Books on Poland
% of GDP
Update No: 089 - (30/09/04)
New government is formed
Poland has a new government. A vote of confidence in the cabinet of PM Marek
Belka is to take place during the Sejm's special session on Oct 14-15.
In his address to the Sejm in June, when he assumed office, PM Belka declared
his readiness to submit his government to a vote of confidence within seven days
after the 2005 budget draft is filed. This was the condition of the opposition
Polish Social-Democracy (SDPL), without the votes of which Belka would not have
been able to muster a majority in the Sejm.
Economy picking up
There is indeed a massive budget deficit of 6.9% of GDP. This is the
government's main challenge.
The Polish economy is, nevertheless, chugging along fairly well. The growth rate
of GDP in 2003 was 3.7%. In 2004 it is forecast to be 4.5%.
According to Economy Minister, Jerzy Hausner, at the end of 2004 there will be
200,000 less unemployed than there were at the end of 2003. By 2005 the jobless
rate should drop below 17%, which translates into 500,000 people finding jobs.
"We will reach EU levels in 2008," said Hausner. He stressed that in
order to maintain the drop in the level of unemployment, annual economic growth
must be kept above 5%, which it is almost nudging. Hausner believes that from
2005 this condition will be met.
Poland is threatened by wage inflation, as at least 100,000 are already
demanding salary increases. Those employed in the mining, steel, oil and food
processing sectors want pay increases reaching as high as several dozen percent,
which according to economists could lead to an economic slowdown. "Rapid
consumption of companies' profits would be an extreme case of
irresponsibility," said Adam Sadowski of the Adam Smith Centre.
"We will turn to the new president with a demand of increasing wages in the
company by 3-4% above inflation," said Józef Wieckowski, the deputy head
of Orlen's trade unions. Other unions have similar demands and, interestingly,
private sector employees in companies such as Fiat Auto Poland and Morliny are
also voicing similar demands.
FDI the key
Poland has attracted some $40bn in FDI. But there are signs of investors
becoming restive. The agitation by the unions does not help.
Deutsche Telekom (DT) rejected the offer made by Elektrim and Vivendi concerning
the sale of a 51% stake in Polska Telefonia Cyfrowa (PTC), the operator of the
Era mobile network. The German investor has been announcing its plans to
purchase 100% of shares in the company for two years now. DT was ready to pay
€1.3 billion to acquire the largest domestic mobile operator. Although the
official reasons behind the decision were not revealed, the announcement was
made a day after PTC bondholders rejected the proposition of an early buyout of
Stock market revolution
Nevertheless, there are new developments afoot. Five entities are to bid for the
Treasury's advisor role in the privatisation of the Warsaw Stock Exchange (WSE).
The State Treasury Ministry has received applications from five entities that
want to participate in the tender for Treasury advisor in the privatisation of
Offers were filed by four consortia-McKinsey & Co along with CDM Pekao SA
and Ernst & Young Audit, Citigroup with DM Banku Handlowego, Grupa
Raiffeisen with BDM PKO BP and A&E Consult as well as DM Penetrator with BNP
Paribas and KPMG Audit. Also, an individual application was submitted by
WP expands to become a financial intermediary
In another indicative development, an extraordinary shareholders meeting of
Wirtualna Polska (WP) changed the company's statute so that now it can operate
as a financial intermediary. TP Internet, which holds an 80% stake in the firm,
voted in favour of the change, while the remaining shareholders abstained from
voting. The majority owner justified its decision by arguing that WP will soon
lose its Internet portal and thus it would be unable to carry out its core
business activity due to bankruptcy proceedings. The eventual new owners of the
enterprise will not take over the whole concern, but only its most attractive
asset, namely the Internet portal.
Revolution in the farming sector
Poland's farming sector may be heading a revolution as international grain
companies will start selling genetically modified (GM) grains of corn in Poland,
called MON 810, that are immune to pests.
The prospective revolution stems from a decision by the European Commission that
approved the corn for plantation in the entire EU.
Largest Defence contract ever in Europe
Poland's Defence Ministry is ready to strike the largest deal of its kind in
Europe for the provision of 690 AMV Patria armoured vehicles, if Ministry
experts decide their technical specifications match those required by the army.
The entire deal is worth zl.5 billion.
In 2005 the ministry will buy 89 vehicles worth approximately zl.600 million.
The first group of F16s is scheduled for Poland in 2006.
Poland says new car sales down again
Polish new car sales in July totalled 22,073, making a third consecutive month
of declines after Poland's May 1st entry into the European Union, New Europe
reported recently. Sales fell 24.3% year-on-year and 4.8% from June, according
to preliminary data recently released by car market research firm Samar.
Alongside the restrictive factors that appeared in May, including stricter
value-added-tax policies, higher fuel and car prices, a new threat - increased
used-car imports - emerged in June and continued in July. 7-month sales, thanks
to the strong first 4 months of 2004, grew 7.2% from the same period of the
In terms of makes, the undisputed leader among Poland's carmakers continues to
be Fiat auto, which lifted its market share to 17.5% after the first 7 months of
the year from 16.35% in the analogous period of 2003. Fiat sold 37,467 new cars
in the January-July period, marking an almost 14.3% annual growth. Czech
automaker Skoda, a Volkswagen unit, was again in second place with 7-month
Polish sales of 27,326 units, 11% more than in the same period in 2003. Skoda's
market share was 12.7% at the end of July.
Toyota, ranked third in sales, had sold by end-July 24,494 units, up 14%
year-on-year, accounting for 11.4% of total new-car sales in the 7-month period.
European GM unit Opel attracted in the January-July period just 21,252
customers, a boost of 11.8%. The company held onto the fourth place it took from
French Renault in May. France's Renault held fifth place, followed by US motor
giant Ford, with slightly over 9% of the Polish market. The American firm,
however, boosted half-year sales by a whopping 54.8% compared to the same period
Kredyt Bank sees profit in Q2
Kredyt Bank, the Polish banking arm of Belgium's KBC group, turned to a
consolidated second-quarter net profit of 38m zlotys, as the company suffered on
operating results, but eliminated the massive risk costs that sunk the bottom
line to a loss in the second quarter of 2003, New Europe reported recently. Net
risk costs were one tenth their 2003 level when Kredyt Bank twice reviewed its
loan books and wrote down huge provisions. Of the 309.5m zlotys improvement in
the bottom line from the second quarter of 2003, 231.7m zlotys could be traced
to the balance on risk provisions. Operations showed a net result on banking
activities down 2.3% year-on-year in the second quarter or down 4.6% in the
first half. The bank managed to defend its interest earnings, up an annual 7% in
the second quarter, but growth in fee earnings was pale next to the market at a
Sale of PGNiG slated for May 2005
The bourse debut of Polish state-run gas monopolist PGNiG will probably be held
in May 2005 or later, Treasury Minister, Jacek Socha, told MPs during an August
25 sitting of the parliamentary treasury committee, New Europe reported.
"If the government approves changes to the programme (for the restructuring
and privatisation of PGNiG), we will then have to prepare an issue prospectus,
so the debut could take place not earlier than in May 2005," Socha said.
Prime Minister, Market Belka, has called for adjustments to Poland's fuel-sector
restructuring programme, which was to be completed by September. As recently as
July, plans had called for the initial public offering (IPO) to be held in the
first quarter of 2005, though, earlier in the year, government planners had
aimed to sell a minority stake by end-2004.
EuRoPol Gaz H1 net profit falls, exceeds annual target
EuRoPol Gaz, the operator of the Polish section of the Yamal-Western Europe
natural gas pipeline, posted a net profit of 262.9m zlotys for the first half of
2004, marking a decrease of over 20% year-on-year, the company told Interfax on
August 19th. However, the net profit posted for the first 6 months of the year
exceeded those planned for the full 2004 by 5%, EuRoPol Gaz added. The company
had planned to reach a 250m zlotys net profit in 2004.
For 2003 the company reported a net profit of 580m zlotys. EuRoPol Gaz's sales
revenues also decreased by 12.6% to 728.8m zlotys in the first half of 2004 from
834.3m zlotys in the first half of 2003, accounting for 52% of the 1.39bn zlotys
annual revenue plan. EuRoPol Gaz is 48% held by the state-owned Polish gas
monopolist PGNiG and 48% is in the hands of Gas Trading.
Eco-tourism along the German-Polish border
Until Poland's recent entry into the European Union, the Oder river marked a
strictly guarded border between prosperity and poverty. Today, environmentalists
see the valley as an opportunity, a green belt to attract eco-tourists, Deutsche
Presse-Agentur (dpa) reported.
The swamps along the banks of the Oder are among the largest in Europe. Large
areas of the river banks are untouched by man. Beavers and otters and the shy
black stork can be found here. Rare bird species have found a home here. In
spring and autumn, huge flocks of birds including cranes, geese and duck can be
seen in their hundreds of thousands. The World Wide Fund for Nature (WWF) and
local Polish partners and two councils have begun creating a network of what are
called "green points" along the river. They serve as starting points
for tourists, providing low-cost accommodation, bicycle rentals and regional
By 2006 some eight to 10 such stations will be in operation. One such
"green point" is situated in Peclav, near Glogov on the Polish side.
Local style walnut cake, biscuits and soups are among the attractions for
visitors stopping over. "We also rent out Kayaks," says Peclav's Mayor
Marek Sadovski. "We are building some more boats so that we will have 10
this year." A cycle path has been established.
Despite these efforts it will take some time before Peclav's 2,300 inhabitants
can make a living from tourism. The unemployment rate in Peclav is around 40%.
WWF's expert on the Oder, Peter Torkler, describes the current difficulties:
"In Germany tourists can stay overnight on farms and watch cheese being
made. There are travel brochures and activities on offer during bad weather. All
that sort of thing has yet to develop here," he says. "Those bold
enough to be the first investors could be bankrupt by the time tourism picks up
in a few years' time," he adds.
It is much the same situation in other areas along the river, In July 2001 an
8,000-hectare zone that is regularly inundated by the river, the Park Narodovy
Ujscie Varty, was declared a national park.
It contains a labyrinth of canals, ponds and streams. Some 160 bird species have
been counted in the area. But a tourism scheme worked out by WWF in 1999 has so
far not been implemented. There are two nature-learning paths, but no marked
An example of successful tourist development is the International Lower Oder
Valley project. The 60km long area on the German side of the border was placed
under protection in 1995. There is close cooperation with the Polish authorities
and the project is run jointly with the Park Krajobrazovy Dolina Dolney Odr and
Cedynski Park Krayobrazovy.
The head of the park administration in Crieven, Romuald Buryn, recommends the
area for bicycle tourists. There are 200kms of cycle paths that criss-cross the
park. Visitors can take part in excursions to spot fish, plants, birds and
animals. There is even an aquarium with typical Oder fish in the national park
building in Crieven. Some 200,000 visitors are counted annually in the park.
FOREIGN ECONOMIC COOPERATION
Polish leaders, King of Jordan discuss Iraq, economic cooperation
Cooperation between Poland and Jordan, the situation in Iraq and Iran and the
Middle East conflict dominated visiting Jordanian King, Abdallah II's, talks
with Polish President, Aleksander Kwasniewski, and Prime Minister, Marek Belka.
This year Jordan and Poland celebrated the 40th anniversary of establishing
diplomatic relations, PAP News Agency reported.
The presidential international affairs aide, Andrzej Majkowski, said the talks
in Warsaw concerned economic cooperation between the two countries.
Addressing Polish businessmen during an unofficial meeting Abdallah II expressed
hopes "to welcome you in my country in future" and encouraged Polish
enterprises to seek partnerships in Jordan. This, he said, would also bring
Polish firms closer to the Iraqi market.
Trade between Poland and Jordan is low, last year's turnover amounting to about
Polfa Kutno aims to be Poland's third drug maker
New Europe reported recently that drug maker Polfa Kutno, held strategically
by US-based generics producer Ivax, plans to become the third largest player on
the Polish market with revenues of 900m zlotys in 2005, as it acquires smaller
rivals and consolidates Polish operations of Ivax, Polfa Kutno President Janusz
Guy said in a statement.
"We are aiming to become the third largest producer on the market, and we
believe it can be done in the first half of 2005," Guy was quoted as
saying. The company, in which Ivax holds a 24.99% stake, does not currently rank
within country's top 10 pharmaceuticals firms. The company is counting on some
260m zlotys of revenues from its own operations, and an additional 240m zlotys
that would be generated by listed drug producer Jelfa for which Polfa Kutno is
bidding. Some 150m zlotys would be brought in by an unnamed producer which Kutno
wants to buy in the next 6 months and 250m zlotys would come from current
operations of Ivax in Poland, the company said.
Polfa Kutno's top priorities are to finish its merger with Ivax and buy Jelfa,
it said. According to Guy, Ivax will announce a call for Polfa Kutno shares in
the second half of September. The price will be set at 340 zlotys per share. The
company plans to buy a 25.9% stake in Jelfa from Poland's Industry Development
Agency (ARP) and carry out a full merger over the next 6 months. The price is
likely to be set somewhere between the 49 and 64 zlotys per Jelfa share.
The company expects to carry out the transaction in September, when the ARP uses
the Jelfa stake to boost the capital of state-owned ship-builder Stocznia
Szczecinska Nowa (SSN). According to Polfa Kutno, no other bidder is interested
in the takeover.
Polkomtel selling a new prepaid phone card service
Polkomtel, the third largest mobile phone operator, has begun selling a new
prepaid phone card service in an attempt to catch up with its archival
Centertel. New prepaid cards sold under the Sami Swoi brand are primarily
addressed to older clients from smaller towns, people who have never owned a
mobile phone before, the Warsaw Business Journal reported.
Polkomtel hopes to sell its zl 199 phone sets with the Sami Swoi brand through
post offices, during holiday outdoor events and in some 2,000 new outlets that
will be set up in small and medium-sized towns. Robert Kraqczyk, the head of the
firm's marketing and sales department, said he wants to beat the competition by
introducing new solutions and new technologies rather than through a price war.
He is positive that Polkomtel will post good results this year , but if the
company is taken over by global mobile operator Vodafone, its strategy will no
doubt be altered.
Netia eyes 35% EBITDA margin for 2004
Poland's alternative telecom, Netia, is eyeing a full-year 35% EBITDA (earnings
before interest, tax, depreciation and amortisation) margin, as the company is
well on its way to reaching 900m zlotys of revenue for the year, Netia President
Wojciech Madalski said during an August 11th conference call, Interfax reported.
"Mid-30s EBITDA is a good guidance for the year," Madalski said.
Although Netia sees a possibility of exceeding a 35% EBITDA margin for the full
year, it would rather sacrifice the surplus for some aggressive market share
growth, Madalski added.
Netia maintained its plan to cut the group's workforce to less than 1,300 from
the current 1,340. The telecom boosted its top line by 25.3% in the second
quarter to 222.1m zlotys, driving the bottom line to 36.7m zlotys in a second
consecutive quarter of growth. In the second quarter of 2003, Netia reported a
net loss of 17.3m zlotys.
The company's revenues increased in all of its key activities: direct voice
services, data, interconnection fees and indirect voice services. Direct voice
services remained the main source of revenue, generating 138.6m zlotys in the
second quarter, but the fastest growth came from interconnect fees, which
generated 13.5m zlotys in revenues in the second quarter of 2004 versus 1.4m
zlotys in the corresponding period in 2003.
PTC expands subscriber base
Poland's leading mobile operator Polska Telefonia Cyfrowa (PTC) saw its average
revenue per user (ARPU) further deteriorate in the second quarter of 2004, as
its client mix shifted on the blistering pace at which it added pre-paid
customers, the company's CFO Jonathan Eastick said in a recent press conference.
PTC signed 1.4m new clients in the second quarter, mainly as an effect of the
Heyah pre-paid brand launch, as 1.2m of the new clients were pre-paid users and
only some 200,000 post-paid. PTC's client count totalled 7.5m at the end of
June, up from 6.9m at the end of March. The increase in the pre-paid client
segment caused the overall performance indicators to fall year-on-year, despite
stabilisation or improvement in individual segments, New Europe reported
BT open office in Warsaw
British Telecommunications (BT) opened its office in Warsaw, which is eventually
to become its marketing centre for the Central and Eastern Europe (CEE) region,
Warsaw Business Journal reported recently. BT's offer in Poland will include a
variety of services, including application management and call centre servicing.
BT is already operating HP's call centre in Poland. "We are entering this
market for the same reasons as other foreign companies: the first are low costs
and the second is fast economic growth. Our ambition is to penetrate the Polish
market more deeply," said Aad van Waveren, vice president of BT Global
Services. Aside from servicing corporate clients, BT is also interested in
government tenders for providing e-government platforms. According to market
watcher IDC, the value of the Polish telecoms market exceeded zl. 30bn ($8.14bn)
Gdansk Transport in new project
The five-company Gdansk Transport Co consortium (GTC) will build 90km of the A1
highway from Gdansk to Nowe Marzy for €504m by 2007, Deputy Infrastructure
Minister Ryszard Kurylczyk told a press conference recently. Work is expected to
begin in May 2005. In mid-2006, the company plans to begin building an
additional 62km segment of the A1 highway, stretching from Nowe Marzy to Torun,
which is to be finished in 2008. "The technical project of the highway will
be ready by the end of April, so that the work on the first part will be able to
begin on May 1st, 2005," Kurylczyk said. "The work on the second part
of the highway will begin a year later." Talks on details of financing the
Gdansk-Nowe Marzy segment are to be completed by the end of the year.
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