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POLAND


 

 

In-depth Business Intelligence

Key Economic Data 
 
  2003 2002 2001 Ranking(2003)
GDP
Millions of US $ 209,563 187,670 176,300 24
         
GNI per capita
 US $ 5,270 4,570 4,230 71
Ranking is given out of 208 nations - (data from the World Bank)

Books on Poland

REPUBLICAN REFERENCE

Area (sq.km) 
312,685

Population 
38,626,349

Capital
Warsaw

Currency 
Zloty 

President 
Aleksander 
Kwasniewski 

Private sector 
% of GDP 
70%



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 attack.

Who's next?
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 network.
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.

Attack inevitable?
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 ultimately vulnerable.
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 foreign policy. 
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 parliament. 

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 domestic market. 
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 citing IMD.
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.

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ENERGY

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 Tupras. 
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 Holding. 

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FOREIGN COOPERATION

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 Ukraine.
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.

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MANUFACTURING

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 next year.

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TELECOMMUNICATIONS

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 fixed-line revenue.

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