Industrial zones in the Czech Republic: no construction on brownfields, the vast majority of zones are being built on greenfield sites;

Press release to audit No. 18/01 - 22.10.2018

The Supreme Audit Office focused on support for industrial zones and commercial real estate and infrastructure between 2014 and 2017. Auditors addressed mainly whether the aid had brought expected benefits and how the Ministry of Industry and Trade (MoIT) and the CzechInvest Agency had evaluated the impact of the funds distributed. They also examined 19 beneficiaries of aid, who had received CZK 4.1 billion for 20 specific projects.

In support of industrial zones, the Czech Republic spent more than CZK 12 billion from 1998 to 2017, from which 102 industrial zones were subsidized. Despite this, neither the MoIT nor CzechInvest had established a conclusive and comprehensive system to assess reliably what exactly the funds disbursed had served for, namely how many jobs had been created or what amounts of money companies had invested in total. In their assessments to date, they had often worked with incomplete, outdated and unreliable data. For example, investors had had not obliged investors to provide relevant information, such as information on jobs created, investment levels, and the like.

The SAO already pointed out in 2004 and in 2009 that complete, conclusive, and real objective evaluations were missing.

Even after 20 years, there is no clear indication of how much the support to industrial zones distributed since 1998 has actually brought to the state budget. The MoIT calculated in 2015 that the benefits of the aid should be higher than the distributed aid itself in 2021. However, it did not take into account a number of related substantial revenues and expenditures of the State. These include the amount of investment incentives, direct support expenditure for specific investors, and the like.

The audit further showed that the industrial zones in the Czech Republic are in principle used — with an occupancy rate of around 80 per cent. The exception is made up of the Holešov zone with the area of 280 hectares. This zone was originally prepared for a particular investor who decided not to use it in the end. The zone is occupied from only 2 %, but the Ministry has already spent there almost CZK 1.1 billion. So far, attempts to raise the occupancy of the zone have failed which is also due to the fact that it is located in a groundwater protection zone. A similar situation can also arise in the 20-kilometres-distant zone of Přerov-Bochoř, which is currently being constructed. Also in this case, the original investor has chosen another site and this area is situated in a groundwater protection zone as well. The construction of this zone should amount to CZK 1.4 billion.

One of the aims of the Czech Republic was to preferentially promote the emergence of industrial zones in regenerated plots and sites that had not been used previously and had been often contaminated — the so-called “brownfield” sites. However, out of the 102 supported zones, 98 turned out to be green. Since 2010, the MIT has not supported creation of an industrial zone on any brownfield sites from public funds. At the time of the audit, four new greenfield sites were considered, in which case occupation of a farmland plot was reckoned.

Auditors also detected deficiencies in the distribution of European subsidies for the renovation and modernisation of premises and sites. Funds from these subsidies were supposed to be used to increase the competitiveness of SMEs, improve their use on foreign markets, as well as contribute to the reduction of operational costs. The MIT did not monitor whether the funds had helped companies in this regard. The SAO reviewed a sample of 12 beneficiaries of aid with a subsidy of CZK 117 million and for six of them it was not confirmed that the money had yielded the expected effect.

Communication Department
Supreme Audit Office

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