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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: 110 - (27/07/06)

President's Twin Wins Confidence Vote to Become Premier 
On July 19th Polish lawmakers approved Jaroslaw Kaczynski as prime minister, giving him and his identical twin, President Lech Kaczynski, control of the country's two most important political offices. 
Deputies in the lower house of parliament, or Sejm, voted 240 to 205 in favour of the government. A simple majority of at least 50 per cent of all deputies present was needed to win the vote, while Kaczynski's Law & Justice party and its two coalition partners have 239 out of the 460 seats in the chamber. 
Kaczynski said during a presentation to parliament that he wants his government to be one of ''hope and optimism,'' citing rapid economic growth, strengthening exports and rising productivity as reasons for optimism. Poland's US$301 billion economy grew 5.2 per cent in the first quarter, the fastest pace in seven quarters, while Economy Minister Piotr Wozniak said in an interview earlier in July that the economy may expand by as much as 5.5 per cent this year. 
Law & Justice formed a minority government following its surprise win in last September's elections, after talks with top opposition party Citizens' Platform on forming a joint government broke down. In May it formed a coalition with two smaller parties that favour higher public spending and want to change the mandate of the central bank. 

Bank Independence 
Self Defence, another coalition party, filed a draft law in December to expand the responsibilities of the bank to include boosting economic growth, a plan the government backed. Central bank Governor Leszek Balcerowicz on July 18 criticized the project as unconstitutional and said threats to the bank's independence could destabilize the currency and impede economic growth. 
The government's long-term viability will be tested as the leaders of each party may clash over spending and policies. ''The durability of the coalition is open to debate,'' said Radoslaw Markowski, director of the institute for political science at the Warsaw School of Social Psychology, in a phone interview ahead of the vote. ''It depends on the behaviour of the junior coalition partners, and also on polls -- if Law & Justice sees it has a chance of winning 40 per cent support, it will do its best to get rid of its partners and call elections.'' 
Kaczynski reiterated his promise to continue the government's policy of keeping the budget deficit at 30 billion zloty (US$9.3 billion) next year, while economists have doubted the plausibility of this pledge as cabinet partners including the interior, health, agriculture and education ministers have demanded additional expenditures. 

Criticism 
Platform Chairman Donald Tusk criticized Kaczynski's speech, saying it had offered no concrete solutions to Poland's problems such as unemployment, which at 16.5 per cent is the EU's highest. 
''I had difficulty in finding anything specific in the prime minister's speech,'' said Platform Chairman Donald Tusk. ``The prime minister didn't talk at all about the fight with unemployment,'' he said, adding that a more ''liberal'' economic policy was needed in Poland. 
According to Tusk, Kaczynski also devoted too little time to foreign policy in his presentation, describing as ''odd'' the prime minister's decision in his hour long speech ``to only devote 60 seconds'' to the topic of the EU. 
President Kaczynski attracted criticism earlier this month, including a letter of protest signed by all eight of Poland's post-communist foreign ministers, after he called off a meeting with German Chancellor Angela Merkel and French President Jacques Chirac at short notice. Political commentators speculated Kaczynski made the cancellation after he took offence at a very insulting satirical article in a German newspaper that described him as a potato.

Ambassador takes umbrage
Poland is "mishandling" relations with Germany, Warsaw's ambassador to Berlin said on July 18, in a rare breach of diplomatic protocol that reflects underlying tensions within the administration of President Lech Kaczynski.
Speaking in a Financial Times interview in Berlin, ambassador Andrzej Byrt said Warsaw's reaction to a controversial satirical article in a German newspaper in which the Polish president was compared to a potato had been "too emotional".
Byrtt as a professional diplomat is concerned that the president is playing politics by refusing to meet Merkel, performing to the gallery of anti-German xenophobes, the core of his constituency.

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For all its political difficulties with EU leaders, Poland is doing very well out of its EU membership. It is going to do even better in the future, according to a Financial Times report of July 14:-

Poland to replace Spain as the largest recipient of EU funds
Poland is to receive almost 60bn Euro, (much of which emanates in Germany), of regional support over the next seven years, overtaking Spain as by far the biggest recipient of "federal transfers" from the European Union budget.
Danuta Hubner, EU regional policy commissioner, set out where money from the EU's 308bn Euro (US$392bn, £213bn) structural fund programme will go, and how she hopes it will be spent.
Ms Hubner wants Europe's poorest regions to focus on raising competitiveness, with less emphasis on prestigious political projects such as new roads and railways and more on laboratories and high-tech clusters.
The breakdown of the programme shows how money is being targeted on 10 new EU members from the former communist bloc: the Czech Republic will get 23.6bn Euro, Hungary 22.4bn Euro and Romania, expected to join the union next year, 17.3bn Euro.
Among older member states Spain will receive 31bn Euro, Germany 23bn Euro - mainly in the east of the country - and France 12bn Euro.
Ms Hubner, a Pole, recently published her guidelines on how the money should be spent, focusing on the EU's economic priorities of raising competitiveness, fostering innovation and creating hubs. Her figures reflect the deal struck by EU leaders at a summit last December.
A total of 62 per cent of all money spent should be "earmarked" for projects directly linked with the EU priorities of creating jobs and growth, the first time such an approach has been used.
Ms Hubner says this marks a shift to spending priorities in the 2000-06 regional programme, where 44 per cent of structural funds were spent on infrastructure projects, including ambitious road and rail schemes in Spain.
That package, which expires this year, was agreed before the EU's Lisbon summit of March 2000 which rather recklessly vowed to make the Union the world's most competitive, knowledge-based economy.
Many new members have studied how countries such as Ireland and Finland turned largely agrarian economies into high-tech centres, by investing in education, skills and clusters.
But Ms Hubner points out that transport infrastructure projects still play a key role, highlighting the chronic traffic problems around Dublin, the Irish capital.
"This is not a one-size-fits-all approach," she said. "These are policies which must be driven from the bottom up. There will be some poor countries where investors will simply not go unless there is a decent road."
Nevertheless, the EU's regional policy over the last decades is littered with "vanity" political projects with questionable value, a problem particularly visible in parts of the Italian south.
New member states are not officially required to earmark money for core economic projects but she expects them to set high targets.
Last December's EU summit also allowed new members to use European funds to renovate decrepit housing stock, something which Ms Hubner opposed on the grounds that the money should be used to create sustainable economic growth.
She is also pushing for more projects to be funded jointly by the European Investment Bank, using financial instruments and venture capital to stimulate small and medium-sized companies.
The EU budget, including regional policy, comes up for review in 2008-09 but Ms Hubner will resist proposals from some - such as British chancellor of the exchequer Gordon Brown - to axe EU regional programmes in rich countries in western Europe.
But she admits that Brussels and national politicians need to explain better why money spent in poor regions, particularly eastern Europe, will bring benefits for everyone by opening up new markets. "This is not a policy for the poor," she says.

New leader vows to guard Polish 'morals' 
By Judy Dempsey International Herald Tribune
Poland Prime Minister Jaroslaw Kaczynski, in his inaugural address, set Poland on a collision course with the European Union on Wednesday by declaring that he would do everything to protect the country's "culture and morals" from Brussels.
In a defiant speech to legislators in Warsaw before a vote of confidence, Kaczynski said that Poland wanted to belong to the EU, but added: "We differ. There is no reason to hide this."
The twin brother of President Lech Kaczynski, the new prime minister gave a broad overview of domestic and foreign policy during his hour-long speech, making his battle against corruption and organized crime the cornerstone of his domestic agenda.
He pledged to reduce Poland's dependence on Russian energy by buying gas from Norway and possibly building nuclear power stations. And he promised the United States, one of Poland's closest allies, that Warsaw would remain a loyal partner.
Although he did not refer directly to the future status of Polish troops in Iraq, which the former center-left government had vowed to withdraw, Kaczynski said: "There can be no desertion. Poland is not a nation of deserters."
But it was the EU, which Poland struggled so hard to join in 2004, believing it would finally give Warsaw an opportunity to exert its influence in a united Europe, that bore the brunt of Kaczysnki's foreign policy remarks.
"We want to be in the European Union - I want very strongly to emphasize this," Kaczynski said. However, he added, "we are also going to work so that Poland can retain its full sovereignty in culture and morals."
He won applause when he vowed to defend traditional marriage, defining it as "a union between a man and a woman" - a jab at the EU countries that have legalized gay marriage. Poland has also crossed swords with other EU countries on the issues of abortion and women's rights.
"We won't let ourselves say that black is white," said Kaczynski, who was sworn in on Friday - half a year after his brother took office as president - making the twins the first in the world to hold a nation's two top political jobs. "We are going to protect this foundation of social life."
The Kaczynskis' conservative Law and Justice Party, which they founded in 2000, relies on the support of the ultraconservative Roman Catholic League of Polish Families, which is widely seen as anti-Semitic and anti-homosexual, and the populist, Eurosceptic Polish Self-Defence party.
But although those parties have roots in Poland's rural heartland, the prime minister's speech did not go down well with many in Maczkow, a rundown village in western Poland, where the communist cooperative farm was dismantled in the early 1990s, leaving people without work.
"This government should be fighting to keep the young people here by creating jobs," said Edwardj Pioro, 66, who owns a small construction business with a German partner. His recipe: Introduce a transparent taxation system and phase out bureaucracy to encourage investment. "But what has Kaczynski's party done about that since it was elected last October? Nothing."
Poland's unemployment rate stands at 18 percent. Here in Maczkow, where the main street needs repaving, talk about protecting the country's culture and morals has little relevance, local people said.
The Kaczynski brothers promised back in October to build houses and roads but also to have Poland play a greater role in Europe.
But intellectuals like Krzysztof Wojciechowski, director of the Collegium Polonicum, a Polish-German university perched just above the river Oder, which divides Poland from Germany, say the twins have spent too much time on power struggles within the Law and Justice party and not enough on improving Poland's relations with the EU.
One of the best ways for Poland to influence the EU, Wojciechowski says, would be to establish a strong relationship with Germany, the largest of the 25 member states but historically a foe of Poland.
Over the decades, and particularly since the collapse of the Berlin Wall in November 1989, the countries have tried to improve ties. But a recent satirical article in the leftist German newspaper Taz, which upset the Kaczynskis by describing them as "Polish new potatoes," exposed the fragility of the relationship.
"The Kaczynski twins completely overreacted," Wojciechowski said. "You must understand that this administration knows very little about Germany or foreign policy, and until now the twins have rarely travelled outside Poland."
Both he and Pioro remarked on the absence of seasoned foreign policy experts under the Kaczynskis.
Several top Foreign Ministry officials have resigned upon being demoted or determining that they could not work with the new administration, among them the former foreign minister, Stefan Meller, and the director of the European Integration department, Pawel Swieboda.
"Instead of implementing policy, they spend their time fighting inside the party," Wojciechowski said.
Outside in the blistering noonday heat, some students were making final arrangements to work in London during the summer vacation. They had no kind words for the Kaczynski twins.
"Stuffing the cultural values and morality stuff down your throat is stupid," said Jadwiga Cywinska, 20. "I thought that was what the Communists used to do."

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ENERGY

Revamped coal sector is bedrock for energy security 


It was synonymous with the sooty, grey gloom of communist Poland, but 17 years after the regime's collapse, the coal industry is revitalised and in the pink with capitalist vigour. 
Poland's estimated 150-year reserves of comparatively clean - burning, hard, black coal set a solid foundation for energy security for the European Union newcomer amid anxiety over the reliability of energy supplies from Russia, energy experts point out. A massive cash injection of more than US$ one billion into Poland's once-bloated coal sector has played a crucial role in streamlining and priming it for profit. "We've sponsored the government's restructuring drive aimed at making the coal sector work on market principles," World Bank official Roman Palac told Deutsche Presse-Agentur (dpa). 
Poland, in fact, is a European leader in modernisation and restructuring that are key to the future of the coal industry, which produces 40.1 per cent of the world's electricity, according to the World Coal Institute's 2003 figures. 
Since 1988, the World Bank-sponsored "Coal Mine Closure Project" has loaned the Polish government a total of US$700 million, including US$600 million for "social mitigation" - mainly cash pay-offs for redundant miners - while the remaining funds were used for mine closures. 
In addition, the Polish government has pumped about US$600 million into restructuring programmes to stop it draining public coffers. 
At present, the right-wing Law and Justice (PiS) government of Prime Minister, Kazimierz Marcinkiewicz, is formulating plans for further reform, aimed at defining coal's role in Poland's long-term energy strategy, a treasury ministry spokesperson confirmed. Under communism, the country's nearly-half-million coal workers were regarded as the heroic, creme de la creme of the proletarian class, and thus received generous benefits. 
However, since the 1989 collapse of communism, some 50 mines have been shut, leaving around 120,000 miners and surface employees working in 30 mines. Some 20,000 more jobs need to be cut in order to meet profit targets. 
Professor Andrzej Barczak of the Katowice Economic Academy says it is "vital" to complete reforms and build up market mechanisms. "We can't leave this road," he says. "Now the sector once seen as excess ballast is looking like a really solid foundation for Poland's energy strategy." "Now we're speaking of coal as a fuel of the future, not as a dirty, polluting old ball and chain," agrees Zbigniew Madej, spokesman for Kompania Weglowa. With some 70,000 workers operating 17 mines and an annual output of more than 52 million tonnes, it is the European Union's largest coal conglomerate. Based in southern Poland's Katowice coal basin, Kompania is fully owned by the Polish State Treasury and has been turning a profit in recent years. 
With a quarter of its production destined for market in Germany, Scandinavia and Austria and a booming coal market, it earned nearly US$140 million profit in 2004. This year's profit forecast has been scaled back to some US$30 million, but Madej is convinced the future is bright. 
Active mines in Poland have a 60-year or five-billion-tonne supply of black coal - but Poland, as Europe's leading producer of what the Poles call "black gold" has an estimated total reserve of 150 years when untapped veins are counted, coal industry experts say. "Poland can be the reservoir for the European Union's energy security," Madej said. "It's quite obvious we are a much more stable country than the majority of oil- producing states, not to mention there's also only 40-60 year's worth of crude oils left world-wide." 
Estimates of the world's remaining accessible crude oil range from one trillion barrels according to OPEC to two trillion barrels by international oil giants like ExxonMobil, but world experts expect oil production to peak - or level off, then drop - by the mid-century at the latest due to physical limitations on extraction. With Poland relying on coal-fired plants for about 91 percent of its electricity, the domestic supply is more than secure for the next century. As more coal-fired generators are fitted with modern carbon emission controls, coal-generated electricity also poses less of an environmental threat than potentially lethal nuclear power generators, its advocates say. 
Kompania Weglowa is also optimistic that plans in Germany to build eight new coal-fired generators by 2011 could also provide new markets for cleaner-burning Polish black coal, Madej adds. 
The EU-sponsored "Clean Technology Clusters" project in Katowice is just beginning to study new technologies aimed at tapping into the country's abundant veins of black gold to produce natural gas or petroleum in the not so distant future when crude oil will be a thing of the past.

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FOREIGN INVESTMENT

Record foreign investment in Q1 of 2006 

Poland saw a record US$3.3 billion in foreign direct investment (FDI) in the first quarter of 2006, a top Warsaw official said. Adam Zolnowski, chief executive of the Polish Information and Foreign Investment Agency (PAIiZ) said it could signal US$10 billion worth of FDI inflow by the year's end. 
Last year Poland saw some US$7.7 billion in FDI.
Investments by global players in the electronics, automotive, IT, service centre and accounting sectors were most common, Deutsche-Presse-Agentur (dpa) reported. 
With PAIiZ currently facilitating 80 investment projects from around the globe, the revved-up investment trend is expected to continue. Companies from the United States, Japan and the European Union continue to be the most eager investors in Poland. 
Poland ranks as the fifth most attractive investment destination according to the fresh "Attractiveness Survey" report by global consultants Ernst & Young. 
It is ranked behind global leaders the United States, China, Germany and India and stands ahead of Japan and EU members Britain, the Czech Republic, France and Spain.

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NUCLEAR ENERGY

Interest in Baltic nuclear option 

The decision of a Polish Parliament speaker to visit Lithuania's only nuclear power station on June 14th signals a new stage in the two countries' energy relationship, Deutsche Presse-Agentur (dpa) reported. 
"This is the wind of change. Poland and Lithuania recently failed to reach agreement on building an energy bridge, but Poland has now stepped into the Lithuanian energy market," Baltic Sea region analyst, Mindaugas Jurkynas, told dpa. The Lithuanian town of Ignalina is home to a Soviet-era nuclear power plant, due for closure in 2009. The national energy monopolies of Latvia, Lithuania and Estonia are currently discussing the possibility of building a replacement at the same site. Marek Jurek, speaker of the Polish Parliament, said his country was interested in cooperating in the project. 
He was expected to visit Ignalina on June 14th. "Discussions on it are under way. The Polish power grids are interested and willing to start cooperation with Ignalina in this field," Jurek said, according to the Baltic News Service BNS. 
Ignalina, which is the only nuclear reactor in the Baltic States, supplies the three countries with much of their electricity. Its closure was one condition of Lithuania's EU accession. Future energy needs were to be met by power stations run on Russian natural gas. 
However, since the "gas war" between Ukraine and Russia nuclear power has returned to the agenda. "A nuclear plant would grant the shareholders guaranteed electricity, increase energy independence and yield potential exports," Jurkynas explained. 
Poland has also expressed concern over its energy dependence. "I think that Poland and Lithuania face a certain danger, that they can be subjected to an attempt at gaining political domination over them by means of energy supplies," Polish President Lech Kaczynski said in a speech to the Lithuanian Parliament in March. 
"We have not yet received any official documents confirming Poland's interest," said Orijana Jakimauskiene, spokeswoman for the Lithuanian Economics Ministry, which handles energy issues.
If Jurek's statement receives governmental confirmation, it will signal a further strengthening of the growing strategic energy alliance between Lithuania and Poland. The Lithuanian state recently permitted Poland's largest oil refiner PKN Orlen to buy a controlling stake in Lithuania's only oil refinery, Mazeikiu Nafta. Poland's status as a fellow-member of NATO and the EU is thought to have been one factor in the decision. "In terms of energy resources, both countries are looking for alternatives to Russia," Jurkynas said. "The power station and an energy bridge would be a long-term investment which would guarantee energy for the Polish market, too." 
Lithuania was occupied by the Soviet Union during the period 1944-1991, while Poland was ruled by a Communist government loyal to Moscow during the period 1945-1990. Both countries have now joined the EU and NATO and are often critical of Russia's stance in Eastern Europe.

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