Source: Global Risk Insights / http://globalriskinsights.com / By Matthew Kuemmerlein /
The success of the five-party coalition “Democratic Bloc” in the Czech parliamentary elections this year represents a new direction for the central European country. Disillusionment with BRI-related investments was one reason for this outcome. This development may be part of a broader trend across the region.
The parliamentary elections in the Czech Republic on October 8th, 2021, resulted in a coalition of five parties, three center-right and two center-left, securing a majority – 108 out of 200 parliamentary seats. The election ousted the incumbent Prime Minister, Andrej Babis, bringing his four-year term to an end. Petr Fiala, head of the center-right Civic Democratic Party (ODS), was appointed Prime Minister on November 28th.
A New Direction
The winning coalition, known as the “Democratic Bloc”, has pledged to strengthen rule of law and focus on policies favored by the Czech Republic’s first president Vaclav Havel, such as improving the Democratic process, NATO membership, and commitment to human rights.
The most recent governing duo, Prime Minister Andrej Babis and President Milos Zeman, who have been in power since 2017 and 2013 respectively, have a record marred by fraud investigation and attempted impeachment. The new Prime Minister, Petr Fiala, is a respected professor, university administrator, and former Minister of Education, Youth, and Sport whose political career is free from scandal. One observer states that this election represents “the end of the post-communist era”. President Zeman has sought to orient the Czech Republic towards the east, paying special attention to Russia and China. Zeman famously stated that he wanted the Czech Republic to be China’s “Gateway to Europe”.
A high-profile visit to Taiwan by Czech Senate President Milos Vystricil and Prague Mayor Zdenek Hrib (both members of the incoming coalition) along with 78 other Czech lawmakers and representatives in August 2020, indicates a change in Sino-Czech relations is likely in the near future.
The trip to Taipei in 2020, during which Vystricil and Hrib were photographed enjoying beers at a Czech-style pub together, was reciprocated by a visit to Prague by Taiwanese Foreign Minister Joseph Wu and 65 other Taiwanese officials in October 2021. Vystrcil presented Wu with the Silver Commemorative Medal of the Senate of the Parliament of the Czech Republic. Surprising no one, Beijing voiced its displeasure. Chinese Foreign Ministry Spokesman Wang Wenbin stated that “[China] will take proper and necessary measures to firmly defend national sovereignty and integrity. No one should have any illusions about this.”
Deals with China
President Milos Zeman, whose term ends in March 2023, invited China to invest in the Czech Republic and visited Beijing in 2014, 2015, 2018, and 2019. To give a brief overview of this relationship, the Czech Republic joined China’s Belt and Road Initiative in 2015. President Xi visited Prague in March 2016. Following these developments, the two signed seventeen agreements, and President Zeman expected China to make 3 billion Euros’ worth of investment in the Czech Republic in 2016 and 7 billion Euros’ worth of investment by 2020. The largest portion of the anticipated 7 billion Euros, an estimated 5 billion Euro, was to go in a fund that would finance infrastructure projects in the Czech Republic.
The drastic activity of the Chinese firm China Energy Company Limited (CEFC) in 2015 made it seem like such investment would become a reality. CEFC made significant investments in major Czech companies in the financial, travel and industrial sectors, as well as media companies and breweries, a football club, and the Eden Arena stadium in Prague, now called Sinobo Stadium. CEFC hired former Czech Defense Minister Jaroslav Tvrdik as its representative for Europe. On the Supervisory Board for CEFC Group Europe was Stefan Fule, who had served as the European Commissioner for Enlargement and European Neighborhood Policy from 2010 until 2014. CEFC hired other Czech form politicians who doubled as advisors to the Czech government. CEFC’s chairman and founder, Ye Jianming, was selected by President Zeman as his advisor for Asia. To some observers, it appeared as though China was investing in the loyalty of Czech officials as much as the Czech economy.
However, subsequent years resulted in disappointment: In 2016, the Czech National Bank estimated that the total value of Chinese investments in the country was 631 million Euro – far less than what was expected. (By contrast, Japanese FDI in 2016 was approximately 1.5 billion Euro and South Korean FDI amounted to 3 billion Euro. 90% of FDI in the Czech economy comes from the E.U. Moreover, in the spring of 2018, a Chinese state-owned firm, CITIC Group Corporation Ltd. took over most of CEFC’s assets in the Czech Republic, and Ye Jianming was detained in China for “suspected economic crimes.” Of the seventeen agreements signed by Xi and Zeman, it has been claimed that only two were completed, one in part.
In 2019, an interesting dispute portended a radical shift away from China. The Mayor of Prague, Zdenek Hrib, announced in October 2019 that he was going to cancel Prague’s “Sister Cities” agreement with Beijing, since Beijing was unwilling to remove the “One China” provision from the agreement document. The “One China” provision, of course, stipulates that Prague concedes that Taiwan is a part of China, rather than a sovereign entity. In retaliation, China canceled numerous cultural events including a tour of the Prague philharmonic orchestra in China, and also withheld the gift of a panda from the Prague Zoo for good measure. In January 2020, Mayor Hrib signed another “Sister Cities” agreement with Taipei. This agreement with Taipei did not take place without precedent: Mayor Hrib had visited Taiwan to meet President Tsai Ing-Wen in March 2019 and invited the head of the Taipei Representative Office to a diplomatic event he hosted in Prague, leading to an exchange with the Chinese ambassador.
Mayor Zdenek Hrib is a member of the left-learning “Pirates” political party, one of the five that make up the successful “Democratic Bloc” coalition. The party perceives itself as carrying on the legacy of Vaclav Havel, who called for Taiwan to have a seat at the United Nations’ General Assembly in 1995. The pivot to Taiwan of Prague is an indicator that many decision-makers and their constituencies in the Czech Republic favor Taiwan. In regard to Senate President Vystrcil’s visit to Taiwan, one observer noted, “To [Vystrcil] and many others among the liberal opposition, Taiwan is seen as a symbol that reflects the Czech Republic’s own historical experience and the democratic values the society is built on.” Vystrcil’s predecessor, Senate President Jaroslav Kubera, planned a visit to Taiwan, but canceled it after pressure from Zeman’s office and China itself.
The Taiwanese delegation in October 2021 not only visited the Czech Republic, but also Slovakia and Lithuania. The Taiwanese Foreign Minister Joseph Wu added Poland to his itinerary. This tour took place amidst tensions between Brussels and Beijing generally – Beijing imposed sanctions on various E.U. entities, including five members of the European parliament, after the E.U. criticized what it regarded as violations of human rights in Xinjiang in the spring of 2021.
This is the background to the success of the Civic Democratic Party’s Petr Fiala and the five party “Democratic Bloc” in the Czech parliamentary election. From 2013 until 2017, the Czech political leadership has been very receptive to Chinese investment in their economy; however, many are disillusioned because of the lack of results. The new coalition has considerable challenges ahead of them, including a record budget deficit and reviving the economy amidst Covid-19. Managing a cooling relationship with Beijing, though, will be an additional challenge facing them over the next few years.