| The Czech
Republic |
| Worth A
Look |
| Due to
human's conscious inertia, most westerners see post-communist countries
as places with an underdeveloped infrastructure, low standard of living
and therefore a very risky market to invest in.
Well, for some
of them, like Russia or Rumania this is still very true (and unfortunately,
will remain true for years, if not forever). Some others, like Hungary
or Czech republic, might surprise you.
It is a known
fact, that Prague is one of the most beautiful cities on earth. In the
last years it has also become a very attractive place to live, do business
and invest. |
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| Living
In Czech Republic
Let's start
with the fact that for a lot of readers of this newsletter leaving their
home country will mean tremendous tax savings (for Americans living abroad,
all income up to 75,000 is tax deductible, for many other countries all
income is.) Sure, if you are a construction worker, you will not be able
to find a job in Prague that will pay you as much as your current job in
LA, but if you are a privacy consultant, Internet entrepreneur or stock-market
trader, you might as well do it from here.
The communications
are about as good as in Germany, and in the small beautiful village
in the mountains where I live, I have a phone line with ISDN, cellular
coverage and satellite dish for my CNN and CNBC.
Saving 25-40%
of your income just by moving your residence abroad would not be that bad,
would it? (Keep in mind, that if you stay in Czech Republic for more than
182 days a year, you will be liable to pay taxes here). The real fun, as
you know, is not saving, it is spending! |
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| The Czechs
have a lot to offer in this direction as well. How about 40-cent beers?
$60 escorts? 3 c/minute cellular calls? (I can assure you, that none of
these are any worse, than their western analogues).
An opera ticket
will set you back $20, the liter of gas $0.80, the workout at the health
club - $2.
Dinner in
the fancy restaurant Hilton Hotel will be $30 (unless you want to go
crazy and pay $1000 for their Chaute, say, 1902: $800.)
Parking ticket:
$15. Fancy 2-bedroom apartment downtown? $1000/month. (and you can buy
it for mere $200,000)
Nothing in
life comes without a price, however. What is the price you pay? |
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Offshore
Resources Gallery
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| Well, electronics
are more expensive, but what percentage of your budget do you really
spend on TV's and refrigerators?
The services
are not as readily available as they are in the States, so if you want
your suit dry cleaned in 2 hours, you have a choice of 2 cleaners, not
200, and they will not let you return your CD player after a month of use,
just because "you did not like it".
Medical
care is not exactly the western standard, but there are special clinics
for foreigners with western personnel and equipment, that accept your insurance.
Well, expatriate
living is by no means for everybody, and if it were, who would stay home
and pay taxes?
However, if
you think, you might be ready to try it, then Prague is definitely one
of the places to be.
Doing Business
In Czech Republic |
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| When a communist
economy opens up and becomes a market one, there are plenty of opportunities
for those who are in search of possibilities. Some things are just
not there, and others are done the wrong way.
The author
is not likely to give you a list, because it'll be just so much fun for
you to walk through the streets of Prague, and see the places you will
put your vending machines, hot dog stands, banks or hotels.
Let's take
a look at the things that usually scare people out of starting a business
in a foreign country.
Foreign
language - probably, the biggest problem of all (depending on type
of business, you are going to run). Hire an interpreter, hire English speaking
personal - better yet, learn the language - by no means should it prevent
you from going and taking, what is yours. |
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Offshore
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| Fear of underdeveloped
legislation base - hire a lawyer! There are some fields (like lending against
real estate collateral) that are still not quite up to the western standard,
but you do not have to be in these fields.
Your right
to own property is defended by law as well as anywhere in the world.
Once you get the feeling of it, you'll probably agree that the impossibility
of being sued on the grounds of sexual harassment is kind of nice compensation.
This country is still not in the hands of lawyers, thank God!
Fear of bureaucracy
and corruption - come on, nowhere in the world have I seen anything like
the bureaucracy of first world countries, and there is nothing more sweet
to a businessman than a corrupted bureaucrat.
The list can
go on and on, but like with any other activity, it's always easy (and less
rewarding) to find an excuse.
Investing
In Czech Republic
I certainly
hope that many readers of this newsletter have more time than they had
to work or run a business far behind them. Whatever you are invested in
(I certainly hope, it is not MSFT or AMZN), you might want to look at what
Czech Republic offers.
Let's start
with the plain vanilla bank deposits. Contrary to the popular believe that
Eastern European countries currencies are unstable, the Czech Crown has
been trading in the range of 17-18 per DM for the last ten years. And during
that same ten years, the yearly deposits were paying 10-14 percent a year.
So, if you just invested in Crowns 5 years ago, your money will have doubled
(a USD account would bring you a mere 40 percent).
Sure, you
could've made much more, if you invested in real estate. In Prague,
during these years, the prices of real estate went up 15% p.a. on average.
You could quite easily have made another 10% p.a. renting property. In
these years, the money you'd have invested in real estate would have tripled!
These returns
do not come free of risk. For example, last year the Czech Crown lost 20%
of it's value compared to USD together with the DEM) That wiped out the
gains for the year in your bank deposits and real estate investments (if
not for this hiccup, the data in the previous paragraph would be even more
impressive). It did come back this year, however.
The moral is
old: If you want to make a lot of money fast, there is just no way to do
it without a substantial risk, and you cannot really predict, how much
your investment will be worth tomorrow. But you can pretty much see in
the case of Czech Republic, what will happen three or four years from now.
The
country is to become a member of EU and that will cause the real estate
prices to become comparable to the prices in other EU countries.
Right now you
can buy a beautiful 6-bedroom villa in a premium location in Prague for
$400.000. In five years it may well be worth one million dollars.
Once in a while
a window of opportunity opens for those, who seek it. Living in Czech Republic,
doing business here or investing is not for everybody. But it might be
for you!
To contact
Ilia Click Here |
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