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Poland regained its independence in 1918 only to be overrun by Germany and the Soviet Union in World War II. It became a Soviet satellite country following the war, but one that was comparatively tolerant and progressive. Labour turmoil in 1980 led to the formation of the independent trade union "Solidarity" that over time became a political force and by 1990 had swept parliamentary elections and the presidency. A "shock therapy" program during the early 1990s enabled the country to transform its economy into one of the most robust in Central Europe, boosting hopes for acceptance to the EU. Poland joined the NATO alliance in 1999.

Update No: 063 - (23/07/02)

New strategy for EU entry
The Poles are the leading nation in the process of European Union enlargement, with a larger economy than the economies of the other nine entrants combined. It is inconceivable that it could go ahead as planned on time without them.
As negotiations close in the coming six months, vital to the enlargement, Poland is trying a new tactic to obtain concessions. It has concerted a common position with the other three Visegrad nations, Hungary, the Czech Republic and Slovakia, so that they represent a united front against Brussels. 
They are objecting in particular to the notion that there will be a ten-year delay before their farmers will enjoy the same subsidies as those enjoyed by farmers already inside the EU. They also object to the 25% level of subsidies at the outset of the period. They fear that most existing farmers will have gone bankrupt by then. No longer can Brussels play off one candidate country against another. 
The Poles are the more apprehensive about EU entry because their economy is in depression right now, GDP growing by only 1% in 2001 and perhaps 1.5% this year. The two million small farmers and the miners are extremely worried that EU adhesion would spell the doom of most of them, that is of their livelihoods.

Bank chief resigns
The new government of ex-communists, elected last year has a little longer to get its act together, but could swiftly become as unpopular as their Solidarity predecessors unless something is done to stimulate the economy. The central bank chief has been a thorn in their side here, a monetarist of the utmost rectitude, Leszek Balcerowicz. Like many central bankers, he has been obsessed about inflation, which is indeed at over 5%, too high still for Euroland membership.
But the Poles need a relaxation of interest rates and pump-priming government spending if the sluggish economy is to be galvanised into action and unemployment at over 15% to come down. Nemesis awaits any government at the polls that does not heed this. 
In early July the political world was stunned by the resignation of Balcerowicz, who has had enough of being the bugbear of the politicians of whatever stripe. The way is no necessarily opened for a new dispensation for the government. Any likely successor from within the central bank is likely to pursue a similarly tight policy. A withdrawal of central bank independence would go down very badly in Brussels.

New right-wing populist
A new figure has emerged on the political scene, Andrzej Lepper, a pig farmer hostile to EU entry and all that it entails, whose Self-Defence (Samoobrona) wins about 20% in the polls.
He has accused the government of "lying from beginning to end" to the people, about the terms Brussels is seeking to extract from Poland. The 25% ceiling on subsidies under CAP, the low milk and steel quotas and other matters rile Mr Lepper. He objects to Poland becoming a dumping ground for subsidised EU over-production.
He also objects to CAP standards which are not based on organic farming. Speaking on his own speciality of pig farming he iterates: "We are for organic and natural ways of farming. The EU farmers produce 2.5 kilos of ham from a kilo of meat. What are these people eating meat or chemicals?"
Leppers wants the Poles to supply the Polish market and then to export. He points out the trade deficit with the EU is US$12bn a year.
He speaks for the peasants and workers, not the elites who are all pro-the EU. It is by no means certain that Samoobronia may not move into the vacuum left by the demise of Solidarity as a parliamentary force.

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Poland ready to receive funds from EU farming aid programme 

Motions for obtaining funds from the EU SAPARD [ Special Accession Programme for Agriculture and Rural Development] programme can be filed with local branches of the Agricultural Restructuring and Modernisation Agency (ARiMR) as of 17th July, ARiMR president Aleksander Bentkowski said on 4th July, PAP News Agency has reported.
The European Commission published in the International Journal a report on transferring SAPARD funds to Poland, Agriculture Minister Jaroslaw Kalinowski told reporters.
Kalinowski said around 600 food processing plants and 17,000 farms have the chance to receive SAPARD funds. (Around 2m farms are to receive direct subsidies).
The programme will be difficult for farmers as first they have to finance the investment from their own funds or credits and then the money is to be returned from the SAPARD programme, Kalinowski stressed.
The European Commission has accredited ARiMR to utilise funds from the EU's SAPARD aid programme.
Under the programme Poland is to receive 171.6m euros to finance upgrades of its food processing industry and rural infrastructure projects. The first tranche is to total around 40m euros.

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Ferrovial and Budimex win tender to build new terminal 

Spain's Ferrovial Agroman, its Polish unit Budimex and Estudio Lamela S.L. won a US$199m tender to build a new terminal at the Warsaw airport, Budimex said in a statement, CEE News has reported. 
The low price offered by the Ferrovial/Budimex group was the main reason it was chosen, Poland's airport operator Polskie Porty Lotnicze (PPL), explained. 
The Ferrovial group offered to complete the work for PLN 803.35m whereas Hochtief, not considered in the bid for formal reasons, offered PLN 1.06bn and Strabag PLN 1.1bn, the PPL said. 
Contracted work involves design of the new terminal, modernization of the existing terminal, tarmac construction, and the building of an underground station and related infrastructure. 
The new terminal will be able to handle 6.5 million passengers annually, boosting Okecie's total capacity to some 9 million passengers per year. The second stage of expansion, assuming refurbishment of the existing terminal, is to leave Okecie with a capacity of 12.5 million passengers a year. 
The first phase is to be completed 3 years from the signing of the contract. 

Silesian Air on maiden flight, to start service in September 

Silesian Air, Poland's first regional airline, made its maiden flight on 4th July and plans to start regular service in the second half of September, Silesian Air head Eugeniusz Piechoczek said, PAP News Agency has reported. Silesian Air was asked by an insurance company to fly home the families of victims of a Polish bus crash in Hungary.
But before Silesian Air takes off on a commercial flight for the first time, the Infrastructure Ministry has to approve the so-called destination network as the regional air carrier wants to fly to home and foreign destinations
Piechoczek said the carrier's aim is to provide low-cost air service for road or railway passengers. It is estimated that the occupancy ratio will be 40 per cent, but the air carrier's target is 80 per cent by the end of the year, which translates into around 56,000 passengers per annum.
The company operates 19-seat Beechcrafts, and may provide cargo a service on board a Turbolet. Silesian Air is wholly-owned by Gornoslaskie Towarzystwo Lotnicze, the sole operator of Katowice's Pyrzowice airfield, but new shareholders are expected to join.

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Polkomtel's long-term bond programme intrigues competitors

Polkomtel's long term bond programme could pave the way for other telecom service providers to raise money domestically, the Warsaw Business Journal has reported.
The zl.500m (US$125m) capital-raising measure, announced recently, allows the mobile operator to sell fixed or variable-rate notes with one to three-year maturities to Polish institutional investors. No other Polish telecom company has sold notes domestically with maturities longer than a year.
"It's a good step forward," said Grzegorz Ludziak, the treasurer at Polsksa Telefonia Cyfrowa (PTC), the nation's No.1 mobile phone company. Ludziak said it would allow other operators - which usually issue similar securities on international markets - another financing option as they try to diversify debt portfolios. He noted that PTC was not in a rush to raise capital.
Polkomtel planned to issue the first tranche of notes in its debt programme, which may also include commercial paper, in mid-June. Its size and maturity are to be determined, said Marek Rudzinski, the firm's finance director.
Poland-based institutional investors, generally are a risk-averse group, have traditionally soured on bonds with maturities longer than a year. Rudzinski said that the longer the maturity, the greater the risk that a corporation would not be able to repay the bonds.
Executives at Polkomtel said that because the company's debt ratios are low and mobile penetration high, investors would warm to longer-term notes. Polish financiers are also hoping for greater long-term bond activity.
"We hope it will pick up," said one Warsaw-based fixed-income banker who asked not to be named. The banker added that if any industry would be able to pioneer long-term bonds, it would be telecoms.
Rudzinski said that if there is significant demand from investors, the company would seriously consider a bond issue for funding future projects such as its third-generation mobile system (UMTS). 
Until now, Polish operators needing to finance projects via the domestic market have primarily issued commercial paper - debt that matures in less than a year.
Bank Handlowy, BPH-PBK and ING Bank Slaski are arranging the issue.

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Polish government wants to privatise chemical industry 

The treasury ministry plans to privatise the heavy chemistry industry within 2-5 years, the ministry said in a statement issued on 13th June PAP News Agency has reported .
At the start of June the government adopted the heavy chemistry development programme envisaging consolidation on defined groups of products.
The new government strategy lacks concrete solutions and details of implementation which are to be dealt with by Nafta Polska, the programme coordinator.
Under the programme Nafta Polska will get the power necessary to carry out the analysis of the chemical sector and prepare the programme for its restructuring and privatisation.
Companies embraced by the programme will contribute their shares to Nafta Polska by the end of 2002.

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Poland offers majority stake in Ostroleka power plant 

Poland's State Treasury is offering a 10 % to 85 % stake in the Ostroleka power plant to potential investors, giving a future investor the chance to buy a majority stake in an energy privatisation for the first time, the Treasury's adviser DGA said, Interfax Information Services has reported. 
Initial privatisation offers are to be filed by July 10th. Further negotiations will concern price offered, development programme and ways to secure obligations. Aside from the shares offered a 15% stake in the company is reserved for employees. 
The Ostroleka plant is a heat and power producer, operating two black coal-fired plants with 1.87% of the Polish power system's capacity. The plant's installed power capacity is 670 MW and heating capacity is 387 MW/t. 
The company reported a mere PLN 0.2 mm net profit in 2001, but due to the introduction of an excise tax on power in 2002 the outlook for the current year's profits is grim. The Polish Treasury's new idea for energy industry sell-offs is to sell majority stakes in selected power-sector entities instead of the current practice of limiting stakes to 35 %, with some firms to see shares floated in Warsaw, the treasury ministry announced in April. 
So far Poland has privatised 4 power plants, 7 heat-and-power plants and one power distributor, filling its coffers with US$1bn. 

Poland interested in Odessa-Gdansk oil pipeline, premier says

Prime Minister Leszek Miller after meeting his Ukrainian counterpart Anatoliy Kinakh on 3rd July said Poland is interested in the co-participation in the construction of the Odessa-Brody-Gdansk oil pipeline, PAP News Agency has reported. Prime Minister Kinakh told reporters that the construction of the pipeline is an element designed to strengthen European energy security and diversify sources of energy supplies from the Caspian Sea. "We should as quickly as possible end work on economic and technical grounds of the project and set up an energy consortium. We see Poland as one of the basic elements of this system," said the Ukrainian prime minister.
Miller said that he also discussed with his counterpart flights by Poland's national air carrier LOT to Odessa and Lviv. The Ukrainian side has recently informed that it wants LOT to cancel its flights to the two cities. The Polish side wants the flight schedule to remain unchanged until the end of the summer season.

Oil company reveals investment plans

PKN Orlen SA oil concern will spend over 4.9bn zlotys on investments in 2003-2005. This year's investment outlays are to close at 1.1bn zlotys, PAP News Agency has reported.
Earlier, PKN Orlen said it plans to invest 2.5bn zlotys in its retail operations and 650m in the wholesale section.
This year, Orlen is to earmark 0.21bn zlotys for wholesale operations and logistics and 0.33bn zlotys for retail trade. A further 0.6bn will be spent on the refinery part.
From 2003 to 2005 Orlen wants to spend 0.44bn zlotys on wholesale and logistics, 2.2bn on retail trade and 1.37bn on the refinery section while the petrochemical section is to receive 0.96bn zlotys in investments.

Poland imports electricity from Lithuania

The Lithuanian power sector company Lietuvos Energija has inaugurated exports of electricity to Poland. Plans provide for Poland's imports reaching 250m kWhs annually, PAP News Agency has reported.
Electricity is sent to Poland by the Russian firm RAOJES.
Lietuvos Energija sells electricity to Belarus, the Kaliningrad District, Latvia and Estonia.

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EU allocates funds to Poland for development of small, medium firms

Over 2,000 small and medium size enterprises [SMEs] are to take advantage of European Union funds, according to Miroslaw Marek, the chief executive officer of the Polish Agency for Enterprise Development, PAP News Agency has reported.
The European Union has earmarked 34m euros within the Phare fund for backing entrepreneurship, including 28m for SMEs.
The agency expects that some 800 SMEs will take advantage of a programme supporting the expansion of exports through the improvement of professional skills of employed workers. The agency itself plans to spend 176m zlotys this year on aid for SMEs. 
Each year the agency supports some 30,000 SMEs.

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Investors eyeing Polish companies as EU membership promises rewards

Local private equity and venture capital professionals plan to accelerate their investment pace to take advance of the financing bargains that Poland's accession to the European Union is expected to bring, the Warsaw Business Journal has reported.
"With the prospect of entering the EU, I don't think there's a better time to invest than now," said Piotr Bardadin, the investment director of Renaissance Partners. Renaissance, with its head office in Warsaw, is looking to make more investments than usual just prior to accession, he said. The government plans to join the EU in 2004.
Private equity firms are rewarded for investing well before companies' valuations reach their peak. A gradual increase in the valuation of small- and medium-sized enterprises (SMEs) should accelerate with accession, making the firms a main investment target, local private equity financiers said.
"I think it makes a lot of sense having as many investments as possible because now is the time," Bardadin said.
But quantity will not outweigh quality, investors cautioned.
"We are quite careful not to be rushed," said Marcin Zagorski, the president of Hals Fundusz Kapialowy. Though the firm is being cautious, it is moving forward.
"I think that now is a good time to invest," Zagorski said. "We are preparing three investments." The Internet boom and bust offer a cautionary tale for many firms considering hasty decisions, he added. "A lot of people burned their fingers on the Internet," Zagorski said.
A number of European and American private equity and venture capital houses have had to reduce on their investment pace over the last year to deal with poor investments they made in Internet-related start-ups, investors said.
Still, some other investors are taking a more wait-and-see approach to the EU and investing. "Some say it's better to wait," said Witold Radwanski, the president of AIB WBK. Radwanski said there are ongoing debates among colleagues about the effect EU membership might have on Polish venture capital. But AIB WBK, with three funds, is putting other more prevailing and predictable issues first.
"The most important factor is the slowdown in the economy," he said. "We are not looking for discount companies."
As investors mull the implications of the EU, so do companies seeking capital.
"Just at the moment we are looking for funding," said Marek Serinafinski, the vice president of pharmaceuticals producer, Agropharm.
Agropharm must raise development capital within the next year due to new EU regulations that will affect production at the Tuszyn-based company.
Serinafinski said that the EU requires drug companies to pay €200,000 to launch a new product - an amount too pricey for small companies.
A new business model would cost the company roughly US$2m in private equity, he said.

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Polish deal puts Tesco in top slot

Tesco has become market leader in the fragmented Polish food retailing market by acquiring HIT of Germany's hypermarkets, the Financial Times has reported.
Although the UK's largest retailer refused to disclose the terms, it said the deal represented less than 2.5 per cent of its market value on July 3rd, or £420m. The deal includes the assumption of HIT Poland's debt, which stood at £83m at the end of last year.
Tesco moved from losses to a small profit in Poland in its latest financial year. Its sales there will double. Analyst said that the acquisition was not cheap but a strategic move. One said: "It is a high price per store to be paying, but it gives them critical mass."
Nick Jones, retail analyst at Goldman Sachs, said that before the deal there had been 10 leading international retails in Poland. These include Carrefour, Casino and Auchan of France. Mr Jones said: "They are vying for position and that has kept sales densities and profit margins low." Excluding Ireland, Poland will now become Tesco's second-largest international market after Thailand and ahead of Hungary.
David Reid, Tesco's deputy chairman, said the talks with HIT had lasted for 18 months. He said there was "nothing specific" currently, but Tesco was "on the look-out to take advantage of further consolidation opportunities." HIT, which generated sales of £337m last year, operates a chain of 134 hypermarkets, with two more under construction. Tesco has 47 stores in Poland including 15 hypermarkets, with sales of £390m.
Mr Reid said: "We expect it to converge to one set of supply chains, probably with one brand." He said that HIT, which had operated in Poland for seven years, made debit margins of some 4 per cent, higher than Tesco's, which are not disclosed. Mr Reid said: "We hope to have 15-20 per cent cash return on international investments over the next few years. Currently it is around the cost of money but strong profits are coming through now in central Europe."
At the end of last year, prior to fair value adjustments, the HIT business had net assets of £17m, including £83m of debt. Tesco said it expects the deal to enhance earnings in 2003-04, its first full year.

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New Szczecin Shipyard to launch production 

The New Szczecin Shipyard will launch production shortly. Banks will then award loans to finalize the construction of at least nine ships, the head of the Industry Development Agency, Arkadiusz Krezel, said, PAP News Agency has reported.
"The Agency offered 20m zlotys [about US$4.1m] to guarantee a loan for the shipyard. The funds will be used to launch production and pay for shipbuilding materials," Arkadiusz Krezel said.
He stressed that all Szczecin Shipyard Porta Holding creditor banks participated in the negotiations to extend the loan.
"The banks are owners of the unfinished vessels. That is why they will finance the completion of the construction and will sell them," Krezel explained. He noted that talks are under way with shipowners to renegotiate contracts.
New Szczecin Shipyard will give employment to around 3,000 people, Krezel said.
The Industry Development Agency paid a "symbolic 1 zloty" to buy from the bankrupt Szczecin Shipyard Porta Holding SA, the ASS company, and changed its name to Stocznia Szczecinska Nowa [New Szczecin Shipyard]. The new company will continue to build ships.
Szczecin Shipyard Porta Holding SA, comprising 30 companies, lost financial liquidity last October.

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Polish government earmarks funds for roads modernisation

The government plans to spend 21.3bn zlotys (US$5.3bn) on the modernization of Polish roads by the end of the year 2005, Infrastructure Minister Marek Pol said in Bydgoszcz on 24th June, PAP News Agency has reported.
Pol said that some 30 per cent of all roads demand immediate modernisation and adjustment to heavy truck traffic...
The deputy prime minister opened a four-kilometre ring-road in Naklo. The road is part of a road connecting Bydgoszcz and Szczecin.

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