% 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: 076 - (01/10/03)
The nature of the 2000s
A certain cycle is developing in Poland in the 2000s quite different from the earlier decade, at least until the watershed of 1998 or so. In the 1990s considerable progress was made from a low base, with a low threshold of expectations. People did not expect miracles and they did not get them. But many, especially younger people, began to do a lot better. At least one half, mostly older people, remained seriously disaffected. But growth was averaging 4-5% per annum and foreign investment was pouring in.
By the early 200s growth had slowed to a trickle, A big problem has been the steep decline of foreign investment, once it had reached a plateau of $50bn or so, as GDP growth declined from between 4 and 5% in the period from 1995 to 2000 to 1% in 2001 and 1.3% in 2002.
Governments have swiftly become fiercely unpopular. The Solidarity-led government was wiped out last year. Solidarity no longer sits in parliament.
The same threatens to happen to its successor, the ex-communists of Premier Leszek Miller. The number approving the government was down to 9% in the polls in August, while those disapproving were 84%. The ratio for Miller is 74: 14 against.
In each case a poor economic performance was compounded by corruption and conflict of interest scandals. These are particularly shocking to the population in the case of the communists, deemed initially less corrupt and more honest.
Other problems , such as EU
Moreover, Poland is having great difficulties with the whole European project which it is due to join next year in May. Negotiations are still in progress over contentious issues, such as the delay in Polish farmers receiving EU subsidies to the full extent of those of existing members.
Poland's future within the European Union depends on its ability to strengthen the rule of law. In the corruption perceptions index put out by Transparency International and the governance index of World Bank's Danny Kaufmann, Poland lags behind its immediate neighbours. If Poland wants to attract the capital needed to grow, and to keep up its prospects of joining the Euro this decade, it needs to do much better in making its privatisation more transparent and rapid.
A recent deterioration in the country's fiscal prospects has put a big question mark over its chances of joining the Eurozone anytime before 2010. This lowered its Standard & Poor's credit rating in late July to negative, even while affirming the country's BBB plus/A-2 foreign currency and A/A-1 local currency ratings.
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.
Polish aviation plant signs cooperation agreement with Russian Mig
PZL Mielec aviation plant and the Russian Mig Corporation on 31st August signed an agreement on cooperation on the preparation of production of the training-combat Mig AT in Mielec. The deal was signed during the fourth international Air Show 2003 in Radom, PAP News Agency has reported.
"The process concerns the implementation of aircraft manufacturing. Starting the initiative depends on whether Mig AT meets the requirements of the Polish army. According to my information there is a chance that the conditions will be set by the armed forces next year. If the aircraft fails the requirements, we will work on that. As a consequence, the Mielec plant would submit a Mig AT delivery offer to the army," PZL CEO and director-general, Stanisaw Wojtowicz ,said.
The agreement was signed after PZL Mielec replied to the Russian cooperation proposal.
"Had not it been for cooperation with PZL Mielec, the Mig corporation would have worse terms of participation in an auction, as Russia is not a member of NATO and the European Union," Wojtowicz said.
Wojtowicz said the auction for the delivery of the training-combat aircraft is to be announced in 2005 or later.
Polish LOT and United airlines sign cooperation agreement
LOT Polish national carrier and United belonging to Star Alliance, on 5th September signed an agreement on cooperation and joint exploitation of air connections between Poland and the United States, LOT press office said, PAP News agency has reported.
Under the agreement, as of 26th October 2003 LOT will fly to Chicago and New York and from there United will take Polish passengers to 30 target cities in the USA.
United is the fifth carrier belonging to Star Alliance to have such an agreement signed with LOT. Earlier LOT signed agreements with Lufthansa, Austrian Airlines, BMI and All Nippon Airways.
Polish government wants World Bank loan for closing coal mines
The capital of the Coal Company [Kompania Weglowa SA] has to be increased with shares worth 1.3bn zlotys (about US$325m), PAP News Agency has reported.
The government is seeking a World Bank 1.3bn-zloty loan to implement the restructuring programme of the mining sector, Deputy Economy Minister, Jacek Piechota, said on 26th August.
According to Piechota, Coal Company will cut its production capacity by 9m tonnes by 2006 and liquidate four mines.
Piechota said the government plans provide for social cushions for laid-off miners, including a 75 per cent wage equivalent for miners who are to retire in three years.
The government is seeking the loan as it does not have funds to finance the cushion programme and increase Coal Company capital.
Piechota also said the decision to reduce the production capacity was caused by economic reasons. At present the output is 102m tonnes a year and the demand stands at 92m tonnes.
US firm starts building power station in central Poland
Construction on a 37-MW environment-friendly power plant has started in the central-Polish Starachowice Special Economic Zone, PAP News Agency has reported.
The US442m gas-fuelled plant will be built by Caterpillar Power Ventures Europe, subsidiary of the US Caterpillar Inc, which will also supply its turbines. The actual construction work will be carried out by the Swiss Tuma Turbomach enterprise.
GDP climbs to 3% in H1
Poland's gross domestic product growth likely approached three per cent in the first half of 2003 against 0.6 per cent in the same period of 2002, Central Statistical Office (GUS) Vice President, Janusz Witkowski, told reporters, according to Interfax News Agency.
"The second quarter will be better than the first quarter in GDP growth; so it is possible that GDP might approach the level of three per cent in the first half of the year," Witkowski said, adding that July's results indicate even more positive results will be recorded in the third quarter of the year. "If the third and fourth quarters don't differ much from the second quarters results, 2003 will be positive," he was quoted as saying.
Industrial output showing strong gains in manufacturing
Boosted by gains in manufacturing output, Polish industry reported strong growth in July from year-earlier levels, Poland's Central Statistics Office (GUS) reported, dpa News Agency reported. The report said industrial output grew by 10.3% in July year-on-year and was 4.9% higher than in June 2003. Manufacturing industry registered the highest gains in July at 11.1% increase from July 2002 and 4.8% hike from the previous month. Production in the mining sector increased by 2.1% year-on-year and was 14.1% higher than in June. In the first seven months of this year, cumulative industrial output gained 7.5% compared with the year earlier period.
Polish companies' aggregate investment levels were on the decline in the first six months of 2003, dropping 2.2 per cent to 21.8 billion zlotys. But the Central Statistics Office emphasised recently that the situation is improving according to Interfax News Agency. "Changes in investment growth are clearly visible, and though investment was still lower in the first half of 2003 than in the first half of 2002, this decline amounted to a mere 2.2 per cent against 15-16 per cent a year earlier," GUS Vice President, Janusz Witkowski, told reporters. In the first half, the largest declines in investment were recorded in construction which saw outlays fall by nearly 38 per cent, in utilities of nearly 12 per cent and transport and communications down eight per cent.
Government agency lends money to troubled engineering works
The Industrial Development Agency (ARP) signed an agreement with the Stalowa Wola Steelworks (HSW) under which the steelworks will receive a 40m-zloty loan (about US$10.1m) for restructuring, ARP's spokeswoman, Roma Sarzynska, told PAP News Agency on 28th August.
"The money will be handed to HSW today," she added.
ARP head, Arkadiusz Krezel, issued a decision on the conditions of the steel mill restructuring and announced that HSW would receive a 75m-zloty loan in two years. The second 35m-zloty tranche will go to HSW next year if restructuring process proves successful.
Poland could get extra EU money for fighting unemployment
Poland can get additional money from the European Union for active forms of fighting unemployment. It's big money - 2bn Euros, that is more than 8.5bn zlotys. At present Poland spend under 1.5bn zlotys a year on this. To make use of the Union assistance Poland has to find 500m Euros from their own budget, Polish Radio 1 has reported.
Marek Szczepanski, deputy minister of economy, labour and social policy explained what the money will be specifically allocated to: "The European Social Fund finances only active measures, so there is no question of these resources being used to increase passive social assistance, for social assistance benefits or benefits for the jobless. What we have here is resources which can be allocated to subsidising new jobs, to training, to re-training but not to raising unemployment benefits."
The European Union money can be used mainly for stimulating groups especially threatened in the labour market. This concerns training and money for residents of the countryside, for people losing their jobs, for restructuring enterprises and for long-term unemployed and disabled.
Sales of desktop and mobile computers on the rise
Poland's desktop and mobile computer sales grew by 14.3% to 268,529 units in the second quarter of 2003, with the US-based Hewlett Packard (HP) increasing its leading grip on the market to 6.8% from 5.6% a year earlier, according to data from research firm Gartner, New Europe reported recently.
HP boosted its second-quarter sales by 37.7% to 18,217 units as against the same quarter of 2002. In desktops, HP was number two with 1,465 units sold (up 33.2% year-to-year) and a 4.9% market share (4.1% in the same period of 2002). HP led the way in mobiles, with 6,752 units sold, up 46.3% year-to-year to give the company a 19.8% market share (18.5% a year earlier).
MINERALS & METALS
LNM closes deal with Polskie Huty Stali
Global steel producer, LNM, the world's second larges steel maker, has secured a deal with Poland's State Treasury regarding the privatisation of Polskie Huty Stali (PHS), Poland largest steel producer by far, according to a deal signed recently, Interfax News Agency as reported.
The deal will now be analysed by an inter-ministerial commission, and after that body's approval and a positive opinion from the Economy and Labour Minister, it will be presented to Poland's cabinet for final approval. Following that, the treasury minister will sign an official deal with LNM.
"We are aware of the time pressure on the ministry. We hope the commission will analyse the deal within the next week so Minister Czyzewski can present it to the government at the next sitting on September 9th, after consulting with the minister of economy," Treasury Ministry spokesman, Janusz Kwiatkowski stated.
LNM will also need to thrash out a deal with PHS' labour unions, with the company expected to start negotiations with unions on a so-called social package in the near future, according to Kwiatkowski. The Treasury's talks with LNM, which beat US Steel for exclusivity in mid-July, had hit a snag in terms of negotiations with the debt-ridden PHS' creditors, pushing back LNM's exclusivity deadline from August 22nd to August 29th. But in the event the two sides were able to come together.
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