Books on Poland
% of GDP
Update No: 103 - (28/11/05)
New Polish leadership and a new government
Poland has a new president-elect and a new government, the major party of which
is the Law and Justice party. As it so happens, Lech Kaczynski, the victor of
the presidential elections, belongs to it. In a remarkable turn-around, after
trailing in the polls throughout the campaign, Kaczynski, the mayor of Warsaw
and one of the leaders of the Polish conservative party, obtained about 55 per
cent of votes in the second round run-off on October 9th and thus became the
newly elected Polish president. Kaczynski's rival, Donald Tusk, of Civic
Platform, was lagging 10 per cent behind. The inauguration of the new Polish
president is set to take place on December 23.
Incumbent Polish President Aleksander Kwasniewski congratulated Kaczynski on the
victory even before the official announcement of the voting results. About 51
per cent of Polish citizens came to the polls, which was higher than the turnout
registered during the first round of voting two weeks previously.
Lech Kaczynski's victory became possible owing to the activity of the regional
electorate (40 per cent of the country's population); Kaczynski promised to
support the Polish peasants, who suffer from tough competition with West
European agricultural companies.
It is clear that the country is splitting against the background of contrary
views regarding Poland's future in Europe. Donald Tusk was leading in Poland's
large cities, including Warsaw, the capital. He was a proponent of European
integration and the free market, on which Polish goods would have little chance
to compete with French and German products, for example. Tusk's followers will,
nevertheless, participate in the formation of the coalition government of Poland
headed by Kazimierz Marcinkiewicz (a member of Lech Kaczynski's party).
Lech Kaczynski and his twin brother Jaroslaw, who declined the position of the
prime minister after the victory in the parliamentary elections for the sake of
his brother's political career, can be characterized as Euro-sceptics. The
Kaczynski brothers do not wish to deprive Poland of certain privileges and hand
them over to the European Committee or the European Parliament. They also want
to adjourn the introduction of the single European currency: Poland will not be
ready for the euro even in 2010, according to their opinion. They continually
emphasize the important role of the Catholic Church in the country: Lech
Kaczynski repeatedly banned gay pride parades in Warsaw, when he took the
position of the city mayor.
As for the international political course of the new Polish president, it
will most likely have a strong pro-American orientation. Lech Kaczynski stated
on numerous occasions that Poland would have to cooperate with the USA and NATO
to be able to defend its interests in relations with Russia and Germany.
Kaczynski harshly criticized Angela Merkel's suggestion to open the museum of
exiled nations in Berlin (the museum would be devoted to the ousting of Germans
from Poland and Czechoslovakia in 1945-1947). He particularly stated that Poland
could easily open the museum of Nazi atrocities in Warsaw.
Poland's relations with Russia have been seriously aggravated with a series of
violent attacks against diplomats and journalists of the two countries. The new
president of Poland will probably take efforts to add more fuel to the fire.
Lech Kaczynski has already stated that he would struggle to retrieve historical
justice and would particularly ask the Russian administration to apologize for
many years of the socialist regime in Poland. In addition Poland's engagement
with the opposition in Belarus is guarantee to annoy Moscow.
Historical legacy of Kwasniewski
It is worth reflecting on the historical legacy of Kwasniewski, who remains
president until December 23. He has played a remarkable role in recent
development in Europe and won plaudits from Washington for doing so. Bush is a
personal friend and is likely to back him for the next post he has his eye on,
that of secretary-general of the UN.
As with the Iraq war and the power struggle in Ukraine, the Polish ruling elite
is taking on the role of a US ally in Europe, helping Washington pursue its
aims. Kwasniewksi was a key figure in the Orange Revolution in Ukraine last year
and was profusely thanked by President Viktor Yushchenko.
Kwasniewski used all his powers to prevent serious resistance against the
toppling of incumbent President Viktor Yanukovich. On November 26, when 60,000
miners from the country's east made their way to Kiev to confront supporters of
the orange revolution, Kwasniewski mustered all his diplomatic weight to prevent
their arrival. After the demonstration was stopped, two of the three demands of
the marchers were met on that same evening.
Two roundtable discussions were held, where the opposition laid out its demands.
Kwasniewski played a decisive role here as well. After the second roundtable,
Yushchenko and Kwasniewski spoke together to demonstrators in front of the
Mariinski Palace. Yushchenko declared: "Without the Polish president, no
solution would have been possible, or it would have been only a modest
Yushchenko was not the only one pleased with Kwasniewski's intervention. During
a telephone conference with Kwasniewski, US President Bush said: "Aleksander,
you did so well with the Ukraine, do you have a bit of time for the Sudan?"
The United States had long been campaigning for regime change in Ukraine.
Behind this policy are vital interests of the Polish state itself. Poland can
only play a leading role in Eastern Europe and on the continent as a whole by
achieving independence from Germany and "old Europe" on one side, and
Russia on the other. Economically, Poland is closely tied to the EU: it accounts
for 75 per cent of Polish exports and 60 per cent of its imports. At the same
time, Poland is dependent on Russian gas and oil for its energy supplies.
The prospect of an alliance between Russia and Germany, for which German
Chancellor Gerhard Schröder has been campaigning for years, is viewed
critically within Poland. The Polish weekly magazine Wprost referred to the
recent agreement between Russia and Germany to build a gas pipeline through the
Baltic Sea, in a none-too-subtle reference to the Stalin-Hitler Pact of 1939, as
the "Schröder-Putin Pact." The ruling elite in Poland fears that it
will once more be ground down between these two great powers.
The Baltic Sea pipeline is to channel Russian gas directly to Germany. By 2010
it will export up to 55 billion cubic metres of gas to the EU every year. It is
feared that the construction of this pipeline will largely cut off Poland from
Russian gas, which is currently pumped into and through the country using the
Jamal pipeline. Sejm Jan Rokita, a leading member of the opposition, said:
"The pipeline through the Baltic Sea will cause injury to the common
interests of the EU and individual states."
Another problem confronting Poland's energy supplies is the oil pipeline from
the Ukrainian Black Sea port in Odessa to the Polish-Ukrainian border city of
Brody. The pipeline was built to transport oil from Kazakstan through the Black
Sea directly to Europe and therefore to bypass Russian territory. Initially, the
pipeline was planned to reach the northern Polish harbour city of Danzig, and
would have allowed Poland to overcome its dependence on Russian oil. After the
completion of the Odessa-Brody section of the pipeline, Russia increased
pressure and finally managed to use the pipeline to pump its own oil for export
in the opposite direction. With the change of government in Ukraine, Poland has
achieved an important victory in this dispute.
All-in-all Kwasniewski. with this record behind him, has proved himself a
statesman. There could be a lot worse people to succeed Kofi Annan, whose back
Washington can scarcely wait to see go. But Moscow would not be so happy at all
and might well veto the idea.
Poland's Power Twins - How will they run Poland?
As curiosities, the Kaczynski twins are peerless. As politicians, Lech and
Jaroslaw just pulled off two consecutive electoral upsets that handed them the
reins of power over the European Union's largest eastern member state.
Their surprise emergence atop Polish politics comes with many unanswered
questions. Jaroslaw Kaczynski's Law and Justice party won last month's
parliamentary elections with a mix of conservative and populist promises. Lech
Kaczynski claimed the presidency, scooping up left-wing as well as nationalist
votes. The brothers, together with the economically libertarian Civic Platform,
will lead a new conservative coalition.
The only thing that one can now say for certain is that the new Polish power
couple proved themselves to be political bruisers full of perseverance and
street smarts. Lech Kaczynski clawed his way back from a seemingly
insurmountable deficit against Civic Platform's Donald Tusk. Both men were
children of Solidarity. Mr. Tusk came from the urbane, economically liberal wing
of the old anti-communist movement while Mr. Kaczynski always felt more at home
with the socially traditional Catholic one.
To differentiate himself from his right-wing rival, Mr. Tusk launched an attack
on Platform's more daring economic ideas, among them a 15 per cent flat tax. Mr.
Kaczynski contrasted his "Poland of solidarity" with Mr. Tusk's
allegedly "liberal Poland." That won him the backing of "Polska
B," the Poles in peasant villages and small towns who often lack jobs and
opportunities. The younger, better-educated "Polska A" went with Mr.
Tusk. This split is a geographic one too. The prosperous western regions voted
for Mr. Tusk, while the backward eastern half stayed with Mr. Kaczynski, who
emphasized that his party wouldn't push as hard for cuts to welfare protections
as Civic Platform.
The tactic worked. According to exit polls, 83% of the votes for Andrzej Lepper,
a pig farmer-turned-populist who won 15 per cent in the first round, migrated to
Mr. Kaczynski in the second. But his success in courting those voters doesn't
mean that the president-elect now embraces the Lepper agenda.
What the Kaczynskis' victory does mean is that Platform won't be able to
implement a lot of its own. The parties recently started talks on forming a
coalition, which had been in the works long before the election. There is
sufficient support for reform. The Poles, for the first time since 1993, will be
without either a former communist prime minister or president.
Mr. Tusk and his allies can also only blame themselves for their flameout.
Leading for weeks, Platform's presidential candidate closed weak. As the scrappy
Mr. Kaczynski kept up the pressure, Mr. Tusk didn't fight back with conviction.
The result: A high 6 per cent of his first round voters -- enough to sway the
outcome -- switched to Mr. Kaczynski.
Economic policy will be mostly decided in the coalition talks. The Law and
Justice platform proposes tax cuts and deregulation, as well as high social
spending and a less independent central bank. Poland needs the first two and
can't afford the second. Yet it is clear that the Kaczynskis run a party with a
short bench. Platform would bring in sounder economic ideas -- as far as the
markets are concerned -- and stronger people to the table. Lech Kaczynski
emphasized repeatedly that he wants a deal with Platform. In Poland, minority
governments have historically proved weak and unpopular. Ironically, narrowly
denied both the presidency and the prime minister's jobs, Platform can now drive
a harder bargain -- or take its chances in opposition.
The Kaczynskis' real appeal was in any case their consistent calls for honest
government. Poles are fed up with the cosy insider dealing that made
millionaires out of former communist functionaries. In the 2005 Transparency
International corruption perception survey, Poland ranks dead last among the
EU's 25 states. Success in cleaning house would also help rebuild confidence in
politics. The turnout of 50.9% was the lowest ever in four post-communist
As president, Lech Kaczynski promises a tougher line toward Brussels, Moscow and
Berlin. Poland has the weight to throw around in the region. Its interest in
spreading democracy and preventing the return of a Russian-German axis is
patently in Europe's as well. Yet the Kaczynskis often sound like the old
Endecja pre-war Polish nationalists who were suspicious of the outside world. A
Poland closed in on itself would be costly.
The president-elect isn't an unknown quantity. He served in the last
Solidarity-led government as justice minister, pushing -- a bit overzealously --
to purge old communists from the government. The twins have been in the public
eye since 1962, when they starred as "lazy and mean" Jacek and Placek
in the cultish children's film, "Two Who Stole the Moon."
Now these two men who can hardly be told apart have stolen, fair and square,
power in Poland. Expectations are high. So are the more than understandable
anxieties about this unique fraternal grip on the executive and legislative
branches. All previous post-communist government have in the end fizzled and
lost power at the very next election. The Kaczynski twins are up next.
Experts call for wholesale switch to e-manufacturing
Automotive-related e-business lags behind in Poland, compared to the Western
Europe, where the automobile business is becoming ever more intertwined with
e-business, New Europe reports.
According to e-business market-research group Intelligence's sales director for
southern Poland, Jerzy Kopiec, 98 per cent of Western European
automotive-related companies do some business on the web. That's a better rate
than any industry other than IT. At a recent conference on e-business in the
automotive industry, Kopiec and other experts taking part in the conference
deplored the backwardness of Poland's automotive sector. They also underlined
the advantages of e-business. It was highlighted that many companies still lack
even a broadband internet connection or use relatively old applications in order
to run their e-businesses. Moreover, hardly four per cent of all transactions
are closed online, so the importance of so-called "online submarkets"
in Poland - such as the Internet market for cars continues to be too small to
have any significant impact. Kopiec believes that the solution to Poland's
e-business woes could be to embrace what he calls "e-manufacturing."
BM enjoys good growth thanks to mortgage loans
Bank Millennium (BM) posted a third quarter profit of 61m zloty a growth of 28%
as compared to the same period last year, Warsaw Business Journal reported.
After the first 9 months of 2005 the bank's net profit amounted to 190m zloty
and the return on capital rate increased from 11.6% to 12.8%. At the end of
September the bank's assets amounted to 22.8bn zloty that is 2.2bn zloty more
than a year ago. Almost two thirds of this increase may be attributed to
mortgage loans whose value doubled to 2.9bn zloty in the third quarter of 2005.
Within the first 9 months of this year, Millennium granted mortgage loans worth
1.6bn zloty, 4 times more than in the same period in 2004.
PKO BP aims to gain control of PKO/Credit
By the end of the year the largest Polish bank PKO BP wants to increase its
control over the PKO/Credit Suisse TFI investment fund, according to Parkiet,
Warsaw Business Journal reported.
The bank is interested in buying a 25 per cent stake from Credit Suisse Asset
Management (CSAM). At present, PKO BP and CSAM own 50 per cent of the company's
shares each. Analysts believe that such an arrangement makes it impossible to
manage the firm effectively. At the end of September this year the TFI managed
assets worth 3.9 billion zloty and had a 7.3 per cent market share, as compared
to 20 per cent in June 2003. The cure for PKO/Credit Suisse TFI's problems lies
in the changes in ownership. PKO BP's spokesperson, Marek Klucinski, confirmed
that the negotiations between PKO BP and CSAM have been going on for the past
few months. According to Parkiet's estimation, the 25 per cent stake could be
worth around 40 million zloty.
Bartimpex asks Probe of PGNiG privatisation
The public offer of Polish Oil and Gas (PGNiG) has been quite controversial,
among other reasons due to its date which was just days prior to the
parliamentary election. Numerous politicians, including the Prime Minister
designate Kazimierz Marcinkiewicz, were ready to submit requests to the
prosecutor to investigate the case. However, only one request was actually
submitted, and it came from Bartimpex, led by Aleksander Gudzowaty, Warsaw
Business Journal reported recently.
The prosecutor has until the end of the month to decide whether to begin an
official investigation. Bartimpex claims that the value of the stake in SGT
EuRoPol GAZ held by PGNiG was significantly undervalued, as 48% of shares were
valued at 542m zloty. The valuation of the company also did not include the
future benefits of increased gas extraction and the positive outlook of the
domestic gas market.
Gillette to open new production plant
The plant constructed by Gillette in the Lodz Special Economic Zone will soon
reach its production capacity, Warsaw Business Journal reported recently.
The three halls of the production facility will host Gillette, the packaging
company Sonoco, and Exel, which is responsible for logistics. "We supply
workers and know-how, while Gillette provides building and equipment. Currently
we are transferring 50 production lines from all over Europe to Lodz and this
process will be concluded in the first quarter of 2006. At present we employ 500
people, but we will eventually employ 1000," said Arkadiusz Nocun,
financial director of Sonoco. Both suppliers have Gillette as their sole client
and thus their development will be dependent on the decisions of the American
company. "Gillette will eventually employ 1100 people," said Karolina
Kalamat from Gillette.
UOKiK clears GTS Polska's takeover of Energis
GTS Polska, a telecom operator, announced that it has received the long awaited
permission from the Office for Competition and Consumer Protection (UOKiK) for
the purchase of a 97.5% stake in an alternative fixed line telephone operator
Energis, Warsaw Business Journal reported.
The 2 companies say they will consolidate in the future, but in the meantime
they will operate under the GTS Energis brand. At the moment no positive effects
of the merger are visible. According to Tomasz Galas, deputy president and
financial director at GTS Energis, the group's consolidated revenues will be
lower than the combined income from the 2 firms, because the turnover inside
each company will be eliminated. However, the group projects its revenues at the
end of 2005 will amount to 376m zloty.
Vodafone's Polish swoop on Polkomtel
Vodafone is in talks to buy out fellow shareholders in Polkomtel, one of
Poland's largest mobile phone companies, amid continuing uncertainty about the
stance of the country's new political leadership on foreign takeovers of Polish
firms, New Europe has reported.
Vodafone, which owns just under 20 percent of Polkomtel, has retained Goldman
Sachs to advise on the negotiations with TDC, the Danish telecoms company, and
it is also in talks with the other three shareholders Polish companies in the
oil, metal and power sectors to achieve a majority stake in Polkomtel. Analysts
value the firm at between two to three billion Euro. Some analysts have
cautioned about difficulties for foreign companies in Poland.
KGHM to make Telefonia Dialog more attractive
Andrzej Szczepek, deputy president of copper conglomerate KGHM, believes that
telecom Telefonia Dialog, which is owned by his company, should start to
cooperate with mobile phone operator Polkomtel, owner of the Plus GSM brand, New
"For the time being this is only a hypothetical scenario, but it is worth
analysing in the process of designing Dialog's future and updating Polkomtel's
strategy," said Szczepek. Dialog could offer convergent services similarly
jointly with Polkomtel to those offered by TPSA and Centertel. TD could also
operate as an MVNO (Mobile Virtual Network Operator), which would be using
Polkomtel's network. "Such cooperation could be imagined not only with the
participation of Dialog.