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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: 086 - (30/06/04)

West or East? 
Poland is by far the largest of the 10 new member countries. It has been allotted 54 seats
in the European Parliament, the same number as Spain, out of 732. The turn-out on June 13th for elections to the parliament was very low, barely over 20%. This is to have been expected. The Poles have not been in Europe long enough to know what they really think about it, which goes for the other entrants too. As the philosopher, Karl Popper pointed out, people vote against the ruling powers that-be, not for opposition forces by and large.

The Poles are at a divide - where do they belong?
They have long thought that it was in Western Europe. The Western allies initiated the Second World War with that in mind, but at the end of the conflict left the Poles to the tender care of the Russians, and the East-European group of communist nations.
So at last they have become Westerners - they have been thinking. Members of the EU since May 1st, who could now doubt it? 

New premier and government
In the wake of the demise of the government of socialist Leszek Miller, President Aleksander Kwasniewski has asked an ex-finance minister, Marek Belka, to form another socialist-led government. Mr Belka's prospects of success are mixed If he wins a vote of confidence in parliament, at first or second attempt, his government-little changed from Mr Miller's-may muddle along for a while, perhaps even until parliament's term ends next year. But a ruinous defeat for the SLD is likely, whenever the election comes. Two dozen of its parliamentary members have left to form a new party, Polish Social Democracy, hoping to distance themselves from the sleaze that helped to drag down Mr Miller's government. 
The economic recovery that began last year may do little to pull the SLD out of its tailspin, though it could limit the number of protest voters rallying to opposition forces. The Miller government fell between two stools in economic policy, upsetting investors with big budget deficits and supporters with promises to cut spending in the future. 

The leprous Lepper
Poland's first election campaign for the European Parliament became a sort of popularity test on Andrzej Lepper, the bete noire of Poland's political class. He is the Le Pen or Haidar of Polish politics.
He calls for a revolution in Poland and professes a profound contempt for democracy and an admiration for Hitler. This is all to bait the politically correct. He is never likely to get very far, because he is widely detested among urban and well-educated Poles.
Lepper, a former pig farmer and Communist Party member, portrays himself as a sort of Polish Robin Hood. He aims to redistribute income from rich to poor. He benefited from the low turn-out of 20% of the electorate. His followers, like most fanatics, are highly motivated to vote.
Samoobrona (or Selfdefence), founded as a small-farmers' movement 12 years ago, appeals more directly and unscrupulously to the millions who feel they have lost out in the transition from communism to capitalism. It promises to halve unemployment in four years, to increase social-security payments, to launch a big public-works programme, and to preserve what remains of state-controlled industry.
Lepper is a veritable demagogue. He says: "George Bush should go on trial for invading Iraq. Poland should set about leaving the European Union unless it can rewrite its terms of entry to get a better deal. Half the Polish National Bank's reserves should be used to subsidise cheap loans for farmers and homebuyers. And if that causes the zloty to slump, no tragedy: the currency is overvalued as it is."
A far-out manifesto? Well maybe. But, as many as 20-30% of Polish voters support the author of these ideas. Lepper, a former boxer, still keeps a punch-bag in his office. His punch puts his left-wing populist party first or second in most opinion polls. 
Its main rival is a right-wing party called Civic Platform, which tends to advocate liberalism on economic issues and conservatism on social ones. Both are miles away from the ruling socialist party, the SLD. 

Economy continues to expand
An economic recovery began last year that is boosting GDP by 6.7 %more. It may do little to pull the SLD out of its tailspin, though it could limit the number of protest voters rallying to Self - Defence.
The Miller government fell between two stools in economic policy, upsetting investors with big budget deficits and supporters with promises to cut spending in the future. Self-Defence and Civic Platform both accept the principles of EU membership, but they dispute fiercely some aspects of it. Lepper wants the EU to increase Poland's quotas for milk and steel production, and has said that he will "begin the process of secession" if these and other concessions are not granted. Civic Platform's parliamentary leader, Jan Rokita, coined the catchphrase "Nice or death" to denounce a planned reduction in the voting weights promised to Poland four years ago in the Nice treaty. The change from Nice forms a central plank of the EU's proposed constitutional treaty, making it essential to find a face-saving way for Poland to climb down if the constitution is to be saved.

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AUTOMOBILES

Auto sales drive to new highs


Auto sales were up 29% in the first 4 months of this year, compared to the same period last year. However, while sales growth has reached record highs, experts say the figures are not sustainable, as much of the buying is rooted in a desire among consumers to acquire vehicles before anticipated EU-driven price hikes and new regulations borne of the country's accession.
Between January and April of this year, 143,624 cars were sold in Poland, including 45,115 in the month of April alone - a staggering year-on-year rise of 45% in a single month, according to auto analysts Samar.
Echoing a new sales profile established in the market last year, Toyota's sales figures were in third place behind Skoda, with traditional leader Fiat remaining in first place.
One analyst firm foresees a more than 6% decrease in sales of new cars this year as a result of new EU taxes causing price rises. However, the economic growth forecast for this decade across the Central European region is anticipated to bring a quick sales rebound followed by an almost 6% new-car sales growth each year over the next 5 years.
Economic prosperity, especially in the cities of Poland, will translate into greater disposable income. Car companies and sales observers alike expect that 'new money' will be spent on new cars, the all-important status symbol that they are.
In December, Erich Papke, president of BMW Poland, told the Warsaw Business Journal, "Hybrid consumption is already emerging in this country. People are saving on value-for-money goods while indulging on branded goods that improve their image, their identity."
Similarly, Uto Harumichi, president of Suzuki Motor Poland, spoke of the thirst among Polish consumers to express their new upward mobility by driving a new car. "Four-wheel drive vehicles can be a tool to express identity," explained Harumichi. "I believe in the future of these vehicles, not because they are practically necessary in Poland, but because of the image that driving such a car can present."
In February, Toyota announced that it was growing faster in Poland than anywhere else in Europe. "[Car magazine] Auto Swiat has claimed that Toyota has 'The best network in Poland,'" said Jacek Pawlak, General Director of Toyota Motor Poland, in its assessment of the firm's success in the Polish market.
Changes in customs charges for cars produced outside the EU benefit Japanese importers, as Poland comes into line with EU law, and may yet bring Toyota closer to first place in Polish sales figures.
New car sales in general are being boosted in Poland by the high price of imported used cars coming from the rest of the EU. Excise tax - in the form of a registration fee - on imported used cars is up to 65%, while used cars derived from Poland are free of this tax.
This situation has brought complaints about Poland to the European Commission. Article 90 of the EU treaty prohibits the use of customs taxes that inhibit the free movement of goods throughout the free market. However, the Finance Ministry is arguing that the trade regulations are fully in line with EU law, so whether this will change is yet to be seen.

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AVIATION

LOT expects growth to take off with Embraers

LOT Polish Airlines is looking to optimise its route network with the addition of ten new Brazilian-built-Embaer jets. This addition to LOT's fleet with help it to concentrate on developing its high-quality medium-haul business as a market niche safe from low-fare rivals.
"The Embraer 170 is setting new standards for comfort and cabin volume for our intra-European network," said Marek Grabarek, LOT Polish Airlines CEO. "We are delighted to have this state-of-the-art airplane becoming part of our fleet."
The ten Emb-170s will be delivered in stages until March 2005. The 70-seat planes have less than half the capacity of LOT's current medium-haul aircraft. But the concept behind the Embraer is to offer passengers space.
"The use of smaller aircraft is intended to optimise existing routes, where passenger numbers are declining due to low-fare competition. However, the market is there for business travellers and those who are prepared to pay."
LOT is the new Embraer model's first customer, with options on another eleven Enb-170 mid-range aircraft to be commercially flown in the world.
"The Embraer 170's state-of-the-art systems architecture results in operational, man-machine interface and maintainability improvements," said Embraer in an official statement. "It has all the attributes to win over demanding customers and passengers for its cost-efficiency, high levels of comfort and functionality."
Currently, some routes are running with a significant number of empty seats, something LOT would clearly like to avoid. The Embraer solution is to offer a more spacious flight for discerning customers who are prepared to pay more. There will be fewer seats, but few of them will be empty. This will help LOT cut costs massively (putting and end to half-loads) while competing on quality with the likes of SkyEurope, Wizz Air and Air Polonia. And LOT's new Embraers will be used on routes from Poland to Vilnius, Kiev, St Petersburg, Minsk, Bucharest, Sofia, Oslo, Milan, Rome, Paris, Stockholm, Brussels and Amsterdam.
The Embraer aircraft are the only type in the world to offer this combination of a medium-range number of seats, extra space and comfort. In an industry paranoid about costs the Embraer looks to be LOT's big chance. Judging by the Brazilian plane makers advanced orders, it seems that Embraer may one day have a chance of outshining the success of all-powerful Airbus.
"As such, LOT Polish Airlines will take advantage of the unique features of that aircraft, such as the fly-by-wire system, the glass cock-pit and the new CF-34-8E engines," said Luiz F Fuchs, Embraer's Senior Vice-President - Europe, Africa and Middle East - Civil aviation Market.
JP Morgan reportedly expects Embraer sales to reach US$3.3bn (zl13.2bn) in 2004 and US$3.6bn (zl14.4bn) next year. Embraer earned US$135m (zl540m) in 2003, on sales of US$2.1bn (zl8.4bn). According to a report in Puls Bisnesu in April, LOT will pay US$180,000 (zl720,000) a month across the next twelve years to lease the aircraft.

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BANKING

Pekao beats forecasts on first quarter net profit


Poland's largest listed bank Pekao SA, a unit of Italy's Unicredito, edged out market expectations with a first quarter net profit of 296m zlotys, a 15.6% year-on-year gain that the bank owes to lowered risk costs and improving fee income, New Europe reported recently.
"A 16.2% return on equity," Pekao chief operating officer Luigi Lovaglio said recently, keeping the focus on profitability, "it proves our ability to earn." Net provisioning costs were halved to 98m zlotys in the first quarter. The gain came without having to switch to the central bank's new classification system for non-performing loans, a shift which has improved provisioning costs and boosted interest income levels for the rest of the banking system.
"Overall this is pretty positive, given especially that they haven't used new NPL classification system," CA IB banking analyst Jakub Korczak said of the overall results. Eyes were glued to developments in lending, where Pekao spent 2003 giving up ground to a hungrier competition. Net interest earnings continue to fall, but much in line with market expectations.
With the total loan book up a slight 0.5% quarterly, the 12.4% decline in net interest earnings was tied more to conservative policy in securities purchases. Interest income on the loan book was down 11.4% from the fourth quarter. Reviews of revenue levels were mixed - figures got an "OK" from CA IB's Korczak and a "not very strong" from Millennium brokerage analyst Marcin Materna, but with honest approbation for gains in fee income - mostly tied to investment funds.
Pekao's total lending portfolio grew by a modest 0.5% to 28.7bn zlotys, but the gain came on a slight 1.4% quarterly increase for the corporate portfolio, which dominates Pekao's overall lending books at 22.5bn zlotys.
Retail lending as a whole continued to slide, down 0.2% from the fourth quarter 2003, but showed gains exactly where Pekao had been promising first quarter growth - in mortgage lending.
Pekao claims a 20% first quarter market share in sales of zloty-denominated mortgages, enough to improve the total market share in new mortgage sales by 4.6% points to 11.9% even as the bank continues to eschew F/X mortgage lending.
Other retail lending was down 6% from the fourth quarter. "We see the first sign of recovery in lending, at least in mortgage lending. As far as loans are concerned - this is the only positive sign," Materna said. The bank made up lost ground in the revenue column thanks to gains for fee income, mostly noted in the investment fund division, where Pekao continues to shuffle the savings of its clients. Costs continue to come down as a result of the bank's ongoing restructuring and officials suggested that cost cutting potential would continue into the second quarter. The cost/income ratio fell to 54.9% - which officials continue to call the benchmark for the industry.

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ENERGY

LUKoil seeks Polish partners to transport crude to Europe

Russian oil major LUKoil is offering Polish oil-pipeline operator PERN and Polish fuel terminal Naftoport major deals to help the Russians transit oil to Western Europe, LUKoil Polska Executive Director, Nikolai Ivchikov, said recently, New Europe reported.
LUKoil has also approached Polish Baltic-Sea drilling company Petrobaltic with an offer to carry oil from the Baltic shelf to the Gdansk sea port on LUKoil tankers. "We presented our proposal to the treasury (which owns both PERN and Naftoport) to sign a direct contract for transit of oil to Western Europe. We are interested in providing our crude oil to the open market, transmitting it in cooperation with PERN and Naftoport," Ivchikov said.
"We also made an offer to Petrobaltic to carry its crude from the Baltic shelf to Gdansk on our top class tankers and Petrobaltic has expressed its interest. We additionally plan to invite Petrobaltic to drilling operations," Ivchikov said.
The ownership of the potential partners for LUKoil is subject to change in the near future. Petrobaltic has been assigned by Polish planners to the nation's number two refining group Group, while Naftoport is scheduled to become part of a to-be-established integrated logistics operator ZOL.
PERN has estimated that the amount of oil transported abroad through its network will increase to 10m tonnes in 2004, after nearly doubling to 7m tonnes in 2003. PERN continues investing to increase its oil transport capacity.

PGNiG grosses 535m zlotys in January-March

Poland's gas monopolist PGNiG managed to increase its gross profit to 535m zlotys in the first quarter of 2004 from 328m zlotys the year before. "Although it is still being analysed by the auditor, gross profits should exceed 500m zlotys, versus 300m zlotys in the first quarter of 2003," PGNiG's, Marek Kossowski, said recently.
The company is laying claim to a moderate rise in sales revenues in 2004. "We are seeing gas sales at least on the 2003 level, which had noted an 11% increase year-on-year," Kossowski said. "We are not ruling out a small 2% increase in 2004 sales as the number of large clients increases."
Kossowski had increased the 2003 gross profit guidance to a range of 500m zlotys to 600m zlotys during a meeting with reporters in February. The original forecast had been for 450-500m zlotys of gross profits in 2003.

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FOOD & DRINK

Agros Nova seeks to slurp down soft drinks market


Agros Nova, a company operating in the food and drinks sector, plans to increase its share of the soft drinks market by 8% at a cost of some 103m zlotys, most of which has already been spent on launching new products.
"Thanks to this strategy, in the first quarter our sales increased by 12% and our nominal soft drinks market share increased by 1.9% and is now 18%," said Robert Niewiadomski, Agros nova's president. The company also plans to boost its exports by targeting the markets of other new European Union entrants. This year, however, the company will concentrate mainly on the domestic market, with foreign expansion set to start no sooner that 2005. Last year the firm expanded its production volume by 27%, which equates to 733m zlotys in terms of the value of goods produced, New Europe reported recently.

Instant coffee with a kick

Instant coffee with more than just a caffeine kick is set to hit store shelves in Poland within the next few weeks as a leading Polish powdered beverages maker begins marketing a novel product containing powdered alcohol and coffee, New Europe reported recently. 
Liquerino, made by Mokate will come in several flavours including traditional Irish coffee, rum, cognac and vodka, said company spokesman Jerzy Chrystowski. The company has secured a European Union patent protecting its unique product which was inspired when Swedish scientist found a way to powder alcohol five years ago. Chrystowski describes the effect of the instant beverages as "pleasant," but insists it won't make anyone drunk and is "totally safe" for drivers. According to a market survey quoted on the company's Web site, Mokate controls 64.4% of the Polish instant cappuccino market. It sells products like instant cappuccino and coffee whitener, in 40 countries across the globe.

AmRest units IPOs in the offing

The operator of Pizza Hut and KFC fried-chicken restaurants in Poland and the Czech Republic, US-owned AmRest Holdings, plans to go public in Warsaw in fall 2004 to raise US$50m to open more restaurants and reduce debts, AmRest Vice President and Development Director Tomasz Suchowierski told Interfax recently. "The initial public offering (IPO) of new and existing shares could be the largest on the Warsaw Stock Exchange (WSE) this year, not including any large state privatisation," Suchowierski said. "Market conditions are favourable and the Warsaw bourse is more liquid than Prague's. We aim to pull the trigger in October."

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FOREIGN ECONOMIC RELATIONS

Chinese, Polish presidents sign joint declaration, pledge to boost ties


China and Poland signed a joint declaration on June 8th pledging to work for a "friendly and cooperative partnership" between the two countries, Xinhua News Agency reported.
The declaration, signed by visiting Chinese President, Hu Jintao, and Polish President, Aleksander Kwasniewski, said the two countries will actively participate in efforts to build a relationship of all-around strategic partnership between China and the European Union.
The "12-point" declaration emphasized the need to further strengthen historical friendship between the two countries, enhance mutual understanding and trust, and deepen mutually beneficial cooperation. 
To this end, the two sides agreed to broaden the scope of their dialogue and maintain frequent contacts between leaders and officials from governments, parliaments and other government organizations in the two countries, the declaration said.
The two countries will respect each other's development mode, and domestic and foreign policies, which are based on their own situations, the declaration said, adding that they will also "respect and support each other's efforts to safeguard its sovereignty and territorial integrity."
Noting that both sides highly value their trade relations, the declaration said China and Poland are willing to, based on partnership, balance and mutual benefit, enhance and upgrade the size and level of their trade relations, and conduct constructive cooperation as well.
The two countries expressed the willingness to enhance cooperation within the framework of the United Nations. They would "support the United Nations' reforms, safeguard the organization's authority and try to strengthen its role", the declaration said.
Hu arrived in Poland for a two-day state visit, the first-ever state visit to the country by a Chinese president since the two countries established diplomatic relations in October 1949.
The two countries signed a number of agreements, notably on bilateral cooperation in copper development and purchasing. Trade between China and Poland hit a record US$1.98bn last year, up 43.1 per cent from a year earlier, making Poland China's second largest trading partner in central and eastern Europe after Hungary.

Belka joins Visegrad solidarity

Poland's newly installed Prime Minister Marek Belka recently joined in a solidarity pledge at his first meeting of the so-called Visegrad states, New Europe reported recently.
Belka held talks with Czech Premier, Vladimir Spidla, Slovak Premier, Mikulas Dzurinda and Hungarian Premier, Peter Medgyessy in this southern Czech town. The four leaders vowed to continue fostering special economic and cultural ties as new members of the European Union. Their Visegrad cooperation effort grew in the 1990s from the countries' shared experiences in the former Warsaw Pact. The premiers agreed to continue their relationship and the Visegrad structure despite their new roles in the EU, which expanded by 10 countries on May 1st. "It is correct for us to consult each other," Spidla said.

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PHARMACEUTICALS

Novartis announce investment of zl.333.6m

Lek, part of Sandoz, the generic branch of global pharmaceutical concern Novartis, recently announced an investment of zl.333.6m (€70m) in a new dry forms factory and logistics centre, Warsaw Business Journal reported recently. 
The company expects to benefit from enforcement of EU standards, which will eliminate from the market competition in the guise of generics whose clinical registrations are considered suspect, said Lek CEO, Marco Dolzan. The European Federation of Pharmaceutical Industries Association (EFPIA), however, is less optimistic about the future for innovative drug sales in this country. If the government continues to scrimp on funding for innovative drugs, says Brendan Barnes, EU enlargement manager for the EFPIA, not only will patients continue to suffer, but this country will find itself suffering from a brain drain of scientists.
As if to mark Poland's entry to the EU, Slovenian-based Lek's new facility was inaugurated recently by Paul Choffat, CEO of Novartis Consumer Health. However, while a growing proportion of output from the plant is expected to travel abroad to neighbouring markets, such as Russia, the Ukraine, Romania and Bulgaria, 80-90% of production is aimed at the domestic market.
Sandoz, which made a net profit of around zl.11.6bn ($2.9bn) in 2003, is now, through Lek, number two on the local generics market and number 12 on the total market, and the company plans to increase its market share over the next two years. This will not be easy though. Indeed, one of the company's most direct competitors, generic concern Polpharma (number three on the total market), a private company owned by one of this country's richest citizens, Jerzy Starak, and which also has Eastern European ambitions, reported a net profit of zl.815m last year.
"Size will be a big issue in the coming years. Smaller companies will have to consolidate in order to survive, not just in terms of production but also distribution," said Dolzan.
He went on to express his expectation that EU entry will benefit the company by bringing in more transparent procedures for drug registration in this country. This is a view echoed, albeit in less cheerful tones, by Barnes, who visited Warsaw recently in honour of Polish Pharmaceuticals Day. Referring to the fact that in Poland - uniquely among both old and new EU members - government reimbursement policies have made no new innovative medicines available to citizens during the last five years, he warned that this country's notable unwillingness to fund innovative medicines is likely to cause a sizable proportion of local scientific talent and expertise to exit the country in search of jobs abroad.

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TELECOMMUNICATIONS

Tel-Energo to dump Polkomtel


Tel-Energo, part of the Polskie Sieci Elektroenergetyczne (PSE) group, is planning to sell its 1.5% stake in Polkomtel, the operator of the Plus mobile phone network, with the transaction slated to be finalised by the end of August, the Warsaw Business Journal said recently. 
According to Tel-Energo's President, Tomasz Kibil, the estimated value of the stake up for grabs is 180-220m zlotys. Although he refused to reveal who would purchase the shares, PSE disclosed it is interested in buying them. "Our main objective is to provide financial aid to Tel-Energo," said Piotr Rutkowski, PSE's deputy president responsible for the company's telecoms assets. Market analysts believe the move on Tel-Energo's part is but a prelude to the selling off of the majority stake in Polkomtel, as some of its major shareholders have also announced an interest in off-loading shares, while Vodafone has expressed a desire to increase its existing stake.

Polkomtel ups Q1 revenues 10%

Poland's number three cellular telecom operator, Polkomtel, increased revenues by 10% annually to 1,32bn zlotys in the first quarter of 2004, at the slowest rate amongst Poland's three cellular operators, a quarterly report showed recently, New Europe reported. A 120% gain in net profits to 182.4m zlotys was chiefly the result of a 111m zlotys reduction in financial costs, the dual effect of debt reduction and favourable foreign exchange rates. "Despite the very strong rivalry on the Polish cellular telephony market, Polkomtel is still improving its financial results," board member Finn Schkolnik said. "Optimalisation of costs and debt reduction allowed us to lower financial costs. This gives Polkomtel a strong position from which to react to all market changes.

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