Books on Poland
% of GDP
Update No: 101 - (27/09/05)
Disillusioned Poles swing to the right
The Centre Right swept to victory in the Polish general election on September
25th, ousting a post-communist government tainted by corruption and economic
Jaroslaw Kaczynski's national conservative Law and Justice (PiS) party, and Jan
Rokita's liberal conservative Civic Platform (PO) were heading for a combined
tally of about two thirds of the vote, according to exit polls.
Latest partial results showed the two centre-right parties controlling at least
274 seats in the 460-member lower house, the biggest electoral victory for the
heirs of the pro-democracy Solidarity movement since it toppled communism in
The outgoing ruling left looks set to see its strength slashed from 217 to about
50 deputies, marking the lowest point since it was created in 1990 by reformed
communists. The ruling Democratic Left Alliance (SLD), made up of former
communists, whose reputation has been destroyed by sleaze scandals and alleged
ties to old cronies in Russia, won only 11.3 per cent. It was the party's worst
result since communist rule collapsed in 1989.
The Polish Right is in effect capitalizing on political disaster in the SLD. Its
administration had been characterized by sleaze scandals in which ministers have
been accused of soliciting multimillion-dollar bribes in return for legislation
in the energy and media sectors.
The two centre-right parties have pledged to form a government together,
although they are divided over how far to go in embracing the free market and
how much welfare Poland, with wealth levels at half the EU average, can afford.
The two parties also promised to weed out corruption that marred the four-year
rule of the Democratic Left Alliance and curb unemployment, which at 18 per cent
is the highest in the EU.
Mr Kaczynski, the next Prime Minister, was quick to declare his party the
winners. "All points to our victory . . . It turned out that those who
backed decisive change were in a large majority in this election," he said.
The two parties making up the new coalition have promised radical reforms, such
as introducing the British first-past-the-post electoral system.
Tough challenges ahead; markets react
Poland's centre-right parties face tough talks on forming a coalition amid
divisions over the scope of market reforms, which alarms the markets. The Polish
zloty fell as partial results showed the pro-business Civic Platform, the
markets' favourite, was likely to play the junior role in the government led by
conservative Law and Justice party.
The conservatives are sceptical about quick euro adoption by the European Union
newcomer and investors doubt the party would have the determination to slash
bloated public spending, the main obstacle to euro zone entry. "Law and
Justice is fearful of the public reaction to painful spending cuts and sceptical
on adopting the euro before 2010," said Tania Kotsos, currency strategist
with Royal Bank of Canada in London. She added the bank's advice on September
25th was to sell the zloty.
Law and Justice leaders sought to calm markets, vowing to start coalitions talks
quickly and insisting the next government's programme would be a compromise.
Talks with the Platform on a joint economic programme for the new coalition were
likely to start early, their economic spokesman Kazimierz Marcinkiewicz told
New Prime Minister
The new government is to be headed by Law and Justice leader Jaroslaw
Kaczynski, 56, a tough-talking former anti-communist dissident, whose triumph in
the elections follows 16 years of failed attempts at winning power.
Critics say Kaczynski, who co-leads Law and Justice with his twin brother Lech,
lacks international experience and his combative, uncompromising style could
make him ineffective at home and isolated abroad.
"Neither Jaroslaw or Lech Kaczynski nor their party are up to the
challenges they face," Poland's former president and Solidarity icon Lech
Walesa told Reuters. The brothers once worked for Walesa but who fell out with
him in the mid-1990s."The Platform would have had a better chance, because
they are more sensible people. I hope I'm wrong," he added.
In principle, the two centre-right parties have more in common than just
their Solidarity roots. Both promise to slash unemployment -- at 18 percent the
highest in the EU -- cut taxes and weed out corruption that tainted the left's
But they differ in their recipes for reviving the economy and bringing standards
of living in line with richer EU members. The Civic Platform campaigned on a
promise to accelerate free market reforms while the conservatives vowed to
protect a "social market economy", reflecting an EU-wide debate on how
much welfare the bloc can afford.
The Platform wants to introduce a flat tax of 15 percent to make the economy
more competitive, boost domestic demand and attract more foreign investment. It
also backs faster fiscal reforms to cut the budget deficit from 3.5 percent of
gross domestic product seen this year.
Law and Justice also vowed to cap the deficit and limit bureaucracy but oppose
the flat tax and want Poland to adopt a more traditional welfare model. Their
economic expert Marcinkiewicz said the flat tax proposal was not an option and
ruled out euro adoption during this term of parliament.
Another hurdle in the coalition talks is the looming presidential vote on
October 9 pitching Lech Kaczynski against the Platform's Donald Tusk. A victory
by Lech could complicate Jaroslaw's bid to be prime minister because he says
Poles would be reluctant to see two identical twins in two top jobs in the
Tougher line towards Russia
Both parties concur on policy towards Russia, and have vowed to lobby other
EU states to take a tougher line on increasing authoritarianism in the Kremlin.
The plight of ethnic Poles in the Moscow-backed dictatorship of Alexander
Lukashenka in Belarus and Russian attempts to dominate Western Europe's oil and
gas supply have been major election issues. "These elections mark the end
of the post-communist era," Mr Rokita declared.
Poland reduces debt burden to Paris Club
Poland's debt to the Paris Club of creditors has diminished by 42 per cent as
compared to the end of 2004, when it amounted to 12.3 billion Euro, the Warsaw
Business Journal reported on August 26.
The government managed to totally pay off countries such as Germany, Britain,
the United States, Switzerland, the Netherlands and Sweden. Poland still owes
the Paris Club 7.1 billion Euro, which constitutes nearly one third of the
foreign debt, and liabilities with France, Austria, Canada, Japan, Italy,
Belgium and Norway still have to be settled.
"We are still in talks with the creditors. There is a chance that the
government will manage to negotiate some debt reductions," said Pawel
Kowalewski from the Polish Finance Ministry. He did not disclose how much was
saved by paying part of the debt earlier than planned. According to unofficial
sources, the savings amount to hundreds of millions of zlotys, mainly due to
lower debt servicing costs.
Prokom raises Q2 net profit on one-offs
Poland's top listed IT firm Prokom posted higher-than-expected second-quarter
net income of 28.01m zlotys, up from a loss in the year-prior period and 9.07m
zloty profit in the previous quarter, Interfax News Agency reported recently.
Analyst enthusiasm was, however, muted, as one-offs accounted for most of the
gain. "The result is higher than expected, but is not sustainable and did
not come from Prokom's core business," CA-IB analyst Przemyslaw
Sawala-Uryasz said. "No fireworks, then."
The lion's share of the Prokom group's net income came from one-off gains at
Prokom's listed subsidiaries. Softbank got a 11.3m zloty repayment of unduly
paid taxes, while the merger of Ster-Projekt and ABG brought in more than 7m
zlotys. Prokom was also able to free up provisions set aside to cover back-tax
claims. The company's revenue inched up in the second quarter by 1.8% to 355.17m
Over the whole first half of the year, Prokom posted 37.08m zloty net profit,
versus net loss of 5.15m zloty in the prior-year period. Revenues came in at
634.5m zlotys, down 2.5% on a year earlier.
India's Lupin, Torrent bid for Polish Jelfa
Lupin Laboratories Ltd and Torrent Pharmaceuticals have put in separate bids for
the Polish government's 47.5 per cent stake in Polish drug major Jelfa
Pharmaceutical, Business Standard reported on August 18th.
The two Indian companies are among six bidders eyeing the Polish government's
stake in Jelfa, it said, adding that the bidding process is expected to be
completed in the near future. Jelfa is one of the largest pharmaceutical firms
in Poland and manufactures hormonal and cardiological drugs and multivitamin
preparations. Kamal Sharma, Lupin managing director, confirmed the company's bid
for Jelfa. 'We have submitted our expression of interest for the bid. Lupin is
open to inorganic growths via acquisitions,' Sharma told Business Standard.
Samsung strengthens Polish market presence
Korean electronics concern Samsung plans to double its share in the Polish
market by cooperating with distributors and the Orange mobile phone network,
Warsaw Business Journal reported on August 11th.
The company intends to sell 500,000 mobile phones by the end of 2005, which
would ensure average market standing.
"In the global picture the major recipients of our mobiles are operators,
as well as independent distributors. In Poland the situation is different, but
it will change over the next few years," said Daniel Opolski, sales manager
in the Polish branch of Samsung.
The Korean producer hopes that its standing will be strengthened mainly thanks
to larger sales in retail chains, which will purchase 100,000 units in 2005 and
over 250,000 next year. "In Poland there is a growing trend to sell mobiles
without subsidies. In this segment we are in the lead and because of this we
will boost market share," said Opolski. The enterprise is negotiating terms
of cooperation with major electronics retail chains and it is assessing the
possibility of using computer showrooms that sell other Samsung products to
market mobiles. Currently it controls 10 per cent of the market, but wants to
increase this share to 15 per cent.