US embassy cable - 05PRAGUE478

UNCLAS SECTION 01 OF 02 PRAGUE 000478 
 
SIPDIS 
 
SENSITIVE 
 
STATE FOR EUR/NCE, EB AND EB/CBA 
COMMERCE FOR 4232/ITA/MAC/MROGERS 
 
E.O. 12958: N/A 
TAGS: ECON, ETRD, EINV, EZ 
SUBJECT: CZECH REPUBLIC AMCHAM REVIEWS ITS AGENDA WITH 
AMBASSADOR CABANISS 
 
1.  (U) This message is Sensitive but Unclassified.  Not for 
Internet distribution. 
 
2.  (SBU) Summary: American Chamber of Commerce in the Czech 
Republic (AmCham) priorities for the coming year include the 
traditional ones of commercial register reform and a new 
bankruptcy code.  The AmCham is also preparing initiatives on 
a new labor code, health care reform and technical training 
for future workers.  All these priorities are heavily 
influenced by the current unsettled political situation.  The 
AmCham board is communicating with the likely successors of 
the current Social Democratic Party (CSSD) government in the 
opposition Civic Democratic Party (ODS).  End Summary. 
 
3.  (SBU) The Board of Directors of the American Chamber of 
Commerce in the Czech Republic met over breakfast at the 
Ambassador's residence in Prague on March 30 to review its 
agenda for the year in light of a change of government that 
looks more and more likely.  The meeting brought together 
representatives of fifteen U.S. and Czech companies.  The 
Ambassador urged the AmCham board not to slacken its efforts 
to promote key reforms, even though a lame duck CSSD 
government or a technocratic interim government would seem 
unlikely to pass them.  The opposition ODS needs to hear the 
message, and sometimes politicians, even lame duck ones, can 
surprise us, he said. 
 
4.  (SBU) AmCham Executive Director Weston Stacey reported on 
progress toward a new law on company registration and a new 
bankruptcy code.  When the commercial register law passed the 
lower house of parliament, the Chamber of Deputies, it added 
an amendment permitting forced buyouts of minority 
shareholders under some circumstances.  The upper house, the 
Senate, opposes that provision, and passed the commercial 
register law without it.  It will return the bill to the 
House of Deputies, which hopefully will finalize its 
enactment without the buyout provision, fulfilling a 
long-held AmCham and Embassy priority.  Stacey deems the 
prospects for passage as good. 
 
5.  (SBU) A new bankruptcy code is another priority, but it 
remains caught up in debate within the government.  There is 
only a small chance it will emerge from the government and 
reach the parliament for passage before the political 
situation is well-settled.  The government has agreed to 
propose a cap on social security contributions at three times 
the average wage, which is now about Kc 17,000 ($740). 
However, the proposal is part of an overall tax bill now in 
preparation that will have tough sledding through the 
parliament under the current circumstances. 
 
6.  (SBU) Stacey introduced three new priority areas for 
AmCham activity.  The first of these is influencing the shape 
of a new labor code.  All around the table agreed that the 
existing labor code lacks flexibility, especially as regards 
termination of employees, hiring of temporary workers and use 
of independent contractors.  Some observed that the situation 
is still not as bad as in some Western European countries, 
but they agreed the issue deserves the AmCham's attention. 
Stacey said that the AmCham has already been in contact with 
members of the ODS who may be in the government soon, and had 
been offered a chance to assist in shaping the new code.  The 
ODS approach is to de-emphasize the labor code as a separate 
body of law and merge its provisions into the civil and 
commercial codes. 
 
7.  (SBU) Stacey said that the current health care system in 
the Czech Republic is inefficient, does not deliver quality 
care to patients, and is too expensive for employers.  Frank 
Watanabe, country managing director for Eli Lilly, said that 
there is a high level of dissatisfaction among companies, 
insurors, doctors, and patients alike.  The current 
government is unlikely to take any action.  Again, in this 
area, the ODS is likely to have an impact, and U.S. companies 
would like to have input early in the policy-making process. 
Watanabe said that there is agreement among foreign embassies 
and chambers of commerce that the system needs change. 
However, because the American system for delivery of health 
care is so different from the Czech and European, there is 
not likely to be strong support for solutions closely based 
on the American model.  The AmCham should push transparency 
and efficiency, he concluded.  The Ambassador noted that the 
regions will become more significant players on health care, 
because they are taking responsibility for regional public 
hospitals. 
 
8.  (SBU) Another priority is sustaining the Czech Republic's 
advantage of a well-trained workforce, especially in 
technical disciplines.  According to Jaroslav Dolezal of 
Honeywell, students are now beginning to prefer degrees in 
law, accounting and other kinds of service provision and are 
avoiding engineering and the apprentice programs that have 
long been a feature of the Czech educational system.  It is 
getting harder to find well-trained shop workers.  The AmCham 
needs to find partners in promoting technical education, 
Dolezal said, and the Academy of Engineers has expressed 
interest. 
 
9.  (SBU) The meeting finished with a review of the current 
chaotic political situation, which has been reported septels. 
 Stacey said that Martin Jahn, the Deputy Prime Minister for 
the economy, hopes to persevere with preparation of a new 
economic strategy for the country, and with the bankruptcy 
legislation.  Stacey mentioned ODS plans for a 15% flat tax 
and revision or abolition of investment incentives as 
upcoming issues the AmCham will have to keep track of, and 
about which it will have to make its opinions known. 
CABANISS