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poland

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POLAND


 

REPUBLICAN REFERENCE

Area (sq.km) 
304,500

Population 
38,633,912

Capital
Warsaw

Currency 
Zloty 

President 
Aleksander 
Kwasniewski 

Private sector 
% of GDP 
70% 

  

Background:
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: 075 - (28/07/03)

The Poles are faced with one great opportunity that is yet also a major challenge - entry into the EU by June 2004. There is no doubt that various countries have seen their economies totally transformed by EU entry, Ireland, Portugal and Greece.
But they are all small or smallish. It is noticeable that Ireland, which entered with the UK in 1973, did much better out of it than the British. This may be for a number of reasons. The UK was in the throes of an economic crisis that needed to be tackled in a wide-ranging way, something which Thatcher realised. Extra cash from the EU, which she negotiated, was a small part of the solution.
Poland's case may be closer to Spain's, a larger country that joined with Portugal and Greece in the mid-1980s. It has done well. But then its economy was restructured under Franco from 1961 onwards when the Opus Dei came to power. The EU funds it procured came to an economy capable of responding to them positively.
In the Polish instance, there was a massive need for restructuring in the early 1990s after the deliverance from communism in 1989. This was provided to a degree under the reforms of finance minister at the time, Leszek Kalcerowicz. He is now, as it so happens, the governor of the Central Bank.
The economy has been largely privatised, but not yet modernised. That could be greatly facilitated by EU funds, especially in the sectors of heavy industry and agriculture.

Lost opportunities
It is clear that the early 1990s gave a great impetus to growth which remained around 5% per annum throughout the decade. But the political will to continue reforms, always a long haul, started to evaporate in the mid-1990s.
The Democratic Left Alliance (SLD) in power in 1994-97 was excessively concerned not to lose popular support. So was its successor, the coalition government of premier Jercy Buzek, in which Solidarity played an increasingly nefarious part, returning to its trade union roots
Reform was stalled. It remains so. The ex-communists who have returned to power (they were ex-communists under communism, nearly all of them) have not recovered their zest to transform the status quo. They are playing for safe.
Here lies the least of the problems of modern Poland. People do not want to face up to the enormity of the transformation still ahead. But the EU offers a chance for them to do just that. Europe needs Poland, the natural leader of the central belt of its states, between Western and Eastern Europe. But it is also profoundly true that Poland needs Europe. It is about to have it.

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ENERGY

Polish oil and gas prospecting company wins contract in Kazakstan

The Cracow-based Oil and Gas Prospecting Company (PNiG) has signed a contract for prospecting drilling in the central part of Kazakstan for the Canadian Hurricane oil operator, PAP News Agency has reported.
"We will drill to the depth of 4,400 metres using MID Continent, which is one of the heaviest pieces of equipment in Europe with the hoisting capacity of 750 tonnes," spokeswoman for the company, Agnieszka Siola, said but did not reveal the value of the contract.
The oil-well will be transported by railroad on 105 platforms [wagons] to the central part of Kazakhstan. Specialists will be sent together with the equipment. The rest of the staff will be local.
The Cracow-based company has been working on the Kazakstan market for four years and has opened its local branch there.
The company has also implemented contracts in India, Pakistan, Russia, Lithuania and Ukraine. It is a daughter company of the Polish Oil and Gas company (PGNiG) SA in Warsaw. It employs some 600 people.

Access to Iraqi oil-fields is aim of Polish firms, foreign minister says

The head of the Ministry of Foreign Affairs, Wlodzimierz Cimoszewicz, has said that the aim of the activities of the enterprises represented by Nafta Polska and the Polish government, which supports it, is access to the Iraqi oil-fields, PAP News Agency has reported.
An agreement on cooperation in the reconstruction of Iraq was signed in Warsaw on 3rd July between the American firm Kellog Brown & Root and Nafta Polska SA, representing a consortium of Polish enterprises. The head of the Polish diplomatic service was present at this ceremony.
Replying to questions from journalists on whether thanks to this agreement Polish companies would gain access to the oil-fields in Iraq, the minister said: "I expect that the participation of Polish firms will concern various spheres, including this one, which, and I do not hide the fact, interests us very much."
Asked to be more precise, Cimoszewicz added: "This is our final aim." "We have not hidden and we do not hide that we would like Polish petrochemical companies to finally have direct access to raw material resources," said the head of the Polish diplomatic service. "One of the weaknesses of the entire construction of the Polish petrochemical sector is precisely the lack of access to raw materials," he explained. He took the opportunity to express the hope that the agreement "opens the road to the attainment of this goa.l"
Cimoszewicz drew attention to the fact that the signed document was the result of several months of preparations, that had been supported by the Polish government. He stressed that this had been a success, thanks to the professionalism of approach of both sides to this agreement.
In the minister's view, the cooperation of Polish and American companies was possible, but it was necessary to learn the manner of reaching these sorts of agreement. "They cannot transpire from a kind of political naivety, they must be based on an understanding of the rules conducting economic activity," he stressed.
"Not a broad wave, ladies and gentlemen, only by forming groups, forming consortia that have potential, that have the possibility of presenting multi-faceted offers, and that can thus elastically adapt to current needs, because this increases opportunities for cooperation with the Americans," the minister told journalists.
"I am deeply convinced that Polish companies that are so oriented and that behave in this fashion will have great opportunities for co-participation in the undoubtedly enormous in size, but I would like to stress also enormously significant from the political point of view, programme for the reconstruction of Iraq - which is economic, but also social and political," the head of the Ministry of Foreign Affairs said after the signing of the agreement.
Cimoszewicz feels that the role of the government and the role of companies should be properly understood and made precise. "The government should help, support and facilitate. Hence, among other things, the sending of our special representative to Washington, hence in the coming days the strengthening of our commercial representative offices in the embassies of the countries of the Persian Gulf and in Baghdad," he explained. At the same time, he stressed that "the government will not do the fundamental part of the work of business for it."
In an interview for PAP, the spokesman of the Ministry of Foreign Affairs, Boguslaw Majewski, drew attention to the fact that it was not a coincidence that the Polish-American agreement was signed after a whole-day conference summing-up everything that Poland could bring to the reconstruction of Iraq, and on what conditions. Representatives of several dozen inter-governmental organizations, humanitarian organizations, and also representatives of academic circles associated with Iraq participated in the meeting, which was organized under the auspices of the Ministry of Foreign Affairs.
Majewski also stressed that economic cooperation was only one of the aims of Polish activity on the territory of Iraq.

Oil field discovery could prove windfall for PGNiG

The biggest oil field ever to be discovered in Poland was recently found in the Miedzchod region of the Wielkopolsk voivodship. Two pools, Lubiatow and Grotow, were estimated to jointly hold at least 200 million tons of oil - the equivalent of about six years of the country's total consumption. Some experts do not exclude the possibility that the pools are even richer, with as many as 150 million tons, the Warsaw Business Journal has reported.
"After all the research has been done, we will be able to estimate its size more precisely," said Zbigniew Tatys of the exploration department of PGNiG, the company that discovered the Miedzchod pools and will probably get the licence to exploit them.
The oil field is very large, given the geological conditions of Poland, but it is not comparable to pools in Saudi Arabia or Siberia, experts unanimously said. In their opinion, exploiting the Miedzchod pools will allow PGNiG to increase its amount of drilled oil from 500,00 tons to 2 million tons per year, which could bring an additional US$300m (zl1.1bn) in revenue, when calculated at current oil price levels. In 2002 PGNiG's revenues amounted to €2.5bn.
"It is extremely difficult to say what impact this discovery will have on the country's economy, before we know all the details concerning the pools," said Rodyg Lobodda, an analyst with BRE Bank. "One thing is sure - it will increase the country's energy security. It may also result in decreased petrol prices, but that is not certain." Lobodda says the consumption of petrol in Poland is expected to grow by 1 per cent a year in the near future. 

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FINANCIAL NEWS

Elektrim and its bondholders takes positive turn

The long-running conflict between Elektrim and its bondholders took a slightly positive turn when the company announced its intentions to pay off the long-overdue bonds, the Warsaw Business Journal reported. Company representatives said that Elektrim has the money, but the company is also obliged to ensure the financing of its investment in ZE PAK. 
Elektrim owes bondholders nearly €500m (zl2.2bn). Meanwhile, Elektrim creditors accused the company of breaking its promise to pay off nearly zl2bn debts, and have threatened to file for the company's bankruptcy. The matter revolves around a zl32m (€7.2m) payment, which Elektrim is obliged to make to its creditors by the end of the month.

IMF: Poland not out of woods yet

The International Monetary Fund (IMF) poured cold water on boastful claims among domestic politicians that Poland's economy is recovering from its three-year-long stretch of stagnation. In a seasonal report released recently, the IMF said that "turning the nascent economic recovery into durable growth will be a major challenge" for the country, the Warsaw Business Journal reported.
The IMF said that Poland's economy remains uncertain due to shrinking foreign direct investment and poor monetary and fiscal policy. The report went on to say that Poland's government needs to limit spending, and the National Bank of Poland (NBP) needs to seriously evaluate the option of more base interest rate cuts without jeopardising the recent success of the central bank's campaign to limit inflation.
"The fiscal-monetary policy mix remains a problem - even as monetary policy has eased, the risk of a tightening, if the fiscal adjustment is delayed, creates market uncertainty," the IMF said.
The IMF pointed to "undue" appreciation of the zloty as a potential side effect of poorly managed fiscal and monetary policy, an effect that could hurt Poland's competitiveness in the open markets of the European Union.
Looking at the current economic indicators, the IMF said that the NBP has room to ease monetary policy.
"With a still widening output gap, high unemployment and continued wage discipline in the corporate sector, (the IMF) saw scope for further interest rate cuts without jeopardising the inflation target," the report said.
The IMF's critical stance towards the fiscal policies of the government of Prime Minister, Leszek Miller, comes at an unwelcome time for the prime minister, as he heads into the ruling party's annual congress at the end of June. The most recent estimates foresaw economic growth in Poland hitting an annualised rate of 3.5% by the end of the year, a fact that Miller's ministers exploited before and after the parliamentary vote of confidence held at the beginning of June.
Miller will have to answer serious questions as he heads into his third year as prime minister, among them how he plans to tackle a budget deficit that is forecast to grow to 4.6% next year - well above the 3% threshold that Poland will have to meet in order to enter into the European monetary union.

Poland unlikely to adopt Euro currency until 2008

Poland should enter the Eurozone as soon as possible, but the government hasn't set 2007 as a fixed target for EMU accession, Poland's Economy and Labour Minister Jerzy Hausner, said in Warsaw recently. The 2007 target for the adoption of the Euro was previously set by the central bank (NBP) headed by Leszek Balcerowicz in concert with ex-Finance Minister, Grzegorz Kolodko, who recently quit his post, New Europe has reported.
Hausner's comment is the latest in a string of suggestions by top Polish officials and analysts that Poland is unlikely to adopt the Euro before 2008. Most analysts peg 2009 as a more realistic target. 
The largest of the 10 mostly ex-communist states awaiting entry to the EU next May, Poland has been urged by the IMF, among others, to overhaul its public spending in order to slash a ballooning budget deficit projected to exceed 4 per cent of GDP this year. The so-called stabilisation pact governing European Monetary Union (EMU) stipulates that national deficits cannot exceed 3 per cent of GDP.

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FOREIGN ECONOMIC RELATIONS

Deputy premiers examine infrastructure projects

Polish Deputy Premier, Marek Pol, paid a one-day visit to Latvia on June 30th at the invitation of his Latvian counterpart, Ainars Slesers, sources were quoted as saying by FRE/RL News Agency.
Latvian Economy and Transportation Minister, Juris Lujans and Roberts Zile, also participated in the meeting of the deputy premiers that primarily focused on international infrastructure projects, including the Rail Baltica railway, Via Baltica highway, Baltic Ring energy network and the Liepaja-Gdansk ferry line.
Both sides agreed that the Rail Baltica project should be a priority, as it could have an important role in boosting tourism and freight transport. Pol also pledged to urge the Polish Chamber of Commerce to open a Polish trade office in Riga to improve cooperation among Latvian and Polish businesspeople. In addition he met in Riga with Latvian Development Agency Board Chairman, Juris Kanels, and Latvian Merchants' Association Chairman, Henriks Danusevics, and visited the Liepaja Free Port. 

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MINERALS & METALS

UK company chosen for final talks in privatisation of Polish Steel group

The British LNM steel consortium has been granted exclusive rights in negotiations for privatisation of Polish Steel Corporation [Polskie Huty Stali - PHS] until 22nd August, Treasury Minister, Piotr Czyzewski, announced, Polish Radio 1 has reported.
Although, the minister selected the British offer, the Americans still have a chance as long as they remain interested in the privatisation of the Polish Steel plants. When the deadline passes, the head of the ministry does not exclude the possibility of resuming talks with the second company, US Steel. According to Minister Czyzewski's statement, the LNM company was chosen for the negotiations because its offer was more attractive.
Czyzewski said: "This deadline means that if the draft of an agreement and the privatisation agreement are initialled and all its conditions are in line with the goals which the state treasury set for the privatisation process, the agreement will be signed. If it is not the case, and provided that the second bidder renews the validity of its agreement, we will resume talks with the second bidder."
The PHS concern created several months ago accounts for 70 per cent of production capabilities of the Polish steel industry. The Polish Steel plants have a 5bn-zloty debt. Without foreign investment the PHS can go bankrupt and several thousand people might lose their jobs.

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PHARMACEUTICALS

Ciech makes move to consolidate pharma firms

Henryk Klinkosz, president of Ciech, Poland's largest chemical group, has submitted an offer concerning a potential takeover of four state-owned pharmaceutical firms to Treasury Minister, Piotr Czyewski. Once the merger is successfully completed, Ciech plans to go public on the Warsaw Stock Exchange, an event it is tentatively planning for 2004, the Warsaw Business Journal reported.
Klinkosz foresees as the first stage of the operation the consolidation of three Polfas, or state-owned pharmaceutical companies, namely Tarchomin, Warszawa and Pabianice, with Biomed, a vaccine producer. The consolidated company has submitted an outline of its development strategy in the Polish pharmaceutical sector to the State Treasury.
Ciech would not discuss the details of the strategy. "Questions (regarding this matter) should be directed to State Treasury representatives," said Jaroslawa Garczynska, a Ciech spokesperson.
It was learned from the State Treasury that the offer is subject to a detailed study by the treasury as well as by the consulting company BAA (Business Analysts and Advisors), which has been hired by the treasury to advise in the privatisation of pharmaceutical sector enterprises.
The Business Journal has also been informed that talks are being held with representatives of the companies involved with Minister Czyzewski. The consultations concern the consolidation and future of the state-owned companies. Ciech representatives are not present at these talks.
"The merger with Ciech could bring about positive results, if additional conditions were to be fulfilled," said Janusz Koziara, head of the Pabianice pharmaceutical plant. "Consolidation of plants would eliminate competition among them and would result in cost reduction. Nevertheless, more aspects of this will be decided by government policy towards the pharmaceutical sector, than by Ciech itself."

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TRANSPORT

Polish minister outlines transport projects seeking EU funds

The A1 highway and the E-65 railway connection from Gdansk through Katowice to Poland's southern border have been placed on a list of priorities of the future enlarged European Union by the EC transport working commission. Such projects may be subsidized by the EU, PAP News Agency has reported.
Infrastructure Minister, Marek Pol, said on 8th July that apart from the two top projects Poland also has submitted other projects to be implemented at a later date; the modernization of Gdansk-Bydgoszcz-Katowice C-E65 rail cargo line (2.4bn Euros), the construction of the Warsaw-Bialystok-Lithuania Via Baltica highway (0.6bn Euros), the construction of a terminal at Gdansk Port Polnocny (0.5bn Euros) and the construction of a logistics terminal in Slawkow (33m Euros).
Pol said that together with the costs of the A1 (3bn Euros) and the E-65 rail connection (2.6bn euros) Poland needs an estimated 9bn euros to implement all the projects. The minister said that the modernization of the C-E65 railroad was placed by the EC commission on the second list of recommended projects, while the terminal in Slawkow on the third list of priorities.
According to Pol, the European Investment Bank is to earmark 50bn euros to finance the priority transport infrastructure projects. Credits are to be granted for 35 years and may cover 90 per cent of total investment costs.

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