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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: 108 - (30/05/06)

Populists joining coalition in Poland
The governing party in Poland on May 5th announced a coalition agreement with a small populist party that would bring one of the country's leading anti-European Union activists into the government as deputy prime minister. The largest parliamentary party, Law and Justice, made the agreement with a group called Self-Defence, whose charismatic and, many say, demagogic, leader, Andrzej Lepper, has been charged with several criminal offences, including assault, blocking roads and dumping grain on railroad tracks in the course of robust anti-government demonstrations. 
Many people in Poland figured that the party was making a last-ditch effort to construct a governing majority, but the move risks a strong backlash, too. Hours after the agreement was announced, the foreign minister, Stefan Meller, said he was resigning; he had earlier expressed an unwillingness to serve with Lepper in the government. This is a resignation that, as we shall see, could have far-reaching consequences. 
The agreement, the product of weeks of intense negotiations, still does not give the two parties a majority in Parliament. Government spokesmen said that a new government would not be announced immediately, presumably after the coalition has persuaded a group of independent legislators to give their support. 
The agreement was the latest effort of Law and Justice to form a working governing majority since close elections late last year made it the biggest party in Parliament. Initially, the expectation in Poland was that Law and Justice would form a coalition with the second- biggest party in Poland, the pro-business Civic Platform. But ideological differences and personality clashes made that impossible. 
Law and Justice, which has promised a moral overhaul of what it portrays as a political system still deeply influenced by Poland's long Communist past, instead entered into a "stability pact" with Poland's two leading populist parties. That arrangement soon proved unworkable, in part because the leaders of the smaller parties demanded ministerial portfolios in exchange for their support of the coalition. 
In the new agreement, Law and Justice has agreed to give Self-Defence three ministerial portfolios, with Lepper becoming both deputy prime minister and minister of agriculture. 
The cover of a widely read Polish magazine, Ozon, shows a picture of Lepper partly obscured by the Polish eagle and the caption, "Enough. Lepper in the Government Is a Shame." 
Lepper, a pig farmer during Communist times, has built his political career largely on the dissatisfactions of small farmers and others who have suffered from Poland's conversion to a market economy. He vigorously opposed Poland's entry into the European Union and has characterized the privatisation of Poland's state-owned industries as a corrupt process by which large segments of Poland's economy have been sold to foreigners for "peanuts." 
Lepper was ordered by a Polish court to apologize to the newspaper Gazeta Wyborcza for falsely accusing it, in a book Lepper published a couple of years ago, of tax evasion. 
Lepper has also campaigned to have Leszek Balcerowicz, the economics professor who is credited by most outside experts for having guided Poland to a free economy, fired from his job as chairman of the National Bank of Poland. "He has to account for the damage he has done to Poland by his reforms and action," Lepper said in an interview with the magazine Poland Monthly. 
The prospect that Lepper would take ranking jobs in the government is "like making someone a cardinal who already has five illegitimate children," a former foreign minister, Andrzej Olechowski, was quoted as saying in the English-language Warsaw Voice. 
But Law and Justice officials have defended the agreement with Self-Defence on the grounds that participation in government will induce the party to moderate its stance. 
"We are fully aware of the reputation of Lepper in Poland and abroad," Konrad Ciesiolkiewicz, the government spokesman, said in an interview. "But at the same time, we know the experience different countries have had with populist parties that entered governments, and the experience shows that when a populist party entered the government, it usually changed its positions

Foreign policy the territory for Polish leaders' battles
Poland's conservative president, Lech Kaczynski, a visceral right-winger and anti-European, exploited the opportunity offered by the resignation of Meller to open a battle to wrest control of foreign policy from his prime minister. On May 10th he appointed one of his closest advisers as foreign minister, a move that could have far-reaching consequences for the country's ambitions in the European Union. 
In naming Anna Fotyga, who belongs to the president's inner circle, but has no diplomatic experience, Kaczynski is hoping to wrest influence from Prime Minister Kazimierz Marcinkiewicz, who has struggled to maintain a pro- European policy. "We can now expect a struggle between Kaczynski and Marcinkiewicz over the future shape of foreign policy," said Sebastien Plociennik, an expert on Polish-German relations at Wroclaw University, in southern Poland. "Marcinkiewicz wants continuity in foreign policy, but Kaczynski wants to use foreign policy to improve his image at home just at a time when Poland should be working hard to mend its relations with the EU," Plociennik said. 
Kaczynski's popularity has plunged in recent weeks as he pursues increasingly nationalist policies after bringing two far-right parties into his fragile coalition in order to stay in power. The further right you go in Poland , the further right you become.
Marcinkiewicz, the conservative but less stridently nationalist prime minister, has started a big push to mend relations with Berlin, which have been sorely strained by the growing anti- German and anti-European Union rhetoric of some members of his coalition. 
German officials were shocked by remarks in April by Poland's defence minister, Radek Sikorski, who compared the North Sea Gas Pipeline - a joint German-Russian project that will allow Russia to deliver gas directly to Western Europe - to the 1939 Hitler- Stalin pact in which both countries carved out spheres of influence in Eastern Europe. 
"I am very angry and very disappointed over those comments," Ruprecht Polenz, chairman of the influential foreign affairs committee of the Bundestag, the German Parliament, said in an interview on May 10th. He well might be. It is an absurd comparison. The 1939 pact carved up and re-allocated countries. The 2006 deal is about gas supply.
In an effort to soothe ruffled ties, Marcinkiewicz, whose government, following a recent reshuffle, now includes the Self-Defence Party, a Euroskeptic group, led by Andrzej Lepper and the Catholic nationalist League of Polish families led by Roman Giertych, held talks with Chancellor Angela Merkel in Berlin. In a major foreign policy speech there, Marcinkiewicz set out what Poland seeks from the EU in the coming years. 
Apart from a common energy policy to weaken Europe's dependence on Russia, Marcinkiewicz said he endorsed EU membership for Poland's eastern neighbours, Ukraine and Belarus. "The enlargement of the EU would demonstrate to other countries that we are not an exclusive club," Marcinkiewicz said. "We say, 'Thank you that we were allowed to join the EU,' but at the same time, we say please, 'We are asking for more. We should open the EU further.'" 
But German politicians and analysts said that Poland's governing Law and Justice Party, which has been in power since winning the presidential and parliamentary elections last October, has so far been focused entirely on promoting Poland's own interests within the EU. 
"This Polish government has taken no new initiatives since taking power," said Kai-Olaf Lang, East European expert at the German Institute for International and Security Affairs in Berlin. "It has made a lot of mistakes with regard to its relations with Germany and the EU despite the fact that Chancellor Merkel helped Poland during last December's EU budget negotiations. The next few months could be very rocky with regard to Poland's relations with both Germany and the EU," Lang added. 
Since October, Poland has challenged the EU's competition rules by trying to stop one of its largest banks from being taken over by an Italian bank. It has shown little interest in approving the EU's constitution even though Poland gained considerably from it by winning substantial voting rights. 
EU diplomats said Poland risked even more controversy because of the attitudes of the League of Polish Families, which was given control of the Education Ministry. The League has a made clear that it wants to ban rallies for gay rights. League politicians also have frequently criticized foreigners. 
If these nationalist trends continued, German officials said Poland would have little chance of winning support inside the EU for its Eastern policy. 
"Poland risks being isolated," said Polenz, a leading member of Merkel's Christian Democratic Union party. "This is neither in Poland's interests nor ours. When it comes to Warsaw wanting Ukraine and Belarus to join the EU, Poland will need the support of Germany and other EU countries."

Poland attracts foreign investors
There is no doubt for all that that Poland has become a prime attraction for foreign investors. Accumulative FDI is well above US$50bn, the highest in the former communist world.
Its appeal stems from the economic situation of the country, situated as it is in the heart of Central Europe, rather than from any special incentives for foreign capital, says a representative of the American Chamber of Commerce in Poland Roman Rewald. 
According to an international consulting company A.T.Kearney, Poland ranks fifth in the world ranking of states attracting world investors, a very high ranking indeed. 
The country has become even more attractive after becoming an EU member, considers Roman Rewald, but to assure more investments Poland's promotion abroad has to be intensified as should be incentives for foreign investors in Poland.
The government expects that foreign investments in Poland will exceed US$10 bn in 2006.
According to Poland's National Bank last year's figures amounted to US$7.7bn.

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Here is a highly idiosyncratic view of affairs by the famous previous president of Poland, whose earlier career is well-known, Lech Walesa:- 

Nobel winner supports 9/11 response by US, Lech Walesa also blames European countries for problems with Iraq 
By Mary Clarkin, The Hutchinson News
"Total chaos" would be rocking the world if the United States had not reacted to the Sept. 11 terrorist attacks, former Polish leader Lech Walesa told a Hutchinson audience on Easter Friday. 
Without a counterattack on Afghanistan, the terrorists would have assaulted Moscow, burning the unprepared city "completely," in Walesa's view. Perhaps London would have been the third target, he said. The US "should take the glory" for responding to terrorism, Walesa said.
He faulted European countries for not uniting to analyse their role and deciding whether to favour or oppose action in Iraq. Europe should take the greatest blame for problems experienced in Iraq, he said.
Walesa, 62, organized shipyard workers in Communist Poland, illegally climbing over the wall to the Lenin Shipyard to lead a strike. Punished by jail and blacklisting, the leader of the Solidarity union movement did not retreat. In 1982, Time Magazine put him on its cover, under the headline: "Shaking up Communism." He won the Nobel Peace Prize in 1983, and in 1990 became president of Poland. He lost two subsequent presidential bids.
Walesa, communicating through a translator, said the anti-communist workers in Poland didn't possess money or missiles to fight an oppressive regime in the 1970s and 1980s. But they had faith and values - and a fellow Pole in the Vatican.
Walesa gave the late Pope John Paul II 50 per cent of the credit for the collapse of the Berlin Wall and communism. "Want to remain on good terms with the one up there," Walesa quipped in a reference to heaven, after giving the pontiff credit.
But Walesa also named Solidarity and himself, as well as former US Presidents Ronald Reagan and George H.W. Bush, for playing a role, too, in the "greatest victory" - dismantling a system that had killed more than 200 million people.

Criticising Gorbachev
Walesa really became controversial in taking against Gorbachev. "Then-Soviet Union President Mikhail Gorbachev was sitting in the driver's seat, and the vehicle - communism - was nearly at the top of the hill," Walesa said.
"But he did not realize that the Poles had unscrewed the engine," Walesa said. The only thing Gorbachev could do was to let the vehicle slide backward - and he's "good at that," Walesa said. "He was forced to behave in the positive way that he did," Walesa said.
Gorbachev later picked up a Nobel Peace Prize also, but Walesa called him a hero by accident.
Walesa confessed he could not understand why Communist Cuba bites the nose off the US, but the US does nothing to get rid of it. He speculated the strategy was to keep Cuba as the Jurassic Park of communism.
With the Cold War thawed, Walesa said the United Nations should be restructured.

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AVIATION

Ryanair chief urges Poland to expand, improve airports 

Head of Ireland's Ryanair budget airline, Michael O'Leary, recently urged the Polish government to improve the country's airport infrastructure in a bid to spur further growth in the European Union newcomer's booming budget air travel sector, Deutsche Presse-Agentur (dpa) reported. 
O'Leary urged Poland to do away with its inflexible centralised national airport authority, bring an end to centrally established airport fees and break the monopoly on airport fuel deliveries. A second airport for the capital Warsaw was also essential, he said. Ryanair is one of five budget airlines competing on the Polish market. Eased labour restrictions in Ireland and Great Britain for EU newcomer Poles have led to an increase in the demand for budget flights from passengers travelling to work. Budget airlines served some 3.23 million passengers in Poland in 2005, accounting for a 31 per cent share of all domestic air passenger traffic for the year and a whopping 18 per cent rise from 2004. Other budget airlines operating in Poland include Centralwings, the budget wing of Poland's LOT national flagship airline, Hungary's Wizz Air, Slovakia's Sky Europe and Britain's EasyJet. Statistics show Poland underwent a 30 per cent boom in passenger traffic through airports in 2005 over the previous year. The growth was the most rapid in Europe.

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Eastern German airports up share in Polish market 

Air travellers in western Poland are increasingly using airports in Germany as the starting point for their journeys, Deutsche Presse-Agentur (dpa) reports. 
That trend has made the border between the two countries less of a barrier than ever before. 
One of the reasons for this development is Germany's better road infrastructure. "I can reach Berlin in three hours and go on holiday from Schoenefeld airport," says Alicja Visnievska from Poznan. "It would take just as long to go to Warsaw and the trip would have been more expensive." Added to that are the shorter waiting times for people crossing the frontier into Germany since Poland joined the European Union in May 2004. 
Visnievska is not alone in deciding to choose a German rather than Polish airport. One million Polish passengers used Schoenefeld airport just outside Berlin last year, according to a recent report in the Polish newspaper Gazeta Vyborcza. That figure could more than double by 2011 to 2.5 million Poles opting to fly from Berlin. 
The Berlin airport authorities are trying to encourage that trend and have begun advertising their services in Polish cities such as Posen and Szeczecin. It is already quite common for Polish travel agencies to offer their customers package tours that begin in a German airport. Stanislav Mirovski, an engineer from Warsaw, says he is quite prepared to take himself and his family to Berlin if that means they can save money over a flight from the Polish capital. "A difference of a couple of hundred zlotys means the four of us can treat ourselves to a little bit more during our vacation," says Mirovski. Dresden and Leipzig airports in Germany have also recently begun advertising themselves in the Polish region of Lower Silesia. 
Dresden is 300 kilometres from the Polish city of Wroclaw, which is closer than Warsaw. The poor state of Poland's road network also means the trip to Dresden is easier. 
Parking fees at the German airports are also considerably less than those in Warsaw. The good bus service between Wroclaw and Dresden is another incentive to fly from the German city. 
Budget airline operators have complained about high airport charges in Warsaw and the airport authority's inflexibility. Many of those discount airlines are choosing to fly from regional airports in Poland instead. Teresa Vavdycz of the Polish tour operator TSS Polska says the inflated charges at Warsaw airport are affecting package tour deals. 
The airports in Berlin, Dresden and Leipzig are 15 per cent cheaper than in Warsaw, said Vavdycz in a newspaper interview. However, Poland's airport authorities have decided to fight back. "We will not just idly stand by and watch them take our passengers," says Artur Burak, spokesman for the Polish airport authorities. "If the Polish national airline, LOT, tells us it is losing passengers, then we will take the necessary steps," he added.

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BANKING

Poland, Unicredit bankers seal deal ending bank fusion row 


European Union newcomer Poland and Italy's banking giant UniCredit recently finalised an agreement ending a hotly-contested row over the fusion of two Polish banks which are both majority-owned by UniCredit, Deutsche Presse-Agentur (dpa) reported. 
"We're extremely happy to have made this agreement and we hope it will serve our banking sector," Polish Treasury Minister, Wojciech Jasinski, said. According to the negotiated deal, UniCredit will fuse 280 branches of the BPH bank with its majority-owned Pekao, Poland's largest bank. But in line with the Polish government's wishes, UniCredit will sell off 200 remaining independent BPH units to another investor in order for the bank to remain a player in the Polish banking sector. "Realising the concept and implications of this agreement we are committed to do so in the interest of all our customers, employees, the community and our shareholders," UniCredit Official Andrea Moneta commented at the signing ceremony in Warsaw. He added the Italian bankers believed in the great potential of Poland's developing financial market. Right-wing Law and Justice (PiS) Prime Minister, Kazimierz Marcinkiewicz, and UniCredit head, Alessandro Profumo, initialled a draft agreement on April 5th following intense negotiations. Poland had attempted to block UniCredit plans to fuse the two banks to create Poland's largest banking group, arguing the Italians agreed not to purchase Pekao competitors such as BPH in a 1999 privatisation agreement. The anti-monopoly clause was inserted into the Pekao privatisation agreement to safeguard competition crucial to the healthy development of Poland's young and rapidly growing banking sector. Poland's attempt to block UniCredit's fusion plans for Pekao and BPH became one of the 25-member European Union's most hotly contested controversies earlier this year. UniCredit acquired a majority sake in BPH via its purchase last year of German banking giant HVB. The European Commission and European business media slammed Poland's moves to block the fusion as being the kind of economic nationalism irreconcilably at odds with the bloc's common market. The Commission even began disciplinary action against Poland for allegedly attempting to violate regulations on freedom of capital flows within the bloc.

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CREDIT RATINGS

Country rating outlook revised downwards 

Standard & Poor's (S&P) said in a press release on April 24th, citing political uncertainty and weaker prospects for fiscal reform, that Poland suffered a downward revision of its long-term rating outlook to "stable" from "positive." The agency wrote in a press release that S&P's rating services revised its outlook on Poland: "At the same time, the BBB+ long-term foreign currency, A- long-term local currency and A-2 short-term sovereign credit ratings on Poland were affirmed." Poland's uncertain politics and deteriorating reform outlook, with the governing conservatives near certain to invite three small populist parties to join the government coalition, stood behind the rating action, S&P wrote, New Europe reported. 
"The outlook revision reflects ongoing political uncertainty, unclear prospects for structural reform and fiscal consolidation, and a deteriorating perspective for Eurozone accession," S&P Analyst Kai Stukenbrock is quoted as saying in the release. "Fiscal deficits are forecast to remain high and debt levels to continue rising." Even though economic fundamentals remain strong, with economic growth accelerating amid still-low inflation, politics mar the picture, making any fiscal improvements unlikely, S&P wrote.
"Growing demand from the EU, as well as a sustained recovery in domestic demand, should support average gross domestic product growth of around 4.3 percent per year in 2006-2009," the release says. 
"At the same time, inflationary pressures should remain low, helped by the strong zloty, with inflation rising to reach the central bank's target midpoint of 2.5 percent only in 2008." But politics make it unlikely that conditions for a rating upgrade will appear any time soon, S&P wrote.
"The Law and Justice party (PiS) won the (September 2005) election on a populist agenda," S&P wrote. "It has since formed a minority government relying on the support of populist fringe parties. The PiS' dirigiste roots and its dependence on fringe parties advocating increased social and agricultural transfers are inauspicious for market-oriented structural reforms and budgetary consolidation."
Poland's budget deficits are likely to remain higher than four percent until at least 2009 and, with the ruling parties showing little enthusiasm for the adoption of the Euro, a key consideration in view of fiscal consolidation, the country is unlikely to enter the Eurozone before 2012. 
"Poland's good macroeconomic prospects on the one hand are offset by the unclear prospects for further necessary structural reforms and fiscal consolidation on the other hand," Stukenbrock is quoted as saying in the release. "The outlook could be revised back to positive if the government presented a clear, credible, and sustainable agenda for driving down fiscal deficits and stabilising the upward trend in the debt ratio."

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FOREIGN INVESTMENT

Shell, Sharp, Orion plan Polish investments
 

The Polish government signed two agreements with foreign investors saying Sharp and Orion Electric as well as Shell will invest 828 million zloty and create 5,400 jobs. Sharp is planning on building a LCD modules factory in the Lysomice Special Economic Zone near Torun. President of Sharp, Katsuhiko Machida, said: "We are initially going to invest 44 million Euro and 150 million Euro in the long term." Global fuel giant Royal Dutch Shell plans to invest 27 million zloty in a new financial accounting centre in Zabierzow, near Krakow in southern Poland, according to an agreement signed between the company and Poland's Economy Ministry, Deutsche Presse-Agentur (dpa) reported.
The centre, to service the company's European branches, is expected to create some 800 jobs. The Polish government has sweetened the deal with investment incentives including a corporate tax break. Shell joins more than 30 multinational corporations, which have set up so-called "back-office" accounting and business processing service centres in European Union newcomer Poland. Citing good availability of qualified low-wage personnel, major players which have set up European bean-counting operations include cosmetics firm Avon, bankers Citi Group, car-maker Fiat, computing giant IBM and Germany's Lufthansa airline, among others. To facilitate the investments, the government will amend the law on Special Economic Zones and draft a law on the Polish Trade and Investment Agency, reports said. Prime Minister Marcinkiewicz reportedly declared that the proposed changes would also help other prospective investors.

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Poland draws US$7.7bn in FDI in 2005 

Poland, the largest of 10 European Union newcomers, drew some US$7.7 billion in foreign direct investment (FDI) in 2005, Deutsche Presse-Agentur (dpa) reported. 
The figure is down slightly from 2004, when Poland joined the EU in May drawing US$7.8 billion in FDI, according to the Rzeczpospolita daily. Both sums are, however considerably lower than the record US$10.6 billion of FDI influx in 2000. Poland attracted a whopping US$84.47 billion in FDI between 1993-2004, according to official statistics compiled by the Polish Information and Foreign Investment Agency (PAIiZ). The 2005 unofficial total compiled by Rzeczpospolita would bring the total to 92.2 billion. Medium-sized companies worth US$10-50 million invested over US$1.5 billion of the 2005 total, Rzeczpospolita said. It pointed to a trend among companies, especially from neighbouring Germany, to set up manufacturing in Poland to take advantage of lower labour costs. 
LG Philips LCD took the spot of top spender for 2005 with a US$530 million investment in a LCD flat-screen TV plant near the south-western city of Wroclaw. Located very near the German border, the plant will provide work for 10,000 employees. Experts note that thick bureaucratic red tape is more likely to scare off investors than Poland's endemic political turmoil. "We do have these problems: constantly shifting regulations and lack of uniform interpretations, high non-wage labour costs and out-of-date administrative procedures," KPMG Consultant Miroslaw Proppe pointed out. He urged reforms aimed at streamlining. Tomasz Kalinowski with the Institute for Research on Market Economy pointed out that low labour costs, Poland's main comparative advantage thus far, are quickly increasing to EU levels.

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