Books on Poland
% of GDP
Update No: 100 - (25/08/05)
Belka right on
Prime Minister Marek Belka finally won the Polish Parliament's vote of
confidence he needed in order for his government to rule.
The outcome of the vote in May was 236 votes for, 215 against with one
abstention, which was pretty close to what pundits had predicted. Just like in
the previous confidence vote, the Democratic Left Alliance (SLD), the Labor
Union (UP) and the majority of independent deputies supported Belka's
As expected, right-wing parties such as the Civic Platform (PO), Law and Justice
(PiS), Polish Family League (LPR), Polish Peasants Party (PSL) and Self-Defense
were against Belka. In the debate prior to the vote, Jaroslaw Kaczynski (PiS)
addressed Sejm deputies and denounced Belka's government as the continuation of
post-communism, while PO's Zyta Gilowska said that Belka's success was a
continuation of the success of the previous premier, Leszek Miller.
The government only won thanks to the votes of the Federated Parliamentary Club
(FKP) and Polish Social Democracy (SDPL), whose deputies agreed to back Belka
after last day negotiations.
Before the vote took place, Belka presented his new plan, which differed from
the previous one only in terms of the concessions he made in order to secure the
SDPL's support. He promised to build a fair state and ensure a citizen-friendly
After the vote Belka said that he will do anything to ensure that his government
operates until spring next year, the date for the next relevant elections to
parliament. He needed time in order for his government to continue.
Conflicting views of the Polish economy
While outsiders are being positive about the Polish economy, insiders are less
enthusiastic. A member of Poland's Monetary Policy Council (RPP) has painted a
grim picture of the economy and he sees nothing that could boost it. Stanislaw
Owsiak, considered a moderate member of the RPP, said that a strong zloty and
weak domestic demand have weighed the economy down, after GDP and investment
growth figures for first quarter came in much lower than expected.
In December the finance ministry predicted five percent GDP growth for this year
- a number that was later revised down to 4.5 per cent, and then down further to
3.7 per cent after last quarter's disappointing growth figures. Still, said
Owsiak, this forecast carries a "downside risk."
"The assumption that economic growth will be at 3.7 per cent in 2005 is
optimistic," he said in an interview recently. And though most analysts
have kept their chins up, saying the economy will pick up in the second half
despite the litany of disappointing results, Owsiak remains pessimistic about
the economy's future.
"There seems to be nothing that could push the economy forward," he
said. "The strong zloty is one of the reasons why growth is weakening. It
would be better for growth if the zloty were weaker. The economy is also choked
by weak domestic demand." Analysts blame stagnant wage growth for much of
the lack of demand in the domestic market.
Owsiak also revealed that the government is now considering ways to boost
investment. Analysts were shocked by growth of just one percent in the first
quarter. "A return to investment incentives is mulled," he said. On
the currency markets, he warned that the zloty's value would become increasingly
volatile as September's parliamentary elections approach.
On the positive side, the gloomy outlook portends low inflation for the rest of
the year. "There should be no inflation pressure in the second half of the
year which could threaten the target," said Owsiak, adding that he saw
inflation hovering between 1.5 and two per cent for the rest of the year - below
the finance ministry's 2.5 per cent target. All of this makes it increasingly
likely that the RPP will look to cut interest rates in the near future.
Poland loses ground in competitiveness: IMD
Poland ranks 57th on the competitiveness list issued by the International
Institute for Management Development (IMD), Swiss-based think-tank, the Warsaw
Business Journal (WBJ) reported. The country's ranking is only three positions
from the bottom and its position has worsened since IMF included Poland on the
list five years ago, when it ranked 40th, the report said.
According to IMF, Poland dropped in competitiveness because of the inefficiency
of government and business. The government is criticised for inconsistency in
taking political decisions, protectionism, legal barriers for business, and lack
of social policy, WBJ said.
But domestic enterprises are not great either, it added, citing IMD experts.
Employees are unmotivated, managers are unreliable, marketing is inefficient,
and there are, apparently, no ethics in business, the report found.
But the problems for Poland do not end there. According to the report, Poland
has the worst telecommunication system from all states listed by IMD. It also
has poor flight connections, both domestic and international. Regulations in the
country hamper the development of new technologies and hiring foreign
specialists. On top of that, there are the complicated and ever-changing
value-added tax (VAT) regulations, and high unemployment rate, WBJ reported
IMD experts have given solace to Poland by appreciating its high export rate,
GDP growth, cheap labour force, and high levels of education, according to WBJ.
The report concluded that Poland should gradually switch from production to
services, and that the government must spend more on R&D. The country's
cornerstone should be the stabilisation of budget expenditures, reduction of
unemployment, and rapid adjustment to EU regulations, it added.
On the other hand, the authors of the report see a bright future for central and
eastern European countries. According to them, the Czech Republic, Slovakia,
Lithuania, Latvia and Estonia are the countries to look at because their
remarkable development mirrors Ireland's post-EU position. But the experts are
also confident that Poland can make it.
Poland proving to be a strong FDI destination
Despite the doom and gloom domestically, foreign investors are still coming
in. Low labour and real estate costs coupled with great potential for improved
productivity and low corporate taxes have made European Union newcomer Poland
the most attractive location for foreign direct investment (FDI) in Central and
Eastern Europe, according to a survey made public in Warsaw recently, cited by
Deutsche Presse-Agentur (dpa).
The Ernst & Young consultants report on investment in Europe, polled 672
managers from leading companies in Europe, North America and Asia. Results show
Western Europe ranked as the most attractive investment destination in the world
for 63 per cent of managers polled. But it also revealed Central and Eastern
Europe (CEE) is quickly coming to be perceived as an attractive FDI alternative
to China and proving stiff competition for Western Europe. Ernst & Young
also found that in early 2005 Central and Eastern Europe attracted 31 per cent
of all FDI in all of Europe, thus surpassing combined investments in Britain,
France, Spain and Belgium. Poland also received top marks with 17 per cent of
respondents for low labour costs. It was also prized for great potential for
improvement in labour productivity. The neighbouring Czech Republic was regarded
as attractive for its low labour costs. Poland ranked as the most attractive
future location for FDI, ahead of Russia, Germany, the Czech Republic and
Hungary. Poland also took top spot in a poll of top managers in 3,000 small- and
medium-sized German companies. Asked where they would chose to relocate
production facilities, 23 per cent named Poland as their preferred destination
ahead of China (15 per cent), Spain (11 per cent) and the Czech Republic (8 per
Poland saw 5.1 per cent growth in labour productivity in 2003, according to
statistics provided by the state-run Polish Information and Foreign Investment
FDI grew for the third consecutive year in 2004 with some US$7.858 billion
entering the country for an FDI total of US$84.477 billion since 1993. Thanks to
its attractive labour costs, among others, a senior PAIIZ official predicted
Poland would see even higher rates of FDI in the coming years.
MAN to build 40 million Euro truck plant in Poland
MAN AG has made a preliminary decision to build its new 40 million Euro truck
plant in Krakau, Poland, the Financial Times Deutschland said in a report on
July 18. An expert group at the company voted in favour of building the plant in
Krakau rather than in Kosice, Slovakia, which was also being considered, the
newspaper said. Krakau was deemed most suitable to serve the new eastern
European markets, which promise high growth rates, adding that MAN is targeting
an annual output of 15,000 heavy-duty trucks in its new plant. MAN chief
executive Hakan Samuelsson is to make an official announcement on the plant's
location in two weeks, the FTD added.
Adviser to take off in Poland with Malopolska carrier
Another new company is entering the Polish airline market, and this time it will
be the firm Adviser, on the basis of which a transport company will be created
with its main focus on Malopolska. "We plan flights from Krakow to Gdansk,
Poznan, but also Berlin. Services are mainly directed at business clients from
Malopolska and thus flights schedules will be adjusted to their needs,"
said Tadeusz Beliwar, president of Adviser, New Europe reported recently.
The company will launch its operations in the autumn, while the maiden flight
will take place by January 2006. "The total value of the project stands at
8-10m Euro, including its own capital, leasing and loans. Offers of potential
investors are being assessed," said Stanislaw Popow, deputy finance manager
on the project.
Polish LOT eyes Malev sale
PLL LOT SA, Poland's state-controlled airline, may join Aviation Solution
International, one of the two investor groups still in talks to buy Hungary's
state airline Malev Rt, Budapest Business Journal reported recently.
The government's asset-sales agency APV Rt will postpone the decision on the
sale to September from the end of July after LOT said it would bid. LOT may
invest money in the Hungarian carrier if chosen.
PKN Orlen seeks renegotiations with Unipetrol
Polish oil company, PKN Orlen, is trying to renegotiate an agreement to buy
Czech Republics Unipetrol following reports that the deal included a provision
to sell part of Unipetrol to Agrofert, owned by Czech businessman, Andrej Babis,
below market value, Poland's Rzeczpospolita daily newspaper reported.
Parts of Unipetrol are to be sold to Agrofert for about 103m Euro (US$127m),
while analysts estimate the true value of Unipetrol's chemicals and fertiliser
businesses is closer to 280m Euro. Mr Babis, one of Czech Republic's wealthiest
businessmen is closely tied to the ruling Social Democratic Party.
PKN's previous management, headed by politically well-connected Zbigniew Wrobel,
negotiated the purchase as part of a planned regional expansion. PKN bought 63
per cent of Unipetrol this year for 13.05bn korunas (US$548m).
PKN recently said it was unable to comment on the contract because of a
confidentiality clause, which carries significant penalties if violated, but did
say attempts were being made to renegotiate the agreement.
PKN's new management is investigating the agreement "to minimise the
negative consequences… to the company and its shareholders."
PKN also said that, if necessary, the results of its probe would be turned over
to the prosecutor's office.
Mr Wrobel told Rzeczpospolita that he was unable to remember many specifics of
the agreement, but that Agrofert was to help PKN restructure Unipetrol.
Both companies are partially controlled by their governments and politics plays
a large part in management decisions. However, both governments are staying
clear of the controversy. Jacek Socha, Poland's treasury minister, called off a
trip to Prague recently.
Pavel Kuta, deputy executive chairman of the National Property fund, the
government tasked with privatisation, said: "We knew PKN Orlen had linked
up with Agrofert but any agreement was between them and not part of the tender.
We did not want to impose any conditions on what PKN Orlen could do with
Unipetrol, in order to get the maximum price."
FOOD & DRINK
CEDC buys Polmos Bialystok
Poland's Treasury Ministry has finalised the sale of a 61 per cent stake in the
leading Polmos Bialystok distiller to the Warsaw-based Central European
Distribution Corporation's (CEDC) for 1.063bn zlotys (US$313m), the treasury
said recently, New Europe reported.
The deal must still be approved by Poland's anti-monopoly authority and the
securities and exchange commission. CEDC outbid Sobieski Dystribucja for Polmos,
maker of Poland's famous "Zubrowka" or Bison Grass-flavoured vodka. It
commands come 20 per cent of Poland's vodka market.
FOREIGN ECONOMIC COOPERATION
Astana, Warsaw set up cooperation commission
Kazak Prime Minister, Daniyal Akhmetov, and Polish Minister of Economy and
Labour, Yatsek Pekhota, agreed to set up a commission for economic cooperation
the first sitting of which is due to take place in September this year in
Warsaw, Interfax News Agency reported recently.
Pekhota and Akhmetov discussed the question of the forthcoming session of the
commission and commented upon cooperation in the sphere of agriculture, energy,
transport and transit.
Pekhota also underlined the importance of realising the Odessa-Brody-Plotsk
The Polish side expressed an interest in Kazak investment in the project.
Pekhota said opportunities of involving the four largest oil refining companies
of Poland into partnership were negotiated with KazMunaiGas earlier in July.
Meanwhile, Poland is interested in Kazak companies taking part in the
privatisation of the oil-refining group Lotos, Piechota said after meeting with
Akhmetov, according to Interfax. "Currently, the first stage of
privatisation will involve the stock exchange, and in the second stage, we're
going to search for investors who will join this branch. And it seems to us that
Kazakstan and Kazak firms could be a good investor," Piechota said.
"In the framework of the talks held with Kazak Energy and Natural Resources
Minister Vladimir Shkolnik, we received confirmation that Kazakstan is
interested in participating in the privatisation of this enterprise,"
Piechota added. During the talks, the Polish side informed Shkolnik about how
the process of privatising Lotos was proceeding, Piechota said.
GTS Polska homes in on telecoms
GTS Polska, which recently took over Energis Polska, is interested in
further consolidation of the telecom market, Warsaw Business Journal reported
The transaction of the purchase of 97.5 per cent of shares in Energis will be
finalised within the coming weeks, after obtaining the green light from the
Office for Competition and Consumer Protection. "The next stage will be to
merge both companies. This task may take us six to nine months," declared
Thomas Polgar, the president of GTS Central Europe.
The merged companies will generate revenues of over 380 million zlotys and
EBITDA (earnings before interest, taxes, depreciation and amortisation)
exceeding 60 million zlotys this year. After the takeover, GTS is among the four
leading domestic independent operators.
Intercity on the right track
PKP Intercity, a Polish railway company, increased the number of its passengers
to 4.5 million - a rise of 800,000 - in the first half of 2005 in comparison
with the same period last year, which translated into the improvement of the
company's results, the Warsaw Business Journal reported.
"We reduced the loss on operating activity to 1.5 million zlotys. In the
first half of 2004 the loss amounted to 32 million zlotys, so it was over 20
times higher. The turnover in the same period increased by 60 million zlotys to
423.6 million zlotys," said PKP Intercity head Jacek Przesluga.