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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% 

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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: 068 - (01/01/03)

The Poles are going through a reconsideration of their impending entry into the EU and much besides. Not for nothing did they vote back the ex-communists in last year's election, which wiped out Solidarity, the architect of Poland's termination of communist rule. Solidarity is no longer even represented in parliament, having failed to obtain the 5% share of the vote required.

New presidential aura
The president of Poland, Alexander Kwasniewski, is another ex-communist, having been Minister of Sport in the 1980s. This fact somewhat diminished his presidential aura and potential to act as the representative of ex-communist Central Europe to a wider world when President Vaclav Havel of the Czech Republic, trailing clouds of glory as an ex-dissident, was in the prime of his office. But Havel is retiring in January.
It is noticeable that the Polish president has already been growing in international stature, in 2002, clearly ready to fill the vacuum. Poland is the natural leader of former communist Central Europe and its president its obvious standard-bearer.
Kwasniewski has forged a good relationship with the US president, George Bush Junior. The two of them toured the US mid-west together in the summer. Bush is keen to attract into the Republican fold many of the 10m Americans of Polish descent, most of them working-class and traditional Democrats, who are concentrated in the rust-belt states that have been keenly contested in recent presidential elections. They defected to Reagan in the 1980s, but then returned to Clinton in the 1990s. Bush wants them back.
In the US, Kwasniewski spelled out Poland's policy abroad clearly and to the point. "Our foreign policy is built on two pillars," he said: "Europe and America's engagement in Europe."
He might say the same of his own career. For he is closely associated with Polish membership of both the EU and NATO, Poland has been a NATO member since 1999 and he was a conspicuous between Western and Central European delegates as an older statesman, despite his 49 years.
He must leave office in 2005 after completing his second term. A career switch will become necessary.
He has been strongly hinting that he may found a new centrist party, which he says might attract 15-25% of the vote in parliamentary elections and hold the balance between left and right. He doubtless has in mind the recent successes of new parties in Bulgaria, where ex-king Simeon II of the Saxe-Coburg-Gotha dynasty is now premier, and in Latvia where ex-central bank chief, Einars Repse, has just won a startling victory and has become premier too.
Alternatively, he might seek a career on the world stage, either as head of NATO in succession to Lord Robertson of the UK or, harking back to his sporting days, as head of football's world body, FIFA. At any event he feels that he is too young to retire.
Any future career depends on Poland joining the EU relatively smoothly in May, 2004. Both Kwasniewski and Premier Leszek Miller have staked their reputations on a 'yes' vote in a EU referendum, due perhaps next June. Anything less than a 2:1 vote in favour, says Kwasniewski, would be a failure. This may be difficult given the disaffection of many Poles with Brussels, especially the small farmers who are complaining of a poor deal over agricultural quotas and subsidies, by which new members are being denied parity with existing members for ten years. If successful, a thumping victory in the referendum would certainly boost Kwasniewski's career prospects, as also the standing of the government.

Backing down from full Western engagement
The Poles are having second thoughts not just about the EU, but also about the wisdom of going along wholesale with the pressures to remake its economy in a Western image. While the OECD and the IMF have been urging further privatisation of state assets and more access for foreign investors in the subsequent sales, many nationalists in parliament disagree with their proposals, Wieslaw Kaczmarek, the embattled Polish treasury minister, is being criticised for being too ready to comply with IMF policy requests. October's sale of Stoen, Warsaw's power utility, to Germany's RWE has caused a big furore. Opponents have called it "a disgraceful treachery" and are determined to block the coming sale of eight more power plants to foreigners.
A new opinion poll shows that 87% of Poles want their biggest firms to remain under state ownership and so out of the hands of foreigners. This might seem strange in that Poland has been the recipient of more foreign direct investment (FDI) than any other former communist state. Accumulative FDI to date is close to US$50bn.
It is generally admitted to have brought great benefits, from modern consumer amenities, shopping malls and the like, to new risk-management in part of the banking sector under international ownership, to jobs in high-tech multinational firms across the board. But the very success of FDI is creating apprehension at the end-outcome. The Poles, belonging to a large nation of 39 million, do not want to fall totally into the foreign thrall. Few local firms have the clout to stand up to multinational firms, being far too small for a start.
There is a growing disquiet across former communist Central Europe at being taken over lock, stock and barrel by foreigners. The inhabitants know that their economies, many of them quite developed before the war, were hollowed out by communism. They fear a subaltern status, leaving them powerless to control their destiny. Hence a growing economic nationalism among their electorates. FDI in Germany, France or the UK means one thing; in Central Europe another. 
Poland plans to keep control of a big retail bank, PKO BP, ostensibly to help its small and medium-sized firms. It has also put off limits to foreigners three large power plants that are in the process of merger. "It's our last chance to create a Polish group that can compete in a fully liberalised market," points out Mr. Kaczmarek. 
Foreign investors are turning to special deals, guaranteeing jobs for several years or large redundancy payments and the like. Investment in portfolio fashion, leaving local management in place, is another route for foreign investors, indirect investment in other words. The future lies with more foreign involvement, but, after the bull-in-a-china shop approach of the early years of FDI, it is likely to take more nuanced forms henceforward.

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AUTOMOBILES

French head for Silesia

French carmaker, PSA Peugeot Citroen is reportedly hardening on Silesia to locate its €700m carplant next year. Poland is now strongly tipped to head off rivals Hungary and the Czech Republic, according to the Ministry of Economy, the Warsaw Business Journal has reported. The final decision is scheduled for mid-December.
"There is proof that Poland is attractive," said Ewa Freyberg, deputy secretary of state at the Ministry of Economy who is at present negotiating with PSA. Freyberg pointed out that Toyota had already awarded the country a vote of confidence this year by selecting Jelcz-Laskowice as the site of its new diesel-engine plant.
Officials at the ministry have sharpened financial inducements that Peugeot Citroen is demanding to bring them in line with those offered by the Czechs. The French are also concerned with infrastructure improvement to service the new plant in Legnica or Radomsko, with a basic capacity of 300,000 units a year.
The ministry is at pains to avoid a repetition of the disaster it suffered last year when bureaucratic fumbling lead Peugeot Citroen in alliance with Toyota, to select the Czech Republic over Poland for a new car plant. Wojciecki president of industry research firm Samar, said: "Poland is better prepared. There will be no mistakes this time."

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ENERGY

Refinery stake offer conditional on other ownership changes

A 75 per cent stake in the Gdansk Refinery [Rafineria Gdanska] may be bought by a consortium of PKN and Rotch provided that it presents to the State Treasury a satisfying proposal to change the ownership of Naftoport, Treasury Minister, Wieslaw Kaczmarek, said on 20th November, PAP News Agency has reported.
The Treasury wants to control at least 51 per cent of Naftoport. Naftoport's major shareholders include PKN Orlen, with a 48.72 per cent stake, Rafineria Gdanska holding 25.64 pct and PERN which owns 17.94 per cent of Naftoport. "We have submitted a concrete scenario which is connected with a change of ownership, and we expect that it will be implemented. What PKN Orlen has proposed is practically unacceptable," Kaczmarek told newsmen.
The Treasury Ministry wants to perform a capital-raising operation at Naftoport, in which only PERN, wholly-owned by the Treasury, would participate.
Orlen had offered to exchange its shares in Naftoport for part of RG shares or for shares in Petrobaltic. "Orlen is seeking all possible means not to pay the price that should be paid if we refer to the previous offer to purchase RG," Kaczmarek said commenting on the PKN Orlen offer.

Fuel company considers launch of exploration projects

PKN Orlen is considering the launch of its own exploration projects, Poland's top fuel company head, Zbigniew Wrobel, told the daily newspaper 'Parkiet.'
Launching exploration projects by PKN on its own, would be rather "hazardous" as PKN has no experience in this field, Wrobel commented, adding, however, that the company is keen to learn from the experience of Petrobaltic as well as the mining and exploration division of Polish Oil and Gas (PGNiG).

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FINANCIAL NEWS

Polish business organization urges government to speed up reforms

The 2003 budget is tight as the government has been too slow in reforming the economy, according to Marek Goliszewski, the head of the Business Centre Club (BBC), PAP News Agency has reported.
Goliszewski claims Miller's government has come to a point when it has to choose between its social policy programme and reforms.
According to him, the government finds itself in a very difficult position. Economic development has stopped and as some 200,000 companies go bankrupt each year there is a need for the introduction of liberal solutions which do not enjoy social support, the BCC head stressed. He added that reforms are necessary for Poland's economy to become a full fledged partner for the economies of EU countries.

Poland's economy shows signs of recovery in third quarter - statistical office

The third quarter of 2002 was decisively better than former quarters and showed signs of economic recovery, according to the deputy head of the Main Statistical Office (GUS), Janusz Witkowski, PAP News Agency has reported.
"The third quarter has also brought more optimism, though in the context of financial situation of enterprises and investment possibilities it confirmed earlier question marks of the revival's lasting character and its possible continuation," Witkowski told a press conference.
Economists think the fourth quarter will see a further economic pick-up. Witkowski assessed that the data on Poland's economic performance in October are likely to signal favourable trends. "October was the month that continued an upward tendency of slight economic growth started in the third quarter," he said.

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INFORMATION TECHNOLOGY

Nationwide company to expand into central and eastern Europe

Nationwide IT products distributor, Veracomp SA, has plans to expand into 16 countries in central and eastern Europe in 2003 as well as eight other foreign markets further afield. Veracomp President Adam Rudowski noted "The company has finished preparing to enter new markets. It has extended distribution contracts with, amongst others, Nokia Internet communications, Lucent Technologies, F-Secure and Adaptec. It has created an organisation to service foreign markets, including a logistics centre in the US.

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SHIPPING

Szczecin shipyard gets US$400m order from Norwegian firm

Stocznia Szczecinska Nowa [New Szczecin Shipyard] shipyard will build six chemical transporting tank ships worth US$400m on the order of Norwegian Odjfjell ASA concern, the Economy Ministry said on 25th November, PAP News Agency has reported.
Engines for the ships will be manufactured by Poznan based H. Cegielski Poznan SA plant.
Since the start of operations in July 2002, the shipyard has received US$950m- worth of orders for 26 ships. Two of the ships have been already transferred to shipowners from Denmark and Italy, and another two are to be received this year.
"The number of orders the shipyard has at present will provide the 4,300-strong shipyard workforce and 1,300 workers of cooperating companies with jobs for next 14 months. A contract signed recently guarantees job for 5,000 people until 2006," it was written in a statement.
The shipbuilding is financed by Pekao SA, BGK and Pekao BP banks. "Talks with other banks are under way," the ministry wrote in the statement.

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TELECOMMUNICATIONS

Telos speak out against unfair TPSA practices

Netia and El-Net are concerned over the slow pace of work on market regulations (the Telecom Law Bill and the Licence Rates Conversion Bill) and are also complaining that Telekonunikacja Polska SA (TPSA) is using unfair practices in the fight for subscribers. Both Telecom operators say TPSA is using aggressive methods to undermine their position. One such example is the company's hints at Netia's possible bankruptcy and at the same time pulling in its subscribers by offering services "for a song." 
In addition, El-Net says TPSA is discrediting new technologies, such as radio access systems, that help smaller firms attract new clients, Warsaw Business Journal reported. Furthermore, the operators are worried about the easing tempo of changes to the telecommunications law which, if not completed by the end of this year, threatens to put them out of business. The Sejm Economy and Infrastructure Commissions were due to look into the new regulations recently. 

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