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Doing Business in Eastern Europe

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A typical story of the economic transition in East-Central Europe is of the frustrated manager in a state-owned company under Communism who becomes a rich and successful entrepreneur after 1989. Certainly there were plenty of frustrated managers during the Communist period. And you can read plenty of stories about the new fabulously wealthy business owners that have emerged in the region over the last 23 years.

But this particular story overlooks two very large categories of people: those who managed to do reasonably well under the system of state ownership and those who have encountered numerous challenges in the new entrepreneurial climate.

Miroslav Blazek belongs to both categories. During the Communist period, he worked for the Zetor tractor company in Czechoslovakia and travelled throughout Europe representing the firm and overseeing the servicing of the product. Zetor produced and sold 30,000 tractors a year and was the number tractor import in such places as Greece and Ireland. Although Zetor supplied virtually all the state farms in Czechoslovakia, not everything went smoothly. All of the hard currency went to the Czech central bank, which meant that Zetor couldn't use it to import scarce parts. There was also a chronic labor shortage.

On the other hand, the system had certain advantages, for instance the apprentice system. "We had a very good system of apprenticeship," Miroslav Blazek told me in an interview in Prague in February. "We had our own very good apprenticeship school and training center. At that time, I didn't know any of my schoolmates who wouldn't go either to school or to an apprenticeship. They usually stayed at the same job. When children went to an apprenticeship they usually stayed at that company for the rest of their lives."

Blazek has gone on to work on several entrepreneurial efforts, the latest one involving machine tools from North Korea. He's endured usurious bank loans and bankrupt companies. He has watched unscrupulous individuals use privatization to effectively steal national wealth.

"I think you could call it here the 'wild west,'" he described the early days of economic transition. "The people who didn't care about anything or about anybody were able to get a lot of compensation. If you were strong enough and didn't care about anybody, you could be in a very good position. We all started more or less from zero. In the beginning, you could get very easy credit and loans from the bank. But later on most of the projects failed, and gradually many were bought by Western companies."

We talked about what it was like to work for a state-owned enterprise, what the fate of the Zetor tractor company has been, and what it's been like to negotiate a deal with North Korea.

The Interview

Tell me how you got involved working in business before 1989.

I was quite lucky because I was involved more or less all my life in the tractor business in a Czech tractor company named Zetor where all my family worked. Naturally, when I finished school, I went to work there too. I really liked the job. I was very keen on tractors, cars, lorries, everything. I managed to get a very good position. I was responsible for servicing tractors in the Czech Republic and later on, abroad. I was able to travel abroad quite a lot, and my family and I spent a few years in England selling tractors. It was very nice.

Before 1989 it was a state-owned company. What was it like to work within that system?

I would say it was maybe easier because it was a very big company. There were 10,000 employees producing more than 30,000 tractors a year. At that time, we had no trouble financing, no problem with employees. However, it was difficult to import parts from abroad to improve the tractor, to make a better quality product. But I would say that it was probably easier than the business is today.

There was competition from a tractor company in Poland and of course there was Caterpillar. I don't know if you had to go up against Caterpillar...

No. At that time, Caterpillar was not producing classical tractors, and that is what we produced. When I was living in the UK, our biggest competitors were ACE, Massey Ferguson, John Deere. We used to be the fifth place in the UK. At the time there were maybe 30 other companies.

When was that?

1979 and 1980.

What was your biggest export market?

At that time we were number one in Greece, Iceland, Norway, Finland, and Ireland. And we were in a very good position in France, the United Kingdom of course, and the United States.

That's interesting because a lot of people, when I talk to them about the collapse of the economies after 1989, a lot of them say that the reason was the collapse of markets in the Soviet Union, but it doesn't sound like you sold to the Soviet Union.

No, we didn't sell anything in the USSR. Our problem was the collapse in Iraq. We used to sell a lot of tractors in Iraq. There was an assembly plant in Iraq, and around 7,000 tractors went to Iraq where they were assembled. At the top time, sometime in the late 1970s, we had about 100 people from Zetor there assembling and servicing tractors.

And what about domestically, did you have a domestic market?

Yes, of course. There were no other tractors in Czechoslovakia except Zetor. There were very few from Romania or East Germany. But 95% of the tractors at that time came from us. Because we had big collective farms, they were able to absorb a lot of tractors. We were selling between 5,000 and 7,000 tractors domestically.

And you were also responsible for servicing the tractors?

I was responsible mainly for servicing the tractors.

You mentioned difficulty of getting imported parts, like clutches. Were there any other bottlenecks in those days that were challenging?

To read the rest of the interview, click here.