Books on Poland
% of GDP
Update No: 098 - (01/07/05)
Government reconfirmed in office
Prime Minister Marek Belka has finally won the Parliamentary vote of confidence
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-Defense
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
The EU baptism
Poland has had a generally successful initiation into the EU, a year after
joining. Polish Euroscepticism, which grew immediately before and after it
joined in May, 2004, is abating. This is primarily due to the generous CAP
subsidies to its farmers, which have seen incomes rise by 50%.
Poland is the least hostile of EU member states to the continuation of the
British rebate in the EU. The Poles remember 1939, when Britain in March gave
them a guarantee of their independence, then only twenty years old, and in
September went to war over the German invasion of their country. Germany is an
ally; the UK is a friend.
Polish voters warm to European treaty
But the Poles are also warming to the EU as a whole. Although the European
constitutional treaty has 448 sections, only two issues have provoked much
controversy in Poland, where as elsewhere, in Europe, very few have bothered to
plough through the text.
The first is the preamble, which talks of "drawing inspiration from the
cultural, religious and humanist inheritance of Europe," but does not
mention Europe's Christian heritage, as many Poles had hoped.
Right-wing parties have mainly exploited that issue. While most Poles would have
preferred to have seen Christianity enshrined in the constitution, few are
expected to reject the constitution this autumn when a referendum is perhaps
expected to be held. Preliminary opinion polls show that more than two-thirds of
voters support the treaty.
The second issue regards Poland's voting powers within the European Council, the
main decision-making body of the EU. While the constitution was being drawn up,
one of the most contentious aspects was how member states' voting weight would
be altered from a system agreed at a summit in Nice in 2000.
Under the Nice treaty, which will remain in force if the constitution is not
ratified, mid-sized Poland and Spain get 27 votes each in the council, while
Germany, with a population twice as large, gets 29 votes. Under the
constitution, a council vote is passed by a qualified majority of "at least
55% of the members of the council, comprising at least 15 of them, comprising at
least 65% of the population of the Union."
Although Poland has similar voting weight under both systems - just over 8% -
the fear was that the new system would give too much power to large countries,
The constitutional treaty's vote weighting initially drew protests, although
last-minute amendments won by the Polish government eased worries over a loss of
Since the treaty signing in December 2003, however, the issue has become much
less contentious. Polish sceptics, too, have largely been won over by the
economic boom sparked by EU membership in May 2004.
Many Poles also have realised that raw voting power is less important than they
had thought in a European Union where consensus-building is often key.
"Voting power doesn't really figure any more," said Roza Thun,
president of Poland's Robert Shuman Foundation, who has been touring the country
to explain the constitution. "People are still a little upset, but when it
is explained that France and Germany won't control everything they change their
There is the UK, and its Central European friends, after all.
Ukrainians purchase FSO plant
Ukrainian auto giant ZAZ concluded negotiations with Poland's State Treasury on
May 11th for the purchase of the treasury-controlled stake of the beleaguered
Warsaw-based FSO car plant, a Polish Treasury statement said, New Europe
The Polish government commands a majority of shares in the FSO plant after
troubled South Korean carmaker Daewoo handed over control of an 80% stake in the
Warsaw car plant. "The investor maintains its readiness to purchase FSO SA
shares belonging to the state treasury and to ensure the further development of
the plant," read part of the statement. No details of the purchase price or
terms were made public.
LOT relaunches domestic flights
Relaunching of local flights by Polish flagship carrier LOT is a great help for
the local government and a relief to the people of the country, the Warsaw
Business Journal reported recently.
Businessmen were affected because of the pathetic and day-by-day deteriorating
condition of the railways and delay in the construction work of the highway. The
flight route will be from Warsaw to Zielona Gora, Bydgoszcz. On the return route
LOT will not use its relatively large planes. LOT finalised a deal for 19-seats
jet stream 13 number planes with a private company whose name was not revealed.
LOT's Director of Connections and Timetable Management, Marek Serafin, said the
private carrier will be operating the flights and passengers will buy only
PGNiG cancels offer for 3.4bcm in gas supply
Poland's gas monopolist PGNiG cancelled a tender for the supply of 3.4bn cubic
metres of natural gas between July 1st, 2005 and December 31st, 2006, as it
received no offer from potential suppliers, PGNiG said in a statement. PGNiG
plans to place the order for natural gas directly with potential suppliers,
Interfax News Agency reported.
"In order to maintain clarity in our actions connected to gas import,
PGNiG's management board has decided to begin another procedure to obtain 3.4bn
cubic metres of natural gas between July 1st, 2005 and December 31st, 2006 -
negotiations without announcing a tender …instead of press announcements the
company will send direct invitations to potential suppliers and, in order to
secure competitiveness, the invitations will be sent to at least 4
companies," read the statement.
PGNiG will establish a tender commission to deal with the procedure.
PGNiG extracts 4.32bn cubic metres of natural gas from domestic resources and
imports 5.75bn cubic metres from Russia, 0.48bn cubic metres from Norway and
0.38bn cubic metres from Germany. As part of a medium-term contract PGNiG also
buys gas from Uzbekistan, Turkmenistan and Kazakstan.
In 2004 PGNiG purchased 2.67bn of Central-Asian natural gas against 1bn cubic
metres in 2003. PGNiG bought 1bn cubic metres less natural gas from Russia in
2004 against 2003 but Russia still accounts for 41% of PGNiG's gas supplies. A
full 32% of PGNiG's gas is produced domestically, while 20% of supplies comes
from Central Asian countries. Norway and Germany account for 4% and 3%,
respectively, of gas supplies to PGNiG.
PKN Orlen's German arm targets network expansion
The German subsidiary of Polish fuel giant PKN Orlen is in talks to acquire
Beckmann Mineraloel-handel, which owns 115 gas stations in Germany, to add to
its current chain in Germany, Jean-Jacques Verschueren CEO of Orlen Deutschland,
said in an interview with the German newspaper, Die Welt, recently, Interfax
News Agency reported.
"We have made an offer. However, a final decision will not be made until
sometime over the summer. This is not a simple decision for us to make at
present and I hope that we can finalise the matter over the next two
months," Verschueren said. PKN Orlen officials were unavailable for
comment, but PKN Orlen's CEO recently set to decide the fate of its loss-making
German operations at year-end. At the release of its first quarter 2005 results
in mid-May, Orlen officials did not deny suggestions that it could actually sell
its German stations. Currently PKN Orlen owned 485 gas stations in Germany that
booked a loss during the first quarter of 2005, primarily due to strong
competition on the German market, but Verschueren is confident the business is
"Now our margins are once again comfortable. I know that we can recover the
losses from the beginning of the year in the third and fourth quarter,"
Verschueren said. "Personally I do not believe that a decision to withdraw
(from the German market) will be made," Verschueren told Die Welt. But the
pressure is on as state-controlled PKN Orlen looks to complete acquisitions in
the Czech Republic and when to cut its losses in Germany as it prepares for
Polish parliamentary elections. "In Germany a price war is being fought and
profit margins have fallen 50% over the past year. By the end of 2005 we must
decide whether to withdraw from the German market" Orlen's CEO Igor
Chalupec said recently. Verschueren also said that PKN Orlen's plans for the
German operations are still uncertain and could be drastically altered by the
outcome of Poland's parliamentary elections later this year. "After the
change of government in Poland PKN will have a completely new management and a
new supervisory board. Therefore it is normal that the new executive board will
question the old strategy," Verschueren said. Orlen is now looking at
retail acquisitions in the Czech Republic, after completing the purchase of
62.9% of Czech oil company, Unipetrol.
At the same time, PKN is looking at 70 Aral gas stations currently owned by BP.
Orlen, which two years ago purchased its German Aral stations from BP, will now
have to beat Austrian fuel concern OMV which also wants the Aral network
FOOD & DRINK
Heineken Polish unit posts 25% drop in Q1 net profit
The consolidated net profit the Heineken group's Zywiec, a leader on the Polish
beer market, were down nearly 25%, to 32.95m zlotys, in the first quarter of
2005 despite a slight 4.25% yearly increase in sales revenues to 548.33m zlotys,
the company said in a report recently, Intertfax News agency reported.
The disappointing results have not stopped the brewer's aspiration of becoming
the Polish beer-market's leader (it is currently no.2 after SAB Miller's
Kompania Piwowarska) which it hopes to achieve through a major restructuring
programme. In the same period of 2004 Zywiec recorded a 43.9m zloty net profit
on 525.97m zloty revenues. Despite the worsening in financial results Zywiec
still intends to become the Polish beer-market leader and to improve results,
adding that it is still focusing on building brands, improving distribution and
"The process of restructuring the Zywiec capital group into a
client-focused company with strong brands and a good distribution network is
underway. The management board is convinced that the completion of this process
will secure the capital group the first position on the market. Restructuring
the brand portfolio and the financial structure will allow the group to reach a
new stage where the focus is on result improvement and the construction of a
strong organisation," the report said.
Despite the bad quarterly results the brewer remains optimistic about the
future. "Considering the economic conditions, the Zywiec management board
is optimistic about the perspective of recording profits in the future,"
the company stated.
Zywiec said in April that it expects to grow along with the market in 2005 and
increase market share. Zywiec's market share is estimated at 36%. Zywiec CEO,
Nico Nusmeier said at the time that, although it's hard to predict beer sales
before the peak time in the summer months, the company has returned to the
expected level of 3-3.5% growth after poor results in the second and third
quarters of 2004.
MINERALS & METALS
KGMH ups Q1 net profit to 523m zlotys
Poland's KGHM, one of the world's largest copper producers, posted a net profit
of 523m zlotys in the first quarter of 2005, up 27% from a year ago, above
analysts' expectations, Interfax News Agency reported recently.
Analysts had underestimated the positive impact of increased revenues on the
company's net profits.
According to Janusz Siatkowski at RZB Brokerage, KGHM stopped hedging copper
prices in the last quarter of 2004 so that this would not have the same negative
impact on its results as before. He also assumed that operating costs would be
7-10% higher than in first quarter 2004 due to larger material and staff costs.
"Taking that into account we expected KGHM first quarter EBITDA (earnings
before interest tax depreciation and amortisation) to be lower by around 12% and
net profit by around 20% in comparison to the same period last year," he
Some analysts had expected revenues to remain flat. "We expected that
revenues would remain at a level of 1.55bn zlotys in first quarter 2004,"
Dom Inwestycyjny BRE Bank analysts said in a comment. Other analysts had
expected revenues to grow, but not by the reported 7%.
"We expected KGHM to show revenues higher by around 3.2% than in first
quarter of 2004 as increasing copper and silver prices positively influence its
sales. However, the strengthening zloty was driving revenues in the opposite
direction," Siatkowski was quoted as saying.
Netia wins tender for UMTS frequency but loses GSM bid
Netia, the top alternative telecoms group in Poland, succeeded in clinching the
tender for an extra UMTS frequency after submitting an offer worth 344m zlotys
over the minimum price of 1.05m zlotys and beating two other candidates, Qiana
Investments and PTK Centertel, the country's telecoms-market watchdog, URTiP
announced recently, Interfax News Agency reported.
Only 5 bidders made offers in the tender for the UMTS frequencies - the 3
existing mobile operators PTC, Centertel and Polkomtel (which already own UMTS
frequencies), along with Netia and Qiana Investments (part of Hong Kong's
Hutchinson group). In an additional tender for an extra GSM 1800 frequency there
were no winners as the 2 shortlisted bidders, Netia and PTK Centertel, failed to
collect the required qualification points. The result is a strange one as Netia
is left facing the question if a mobile-telephony service is commercially viable
on the basis of only UMTS without GSM.
The 3 Polish mobile telecommunications operators already have UMTS frequencies
but, by winning the UMTS tender a fourth Poland-based mobile operator may have
been created in Netia, even though analysts had commented that this was unlikely
as the tender criteria did not favour smaller players nor is the market itself
attractive enough for additional global players.
Poland currently has 3 mobile operators, indirectly controlled by large global
operators. They have invested heavily in infrastructure and brand-building,
making entry for any new operator an expensive affair. Thus, even though further
growth is expected on Poland's mobile market, it will not be lucrative enough
for a new entrant given the tender's restrictions on key-operated elements which
limit potential revenue and increase set-up costs dramatically.
A few of the world's largest mobile operators - with their deep pockets and
established brands - are already indirectly present on the Polish market, making
market entry even more difficult, Interfax said.
France Telecom, owner of Orange, currently controls Polish telecoms giant TPSA
and its mobile wing Centertel, whose brand name is to be changed to Orange.
The world's largest mobile operator, Vodafone, holds a stake in Poland's number
three, Polkomtel, and has expressed an interest in increasing its involvement.
Deutsche Telekom is currently fighting for control of Poland's leader, PTC. The
3 mobile operators which purchased UMTS licences in 2002 have to have 20%
coverage in Poland with UMTS services by the end of 2007.
Hutchison bids for UMTS licence
Hutchison Whampoa Ltd said it would make a bid for third-generation Universal
Mobile Telecommunication System (UMTS) spectrum in Poland, Polish radio reported
A Hutchison spokeswoman confirmed on May 27th that Qiana Investment, one of five
bidders for the extra UMYS spectrum, is bidding on behalf of the conglomerate.
Hutchison said Poland offers synergies with the company's existing 3G businesses
in Europe. It said among the attractions of the Polish market are potential
demand for value-added services, such as data usage, and strong economic growth.
Other bidders for the spectrum include incumbent operators Polska Telefonia
Cyfrowa (PTC.YY), Polkomtel (PKT.YY) and Centertel, a mobile unit of
Telekomunikaja Polska SA (TPS.WA).