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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: 070 - (21/02/03)

Poland shines in Iraq crisis
The Poles have every reason to appreciate what the US is up to in Iraq. They have experienced military dictators several times in the last century. Marshall Pilsudski and Colonel Beck in the interwar period and martial law in the 1980s were unpleasant episodes, even if Pilsudski was popular in many quarters for his defeat of the Red Army in 1920 and fierce anti-communism.
Poland has swung right behind Bush in his desire to topple Saddam, now obviously set to happen. President Alexander Kwasniewski went to Washington recently where he won high praise for his nation from Bush: "I have got no better friend in Europe than in Poland. One of the reasons why is because this man has made a commitment to work together, as equal partners in the war on terror…. in the desire to find freedom for people who live in misery."
Bush knows that the Poles as a nation support him in his own determination to rid the world of Saddam, whereas the British do not, even while Premier Blair remains totally supportive of him. Having been victims of fascism and communism, the Poles have a detestation of totalitarian tyranny, and they can see clearly that that is exactly what the Saddam regime represents.

Reshuffles in government
Premier Leszek Miller is striving to recast his government, which is predictably suffering in popular standing from being associated with a poor economic showing. Growth in GDP is slow, barely over 1% last year and not much better expected this year.
The treasury and economy ministers were replaced on January 6th, having made no dent on unemployment, which is running at nearly 18%. Then later in January two deputy finance ministers and an unpopular health minister were replaced.
Miller's government has been in power for eighteen months, having won elections in the autumn of 2001. The Solidarity-led coalition was wiped out and so the ex-communists have little effective opposition. They successfully completed complex negotiations to join the EU in December. Poland as by far the largest member to join in the next wave was the most difficult to reconcile to several of Brussels' sticking points, such as a delay in its small farmers having the right to claim subsidies under the Common Agricultural Policy. Membership will ensue in 2004. Everybody is eager to see the consequences.

Bribery scandal rocks Poland and rattles its EU bid
The political scene in Poland is rocked by a bribery scandal that amounts to a huge stumbling block in the road to EU membership.
On a narrow reckoning, it comes down to whether Prime Minister, Leszek Miller, or key figures in his ruling alliance knew about a US$17.5m (16.4m Euro) bribe allegedly solicited from leading media group Agora, publisher of Poland's largest daily Gazeta Wyborcza.
Movie producer, Lew Rywin hinted that Mr Miller was involved when he told Wyborcza's editor in chief, former dissident, Adam Michnik, that a group of ruling party politicians could arrange for parliament to pass a media law allowing Agora to acquire Poland's biggest private television broadcaster, Polsat.
"This is coming from Leszek Miller?" asked Michnik, who was secretly taping the July 22nd conversation.
"But he's not alone," said Rywin in the transcript that Wyborcza finally published on December 27th. The delayed publication detonated a political time bomb that some think could fracture Miller's already unpopular Left Democratic Alliance, or SLD, and potentially endanger the outcome of June's nationwide referendum on EU entry.
That wouldn't prevent Poland's EU membership. A bill is under consideration to allow the combined houses of parliament to approve EU entry if voters fail to turn out in sufficient numbers.
But a failed referendum would likely be the end for Miller and could fracture his ruling SLD, which holds nearly 50% of the seats in parliament and had looked set to dominate Polish politics for the rest of this decade, after demolishing the splintered right in September 2001 general elections.
"The government has no choice - it must do everything to win the referendum. Otherwise, it's all over for Leszek Miller," said one prominent SLD politician who asked not to be named.
Lech Nikolski, government coordinator for the EU referendum, acknowledges the scandal could have an impact but said quick results from the investigation could actually boost pro-EU feeling.
"The most important aspect is how this matter gets cleared up. Fast action from prosecutors and open hearings give grounds to hope for a clear resolution," he said.
The fear is that painful cuts on social spending could alienate voters. But failure to act could prevent government matching funds from being released for EU-backed investment projects in 2004-2005, triggering a "post-accession shock" and sending the economy into a tailspin.
Miller has reshuffled his cabinet twice since Jan 6 in moves that demonstrate less decisiveness than fear that the wheels are coming off.
With Poland's next general election nearly three years away and the SLD's near-majority hold on parliament uncontested, the government coalition is unlikely to be overthrown, but could well lose direction and rot.
Poland has seen this scenario before, as the centre-right government of Prime Minister, Jerzy Buzek, stumbled from scandal to scandal in 1997-2001, before its constituent parties were swept from parliament in a general election wipeout.
Moderate opposition strategists like Mr Arkuszewski and Mr Rokita wouldn't necessarily relish a replay, since they worry the ultimate beneficiary of a left-wing collapse would be radicals such as Mr Giertych's LPR and agrarian populist Andrzej Lepper.

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AGRICULTURE

Polish minister supports EU mixed subsidy system for farming

Polish European Affairs Minister Danuta Huebner on 30th January underscored the benefits of an EU-suggested mixed farmer subsidy system in Poland under which farmers would receive aid by acreage or by product. According to Huebner, this would be "ideal under Poland's conditions," PAP News Agency has reported.
Huebner said mixed subsidies would allow larger aid for EU-producing farmers. She added, however, that the Polish government was still opting for a simplified system to come under debate next November.
"Under the mixed system, all farmers would receive, by acreage, respectively 25, 30 and 35 per cent of the EU subsidy norm over the first three membership years while money from rural development funds and the state budget paid only to producers of products subsidized in the EU," Huebner said.

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AUTOMOBILES

Rover lets Daewoo deal deadline slip

MG Rover has allows its deadline for a deal giving it control of a former Daewoo car plant in Poland to slip, in the belief it is near the end of talks with creditors of the bankrupt South Korean auto manufacturer.
The Birmingham-based car company is thought to have agreed, in principle, to take a controlling minority stake in the plant for about US$125m. But it does not yet have agreement from the boards of the Polish and Korean banks that assumed control of the plant when Daewoo went bust, the Financial Times has reported.
Privately-owned Rover said: "We set a deadline of 14th February for concluding these negotiations or moving on. We haven't concluded the negotiations but things are moving in the right direction and we are hopeful of getting a positive result before the end of the month."
The talks have been delayed by Polish creditor banks concerned that the factory near Warsaw could generate more by being sold for redevelopment than Rover's business plan would produce.
Rover has embarked on a series of talks about overseas deals since being bought from BMW by a consortium of West Midlands businessmen almost three years ago. It has agreed to import a small car from Tata of India and rebadge it as a Rover, buts deal in China has been closet o collapse for months.

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AVIATION

Terminal two in holding pattern


Excessive bureaucracy appears to have brought the projected construction of Warsaw's Okecie Terminal II to a grinding halt. The new terminal could radically improve the passenger-handing capacity of the capital's airport and contribute to its hub role in the region, the Warsaw Business Journal has reported.
Last July, the tender commission for the Polish Airports Authority (PPL) selected a construction consortium consisting of Spain's Ferrovial Agroman, architects Estudio Lamella and local general contractor Budimex, to construct the second terminal at Okecie airport. The consortium beat Hochtief and Strabag with what turned out to be the lowest bid, of €200 million. Although the losers have challenged the result of the tender, last September the Infrastructure Ministry announced it had found no irregularities in the commission's procedures.
When completed, the 100,000 sq.m terminal will have the capacity to handle 6.5 million passengers a year, while the current terminal handles an average of 3.5 million passengers annually. The contract also stipulates the construction of the terminal must be completed within 36 months after the signing of the deal.
The delay could take up to several months, according to Budmex spokesman, Waldemar Mierzwa, due to the increasing number of permits from various local and national authorities, which the general contractor is obliged to procure before the first spade can hit the ground. Mierzwa gave assurances that the required completion date of autumn 2005 has not been altered and added that the contractor has taken bureaucratic hindrances into consideration in its itinerary.
"We thought that things would go a little smoother, and everyone wanted to increase the air-traffic flow in Okecie," he said. "But we were prepared for it, and we are optimistic about delivery of the terminal on time."
PPL representatives were not available for comment.
Meanwhile, the voivodship office has been busy designating the safety area around the airport perimeter. Lack of such a regulation, which takes factors such as noise and pollution into consideration, would slow down the construction of the new terminal even further.
The "zones of limited use," as the safety areas are dubbed, could prove to be a blessing in disguise for those already living close to the airport. Any further construction in the immediate proximity of the airport will be forbidden and inhabitants will have a chance to move elsewhere to better quality locations.

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BONDS

Poland launches 10-year issue in larger-than-expected deal

Poland launched a larger-than-expected 10-year bond, and other issuers, including Deutsche Telekom and German retailer Metro, have also prepared deals, the Wall Street Journal Europe reported on January 28th.
Poland sold €1.25bn of 4.5% bonds due February 2013, priced o.45 percentage point over midswaps. Deutsche Bank and J P Morgan Chase were lead managers on the deal, which is €500m greater than investors expected and rated single-A-2 by Moody's Investors Service and triple-B-plus by Standard & Poor's.
Poland's success should help pave the way for Hungary's pending €1bn 10-year transaction. Hungary, like Poland an aspirant for the European Union's next wave of admissions, expects to price its bonds in the near future. In Frankfurt to kick off a whirlwind six-city road show, book runners Dresdner Kleinwort Wasserstein, a unit of Dresdner Bank, and Schroder Salomon Smith Barney, a unit of Citigroup, declined to be drawn on price talk.
Deutsche Telekom's planned €1bn five-year bond, which is being marketed to retail investors through lead managers WestLB International and DZ Bank, has price talk of midswaps plus 2.2 to 2.3 percentage points. Traders and analysts, however, said that level looks tight for the deal, Deutsche Telekom's second bond sale of the year.
Metro will sell a benchmark size sterling- and euro-denominated transaction through Dresdner Kleinwort Wasserstein, Deutsche Bank, HSBC Holdings and J P Morgan. The deal's seven-year sterling tranche will go to market at two to 2.1 percentage points above UK government bonds. Its five-year euro tranche will price at midswaps plus 1.6 to 1.7 percentage points, the lead managers said.

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CONSTRUCTION

Atlas unveils scheme to develop new plants

Construction materials maker Atlas group said it will build a limestone-processing plant and cement facility, valued at 500m zlotys (€123m), according to Bluebull. But competition is high on the domestic market and experts said that nine groups currently in operation are planning restructuring. Gorazdze Cement Chairman, Andrzej Balcerek, said Atlas' move was "strange and it is like someone willing to drink beer buying a brewery." The facility is expected to produce one million tonnes of material each year despite the fact that Atlas Group uses only 150,000 tonnes a year.

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ENERGY

Poland to buy 161 bcm of gas from Russia until 2022

Polish and Russian government negotiators have agreed to slash Poland's long-term gas import levels, cutting the total import level to 161.3 billion cubic metres (bcm) while extending the purchase term by two years to 2022. Deputy Prime Minister and Minister of Infrastructure, Marek Pol, said after returning from Moscow that there would be an overall 35% reduction in supply. He noted that the prior contract had assumed 218 bcm by 2020. Poland had previously revised down its long-term gas usage forecasts and sought a re-negotiation of the framework purchase agreement signed in 1996. 
The preliminary agreement reached now must be confirmed by the two governments. "We achieved a considerable limitation of supply volume contracted over 20 years," Interfax News Agency quoted Pol as saying. The sides further agreed to complete the Polish link on the first line of the Yamal-western Europe pipeline, which is built and operated by a joint venture between Russia gas monopoly Gazprom and Polish PGNiG. The remaining construction will be financed "with money earned on gas transit without participation of the state budget and without State guarantees," Pol said. The first line still requires several compressor stations in order to bring capacity up to plan. "By the end of 2004 sides will settle terms for the construction of the second pipeline," Pol said. 

Polish-Norwegian gas contract deadline extended

Polskie Gornictwo Naftowe i Gazownictwo [PGNiG -Polish Gas and Oil Exploration] and Norwegian Statoil have extended until the end of this year the deadline for the ratification of a contract on Norwegian gas deliveries for Poland, Statoil Polska's Ewa Grabarczyk told PAP News Agency on 28th January.
PGNiG signed the contract on the deliveries of 74bn cubic metres of natural gas with five Norwegian companies in September 2001. The gas is to reach Poland in the years 2008 through 2024. The supplies are to be 2.5bn cubic metres in 2008 and will grow to 5bn cubic metres starting in the year 2011.
Grabarczyk explained that the parties to the contract decided to extend the deadline for its ratification in view of the fact that Poland had not signed an agreement with Russia so far on the scaling down of gas deliveries under the Yamal contract, while Norway had not found additional customers ready to buy gas to be supplied via the pipeline to Poland.

Polish government revises mining industry restructuring programme

The government on 28th January revised the mining industry restructuring programme. According to the revised version, miners from liquidated pits will be offered jobs in still operating mines, Deputy Economy and Labour Minister Marek Kossowski said.
The revised version envisages that a decision on pits' liquidation can be made after coal excavation forecasts and its predicted sales are presented by a team of experts.
The team should conclude its work at the end of March or at the start of April, Kossowski added. 
The government also updated a programme of introducing the electricity market and a programme of restructuring and privatising electricity-generating sector, prepared by the treasury ministry.

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INFORMATION TECHNOLOGY

Booming IT sector in 2003

The revenue windfall Poland's major IT firms have been expecting from the anticipated demand for products and services brought about by accession to the European Union will finally start to pay off in 2003, triggering a sector recovery, reports New Europe. Big tech firms have been hard hit by the overall recession for the past two years as prospective customers have kept plans to upgrade their IT systems on hold. 
But analysts now forecast revenue growth of 8-15% in 2003 compared with last year's 5-8% growth rate. Total sales for the IT sector in 2003 should reach €3.94bn compared with €3.53bn in 2002 and about €3.19bn in 2001, said Marek Paczuske, an analyst at CA IB Securities in Warsaw, citing figures provided by tech research firm IDC. The largest stock exchange-listed IT firms - Prokom, ComputerLand and Softbank - will stay at the top making the most of the EU benefits. Primarily, companies in the public administration sector will drive up IT revenue as they start spending funds on upgrading or replacing their systems, especially for EU-related projects, such as centralised system for border patrol guards and a central drivers registry. 
Although the initial stages of bidding processes have begun, for two huge contracts for central IT systems offered by PKO BP and insurer PZU the second half of the year will see the final outcome. The PKO contract is said to be worth about €499m (2bn zlotys), and the PZU contract €299m (1.2bn zlotys).

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PHARMACEUTICALS

Richter Gedeon in talks for transfer of goods to GZF Polfa

Hungarian drugs maker, Richter Gedeon has launched negotiations for the transfer of three products to its new Polish unit, GZF Polfa, Interfax News Agency quoted CEO, Erik Bogsch, as saying.
Reports suggest the goods will still be produced in Hungary, but the registration for the Polish market will be transferred to Polfa, which will probably sell the drugs under its own trademark. Interfax said GZF Polfa's business scheme has not been finalised yet, and its 2002 figures will only be revealed after consolidation into Richter. But Bogsch said that the Hungarian company hopes to secure a three per cent share of the Polish market, against Polfa's 1.25 per cent in 2002. 
The drug market in Poland is worth US$2.5bn each year, and this is expected to increase by another six per cent. The Polish unit will centre its activities in the marketing sector. Since Richter purchased the company, Polfa's network of medical representatives has grown to 70 from 22, and should total 100 in the coming years. As regards investments, the Hungarian group said it would realise a 70 million zloty investment programme by 2008 and focus on production capacity for finished drugs, and research and development.

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PRIVATISATION

Nine per cent more private firms in Poland in 2002

There were 353,000 private firms in Poland in 2002, 9.1 per cent more than in 2001, according to figures released by the Main Statistical Office (GUS). The number of firms in the public sector went up by 8.7 per cent, PAP News Agency has reported.
The largest fall occurred in the number of state-run hotels and restaurants (21.4 per cent down), transport, warehousing and communications firms (9.2 per cent down) and trade and repair firms (7.3 per cent down).
24,010 new private firms were set up last year, 5.5 per cent of all such firms registered in the REGON [commercial] register at the end of 2001. The bulk of them operated in the financial sector, hotel and restaurant services and municipal services.
Five 5,388 firms were deleted from the REGON register, 1.2 per cent of their total number. These were chiefly companies dealing in municipal services, the financial sector, mining and quarrying.

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