CZECHOSLOVAKIA

through foreign investment, either wholly-owned or joint ventures.

Czechoslovakia rejoined the IMF and the World Bank in September 1990. As part of this process, it is committed to making fiscal and monetary data available and in an acceptable format. This will be a long-term effort, however, and currently reliable data remains difficult to find. As part of the economic transformation, the government has or will cease to provide production targets for industry. It has already removed much of the subsidies for food and other products. Price liberalization is scheduled to go into effect in January 1991, with most prices being allowed to move to a market level. The tax system is undergoing reform, and will likely involve reliance on a value-added tax (which currently does not exist) similar to most EC countries,

On the monetary side, in the past the State Bank (Central Bank) performed both traditional central banking as well as commercial banking functions. In a reform put through by the previous regime, but not implemented until January 1, 1990, the government separated the commercial banking functions from that of the State Bank. Those portions of the State Bank which had dealt with commercial banking were set up relatively independently, although the State Bank continued to be a major shareholder in them. The banking system is now in great flux, with the setting up of new banks, the opening of representational offices of foreign banks and the expected creation of foreign joint venture banks. The State Bank and the local commercial banks are trying to adopt traditional Western-style activities and monetary policy tools, but this will take some time and much technical assistance.

Politically Czechoslovakia is in the process of moving from an effective unitary state, with final decision-making authority in the hands of the Communist Party, to a genuinely federal state, with most economic and political power to be lodged in the hands of the Czech and Slovak Republics. This process will have substantial impact on the pace and outcome of economic reform.

As a major part of the move to a market economy, the government is aiming at full internal convertibility of the Czechoslovak crown. Low reserves of hard currency, however, may delay the overall plan for full convertibility. Czechoslovakia adopted "internal" convertibility on January 1, 1991. Internal convertibility means that the crown will float against the dollar between officially set limits and that businesses and institutions may obtain access to hard currency in exchange for crowns to conduct import and export transactions. It will also authorize repatriation of crown profits in hard currency by foreign investors, initially however, only under bilateral investment treaties. The government of Czechoslovakia has also combined the two exchange rates used in the past into one, semi-floating rate.

The government is in the process of a major economic reform effort, with a number of reform laws and administrative actions passed and more planned. These include laws on large-scale privatization, restitution of property, exchange rates, labor and others. In the area of foreign trade, the government is intensifying the previous regime's efforts to attract more Western trade and investment through new, more liberalized legislation and trade policies such as allowing wholly-owned foreign investment. It nonetheless needs to maintain a significant degree of trade with the Soviet Union since the USSR is its main source of oil, natural gas and most raw materials. Moreover, much of Czechoslovakia's industrial production has been designed for the Soviet market.

4. Debt Management Policies

Czechoslovakia's hard currency borrowing remains low and has been historical largely connected with trade financing. The country's gross hard currency indebtedness runs between $7 billion and $8 billion. Czechoslovak authorities point out that much of this debt is offset by claims owed them in developing countries. This point is only of theoretical importance in view of Czechoslovak debt collection problems with these countries.

The current government is as determined as the previous regime to hold down borrowing, but may be less successful. Difficulties include the drastic reductions in export markets in CMEA countries and the conversion of CMEA trade to world market prices and hard currency payments. Consequently, Czechoslovakia is seeking or has obtained credits from various international organizations to finance current account deficits foreseen from the combined impact of these factors and for supporting the move to internal convertibility.

5. Significant Barriers to U.S. Exports

Czechoslovakia's trade had been strongly oriented toward the countries of the Council for Mutual Economic Assistance (CMEA) for both political and economic reasons. In the Communist regime's last years, substantial efforts were made to increase the proportion of trade with the West, but this policy effort had little impact on actual trade figures. The new government in Czechoslovakia is even more desirous of increasing trade and investment ties with the West, particularly with the United States, but creating the necessary open and free market for trade is proving to be a difficult and long term process.

U.S. companies interested and active in trade and investment have increased substantially since the beginning of 1990. An increasing number of companies are opening offices and signing trade and investment contracts in the country. Moreover, several artificial barriers to U.S. trade have fallen or been weakened. On November 17, 1990 the United States and Czechoslovakia implemented a bilateral trade agreement, granting bilateral most-favored-nation trading status. Czechoslovak monopolies on foreign trade granted to

CZECHOSLOVAKIA

state-owned foreign trade organizations have legally been abolished. Restrictions on exports of high technology Western equipment to Czechoslovakia should be reduced further under the proposed COCOM safeguards program. The Federal Assembly on December 5, 1990 passed legislation safeguarding imports of high technology and implementing an export licensing regime to track high technology imports.

In addition, U.S. government programs to assist exporters and investors have been implemented. The U.S. and Foreign Commercial Service opened an office in Embassy Prague September 4, 1990. The Export-Import Bank has opened all of its programs to Czechoslovakia. The Overseas Private Investment Corporation (OPIC) signed an operation agreement with the Czechoslovak government on October 18, 1990. Treaties on bilateral investment and double taxation should be completed and signed in 1991.

One potential new barrier to U.S. exports is the Czech government's imposition on January 1, 1991, of an import tax of 20 percent on a variety of consumer goods. Czech authorities have explained that this measure was imposed to offset the possibly destabilizing effects of moving to partial convertibility of the crown. The Czech government has not yet clarified how long the import tax will remain in effect or precisely how long categories of consumer goods it covers.

6. Export Subsidy Policies

We are not aware of any Czechoslovak subsidies specifically designed to increase exports to Western countries.

7. Protection of U.S. Intellectual Property

Czechoslovakia is a member of the World Intellectual Property Organization and is a party to the Paris Convention for the Protection of Industrial Property, the Berne Convention for the Protection of Literary and Artistic Works, the Universal Copyright Convention and the Geneva Phonograms Convention.

The Czechoslovak record on protection of intellectual property is generally good. Complaints have been raised regarding copyright coverage for cinematographic works; Czechoslovakia covers these works for only 25 years, a violation of the Berne Convention's requirement of 50 years. Czechoslovak law sanctions granting trademarks to enterprises in which there are foreign partners or wholly-owned foreign investment. New proposed legislation recognizes the exclusive rights of owners of patents and industrial designs.

8. Worker Rights *

a. Right of Association

Workers in Czechoslovakia have the right to form or join unions of their own choosing without prior authorization. Over 90 percent of workers are members of labor organizations.

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b. Right to Organize and Bargain Collectively

Current Czechoslovak law concerning collective bargaining is undergoing revision in the wake of the revolution which the country experienced in 1989. At present the law does not provide a realistic framework for collective bargaining, but draft legislation which would guarantee the right of workers to organize and bargain collectively has been prepared and is expected to become effective in 1991.

C.

Prohibition of Forced or Compulsory Labor

Forced labor

There is no forced labor in Czechoslovakia. is not explicitly prohibited under existing statutes, but is implicitly prohibited by legal provisions concerning the deprivation of personal liberty.

d. Minimum Age for Employment of Children

The minimum age for full-time employment is 16, although younger persons may accept part-time employment.

The Federal Ministry of Labor and Social Affairs

establishes mandatory minimum wage rates based upon general Occupational categories. The lowest established wage is about $65 at the official exchange rate, but virtually all workers earn considerably more.

Working conditions appear generally acceptable. A maximum standard legal work week of 43 hours is provided by law although various exceptions to this standard exist. Workers are entitled to a minimum of three weeks vacation per year. Occupational safety and health regulations exist and are enforced by departments of the Slovak and Czech Ministries of Labor and Social Affairs.

f. Rights in Sectors with U.S. Investment

As of 1990, sectors with U.S. investment are almost nonexistent. We expect this to change within the next two to three years.

No sector by sector data is available on investments in Czechoslovakia.

* Section 8 is an abridged version of Section 6 of the Czechoslovakia country report included in the Department of State's Country Reports on Human Rights Practices for 1990, submitted to the Congress January 31, 1991. For a

comprehensive discussion of worker rights, please refer to that report.

DENMARK

Key Economic Indicators

(Millions of Danish Kroner (DKK) Unless Otherwise Noted)

1/ Percentage by Gross Factor Income Distribution.

2/ Personal Savings in Percent of Personal Disposable Income. 3/ Excluding EC Export Subsidies, accounting for less than three percent of total commodity exports.

4/

End of Period.

1. General Policy Framework

Dependent on imported raw materials and hard fuels, Denmark has pursued a liberal trade policy to maintain supply security. An industrialized market economy, the standard of