By Vojtěch Chloupek and Jiří Švejda
The European Union has launched its largest package of economic stimulus measures to help with the aftermath of the COVID-19 outbreak (NextGenerationEU). It aims to support the crisis-hit economies following the pandemic. The key instrument for helping to mitigate and support the economies’ recovery is the Recovery and Resilience Facility (RRF). This article summarises the current National Recovery Plan that is being implemented in the Czech Republic using RRF funds.
As the last COVID-19 wave slowly recedes, its economic consequences are continuing to emerge. In response, the European Union has launched NextGenerationEU (“NGEU”) – its largest package of economic stimulus measures to help with the aftermath of the COVID-19 outbreak.
NGEU aims to support the crisis-hit economies following the pandemic. The key instrument for helping to mitigate and support their recovery is the Recovery and Resilience Facility (the “RRF”). The RRF comprises EUR 750 billion, of which EUR 390 billion is in the form of grants, and EUR 360 billion in loans. The sum is to be distributed between the Member States for the pursuit of their common goal of building a greener, more digital and more resilient Europe.
The Member States have been offered a chance to boost the recovery of their economies, to make them stronger and to work together to build a resilient, digitalised and green European Union. To accomplish these goals, all Member States have proposed their own paths to success and their own national recovery plans. The Czech government drew up its National Recovery Plan (the “Recovery Plan”), presenting a plan for reform and investment using RRF funds. The Recovery Plan was approved by the European Council in September 2021 and the Czech Republic will receive EUR 7 billion in grants and EUR 16 billion in loans. A total of 42 per cent of the plan will support climate objectives, 22 percent will encourage digital transition, and the rest will go to economic and social resilience. This promising plan of reform and investment has to be implemented within a tight time frame, as the due date set out by the RRF regulations is August 2026.
The Recovery Plan aims to promote economic growth, create jobs and maximise the benefits of digital transformation, and improve the quality of public administration. It is expected to lift the gross domestic product by 0.8 per cent to 1.2 per cent by 2026 and, as a result, provide jobs for up to 18,000 citizens. On top of that, the Czech Republic will benefit significantly from the recovery plans of other Member States, producing a 0.3 per cent uplift in gross domestic product in 2026.
So, what are the key measures that the Czech Republic will focus on to ensure that this promising plan is accomplished? The basis of the Recovery Plan consists of six fundamental parts which are then broken down into components and particular reforms and investment plans. The fundamental parts are, first and foremost, digital transition, infrastructure and green transition, followed by education and the labour market, business support in response to the COVID-19 pandemic, research, development and innovation and, finally, population health and resilience.
Digital transition
On the way to digital transformation, the Czech Republic faces many challenges, including improving connectivity through very-high-capacity networks and investment in e-services and e-government to raise the quality of public administration to the EU level. The Recovery Plan aims to support the digitalisation of companies (EUR 650 million), and digital transformation and cybersecurity in public administration, the justice system and healthcare (EUR 450 million). Furthermore, the plan will invest in revamping the digital curricula in education by providing digital equipment and training to schools, new university programmes and upskilling and reskilling in digital skills (EUR 585 million).
Green transition
The green transition should be secured by adopting effective measures such as investing in renewable energy sources (EUR 480 million), energy efficiency (EUR 1.4 billion), sustainable mobility (EUR 1.1 billion) and the circular economy (EUR 141 million). For a successful outcome, it is important to take into consideration the involvement of businesses and households. The plan aims to support the installation of renewable energy sources for businesses and households and to ensure water conservation. Improving railway infrastructure and cycling pathways and promoting the use of electric and low-emission vehicles should encourage the public to switch to using public transport.
Economic and social resilience
The main objectives are to reinforce economic and social resilience through equal access to education (EUR 393 million), the increased resilience of healthcare services (EUR 823 million) and a better business environment (EUR 222 million). The Recovery Plan aspires to increase access to affordable childcare, as well as providing support for disadvantaged children, training for teachers and additional tutoring for children at risk of failure. The business environment should be improved through better access to finance for companies, especially SMEs, the acceleration of construction licence procedures, reinforcing anti-corruption measures and boosting cooperation between public and private research. On top of that, the purpose of economic and social resilience is to implement measures that will lead to an improvement in healthcare services. This goal should be achieved by building new hospitals, acquiring new medical equipment, strengthening cancer screening programmes, rolling out e-health and focusing on long-term care.
Whilst implementing these measures, certain requirements need to be met. Stakeholders should continue to be involved in the implementation of the Recovery Plan to ensure ownership of reforms. The disbursement of funds is performance-based and will reflect progress on the reforms and investments set out in the plan. A certain level of publicity must be maintained, and control systems will protect against serious irregularities such as fraud, corruption and double funding and, most importantly, none of the plan’s measures will do significant harm to the environment.
In December 2021, a new government took over the reins in the Czech Republic. In a policy statement, it revealed its ambitious vision for the country, including many reforms to be carried out over the coming four years. The new government has taken its obligation towards the EU very seriously and plans to deliver a successful outcome for the Recovery Plan. It will attempt to lay the foundations for a smart and effective state, in order to integrate the country into a strong and green European Union. The aim is to digitalise and to govern effectively based on facts and evidence-based data. The main objectives of the government policy statement are consistent with the goal of the Recovery Plan. The government wants to focus on improving public administration, education, family support, a flexible labour market, e-services, transparency and publication of grant recipients, and the green transition, bringing to the fore the need to achieve the modernisation and investment into a circular economy, decarbonisation, renewable energy sources, sustainable agriculture and far more.
Despite the Recovery Plan being in the initial stages of implementation, the first initiatives have already been announced.
Circular economy
The Ministry of the Environment has drawn up a plan, “Circular Czech Republic 2040”, which targets changing production in such a way that resources will circulate and therefore the impact on the environment will be mitigated.
Sustainable mobility
The initial work on a new trolley bus line in Prague began in January 2022. The project belongs to the infrastructure and green transition measures adopted under the Recovery Plan. The new line is expected to start a trial run in October 2022. Everyone believes that the building of the new electrically powered line will contribute to the overall green transformation of public transport.
Education
The Ministry for Education has come up with an initiative to change the forms and content of university programmes to accommodate the surge in new digital fields. Moreover, the ministry will provide schools with funds aimed at the digitalisation of study materials and the purchase of new digital devices.
Renewable energy sources
The most recent initiative has been presented by the Ministry of Industry and Trade. It consists of support for the implementation of projects leading to an increase in installed photovoltaic capacity and a subsequent increase in the production of electricity from renewable energy sources within the Czech Republic.
The National Recovery Plan is currently in the initial phase of its implementation. The next step is to submit the first application for payment of the RRF grants. The first application for payment includes 37 milestones that must be met before submission. To date, the Czech Republic has fulfilled 12 milestones and is on track to fulfil another 22. Three milestones are delayed but hopefully they will be met soon, as the anticipated date for submission of the application is August/September 2022.
Requests for payment may be submitted no more than twice a year. The Czech Republic needs to send the last request to the European Commission by the end of August 2026 and the last payment must be made by the end of 2026 at the latest.
All in all, the National Recovery Plan provides an excellent opportunity to help boost the crisis-hit economy of the Czech Republic after the COVID-19 outbreak and to address common European challenges by embracing the green and digital transitions, as well as strengthening economic and social resilience and the cohesion of the Single Market.
Further information on the Czech Recovery Plan can be found in Czech: https://www.planobnovycr.cz/aktualne.
About the Authors
Vojtěch Chloupek is a partner at Bird & Bird, where he heads up the Tech & Comms and IP practices in the Czech Republic and Slovakia. Vojtěch has significant industry expertise in a number of sectors, including aviation, electronics, financial services, food and beverages, gaming, media, life sciences and software. He is consistently ranked by major legal directories as one of the top tech lawyers in the Czech Republic.
Jiří Švejda is a junior associate at Bird & Bird, based in Prague. He focuses mainly on commercial, competition and corporate law. He enjoys working on innovative projects, particularly in the digital environment.
