BMI's Executive Summary

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Although the centre-right coalition government which took office at the beginning of 2007 under Prime Minister Mirek Topolánek had a wafer-thin majority, it had settled down to the business of government relatively well, and BMI's view continued to be that the country's defence and security fundamentals were strong. In August 2007 the administration was able to secure parliamentary approval for a package of tax and expenditure reforms that were set to contribute to an improvement of the underlying fiscal position on the medium term.

A key defence story in 2007 was the Czech Republic's enthusiastic support for a proposed strategic US missile defence system. The US$3.5bn system would include construction of a radar base in Brdy, some 80km southeast of Prague, as well as 10 ground-based interceptor missiles in northern Poland. If implemented, the system would link the Republic more closely into US and potentially NATO defences, as well as bringing a big defence contract to the country. Among the potential negatives was exposure to Russia's hostile response to the programme (which Moscow saw as a return to Cold War-style spying on its own territory), rather than, as stated, a defence of Europe against missile attack from rogue states such as Iran. A further disadvantage was that the radar base could raise the Czech Republic's profile as a desirable target for terrorist groups. However, whether the US progresses with the project or not will largely depended on the outcome of the US presidential elections in 2008.

Although not a major issue, there have been continuing concerns over corruption in public life, highlighted in November 2007 when deputy Premier Jiri Cunek was forced to resign following allegations that he had claimed social welfare payments inappropriately and had been involved in alleged bribery some years earlier when mayor of the city of Vsetin in the east of the Republic. Cunek denied any wrongdoing and said he was stepping down to clear his name.

The country ranks highly in BMI's security risk ratings. The Czech Republic faces limited security threats. The Czech lands do not have a history of political violence and the two historic political changes, 'The Velvet Revolution' which ended the Communist era in 1989, and the division of Czechoslovakia into the Czech Republic and Slovakia in 1993, occurred without loss of life or significant violence. The country also enjoys good to excellent relations with all of its neighbours and none of its borders are in dispute. Historically, terrorism has also factored little. However, increasingly it has become at risk, most notably because of the country's support of the US in the 'war on terror' in Afghanistan and operations in Iraq.

The Czech Republic's defence industry is well-suited to meet the country's security needs. Its armed forces are currently undergoing reform and modernisation as required by its membership of NATO. Despite a reduction in military expenditure, the drive for interoperability with the multinational organisation has provided both the impetus and the opportunities for the defence industry in terms of research and development and the production of more advanced military hardware. However, the Czech industry is still incapable of manufacturing most advanced conventional weapons systems and requires large procurement deals from overseas.

The Czech Republic is relatively stable and free from significant security threats, but whilst the Czech armed forces have reliable access to the military equipment it requires, the country would do well to invest in its indigenous industry. The Czech defence industry must seek out export markets to survive, however, although new, high technology companies should be able to develop a niche market in which the Republic can specialise.

Chapter 1 - Executive Summary

SWOT Analysis

Czech Republic Political SWOT

Czech Republic Security SWOT

Czech Republic Defence Industry SWOT

Czech Republic Economic SWOT

Chapter 2 - Political Overview

BMI Core Scenario

Domestic Political Outlook

Stuck In A Mess

Painstaking Progress

A 'Caretaker' Government?

Chapter 3 - Security Risk Analysis

BMI’s Security Ratings

Risk Ratings

Table: Czech Republic Regional Risk Ratings

Table: Czech Republic State Terrorism Vulnerability Index

Regional Security: Europe

Overview

Internal Terrorism

International Terrorism

Criminal Activities

Czech Republic Security Risk Ratings

Czech Republic Conflict Risk

Czech Republic Terrorism Risk

Czech Republic Physical Safety Risk

Chapter 4 - Security Overview

Internal Threats

Organised Crime

Corruption

External Security Situation

International Terrorism

Chapter 5 - Military Structure & Defence Industry

Armed Forces

Table: Regional Armed Forces (including conscripted) 2006

Defence Reform

International Deployments

Table: Czech Republic Foreign Deployments

Co-ordination And Joint Operations

Table: Selected Training Events/Exercises In Which The Czech Republic Took Part In 2004:

Weapons Of Mass Destruction

Chapter 6 - Market Overview

Arms Trade Overview

Imports

Exports

Industry Trends & Developments

Table: Czech Republic Defence, Key Players

Procurement Trends & Developments

Table: Recent Procurement Contracts

Chapter 7 - Industry Forecast Scenario

Table: Government Expenditure On Defence Industry

Army Enlargements

Government Expenditure on Defence Industry

Key Risks To BMI’s Forecast Scenario

Chapter 8 - Macroeconomic Forecast

Table: Czech Republic – Economic Activity

Chapter 9 - Company Profile

Aero Vodochody

Chapter 10 - BMI Forecast Modelling

How we generate our industry forecasts

Defence Industry

Sources

Chapter 11 - Appendix A: Risk Ratings Methodology

Conflict Risk Methodology

Terrorism Risk Methodology

Physical Safety Risk Methodology

Overall Risk Rating

State Vulnerability Index

Competitive Landscape for European Defence & Security: Sample of  
Companies Ranked

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Rankings and Competitive Landscapes by production and sales; market share and change on previous year; number of employees, ownership structure and year established. Also includes analysis of company expansion, export and investment strategies.

Network of Defence & Security Sources

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BMI's European Defence & Security Reports are based on an extensive network of multilateral organisations, government departments, automotive industry associations, chambers of commerce and company reports. Information sources include: