Aug. 25 (Bloomberg) -- When Hollywood film producer Jane Garnett scouted for a location to recreate early 20th century Vienna's cobblestone streets and baroque facades, she found it 110 kilometers (68 miles) north of the Austrian border: in Prague.

The Czech capital was selected for the shooting of ``The Illusionist,'' a Bull's Eye Entertainment film starring Edward Norton and set for release next year, over sites in Romania, Bulgaria and Hungary, Garnett said.

``We were looking where we could get the biggest bang for our buck'' that also ``would make sense creatively,'' Los Angeles- based Garnett said in a telephone interview. ``It was a $17 million movie but we wanted it to look like a $40 million movie.''

Scenes from ``Mission Impossible'' and ``xXx'' were filmed in the Czech Republic, whose movie industry annually attracts 2 billion koruna ($83 million) from abroad as filmmakers seek lower costs from production, wages and taxes. The cost of building film sets in eastern Europe are 30 percent to 50 percent cheaper than in Hollywood, said David Minkowski of Prague-based Stillking Films.

The Czech Republic is more popular than even cheaper parts of eastern Europe because it offers better equipment, sets and staff, according to film executives in Hollywood and Prague. Hiring an extra, or an actor used in non-speaking parts and background crowds, in the U.S. may cost between $100 and $150 a day. Czech extras cost about $30 and extras in Romania are $15.

Filmmaking in the region, which produced such names as Czech Oscar-winner Milos Forman and Poland's Roman Polanski, has reshaped itself after decades under Communist control.

Regional Rivalry

Twenty-one feature films were shot in the Czech Republic in 2005, compared with 14 in 2003, according to the European Audiovisual Observatory, based in Strasbourg, France. In 2004, 57 films were produced in the U.K., down from 68. In France, the number of films produced fell last year to 167 from 183. Fifteen movies were made in Poland, 11 in Romania and four in Bulgaria.

In Hungary, Andrew Vajna, who produced the Rambo and Terminator movies, is building a 150 million-euro ($186 million) film studio due to open later this year, Nepszabadsag newspaper reported Nov. 23. Metro-Goldwyn-Mayer's ``Blood and Chocolate,'' about a teenage werewolf, went to Romania and Brian De Palma's ``The Black Dahlia'' is being partly filmed in Bulgaria.

Hungary allows foreign movie-production companies to deduct 20 percent of corporate income tax, under its 2003 film act.

Still, Prague remains the No. 1 choice for eastern European filmmaking, said Garnett and Minkowski.

``We were not sure'' filming in Prague ``was going to be cheaper but we had a sense that it might be easier because there is a very good established network,'' Garnett said. ``We really couldn't afford for anything to go wrong.''

`Oliver Twist'

Garnett spent 46 days in the country shooting ``The Illusionist,'' an adaptation of Steven Millhauser's short story about a magician in early 1900s Vienna. This year's release of Polanski's $61 million ``Oliver Twist'' and Andrzej Bartkowiak's $70 million ``Doom'' add to Czech cinematographic credentials.

``We also considered shooting it in Romania,'' Polanski told Mlada Fronta Dnes newspaper on Aug. 18. ``It would obviously have been significantly cheaper but the studios there definitely cannot offer the quality'' of Prague.

The Czech film industry, which includes more than 100 production companies, is anchored by the Barrandov Studios, founded in 1921 by Milos Havel, an uncle of former President Vaclav Havel. It operates 11 studios on a hill overlooking southern Prague with 40 acres of outdoor sets.

Barrandov became the centerpiece of Czech filmmaking in the 1930s and its shining lantern logo has survived both the Nazi occupation, which used the facilities to churn out ideological propaganda, and 40 years of communism.

In the early 1980s, Forman, who left communist Czechoslovakia for Hollywood during the 1968 Soviet-led invasion, returned to his homeland to film ``Amadeus.''

Prague Architecture

Since the fall of communism in 1989, more than 80 feature films have been shot. When Walt Disney Co.'s ABC needed an authentic street to film for ``Anne Frank, the Whole Story,'' it looked to Prague and Barrandov.

Among the features of Prague is its architecture, ranging from Baroque to Art deco, which escaped the bombings of World War II that devastated Warsaw and other eastern European cities.

Los Angeles-based producer Tom Karnowski, in an interview during the 2002 shooting of ``Shanghai Knights,'' which recreated London's Victorian-era Thames riverfront on Prague's Vltava River, said Czech architecture couldn't be rivaled in the region.

Barrandov needs to upgrade existing studios after years of neglect while Moravia Steel, a steelmaker that owns it, was trying to sell the business, said Norbert Auerbach, a former United Artists president who now lives in Prague, in an interview.

Upgrading Studios

``Barrandov cannot stay competitive if it does not modernize'' Auerbach said. ``One of the problems of Barrandov has been that they have not invested into the infrastructure.''

Barrandov Studios board Chairman Vladimir Kuba said in an Aug. 4 interview his company will make upgrades. To accommodate more than one feature film at a time, Barrandov needs to build 4,000 square meters of studio floor next year, he said. Studios for commercials and a central parking lot are also planned.

``Barrandov will fight to keep its high-quality standard,'' Kuba said. ``The standard is here to stay.''

To contact the reporter on this story: Marek Miler in Prague at m.miler@bloomberg.net

Last Updated: August 25, 2005 01:49 EDT