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Key Economic Data 
  2002 2001 2000 Ranking(2002)
Millions of US $ 187,670 176,300 157,600 22
GNI per capita
 US $ 4,570 4,230 4,170 71
Ranking is given out of 208 nations - (data from the World Bank)


Area ( 





Private sector 
% of GDP 


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: 078 - (27/10/03)

The Polish bridge
The poles are the natural leaders of Central Europe by a mile. Ukraine is larger in both population and territory, but has nothing like Poland's gravitas and appeal, which, for instance, put it fifth in the world in attracting foreign direct investment. FDI, indeed, now reaches over $50bn.
Poland's pole position is due to its historic importance as the country over which the Second World War, the defining conflict of modernity, was initially fought. Poland was the corridor through which armies from the east could march westwards and those from the west march eastwards. The appalling suffering afflicted by the Germans and the Russians on the Poles in 1939 and thereafter has given it a moral credit on which it can draw. It has been able to do so in EU entry negotiations because everyone knew that it was inconceivable that Poland of all countries would be left out. From a corridor it has become a bridge.
Poland is a member of an annual troika meeting of itself, France and Germany. It is the one country in the first wave of entrants that can influence the outcome of negotiations for the second wave. It has promised to do its utmost to expedite the entry of Croatia, Macedonia and Romania.

The economy the problem
The communist government of Premier Leszek Miller is not faring well. It is likely to be ousted at the next election, which, however, is years away. The communists are well aware of the Clinton administration's dictum; "it's the economy, stupid." But even in the US that is not so easy to fix. In Poland right now it is very hard.
The EU economy as a whole is quite flat and has been low for years. Its foreign investors are less active. Both developments have hurt Poland. GDP growth has declined from between 4-55 in 1995-2000 to 1% in 2001 and 1.3% in 2002. FDI is right down.
The market has its own remedies for discrepancies such as these. The zloty has declined precipitously against the Euro, reaching a new low of 4.64 in early October. This will make Polish assets cheap and encourage FDI again, if the currency stays down.
The government is wrestling with a large budget deficit, whose reduction, however, will bring it into direct conflict with its traditional supporters, the coalminers, who are threatening to go on strike. They threaten a general strike against the closure of four mines in Silesia. The Polish coal industry, like the British one in the 1980s, is due a sharp contraction, as the world switches to less pollutant forms of energy. The older pits are running out of coal. A strike against their closure is a strike against ecology. But it is also a strike against the present government.
The government is hoping for a 1.3bn zloty loan from the World Bank to restructure the coal industry.
Official figures for growth in industrial production are positive, nearing 10% on an annual basis in the summer. But it remains to be seen if the initial spurt is a seasonal freak or sustainable.

The dubious Iraqi chalice
One bright spot might seem to be in Poland's international profile. An advance guard of Polish troops has gone to Iraq to form the nucleus of the 9000-strong international division to assume peace-keeping duties in the centre of the country. It will be doing so under Polish leadership. This puts them in a special position. They are to be the leaders of an international force.
Under their command are 500 Bulgarians, a 500-strong Hungarian contingent, 1,640 Ukrainians and a sundry assortment of other forces. This is putting them at odds with the Europeans.
Undoubtedly this is due to the US wanting to reward Poland for its loyalty over the war and to irk the Germans who were invited to send troops under Polish generalship, about which they were not best pleased.
But this is not making the government any more popular. Most of the population were against the war, even if the government backed it. The news about what is going on in Iraq in the aftermath of the war is not encouraging. If Polish soldiers begin to take casualties like the Americans and the British, the government's popularity could go even further down. The pattern of the 2000s looks like dooming the Miller government.

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Koreans agree to rescue Polish Daewoo-FSO car plant

In a move aimed at saving Poland's troubled Daewoo-FSO carmaker from collapse, Korean shareholders agreed recently to restructure part of its debt, but insisted that around half of the jobs at the Warsaw plant would have to be cut, New Europe reported recently. 
The carmaker owes nearly 600m zlotys (US$151m) to six Polish banks and over US$160m to Korean creditors. The decision to transform a portion of the company's debt into stock was taken during a tense round of negotiations at Poland's Treasury Ministry in Warsaw, as some 500 anxious employees demonstrated outside. Daewoo-FSO's Korean shareholders agreed to the rescue plan after a Korean court okayed the restructuring scheme. The rescue plan also specifies job cuts for up to 1,480 of the plant's 3,100 workers. The definitive number of job cuts is to be agreed with trade unions at the plant. 
Polish radio quoted Jacek Piechota, Poland's deputy minister of economy and labour, as saying the rescue plan opened up the opportunity to find a new investor for the ailing company. Piuechota said MG Rover was still keen on a possible takeover, but the minister also confirmed other unnamed carmakers had expressed interest.

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Second Warsaw airport planned for opening by 2010

A second airport near Warsaw should be opened by 2010, the Polish government said on 8th October quoting IATA officials, PAP News Agency has reported.
Last April, Infrastructure Minister Marek Pol said decisions on building a second airport in Warsaw should have been taken by the end of the year.
By 2020 the new airport is expected to process 6.6m passengers a year.

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Lukas bank founder targets shopping malls

The end of September saw the launch of a new retail bank. Eurobank is to open 50 outlets in supermarkets across the country and plans to double that number by the end of the year, Warsaw Business Journal has reported. Miroslaw Lukasiewicz, who owns the majority stake in the bank through his Wroclaw-based firm, LOOK Finansowanie Inwestycji, plans a public debut in two to three years to boost the firm's equity, which currently stands at a modest zl.170m.
Lukasiewicz is known as the founder of the Wroclaw-based Lukas Bank, acquired last year by Credit Agricole. Funds gained from the transaction are the exclusive source of finance for his new venture. Lukasiewicz rules out an investment by a financial or strategic investor in the new future.
"The timing of our debut is connected to the plans of the competition," Lukasiewicz says, apparently referring to HSBC's acquisition of the Polish Credit Bank (PKB). The retail sector has consistently outperformed the corporate segment of the banking industry, which has suffered in the economic downturn of the past two years. Eurobank's owner expects the market to improve even further in the approaching months, and envisages the bank reaching breakeven point in just a year.
The mainstay of the bank's strategy is going to be easy access to consumer credit, says Slawomir Lukasiewicz, Eurobank president and brother of the chief stakeholder. The loans, ranging from zl.500 to zl.100,000, will be available to supermarket shoppers along with the Visa card. The loans will be repaid in equal instalments, which makes it a different proposition from the typical credit card. The bank is also working on introducing insurance products.
Eurobank's offer is targeted at medium- to lower-income customers. Slawomir Lukasiewicz listed mBank, Millenium and Lukas bank among its main competitors.
"But we do not measure ourselves by the existing market players' standards," he says. "We want to create our own market." The bank's strategy is based on the innovative location of its outlets and low costs. Eurobank will use an IT system developed in cooperation with Poznan-based software maker, Comp-Win. It has already been tested at Lukas bank and is a factor that directly contributes to Eurobank's low costs.
Another factor is the location of branches in existing retail outlets. According to a recent survey by the PBS Sopot research firm, 20 per cent of bank customers have changed their bank due to the inconvenience of branch locations.
Slawomir Lukasiewicz said that the bank has employed 670 people and is planning to increase that number to 1000 by the end of the year. This is thought to be the largest recruitment drive in the country this year.

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Lockheed and KBR agree hefty upgrade with Lotos Grupa

US aerospace titan, Lockheed Martin, and the Texas-based oil services giant, Kellogg Brown, and Root (KBR) concluded an agreement recently in Warsaw with Poland's second largest refiner Lotos Grupa SA (LG) and subsidiary Lotos Ekoenergia SA for the upgrade of LG's Gdansk-based refinery, dpa News Agency reported citing an official statement.
Worth over half a billion US dollars, the upgrade will enable the refinery to process high-sulphur Russian crude oil into gasoline and diesel and expand output from four to six million tonnes a year. It is expected to be completed by 2006.
Polish Deputy Minister of Economy, Labour and Social Policy, Jacek Piechota and US Energy Secretary, Spencer Abraham, attended the signing ceremony at the Warsaw head-quarters of the state-owned PGNiG (Polish oil and gas company). Officials said the upgrade is strategic as it would transform the Gdansk refinery into one of Europe's most modern facilities able to meet EU environmental standards. The deal was struck within the framework of the so-called F-16 offset programme in which Lockheed agree to off-set projects in Poland to the tune of US$6bn in return for Poland's decision to purchase 48 of the company's F-16 warplanes for US$3.5bn.
Lockheed has agreed to finance the purchase of the technology licences required for the refinery upgrade, while several Polish banks will provide financing. Abraham noted that the US was keen to expand cooperation between Polish and American companies. He named the planned Odessa-Brody oil pipeline aimed at bringing Caspian oil to European markets as one possible project.
Lotos head, Pawel Olechnowicz said the majority state-owned company would likely be ready to issue a rivatisation tender by early next year. The refinery deal is not the only project KBR has going in Poland. In July the unit of US oil service titan Halliburton signed a framework agreement with the Polish oil consortium Nafta Polska on possible cooperation in the reconstruction of Iraq's lucrative oil sector

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Markets reappraise Poland's debt

Poland's worsening public finances have this year prompted a reappraisal of the country's prospects for meeting the criteria for eurozone entry, the Financial Times reported on October 8th.
This reappraisal has led to a divergence of Polish government bond yields compared with eurozone benchmarks in the final montes before Poland's entry into the European Union next January.
With the zloty still unstable, heightened risks remain for investors in Poland's debt.
"There has been a reassessment of the convergence trade because of a realisation that an early adoption of the euro is not going to happen," said Tim Ash, an analyst at Bear Stearns.
Initially it was thought that Poland could adopt the euro as soon as two years after its membership in the EU takes effect, but now some analysts are warning that it could be delayed until after 2010 unless the government reverses the rise in indebtedness.
Poland's two-year yield spreads over equivalent German government bonds hit a record low of 2.17% in August, but by October 7th had widened to 2.74%.
Following a bout of instability in Poland's financial markets in recent weeks, the government will test demand at a crucial auction. Two such tenders failed in September, sending the zloty to a record low against the euro.
Coming on the same day that Jerzy Hausner, the economy minister, presents his plan for emergency budget cuts, Poland is offering 500m zlotys (US$128.8m) in 10-year bonds.
Mr Haysner's proposal entails shaving 3.7bn zlotys off the 2004 budget, which currently is forecast to have a 45.5bn zlotys deficit, up from 39bn zlotys this year.
Any sign that Leszek Miller's minority government is coming to grips with the budget deficit should cheer investors in Poland's government debt, many of whom are foreigners.
Lack of demand for longer-term debt has recently forced the government to rely on short-dated instruments. Recently, it placed an offering of 2.9bn zlotys but had to pay a yield of 5.246%, up from 4.982% at the beginning of September.
Anna Suszynska, a senior official with the Polish finance ministry, said the government hoped the budgetary strains would ease within one to two months.
In addition to domestic debt, the government is planning to place US$500m to US$700m in global bonds later this year, and as much as €3bn to €4bn through a European sale.
Standard & Poor's, the credit rating agency, expects Poland's public debt to rise from 50.5% this year to 60% by 2006.
This marks the eurozone ceiling and an upper limit written into Poland's post-communist constitution. Under the constitution, if public debt exceeds 60% of GDP, the next budget has to be in balance, which would mean radical cuts in social spending, a disastrous prospect for the government.
As Poland's debt creeps upwards, currency stability becomes increasingly important. Because 33% of Poland's 362.7bn zlotys debt is denominated in foreign currencies, mainly euros, a drop in the zloty's value would push the debt past the 60% of GDP mark.
"In that situation, the government has to defend the level of the currency," said Rafal Antczak, an economist with Warsaw's Centre for Social and Economic Research Foundation.
That could turn the floating zloty into what amounts to a fixed currency, defended by Poland's US$28bn in foreign currency reserves a "tasty morsel" for speculators, Mr Antczak said.
The degree of concern about Poland's creditworthiness is reflected in a decision by Standard & Poor's this summer to put the government's Single A rating on negative watch.
Moody's Investors Service, a rival credit ratings agency, rates Poland's domestic debt at A2.

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Large Polish firms forming Iraq contracts consortium

The Polish Ocean Lines (PLO) will join Poilen, a consortium founded by the PKN Orlen petroleum corporation to bid for Iraq reconstruction contracts, PLO shipping, logistics and trade chief Krzysztof Lewinski has told PAP News Agency. Poilen's registration is under way at the moment. It will consist of five companies, including PLO, Lewinski said. The consortium's umbrella partners will be Orlen and Polimex-Cekop.
PLO will take care of logistics and transport on Iraq projects, Lewinski said. He added that the Poilen companies decided to team up to raise their chances of obtaining Iraq contracts.
The Poilen consortium is not PLO's only operation in the Middle East. The company is also a shareholder in the Dubai-based Polish Ocean Lines Middle East enterprise together with firms from the Arab Emirates. The company's mission is representing Polish interests in the Middle East. It will also cooperate with Poilen.

Vietnamese will welcome Polish investments, upper house Speaker says

Vietnam is interested in Polish investments in Vietnamese mining, shipbuilding, power engineering, pharmaceutical and food processing industries, the Senate [upper house of parliament] Speaker Longin Pastusiak, said on 30th September at the conclusion of his visit to Vietnam.
Economic cooperation was the main subject of talks conducted by a Senate delegation in Hanoi. Pastusiak met with the Vietnamese president, the prime minister, parliament leader and leader of the Communist Party of Vietnam.
According to the Senate Speaker political contacts of the two countries are good, but both sides agreed that economic cooperation is unsatisfactory and mutual investments scarce. The value of trade exchange last year amounted to US$143m. "If we want to build a solid base of Polish-Vietnamese relations we must also build a solid economic base," Pastusiak told journalists. A considerable number (about 4,500) of Vietnamese educated in Poland and speaking Polish may be helpful in establishing contacts with Polish businessmen.
According to Wlodzimierz Sobczak, deputy president of the Polish Chamber of Commerce (KIG), advanced technology which many Polish enterprises can offer may be competitive on the Vietnamese market. An agreement is to be signed soon on US$90m of Polish credit to support export of Polish investments in Vietnamese mining.
Vietnam was the last stage of a nine-day tour by the Senate delegation to the region, during which the delegates visited China and met with Poles living in Siberia in Irkutsk. The delegation was accompanied by about 40 businessmen.

Polish foreign minister says EU entry to affect trade accords with Russia

Poland must renounce bilateral trade agreements with Russia, because after joining the EU Poland will become a party to the EU-Russia partnership and cooperation treaty, Foreign Ministe,r Wlodzimierz Cimoszewicz, declared here on 13th October, PAP News Agency has reported.
He thus rejected Moscow's demands for maintaining bilateral trade accords with states that will enter the EU on 1st May 2004.
"It is with certain concern that we notice Russia's reluctance to acknowledge that the new EU member states should be covered by the mechanisms of the partnership and cooperation treaty," the minister told newsmen during a break in the conference of foreign ministers of 25 states which are or will shortly become EU members.
"We simply have to renounce the trade accords," he added when giving an account of his speech delivered at the conference.
EU diplomats say that Moscow is well aware of the situation, but sticks to the accords in the hope of winning compensation for alleged losses caused by the change in terms of trade with the new EU members.

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Slump hits foreign direct investment

Foreign direct investment (FDI) in Poland in the first half of 2003 totalled US$2.528bn, down US$702m from the 2002 mid-year total, dpa News Agency quoted the Polish Information and Foreign Investment Agency (PAIIZ) as saying. 
The Dutch-based company Fiat-GM Powertrain BV ranked at the top of the list of investors in the first six months of this year with US$432.4m invested in a diesel engine factory. International real estate conglomerate GE Capital Real Estate/Heitman Central Europe Property Partners came second with US$254.7 worth of property investments. Austrian property developer, Europolis Invest, came third with US$237m invested, while Germany's Deutsche Bank ranked fourth with US$183.3m of investment. According to the 2003 FDI Confidence Index, published recently by global consultancy A.T. Kearney, Poland ranked among the top five most preferred investment destinations worldwide.

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Polish sell-off tests the metal of EU steel industry

The sprawling Sendzimir steelworks on the outskirts of the Polish city of Krakow recently echoed to the sounds of Carl Orff's Carmina Burana, an apocalyptic vision of life and death in medieval times, the Financial Times reported on October 7th.
About 2,000 people crowded into a cavernous disused strip mill for a performance that included lasers, fireworks and film of the plant in action. It was intended as a celebration of a mighty industrial enterprise. But is also contained a warning about the state-owned plant's future. For the key figure in Orff's recital is Fortune, the malevolent empress of the world, who can strike down a man in an instant.
These are uncertain times at Sendzimir. After a decade of delays, the government is on the verge of selling the lossmaking plant to LNM Group. The UK-based international steelmaker is offering to buy the bulk of Poland's steel industry, including Sendzimir, for an estimated total of more than US$1bn, including assumed debts, investment pledges and social support for workers made redundant in a proposed restructuring programme. The government has initialled the deal but the powerful trade unions have yet to give approval.
The unions represent 26,000 workers, Lakshmi Mittal, LNM's founder and chief executive, says he is confident of success. But Adam Ditmer, head of the steel industry section in the Solidarity trade union, Poland's largest, said: "We must not let this industry go to ruin by failing to reach agreement. But the plans are still not clear."
If it goes through, the deal will bring into private hands the last big slice of state-owned steelmaking in the 10 countries joining the European Union next year. It would also create a new order in European steel-making.
Big west European steel groups such as Arcelor and Corus spent much time considering acquisitions but the biggest buyers have turned out to be two companies with non-European roots: US Steel and LNM, which began life in Asia.
As well as its proposed Polish investment, LNM owns Nova Hut, the largest Czech plant, and Sidex, the biggest producer in Romania, which is not joining the EU next year but hopes to do so in 2007. US Steel has acquired Slovakia's Kosice works, reckoned to be the region's most efficient. The two groups are also front-runners for Dunaferr, Hungary's medium-sized state-controlled steelmaker, which was offered for sale this summer.
Under the EU accession treaty, the new members must restructure their industries and eliminate subsidies.
Privatisation is crucial, both to bring investment to the undercapitalised enterprises and to ensure transparency in future relations with the state. West European steelmakers, which spent decades on state aid, are watching for any departures from the accession agreements.
Earlier this year, Guy Dolle, chief executive of Arcelor, Europe's biggest steelmaker, and head of Eurofer, the industry body, wrote to the European Commission questioning tax breaks granted to US Steel in Slovakia. He says the reply was unsatisfactory and is seeking more details.
The new states will add only about 14m tonnes of annual output to the EU's current 138m tonnes. But these producers are more significant than the figures imply because they are located in markets in which manufacturing output is growing, not least from the transfer of industries such as carmaking from western Europe.
Mr Dolle says: "The real challenge for us at Arcelor is the movement of our customers to the east."
West European producers have competitive advantages in high-quality steel, notable steel sheet for the motor industry.
In the east, only Slovakia's Kosice plant produces similar steel in significant volumes. Mr Mittal says given time, Polish mills could compete through investment, better management and closer ties with customers.
Such relationships will be important to both western and eastern European producers because both face growing competition from Russia and Ukraine.
Christopher Beauman, a senior advisor at the European Bank for Reconstruction and Development, says the three top Russian companies - Severstal, Magnitogorsk and Novolipetsk - are strong operators with low cost ore, coal and labour.
Russian and Ukrainian exports to the EU are restricted by quotas, so sales efforts are directed elsewhere, including Asia. But such trade limits will be difficult to sustain once Russia and Ukraine join the World Trade Organisation as they hope, in the next year of two.
Mr Beauman said: "The central European producers could get caught in the middle. They are not as close to big customers as the west Europeans and they are not as low-cost as the Russians."
But Mr Mittal - who also has operations in Germany, the US, Mexico and Kazakstan - says central European plants will benefit from joining groups such as US Steel and LNM. "We have clout and we know how to use it," he says.

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Mixed feedback, yet LIFFE comes in 

The London International Financial Futures and Options Exchange (LIFFE) delegation visited Poland in mid-September to lay the groundwork for the introduction of trading in Polish interest rate futures on the London exchange, which is a member of the Euronext alliance. In a controversial measure that few experts see as likely to prove successful, LIFFE would initially offer Warsaw Interbank Offered Rate (WIBOR) contracts and could extend its offer at a later date, the Warsaw Business Journal has reported.
The instruments are currently on offer at the Warsaw Commodity Exchange (WGT), where transitions in 1-month and 3-month WIBOR contracts take place "sporadically," according to Jacek Bakowski, chief expert in futures contracts at WGT. The low liquidity of the papers on the local exchange makes analysts cautious as to the chances of trade taking off in London.
According to Artur Czerwornski, asset manager at CA-IB Investment Management, there is little reason for domestic investors to become interested in the contracts once they are listed in London. Czerwonski said that he was not familiar with the details of the LIFFE proposal, but described the idea as "interesting" and envisaged potential interest from foreign banks. 
A Warsaw-based trader, who declined to be named, said that he could not see banks alone creating enough demand to drive the market for WIBOR futures. He was, however, at a loss to guess what other category of investors LIFFE might be targeting. "But I don't know where else they're likely to find an interest," he added. LIFFE is thought to hope for interest from individual liquidity providers and banks that do not trade in the zloty.

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