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Wednesday, September 20, 2017

Successful Models for Czech-Chinese Cooperation

~ Warsaw Forum

Mr. Jan Kohout is President of the New Silk Road Institute Prague and Adviser to the President of the Czech Republic. This is an edited version of the keynote speech he gave at CEIBS 1st China-CEE Development Forum in Warsaw on September 15, 2017.

“Thank you for the floor and good afternoon ladies and gentlemen. Let me first express my thanks to the organizers for the invitation to this forum, especially the China Europe International Business School and Koźmiński University. It’s a great pleasure for me to be here today because the First China-CEE Development Forum, and especially its title “Exploring Innovative Approaches to Win-Win Cooperation between China & CEE in Light of the Belt and Road Initiative” is very important to me.

It’s a little bit long, I think that it could be shortened. In fact what we should do to be more efficient in our cooperation is exactly why I established this non-governmental institution just two years ago, inspired by the 16+1 cooperation, which I have been attached to from the very beginning. I remember well the visit by the former Chinese Prime Minister Wen Jiabao to Warsaw at the launch of this initiative. I was present for that and I also attended the last big forum in Beijing on the Belt and Road Initiative. So the Belt and Road Initiative is another source of inspiration and I think that there’s a need to reflect on what it means for Central Europe and for Central European countries.

I would like to focus first on what links China and the CEE countries. This morning, it was said that there’s huge diversity between the CEE countries.  They are in many different clubs, maybe more than are necessary.  Nevertheless this is the reality. But I think that there is one link beneath all this and that’s our common history. So I think that China and Europe jointly promote the dialogue between people so that we can learn from each other while creating future features of openness and inclusiveness. And economic change is an inseparable part of this dialogue between us. 

Furthermore, the China CEE dialogue has more in common than it looks like. Above all let’s have a look at the economic transformation from the centrally planned economies toward market economies. Under different circumstances, and led by different incentives still different solutions, but in many ways similar.

Deng Xiaoping as well as the post-Soviet leaders of the CEE countries faced problems caused by decades of inefficient administration and state regulation. After more than a quarter of a century, China is now the biggest economy in the world and the development of the CEE countries is less definite. However, we can find indisputable examples of the success of marketization.

We've heard about the example of Poland, and as Former Minister of Foreign Affairs and Vice Prime Minister of the Czech Republic, of course I will speak about the Czech Republic. I would like to point out that the Czech Republic emerged from an obsolete economy to become one of the best-performing economies in the region, with one of the lowest unemployment rates, and has had success in reducing the public debt. Privatization, foreign capital inflows, coordination instead of tight regulation, and other steps helped in this turnaround.

While the development of China has been much faster and more extensive, there is still a common path for the destiny of our countries. For this reason, this kind of dialogue, people-to-people exchanges, and best practices sharing, is especially important and beneficial for both sides of a partnership.

The fact that we are here, that we gather on a regular basis, that there are still topics to discuss, shows that China and the 16 countries of Central and Eastern Europe have a lot in common. Furthermore, most of the Central and Eastern European countries have seen the arrival of Chinese investment over the last few years, and there is a growing portfolio of Chinese infrastructure and development projects, equity investments and acquisition in the region. Trade is rising and numerous initiatives in research, education, business-to-business, and other areas are operational or underway.

Altogether the number of regular and institutionalized mechanisms under the initiative, a pre-requisite, in my view, for long term and sustainable development of the platform, is growing by the year, ensuring a solid foundation for the future.

Nevertheless, there is one more issue I have mentioned at similar occasions many times before. Around the ancient Silk Road, caravans loaded with rare commodities travelled in both directions. In order to fulfil the resolution of the new Silk Road initiative, it is important to make sure that there is bi-directionality, even in today's conditions. The second requirement is that the nature of investment and trade exchange should be based on a mutually beneficial partnership and be oriented to high value-added sectors with clear interest and evident value for the economy.

We still all need to focus on this in the Czech Republic once again. In the Czech environment we have seen several projects and capital inflows in areas with low added-value or marginal importance for the economy. In this context, there are doubts about whether the economy will actually experience any real benefits from incoming investments, or whether they are only property transfers with no impact on job creation, support of SMEs, support for scientific research and innovation, and other activities which contribute to increasing the economic and technological level of the country.

Recently we could read in the Czech media that the rate of growth of Chinese investments in our country has been falling. So there has been a factual decline, compared to the year in which President Xi Jinping visited the Czech Republic, which was last year. I am not so skeptical about this. On the contrary, I consider the gradual pace to be possible evidence of a paradigm shift or rational and strategic approach to investment in the sector, through focus as well as entry level respectively.

However, it is primarily up to us to act in favour and to promote projects with high added value, to create suitable conditions for them and, above all, to remain united to clarify our position, to behave predictably and to be a trustworthy partner.

We are the ones who should influence and lobby political representatives and political parties in order to promote sustainable projects. Projects with high added value and potential bring benefits to the people of our countries.

To give just one successful example, I will mention the cooperation in the aviation sector between the Czech Republic and China, which would not be possible without support and coordination of national governments, non-governmental organizations, universities, research organizations, development and design studios, aircraft and power manufacturers, maintenance, repair providers or air traffic control. The success of aviation cooperation can be seen in the opening of three direct flight connections and another which will open very soon.

But I will leave it to my colleague Mr. Hyl, he’s the Czech Republic’s best expert on aviation to discuss in more detail. He will be involved in the cooperation in the aviation sector between the Czech Republic and China. But what I want to say is that this sector provides a good example: I think that this is an example of Goliath gives up fighting with David and enters into a partnership which is based on mutual needs as well as economic characteristics, which is also beneficial for all parties, especially the people of the participating countries.

So, ladies and gentlemen, I hope that some of what I said will provoke your thoughts.  And I wish us all a practical exchange of views, ideas, and experiences, and new partnerships in accomplishing our mission. Thank you very much for your attention.”