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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% 

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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: 072 - (17/04/03)

The Poles have been pre-occupied of late with the Iraqi war. It is not generally known outside Poland, but it is well known within it, that it has represented US interests in Iraq since 1991, at some risk to its diplomats. Iraqi's subjected them to steady harassment and on one infamous occasion Polish sovereign immunity was violated when a Polish diplomatic post was opened by the threat of force. In 1991 Polish intelligence service agents spirited CIA personnel out of Baghdad in a daring operation worthy of a Hollywood film.

Poles in the present conflict
The Poles sent 200 troops and logistical support to the Gulf to fight in the Iraqi war. Polish commandos fought alongside British, Australian and American allies in the successful capture of Umm Qasr, the key port in the south that has enabled war material and humanitarian supplies to come ashore and move northwards to the war zones of Iraq. This is the first time since the Second World War battles of the Battle of Britain, Tobruk and Monte Cassino that Poles have been fighting side-by-side with Western troops.
The dispatch of the troops to the Gulf is all the more remarkable for happening after French President, Jaques Chirac, issued the famous threat to block the EU's enlargement to countries that show too much sympathy with the United States. The Polish government is signalling that while it believes in European integration, it does not share the Gaullist agenda of creating a rival superpower.
For the moment, the Polish public agrees. Internet opinion surveys by Poland's largest news magazine, Wprost, show 79% support for the government's pro-American stance and 73% in favour of increasing Poland's contribution to the Iraq expedition. Ninety per cent of those voting favour establishing US bases in Poland and a full 85% favour the disbanding of the United Nations. Attitudes across the nation are of course more sceptical than among the Internet-surfing yuppies; but America clearly has a generation of sympathisers out there who seem to share its instincts and values as much as interests.
But Poles want to be both good Europeans and good allies of the United States and that means, in time of war, rallying around the leader of the free world.
The US needs this support. If it hadn't been for Tony Blair acting against mainstream sentiment in his own party, other opponents of the Berlin-Paris axis in Western Europe would not have dared to stand out. If the EU had adopted a united stance, candidate countries would have followed their usual practice of endorsing EU foreign policy positions. If the post-war reconstruction and security efforts in Iraq go badly, and French diplomacy shows less arrogance and more skill, the next time around the US might face a Europe that is stubbornly and vociferously opposed to whatever the US undertakes. A split in the West would then ensue.
Bank criticism throws doubt on Polish reforms
Some doubts have arisen over the future of Poland's vital fiscal reform plan after central bank officials presented a withering critique of the programme.
Bank officials have said that a reform blueprint drafted by Grzegorz Kolodko, deputy premier and finance minister, would do too little to revive stagnant growth and prepare Poland's state budget for the demands of European Union membership. The plan "cannot be recognised as a comprehensive programme of actions leading to a deep and lasting fiscal reform," the bank's governing monetary policy council have said.
The bank also rejected Mr Kolodko's proposal to release one-third of its 27bn zloty (US$6.8bn, €6.3bn,) revaluation provision, which cushions against exchange rate shocks, to help finance Poland's EU-related financial obligations. Doing so would amount to printing new money and violate EU national accounts standards, the bank averred. "Printing additional money is not the way to co-finance EU aid," said Leszek Balcerowicz, central bank chairman, who called the reserve an "accounting device."
Mr Kolodko hit back, saying: "If the central bank is serious about my drive to cut the fiscal deficit, they should support me." Regarding his plan to tap the revaluation provision, he said: "If the central bank will oppose this move, it would be a very ill-advised, short-sighted and stupid policy."
Poland must free up 31bn zlotys in 2004-6 for its contribution to the EU budget and institutions. It also needs to muster co-financing for EU aid projects after it joins in May 2004.
Without a reform of its overstretched budget, the added costs risk pushing the fiscal deficit and public debt beyond sustainable levels. This would delay Poland's goal of qualification for euro-zone membership by 2008.
But Mr Kolodko has struggled to gather support for his plan within and outside the government amid a recent weakening of the authority of Leszek Miller's leftwing cabinet. The government lost its parliamentary majority in March, and Jerzy Ausner, the economy minister, has presented government colleagues with his own package of reform measures.
The central bank praised elements of Mr Kolodko's plan, including proposals to eliminate tax loopholes, relax mandatory indexation of some spending items and devolve fiscal authority to Poland's regions but it called outlined tax cuts too small.

Poland vetoes deal on broader EEA
Poland recently blocked a long-awaited deal on expanding the European Economic Area (EEA), the free-trade zone between the European Union, Norway, Iceland and Liechtenstein, after Warsaw's demands for higher fishing quotas went unheeded.
Poland's veto came as a surprise to the European Commission, which had been locked in talks with EU candidate countries and the three EEA partners for months and was convinced that all outstanding issues had been resolved.
The move is also likely to raise fresh concerns over the EU's ability to reach decisions once it expands to 25 member states next year. EU law still requires member state to agree unanimously on some of the most important areas of legislation, and the prospect of 10 more states wielding veto power has alarmed many who fear a state of near-permanent deadlock.
The support of the 10 countries lining up to join the EU was required in this case because the terms of the EEA agreement were supposed to be extended to cover the candidate countries as well.
The EU was also keen to raise the financial contributions the three non-EU countries make in exchange for their access to the single market. The new deal would have dramatically increased their contributions - from €24m (US$25.6m) to €233m, with Norway picking up the bulk of the bill. Norway's centre-right government will be disappointed by the failure: the country's relationship with the EU has been a divisive issue.
EU officials said there were no plans to reopen talks on the entire package, suggesting that the Commission hopes it can persuade Poland to drop its opposition in the coming weeks.

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BANKING

EBRD confirms interest in BGZ privatisation


The European Bank for Reconstruction and Development (EBRD) has confirmed its interest in the privatisation of Bank Gospodarki Zywnosciowej SA (BGZ), a universal bank specialising in agricultural lending, EBRD Managing Director, Jan Krzysztof, said. The Treasury is preparing to sell off a minority stake in the bank on the WSE and is now looking for a privatisation adviser. 
It also plans to retain control of BGZ. BGZ officials reportedly said recently that the sale would most likely occur in the first half of 2004. "BGZ's net loss was roughly 260m zlotys in 2002, though the bank plans to record a 100m zlotys profit this year," Interfax News Agency reported bank head, Jacek Bartkiewicz as telling the state news agency, PAP.

HSBC aims to gain foothold on Polish market

The Polish banking sector continues to draw considerable attention from major European banking groups, Bluebull News Agency reported. British HSBC, one of the world's biggest players in the banking sector, is reportedly keen to enter the Polish market. The bank is studying the possibility of either setting up a new entity or buying an existing bank in the country.
HSBC has applied to the National Bank of Poland (NBP) for a banking licence. "We always have either a small outlet offering specialised niche services, or we become one of the top three biggest banks. We are never ranked 10th," an HSBC representative commented verifying the bank's interest in the Polish market. Bluebull also reported that the company has already started headhunting and plans to employ 100 people.
According to experts, there are only two banks, Millennium and BZ WBK, which may be sold. However, HSBC might also consider taking part in the privatisation of the country's largest bank PKO BP, which would suit it perfectly.

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DEFENCE INDUSTRY

Most Polish army upgrade deals going to Polish firms

Most army modernization contracts go to domestic defence firms, such orders constituting 63 per cent of Ministry of National Defence [MON] modernization spending in 2002 (1.15bn zlotys or US$283,000), the MON wrote in a statement to PAP News Agency on 28th March.
The statement came in response to protests by defence employees who demanded more army contracts for Polish arms industry. According to the ministry, Polish arms firms may receive up to 15 per cent more army contracts this year.
The ministry said it would spend around 2bn zlotys on military modernization this year.

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ENERGY

Polish, Ukrainian premiers discuss Odessa oil pipeline project

In a phone call to his Ukrainian counterpart, Viktor Yanukovych, on 28th March, Prime Minister, Leszek Miller, discussed his recent visit to Brussels during which the European Commission showed an interest in the construction of the Odessa-Brody-Gdansk oil pipeline, PAP News Agency has reported. 
Miller confirmed that the venture should be of a commercial character and said that by the end of May deputy prime ministers of the two countries may discuss in Brussels the detail of the EU's share in the realization of the project.
During the conversation the two prime ministers stressed the importance for Warsaw-Kiev relations of a proper preparation of the introduction of visa duty for the Ukrainian citizens starting 1st July. The Ukrainian side will not introduce visa duty for Poles which testifies to a special character of mutual relations.
Yanukovych invited Miller to pay a visit to Ukraine at the end of June and early July this year.

Rude awakening for Rotch

Representatives of Rotch Energy, the British company that has been trying for more than two years to purchase Rafineria Gdanska, were dismayed to read in the newspapers that the government had cancelled the tender, the Warsaw Business Journal reported recently.
The source of the information was Jan Ryszard Kurylczyk, who was quoted as saying that Rotch had not been invited to continue the negotiations with Nafta Polska and the treasury. His office was quick to claim that he had merely meant that the possibility of halting negotiations could not be ruled out. Michal Tober, the government spokesman, also denied the reports.
Keyvan Rahimian, the chief executive of Rotch Energy, said that he would not criticise the voivod for the confusion that his comments had created, but added that the company is concerned about the slow progress of the privatisation, which he ascribed in part to the complexity of the treasury's position as owner, both directly and indirectly through its shares in Nafta Polska, of 85% of the refinery. He also cited the inertia brought about by the "individual self-interests" of the parties involved.
However, many industry analysts see the apparent misunderstanding as a deliberate attempt to herald the creation of a new industry giant, rivalling PKN Orlen, in which Rotch Energy would probably have no part. The so-called Lotos group would include not only Rafineria Gdanska, but also the Jaslo, Czechowice, Glimar, Petrobaltic and Naftoport refineries in southern Poland.
Support for creating the Lotos group has come from Kurylczyk and other local representatives, for whom the possibility of workers being laid off by one of the biggest employers in the region is a matter of considerable concern.
By contrast, a number of analysts are highly critical of the plan to consolidate a number of small southern refineries with the Gdansk plant in the north.
"Rafineria Gdanska is too small, badly located and has little control over the quality of the products sold under its brand," said Rafal Jankowski of CDM Pekao, explaining that since the refinery's chain of 300 petrol stations are owned by individuals, attempt to implement any quality control cannot be treated seriously.
Janowski and other analysts said that the most profitable options for all the interested parties - the treasury, consumers and pension funds - would be a takeover of Rafineria Gdanska by PKN Orlen, supported by Rotch.
"Such a combination would be powerful enough to compete on the single European market, after it is liberalised," Janowski ssaid.
The current Rotch-PKN Orlen bid values the 75% of Rafineria Gdanska on offer at €254m. With more promised investment, the total bill is expected to reach €311m.

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FINANCIAL NEWS

Polish state land sales to foreigners very small, official reports

The State Treasury Agricultural Property Agency (AWRSP) sold 160,000 hectares of arable land in 2002, AWRSP official, Tomasz Ciodyk, said during a Polish-Dutch seminar on 1st April, PAP News Agency has reported.
In the years 1992-2002, the agency sold 1.27m hectares of land, or 27 per cent of the land taken over by the agency from the state sector. The agency took 4.7m hectares of arable land from the state sector.
Since the beginning of its operations, the agency has sold 6,743 hectares to foreigners. A total of around 2.4m hectares of land owned by the agency has been leased.

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FOREIGN LOANS

Poland to get 7.3bn euros from EU

Poland will receive 7.3bn euros in EU aid between 2002 and 2006, EU Commissioner for Enterprise and Information Society, Erkki Liikanen, said on 31st March in Warsaw, PAP News Agency has reported.
Liikanen said the funds will finance commercial, infrastructure and regional development projects.
Poland will have to set its priorities in utilizing the funds and seek ways to benefit from the enlarging market, Liikanen said at a conference in Poland's Economy and Labour Ministry.

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INFORMATION TECHNOLOGY

PZU shortlists tender offers

Polish insurance giant, PZU, has short-listed two consortia - Poland's Prokom and Computer Sciences Corp (CSC) on one hand and the giant IBM and Germany's TIA on the other - as its major IT integration tender moved onto the next stage, the company said in a statement. 
Of the more than 30 consortia that placed offers, PZU had considered five and ranked them as follows: Prokom/CSC; IBM/TIA; Accenture; Computer Land/SAP and Fujitsu. "PZU's management accepted the recommendations of its analysis unit and passed a resolution to invite two consortia: CSC/Prokom and IBM/TIA," PZU said in a statement, Interfax News Agency reported. 
The winner is to be chosen in May and June, PZU said. The tender is estimated to be worth anywhere from 400m zlotys to one billion. The PZU group is the largest insurance group in Poland. It has over 400 IT systems operating within the group that need to be integrated. The PZU group will create an IT centre that will eventually serve the whole group, PZU president, Zbigniew Montkiewicz, said recently.

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MINERALS & METALS

KGHM forecasts 40% drop in 2003 net profit

KGHM, a Polish copper and silver processing company, announced this year's net profit should reach 154m zlotys, down 40%, against 254m zlotys in 2002, New Europe reported. 
Sales are expected to drop 7.6% to 4.149bn zlotys from 4.488bn zlotys, the company said in its annual report for 2002. Sales from products should bring the company about 4.12bn zlotys, while pre-tax profit should amount to 197m zlotys, the company said. KGHM expects to sell 520,000 tonnes of electrolytic copper this year, almost three per cent less than it sold in 2002. "Analysts forecasts for 2003 assume that copper prices will rise moderately, while silver prices will remain at levels similar to those in 2002," KGHM said in the report. 
"Projection of the financial results of the company in 2003 were constructed based on analyses of external conditions, and on production and sales volume possibilities for the basic products of the company." KGHM holds the seventh spot on the global copper mining market and second in silver mining.

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PRIVATISATION

FinMin sees little chance over privatisation targets

Poland's Finance Ministry sees little chance of the government meeting its 9.1bn zlotys privatisation-income target for 2003 and the country will have to issue more government securities to finance expenditures, as Deputy Finance Minister, Halina Wasilewska-Trenkner said recently, New Europe reported.
Asked if state sell-off receipts would meet the plan, Wasilewska-Trenkner said it seemed very difficult. "The budget will have to issue additional debt, meaning selling larger amounts of Treasury papers. We've had to face such a situation for three years." Wasilewska-Trenkner added that privatisation revenues usually flow into the budget in the fourth quarter. Thus, government spending in the course of the year that is supposed to be financed via privatisation is financed from the budget. These expenditures include compensations for public-sector employees and funds for open pension funds (OFEs). Poland's 2003 budget assumes that 7.4bn zlotys of the privatisation total will be earmarked to finance the budget deficit, which is planned at 38.7bn zlotys.

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RETAIL INDUSTRY

Tesco Polska announces ambitious expansion plans

"The Polish retail sector will soon begin to consolidate, as there is only room for five big players on the market," Tesco Polska Deputy President, Czeslaw Grzesiak, recently told the press, Bluebull News agency reported. 
Tesco plans to open six new hypermarkets at a cost of €137m this year. Savia, a smaller retail chain belonging to Tesco, will develop through either construction of new stores or taking over existing ones. According to Grzesiak, there should be no significant improvement on the retail market in 2003, but on the other hand, the war in Iraq will not influence food prices in Europe and will not affect commercial companies.

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