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Czech Republic

On April 16 the Czech government announced a package of measures to cut growing budget and trade deficits, stimulate the sluggish economy, dampen demand for imports and add confidence to the Czech capital markets. The package consists of monetary and fiscal measures, policies on privatization and capital markets and the protection of the domestic market, and measures aimed at tackling white collar crime.

Imports of selected products are burdened with an import deposit of 20% of the price of the goods delivered. The importer must deposit the sum in an interest-free account with any Czech bank for six months. The goods listed by the government represent 30% of all imports. The measure, regarded as having an effect equivalent to an import surcharge of 1% to 2%, is designed to reduce the export deficit of the Czech Republic and to avert the deepening balance of payments crisis. There are concerns about whether the measures will affect the inflexible demand for certain goods even if the costs are shifted by the importers to consumers.

Investment companies would be restricted from owning stakes in funds and unit trusts and investment companies and funds prevented from operating through associated companies. Furthermore, the credit operations of banks would be separated from their ownership and portfolio management roles.

Other measures include a plan to amend the legal provisions on tax-deductible items and to increase capital adequacy and disclosure requirements for entities operating in the capital markets.

Further privatization is contemplated for about 50 strategic companies including four big banks. Renewed pressure is to be exerted on the National Property Fund (FNM) to fulfil its tasks and complete its activities as soon as possible. The Ownership rights of the FNM will be transferred to individual ministries thought to be more effective in their implementation.

Government further decided to increase the possibility of write-offs of old uncollectable receivables from 10% to 20%, to prefer domestic over foreign suppliers in the case of state tenders, to stipulate minimum import prices in the agricultural sector and to impose seasonal quotas on selected agriculture commodities.

The office of the state attorney will create dedicated teams to investigate economic crime. Special benches in higher courts to deal with such cases would be established. An amendment to the Criminal Code for new types of offences relating to the financial and banking sectors has been announced.

Kvetoslav Krejci

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