Oliver Röhn
OECD
OECD Economic Surveys: Czechia 2025
Abstract
Czechia’s productivity growth has slowed down since the global financial crisis and has stalled since the pandemic, leaving a sizeable productivity gap with the OECD average. Boosting the innovation capacity and business dynamism can help revitalise productivity growth. Improving the innovation ecosystem requires better targeting business support for R&D, developing capital markets and strengthening linkages between businesses and science. The business environment can be strengthened by improving regulations to facilitate the entry and scaling up of productive firms, and the exit of unproductive firms as well as further enhancing the anti-corruption framework.
Productivity growth has slowed down significantly after the global financial crisis. Growth in GDP per hour (in constant PPPs) declined from close to 5% per year on average in the period 2000-2007 to under 2% in the period 2010-2019, and has stalled since the pandemic. As a result, productivity convergence to the average OECD country has also slowed and a significant productivity gap of around 20% remains (Figure 2.1, Panel A). Strong productivity growth in the period before the global financial crisis was mainly driven by the integration into global value chains, especially downstream activities in the automotive sector, and accompanied by significant FDI inflows into manufacturing. The productivity slowdown has been most pronounced in manufacturing but has been broad-based across sectors, with the exception of the finance and insurance sector (Figure 2.1, Panel B). Meanwhile, FDI inflows have become more diversified in the past decade, with particularly strong inflows into finance and real estate as well as non-automotive manufacturing sectors (OECD, 2024[1]).
Note: In Panel A, productivity is calculated as GDP (USD, constant prices, 2015 PPPs) per hour worked.
Source: OECD calculation based on OECD Productivity database
Small and medium-sized enterprises (SMEs) play an important role in the business landscape but lag in productivity. SMEs account for around two-thirds of employment and a bit over half of value-added in the business sector. As in other OECD countries, SMEs have lower productivity than large firms in Czechia (Figure 2.2). Low-productivity micro-firms (1-9 employees) dominate the business landscape, accounting for 96% of all active enterprises in 2020 (compared to 91% on average in OECD countries). The productivity gap between large and micro firms has widened over time, especially in manufacturing and in higher technology services sectors (OECD, 2024[2]). Mid-sized firms (50-249 employees) only account for less than 1% in the business sector. This lack of mid-sized firms is common across OECD countries but more pronounced in Czechia in the manufacturing sector than in other OECD countries. Mid-sized firms account for less than 2% of firms in the manufacturing sector while they account for more than 5% in Germany, Austria, Denmark and Switzerland. Mid-sized firms are often seen as key drivers of innovation, productivity growth and job creation since they have better capacity than smaller firms to invest in R&D and adopt new technologies, while being more agile and adaptive than large firms. The lack of mid-sized firms may reflect deficiencies that prevent small firms from scaling up.
1. Except financial and insurance activities. OECD average is a simple average of 23 OECD countries.
Source: OECD Structural and Demographic Business Statistics Database.
The productivity gap partly reflects limited productivity spillovers from foreign multinational enterprises (MNEs) that source less from domestic SMEs compared to other OECD countries. MNEs are twice as productive as domestic firms in Czechia, highlighting the potential of productivity spillovers (OECD, 2024[2]). However, foreign affiliates in Czechia import almost half of their intermediate inputs compared to around a third in other OECD countries. Moreover, domestic-owned firms are responsible for only around a third (32%) of the inputs sourced by foreign affiliates, compared to half on average in other OECD countries. Similarly, foreign affiliates’ output is mostly exported or sold to other foreign affiliates operating in the Czech market (OECD, 2024[2]).
Research intensity and innovation capacity have improved but still lag many OECD peers. Despite an upward trend, R&D spending of businesses, in particular SMEs, continues to significantly lag behind the average OECD country (Figure 2.3). FDI has been traditionally concentrated in sectors that spend less on R&D. Only 4% of greenfield FDI that took place in Czechia over the period 2003-2022 involved R&D activities, about half the share in leading economies like Ireland, Austria and Denmark (OECD, 2024[2]). Moreover, the number of patent applications is low, and Czechia remains a moderate innovator according to the European Innovation Scoreboard, although the gap to the EU average is closing (EC, 2023[3]). The performance of SMEs in introducing product, process and organisational innovations has improved in recent years (OECD, 2024[2]).
Business dynamism is relatively low. Entrepreneurship and a dynamic business sector are crucial for the diffusion of new technologies. Young firms are often the first adopters of new technologies and engage more in risky break-through innovations. They therefore account for a significant part of aggregate innovative activity and are a vital factor in making new technologies more broadly available to the rest of the business sector. Moreover, the green and digital transitions will require economic renewal, highlighting the need for structural policy settings that facilitate capital and labour reallocation. In Czechia, the birth and churn rate of firms are lower than on average in the OECD and especially low compared to the most dynamic economies such as Denmark (Figure 2.4). Furthermore, the share of start-ups (0-2 year old firms) in the business population and in employment (4.5%) is lower than in other OECD economies (Panel C).
Improving human capital and reducing skill mismatches in the labour market are also crucial areas to boost productivity and innovation in Czechia. Areas for reform to enhance education and skills are discussed in detail in Chapter 4. For example, a larger number of tertiary-educated persons would help foster innovation. Boosting tertiary educational attainment requires income support to vulnerable students, and also strengthening core and transversal skills in VET programmes to help students transition from VET to tertiary education. The share of STEM graduates is high overall but needs to be increased among women especially in ICT fields. Expanding opportunities for adult learning (e.g. coding) through flexible, modular and high-quality training programmes would make the workforce more adaptable to changing skill needs. Finally, strengthening continuous professional development of teachers, for example in the field of digital competences, can improve teaching quality and better equip pupils with skills for the labour market. This chapter focuses on the business side of the innovation ecosystem and business environment as policy levers to revitalise productivity convergence.
Note: GERD stands for Gross Domestic Expenditure on R&D. In Panel B, the number of patent applications refers to applications by inventor and priority year to the PCT (Patent Co-operation Treaty), the EPO (European Patent Office) and the US (US Patent and Trademark Office).
Source: OECD Main Science and Technology Indicators (MSTI) database; OECD Patents Statistics database; and OECD calculations.
Total business economy
Note: The total business sector refers to total industry, construction and market services except holding companies. OECD average is calculated as a simple average of 24 OECD countries.
Source: OECD calculations based on OECD Structural and Demographic Business Statistics (SDBS).
Improving the governance of the innovation system
The authorities have adopted various strategies and programmes to boost the economy’s innovation capacity, but the governance framework should be enhanced. There are at least six different strategies with a main aim to support innovation (OECD, 2024[2]). Among the most important strategies is the Innovation Strategy of the Czech Republic 2019-2030, which aims inter alia to increase R&D expenditure to 3% of GDP by 2030 from currently around 2%. In addition, The National Research and Innovation Strategy for Smart Specialisation (RIS3) sets up sectoral and thematic priorities (e.g. sustainable mobility, advanced materials) over the EU programming period 2021-27. To reduce overlap between these strategies and clarify responsibility for their implementation, the Office of the Government is currently preparing a law that specifies the hierarchy of strategies, giving the National Policy of Research, Development and Innovation 2021+ an overarching role. However there remains a need to enhance coordination among various ministries, national implementing agencies, their regional branches, and regional innovation centres involved in innovation policy (OECD, 2024[2]) (OECD, 2020[4]).
A large number of actors are involved in the formulation, implementation and funding of R&D and innovation policies. The main bodies include:
Advisory and coordinating bodies: The Section for Science, Research and Innovation was established in 2022 within the Office of the Government of the Czech Republic under the authority of the Minister for Science, Research and Innovation and tasked to coordinate policies. The Council for Research, Development and Innovation (CRDI) is the main advisory body to the government and responsible inter alia for the preparation of national strategies (e.g. National Policy of Research, Development and Innovation 2021+) and for overseeing and validating the allocation of R&D funds.
Ministries: Ministry of Education, Youth and Sports (mainly public R&D and higher education policies), Ministry of Industry and Trade (MIT; mainly business R&D and innovation polices, start-up environment), Ministry of Finance (e.g. R&D tax credit).
Implementing bodies: Technology Agency of the Czech Republic (under the supervision of the CRDI) is the main agency and runs in-house programmes and programmes on behalf of different ministries in the area of applied research and experimental development. Other implementing agencies include the Business and Innovation Agency (under MIT, mainly EU-funded business support), CzechInvest (under MIT, e.g. start-up support), and the National Development Bank (e.g. risk capital funding).
Other bodies: The Czech Academy of Science funds 54 research institutes; the Czech Science Foundation provides public funding exclusively for basic research projects.
Moreover, numerous strategic frameworks exist to support innovation with different responsible institutions. Main strategies include (responsible body in parenthesis): Innovation Strategy: The country for the future (Prime Minister office and CRDI); National Policy of Research, Development and Innovation 2021+ (CRDI); National Research and Innovation Strategy for Smart Specialisation (MIT); Industry 4.0 Strategy (MIT); National Artificial Intelligence Strategy (MIT); Digital Economy and Society (MIT).
Better targeting business support for R&D to SMEs and young firms
Government support for business R&D is relatively low in Czechia and focused on direct support (Figure 2.5). Government support for business R&D can help overcome market failures related to positive externalities from R&D and financial constraints. Firms often cannot fully appropriate the returns to their investment in new knowledge. Also, intangible capital is more difficult to use as collateral than physical capital, limiting private financing options, especially for small start-up firms without other collateral. This results in a socially suboptimal level of private investment in R&D. Many OECD countries use a combination of direct support to business R&D (e.g. grants) and tax incentives to support business R&D. The authorities should therefore consider increasing the overall government support for business R&D.
Recent empirical OECD research confirms the overall effectiveness of government support to crowd in private R&D. In particular, OECD research finds that one extra unit of R&D support (direct support or tax incentive) translates into around 1.4 extra units of R&D (OECD, 2023[5]). In addition, OECD research highlights the complementarity between tax incentives and direct funding for innovation support. R&D tax incentives tend to encourage experimental development more strongly, while direct funding tends to encourage basic and applied research (OECD, 2023[5]). At the same time, direct R&D support is better suited to support specific policy priority areas.
The R&D tax allowance should be made more beneficial for small and young firms. Since 2005, Czechia operates an R&D tax allowance (OECD INNOTAX). In 2020, about 800 firms benefited from the tax allowance, which is a relatively low number compared to countries of similar size such as Austria, Portugal and Sweden. Moreover, over 70% of the total amount of tax support went to large firms, a large share in international comparison (OECD, 2023[6]). To make R&D tax benefits more beneficial for small and young firms, it is important that they include carry-forward provisions or cash refunds. The large majority of OECD countries that offer R&D tax incentives, offer refundable or equivalent incentives. The R&D tax allowance in Czechia can be carried forward up to three years and the authorities plan to increase this period to 5 years. This is welcome, but shorter than for instance in Poland (6 years), Portugal (8 years), Spain (18 years), and the United States (20 years) (OECD, 2023[6]). In addition, cash refunds may be more beneficial for young firms, who may not have sufficient tax liability for several years and need financial support early in the innovation process. Australia, Canada, Colombia and the United States are examples of countries that offer refundable R&D tax credits targeted at SMEs and start-ups. OECD research suggests that firms’ responsiveness to tax support (i.e. into how many units of extra R&D one unit of tax support translates) is nearly twice as large when refund provisions are available in case the tax provision cannot immediately be claimed because of insufficient tax liability. It is three times as large when tax incentives are redeemable against payroll taxes and thus disconnected from the profit situation of firms (OECD, 2023[5]). A number of OECD countries also offer more generous R&D tax credit rates for SMEs and/or young firms (e.g. Australia, Canada, Iceland, Korea).
Direct government funding and government tax support for business R&D, as a percentage of GDP, 2021 or 2020
Note: BERD stands for Business Enterprise R&D.
Source: OECD R&D Tax Incentives database, July 2024, https://oe.cd/rdtax.
Direct R&D support to businesses should be thoroughly evaluated and effective programmes scaled up. The Ministry of Industry and Trade and the Technology Agency of the Czechia offer numerous grant schemes to support R&D and innovation activities. This support targets mostly domestic SMEs in specific regions and sectors (OECD, 2024[2]). However, there are overlaps across programmes and some are perceived as cumbersome, procedurally difficult and time-consuming, therefore considerably limiting their relevance for smaller enterprises (OECD, 2020[4]). More generally, there is a need to thoroughly evaluate the support programmes. The Technology Agency generally evaluates its completed programmes and publishes the results. The evaluation of the ALFA programme of the Technology Agency is a good example of a thorough evaluation conducted in collaboration with academia (Bajgar and Srholec, 2023[7]). The study finds that the subsidies significantly stimulated R&D expenditures in SMEs, but not in large firms. This suggests that follow-up programmes could potentially become more efficient by reallocating funding from large firms to SMEs. Moreover, the evaluation found that the programme supports more established firms (median age of 15 years). Support could more specifically be targeted to young firms. Based on the results of thorough evaluations, programme designs should be optimised, ineffective programmes cancelled, and effective programmes scaled up.
Further developing capital markets
Despite significant progress, access to risk capital remains a challenge for start-ups and young firms. Bank credit is readily available for SMEs but capital markets are underdeveloped in Czechia (OECD, 2023[8]). Risk capital funding is critical for young SMEs without collateral, corporate and credit history. The venture capital market has grown significantly in Czechia in recent years but remains shallow compared to other OECD countries (Figure 2.6). Moreover, business angel networks are fragmented, lack visibility and involve only a limited number of investors (OECD, 2020[4]). Aside from providing funding at a critical and early stage of an innovative firms’ life cycle, these angel investors can provide mentoring services, business advice and access to networks. Czech founders view access to finance as one of the most important areas to improve the start-up ecosystem (Czech Founders, 2024[9]).
The authorities have made sustained efforts to boost risk capital markets. In 2018, three private venture capital funds were established, backed financially by the European Investment Fund (EIF) (OECD, 2024[10]). As part of the Recovery and Resilience Plan, the authorities also launched a EUR 55 million fund-of-funds in 2023, managed by the EIF and focused on equity financing for early-stage Czech start-ups and spin-offs developing digital technologies. Moreover, the Ministry of Industry and Trade in cooperation with the National Development Bank (NDB) established a venture capital - IPO fund in 2020, which helps SMEs enter the Prague Stock Exchange SME market (START) (OECD, 2024[10]). Crowdfunding, an alternative form of financing, has become more popular in Czechia, although the overall funds raised remain small. In 2022, the EU regulation on crowdfunding was transposed into Czech law. Crowdfunding service providers are supervised by the Czech National Bank (CNB). Empirical evidence suggests that the introduction of explicit regulation is associated with an increase in retail crowdfunding volumes (Rau, 2017[11]). This may be because explicit regulation and supervision strengthen investor protection and regulatory clarity. In addition, the regulation allows providers to expand their services to other EU countries without the need to obtain additional licenses (OECD, 2023[12]).
Venture capital investments, % of GDP, 2023 or latest available year
Source: OECD Entrepreneurship Financing Database
Incentives to invest in risk capital can be further enhanced. The authorities could consider tax incentives to stimulate the provision of private risk capital, including by experienced foreign venture capital investors. A number of European countries provide tax relief measures targeted at business angels (ESNA, 2024[13]). The United Kingdom’s Enterprise Investment and Seed Enterprise Investment schemes, which grants tax breaks for investments in start-ups and other eligible firms, has been successful in stimulating financing of young firms (EC, 2017[14]). Israel developed its venture capital industry around the YOZMA group, established by the government in the early 1990s. The group took equity stakes in Israeli start-ups and provided equity guarantees for foreign investors (OECD, 2003[15]). As the venture capital industry grew and matured, the government successfully phased out its equity involvement. Moreover, the authorities could support the creation of a formal and structured business angel network, to boost activities, and raise the profile of angels as a driver of innovation diffusion (OECD, 2020[4]).
Pension funds have played an important role in capital market development and venture capital funding in some OECD countries. Capital-based pension systems can contribute to providing risk capital. However, many OECD countries have strict quantitative restrictions that limit investment in private equity and venture capital. In Czechia, pension fund investment into private equity was prohibited until recently. Prudent regulations are important to protect pensioners’ contributions. However, quantitative restrictions may currently be too restrictive to make greater use of pension funds as a source of scale up funding of innovative start-ups. Reforms to pension fund legislation have been key to the development of venture capital markets in some OECD countries. For example, reforms in Sweden in 1996 allowed investment in equity funding for SMEs, and pension funds now play a dominant role in Swedish venture capital funding (OECD, 2018[16]).
Encouraging higher pension fund allocations to risky assets, while ensuring prudent regulations to protect pensioners’ contributions, could help develop the capital market and improve pension income. In Czechia, the funded pension system only consists of a voluntary personal pension scheme (Pillar 3). The participation rate is quite high, with around 64% of the working age population participating in pension plans, but the total amount of assets under management remains moderate, at around 9% of GDP (Figure 2.7 and (OECD, 2023[17])). Most importantly, returns of the funds have been extremely low. For example, the average annual real return over the past ten years was -2.4%, the lowest in the OECD (OECD, 2023[17]). This is due to a very conservative asset allocation, with the highest share of assets in low-risk bills and bonds across OECD countries (Figure 2.7, Panel B). To improve the performance of the pension funds the OECD Pension Review of Czechia (OECD, 2020[18]) recommended for example to incentivise participants to switch to funds without an annual non-negative nominal return guarantee, as the guarantee incentivises pension fund providers to invest in low-yielding short-term bonds. The government should also promote access to an appropriate default life-cycle based investment strategy. In the OECD, pension providers have to offer a life-cycle investment strategy as a default in Australia, Canada, Chile, Israel, Lithuania, Mexico, Poland, Slovenia, Sweden, the United Kingdom and the United States. In Czechia, some pension management companies already offer life-cycle based investment strategies by mixing different participating funds. The regulatory framework could require all companies to offer such strategies as a default option.
In 2024, the authorities introduced a number of reforms to strengthen participation in private pension schemes and offer a wider variety of old-age savings products with fewer restrictions, with the potential to help develop capital markets. For example, to increase contributions into Pillar 3, the minimum monthly contribution to receive a proportional state contribution was increased. Moreover, a new and additional participatory pension fund was introduced with fewer investment restrictions. For instance, the fund is allowed to invest a share in private equity or venture capital funds. Finally, long-term investment accounts were introduced. Investment in these accounts is tax favoured and the investor can allocate contributions freely into a set of approved investment products (e.g. stocks and bonds).
Source: OECD (2024), Pension Markets in Focus 2024, OECD Publishing, Paris, https://doi.org/10.1787/b11473d3-en.
Strengthening linkages between businesses and science
The transfer of knowledge and technology from higher education and research institutes to firms can be further strengthened. For instance, higher education expenditure on R&D financed by domestic business enterprises remains below the OECD average (Figure 2.8). The number of researchers employed by businesses lags the EU average (EC, 2023[19]). Moreover, academic spin-offs are relatively rare (OECD, 2020[4]). Academic spin-offs have a significantly higher propensity to patent than non-academic start-ups (OECD, 2019[20]). The authorities use several instruments to stimulate business-science linkages, although the amounts involved are relatively small. For instance, innovation vouchers, which are widely used to purchase R&D services from universities or public research institutions, typically involve amounts below EUR 10 000. Nevertheless, beneficiaries considered them easy to apply for and receive support, enabling smaller enterprises to successfully apply (OECD, 2020[4]). Moreover, every technical university has a (small) technology transfer office, and the Academy of Sciences operates a central technology transfer centre.
There are a number of policy options to enhance business-science linkages. For example, the performance-based funding of universities (around 17% of the total university budget) could include a higher weight on collaborations with businesses. University governance structures include a board as the main decision-making body with private-sector participation in 25 OECD countries, but this is not the case in Czechia (OECD, 2019[20]). Private sector participation in boards enhances the propensity of institutions to cooperate with industry and support knowledge transfer. Furthermore, a number of OECD countries support mobility schemes that allow public researcher to work temporarily in the business sector or vice versa, including by subsidising a portion of the researchers salary (e.g. Canada, Norway). Finally, legal uncertainty and cumbersome procedures appear to hinder the creation of academic spinoffs. Three universities have created subsidiary entities with the aim to initiate and develop spin-offs. This model could potentially be rolled out at more universities. In 2024, the government introduced the “knowledge transfer” reform to enhance the utilisation of scientific and research knowledge. The reform includes for example measures to strengthen technology transfer offices and innovation centres, and support for the establishment of a fund of funds for transfer activities, specifically for seed and pre-seed investments into spin-off companies, in cooperation with the European Investment Bank.
Share of higher education expenditure on R&D financed by the business sector, %, 2022 or latest available year
Source: OECD Main Science and Technology Indicators (MSTI) database.
Improving the communication infrastructure
Czechia faces some challenges in digital connectivity. Access to reliable and high-quality fixed and mobile broadband connections constitutes the backbone of a knowledge-based and digital economy. In 2023, only around 51% of households (EU average 79%) were covered by very high capacity networks (VHCN) (EC, 2024[21]). According to the OECD broadband statistics, the share of fibre connections in total fixed broadband connections was only 21.6% at the end of 2023, compared to an OECD average of 42.5%. The coverage in rural areas is among the lowest in the EU. Moreover, the share of firms with broadband speeds higher than 100 Mbit/s is low (46% in 2024 compared to 63.3% on average in the OECD, and 65.2% in the EU) (OECD ICT Survey). In contrast the 5G coverage was above the EU average in 2023 (95% of populated areas compared to 89%) (EC, 2024[21]).
Czechia should accelerate its roll-out of high-speed communication infrastructure, especially in rural areas. To encourage the deployment of high-quality broadband networks in underserved areas, the authorities could consider a competitive tender process for public funds that operators can receive in underserved or unserved areas. According to the 2024 OECD Product Market Regulation indicators, there is also room to improve transparency about the location, level of occupation and planned works on fixed and mobile infrastructure. Network operators are not required to publish such information and there is no electronic platform where it is published. Having access to such georeferenced information can encourage faster and more efficient deployment of very high-capacity networks, promote infrastructure sharing, reduce costs associated with duplicated infrastructure, and ensure that small operators can identify all potential access points to the network.
Improving regulations to foster business dynamism
According to the 2024 OECD Product Market Regulation indicators, regulations are overall less restrictive than on average in OECD countries (Figure 2.9). Nevertheless, there are areas for improvement including by simplifying procedures to start a business and to obtain licences as well as regulation of professional services (see below).
OECD Indicators of Product Market Regulation (PMR), overall economy-wide indicator, index scale of 0-6 from least to most restrictive, 2023
Source: OECD PMR database, January 2025.
Progress has been made to facilitate starting a business but administrative requirements to obtain licences and permits can be further streamlined. In July 2023, the company law was amended which inter alia decoupled the process of starting a company from the process of obtaining licences and permits, and allowed to start a limited liability company fully electronically. To streamline the process of obtaining licences and permits, the authorities could consider setting up a one-stop-shop, which would further reduce barriers to entry. Furthermore, while there is an online inventory of all licenses and permits, there is no requirement to regularly review it and assess whether such licenses and permits are still necessary or should be removed. This regular revision of the inventory is a good way to reduce red tape. Moreover, public bodies are not required to apply the ‘silence is consent’ principle when issuing permits and licenses to businesses. Adopting such a principle would provide strong incentives for authorities to respond in time, while enhancing certainty about timelines for entrepreneurs. At the same time, there has been some progress in the area of building permits for large infrastructure projects, with the establishment of a new Transport and Energy Construction authority in 2024, that centralises and streamlines building permitting for large transport and energy construction projects.
The ecosystem for start-ups needs to be further improved. Czechia is a member of the EU Startup Nations Alliance (ESNA) and in 2022, the Czech government signed up to implement 8 Startup Nations Standards (SNS). According to the latest Startup Nations Standards Report (ESNA, 2024[13]), there is room for Czechia to improve several standards. For instance, while a virtual helpdesk for startups and scale-ups (“Justina”) assists with frequently asked question, the scope could be broadened to include regulatory issues and information on funding opportunities. Also, legal documents without apostille from some other EU countries are not recognised to start a business. Moreover, stock options are an important means to attract talent for start-ups. A new legal framework for employee stock options has been enacted in 2023. However, taxation of stock option could be reviewed, as it does not comply with the recommended standard set out by ESNA, namely for stock options to be subject to capital gains taxes upon cash receipt rather than beforehand. Czech founders attach the highest priority to improving the framework for employee stock options (Czech Founders, 2024[9]). Lastly, no special regulatory regimes or regulatory sandboxes exist for start-ups. Regulatory sandboxes are special legal frameworks with the aim to test innovative solutions.
Regulatory impact assessments (RIA) are well developed but their effectiveness can be strengthened. An obligation to conduct ex-post RIAs was introduced in 2023 and came into effect in January 2025. However, RIA for primary laws only cover processes carried out by the executive, which initiates approximately 45% of primary laws in Czechia. There is no requirement for RIA for primary laws initiated by parliament (OECD, 2021[22]). In addition, the RIA Board, an independent watchdog, is responsible for overseeing the quality of RIAs produced by individual ministries and other agencies. However, RIAs are seldomly amended by the submitting authority in response to recommendations of the RIA board (OECD, 2023[23]). An obligation to redraft a RIA after a negative statement of the Board could be reintroduced. A reform of the RIA process that aims to strengthen incentives for submitting authorities to incorporate the RIA Board’s feedback and improve the quality of RIAs more broadly is currently in preparation.
Regulations in professional services remain more restrictive than in other OECD countries. Restrictions in regulated professions reduce competition, job mobility and negatively impact on the competitiveness of firms in downstream industries that use these services. According to the 2024 OECD Product Market Regulation indicators lawyers, notaries, architects and civil engineers are more regulated than in other OECD countries. This is partly due to the compulsory membership in relevant professional associations and prohibition of firms in these professions to incorporate. Moreover, cooperations between lawyers and other professions are restricted and only lawyers can have ownership and voting rights in law firms. Lifting conduct restrictions to allow multidisciplinary practices could lower costs, provide economies of scope, and offer clients the benefits of a one-stop shop. Similarly, allowing non-lawyers to invest and manage legal firms could provide new sources of investments as well access to better management skills, and encourage the development of more innovative business models. The United Kingdom and Portugal have recently undertaken reforms in these directions (OECD, 2024[24]). Moreover, the notary profession is heavily regulated in most civil law countries. Nevertheless, Czechia could follow the example of some OECD countries like Italy, the Netherlands and France that have eased restrictions on the number of notaries and/or liberalised fee regulations. Finally, certain property services are currently reserved exclusively for estate agents, which could be opened to other professionals (EC, 2024[21]).
Czechia has made progress in improving its insolvency regime. Efficient insolvency frameworks can foster business dynamism, resource reallocation and productivity. According to the updated OECD insolvency framework indicator (André and Demmou, 2022[25]), the insolvency framework has become more efficient since 2016. Moreover, Czechia transposed the EU Directive on preventive restructuring frameworks in 2023 and 2024. This should lead inter alia to the further development of early warning tools for debtors, and access of honest insolvent entrepreneurs to full discharge of their debt after a maximum of three years. Nevertheless, further progress can be made. For example, the number of stages in which the court is involved in the liquidation and restructuring process remains higher than in other OECD countries. Further promoting out-of-court proceedings can speed up and lower the costs of restructurings and liquidations (André and Demmou, 2022[25]).
Further strengthening the anticorruption and public integrity framework
The perception of corruption among citizens and businesses remains relatively high (Figure 2.10). In 2024, 79% of survey respondents considered corruption widespread in Czechia (EU average 68%) (Eurobarometer 548, 2024). Among businesses, 67% of companies consider that corruption is widespread (EU average 64%) and 42% consider that corruption is a problem when doing business (EU average 37%) (Eurobarometer 543, 2024).
Note: Panel B shows the point estimate and the margin of error. Panel D shows sector-based subcomponents of the “Control of Corruption” indicator by the Varieties of Democracy Project.
Source: Panel A: Transparency International; Panels B & C: World Bank, Worldwide Governance Indicators; Panel D: Varieties of Democracy Project, V-Dem Dataset v12.
Czechia has the legislative and institutional framework to prevent and fight corruption largely in place. A new Anti-Corruption Strategy 2023-2026 was adopted in April 2023 and is complemented by the Government’s Action Plan to Fight Corruption for 2023-2024. In March 2024, the government approved a draft law that introduces lobbying rules for the first time, including a transparency register with obligations for both lobbyists and the lobbied parties. The law is pending approval by the parliament. New ethics rules for civil servants entered into force from January 2024 but there are still no codes of ethics in place for either chamber of parliament, and a comprehensive framework is lacking in relation to gifts and benefits for members of parliament (EC, 2024[26]). A Committee of the Chamber of Deputies approved a resolution in February 2024 that sets out recommended ethical behaviour for its Members to partly address this shortcoming. Moreover, post-employment rules remain limited, covering the civil service and the government only in limited cases. A limited number of civil service positions have a mandatory one-year cooling-off period from working in the same sector. This concerns mostly positions dealing with sensitive matters such as public procurement for certain sectors. The lack of broader rules on revolving doors represents a gap in the legal framework (EC, 2024[26]). Regulations comprehensively define conflict-of-interest situations for various levels of government and include proportional sanctions for breaches of conflict-of-interest provisions. The submission rate of asset declarations is close to 100% for members of government, parliament and the judiciary. However, verification of the filed declaration can be further strengthened (OECD, 2024[27]).
References
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