AmCham 2025 Update to Letter on Innovation

We write to recommend steps Czechia can take in 2025 to accelerate the growth of its innovative economy. 

Czechia has set becoming a top ten EU economy as its goal. To achieve this will require an increasing amount of innovation, especially in advanced technology creation. The development of such technology has become increasingly competitive, as more nations and companies invest more into science and technology as societies become more digitized and as climate change incurs higher costs. Czechia’s ability to match German or Austrian GDP per capita and wage levels depend on substantially increasing not only investment into innovation, but the effectiveness of that investment.  

Raising the level of investment and effective outcomes depend on better international cooperation and improvements in domestic policy. Over the next year, Czechia could pursue seven policy areas (four international economic policies and three domestic policies) that would make its innovation deliver more to society. 

International Economic Policy

1. Expand the elements of the Green Deal that will make Europe more competitive in the future. The new EU Commission and Parliament will debate whether, and how, to revise the Green Deal. The government could argue to increase European-level funding devoted to developing new advanced technologies that are more material and energy efficient. 
2. Engage in the debate over Europe’s competitiveness, so Czechia benefits most from what results. The Draghi Report argues that innovation policy should be shifted to the European Union level, and concentrated in regions. Staying out of this debate may push Czechia to the periphery of advanced technology production. The more engaged and aligned Czech political, business and academic, the more likely the country will benefit.
3. Align Czech space and AI priorities with new US administration priorities. The Trump administration has prioritized space and AI. Czechia should aim to maximum cooperation in developing advanced technology in the two industries. 
4. Prioritize technology development when negotiating potential tariffs. The US administration has indicated tariffs could be imposed on imports from Europe. AmCham urges both sides to recognize the vital importance of public and private sector cooperation between the EU and US in developing new technologies has in improving competitiveness and solving climate change, and to ensure any negotiations over tariffs enhances, not deters, that cooperation. 

Domestic Economic Policy

1. Prioritize science that develops advanced technology. Top innovation requires creating a cycle of advances in science, technology, and using that technology to produce global products. Building that cycle in Czechia requires companies develop a higher amount of advanced technology here. Current public research policies emphasize scientific creation over technology development. Scientific creation in the Czech research community needs to be more closely aligned with the advanced technology development capabilities of companies in the Czech Republic. 
   1. Public Research. The principle aim of current public research policy seems to be to support academic research into science. Acquisition of knowledge without converting that knowledge into technology limits its benefit to society. We propose allocating 50% or more of public research money into science or technology development that is related to high value-added technology sectors. By doing so, the government would make the primary goal of public funding to create competitive advantages in sectors in which competitive advantage has been established.   
   2. Private Research. To leap up the innovation ladder, we need to accelerate the amount of advanced technologies researched and developed by companies in Czechia. That can be achieved by
      1. attracting major development projects from global technology leaders through “Big Bets”. To attract key technology development to the country, the government should form a unit dedicated to recruiting and supporting Big Bet investment into developing advanced technologies (including areas such as defense, information technology, and sustainable technology).

      2. designing a program of tax deductions that a) encourage global firms to expand or locate their advanced technology research and b) engage in the type of higher value added projects that produce major innovation in Czechia. This would require the system of tax deductions to be much more competitive to other systems in the region and globally, more predictable than today’s  high levels of tax uncertainty), and require equal or less administrative burden than in neighboring countries. 

2. Reverse the trend in STEM graduates. The number of STEM graduates are declining. The lack of scientific and engineering workforce is pushing existing technology development investment to move to other countries in the region. Reversing these trends will require immediate introduction of a short-term solution through immigration policy targeting STEM workforce and students and a long-term solution through a systemic reform of education that increases the percentage of high school graduates who pursue STEM degrees.  
3. Make digitization a top priority across government. The digitization of government processes promises not only more effective public services, but also the possibility for companies to access data that can help drive new innovations. Digitizing government services needs a set of government-wide priorities, and implementation requires more effective coordination. 

We would welcome to discuss how AmCham can support your goals to turn Czechia into a top innovative economy.