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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)

Books on Poland

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: 083 - (19/03/04)

Occupation by the East 
The Poles are entering NATO and the EU in April-May. The double event is significant as the definitive landmark bringing Poland into the West. For its real meaning to be revealed one needs an historical perspective.
Poland was the most luckless of countries in the last two centuries and a half. Its late feudal polity was the least viable of them all because it embodied an extraordinary, overly democratic principle that everyone in the Seljm, or national assembly, had the right of veto over legislation. A more disastrous idea could be scarcely imagined. Foreign powers only had to bribe one member to paralyse Polish legislative initiatives.
This they did to such effect that there were three Partitions of Poland (1772-95), in which the country lost its very existence. It was now subject to Austria, Prussia and Russia, which had the largest share, the three powers of the Holy Alliance, proclaimed as such by Alexander 1st of Russia in 1815 at the Treaty of Vienna - the Regal East of Absolutism. To the Poles it was a most unholy alliance, against which they staged revolt after revolt.
The collapse of the Austro-Hungarian Empire, the Prussian Empire and the Russian Empire at the end of the First World War liberated many nations from oppression, none more so than Poland.
Poland had independence, from 1926, under various military dictatorships, but not for long. In 1939 its occupation by Hitler set off the Second World War and its division in a Fourth Partition of Poland between Nazi Germany and the USSR. The struggle between these titans was to decide the outcome of the War and the fate of Poland.
From being subject to fascism it became a communist satellite of the USSR. But as Stalin himself said: "communism fits Poland like a saddle does a cow." Poland was the first country in the Soviet bloc to have a non-communist government in 1989, setting off the wave of revolutions that dissolved it in that year.

Independence or occupation by the West?
Poland now entered the Western world for the first time. They at last acquired their true independence, so they thought in 1989,. Now it appears it was only to see it given away voluntarily in 2004 to Brussels, the mentor of the West in Europe, and all that that portends. Such is the reasoning of many patriotic Poles reluctant to accept EU tutelage forthwith.
Actually the adhesion of ten new countries to the EU, with Poland at their head, is likely to change the Union profoundly, making the dreams of a Federal Europe far less easy of realisation. Poland, for instance, has rejected new proposals that will make it and the other nine countries up for entry into the European Union liable for recent changes to the EU common agricultural policy (CAP). 
Poland's Europe minister Danuta Huebner has complained that the plans were "unacceptable". Talking to EU political website Eupolitix.com, she dismissed Commission claims that the changes amounted to technical tinkering to bring the membership agreements in line with the new legal reality.
"The commission may not want to renegotiate, but seeing as these proposals are unacceptable in their current form, we're going to have to at least 'rediscuss'," said Huebner. 
The Poles, indeed, view the current round of Common Agricultural Policy (CAP) reform as the European Commission's way of getting off the hook of the world trade organisation (WTO), and reducing the costs of the CAP to the wealthier members of 'the club'.
It is generally agreed that the new policy of subsidising agricultural land, rather than production does represent a change for the better, It should remove many of the current distortions of the agricultural market. However, all systems of subsidy inevitably lead to distortions. The new policy, if implemented, is likely to distort the land market and cause resistance to changing land-use from agriculture to more socially and economically useful activities. 

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AUTOMOBILES

New car sales up by 20.9 per cent in February

New car sales in February rose 20.9 per cent year on year to 30,340 units from 25,093 units, the automotive market monitoring company, Samar, said in an initial report on Monday 8th March, PAP News Agency reported. 
Fiat was the best selling car, with sales of 6.203 units after a rise of 39.36 per cent. Toyota finished second, with sales of 4,305 cars, up 57.35 per cent, and Skoda was third, with sales of 3.705 units, after a 28.51 per cent rise. "New passenger car sales are rising slowly from the first months of 2003, remaining at the monthly average for 2003," Samar's Wojciech Drzewiecki said.
He added that the current trend will remain unchanged in the coming months, and that the situation may change after May 1st when Poland joins the European Union.
"The projected sales result for 2004 is around 300,000-320,000 units, much fewer that in 2003. The broad projection range follows uncertainty over VAT regulations, the shape of the austerity programme and the economy," Drzewiecki said.

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AVIATION

'Big Bang' to be followed by a rush of Wizz Air

Wizz Air is on course to make its maiden flight from Katowice Airport immediately after the May 1st 'Big Bang' enlargement of the EU from fifteen to twenty-five states, reported Warsaw Business Journal recently.
"Two of those countries, Poland and Hungary, are at the heart of Wizz Air's plans to open up a network of routes across Europe," says Wizz Air CEO, Jozsef Varadi, "We will operate on a multi-base principle that will enable us to provide services to millions of customers in the region."
Jozsef Varadi left Malev after serving as the Hungarian flag carrier's CEO. After researching the business models of established low-fare leaders such as Ryanair in Europe and JetBlue in the United States, Varadi has chosen Katowice and Budapest as his first bases.
In a relatively ambitious plan for an unknown start-up low-budget airline, Wizz Air will start operations with a burst of activity. Ten European destinations will be offered, and Wizz Air has completed lease agreements for nine airbus A320 aircraft, each with 180 seats.
The company has a target of increasing its workforce from 60 to 250 within two years. During the same period, Wizz Air plans to create a fleet of twenty aircraft, which would make it Central Europe's largest operator.
This will serve to seriously compete with regional leaders such as LOT and CSA Czech Airlines, while threatening smaller carriers such as Air Polonia, GetJet and White Eagle. "A fleet of this size will enable us to take commercial advantage of the under-developed market for low-fare air travel to and from Central and Eastern Europe," said Varadi. Our network will branch out from our initial bases in Poland and Hungary, opening up routes for many millions of travellers to and from popular European destinations."
However, indicating a move toward cooperation in the sector, a European Low Fares Airline Association (ELFAA) was founded at the end of January, of which Wizz Air became a member. The objective of this organisation is to ensure that low operating costs can be maintained so that a greater number of low fares are available to the traveller. Many established low-cost airlines have shied away from Central Europe because of expensive and inefficient airports.
But Katowice is a new development which, as a late entrant, is able to modify the practices of its competitors, tailoring its services to the needs of the new generation of airlines. Indeed, the new airport will be home to the entire European fleet of the new Wizz airline, which will be serviced and maintained there, raising the profile of Poland's already promising skill base of aircraft technicians, currently bidding for major US investments.
With the tourist destination of Krakow an hour away, local authorities look forward to attracting foreign visitors. "Soon numerous shops, car parks, restaurants and hotels will crop up," said Marek Mutke, Chairman of the Board of the Upper Silesian Aviation Group.
European cities on the list of Wizz Air's destinations include Brussels Charleroi airport. "Low-cost travel between Poland and Belgium should undoubtedly have an economic impact and give a boost to our trade relations, especially at the level of SMEs," says Eric De Clercq, the Economic and Trade Commissioner in Warsaw for the Walloon Region.
"It's a great opportunity for our two nations to get to know each other better and put Poland on the map as an easily reachable and attractive tourist destination for Belgians in the coming months," he adds.
Earlier this month, Wizz Air began its final phase negotiations to secure up to zl.231m ($60m) of venture capital funding from American and European institutional investors. The board of directors includes Lynn Wotherspoon, former COO of Buzz (the former low cost arm of KLM), and high-ranking employees of regional branches of Proctor & Gamble and The World Bank.
"Of all the countries entering the EU, Poland is the largest market and has the most potential in terms of business development," Varadi says.
Internet usage, a mainstay of low-fare airlines, is relatively low in Poland and Hungary. Varadi has indicated that this could necessitate cooperation with travel agents, a cardinal sin among low-cost purists such as Ryanair.

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ENERGY

PKN Orlen admits need for sale or merger


PKN Orlen, the Polish oil group, yesterday admitted it lacked the scale to survive as an independent and would either have to seek a buyer or merger partner such as Hungary's Mol, The Financial Times reported recently.
Zbigniew Wrobel, chairman, told the FT that the company's future lay in either combining with Mol or Austria's OMV to become a significant operator in central Europe, or risk becoming "marginalised" and bought, most likely by a cash-flush Russian oil company. PKN and Mol are holding talks on a potential merger, having signed a letter of intent that expires at the end of April.
Mr Wrobel said the talks were going well and the hope was to create momentum for closer co-operation before both Poland and Hungary join the European Union in May.
The planned merger calls for an exchange of shares, but that is looking more problematic after the Hungarian government sold an 11% stake in Mol earlier in March. It said it had no plans to use its remaining 12% stake in a share swap.
Jan Kulczyk, the Polish businessmen who holds a 5% stake in PKN, called recently for a merger with Mol because the two companies "are too big to die and too small to survive". But the Polish treasury, which has a 28% stake in PKN, recently suggested that there might be other partners.
PKN is working with ConocoPhilips in its attempt to buy the Czech group Unipetrol, and bought 500 petrol stations in northern Germany from BP in 2002. 
PKN's results for 2003 make it an attractive partner. Helped by higher refining margins, improving non-fuel retail sales, cost-cutting and reserve changes due to lower corporate taxes, the fuel group posted a net profit of 1.04bn zlotys ($270m), up from 421m zlotys in 2002.
Mr Wrobel said it would be difficult to match that result this year, although revenues would be helped by the planned sale of a 20% stake in Polkomtel, a digital telephone network.
The company plans to invest 2bn zlotys this year modernising its retail and refining operations. Cost-cutting will continue.

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Poland fuses refineries, oil firm into Lotos

Poland has taken a long-awaited step into the creation of a second major fuel group and provided the shares of three small refineries and a Baltic Sea oil-drilling firm into the structures of Lotos Group, the country's number two fuel company, the Polish Treasury said in a recent statement.
Lotos's 75% owner, Nafta Polska, the state fuel sector holding and sell-off unit, will receive 10% stakes in Rafineria Czechowice, Rafineria Glimar, and Rafineria Jaslo, all located in southern Poland, and 75% of offshore drilling firm Petrobaltic.
Poland's leftist cabinet will be asked to sanction the non-public transfer of the shares.
"The treasury's decision is a consequence of a Nafta Polska application approved in mid-July 2003 about the transfer of Petrobaltic's and the three refineries' shares to the to-be-established Lotos group," the treasury said, Interfax News Agency reported.
"This means a capital, product and technology merger of the entities consolidated around the Lotos group," it added.
The treasury stressed that the takeover of the companies would lead to increased production and storage capacities of the Lotos Group and would allow the group to grow its share of the fuel market, particularly in southern Poland.
"A successful restructuring and integration will be reflected in the growth of the Lotos Group's value. It will also secure jobs in the southern refineries, all of which face financial troubles," the treasury said.
Lotos , Pawel Olechnowicz, said late last year that the group's value would grow to 2.5bn zlotys (US$650m) from 1.8bn zlotys after the consolidation.
He also said integration of the four companies should be finished by the end of the third quarter of 2004.
Lotos (formerly Rafineria Gdanska) was originally to be sold off, but a long-running privatisation process was killed off in the summer of 2003.
Officials now talk of an initial public offering and have mentioned that other state-held fuel companies could be added to the group. 
Lotos expects to grow its sales further in 2004, though the group creation is expected to dent its bottom line, with net income expected to fall to 130m zlotys in 2004 from a planned 200m zlotys in 2003.

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PKN Orlen boasts best ever profit performance

Polish fuel market colossus PKN Orlen preannounced a net profit of 1.05bn zlotys for 2003, a result the company boasted was its best-ever, Interfax News Agency reported recently. 
Orlen, now eyeing a big regional push, said the two-and-a-half-time growth in its preliminary net income result (against the prior year period) came on the back of a cost-cutting programme launched in the second half, improved fuel-station profitability, and better margins tied to fortuitous global oil and gas industry conditions. The numbers are more or less in line with my expectations," CDM Pekao analyst Rafal Jankowski said. "The good results are the result of good management and the cost-cutting programme, but not only. The market situation significantly helped as well," he added.
The company, which published official results recently, said preliminary results also showed an operating profit of 1.30bn zlotys. The net profit calculated on a LIFO basis (last-in-first-out accounting) was expected to be 1.01bn zlotys, which would mark a jump of nearly five times. Orlen has been guiding up expectations for its 2003 results for some time, noting in early 2004 that the strong operating conditions, high fuel margins and cost cutting would equal a record result.
That, combined with its good chance of success in last part of its retail ambitions (ie the Czech Republic), has led its shares in Warsaw to record highs.

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FOREIGN LOANS

World Bank's US$3bn loan to help Poland's mining industry reform


The World Bank will loan Poland US$200m for mining reforms. Polish Deputy Economy Minister Jacek Piechota and World Bank officials sealed talks on the loan on Friday 27th February in Washington, PAP News Agency reported.
The funds will mainly go for severance benefits to laid off miners. Reforms in Poland's mining are to cost about 20,000 jobs. I'm sure this will prove good for Poland, Piechota said. He refused to name any details of the loan.
The total cost of restructuring Poland's mining industry is estimated at US$3bn.

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MINERALS & METALS

Aluminium producer Kety ups net profit in 2003


Kety, Poland's largest aluminium producer, recently reported a 2003 net profit of 69.7m zlotys (€14.4m), a 48% increase against a year before, New Europe reported. 
The profit was slightly ahead of the consensus forecast of 68m zlotys and of management guidance of 65m zlotys. Revenues rose 19% to 740m zlotys (€154m) in the monitored period. The bottom line was improved by the weakening US dollar, lowering aluminium purchase costs, while the higher Euro raised revenue from the company's exports to European Union countries. Kety is a market leading company in aluminium profiles, architectural systems and flexible packaging in Poland. On the list of more than 2,000 customers are large European concerns and medium-size and small companies from such sectors as construction & building, automotive, indoor fittings and also food concentrates, fatty products, sweets and confectionery. The company controls around 52% of the domestic market of aluminium extrusions, 45% of aluminium joinery products and around 21% of flexible packaging sector.

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TELECOMMUNICATIONS

Energis applies organic-growth strategy, for now


As many fixed-line phone operators are homing in on industry consolidation plays, mid-sized business operator Energis is setting its sights on organic growth, at least for the next two years, Warsaw Business Journal reported recently.
Tel-Energo is wrapping up its merger with Telbank, Netia is prepping its formal marriage to El-Net whilst, behind the scenes, telecom execs are fixing on the next step in piecing together their fragmented sector.
Energis' tack is a different one. Following its financial restructuring, the operator is hoping that the next few years will be as prosperous as 2003, when it recorded 154% year-on-year revenue growth. In that light, it wants to reach about zl.400m (€81.9m) in annual revenue by 2007 - an ideal turnover to be an active participant in industry consolidation. That is, if there are still any opportunities.
Until then, under the stewardship of CEO, Jaroslaw Mikos, Energis is rounding up some zl.38.6m in venture capital, adding an outsourcing element to its business model and targeting zl.220m (€45m) in revenues this year. Last year, revenues reached zl.138m (€28.2m).
"We understand our place on the telecom market," Mikos says.
Indeed, he realises that Energis is a smaller player in the industry, but notes that by investing zl.58m (€11.9m) in the expansion of its network and scouting new metropolitan markets for business customers, organic growth will come.
He explained that Internet Protocol (IP) voice and data services for businesses - a technology that competitors are only just beginning to offer - is proving to be Energis' advantage on the market. He explained that, aided by European Union membership and the already accelerating economy, more businesses will demand newer communication technologies - and that IP is the cutting edge.
Though Mikos' organic approach to growth counters the strategies of the larger telecom players, which are looking to mergers, he says it is likely that the consolidation would occur at a slow pace, affording Energis time to grow on its own.
"Time plays to our advantage," he says. He assures, also, that he's not just being blindly optimistic. For years, he says, rumours predicted mass consolidation among Western European operators. Yet thus far, there have been few mergers and acquisitions, he says. Poland could follow this lead. For the immediate months ahead, Mikos' expectations should be correct, as far as recent reports would suggest.
Michal Cieminski, vice president at Tel-Energo, said that combining Tel-Energo and Telbank, as well as customer acquisition, would occupy his time this year. And Netia executives have noted that they will focus the next three months on operationally fusing with El-Net.
Netia, though, still plans to pursue other telecoms, such as Telefonia Dialog.
But whatever happens on the M&A front, Energis still plans to augment its customer base through its growing suite of products.

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SHIPPING

Polish shipyard launches ship for Norwegian firm


The third of six chemical tankers for Norway's Odfjell ASA company was launched on Wednesday 3rd March in the New Szczecin Shipyard in Szczecin, northeastern Poland, PAP News Agency reported.
The 182-metre long, 32.2-metre wide, 40,000 DWT ship was named Bow Spring and is one of the world's biggest chemical tankers. 
The ship was built under a contract originally covering eight vessels sealed with the now-defunct Szczecin Shipyard. Odfjell broke off the deal following Szczecin Shipyard's 2002 bankruptcy, renewing it for six vessels after the foundation of the New Szczecin Shipyard.
Odfjell ASA specializes in liquid chemicals freighting. The company operates a fleet of 80 tankers, 16 of which were built in Szczecin. 
By 2008 the New Szczecin Shipyard is expected to build 26 ships worth a total US$1bn.

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