Books on Poland
% of GDP
Update No: 099 - (26/07/05)
Poland is facing elections to parliament in September. It is
not surprising if that is leading to considerable alarms.
Then on July 7th came the events in London, a traditional ally of Warsaw, full
of Polish tourists. Warsaw suffered terribly in the Second World War, far worse
than London. But London will always be to the Poles the symbol of the struggle
against tyranny, whether from the continent or the Middle East.
Polish president vows to continue mission in Iraq
The first reaction was that the next day the Polish President Aleksander
Kwasniewski pledged to complete the mission in Iraq and called for concerted
efforts between NATO, the European Union and Russia.
Speaking one day after the serial terrorist blasts in London killed more than 50
people, Kwasniewski noted that Polish troops would continue to stay in Iraq.
"We should keep to what has been said and agreed with our allies,"
Kwasniewski said. "It would be bad if in the light of attacks in London,
Poland started to behave in an unpredictable manner."
He also called on the European Union, NATO and Russia to strengthen cooperation
in the face of terrorism. Poland's parliament on the same day also urged closer
cooperation in fighting terrorism. In a unanimous resolution, it condemned
"with full strength and resolve the barbaric act" of the London
Recognising that we are all in this together, after deadly rush-hour bombings in
Spain and Britain just over a year apart, Italians and other U.S. allies in
Europe are asking themselves: who's next?
Spain blames al-Qaeda for last year's Madrid train bombs and London's police
chief has said that London attacks bore all the hallmarks of the loose Islamist
A vocal European proponent of U.S. foreign policy, Italy is a repeated target of
Islamic militant threats. It does not seem to be sufficient for the populace to
be opposed to the US war in Iraq, as they are in Italy. Two different groups
claiming affiliation to al-Qaeda have warned of attacks on Italy within the past
24 hours alone. One group calling itself the Organization of al-Qaeda - Jihad in
the Arabian Peninsula described Rome as "the capital of infidels" in a
menacing message on July 8th.
"These threats need to be taken seriously," said Vittorfranco Pisano,
a retired American army colonel and Rome-based terrorism consultant. "Italy
is the closest ally of the United States in continental Europe and has become
far more active in international affairs." Italy dispatched extra
plain-clothes police to guard public transport, heightened security at airports
and said more than 13,000 "sensitive sites" were under special guard.
But for many Rome residents, an attack seems inevitable. "It will happen.
Rome is an important city, it's home to the Vatican. Maybe not today, or
tomorrow, but eventually," said Rita Pesce, waiting for a bus.
After the United States and Britain, Italy is the third largest Western member
of coalition forces in Iraq, and Italian Prime Minister Silvio Berlusconi
acknowledged after the London bombings that Italy's role in Iraq left it
"exposed" to attack.
Denmark has also sent troops to Iraq and found itself threatened along with
Italy by the previously unknown "Secret Group of al Qaeda's Jihad in
Europe," which also claimed credit for the London blasts.
Denmark's Foreign Minister Per Stig Moeller said terrorists would inevitably
"slip through the net" and warned that all European nations were
Poland, which has about 1,700 troops in Iraq and commands a multinational
division, played down the threats." I wouldn't succumb to emotions because
some group, known or unknown, has mentioned us on the Internet," President
Aleksander Kwasniewski told public radio.
Ordinary Spaniards still have painful memories of the March 2004 train bombings
in Madrid, which killed 191 people. An Islamic militant group claimed the
attack, saying it was punishment for Spain's then involvement in the Iraq war.
Three days later, Socialist Prime Minister Jose Luis Rodriguez Zapatero was
elected. He withdrew troops from Iraq.
Even France, which won support in the Muslim world for opposing the Iraq war, is
warning that it too could be a target. French security experts say the risk is
high because it shares intelligence with Washington and London, and has helped
leaders in its North African ex-colonies fight Islamic radicals.
Michel Gaudin, head of France's national police force, said the main threat to
France came from the radical Algerian Islamist group GSPC and a network
recruiting young French nationals to fight in Iraq. "We are very vigilant,
very watchful, notably over recent positions take by the GSPC Algerian group. We
know that the threat of a chemical weapons attack is not unrealistic,"
Gaudin said on Europe 1 radio.
Government reconfirmed in office
It is perhaps just as well that Prime Minister Marek Belka became
established before these horrendous events took place. Prime Minister Marek
Belka has finally won the Polish Parliament's vote of confidence that he needed
in order for his government to rule.
The outcome of the vote 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 Labour Union (UP) and
the majority of independent deputies supported Belka's government.
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-Defence
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
RPP's Owsiak paints grim picture for Polish economy
A member of Poland's Monetary Policy Council (RPP) has painted a grim
picture of the Polish economy and he sees nothing that could boost it, Warsaw
Business Journal has reported. Stanislaw Owsiak, considered a moderate member of
the RPP, said that a strong zloty and weak domestic demand have weighed down the
Polish economy, after gross domestic product (GDP) and investment growth figures
for first quarter came in much lower than expected.
In December the finance ministry predicted five per cent 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
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.
Gronicki's budget projections
Based on the latest assumptions of the state budget for 2006, Poland's
deficit should amount to between 28-34bn zlotys, economic growth to 4 per cent,
while inflation will hover around 1.5 per cent, commented the Polish finance
minister recently. Miroslaw Gronicki said, "This year for the first time,
both revenues, expenditures and deficit, were provided in brackets, rather than
specified amounts." Projections show that revenues should stand at
184-189bn zlotys, while expenditures at 216-222bn zlotys. At the same time, the
government expects higher internal demand, especially consumption demand, and
thus the current account deficit should stand at 2 per cent of gross domestic
product (GDP). "Average wages will increase by 3.5 per cent, while those in
the public sector by 1.5 per cent," said Gronicki.
PGNiG IPO on the cards
Poland plans a stock flotation of the state-owned Polish Oil and Gas Company (PGNiG)
fuels giant between September 2nd to 25th, Polish Treasury Minister, Andrzej
Socha, said recently. The Treasury expects to earn at least 1.5bn zlotys
(US$446.5m) from the privatisation project. The funds will in part be invested
in PGNiG operations. The company's plans call for 8.75bn zlotys of investment
over the next three years directed at increasing extraction of natural gas and
crude. Three tranches of 270m shares will be offered to small, institutional and
foreign investors, the Polish PAP News Agency reported.
The ministry had previously suggested the float might go ahead in June. PGNiG
recorded net profit of 1.11bn zlotys in 2004 and 10.91bn zloty in gross revenue.
PKN Orlen targets north, south expansion
Fresh after its recent acquisition of Czech fuel company Unipetrol, Poland's top
fuel refiner PKN Orlen has plans afoot for hefty takeovers in both the Baltic
states and the Balkans. "Because the investment possibilities in central
Europe have almost ended, we are considering different directions: southern and
northern Europe," PKN Orlen Deputy President, Cezary Smorsz-czewski, was
quoted as saying by the Puls Biznesu daily.
Noting Orlen has some 1.7bn Euro to spend, Smorszczewski said preparations for
takeovers in the Balkans and the Baltic states had already begun. Acquisitions
are to go ahead following the completion of the first phase of restructuring at
Unipetrol, he explained.
Orlen is eyeing Slovenia's Petrol, Serbia's NIS, MOH in Greece, Turkey's Tupras
and Lithuania's Mozejki refinery.
"We don't rule out engaging in these projects if the circumstances are
amenable," he told Puls Biznesu. Smorszczewski, however, refused to comment
on whether Orlen was already involved in a tender for 51 per cent of Turkey's
The Orlen official also pointed to investment opportunities in Poland's western
neighbour, Germany, where Orlen already owns some 500 service stations that
operate at a loss. "Here there is the potential of taking over shares in
refineries such as Wilhelmshaven, Ruhroil, Schwedt or Luena," he observed.
Orlen failed in its 2000-1 bid to buy shares in Luena. The Polish company is
also mulling whether to sell or expand its service station network to achieve an
"economy of scale" in Germany and so begin generating profits rather
than losses there.
Talks were underway with the Q1 service station chain, according to the Puls
Biznesu report. Smorszczewski also pointed to a stake in the Czech Republic's
Czeskiej Rafinerskiej as an attractive potential acquisition. Orlen was also
considering the Czech fuels pipeline company Czepno, he said. The Polish fuel
giant has also placed a bid in a tender for the Aral chain of service stations.
But according to Smorszczewski, Orlen, which already holds a 15 per cent slice
of the Czech service station market, has no ambitions for dominance.
The Orlen official confirmed no merger talks were being held with Austria's OMV
or Hungary's MOL. "Time will tell who will play the main role in the
consolidation processes in the region," he said.
The Polish state hold a minority 27.52 percent stake in PKN Orlen. Other
share-holders include The Bank of New York and Fidelity Int Ltd and Kulczyk
Polish, Ukrainian presidents witness car, steel plant deals
The presidents of Poland and Ukraine presided over the signing of two major
bilateral industrial deals at the VIII Poland-Ukraine Economic Forum in the
Baltic port city of Gdynia recently, New Europe reported.
Poland's Alexander Kwasniewski and Ukraine's Viktor Yushchenko watched as
Ukraine's Avtozaz motor company formally inked a deal for the takeover of 20 per
cent of shares in Poland's troubled FSO car plant and the acquisition of
Poland's Huta Czestochowa steel mill by Ukraine's Industrial Union of Donbass.
Ukraine's Avtozaz already buys up almost all of FSO's output, using the parts
from the Polish plant in the assembly of Daewoo models at Avtozaz car works in
FSO produces Daewoo Lanos and Matiz model cars and car parts. There has also
been media speculation over whether a new-model Lanos or perhaps even a General
Motors-made Chevrolet model may be introduced to the FSO product line. US
carmaker GM took over part of South Korea's insolvent Daewoo which had
previously controlled 80 percent of FSO.
The FSO plant currently employs more than 2,000 workers who have lived in
uncertainty since the company hit hard times in 1999 when Daewoo became
insolvent. The company then handed over control of its 80 percent share in FSO
to Poland's State Treasury.
The presidents also presided as officials from Ukraine's Industrial Union of
Donbass sealed the deal for Poland's state-held Huta Czestochowa steel mill.
Donbass had managed to out-manoeuvre Indian-owned titan Mittal Steel which
dominates the Polish steel market with seven million tonnes of annual
production. Mittal Steel fell out of the running for Huta Czestochowa after
failing to agree on a labour package with the mill's unions. Donbass succeeded
in subsequent labour negotiations.
Kwasniewski also called on other EU states to adopt free visas for Ukrainians
similar to those granted by Poland which joined the EU in May 2004. "I am
convinced that we as the European Union should adopt the standard which for many
months has been in force in Polish-Ukrainian relations - no visas to Ukraine and
free visas for Ukrainians to all EU countries," Kwasniewski was quoted by
the Polish PAP news agency as saying.
"This is our postulate, which I am putting forth vocally to our EU partners
and I believe that it will be accepted," he said.
Kwasniewski also backed Ukraine's drive for closer ties with NATO and its drive
for closer ties and eventual membership in the European Union. "I trust
that no one will lack the energy, conviction and determination that will
strengthen an independent Ukraine and a sovereign Poland and build our strong
position in Europe," he said.
Poland, both at the political and social level, was the strongest European
backer of Ukraine's recent pro-democracy "Orange Revolution" and has
since demonstrated consistent diplomatic support for Ukraine's drive for closer
integration with Western European institutions.
Yushchenko, a key leader of the Orange Revolution and enthusiastic pro-market
reformer, echoed Kwasniewski. "Today we clearly say we are a country which
is aiming for European integration. We are an integral part of European
integration," he said.
Yushchenko also told Polish and Ukrainian business leaders gathered at the
bilateral business forum they should be a driving force in the further
integration of Europe.
Fuji Seal to build plant in Lodz
Japanese plastics packaging manufacturer Fuji Seal International has signed an
agreement concerning the construction of a production plant in Kutno, which is a
part of the Lodz Special Economic Zone (LSSE), Warsaw Business Journal reported
on June 27.
"The company will invest 40m Euro and create 150 jobs. This is an important
investment, because it introduces very advanced technologies," said
Sebastian Mikosz, deputy president of the Polish Information and Foreign
Investment Agency (PAIIZ). What is interesting is that this sum only concerns
the initial investment. "The company might invest an additional 20m Euro,
as there are plans to increase the size of the workforce to 250, and later make
it even 300 strong," said Andrzej Osniecki, the president of the LSSE. He
went on to say that he approached the government earlier with a request to
enlarge the zone especially for the Japanese investor. Construction of the new
factory will start as soon as possible, with production to be launched some time
France's Vivendi regains PTC
French telecoms giant Vivendi recently announced plans to strengthen its market
presence in Poland by taking control over domestic mobile operator PTC and the
acquisition of digital television, WGJ reported.
Vivendi President Jean-Bernard Levy said current investments were only the
company's first step. Levy also revealed in an interview that the company sees a
great potential in the paid-for television segment, and this is the direction
the company will follow. However, the current priority is to regain control of
Elektrim Telekomunikacja, where it holds 51% of Era operator PTC. "We have
invested 1.8bn Euro in the operator and we demand the respect for our
rights," Levy explained.
TP SA targets brand change
Telekomunikacja Polska (TP SA) hopes to switch its mobile brand to Orange by the
end of the year, the Warsaw Business Journal reported recently.
"We would like to introduce the Orange brand, we do not yet have a date,
but I think (it will be) at the end of this year," TP SA chief executive,
Marek Jozefiak, said at a conference of telecom operators on June 6th. TPSA
plans to pay Orange, the mobile services unit of TPSA's strategic shareholder,
France Telecom, 1.6% of its revenues each year to make use of the name. The move
comes as part of TPSA's strategy of using mobile services to offset falling