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Solar Turbines Inc, the San Diego-based unit of Caterpillar Inc has announced it will build a maintenance center in the Czech Republic, creating 450 skilled jobs and possibly signaling a turnaround in FDI inflow for the Central European country.

In 2009, the Czech Republic saw a roughly 50% year-on-year drop in FDI to $875 million, the lowest level since 1997, Stanislav Martinek, director of the Investment Division of CzechInvest told The Next Silicon Valley.

This year, the agency sees gradual FDI improvement as the global economy continues to heal.

[Also reporting an upbeat investment outlook is Czech's Eastern Europe neighbor, Saxony. For more on this see: PROFILES IN INNOVATION: Europe's Silicon State of Saxony. Editor]

"It won't be a huge ramp up of projects, but we are forecasting 10% growth," Martinek said.

In the last decade, CzechInvest has experienced the whipsaw dynamics of FDI and labor.

In 2000, Czech unemployment was high and jobs were needed. Projects, typically manufacturing plants requiring a lot of workers, increasingly came in and by 2006, the Czech Republic received its largest annual FDI inflow ever -- $4.7 billion.

Like the rest of Central Europe, the country experienced a labor shortage -- there were too many jobs and not enough people to fill them.

"Most of Czech Invest activities were focused on trying to solve the problem of a lack of labor force," Martínek said. "The situation has now completely turned around and we are back in the position we were in during 2000."

The agency is encouraging investments in the renewable energy sector as well as nanotechnology, microelectronics and life sciences.

In the last few years, CzechInvest targeted the services sector and smaller, more knowledge-intensive investments.