current overall MFN tariff on  agricultural goods is high er in the EU than in
the Czech Republic.  What does the Czech Republic think about the effects of EU membershipon its agricultural imports?
Question (United States): The Secretariat's report notes that EU membership is likely to raise
the level of protection in agriculture as the current overall MFN tariff on agricultural goods is
higher in the EU than in the Czech Republic.  What is the Czech Government doing to reduce
this?WT/TPR/M/89/Add.1
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Question (Uruguay): Associ ated with the statement contained in the Report of the Secretariat,
according to which EU membership is most likely to raise the level of protection in agricultureas the current overall MFN tariff on agriculture products is higher in the EU than in the Czech
Republic.
In case of joining the European Union tomorrow, the Czech Republic would be able to respond in
detail the question. However, under present circumstances  it is premature, already at this point intime, to make any reliable judgements about the likely effect of accession of the Czech Republic to the
EU on its total agricultural imports.  There are too many variables that are likely to play a role. Since
most of agricultural imports originate in free-trade partners, it will depend very much on the breadth
of  EU enlargement, i.e. which other countries will be acceding to the EU together with the Czech
Republic. We are just about to change the gear in the ongoing WTO negotiations on agriculture theresults of which will undoubtedly be a crucial factor.
Given the high share of European partners in total imports, we do not expect any major negative
consequences on agricultural trade with third countries. On the contrary, we believe that the accession
will benefit not only the EU and the Czech Republic, but also their partners, in particular due toextension of the Common Agriculture Policy implementation  across an enlarged  EU that will
facilitate trading within Europe.
Question (Japan): During the ongoi ng transitional period to accede  to the EU, the tariff rate on
televisions produced in Japan has dramatical ly increased (i.e. from 2.2 % to 13.2 %). Japan
considers that the Czech Republic has to invoke a procedure under Article 28 of the GATT.
Please provide the Czech Republic's view on this point.
There must be some misunderstanding regarding this issue. The Czech Republic has not increased its
M.F.N.  rates on televisions. On the contrary, the Czech Republic implemented, as a result of the
Uruguay Round,  all required tariff commitments on schedule and reduced its tariffs on televisions
from 16.5 per cent to 13,2 per cent in 2000.We do  not, therefore, see any need for invocation ofArticle 28 of the GATT.
Question (Japan): Concerning import duties, there exists a wide gap between those imposed on
products from EU countries and those from the other countries. In particular, as the import
duties on almost all products imported from the EU have been abolished since January, the riftappears greater. Is the Czech Republic considerin g some measures to reduce such a gap? Please
comment on  the situation.
We beg to disagree with the statement referring to a wide gap between tariffs imposed on the EU and
other countries,  the reasons being a very low average MFN rate and the overall openness of the Czechmarket that make it possible to non-preferential partners to compete and create favourable trading
opportunities for all. Bilateral trade figures bear w itness to the ability of the Japanese companies to
benefit from those promising market opportunities.
As regards tariff cuts of January 2001, it needs to be explained that these reductions had been made in
the context of the Europe Agreement, the aim of which is to create a free trade area. Since the
Agreement is in full compliance with Article XXIV of the GATT 1994, it does not require to  take any
measures to compensate for higher MFN duties applied to third countries.
The above also explains why the Czech Republic has no intention to take any autonomous
liberalization measures. However, it remains committed to contribute, through a new  round of
sufficiently broad-based negotiations and within the parameters of effective reciprocity, to furthertariff reductions on a multilateral level.WT/TPR/M/89/Add.1
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Comment (Korea): The discrimination against products from non-European member states is
affecting third countries in a negative way. In this regard, we request the Czech Republic toreduce the MFN tariff rates soon.
Please refer to the response to the question posed by Japan. In addition, we would like to confirm our
readiness to contribute, through a new  round of sufficiently broad-based negotiations and within the
parameters of effective reciprocity, to further tariff reductions on a multilateral level.
Question (United States): We are pleased that in 1997 the Czech Republic became a participant
to the WTO Declaration on Trade in Information Technology Products (commonly referred to
as the Information Technology Agreement (ITA)).  In this context, it agreed to eliminate tariffs
by 2002 on a range of imported information techno logy products covering 359 (eight-digit) tariff
lines, including  computers, telecommunications equipment, semiconductors, software, and
scientific instruments.  When will the Cz ech Government be eliminating these tariffs?
As committed,  the final bound rates will be introduced as of 1 January 2002.
Question (United States): Under the end-use provision scheme, who decides whether relief
should be granted on the grounds of their interest  for public use?  How is this decided?   Can
you please more fully describe the term "public interest"?
The end use scheme is not implemented in the Czech Republic.
Question (United States): Can you please more fully explain how the benefits provided by
inward processing suspension system differ from benefits provided by the customs-free zone?
Do benefits granted under the inward processing suspension system depend on whether Czech
goods have been incorporated into the product?  Are all products available for benefits under
this program?
There are no differences between benefits concerning goods imported to the inward processing
suspension system and benefits provided by the customs-free zone. Benefits granted under the inward
processing suspension system does not depend on whether Czech goods have been incorporated into
the product. All products are eligible for the purposes of this program.
Question (United States): Under the outward processing scheme do benefits depend on whether
the product, which has been temporarily exported for the purposes of undergoing processing
operations, will be re-exported after processing is complete?
Benefits under outward processing scheme depends on whether the product, which has been
temporarily exported for the purposes of undergoing processing operations, will be re-imported after
processing is complete.
Question (United States): Can you please clarify why exported products and services are
zero-rated for the VAT?  Does this essentially me an that the exported products and services are
exempted from the VAT?
Exported products and services are relieved from the VAT according to the Act No. 588/1992 Coll. on
VAT. The reason for such relief is the fact  th at the foreign importers pay the respective VAT or
similar tax according to regulations of the importing country.WT/TPR/M/89/Add.1
Page 15
II.2. Customs procedures : regulations, valuations, and appeals provisions,
Question (Japan): It seems that a unified interp retation of the customs regulations is lacking
(for example, the judgement of a same case sometimes differs among regional Customs Offices).
In order to avoid such a situation, in the case of Japan, for example, the government will issue a
notification covering the necessary interpretation  of the regulations concerned.  Japan considers
that such a system would also be useful in  the Czech Republic.  Please comment on this.
The Czech Republic follows the same practice. It is the Ministry of Finance - the General Directorate
of Customs, which instructs Customs Directorates and Customs Offices on the relevant interpretation
of customs regulations.
Question (Japan): According to the Report, although the Customs Act contains a right of appeal
against the decision of the Customs Office, there are no provisions whereby a higher
administrative body could address the appeal. Due to the lack of such provisions, one cannot
avoid following the decision by the Customs Office, even if it is considered to be wrong.  Japan
considers that the Czech Republic should take some measures in order to resolve such a
situation.  Please provide the Czech Republic's view on this point.
The right to appeal is guaranteed. The procedure clearly stems from paragraph 6 of  Article 104 of the
Customs Act, according to which a declarant may appeal a decision (of a Customs office) within one
month of the day following the day of its receipt. The declarant submits his appeal through the
Customs office (to a higher body) which may revoke its original decision. If not granted in full or
rejected, the contested decision goes for the final decision to a higher body, which is a Customsdirectorate.
Question (Japan): Japan considers that the Czech Republic should take some measures to
resolve the following situations.  Please comment.
(1) No correction to a customs declaration shall be permitted if requested after the
arrival in the country of the imported goods.
Upon request made by a declarant, the Customs office may amend the data presented in an already
accepted customs declaration before release of the goods. Even in situations, when the goods havebeen released, a declarant may request for the invalidation of the original declaration by a Customs
office. This request is granted if  the goods in question were released into a customs procedure
involving an import duty payment instead of another procedure by mistake and provided that the
request to invalidate the customs declaration is submitted within 3 months of the date of the receipt of
the original customs declaration.
(2) Currently, no established system of pre-consultation exists.
Any person may request the customs authorities for  information on customs regulations applicable in
a particular case.  Information on goods of commer cial nature is provided if properly documented.
On the basis of  a written request, the customs authorities shall issue a decision pertaining to tariff
classification of goods or the origin of goods - so called “Binding information”. Binding tariff
information preserves its validity for a period of six years. Binding origin information is valid for a
period of three years.WT/TPR/M/89/Add.1
Page 16
(3) Much time is necessary to carry out customs procedures.
In order to shorten the length of customs proceedings, the Czech Customs authorities have introduced
the electronic clearance and simplified customs procedures available to authorized declarants (for
further details, please refer to information submitted in the document G/C/W/247 on national
experience in the area of trade facilitation). Some other measures have also been taken, including
simplified access to Customs offices through their location outside  large conglomerations (usually onhighways in proximity of these conglomerations).
(4) The Administration of Taxes Act No. 337/1992 Coll. is sometimes applied to
customs procedures if the description of the provisions in the Customs Act is not
sufficient.  Such a system makes customs procedures opaque and unpredictable.
The Act No. 337/1992 Coll., on administration of taxes and fees applies only in instance when the
Customs authorities decide on pecuniary fulfilment (e.g. collecting of duties, taxes, fees, fines and
storage charges). In relation to other matters, proceedings are governed by the general provisions of
Administrative Procedure Code.
Question (India): We have been told by our concerned authority that he Czech authorities are
levying import duties on the "unit price" of certain textile and garment categories. This acts as a
barrier for Indian export of textiles of th e Czech Republic. We should request the Czech
delegation to let us know the details of the levy of the import duty under the "unit price"
method. Further, we would request the Czech au thorities to review this method of levy of
import duty.
The Czech Republic would like to clarify that this method is based on Article 5 of the Agreement in
Customs Valuation. Customs value of the imported textile and garment categories is determined under
this method only if the previous ones as stipulated by the Agreement cannot be used in a sequential
order of application.
Question (Hong Kong, China): It is mentioned that  although the Customs Act contains the right of
appeal, there are no provisions whereby a higher administrative body could address the appeal
Could the Czech authority clarify the struct ure and operation of the appeal mechanism?
II.3. Import licensing regime
Question (Hong Kong/China): It is mentioned that certain non-automatic licenses are granted
on a first-come-first-served basis. Would like to know the products that are subject to this
arrangement and whether measures have been put in  place to ensure that it will not become a de
facto restriction.
First-come, first-served is one of the methods envisaged by the national legislation to administer
non-automatic licensing  with volume limits. At presen t, this arrangement is not applied to any of a
few products subject to quantitative restrictions.
Question (European Union): Table A III.3 (page 98) contains a surprising statement. Under C it
reads that certain listed products from the EU are subject to non-automatic licensing, with
volume limits, and that the reason is for monitoring purpose. From our point of view, there
appears to be a contradiction. We would be grateful to receive some clarifications.
The contradiction highlighted in the question is a printing error. Apparently, automatic licensing
cannot be administered in such a manner as to have restricting effects.  The Czech Republic does notWT/TPR/M/89/Add.1
Page 17
apply any volume limits on imports of products in question (common metals, iron and steel products
listed under C in table AIII.3) originating in the European Union. These products should, therefore,
have been included in list B  - Export subject to automatic licensing, without volume limits., as they
are subject to a "double-checking" system agreed between the European Union and the Czech
Republic for the monitoring purposes.
Question (Discussant): However, at this point I would like to ask the Czech authorities how they
use non-automatic licence system with volume limits for the monitoring purposes.
We are confident that it is apparent from the answer to the question raised by the European Union that
the Czech Republic does not use non-automatic licensing with volume limits for the monitoring
purposes.
II.4. Contingency measures
Comment (Discussant): However, it is yet to be s een if the Czech Republic will be an active user
of contingency measures.
We would prefer to refrain from speculating on what is going to happen in the future. The Czech
Republic's performance up to now clearly testifies to a sufficient restraint in resorting to contingency
measures and the authorities will spare no effort to promote the country's national trade policy
tradition and objectives based on free, rules-based trade.
II.5. TBTs/SPS : recent legislative changes to harmonize with EU requirements
Question (United States): The United States has raised its concerns with the Protocols to the
Europe Agreement (PECAs) on the Conformity Assessment and Acceptance of Industrial
Products in the TBT Committee (see, e.g., G/TBT/W/152).  Specifically we have raised questions
regarding the inclusive of provisions on rules of origin which will discriminate between likeproducts from non-PECA parties on the basis of their origin.  Could the Czech Republic please
explain the rationale and justification for such discrimination.
We dare to differ with the statement according to which the PECA discriminates against third parties.
The purpose of this Protocol is to facilitate mutual trade through elimination of technical barriers.  Ithas been concluded to implement the Europe Agreement and to enhance the process of harmonization
of the Czech national legislation with the aquis communautaire in this area. We believe that not only
countries concerned but also third countries will benefit from high-quality harmonized technical
regulations and their effective implementation.
Comment (Malaysia): Expressed belief that....“conformity and other testing procedures will no
be more onerous than before. It is noted that SPS measures in the form of import bans may also
be introduced. We hope that any measures ta ken will be based on scientific criteria”.
The process of alignment of  technical regulations with those of the European Union have already
simplified dealings of third parties within the Czech market. We believe that this process will continue
delivering benefits and we do not expect that the Czech Republic's joining the European Union will
result in any new obstacles in the area of technical barriers to trade. On the contrary.
Regarding SPS measures, we confirm that, subject to the right to act with precaution as provided in
the Agreement on Sanitary and Phytosanitary Measures, any import bans will be based on scientific
criteria.WT/TPR/M/89/Add.1
Page 18
II.6. Government procurement: remaining preferences for domestic tenders, participation in 
the WTO plurilateral agreement and in  the negotiations on transparency
Question (Hong Kong/China): Understand that th e contracting authority may stipulate a price
advantage for domestic tenderers of up to 10%. Specifically, we would like to know whether and
how the preferences for domestic tenderers will be treated in the new draft law on public
procurement, which is expected to be in force by January 2002.
The contracting authority may stipulate the afores aid advantage. The stipulation is fully at the
authority's discretion.  So far, this option has been used in about 5 per cent  of all contracts. The draft
law envisages that the price advantage will cease to be applicable either by accession of the Czech
Republic to the European Union or on 31 January 2005, at the latest.
Question (Korea): As para 15 (page 16-17) of the Secretariat’s Report points out, at the time of
the previous review, the Czech Republic had indicated that it was considering the possibility of
joining the Agreement on Government Procuremen t (GPA).  However, this did not materialize.
What are the intentions of the Czech Re public with respect to joining the GPA?
Question (United States): We  are pleased that the Czech Republic intends to accede to the
Government Procurement and the Agreement in Trade in Civil Aircraft. When does the Czech
Government plan to join these plurilateral agreements?
Question (United States):We were pleased that a draft law on public procurement, was
approved by the Government in January 2001. When is it likely to be approved by Parliament?
Question (Norway): Norway notes with satisfacti on that the Czech Republic became an observer
to the WTO Agreement on Government Procurem ent in August 2000. We particularly welcome
the new draft law on public procurement which was approved by the Czech Government in
January this year and is now submitted to Parliament and expected to be enforced as of 1January 2002. Can the representative of the Czech Republic give an update on Parliament
consideration of this draft law? And further,  when the new law is enforced, does the Czech
Government have the intention of becoming a signatory to the WTO Agreement on Government
Procurement? If so, could you indicate the timing of such a move, which from Norway
perspective would be very welcome?
The Czech Republic has initiated the process of becoming closer to the Agreement on Government
Procurement by requesting for an observer status in the Committee on Government Procurement.  An
ultimate objective is to join the GPA by the time of accession of the Czech Republic to the European
Union, at the latest. The same goes for the Agreement on Trade in Civil Aircraft.
Regarding the new draft law, its passage has been influenced by new administrative rules, giving  the
right to district officers to become affiliated with the process and to comment on the draft. Since a
deadline for their comments is bound to expire these days, there is a fair chance for the Parliament to
read the draft without any delay during the next session.
II.7. Export policy and export assistance measures
Question (United States): Is it expected that  the new export policy adopted by the Czech
Republic will affect future outlays by the Czech Republic for products for export (including
export promotion, export subsidies, export insurance guarantees etc...)?WT/TPR/M/89/Add.1
Page 19
Additional outlays, if any, will not go beyond what is provided by other comparable economies and
will be in strict compliance with the established practice and commitments of the Czech Republic. Themajor objective of the new export policy is to improve cooperation of institutions involved in this
area, ensure their concerted action, and more effective use of available financial resources.
Question (United States): How is it determined on what terms export credit financing will be
granted?   If export insurance from the EGAP is not obtained, are there circumstances under
which export credits from the Czech Export Bank will still be offered?
II.8. Customs free zones,Question (United States): Can you please identify  the nine custom free zones?  What are the
eligibility requirements to locate facilities in a custom free zone?  What incentives are
specifically offered in each of the custom free zones?
List of free Customs zones and free Customs warehouses:
1. Free zone Ostrava, Vítkovická 1, 701 93, Moravská Ostrava,
2. Senzo Cheb, Svobody 25, 35O 01 Cheb,
3. Graddo Zlín, P.O.BOX 231, 760 01 Zlín,
4. Free zone Pardubice, Perštýnské nám. 1, 530 21 Pardubice,
5. T řinecké železárny, 739 70 T řinec,
6. Čs. management Praha, K šancím 50, 163 00 Praha 6, as a manager of the free customs 
zone, in the area of the city Vyso čany-Bor u Tachova,
7. Merka Spedition, Skladištní oblast 857, 500 03 Hradec Králové,
8. EXCES spol. s r.o., Tiska řská 563/6, 100 00 Praha 10,
9. SPEDQUIC spol. s r.o., Lukášova 7, 130 00 Pr aha 3, - Free customs warehouse in Františkov
nad Ploučnicí.
Eligibility requirements to locate facilities in a customs free zone were:
a) type of industrial, commercial or service activity,
b) Customs free zone or Customs free warehouse,
c) level of employment in the region,d) transport and other infrastructure,
e) available area.
Industrial, commercial or service activities can be performed in a free Customs zone or in a free
Customs warehouse only  in compliance with conditions stipulated by the Customs Act and otherlaws. After establishing of any free Customs zone or warehouse, the local Customs office shall be
notified of the performance of such activities. According to relevant provisions of the Customs Act on
sensitive information, information about activities in each of 9 above mentioned free Customs zones
or warehouses can be published only by these free zones or by Customs authorities after a prior
consent of a manager of these Customs free zones or warehouses.
II.9. Intellectual property rights: International rules, enforcement
Question (European Union): The report states that the IPO can grant a compulsory licence for a
patent if the owner of the patent does not “work” the patent sufficiently or when an important
public interest is endangered. Could the Czech Government please explain what is understood
under the “non-working” of a patent?WT/TPR/M/89/Add.1
Page 20
No compulsory licence has been granted so far in the Czech Republic . Conditions for granting a
compulsory licence, as set for in Patent Law No. 527/1990 Coll., as amended by Law No. 116/2000Coll., are in full compliance with Article 31 of the TRIPS Agreement.
According to this legislation non-working of a patent, where subject matter is a product, may not
occur when the patentee makes, offers, puts on the market, uses the patented product, or imports or
stocks the product for these purposes, or disposes with it by another manner. In case of a patent, wherea subject matter is a process, non-working of patent may not occur when the patentee uses or offers
the use of the patented process. The patentee can also conclude a licensing contract.
A final decision of the Industrial Property Office to grant a compulsory licence can be reviewed by a
court.
Question (European Union): Could the Czech Republic please explain how it has implemented
its obligation under Article 39.3 of the TRIPs Agreement to protect against unfair commercial
use and disclosure of data required as a condition of approving the marketing of pharmaceutical
or of agricultural chemical products which utilize new chemical entities.
The protection of undisclosed information which is required as a condition of approving the marketing
of pharmaceuticals and agricultural chemical products, is provided for in Law on medicines No.
79/1997 Coll. (Pharmaceuticals) and by Law on plant medical care No. 147/1996 Coll. (Agricultural
Chemical Products). Provisions of Law No. 513/1991 Coll., (Commercial Code) relating trade secrets
are also relevant.
Data submitted in the framework of the registration procedure of medicament must not be disclosed to
other people without an authorization of an applicant for registration. In the registration procedure of
another medicament, these data may be used only when the applicant for registration submits written
authorization of the holder of the registration decision with the use of these data, specifying the scope
and limitations, if any, for their disposal, or at least six years have expired since the issue of theregistration decision.
Data regarding effective substance of product and product submitted by the applicant for the
registration, can not be disclosed without the consent of the applicant. It must not be used in the
registration procedure in favour another applicant, when at least ten years have not expired since theissue of decision registration of product containing the same active substance, or the applicant for
registration does not submit a written authorisation of the holder with the use of these data, specifying
the scope and giving all limitations, if any, for their disposal.
Question (Japan): The Report states that  the Member States of the European Patent
Organization have invited the Czech Republic to accede to the European Patent Convention,
with the earliest date of accession of 1 July 2002.  Please indicate the current situation and the
perspective for such accession.
The Czech Republic has an observer status in the Administrative Council of the European Patent
Organization. In May 2001, the Government approved the proposal on the accession of the Czech
Republic to the European Patent Convention with effect as of 1 July 2002. This proposal was
submitted to the Parliament for an approval.
Question (Japan): When comparing the figure s of 1999 and 2000, we note that while the number
of apprehensions by the Czech Trade Inspection , as well as the number of cases of goods
infringing copyright and trade marks prosecuted by the Directorate General of Customs, hasWT/TPR/M/89/Add.1
Page 21
increased, the number of appreh ensions by the Czech police has declined.  Please explain the
reason for this.
This can be explained by a new legal framework, established in 1999 and 2000, which provides for
increased possibilities to act against infringement of IPR's under the civil and administrative
procedures. As a result of it, more cases have been apprehended by Customs and Czech Trade
Inspection authorities, which closely cooperate with the Police of the Czech Republic. Overall, thenumber of cases testifies to the positive trend in enforcement of IPR's in the Czech Republic.
Question (United States): The Secretariat's repor t notes that while the authorities have brought
laws for the protection of intellectual proper ty towards international standards, enforcement
appears to have lagged. A newly enacted law provides for tough criminal sanctions forinfringement, but the Czech courts have not yet im posed such sanctions in practice.  What is the
Czech Government doing to encourage the Czech courts to impose tough sanctions?
Statistics prove that the provisions of the Czech laws are operational and that sanctions for
infringement of IPR s are imposed and the amount of condemned persons for breaching of intellectualand industrial property rights doubled for the period of 1996 – 2000.
To encourage the Czech courts to impose tough criminal sanctions for infringement of IPR's laws, the
authorities organize various seminars, workshops and training courses focused on enhancing
awareness of various aspects of protection and enforcement of IPR's. Specialised seminars are
organized, quite often in co-operation with the EU and the US institutions, for judges and prosecutors.
The judicial practice has been unified through legal opinions and decisions published in the Collection
of judicial decisions and opinions issued by the Supreme Court.
III.  SECTORAL POLICIES AND MEASURES
III.1. Agriculture : relatively high tariff protection, domestic support, export subsidies, other 
trade restrictions,
Question (United States): To what degree a nd in what manner are potato starch export
subsidies provided?  Can you please include this export subsidy program in your updated
subsidies notification?
Potato starch export subsidies have been provided  in accordance with and within the limits of the
Czech Republic s Uruguay Round Schedule. All relevant data have been notified to the Committee on
Agriculture.
III.2. Financial services : recent bank reforms, pr ivatization and degree of competition in the 
sector, foreign participation, insurance services
Question (United States): The Secretariat’s report notes that the banking sector suffers from
major weaknesses in the areas of asset quality (high share of classified credits) and profitability.
Sources of weaknesses are said to include poor corporate governance, poor ability to assess risk,
and the belief that the Czech authorities would no t let the banks fail, creating an environment of
moral hazard. What is the Czech Government doing to improve the structure of the baking
sector?
As stated in the Secretariat Report, the major state owned commercial banks have already been
privatized  recently, and the privatization of the remaining largest bank - Komercní banka - has beenWT/TPR/M/89/Add.1
Page 22
just completed. As a result,  almost 95% of the total assets of the banking sector are in foreign hands.
The new owners belong to well known top financial institutions of the world.
According  to  the IMF latest FSSA Report (Financial Sector Stability Assessment),  the current level
of non-performing loans of banks is constantly decreasing and does not pose the systemic threat to the
stability of the Czech banking sector.
Question (Canada): The Secretariat Report states that the insurance market  is open to national
and foreign investors and that establishment requires the authorization of the Insurance
Supervisory Authority.  Please explain the proces s for a foreigner to obtain this authorization?
The requirements  regarding  the authorization fo r doing business  in the insurance sector are
stipulated in the Act No. 363/ 1999 Coll.,  on insura nce  (paragraph 3-5 and 7-12). As to the licensing
process,  paragraph 38  of  the Act is applied.
The foreign entity, intending  to provide insurance activities within the Czech Republic s territory, can
either set up an organizational unit  or establish a Czech legal person in the form of  a join stockcompany or a cooperative.
Question (Canada): Accord ing to para 17, certain financial services sectors are closed to foreign
investment by law including mortgage banking, some operations in securities on capital
markets, operations in the collective investment  securities, and operations in foreign exchange
activities.  Given the benefits that the Czech Republic would obtain by opening these sectors to
foreign investment, does the Government of the Czech Republic plan to liberalize these sectors
in the near future?
Question (Hong Kong/China): It is noted that certa in activities are closed to foreign investors by
law, like mortgage banking, some operations in securities on capital market and so on. Like to
know the rationale for such measures and whethe r there are any plans to consider relaxing such
measures.
Since the first TPR in 1996 the liberalization of financial services has substantially progressed. The
Czech Republic has nearly completed the foreign exchange liberalization by the end of 2000 (after
the adoption, on 31 May  2000 of the Government Resolution No. 169/2000 Coll., amending  theGovernment Decree No.129/1998 Coll., which came into  force on 1 January 2001).  All  restrictions
with respect  to the operations  of  deposit accounts by residents with non-resident financial
institutions have been abolished. The remaining restrictions are particularly based on provisions  other
than those of Foreign Exchange Act. They are mainly focused  on monitoring of capital inflow.
In fact the existing rules do not represent a real restriction since foreign persons are allowed to
provide  the majority of financial services, provided  they have received a permission by  the
Securities Commission.  Nevertheless, it should be underlined that the permission of the Securities
Commission is required not only for operations provided by foreign entities, but  for those provided
by domestic subjects as well. These measures are necessary for the financial system stability.  Itmeans that the national treatment principle is applied and MFN status is granted in these cases.
There is a special provision  regarding  foreign  mortgage  bonds  that can be issued  only  by  a
licensed bank established under the Czech law (according to the  Czech legislation, this bank can be
100  per cent foreign owned).  This measure results from the bankruptcy regulations stipulating that in
case of bankruptcy  of a bank mortgage bonds ha ve preferential treatment (however  issue of
mortgage bonds does not require Security Commission s permission, they are only registered by theCommission).WT/TPR/M/89/Add.1
Page 23
Question (Hong Kong/China): Welc ome the opening up of the insurance market to both national
and foreign investors. However, certain mandatory insurance is reserved for the
locally-owned/licensed suppliers. This limits competition and is not in the interest of the
consumers. The premiums should be set by the market forces instead of the authorities. The
recent third-party insurance case of air transport in the wake of the attack on the US is a good
lesson. Would therefore like to know whether the authorities have any plans to follow suit the
liberalization of the supply of compulsory third-party motor liability insurance.
The process of liberalisation of mandatory insurance services  has been accomplished, with the
exception of  mandatory liability insurance for employers against injury or occupational diseases and
compulsory health insurance.
Mandatory liability insurance for employers  against injury or occupational diseases is based on  the
Act  no. 65/1965 Coll., Labor Code , para 205 and on the Decree of the  Ministry of Finance  No. 125/
1993 Coll.  In  accordance with these regulations the services can be provided  by  insurance
companies disposing of sufficient  branch network within  the Czech Republicÿs territory. If a foreign
insurance company fulfills this condition, it will be  granted the relevant authorization by the Czech
authorities as well.
In the health insurance, a distinction has to be made between public health insurance and commercial
health insurance. The former is provided throug h health insurance companies operating on a quasi -
tax  system when the Government  fixes the premium,  while  the latter provides services on a
commercial basis. There are many commercial insurance companies providing health insurance.
III.3. Telecommunications : privatization, competition and remaining FDI restrictions
Question (Canada): According to para 23, the Czech Republic increased competition in the
telecommunications sector by gradually opening up its markets to national and foreign
investors. We note that the telecom monopoly company, Cesky Telecom, has been partlyprivatized. Is this a first step leading to tota l privatization? Are there plans for the Czech state
to retain a minority stake in the company, or a controlling interest?
The Government s objective is to privatize the re maining 51% of shares in the Cesky Telecom during
2001 - 2002. Once privatized, the state will not exercise its control over the company which will haveto abide by regulatory measures applicable on the market.
Question (United States): We are pleased that the authorities are planning to privatize the
remaining 51% of shares in the Cesky Telecom and the CR during 2001. When is this likely to
occur?
The sell-off of the state 51% ownership of the fixed line telecommunications operator Cesky Telecom
is under way and it is expected to be accomplished during 2001 - 2002. In accordance with the
Government Resolution the state-owned share of 51% in Ceske Radiokomunikace has been sold to a
chosen company and the Agreement between the National Property Fund (owner of the state shares)and a new owner of the company Ceske Radiokomunikace was signed on October 15, 2001.
Question (Canada): Chart V.2 sh ows the growth in the number  of competitors in different
telecommunications market segments (long distance,  international, local, mobile, 3G, Internet).
Please provide market shares for incumbents and new entrants in these market segments.
As liberalization of the market in the voice telephone services over fixed networks started on 1
January 2001, there is no sufficient reliable data allowing any informative assessment. At present, theWT/TPR/M/89/Add.1
Page 24
share of the Czech Telecom in fixed telephone lines amounted to 98,7%. Development of the mobile
services market increased the penetration of mobile to 58% of telephone market, compared to 38%penetration of fix line services. Market shares in mobile services are as follows: Eurotel (incumbent
owns 51% of its shares) take a share in 48,3% of end users, RadioMobil is the second largest with a
share amounting to 42,4% and the third one is Cesky Mobil with 9,3%. Shares in the Internet market
are difficult to be assessed as the market is fully liberalized. There are some indications stemming
from unofficial data that the incumbent company operating at the market has about 40% share innumber of users.
III.4 Tourism: fiscal incentives
Question (Canada): According to para 46 under the State Programme for Tourist Support,
investors may receive grants up to 50% of investment costs for the development of spa-related
activities. Please explain how foreign investors can obtain this grant?
The grant can be obtained by any tourism-related entrepreneurs, both of Czech and foreign origin,
provided they run their business in accordance with the Czech law, and within available financialresources. To qualify for the grant, supported project have to comply with certain conditions,
including contribution to the improvement of tourism infrastructure and services, creation of new jobs,
respect for special needs of certain regions, and have to be environmentally friendly. Technical details,
forms etc. are available on the web site: www.mmr.cz.
__________