Geert Bekaert and Campbell R. Harvey's


Chronology of Economic, Political and Financial Events in Emerging Markets


Czech Republic


Major Political and Economic Events




The introduction of the Insider Trading Laws.a4


The first prosecution under the Insider Trading Laws.a4


(1) Purchases of foreign securities by residents were partially liberalized; (2) the rules for acquiring properties abroad were simplified; and (3) exports and imports of securities denominated in koruny were permitted without restriction.a3(first entry)


The National Bank announced that effective Aug.33, 1995, borrowing abroad by banks would be curtailed by limiting open positions of the National Bank vis-a-vis nonresidents.a3


ADR effective date. (Company=KOMERCNI BANK 144A, Exchange=PORTAL)a11


Czech President Vaclav Havel swore in a minority government led by conservative Prime Minister Vaclav Klaus. The Social Democrats threatened to vote "no" in vote of confidence in Parliament.


The government intended to merge the four largest banks prior to privatization. 


The governing coalition had won a majority in the upper house of Parliament.


The Ministry of Finance took control of investment fund Mercia Hradec Kralove, which was accused of collateralizing a loan to a third party with securities from its own portfolio.


To improve the country's securities regulations, government order to publish all off-exchange transactions, effective in February, and decide to set up a regulatory commission modeled after the U.S. S.E.C. A new clearing house will be set up and operational in early 1998.


The country's ruling three-party coalition boosted its position in Parliament to 100 out of 200 seats, after Deputy Thomas Teplik joined the coalition.


The government cut 5% of its budget spending, lowered 7.3% cap on government wage growth, and pledged to amend the law on investment funds and improve capital market oversight as well as accelerate privatization of state companies.


Prime Minister Valclav Klaus announced a Cabinet reshuffle.


Severe flooding halted production in many and extensively damaged the nation's telephone network.


The finance ministry discussed plans to raise government regulated energy prices by 40% by mid-1998 and by another 40% in 1999. Foreign minister resigned.


IBCA downgraded the country's credit rating to "BBB+" from "A."


Prime Minister Valclav Klaus 's government resigned on November 30. The former Central Bank Governor Tosovsky was appointed the new Prime Minister.


President Vaclav Havel was re-elected for a second term. The government won a vote of confidence in Parliament.


Parliament approved the Securities Commission Act.a3


Environment Minister Jiri Skalicky offered his resignation.


New amendments to the banking act implemented prohibit banks from holding controlling stakes in companies other than banks, financial institutions, and companies providing banking support services.a8


A 24% increase in residential electricity prices.


S&P assigned an "A" rating to SPT Telecom's new Eurobond. Jiri Franz resigned from his post as general secretary of the Prague Stock Exchange, after being elected a member of the stock exchange's board.


The Securities Commission Act entered into force, removing most restrictions on controls imposed by the previous Securities Law.a3


Czech Securities Commission (SECOM) was established to take over the responsibility of regulating capital markets from the Ministry of Finance.a8


Market-maker-based system was launched on the Prague Stock Exchange.


Amendments to the law on investment companies require closed-end funds to open within six months of the amendment's passage if the fund's shares are valued at a 40% or higher discount to net-asset-value. (This shreshold falls to 25% after one year.) The amendments also limit a fund's holdings in a single company to 11% of the company's assets and set new rules for transformation of investment funds into holding companies.a8


Right-wing parties won a two-seat majority.


State authorities expressed willingness to speed up the privatization of most important domestic banks. The privatization of banks began with the sale of the government's stake in the Investment and Postal Bank to Nomura.a8


S&P downgraded its country rating and the ratings for its biggest corporations. Prime Minister Milos Zeman said the government could buy bad debt from banks through the National Property Fund to help clean up bank balance sheets before the sale of its bank stakes to foreign investors.


The government announced details of the Ceska Sporitelna bailout.


A new government decree eliminating most controls on foreign securities operations entered into force. Controls on operations with foreign securities, on operations in derivatives and on extending financial credits and transactions with securities were eliminated.a3


The government is planning to raise the capital of Ceska Sporitelna by 5-6 billion koruna ($145-174 million). The transportation ministry said that additional stakes in C.Radiokomunikace could be privatized by the end of 2000.


Czech ministers announced on April 13 that a draft bailout plan for industrial companies had been signed. The plan proposed to buy outstanding debt from large industrial companies, convert it into equity and sell it to new investors. 


The government sold a 66% stake in CSOB to Belgian bank KBC and decided to bail out two troubled banks, Ceska Sporitelna and Komercni. The central bank lowered bank minimum reserve requirements from 5% to 2%.


Better-than-expected GDP growth figures for the second quarter mitigated the losses in the stock market.


The minister of transportation and communications was replaced.


Export soared 21% year-to-year in koruna terms. The central bank set up a special foreign exchange account for privatization inflows to ease the appreciation pressure on the koruna.


(Provisions specific to commercial banks and other credit institutions) Insurance companies and pension funds may place their assets abroad, subject to specific prudential regulations.a3


In the second quarter. the government canceled a planned international offer of its 51% stake in Ceske Rediokomunikace. After customer panic, Investicni a Postovni Banka's (IPB) banking license was revoked. In June, Ceskoslovenska Obchodni Banka took control of the bank.


In the third quarter, the senate was divided over a draft law that threatened the independence of the central bank. The ruling Social Democrats and the main opposition Civic Democratic Party passed a controversial electoral law, overriding President Vaclav Havel's veto. The minister of justice resigned after Parliament rejected his bill for legal reform.


CEZ was privatized and the Temelin Power Plant completed. The IMF issued a sharp warning to the Czech Republic regarding the growing fiscal deficit.


Gas industry was privatized.


A sound monetary policy was announced. On Dec 18, S&P issued a stable outlook rating.


The Czech National Bank cut all major interest rates to boost economic growth. Trading volumes during the first quarter were high, with the koruna depreciating more than 4.5% for the period.


The Czech National Bank intervened against the koruna, after the currency rose to another record high against the euro. The government issued a 10-year ban on the splitting of the Unipetrol Empire.


At the end of the year, Czech Agrofert won the bid for the government’s stake in Unipetrol.


The Czech central bank has cut interest rates by 25 basis points to 4.25% for the second time in less than a month. b1


Parliament votes unanimously to reject calls by neighbouring countries for the repeal of the post-war Benes decrees which led to the expulsion of over two and a half million ethnic Germans.


The Social Democratic Party led by Vladimir Spidla tops the poll in elections but wins only 70 seats in the 200 seat parliament. Spidla forms coalition with centrist alliance of Christian Democrats and Freedom Union. The Communists come third in the election with 41 seats, scoring by far their best result since the Velvet Revolution. b6


The Czech National Social Party (CSNS), once one of the country's richest political parties, has declared itself insolvent despite the recent sale of its 7m euro (US$7 million) headquarters last year


Prague suffers its worst flooding in 200 years as torrential rain batters central Europe; other towns and villages across the country are also devastated. Floodwaters spare the city's historic Old Town.


Hana Marvanova's refusal to back government tax reform puts the coalition government agreement under pressure.


EU summit in Copenhagen formally invites Czech Republic to join.


Former prime minister Vaclav Klaus elected president. He succeeds Vaclav Havel.


The Czech Defense Minister Jaroslav Tvrdik has resigned in protest at the government's planned cuts in Czech military expenditure


The ruling Czech Social Democrats have given assent to the government's finance reforms, in a move that significantly raises the prospect of it being able to push forward with its program in full.


The resignation of Josef Hojdar, a senior figure in the Czech Social Democrats, from the CSSD parliamentary caucus effectively eliminates the government's majority. The opposition Civic Democratic Party (ODS) declared 'war' on the government and indicated that they will do all in their power to topple the government soon after. 


The Czech Central Bank reduced the leading interest rates by 25 basis points to 2% - on a par with that set by the European Central Bank (ECB).


Taxation on investment and mutual funds was set to drop from 15% to 5% under new legislation.


The upper house (Senate) has approved reductions to the rate of corporate taxation that will see it fall from the current rate of 31% to 24% by 2006.


A package of reforms to capital markets regulations was approved, to bring Czech legislation into line with EU directives. b1


Presidential Veto on Czech VAT Law Overturned. The VAT rate will now fall from 22% to 19%, shifting some goods and services from a lower 5% rate to the upper rate. b1


Czechs vote at referendum in favour of going ahead with EU membership in 2004.


A new financial police force has been created to tackle serious tax and customs violations, as part of attempts to tackle the grey economy, but the scope and cost of the body is being questioned


Czech Republic is one of 10 new nations to join the EU.


Vladimir Spidla announces resignation as prime minister and leader of Social Democratic Party. Efforts begin to form new coalition government. b6


Freedom Union-DEU Deputy Marian Bielesz confirmed his resignation


Regulations on Foreign Investors


Restrictions: 1. Export of securities needs a license from the Central Bank. 2. Profits, dividends and capital may be freely repatriated. 3. The export of securities requires a license from the Czech National Bank.

Taxation: 25% dividend tax and 20-47% capital-gain tax. No tax if shares held for more than 3 months. Lower tax rates for countries having tax treaties with the Czech Republic. a5(first entry)


Restrictions: No change.

Taxation: 25% dividend tax, 15-40% individual capital gain tax and 39% institution capital gain tax. No tax if shares held for more than 3 months. Lower tax rates for countries having tax treaties with the Czech Republic. a5


No change through 2001.a5


Restrictions: all sectors of the Czech economy are open to foreign investment. Investors in banking, financial services, insurance and broadcast media sectors must meet certain licensing requirements. b7


Taxation: the 5% VAT levy was taken off a number of services and replaced with the higher rate. Corporate tax is to fall 7% to 24% in the next 3 years. b1, b7


Restrictions: prohibition of foreign ownership of real estate will be phased out within a 10-year timescale.

Taxation: Income from the sale of publicly traded shares starts to pay tax at 0-40%. VAT rate dropped to 19%. b1