Books on Poland
% of GDP
Update No: 091 - (26/11/04)
PM Belka wins parliamentary confidence vote; Poland avoids
Prime Minister Marek Belka was cemented in his job on October 15th as he and his
Cabinet cleared a parliamentary vote of confidence by a margin of 16 votes. The
vote of confidence eliminates any immediate need to proceed to early elections.
Needing only a simple majority, Belka garnered 234 votes with 218 voting against
and one abstention. Attendance for the key vote was nearly full at 452 deputies
of Parliament's total 460.
"I was sure that the chances were great, but I wasn't sure," Belka
said in an interview for the private television tvn24 right after the voting
The vote follows a promise made by Belka when he won a June 24 confidence vote
after establishing a new government in May. Belka had promised his Cabinet would
undergo another vote of confidence once it had submitted a 2005 budget. The
government submitted the budget at the end of September.
Earlier in October, Belka said he would propose new parliamentary elections be
held in the second half of May 2005, instead of autumn 2005, to enable the next
government to prepare its own budget. In Poland, parliamentary elections are
traditionally held in September or October, the time of year when the country's
government prepares the state budget. When a new government comes to power, it
then inherits the budget prepared by the previous government.
Belka, a member of ruling party SLD, was appointed by Polish President
Aleksander Kwasniewski as Poland's acting prime minister on May 2, when former
Prime Minister Leszek Miller and his Cabinet resigned amid waves of record-low
Poland the powerbroker
Poland is in the aftermath of a bout of election fever all the same. But it was
voting by Belarusians and Ukrainians which stirred up the enthusiasm. Elections
in two eastern neighbours with strong historical ties to Poland may not only
determine the two countries' political course for years to come, but might also
set the course for Poland's--and possibly Europe's--eastern policy as well.
"[The Ukrainian elections] are very important to Poland because it makes a
big difference if Poland finds itself only on the periphery of the West or in a
friendlier geopolitical environment," parliamentarian Marek Jurek of the
Law and Justice Party told the news channel TVN24 on 31 October.
Jurek drew a picture of the 31 October Ukrainian presidential election, where
the candidate backed by outgoing President Leonid Kuchma, Prime Minister Viktor
Yanukovych, faced a strong challenge from the opposition's leading candidate
Viktor Yushchenko, as a choice between East and West, the Kremlin and the
European Union, autocracy and democracy.
Most Polish politicians share Jurek's view, and those who have commented on the
Ukrainian vote have more or less explicitly supported Yushchenko. One of few to
take a less partisan stand was former Speaker of the Sejm Marek Borowski of the
fledgling Polish Social Democracy party. "The Ukrainian people have the
right to decide for themselves. In Poland, it's a common thing to say the
elections will be a success if Yushchenko wins and a failure if Yanukovych wins.
In my opinion, the most important thing is that the elections are as democratic
as possible," Borowski told Polish Radio on 31 October.
On 1 November it appeared likely that the two men would face each other in three
weeks for a deciding runoff. Whichever direction Ukraine turns, the outcome will
to a large extent shape Poland's strategy toward its largest eastern neighbour.
More than that, many commentators have conjectured, Warsaw may be able to take
the lead in setting the enlarged EU's eastern policy.
After 6 months, EU looks better to Poles
In October, fate played a joke on Andrzej Lepper. He became one of the first
5,000 Polish farmers to receive money from the European Union, which Poland,
along with nine other countries, joined seven months ago, on May 1st.
Lepper, 50, the populist farmer-leader of the anti-European Samoobrona Party,
was given 8,000 zloty, or nearly US$2,400, a sum he will receive regularly for
the next several years as part of the EU's generous farm subsidy plan. The joke
is that this tidy sum could be Lepper's political undoing. His support has come
from the countryside, where he set up Samoobrona, or Self-Defence, in 1992 to
campaign against Polish entry into the EU.
As EU farm subsidies start trickling into the newly opened bank accounts of
Poland's 1.4m farmers, Lepper's support is crumbling. His vitriolic and
sometimes violent campaigning among farmers to stop Poland from joining the EU
is rapidly losing appeal. His doomsday predictions that farmers would be
forgotten and left to starve have been proved wrong.
The EU had never been popular in the depths of the Polish countryside, where
populist politicians like Lepper often joined ranks with the local and still
powerful Catholic Church to oppose joining the Union. The church, which played a
big role in opposing the Communist regime, fears a democratic Poland will follow
other European countries by becoming more secular.
The church is already losing influence in the countryside, its main power base,
as young people leave the villages and move to towns and cities where the
church's influence has weakened over the past decade as democracy has taken
Even mainstream Polish politicians tried to use this Euro-scepticism to extract
concessions from Brussels during difficult accession talks. As the largest of
the 10 new members, Poland had made so many demands that it exasperated its
negotiating partners. Yet months after joining, the mood in Poland toward the EU
is improving, with opinion polls showing 75 per cent supporting Europe.
Car production skyrockets
Delivery van production in Poland increased by a massive 350% during the first
three quarters of this year while manufacturing of cars surged by a robust 76%
during the same period, the Warsaw-based Samar auto market analysts said
recently, Deutsche Presse-Agentur (dpa) reported.
The percentages translate into 92,501 new delivery vans and 395,195 cars of
which 83.5% were exported. Italy's Fiat led the pack in car production claiming
58.4% of the total number of cars produced in Poland during the first 8 months
of this year. Germany's Volkswagen came second with 11.2% while the troubled
Daewoo FSO factory took 8.7% of the cake ahead of VW Caddy with 7.1%.
S&P's revised outlook on PZU
Standard & Poor's Ratings Services revised its outlook on Powszechny Zaklad
Ubezpieczen SA and Powszechny Zaklad Ubezpieczen na Zycie SA, the core entities
of Poland's largest insurance group, PZU, to stable from negative, just days
after upgrading the ratings of Poland, S&P said in a statement, New Europe
"Previously, the negative outlook on PZU reflected the risk that the
ratings on the sovereign could be lowered, which would also have resulted in a
downgrade of PZU's core subsidiaries. This risk has now been removed," said
Standard & Poor's credit analyst, Tatiana Grineva. At the same time,
Standard & Poor's affirmed it's A- long-term counterparty credit and insurer
financial strength ratings on both entities.
PKN Orlen to boost corporate transparency
PKN Orlen, central Europe's largest downstream oil company, based in Poland,
has made several changes to the company's management board in an effort to
increase transparency and effectiveness at the company, Interfax News Agency
"During a meeting on October 18th, the supervisory board has made some
changes to the management board of PKN Orlen. These changes were made to support
more effective and transparent management," a company statement said. PKN
Orlen has been plagued with corruption scandals for the last few years. A
parliamentary investigation into company dealings is in progress. Igor Chalupec
was appointed CEO in September and pledged to clean up the company by replacing
the old supervisory board. This move has been expected, though it is the first
confirmation of the new members. All the announced changes in the management
board were made after individual assessments made by independent head hunting
company Korn/Ferry International.
Vattenfall ready to strengthen position
Swedish energy giant Vattenfall is ready to significantly strengthen its
position on the Polish market, the Warsaw Business Journal reported recently.
Group president, Lars G Josefsson, said that his company is planning to purchase
several domestic competitors, but only in cases where it will be able to obtain
majority control over the acquisition. Josefsson said that he is interested in
securing a 100% stake in Elektrocieptownie Warszawskie (EW), where it currently
holds a 70% stake, as well as in Gornoslaski Zaklad Elektroenergetyczny (GZE),
where it now holds 75% of the shares.
"Between 2000-2003 we invested zl.560m in EW and zl.393m in GZE,"
revealed Josefsson. As part of Vattenfall's strategy to become the leading
energy concern in Europe, the company is examining the Kozienice power plant,
PKE, or BOT as potential acquisitions.
Use them wisely
As much as EUR100bn will be distributed among EU members in the new Multiannual
Programme (MAP) for Enterprise and Entrepreneurship, and Poland will get a nice
chunk, the Warsaw Business Journal reported recently.
"The MAP value is impressive, considering the fact that the Polish budget
equals €45bn in total," said director of Regional Studies at the Gdansk
Institute for Market Economics Marcin Nowicki. The new program, which will grant
funds to eligible businesses, is to be implemented between 2006 and 2010.
Through 2005 the member states are still benefiting from the previous one.
Analysts from the Institute for Market Economics, meanwhile, argue that the
Polish government does not dedicate enough attention to the use of MAP funds.
The National Development Program for 2007-2013 designed recently by the Polish
authorities will, in their opinion, copy old mistakes.
The institute claims distribution of funds is highly centralised and thus fails
to meet regional needs. Furthermore, according to the Institute's vice
president, Maciej Grabowski, decisions on where to direct the flow of funds
should be preceded by in-depth analyses of this country's economy problems.
"We cannot cure the disease if we are unaware of its cause," says
Nowicki, giving the example of the widely recognised but vaguely researched case
of high unemployment.
Trade between Poland and Serbia and Montenegro goes up
In January-August 2004 Poland's exports to Serbia and Montenegro reached
US$90.5m up by 32.6 per cent from the corresponding period of last year, and
imports totalled US$18.4m, up 53.3 per cent, according to a report by the
Economy Ministry, PAP News Agency reported.
Serbia and Montenegro is interested mainly in imports of machines and equipment,
coke, chemical products, furniture and foodstuffs.
According to the ministry, the economic sanctions imposed on Serbia and
Montenegro made bilateral trade and economic cooperation fall to a minimal
level. But in 2003 Poland's exports to that country went up by 84 per cent to
US$101.4m, and imports by 75 per cent to US$19.1m.
The ministry said in its report that Polish firms were displaying a growing
interest in Serbia and Montenegro and that some furniture makers were even
planning to open branch offices in that country.
Market changes, IT remains
One of Poland's leading IT integrators, Softbank, says it is planning to
switch its focus from the banking sector, where most of the institutions have
finished building their systems, to the public sector, Warsaw Business Journal
They see the thousands of state and local government systems that need to be
developed to comply with EU guidelines as a potential gold mine.
"Integrated systems are passing into the shadow zone. The public sector now
shows the biggest growth dynamics," says Softbank president Krzysztof Korba.
Estimates suggest total public IT bids, valued at zl.2.37bn in 2003, are set to
double in two years. The company hopes to double its revenues from public
administration contracts by 2006, to reach zl.150m.
Softbank's expansion does not imply a retreat from the banking sector. But the
end of the initial integration phase will require a change of roles.
"We are staying in banking, we just need to provide different products than
those we have been offering so far," says Korba.
Competitors are sceptical though. Computerland, which is the biggest banking
sector IT provider, will not give up its position without a struggle.
Computerland's deputy president Slawomir Chlon says: "I do not understand
why Korba is so sure that achieving zl.360m revenue in 2006 will be enough to
jump into first place. We already have zl.300m and 2 years is a long time."
The DiS analytical office estimates that banks spend zl.600-800m on maintenance
of existing systems. And Korba sees a potential future for Softbank in the
sector as a data manager and IT trainer rather than a systems architect and
integrator. "I cannot exclude a possibility of transforming Softbank into a
consulting firm in the future," he admits.
Rival integrator Computerland, which has annual revenues of around zl.300m,
intends to sustain its position in banking and record a steady growth - both
here and abroad.
While keeping an eye on developments in Poland, Computerland is simultaneously
preparing itself for the conquest of foreign markets. "We have already
established business in Russia and we are now entering Saudi Arabia,"
reveals Computerland director of foreign investments, Dariusz Sliwowski.
Adamed to start exporting to Saudi Arabia
Adamed, a domestic pharmaceutical concern, intends to start exporting its drugs
to Saudi Arabia and become the first Polish pharmaceutical to enter the US$1.8bn
market there, the Warsaw Business Journal reported recently.
Adamed became interested in Saudi Arabia only after the government, together
with the National Economics Chamber (KIG), sent representatives there on a
mission to help establish economic links between the countries. "We have
been researching the market for a year and have developed the most profitable
cooperation model. We signed an agreement in September," said Adamed's
managing director Slawomir Mirek. The Saudi Arabian drug registration procedures
should close by the end of 2005 and Adamed's products should be available on the
market by 2006. The company is the leader in this country's market for new
generation drugs used in cardiology, psychiatry, lung treatment and gynaecology.
Established in 1986, Adamed enjoyed an income of zl.158m in 2003, with a net
profit of zl.9.9m.
KPN explores tie-up with Polish group
KPN recently said it was in the early stages of exploring a tie-up with Polish
fixed-line operator Netia, which is preparing a bid to become Poland's fourth
mobile phone operator, the Financial Times reported.
KPN's move revives the Dutch telecoms company's interest in central European
markets it abandoned three years ago.
KPN said: "We are always looking for opportunities to expand in Europe, and
this seems to be one. However it is at a very early stage."
The company has made no secret of its eagerness to grow its mobile operations, a
need heightened by indications of flagging fixed-line revenues and declining
domestic mobile market share.
It has mentioned markets such as Italy and Germany as potential hunting grounds
for acquisitions or partnerships.
Its attempt to take over MMO2 were rebuffed by the UK mobile group earlier this
year. Talks collapsed over price disagreements.
KPN shed operations in Hungary and the Czech Republic in 2001 and early 2002 to
reduce €22bn (US$38bn) in debt racked up by investments in costly
third-generation mobile licences and the acquisition of mobile unit E-Plus, in
Netia is Poland's second-largest fixed-line operator, with about 5% of the
Netia confirmed the company was looking for a partner to help launch a joint bid
for a new Polish mobile phone network. However, the company would not confirm
that it was holding talks with KPN.
The new network would use frequencies abandoned by the Polish military. The
frequency auction could take place as early as December and the winner could be
known by spring, said at the Office of Telecommunication and Postal Regulation.
Poland's three current mobile phone operators each paid €650 in 2000 for 3G
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