Czech Republic seeks to boost innovation
In line with the recent report by Eurochambres (the European Chambers of Commerce) which emphasised that innovation is the only way for EU economies to compete with emerging markets in Asia and sustain long-term growth, the Czech Republic has taken a series of measures to promote research and development (R&D) investments. The government has also announced that it will make R&D a priority for the economy in the future, and is thus planning to implement further measures. In December the Czech government passed an amendment to the Income Tax Act, which includes a provision to encourage businesses investing in R&D by enabling them to deduct 100 per cent of R&D spending from their tax bills. In addition to the amendment, the government has announced that it is planning to reduce corporate income taxes from 28 per cent to 24 per cent in 2006. Furthermore, the country has increased state funding for R&D in the 2005 state budget by 12 per cent. 'R&D is so important for any country because in modern economies research and development is, in the long run, perhaps the most important driver of economic growth,' David Hofman, adviser to the Deputy Prime Minister for the economy, Martin Jahn, is quoted as saying in the Prague Post. 'There is a worldwide shift toward higher value-added services and products, and there is no way you can move on without innovation,' he added. The Czech government must be the catalyst for R&D development because it is considered risky by the private sector, which is unwilling to invest, believes Mr Hofman. The Deputy Prime Minister, Mr Jahn, who has focused his attention on R&D as one of the five pillars of the country's economic growth strategy until 2013, was the initiator of the recent R&D measures. As production costs in Asia fall to a fraction of what they are in the EU, further innovative measures are required to sustain growth. The Czech Republic has already announced its strategy of focusing on two long-term goals: the Lisbon objective and the shifting of R&D funding responsibilities from the public to the private sector. While the Lisbon objective incorporates the goal of EU countries investing three per cent of their GDP in R&D by 2010, at present the Czech Republic is investing barely 16.5 billion KC (548 million euro), less than one per cent of its GDP. Mr Jahn's growth strategy is therefore to increase that figure to the EU target. The second long term goal is to focus government funding on R&D projects with real-world applications, and to shift responsibility for this to CzechInvest, the Investment and Business Development Agency of the Ministry of Industry and Trade. A decision on whether the government will grant the agency more competencies is expected by the end of the month. It is felt that a shift in responsibility would enable funding to go to more goal-oriented projects with real-world applications, rather taking the form of blank-cheque contributions to public institutions.
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Czechia