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POLAND

NEWS REPORT
 

 

In-depth Business Intelligence

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% 

  

Update No: 091 - (26/11/04)

PM Belka wins parliamentary confidence vote; Poland avoids early elections 
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 culminated. 
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 voter support. 

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 hold.
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.

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AUTOMOBILES

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%.

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CREDIT RATINGS

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 reported.
"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. 

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ENERGY

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 reported.
"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.

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FOREIGN LOANS

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.

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FOREIGN TRADE

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.

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INFORMATION TECHNOLOGY

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 reported recently. 
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.

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PHARMACEUTICALS

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.

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TELECOMMUNICATIONS

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 Germany.
Netia is Poland's second-largest fixed-line operator, with about 5% of the market.
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 licenses.

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