“The economic success of the EU and the Czech Republic, as well as the preservation of our values, will not be ensured by bold statements about what should be abolished. We need to push through dozens of changes to support innovation, reduce regulation, and apply common sense,” says Jan Rafaj, President of the Confederation of Industry of the Czech Republic.
How can Europe regain its position among the world’s strongest players? What are the key demands of businesses, not only toward the European Union?
The European Union (EU) is falling behind economically, technologically, and in the area of defense, while European companies are losing their competitiveness. The core of global business is now happening outside of Europe. This situation has several common denominators. One of them is Europe’s prosperity, which has been built over decades and has led us to a state of complacency, where we have forgotten that growth must be continuously pursued.
The newly elected European Parliament and the renewed European Commission represent a major opportunity to adjust existing EU policies with the goal of maintaining Europe’s global competitiveness. The Confederation of Industry has summarised specific demands and key steps necessary to strengthen Europe’s competitiveness. At the end of January, the Priorities of Czech Business in the EU report was presented directly in Brussels to representatives of the European Union, Members of the European Parliament, and members of the commissioners‘ cabinets.
What are the Biggest Issues Facing Europe Today?
European companies are losing their competitiveness and struggling to meet global challenges. While the EU presents itself as a unified market, in practice, this is far from reality. One of the reasons is the complex and opaque bureaucracy, along with excessive regulatory barriers that hinder innovation. These obstacles often arise at the national level. What we need are innovations that transcend individual countries.
If the EU wants to be competitive, it must undergo a legislative detox and set realistic goals. Businesses understand the concept of the Green Deal, but governments are imposing overly complex regulations—such as ESG requirements—where compliance and reporting overshadow the actual innovation potential that exists. The Green Deal should not just be a set of regulations; it should be a true catalyst for innovation.
Today, companies are forced to create entire departments dedicated to reporting and administration. Innovation is becoming more difficult, and only companies that can separate their innovative projects from standard corporate structures are truly successful.
Another major obstacle is the high cost of energy, which directly threatens industrial enterprises. European manufacturing companies pay up to 50% more for electricity and about a third more for gas than their competitors in the United States. For energy-intensive industries, such as steel production, this situation is critical.
How to Support Innovation Potential?
We need to create an attractive investment environment. During an export mission to the United States and Canada, specifically at an innovation center in Toronto, I met with venture capital experts. They explained how they allocate their investments globally, but at the same time, they pointed out that they currently have no interest in European countries. The reason is not only regulatory barriers but also the fact that the Czech Republic has not yet adopted the euro, which further discourages investors.
At the start of November and December 2024, you led a business delegation to Australia, accompanying the first presidential visit to the country in nearly 30 years. The delegation attended an Australian-Czech business forum and visited the University of Adelaide, known for its innovation programs. What were the key takeaways from this mission?
We saw a highly effective tool for economic support in practice – the Australian government has shifted a significant part of its defense research from the military to innovation hubs, which are connected to universities, research parks, and companies. These ecosystems have now grown into large-scale networks, capable of multiplying state investments and generating real added value.
In contrast, instead of supporting domestic research and development, we purchase ready-made technologies, and Czech companies are often limited to assembling components. This is a strategic mistake that we must correct.
Furthermore, Europe spends 80% of its defense budget outside the EU, rather than investing in its own industry and research. As a result, Europe loses the entire multiplier effect—European companies lack access to contracts, and the economic value flows abroad.
What is Your Outlook on the Business Environment in the Czech Republic?
Over the past two years, I have regularly met with companies and know many great businesses that successfully export their products and do it very well. However, we are in a transformational decade—not only due to changes in Europe but also because of a generational shift among entrepreneurs.
The founders of companies who built their businesses after the Velvet Revolution are retiring and handing them over to their children or new successors. Companies that manage this transition well have a chance for long-term success. The key is to sustain innovation and growth, rather than remain in a state of comfort.
What’s ahead? We can expect the sale of Czech businesses to foreign investors, but also the emergence of new companies and startups. The Czech startup scene is growing, but one major problem is that Czech companies are being sold too early—before they achieve significant value. We need to support our businesses so they can develop and grow in the domestic market.
We should take inspiration from Ireland or Luxembourg. These countries strategically selected key industries and provided them with significant advantages, which kickstarted their economic growth.
The Czech government recently approved a new Economic Strategy—a Vision for the Development of the Czech Economy—which, for example, mentions semiconductors. However, shortly after, the representative of this sector was removed from the Council for Research, Development, and Innovation. So, while we have strategies on paper, in reality, we are contradicting ourselves.
How do you see the Geopolitical Tensions Between the U.S. and Europe?
America will always play to win. Trump will only reinforce their aggressive approach. And on the other side stands Europe, which is its own biggest obstacle. Why? Because we are too fixated on the welfare state.
In the U.S., people know that if they don’t work, they don’t have health insurance, they don’t have social benefits, they don’t have housing. This creates a completely different approach to work—in the U.S., people compete to survive.
In Europe, people wake up and already have all these benefits secured. That’s not necessarily a bad thing, but it suppresses competition. We need to return to natural competition. The U.S. will only respect us if we are strong competitors. If we only ask for concessions and plead for cooperation, they will not take us seriously.
Ironically, Trump may actually jumpstart the global economy—his policies could stimulate greater competitiveness and eliminate stagnation. For Europe, this is a challenge—either we learn to compete again, or we will continue to decline. And this applies not just to business but also to the political arena.
The Trump administration has implemented the announced tariffs on Canada, Mexico, and China and is beginning to implement a tough trade policy—which means some European companies will be forced to relocate production to the U.S. How will the business sector respond?
For example, the Confederation of Industry is planning a business mission to the U.S. in the spring of 2025 for companies looking to expand and considering a long-term entry into the American market. The goal is to help them navigate industrial zones and understand business conditions.
I believe that now is the perfect time to break into the U.S. market—not just because of energy prices, but also due to other regulatory factors. If companies have the ambition to grow, we should support them.
Mr. Rafaj, thank you for the interview.
You can find the full interview in POSITIV Business & Style magazine here.
Foto: Svaz průmyslu a dopravy ČR
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