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  POLAND

REPUBLICAN REFERENCE

Area (sq.km)
304,500

Population
38,500,000

Capital
Warsaw

Currency
Zloty

President
Aleksander Kwasniewski

Private sector
% of GDP

70% 

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Background:
Poland gained 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 January 2002

The new former communists, who triumphed in recent elections to parliament, trouncing the Solidarity-led coalition, are proving to be better at negotiating Poland's vital talks with Brussels on EU entry. Premier Leszek Miller has had the good sense to appoint a minister especially concerned with the negotiations, Jan Truszcynski, who is pushing ahead faster than before.
Poland, as the largest country in Central Europe and with big problems in agriculture and mining, was always going to be the hardest to integrate into the EU. But its inclusion is widely seen as vital, rectifying historical injustices from the Second World War. The Poles are now in a troika with the French, traditional friends, and the Germans, traditional foes now turned friends, to manage a successful enlargement eastwards. Poland as the flagship is all important here.
One positive development is that Latvia and Lithuania to its east have accelerated talks, closing the competition chapter on November 28th, along with Estonia and Slovenia. The EU will be stretching right along the eastern Baltic shore, almost to St. Petersburg.
Poland has closed 19 chapters of the 30 required, but still has not reached agreement with Brussels on the free movement of people and of capital. Poland wants a transition period of 12 years on the key sale of land to foreigners. They fear Westerners buying up land from the needy peasantry. The EU's common position is that the limit should be seven years.
As things look now, ratification could be complete for Poland and several other of the 12 applicant countries by the end of next year and actual enlargement occur by mid-2004. Poland has already attracted the largest intake of foreign direct investment (FDI) into a transition country (unless one counts China as one), namely over US$40bn. This should rise steeply as accession takes place. Bang next to Germany, with far lower wages and yet an educated work force, Poland is a logical place to locate investment. After the lull of present developments is superseded, FDI should flood into Poland by mid-2004.
One excellent result among macroeconomic indices of late has been a reduction in inflation to 4% on an annual basis. This should facilitate a reduction in double figure interest-rates that have been sharply criticised. The former finance minister and now central bank governor, Leszek Balcerowicz, may have other ideas, keen to wring inflation out of the system for good. He also has the ambition to see Poland enter Euroland as soon as possible after EU entry. Becoming part of a vast new economic space would enable Poland to prosper as never before, he is convinced. He may well be right.

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BONDS

ARP to select bank for metallurgy bond issue


The Agency for Industrial Development (ARP) will choose a bank to organise a 350-400m zloty seven-year bond issue for metallurgy, announced Arkadiusz Krezel, president of ARP which will issue the bonds, New Europe has reported. "We have established a short list, now we are just negotiating the price," Krezel noted, quoted by Internet Securities Businesswire. Issue proceeds are designed to enable debt restructure of steelworks Katowice (HK) and Sendzimira (HTS). HK has to repay a credit of 290 million zlotys, while it also owes over 500 million zlotys to the Polish State Railways (PKP).
The sector's total debts amount to some 10 billion zlotys. HTS and HT are expected to form the Polish Steelworks Concern (PHS) to which two small steelworks Florian and Cedler will be linked. The holding's capacity would cover 60 to 70 per cent of the country's steel demand.

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ENERGY

PGNiG looks to US$11m Kazak drilling project


Poszukiwania Nafty i Gazu Krakow, a wholly owned subsidiary of PGNiG, Poland's official oil and gas mining company, this year intends to complete drilling contracts worth US$11m in Kazakstan. This figures will further rise to US$20m next year, noted chief executive Jaroslaw Balasz.
PGNiG Krakow has registered a branch in Kazakstan, the Polish News Bulletin has reported. "This produces very good results and enables us to operate effectively on a very competitive market," Balasz explained. Average Kazak oil output currently amounts to some 40 million tonnes per year, and is expected to rise to 100 million tonnes by 2010.

Polish premier says coal mining structure to be streamlined

The government will offer in the first half of 2002 a programme of changes in the hard coal mining industry to streamline its structure, Prime Minister Leszek Miller said on 2nd December, PAP News Agency has reported.
Miller was in the mining region to attend the miners' day celebrations in Bytom and Sosnowiec, and lay a wreath to the miners killed during a martial law riot police raid in Katowice.
Miller told newsmen that some measures will have to be taken to cut the red tape and make the system more transparent. He said that two instead of seven coal mining holdings should be formed after the plan was initially approved by the Economy Ministry.
The government is aware of the difficult situation of miners leaving their jobs, or miners who lost their jobs as a result of the recent reform of the loss-making mining sector.
Miller assured miners of his government's readiness to provide aid, including financial assistance, both to miners and those taking part in retraining programmes.
"The new government will keep the problems in mind," Miller said and added that Poland will need coal and mining, while the Czech Republic has shown interest in importing Polish coal.
Employment in the mining industry has been cut by over 100,000, 20 pits have been shut down, and coal output was reduced to 102m tonnes in 2001 from 150m tonnes 10 years ago.

LOT to deliberate sale of 49% stake in Petrolot

The recent troubles encountered by the Polish national airline LOT has given rise to rumours of a possible sale of its 49 per cent stake in Petrolot, co-owned by PKN Orlen, which is in control of the remaining stake. PKN Orlen has already voiced its interest in such a take-over, while several other international fuel concerns have shown their eagerness to become involved, New Europe has reported. 
LOT spokesperson, LeszekChorzewski, confirmed these allegations, but was not at liberty to provide any details, Polish News Bulletin reported. Petrolot head, Jan Kujawa, has noted that his company is one of Europe's most modern aircraft fuel distributors. In light of this, the interest it raises should not surprise anybody. "It is difficult to determine now who will get LOT's stake and whether the transaction will take place at all," he commented. 
Petrolot's revenues for this year are estimated to amount to 450m zlotys, with 5.5m zlotys in net profits, two million zlotys less than in 2000. Petrolot presently operates in Warsaw, Krakow, Poznan, Gdansk, and Szczecin, and has plans to enter Wroclaw, Katowice and Rzeszow soon.

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EU ACCESSION

Poland's Cimoszewicz to present new EU negotiating strategy


Polish Foreign minister, Wlodzimierz Cimoszewicz, was scheduled to meet with top European Union and NATO officials in Brussels during a two-day visit in late November. In talks with EU Enlargement Commission Guetner Verheugen, Cimoszewicz, was expected to speak about Poland's new strategy for negotiations with the European Union unveiled by leftist Polish Prime Minister Leszek Miller the previous week, New Europe reported.
In a bid to speed up flagging accession talks, Poland's new government has softened two key negotiating positions which had proven sticky in membership talks with the European Union. Poland dropped its outright rejection of a Brussels - proposed maximum seven-year transition period of east-west labour movement following enlargement, saying it was willing to accept a maximum two-year moratorium. But Miller also insists his government will work hard to convince the EU's 15 member-states that no restriction on labour flows will actually be necessary.
Poland has also cut its proposed restrictions on farmland sales to foreigners from 18 to 12 years. Officials are calling the concessions a "breakthrough" in Poland's negotiations with the EU which slowed under the country's previous conservative Solidarity administration. Foreign Minister Cimoszewicz will also meet with NATO Secretary General, George Robertson, EU security chief, Javier Solana, and EU Agriculture Commissioner, Franz Fishchler.
In its recently published annual report on the progress of candidate states in meeting EU norms, the European Commission said Poland along with 9 other hopefuls stood in good stead to enter the bloc in a "big bang" round of expansion which could take place in 2004.

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FOREIGN ECONOMIC RELATIONS

Poland wants to renegotiate free trade agreement


Agriculture Minister Jaroslaw Kalinowski said on 7th December that he had asked the economy minister for the renegotiation of a Central European Free Trade Agreement (CEFTA) agreement, PAP News Agency has reported.
In his opinion, it will not be easy to modify the agreement with CEFTA being a big trade partner for Poland.
"Year 2001 was the first year to see a surplus in Poland's trade with CEFTA-member states," Kalinowski said.
According to deputy Agriculture Minister Jerzy Plewa, the need to renegotiate the deal follows a liberalising agreement recently concluded by the Czech Republic, Slovakia and Hungary that eliminates export subsidies in trade between these countries.
CEFTA groups the Czech Republic, Poland, Hungary, Slovakia, Slovenia, Romania and Bulgaria. CEFTA's objective is to liberalise trade among its member states.

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FOREIGN LOANS

EBRD expands commitment to municipal sector in Poland


The European Bank for Reconstruction and Development is investing €217m in two Polish municipalities to help relieve traffic congestion, reduce pollution and create a more efficient waste water collection service. The loans are part of the Bank's strategy to spread investments in municipalities throughout Poland.
A €16.7m loan to Przedsiebiorstwo Wodociagow i Kanalizacji (PwiK), a water supply and sewer company in Rybnik, in southern Poland will help create a more efficient waste water collection service, relieve public health hazards and reduce pollution in local rivers. The loan, which comes with a partial guarantee from the city of Rybnik, will be sued to extend PwiK's sewer network by more than 600km, connecting about one-third of the city's inhabitants to a new waste-water treatment plant. The loan will also help to clean up the region's environment by removing direct effluent discharges into local rivers and by reducing the number of septic tanks in the region.
Thomas Maier, Director of Municipal and Environment Infrastructure at the EBRD, said the Bank's loan will not only help PwiK substantially reduce the amount of untreated effluent entering the tributaries of the Odraj River and eventually the Baltic Sea, but also bring Rybnkik's sewerage collection in line with EU environmental standards. 
This also marks the EBRD's first environmental loan in Upper Silesia, which is one of the most extensively industrialised and polluted regions of central Europe. The European Union, through its ISPA Programme has approved Rybnik's application for complementary grant financing of approximately €71m to co-finance the project.
A €5m loan to the city Sopot will help relieve traffic congestion and reduce pollution by financing new traffic-activated signalling and the construction of a pedestrian passageway beneath the busy Niepodleglosci Avenue connecting the urban centres of Gdansk and Gdynia. It will be a direct municipal loan, without sovereign or commercial-bank guarantees. Additional funding from the EU's PHARE facility was used to help prepare the project.
Mr Maier said the loans highlight the EBRD's growing involvement in financing municipal infrastructure in Poland, which the Bank has already loaned around €170m. He said the loans may act as a launch paid to develop similar projects in other central European municipalities. The EBRD is working closely with the Polish authorities to find ways to support smaller cities which often find it more difficult to attract commercial loans or grants. "It is important for Poland and for its accession to the European Union that its smaller municipalities catch up quickly with the major urban centres, he said."
Earlier this year the EBRD signed €12m loan with the city of Gdansk to improve the city's public transportation by helping to refurbish trams, rehabilitate key sections of tram track and introduce electronic ticketing.

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PHARMACEUTICAL INDUSTRY

Krka starts pharmaceutical production line in Okecie


Slovenian pharmaceutical company Krka has opened a new factory in Warsaw's Okecie neighbourhood. Polish president Alexander Kwasniewski and Slovenian counterpart, Milan Kucan, both attended the ribbon-cutting ceremony, Warsaw Voice reported. 
"The launch of this plant testifies to the strong position of the Slovenian pharmaceutical industry in the European medicine market," Kwasniewski states. Some of the medicines Krka will produce at the new Polish factory will be exported to other Central European countries.

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TRANSPORT

Government highway panned by critics


The Infrastructure Ministry said recently that it wants to start building a new motorway as early next year to step up the construction of the country's roads. But the move has been criticised by other parties involved in the scheme who said the project would not happen earlier than 2004, the Warsaw Business Journal has reported.
Mieczyslaw Muszynski, the new appointed deputy minister of infrastructure told a news conference that the construction of Poland's motorways will be accelerated under the new administration.
Besides existing work on the A-4 motorway in the south and on the A-2 section between Nowy Tomysl (west of Poznan) and Konin (central Poland), the government wants to start building the next stretch from Konin to Strykow (near Lodz).
The Konin-Strykow highway will extend the A-2 highway 107 kilometres closer to Warsaw and is a further step toward the long-awaited completion of Poland's four-motorway system that will be upgraded to European Union (EU standards).
But Pawel Posadzy, spokesman for the Autostrada Wielkopolska (AW) consortium, which is building the 149-kilometre-long Nowy Tomysl-Konin stretch, said a minimum of 2.5 years will have to pass before the construction of the new section can be started.
"The tender procedure to choose the company (which will build the motorway) will take at least 18 months," Posadzy said. "Then it will be another year until the actual works can start. Our experiences so far suggest that it will take rather longer than 2.5 years."
Agata Berdys, spokeswoman for the Motorway Construction and Operation Agency, which implements the government's motorway construction plans, said the schedule for motorway construction envisages ground-breaking on the Konin-Strykow stretch in 2004.
"No concession has been issued for this stretch yet," Berdys said. "The construction itself is the shortest period of time, while it is the preparations that take the longest."
She quoted the example of the concession that was issued to AW for the Nowy Tomysl-Konin stretch. "The concession was issued in 1997, but the work began last summer," she said.
Tadeusz Wilk, transport department director at the International Road Carriers Association, which represents 4,300 road operators in Poland agreed that the project would be almost impossible to implement as early as next year. "It will be organisationally extremely difficult to start next year," Wilk said. "An enormous amount of funds and resources would have to be first raised for this venture."
However, the ministry wants to push with its plan to start the development next year, the ministry's press department told the Business Journal. The decisions on the tender concessions are to be taken within the next two weeks, according to the department.
The stretch is to be build in a system of private-public-partnership, with the government and private investors sharing the costs and risks of the venture.

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