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POLAND


 

 
Key Economic Data 
 
  2002 2001 2000 Ranking(2002)
GDP
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)

REPUBLICAN REFERENCE

Area (sq.km) 
312,685

Population 
38,622,660

Capital
Warsaw

Currency 
Zloty 

President 
Aleksander 
Kwasniewski 

Private sector 
% of GDP 
70% 

  

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: 082 - (01/03/04)

The Polish political situation is highly volatile. Governments tend to become highly unpopular very quickly. This has happened to the ruling Democratic Left Alliance government of Premier Leszek Miller. Its ratings in opinion polls are around 12%, not very promising if early elections are held, which is being widely demanded.

Miller resigns party post
The solution to the immediate problem has been for Miller to resign as leader of his party. The manoeuvre was recently applied in Germany by the Social Democrats, whose leader, the German Chancellor, Gerhard Schroeder, resigned his party post but stayed on to head the government.
The problem remains of the main reason for the unpopularity of the government, an austerity programme being carried out when the situation is already austere for most people. If the programme fails to be accepted by parliament, then the government would have to resign and allow new elections to take place.
The government has 205 seats in the 460-member parliament, not enough to guarantee victory. The liberal opposition, Civic Platform, which is well ahead in the polls, has demanded the resignation of the cabinet and new elections. But it is not clear that they really want to topple the government just yet ahead of EU accession in May.

The economy is the problem
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 Polish corridor becomes the new bridge
The Poles are the natural leaders of central Europe. 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 inflicted by the Germans and the Russians on the Poles in 1939 and thereafter, has given a moral credit on which Poland 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.

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AGRICULTURE

Poland's EU agricultural reporting system in test phase

IACS (Integrated Administration and Control System) for farming has started to be tested, head of the Agricultural Restructuring and Modernization Agency [ARiMR], Wojciech Pomajda, said at a news conference in Warsaw. Auditors of the KPMG international auditing company will supervise the process, PAP news agency reported.
Pomajda recalled that farmers motions for direct subsidies can be filed between 15 April and 15 June 2004. Subsidies will be paid out until December 2004, farms registration was concluded by 9 February 2004. Poland has trained 600,000 farmers but still more have expressed interest in the training, Pomajda said.

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AUTOMOBILES

Sanden to invest in car air-conditioning plant

Japan's Sanden Corp intends to invest €60m (some 280m zlotys) over two years in a new automotive equipment production facility in the Legnica Special Economic Zone (LSSE) in southern Poland, company officials announced in Warsaw recently.
"The new plant, for the production of automative air conditioner compressors, will be Sanden's second manufacturing facility in Europe after Rennes in France," Sanden Chairman and CEO, Masayoshi Ushikubo, said, New Europe reported recently.
Sanden regards its planned presence in Central and Eastern Europe as key to growing its global market share. The decision to locate in Poland was based on a clear tendency among motor manufacturers to shift production to Central and Eastern Europe and forecasts for rising European demand for vehicles with air conditioning, Ushikubo said.
Moreover, the local government authority in the LSSE's Polkowice area, where construction of the new factory is slated for April 2004 and production in 2005, offered conducive conditions. "We have freed Sanden from real-estate taxes for five years and guarantee fast administrative procedures, to which Volkswagen Motor Polska can attest," Polkowice Mayor Emilian Stanczyszyn, said.
Volkswagen employs 2,000 people in the LSSE. The Polkowice factory will initially employ 200 workers, with plans to boost this number to 300 as production grows.
"Sanden will not be satisfied until the second and third stages of the planned investment are realised. Should production develop in line with our expectations, we will increase production capacity and boost investment, as we did in the US and in France," Ushikubo assured. Poland beat eastern Germany, Hungary and Slovakia in the fight for the Japanese investment. "The realisation of the Polkowice factory is a good example of effective cooperation between four sides - Sanden, the Polkowice local government authority, the Polish Foreign Investment Agency and the Economy and Labour Ministry," Deputy Economy and Labour Minister, Irena Herbst, said. "Investment can be won by actively pursuing potential investors and making the most of the possibilities which we can offer. We succeeded with Volkswagen, and other investors, like Sanden, are taking the Germans' lead," Herbst added.
Poland must be hoping that such a success can be repeated in its hunt for a US$1.5bn carplant investment competition that South Korea's Hyundai is deciding. The South Koreans are also considering Slovakia. 

December new car sales climb to 358,414 units

Polish new car sales gathered pace in December of 2003, rising 51.6% year on year to 37,637 units in the month and driving the 12-month figure up 16.3% to 358,414 units, according to preliminary data released by car-market research firm Samar, New Europe reported recently.
The December result, which also marked a 22.7% rise in month-on-month terms, puts the Polish new car market's recovery on firmer ground and led Samar to forecast that future sales would be even higher. That optimism rests on the momentum built up in the second half of the year, with sales higher in every month since August in annualised terms and with December sales the highest for the entire year. Poland's solidifying economic recovery underpins this view. In turn, hope exists that sales of 640,179, some 44% above the 2003 total. In terms of makes, Fiat Auto finished the year with a flourish. Its December sales leapt by 78.12% to 7,611 units, helping carry full-year sales 16.81% higher to 65,951 units. 

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AVIATION

Lufthansa plans to ride out oncoming storm

One man not ruffled by the coming low-cost airline storm is Chris Zimmer, Director of Lufthansa's operations in Poland, the Warsaw Business Journal reported.
The German flag-carrier, which has a 20% market share and is second only to LOT in Poland, will not try to compete on cost, and instead plans to raise the bar of luxury even higher through the launch of its new business class.
For the last two years, Warsaw based businessmen flying to and from North America have had a host of flag-carriers from this hotly contested route. With 55% of Lufthansa's Polish customers buying long-haul tickets and using German hubs as gateways to other continents, Zimmer recognises that this business customer is particularly valuable.
"BA has had beds on its transAtlantic business class for two years," says Zimmer. "We are late, but we said that once we do it, we'll do it 100% right. Thanks to the new Airbus 340-600 we will have enough space to offer a really luxurious product."
Until now, Lufthansa has been unable to compete with carriers such as BA on product. "Now we are fully competitive," says Zimmer. "Before we were competing on price and schedule, but now we can compete on the product as well, a product that is an improvement on what is already on the market."
Unlike British Airways and Air France, both of which have tried to maintain long-haul luxury while launching low-cost subsidiaries (Go and Brit Air respectively), Lufthansa has continued to focus its attention on the high end of the market, the places where the low-cost rebels cannot and will not go.
Zimmer goes as far as speculating that one day the 'new generation' of carriers could be supplying his intercontinental routes. "Personally, I think that in ten years you will have 'decentralised services'," says Zimmer, "Lufthansa could be concentrating on intercontinental flight while regional travel is serviced by two large European low cost competitors."
In the year 2000, Lufthansa offered routes from Poland to Cologne, Hamburg, Stuttgart, Dusseldorf, Munich and Frankfurt. The first three of these routes have been discontinued. Traffic, especially via Frankfurt, is increasing. The trend has already begun.

US Lockheed Martin implementing 25 Polish offset projects

Lockheed Martin began implementation of 25 offset projects over the past nine months. The US company is expected to unveil a detailed report on the progress of the projects in late March, Philip Georgariou, Lockheed Martin director for offset affairs, said at a new conference on 22nd January, PAP News Agency reported.
We began implementation of 25 offset projects in the past nine months. Five prospective offset obligations are under way, and eight new ones have been initiated, Georgariou said.
Among projects started by Lockheed Martin are Opel Gliwice, Akcelerator Technologiczny and the Aeronautics Institute [Instytut Lotnictwa], know-how transfer to Grupa Lotos and programmes for PZL Mielec, WSK Rzeszow, WSK Bydgoszcz and Bumar Labedy.
Georgariou said one of the new projects included in the offset programme is a trade contract Nitro-Chem SA from Bydgoszcz is close to signing with the US company ATK.
Lockheed Martin is to submit a formal report on last year's progress of the implementation of the offset obligations with the Economy Ministry by 31ssst March 2004.
The report deadline is 31st March but we will try to submit the report earlier, Georgariou told PAP.

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ENERGY

New Polish minister wants to speed up privatisation of energy distributors

The newly-appointed treasury minister, Zbigniew Kaniewski, has announced that a decision concerning the privatisation of the G-8 group of electricity power generators will soon be made, but it will be made according to the conditions proposed by the State Treasury, PAP news agency reported.
"Decisions regarding this issue will have to be made soon. There are certain requirements concerning the flow of revenues from the privatisation of the G-8 group to the state budget. However, the privatisation will take place according to the conditions proposed by the State Treasury, and not those presented by the investor," the minister said in an interview.
Kaniewski said that the issue of merging the Lotos Group with refineries in southern Poland should also be resolved soon. "This problem should be resolved, otherwise there is a possibility that the refineries will find themselves in a difficult situation. I don't want to wait until those companies go bankrupt because nothing is being done about it," he said.
The Lotos Group is to include three refineries in southern Poland: Czechowice, Jaslo and Glimar.

Poland to become oil gatekeeper thanks to Odessa-Gdansk pipeline

This year, recent events in the oil sector could see the arrival of a new, positive epithet, that of 'America's Gatekeeper in Eurasia,' the Warsaw Business Journal reported recently. 
The project at the heart of the matter, an extension of the existing, expensive though as-yet-unused Odessa-Brody pipeline in Ukraine on to Plock and eventually the port of Gdansk, was given official support by the Polish and Ukrainian administrations recently. The first phase will be the formation of a joint venture by pipeline network operator PERN and Ukrainian equivalent Ukr-transnafta. According to Deputy Prime Minister and Infrastructure Minister, Marek Pol, the venture will seek to attract foreign investment, which is expected to come in large part from the world's top five oil companies.
Once the 500 kilometre extension from Brody in western Ukraine to Gdansk is completed, a zl.1.845bn (US$500m) project that will take at least two years to realise, Gdansk will be able to feed tankers bound for world markets with oil that has been piped from Odessa in the Black Sea, where it has arrived from the Caucasus region.

Polish investor eager to clinch 63% of Czech Unipetrol

Poland's leading downstream fuel firm PKN Orlen submitted a preliminary bid for the 62.99% stake of Czech oil and petrochemical group Unipetrol put up for sale by the state-owned Ceska Konsolidacni Agentura (CKA), Interfax News Agency reported.
The bid, which the company had signalled it would make, was also lodged for the purchase of the receivables of CKA towards certain entities directly or indirectly owned by Unipetrol, as well as for the potential purchase of 9.76% of the share capital of Spolana as, currently held by CKA, Orlen said.
Orlen, which has its gaze firmly fixed on regional expansion, said that the price it offered is subject to change since it is based on limited information and data gathered in an early phase of negotiations. The company expects that in the next phase of talks, it will be able to conduct details legal and financial analyses that will allow for a more precise estimate of Unipetrol's value.
"The final price described in the binding offer for the purchase of Unipetrol may be subject to change," the company said. "The offer is part of an early phase of negotiations and the non-binding document confirming Orlen's interest in the privatisation of Unipetrol. It also comprises part of Orlen's strategy according to which Orlen will become a leader in the consolidation of the fuel refining sector in Central European," the company said.
Orlen said a purchase of Unipetrol would allow it to expand its geographic range of activity, enter the attractive Czech market and strengthen its position in southern Poland. "Orlen sees itself as a long-term strategic investor and regional consolidator of the most important refinery assets and retail distribution businesses of Unipetrol," the company said in its statement.
The company also spoke of the initial deal it signed in November with Czech conglomerate Agrofert Holding that assumes the sale of those Unipetrol assets that are not core to Orlen's activity.
Orlen has also lined up potential future cooperation in the bid with US oil giant ConocoPhilips, according to an initial agreement announced January 9th. ConocoPhilips owns 18.3% of Ceska Rafinerska, a refining unit of Unipetrol. Orlen's courting of a deal with the American company is seen as tied to the Polish company's desire to square away matters with minority shareholders of companies owned by Unipetrol.
The Czech agency CKA is expected to take binding bids for Unipetrol in mid-March and a new majority owner should be selected by the end of March. The Czech government re-launched the Unipetrol sell-off in early November. Economists said the sale could net up to over US$500m.
The Unipetrol holding consists of the parent company Unipetrol, the 100%-held petrochemical holding Chemopetrol, rubber maker Kaucuk, fuel retailer Benzina, refiner Ceska Rafinerska (51%), refiner Paramo (74%), and pharmaceutical firm Spolana (80%).

PKN Orlen says still interested in Petrom

Top Polish fuel firm PKM Orlen's hunt to buy Romanian oil group SNP Petrom could hit some snags with a later-than-planned sale, though the company is continuing to seek out partners for a joint bid, Orlen's CEOsaid, after the Romanian government delayed Petrom's sell-off process, New Europe reported. 
"The Romanian government delayed negotiations by at least half a year, and we expect that the delay could be even greater since this is an election year in Romania and such a privatisation might cause some political and economic problems," Orlen chief Zbigniew Wrobel said on December 8th. The list of bidders for Petrom also included US firm Occidental Oil and Gas, Switzerland's Glencore, and Russian gas monopoly Gazprom.

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IRAQI RECONSTRUCTION

Polish government pledges aid for companies seeking to secure Iraq contracts

The government assures it is still not too late to do business in Iraq and has promised to assist Polish companies bidding for reconstruction contracts. It remains unknown who will get the huge contract that Bumar is bidding for, Gazeta Wyborcza reported recently.
"The Polish trade mission was successful," Deputy Foreign Minister, Sergiusz Najar, assured. Five ministers and 15 businessmen representing consortiums that are competing in bids for the reconstruction of Iraq returned from Baghdad recently. They attended the "Rebuild Iraq" fair in Kuwait, where 34 Polish companies presented their offers. "Our companies are very well prepared. They know what they want and stand big chances for money from reconstruction. Practically every Polish offer presented was right on mark. I was quite surprised. It is certainly not too late to do business in Iraq," says Deputy Economy Minister, Krzysztof Krystowski.
"Doing business in Iraq requires knowledge of the local culture, language, and customs. There are no financial or insurance systems in place. All transactions have to be made in cash." Sergiusz Najar stressed. "There is, however, business to be done."
This is why the government wants to help Polish entrepreneurs. "It should be clear from the very start that we want to assist companies, not do things for them. Those who want to get contracts must work very hard," the deputy minister explained. According to Najar, "several Polish companies stand chances of getting major contracts in Iraq very soon." He refused to say which companies these are.
Krystowski declared that the National Chamber of Commerce [KIG] is to receive funding to open a representative office in Baghdad that will seek information on tenders and pass it on to Poland. The KIG mission would also collect information on the Iraqi economy. "We realize a company cannot succeed without a representative in Iraq who would follow invitations to tenders published in the local press and submit offers," Najar told reporters.

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TRANSPORT

Budget subsidies for Polish State Railways, Warsaw Metro remain unchanged

This year's budget subsidies to Polish State Railways [PKP] Regional Routes transport unit will amount to 550m zlotys, and the Warsaw Metro will get at least 150m zlotys, the Sejm [lower house of parliament] said after rejecting a Senate [upper house of parliament]-made amendment to the budgetary law, PAP news agency reported recently.
The Sejm rejected the amendment cutting the PKP subsidies to 192m zlotys and the Warsaw Metro subsidies to at least 50m zlotys. Thus, the Sejm did not agree to reduce revenues from the special funds of state institutions to 15 per cent from 40 per cent.
The 2004 budget deficit will be 45.3bn zlotys, spending and revenues were set at 199.8bn zlotys and 154.5bn zlotys respectively.

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