XXI. MEZINÁRODNÍ KOLOKVIUM O REGIONÁLNÍCH VĚDÁCH. SBORNÍK
PŘÍSPĚVKŮ.
21ST
INTERNATIONAL COLLOQUIUM ON REGIONAL SCIENCES.
CONFERENCE PROCEEDINGS
Place: Kurdějov (Czech Republic)
June 13-15, 2018
Publisher: Masarykova univerzita, Brno
Edited by:
Viktorie KLÍMOVÁ
Vladimír ŽÍTEK
(Masarykova univerzita / Masaryk University, Czech Republic)
Vzor citace / Citation example:
AUTOR, A. Název článku. In Klímová, V., Žítek, V. (eds.) XXI. mezinárodní kolokvium
o regionálních vědách. Sborník příspěvků. Brno: Masarykova univerzita, 2018. s. 1–5.
ISBN 978-80-210-8969-3.
AUTHOR, A. Title of paper. In Klímová, V., Žítek, V. (eds.) 21st
International Colloquium
on Regional Sciences. Conference Proceedings. Brno: Masarykova univerzita, 2018. pp. 1–
5. ISBN 978-80-210-8969-3.
Publikace neprošla jazykovou úpravou. / Publication is not a subject of language check.
Za správnost obsahu a originalitu výzkumu zodpovídají autoři. / Authors are fully responsible for the
content and originality of the articles.
© 2018 Masarykova univerzita
ISBN 978-80-210-8969-3
ISBN 978-80-210-8970-9 (online : pdf)
Sborník příspěvků XXI. mezinárodní kolokvium o regionálních vědách Kurdějov 13.–15. 6. 2018
176
DOI: 10.5817/CZ.MUNI.P210-8970-2018-22
SPATIAL DIFFERENCES IN THE CONCENTRATION OF THE
INVESTMENT INCENTIVES IN CZECHIA
Prostorové rozdíly v koncentraci investičních pobídek v Česku
PETR HLAVÁČEK
PETR BUŘT
Katedra regionálního rozvoje a veřejné správy
Fakulta sociálně ekonomická
Univerzita Jana Evangelisty Purkyně v Ústí n. Labem
Depart. of Regional Develop. and Public Adminis.
Faculty of Social and Economic Studies
Jan Evangelista Purkyně University in Usti n. Labem
 Moskevská 54, 400 96 Ústí nad Labem, Czech Republic
E-mail: petr.hlavacek@ujep.cz, petr817@seznam.cz
Annotation
The article focuses on analysis of provision of the public support in the form of the investment incentives in
Czechia. The objective of the article is finding out how the system is used in practice, what the differences exists
at the regional level with respect to provision of the investment incentives, and if operation of the system
contributes only to reduction of the inter-regional differences, and meets the stabilization function of the regional
policy. The analysis use data from the database of investment incentives by CzechInvest. The analysis showed that
there are relatively big differences among the regions, the provision of the public support prefers the regions with
structural handicap to a certain level only, the support is consumed also by the regions without development
problems, as well as those being regarded as above-the-average developed ones.
Key words
investment incentives, regional policy, region, Czech Republic
Anotace
Článek je zaměřen na analýzu poskytování veřejné podpory ve formě investičních pobídek v České republice.
Cílem článku je zjistit, jak se systém v praxi realizován a jaké rozdíly existují na úrovni regionů z hlediska
poskytování investičních pobídek a jestli fungování tohoto systému přispívá pouze ke snížení meziregionálních
rozdílů a naplňuje stabilizační funkci regionální politiky. V analýze se použila data z databáze investičních
pobídek agentury CzechInvest. V rámci analýzy bylo zjištěno, že rozdíly mezi regiony jsou relativně velké,
poskytování veřejné podpory preferuje strukturálně postižené regiony pouze částečně, podporu čerpají i ostatní
regiony bez rozvojových problémů i regiony, které jsou považovány za nadprůměrně rozvinuté.
Klíčová slova
investiční pobídky, regionální politika, region, Česká republika
JEL classification: O25, R11
1. Introduction
A lot of factors play their role in decision-making of the investors as to where establish a new branch (Ginevicius,
Simelyte, 2011); Jones and Wren (2006) name the market size, the infrastructure level, or the labour market
(Kotíková, 2016). The market sizes and their growth potential attract the foreign companies (Hardy, Micek, Capik,
2011), who has already overgrown their domestic market and look for the expansion possibilities in order to further
increase their sales or market shares. The political factors play their role in particular in less developed or transient
economies (Hlaváček, Bal-Domaňska, 2016). As regards the legal conditions, of particular interest are the general
conditions for running a business, the protection of investments, the laws and standards with impact on the business
or the market transparency (Wokoun, Tvrdoň, 2010), or the tax conditions for which the investors monitor either
the taxation rate or definition of the tax base (Damborský, Říhová, 2008).
Sborník příspěvků XXI. mezinárodní kolokvium o regionálních vědách Kurdějov 13.–15. 6. 2018
177
The nation’s investment incentives the state uses to influence the regional development processes are a specific
area. The positive impacts of the investment incentives to support the underdeveloped regions are e.g. described
by (Bondonio, Greenbaum 2006). The form of the investment incentive is then based on the level of the regional
problems or character of the investment in the pipeline. According to Thomas (2007), an investment incentive can
be generally defined as a benefit being provided by the governments in order to influence where an investment is
located. The reason for granting thereof may be attraction of new investments or retaining of the existing
installations. The investment incentives have successively became a common economic-political instrument in the
developed and emerging countries; Hungary and Poland were the first countries in the Central and Eastern Europe
offering them.
The state may influence the branch or region the firms should invest to through the incentive system. Their purpose
is also attracting of the investors into the branches of the priority development of the economy and investments
would be otherwise implemented abroad, had the incentive system not been existing (Šimanová, 2011). In Czechia,
there are now supported three areas being the processing industry, the centres of strategic services, and the
technological centres. The regions with the highest unemployment level are given the preferential treatment.
According to Blomström, Kokko (2000), the investment incentives may play their role in the decision making to
at least marginally, e.g. when the investor has available more or less identical alternatives for placement of his
investment. In these cases the incentives may become the decisive factor for his investment decision.
The study by Deloitte (2010) reviews positively the impacts of the investment incentives for Czechia; the study
monitors their impact on the labour market where the receivers of the incentive created 27% of the jobs alone, and
73% by the subcontractor companies. The fiscal impact of the investment incentives was another monitored factor.
It has been found that state’s income was multiple times higher than the investment incentives drawn. The average
income between 2000 and 2008 achieved CZK 8.6 of the income for CZK 1 of the incentive. The final part of the
study focused on assessment of the economic impacts. It could be assumed based thereon that the investment
incentives contributed to the restructuralization of the Czech industry, which is also supported by that more than
one half of the supported projects has been implemented in the automotive, electronic, and engineering industry.
The other positive factors include the benefits of the know-how in the form of new technologies or management
experience, contribution of the supported investment in creation of the added value, and their export on share
(Deloitte, 2010).
On the contrary, the study (Schwarz et. al., 2007) criticises the investment incentives. According to the study, the
support was most directed to the regions reporting the highest GDP per capita (Prague capital city and Central
Bohemian Region) that contributed to even higher differences between the most and least developed regions. With
respect to this, the new jobs created by the investment incentives did neither remove nor mitigate the differences
in the unemployment level as the incentives headed to the lower-unemployment regions. In addition, the newly
created job opportunities cause headhunting of the employees from other companies rather than decreasing of the
unemployment level. Also in many cases, the costs for creation of 1 job were higher than those without any
incentive received. In addition, the importance of the flowing effect is challenged, which is according to the study
overestimated in connection with the investment incentives, the incentives are the instruments that deform the
market as they produce better conditions for bigger investors at the expenses of small and medium sized
enterprises.
The objective of the article is finding out how the system is used in practice, and what are the differences at the
regional level with respect to provision of the investment incentives, and if operation of the system contributes
only to reduction of the inter-regional differences, and meets the stabilization function of the regional policy in
the support of the structurally impaired regions, and to what level the support is provided to other regions as well.
2. Data sources and methodology
The data for the analysis was obtained from the database maintained by CzechInvest, where the projects between
1998 and 2015 are analyzed. The data for the database is originating from successful investment projects submitted
by the companies upon start of their projects. This paper uses information about the amount of the investments,
their origin and placement, sector classification, number of newly created jobs, and the type of the subsidies used.
Data about the supported projects for both foreign and domestic investors was analyzed. The other sections, where
the supported projects are reviewed with respect to further criteria, contain only some selected investments from
foreign companies.
Sborník příspěvků XXI. mezinárodní kolokvium o regionálních vědách Kurdějov 13.–15. 6. 2018
178
3. Results of the analysis
Prague capital city has a specific position among the regions of Czechia, which is undoubtedly the biggest receiver
of the foreign direct investments, but receives almost no investment incentives and therefore, the 13 remaining
regions without Prague will be reviewed. The distribution of the supported investments in the territory of Czechia
is highly uneven, which is evidenced by the fact that almost one half of the projects is located in the territory of
three regions only. Undoubtedly, the Ústí Region received the most foreign projects supported by the investment
incentives over the monitored period of time. The motives for implementation of an investment project in this
region could be e.g. favourable geographic location near German border, the offer of pre-developed lands,
industrial tradition, and higher investment incentives as well.
Tab. 1: The projects and jobs supported by the investment incentives between 1998 and 2015 by the regions
region
Investments (mil. CZK) Job places
Investment
per job places
total in % total in % (mil. CZK)
Ústí 94 989 20,4 19 820 18,1 4,8
Moravian-Silesian 79 541 17,1 15 989 14,6 5,0
Central Bohemian 90 037 19,3 19 389 17,8 4,6
South Moravian 23 902 5,1 8 257 7,6 2,9
Plzeň 19 095 4,1 7 831 7,2 2,4
Olomouc 18 878 4,0 4 574 4,2 4,1
Liberec 24 098 5,2 4 304 3,9 5,6
Pardubice 25 980 5,6 11 007 10,1 2,4
Hradec Králové 19 263 4,1 6 398 5,9 3,0
South Bohemian 14 040 3,0 3 987 3,7 3,5
Vysočina 29 658 6,4 3 780 3,5 7,8
Zlín 14 289 3,1 2 043 1,9 7,0
Karlovy Vary 9 809 2,1 1 805 1,7 5,4
Prague 2 875 0,6 28 0,0 102,7
Total 466 453 100,0 109 212 100,0 4,3
Source: own elaboration based on database of CzechInvest
Some of the factors could have the influence the decisions of the investors also in the second most successful
region in attracting of the foreign projects being the Moravian-Silesian Region. Almost equal number of the
investments was realized by the companies thanks to the incentives in the Central Bohemian Region, which is
attractive for the investors with its closeness to Prague, developed infrastructure, or location of the automotive
industry. On the contrary, the least attractive regions for the foreign companies included over the reviewed period
the Karlovy Vary Region and Zlín Region, where only a few projects supported by the investment incentives were
realized.
The highest volume of the investments supported by the investment incentives was reported in the Ústí Region
with total amount of CZK 95 billion. The German companies invested most in this region because closeness to
the German border is a big advantage for them. As far as the sector classification is concerned, the sector of
transportation means was represented most followed by rubber making and plastic industry, where the highest
supported investment by Nexen Tire amounting to CZK 23 billion was directed. Despite substantially lower
number of the implemented projects, the foreign companies exceeded CZK 90 billion in the investments also in
the Central Bohemia Region. Thanks to the location of Škoda Auto the highest share of the investments in this
region focused on the automotive industry with the most origin from German companies. The most important
supported project here was the joint investment of Toyota and PSA Peugeot Citroën in Kolín (CZK 23.5 billion).
The triad of the most attractive regions for the foreign capital complements the Moravian-Silesian Region where
projects amounting to CZK 80 billion were obtained thanks to the investment incentives. Here, Hyundai
contributed most with its project amounting to CZK 35 billion. Especially thanks to this investment event, the
largest amount of funds in this region was directed to the transport industry and came from the Korean investors.
Thanks to these large projects, the most demanding capital projects in these three regions were realized when the
Sborník příspěvků XXI. mezinárodní kolokvium o regionálních vědách Kurdějov 13.–15. 6. 2018
179
average value of the investment per project exceeded CZK 1 billion. In the Central Bohemian Region this indicator
achieved value CZK 1.45 billion.
Fig. 1: The investments supported by the investment incentives per EA inhabitants in the regions in 1998-2015
(in CZK)
Source: own elaboration based on database of CzechInvest
When compared relatively, in average, the investments supported by the incentive system amounting to CZK 87.8
thousand per economically active inhabitant have been achieved. The comparisons of the regions reveal that the
value of the foreign investments with the investment incentive is highest in the Ústí Region with almost CZK 240
thousand per one economically active inhabitant. The Central Bohemian Region follows with a huge margin
behind the Ústí Region.
Fig. 2: The number of new jobs created per 1,000 economically active inhabitants in the regions
Source: own elaboration based on database of CzechInvest
On the contrary, the lowest level was reported in the South Moravian Region where the average amount of the
investment supported by the investment incentives per economically active inhabitant was six times lower
compared to the Ústí Region. One half of the total number of new job opportunities came from the investment
incentive system in the territory of three regions. In the Ústí and Moravian-Silesian Region, which have long been
facing high unemployment, the foreign companies have agreed to create 36,000 new jobs. Almost the same number
Sborník příspěvků XXI. mezinárodní kolokvium o regionálních vědách Kurdějov 13.–15. 6. 2018
180
of new job opportunities as in the Ústí Region was created thanks to public support also in the Central Bohemian
Region, which, on the other hand, is the region with the second lowest unemployment followed by Prague capital
city. Only 3.5% of the total number of jobs originated in the two least attractive regions for foreign investors, i.e.
in the Karlovy Vary Region and Zlín region. One reason for such a low value was that in these two regions, the
foreign companies created the smallest operation units, with an average of 100 new jobs created per 1 implemented
project. On the contrary, the largest foreign companies' operation units were established in the Pardubice Region,
where each investment project averaged almost five times more new job opportunities. The high values of this
region are due to the localization of large electronics and electrical engineering industry in the region.
In relative terms, the investment incentives-supported projects in Czechia created in average 21 jobs per 1,000
economically active inhabitants. The comparison of the regions show, that the Ústí Region achieved the highest
values with 50 job opportunities per 1,000 economically active inhabitants. The Pardubice Region also achieved
very high values, which tripled the nationwide average. Four more regions exceeded the nationwide average as
well. Clearly the worst in this comparison was the Zlín Region, where the investment incentives created only 7
jobs per 1,000 economically active inhabitants.
Conclusion
The IP Investment Support System has been operating in Czechia for almost 20 years, during which it has
undergone many changes. Following the example of the other Central European countries, the system for attracting
investment was launched by Resolution No. 298 in 1998. A more integrated form of investment support system
was approved by the Act on Investment Incentives in 2000. However, its shape had to successively adapt to the
economic and legal development. These adjustments were mostly caused by European legislation. With the
accession to the EU in 2004, Czechia had to incorporate European rules on the use of public support into law. In
2007 and 2015, the amendments to the Act on Investment Incentives were associated with a reduction in the level
of public support.
As far as the distribution of the investment projects in Czechia is concerned, it can be considered to be very uneven.
The wider offer of the investment incentives has contributed to the fact that the largest number of its projects were
implemented by foreign companies in the two most problematic regions, namely in the Ústí Region and the
Moravian-Silesian Region. The higher number of the projects was still directed in the Central Bohemian Region,
which attracted investors, for example, due to its location and the automotive industry. Together, these three
regions earned 57% of the foreign investments. On the contrary, the least attractive regions for the foreign investors
were the Karlovy Vary Region and the Zlín Region. The average value of the supported investment per the
economically active inhabitant for the whole Czechia amounted to CZK 88 thousand. The higher concentration of
investment incentives, of course, cannot be considered as a criterion of attractiveness of the regions, as evidenced
by the example of the South Moravian Region, where there were relatively less investment incentives were
provided because the state focused more on the support of the other more problematic regions. On the other hand
the fact that the system of public support is not intended only for the problem regions, is evidenced by e.g. the
Karlovy Vary Region or the Zlín Region with the absolute and relative least jobs created (Novák, Vokoun,
Stellner, Vochozka, 2016).
In conclusion in can be said that the investment incentives provided as a localization factor have only a limited
role in the selection of the location by the investors. The factors such as market size, production costs, or
geographical nearness of the markets or sources, are more important for the foreign investors, or large enterprises
(Sucháček, Seďa, Friedrich, Koutský, 2017). From the point of view of the regional policy, the investment
incentives are more focused on mitigation of the growth of the regional differences in Czechia, and they also partly
contribute to the growth of regions with higher competitiveness, as shown by example of the Central Bohemian
Region. The next research on the investment incentives should focus on the qualitative aspects, how the value
added of the companies drawing on the investment incentives is developing, or how is the position of the branch
operations in the global production chain. The other opportunities to maintain the economic growth of the regions
in Czechia are related to how productivity and business performance will grow.
Literature
[1] BLOMSTROM, M., KOKKO, A., (2003). The Economics of Foreign Direct Investment Incentives (Working
Paper No. 9489). National Bureau of Economic Research. [online]. [22.3.2018]. Retriewed from:
http://www.nber.org/papers/w9489.pdf. DOI: 10.3386/w9489.
[2] BONDONIO, D., GREENBAUM, R. T., (2006). Do Business Investment Incentives Promote Employment
in Declining Areas? Evidence from EU Objective-2 Regions. European Urban and Regional Studies, vol. 13,
no. 3, pp. 225–244. ISSN 09697764. DOI: 10.1177/0969776406065432.
Sborník příspěvků XXI. mezinárodní kolokvium o regionálních vědách Kurdějov 13.–15. 6. 2018
181
[3] BUŘT, P. (2016). Analýza veřejné podpory přímých zahraničních investic v České republice. [Diploma
thesis]. Ústí nad Labem: Jan Evangelista Purkyně University in Ústí nad Labem.
[4] CZECHINVEST, (2017). Udělené investiční pobídky. [online]. [20.3.2018]. Retrieved from
http://www.czechinvest.org/investicni-pobidky-nove.
[5] DAMBORSKÝ, M., ŘÍHOVÁ, G., (2008). Přímé zahraniční investice v ČR. Regionální studia, vol. 02, pp.
22-28. ISSN 1803-1471.
[6] DELOITTE, (2010). Finální zpráva vyhodnocení dopadů investic čerpajících pobídky a zhodnocení efektivity
agentury Czechinvest. [online]. [20.3.2018]. Retrieved from: http://www.czechinvest.org/data/files/analyzadopadu-pobidek-na-cr-2050-cz.pdf
.
[7] GINEVICIUS, R., SIMELYTE, A., (2011). Government Incentives Directed Towards Foreign Direct
Investment: A Case. Journal of Business Economics and Management, vol. 12, no. 3, pp. 435–450. ISSN
2029-4433. DOI: 10.3846/16111699.2011.599415.
[8] HARDY, J., MICEK, G., CAPIK, P., (2011). Upgrading Local Economies in Central and Eastern Europe?
The Role of Business Service Foreign Direct Investment in the Knowledge Economy. European Planning
Studies, vol. 19, no. 9, 1581–1591. ISSN 1469-5944. DOI: 10.1080/09654313.2011.586180.
[9] HLAVÁČEK, P., BAL-DOMANSKA, B., (2016). Impact of Foreign Direct Investment on Economic Growth
in Central and Eastern European Countries. Engineering Economics, vol. 27, no. 3, pp. 294–303. ISSN 2029-
5839. DOI: 10.5755/j01.ee.27.3.3914 .
[10]JONES, J., WREN, C., (2016). Does Service FDI Locate Differently to Manufacturing FDI? A Regional
Analysis for Great Britain. Regional Studies, vol. 50, no. 12, pp. 1980–1994. ISSN 1360-0591. DOI:
10.1080/00343404.2015.1009434.
[11]KOTÍKOVÁ, S., (2016). Quantification of the Direct Impact of the Creation of Jobs Created by FDI in
Selected Regions. In XIX. mezinárodní kolokvium o regionálních vědách. Sborník příspěvků. Brno:
Masarykova univerzita, pp. 364-370. ISBN 978-80-210-8273-1. DOI: 10.5817/CZ.MUNI.P210-8273-2016-
46.
[12]NOVÁK, V., VOKOUN, M., STELLNER, F., VOCHOZKA, M., (2016). Institutional Analysis of the
Contemporary Regional Labour Market in the Czech Republic. E & M Ekonomie a Management, vol. 19, no.
3, pp. 4–19. ISSN (Online) 2336-5604. DOI: 10.15240/tul/001/2016-3-001.
[13]SCHWARZ, J., BARTOŇ, P., BOLCHA, P., HEŘMANSKÝ, P., MACH, P., (2007). Analýza investičních
pobídek v České republice. [online]. [20.3.2018]. Retriewed from:
https://www.mpo.cz/assets/dokumenty/32013/35445/388865/priloha001.pdf.
[14]SUCHÁČEK, J., SEĎA, P., FRIEDRICH, V., KOUTSKÝ, J., (2017). Regional Aspects of the Development
of Largest Enterprises in the Czech Republic. Technological and Economic Development of Economy, vol.
23, no. 4, pp. 649–666. ISSN 2029-4921. DOI: 10.3846/20294913.2017.1318314.
[15]ŠIMANOVÁ, J., (2011). Investiční pobídky, nadnárodní firmy a regionální rozvoj. Liberec: Technická
univerzita v Liberci.. ISBN 978-80-7372-803-8.
[16]THOMAS, K. P., (2007). Investment Incentives: Growing use, uncertain benefits, uneven controls.
International Institute for Sustainable Development. ISBN 978-1-894784-09-2. Retrieved 21 March 2018,
from http://www.iisd.org/library/investment-incentives-growing-use-uncertain-benefits-uneven-controls.
[17]WOKOUN, R., TVRDOŇ, J. and col., (2010). Přímé zahraniční investice a regionální rozvoj. Prague:
Oeconomica. ISBN 9788024517360.
Acknowledgements
Project supported by grant within student grant competition at UJEP - Jan Evangelista University in Ústí nad
Labem (UJEP-SGS-2018-45-003-2)