Poland’s economic therapist

If Lech Walesa was the man who liberated Poland from communism, Leszek Balcerowicz was the guy who brought capitalism back.

Like Walesa, Balcerowicz is a genuine hero — a man of principle, perseverance and courage who as finance minister, deputy prime minister and head of Poland’s central bank managed the turnaround of one of Europe’s poorest and most dysfunctional economies. While his “shock therapy” for the Polish economy in the early 1990s was risky and painful, it produced some of the strongest growth and lowest inflation on the continent.

Though he has been driven out by Poland’s new government, Balcerowicz can take satisfaction that the roots of economic and political reform are now deep enough that backsliding is unlikely.

Recently, Balcerowicz was at the Cato Institute in Washington doing what he likes best — spreading the gospel of free markets and warning about the dangers of the modern welfare state.

Even as he outlines the intellectual arguments for deregulation, privatization and lower taxes, his academic views are tempered by the experience of actually running a government and mixing it up with politicians and the public.

As is often the case with revolutionaries, Balcerowicz today is probably more highly regarded outside his country, in Ukraine or Kazakhstan, than in Poland, where he remains divisive.

In the last election, it seemed that the only economic agenda put forward by the prime minister was ousting Balcerowicz as head of the central bank. The Kaczynskis called him out as a former communist, accused him of corruption and criticized him for selling out the country by allowing the merger of two Italian-owned banks. They stripped the central bank of much of its regulatory power.

But Poland’s constitutional court sided with Balcerowicz in his refusal to appear before a special panel directed to investigate his performance — an important affirmation of the independence of the central bank. And despite the campaign against him, he managed to serve his entire seven-year term before being replaced by a Kaczynski crony earlier this year.

He’s started a think tank in Warsaw to push for the privatization he was never allowed to complete and the reform of bloated welfare programs for the disabled and retired farmers. (“Did you know we are No. 1 in the world in terms of worker disability?” he says with mock pride.) The purpose of the think tank isn’t really to come up with new economic policies, he explains, but to figure out ways of communicating about economic policy that don’t cede the moral high ground to the socialist point of view.

And here is where Balcerowicz is at his most passionate and most challenging. The reality, particularly in poorer and developing economies, he says, is that money meant for the poor or the unemployed winds up in the hands of bureaucrats, cronies and other undeserving members of the middle class.

Over time, they weaken the work ethic and the sense of personal responsibility while crowding out less expensive and more effective private charity.

Source: By Steven Pearlstein, kansascity.com

Flights to Poland

Novea - Business in Poland

Poland to maintain veto on EU-Russia talks

WARSAW) - Poland will maintain its veto on new talks between the EU and Russia, Poland's prime minister said Sunday after negotiations failed to lift Moscow's embargo on Polish meat.

"Everything remains as before," Prime Minister Jaroslaw Kaczynski said, cited by PAP news agency. "We do not agree to opening discussions with Russia on a new agreement as long as this issue is not settled."

EU Health Commissioner Markos Kyprianou and Russian Agriculture Minister Alexei Gordeyev failed to broker a deal on Sunday that would have seen Moscow lift its embargo on Polish meat and plant products.

The row has taken on wider proportions since Warsaw vetoed the opening of talks between the European Union and Russia on a new partnership agreement.

That broad economic cooperation agreement is to be aimed, among other things, at securing a reliable flow to Europe from Russia's massive oil and gas fields.

Russia accuses the Polish authorities of lax practices over food safety standards. It imposed the embargo in November 2005.

Warsaw argues that the ban is a politically motivated move against the former Soviet satellite state, now an EU member.

Kyprianou said Sunday that talks between Russian and EU officials would continue on the embargo, but a new date has not been set for negotiations.

Germany's foreign minister said last weekend that he hoped the issue would be resolved in time for the next EU-Russia summit beginning May 18.

Source: eubusiness.com

Flights to Poland

Novea - Business in Poland

Bush to visit Poland in June – paper

WARSAW – U.S. President George W. Bush is expected to visit Warsaw in June for talks on installing part of a U.S. missile defence system in Poland, Polish daily Rzeczpospolita said on Saturday, quoting a government source.

'We're expecting Bush to come,' said the source, adding the visit had been arranged by Elzbieta Jakubiak, head of President Lech Kaczynski's office, during a recent trip to Washington.

Officials at the U.S. embassy could not be immediately reached for comment. Bush is in Europe for the June 6-8 Group of Eight summit in Germany. He is also expected to visit the Czech Republic and Rome during his trip.

Washington wants to deploy 10 interceptor rockets in Poland and a radar in the Czech Republic by 2012 as part of a multibillion-dollar system designed to shoot down missiles from states such as Iran.

Poland's government supports the shield, saying it would boost Polish security. But public opinion is divided, with critics saying an installation could make Poland a target for terrorists.

A visiting U.S. delegation now meeting officials in Warsaw has tried to allay Polish fears by stressing that the system would increase security.

'The missile shield will not only defend the United States but also Europe, including Poland,' Lt-Gen Henry Obering told all-news channel TVN24 on Saturday.

The chief of the U.S. Missile defence agency also rejected Kremlin fears the system might endanger Russia's security by emphasising its non-offensive nature.

'Russia's reaction is unjustified because the 10 interceptor missiles will not be equipped with warheads but will neutralise enemy missile strictly through impact,' Obering said.

Washington hopes to begin detailed negotiations with Warsaw and Prague within the next 30 days, diplomats say.

The project has jangled nerves in Western Europe, too, notably in Germany, but no allies raised objections to the system at NATO talks on Thursday, NATO officials said.

Source: signonsandiego.com

Flights to Poland

Novea - Business in Poland

EU, Russia seek breakthrough in Poland food embargo talks

EU Health Commissioner Markos Kyprianou and Russian Agriculture Minister Alexei Gordeyev said on Saturday they were seeking a breakthrough toward a deal for Moscow to lift its embargo on Polish farm products.

"Let's hope we will reach some outcome this evening, and see how we proceed," Kyprianou told reporters during a break in their talks in the coastal city of Limassol in his native Cyprus.

"We've identified issues and the areas we should concentrate on. Now it's a question of agreeing procedure and steps that should be taken to solve the problem as soon as possible," he said.

Gordeyev said: "We are trying to identify solutions and that process will continue tonight."

Asked if he was optimistic, he said: "Just as in the past, we are in a position to identify mutual acceptable solutions for both the Russian Federation government and the EU Commission. We are quite confident to do so today as well."

In Brussels, EU officials have voiced optimism that Russia can be persuaded to lift its embargo on Polish farm products so that talks can begin on a new partnership agreement with Moscow.

On Tuesday the European Commission sent the latest in a string of letters to Moscow seeking to clear up lingering concerns over the safety of Polish meat and other foodstuffs.

Russia, which accuses the Polish authorities of lax practices over food safety standards, imposed its embargo in November 2005 but Warsaw argues the ban is a politically motivated move against the former Soviet satellite state.

The row has taken on wider proportions since Warsaw vetoed the opening of talks between the European Union and Russia on a new partnership agreement in retaliation over the embargo.

That new broad economic cooperation agreement will be aimed, among other things, at securing a reliable flow to Europe from Russia's massive oil and gas fields.

The existing partnership agreement runs out late this year, but EU officials stress it can be extended in the absence of a new deal.

After the meeting on Saturday, being held on an informal basis, Russian Foreign Minister Sergei Lavrov is to hold talks with EU officials on the sidelines of an EU foreign ministers' meeting in Luxembourg on Monday.

An EU-Russia summit will take place on May 18 in the eastern Russian city of Samara.

Source: eubusiness.com

Flights to Poland

Novea - Business in Poland

Poland's GDP grows much above 6 percent in first quarter: minister

Poland's GDP growth in first quarter (Q1) of this year is likely to be much above 6 percent recorded in the fourth quarter (Q4) 2006, Deputy Finance Minister Katarzyna Zajdel-Kurowska told Polish news agency PAP on Friday.

"Chances are that the growth will be higher than in Q4 2006. It will not be too risky to put it much above 6 percent. How much exactly we will have to wait for retail sales data to be released on April 25," Zajdel-Kurowska said.

"The trend is still positive. We are especially happy about revival in the construction sector. This will translate into real investment growth in Q1," she remarked.

"There are fat chances that the investments will stand at some 20 percent, as in Q4 2006. Or perhaps even more. Construction output is impressive," Zajdel-Kurowska added.


Flights to Poland

Novea - Business in Poland

Yemen, Poland discuss investment opportunities in Yemen

Yemeni ambassador to Poland Shaif Badr discussed during his meeting on Friday with the vice president of Polish Information and Foreign Investment Agency Wojciech Szelagowski the current arrangements to hold the conference of Exploring Investment Opportunities in Yemen (EIOY) on April 22-23.

The polish official confirmed participation of his country, addressing the importance of the conference for the Polish businessmen and foundations.

In the meeting, the two officials also discussed means of enhancing and improving relations between the two countries.
Source: sabanews.net

Flights to Poland

Novea - Business in Poland

Poland: Wages explode - rate hike ahead

Wage growth in the Polish corporate sector accelerated significantly in March to 9.1% y/y, up from February ‘s 6.4% y/y. Today’s data was well above our forecast of 6.8% y/y and the consensus expectation of 6.2% y/y. This very strong rise in wage growth makes a rate hike of 25bp next week seem very certain.

Polish wage growth has actually been very subdued over the last couple of years, but this pronounced acceleration changes that picture dramatically. Unemployment has dropped considerably over the past couple of years and employment growth has been strong. Furthermore, emigration to other EU countries has been very noticeable since Poland joined the union in 2004. Clearly, these trends are now impacting wages. That being said, wage growth has hitherto been very subdued and productivity growth has been strong - and hence it is still too early to say whether the acceleration in wage growth will be particularly inflationary or a major concern in terms of Polish competitiveness. Still, there is certainly no reason to be complacent, and monetary policy will need to react. This is why we think a rate hike of 25bp, bringing the policy rate to 4.25%, at next week’s Monetary Policy Council meeting is a largely a given. This will most likely also be the consensus expectation - after today’s numbers. There is of course a chance that the rise in wage growth is due to some mysterious one-off factor, but this is most likely the real thing and we would expect wage growth to continue accelerating in the coming months.

We will be revising our forecast for Polish interest rates and the zloty in the wake of today’s data. We now doubt that our hitherto forecast of two rate hikes will be enough to stem the acceleration in labour pressures and therefore the outlook for the zloty has obviously become much brighter.

There is also a clear regional trend that should be noted here. Domestic demand has accelerated all across Central and Eastern Europe and the overheating “zone” is not far off in many of the new EU countries. The situation is worst in the Baltic States - where recent inflation numbers have surprised strongly on the upside - and in south eastern Europe, where the current account situation has deteriorated further in recent months.

The good news is that growth is strong all across Central and Eastern Europe (with Hungary as the only exception), but the bad news is that the composition of growth is worsening, as domestic demand is the main driver. Furthermore, strong domestic demand and accelerating wage growth right across the region means a gloomier outlook for the current account situation. This is true of most countries in the region, though it should be noted that Polish growth is more sustainable than that in, for example, Romania, Slovakia or the Baltic States. Growth becoming less sustainable in Central and Eastern Europe means the risk of more volatility in the CEE markets is increasing.

Source: By Lars Christensen Danske Bank A/S


Flights to Poland

Novea - Business in Poland

Poland Tokai Okaya building new hall near Torun

Poland Tokai Okaya, a Japanese company, plans to invest in a production hall near Torun where in September this year it plans to launch production of metal components for LCD monitors.
Poland Tokai Okaya will be the latest in a series of Japanese plants to open near Torun. Sharp and Orion already have production facilities operating in the area. The new facility, together with offices and technical areas, will be around 7,200 m² in size. The investment will cost more than PLN 38m (€10m). The plant will turn out sheet metal and processed metal elements for LCD screens. Sharp will be the main customer for these products.
Source: polishmarket.com

Flights to Poland

Novea - Business in Poland

GM Europe To Produce Astra In U.K., Poland, Germany, And Sweden

The new General Motor's Astra is to build in plants across four nations: Poland, Germany, Sweden, and the U.K.

GM, which trades under the name Vauxhall in Britain will build the Astra in Ellesmere Port, Cheshire, beginning in 2010.

The Astra is GM's best-selling car in Europe, selling nearly 500,000 cars annually - in Europe the brand goes under the name Opel.

The world's biggest auto maker has been under pressure from losses due to competition from rival firms. GM Europe has cut 12,000 jobs since 2005; this comes amid efforts to drive regional operations toward profitability.

The new edition Astra is designed with technological enhancements in now available for order with two 1.7-liter diesel engines.

A statement on the car's web page said, "These highly efficient units, which both come coupled with six-speed transmissions as standard, already meet the design-engineering requirements for future emission standards - a characteristic shared by all Astra CDTI engines with maintenance-free diesel particulate filters."

It continues to say, "Customers profit from low running costs also as a result of the low average consumption of just 5.2/5.4 liters per 100 kilometers (five-door variant). The two 1.7-liter CDTI ECOTEC units combine their high power output per liter with a maximum torque of 260 Nm and 280 Nm at 2300 rpm respectively. The Astra GTC 1.7 CDTI models have a top speed of 187 and 197 km/h respectively, and their zero to 100 km/h acceleration times of 11.6 and 10.4 seconds show just how much dynamic potential the new engines possess."

The Astra production plant in Britain will create 1,400 jobs and the U.K. operations are expected to receive government grants. Under the new guidelines, Antwerp in Belgium will lose a facility that used to produce Astra. Other sites for Astra's production will include Bochum in Germany and Gliwice in Poland and Trollhattan factory in Sweden.

Source: By Jacob Cherian, allheadlinenews.com

Flights to Poland

Novea - Business in Poland

Poland/Ukraine to host Euro 2012

A joint bid from Poland and Ukraine has won the vote to stage the 2012 European Championships.

The vote was conducted by the Uefa executive committee at a meeting in Cardiff this morning and the winning eastern European bid triumphed ahead of rivals from Italy and another joint bid from Croatia and Hungary.

New Uefa president Michel Platini read out the result to a chorus of cheers from the Polish and Ukrainian delegation in the conference room.

Italy had been the overwhelming pre-vote favourites to host Euro 2012 but it seems the recent problems that surrounded the policing of a recent European match between Roma and Manchester United may have damaged public opinion towards the country.

Those difficulties came soon after a match-fixing scandal rocked Italian football last summer, leading to punishments for several of the biggest clubs in the country.

Then earlier this year, crowd trouble in the Sicilian derby between Palermo and Catania led to a policeman being killed – the upshot of which was that football was suspended in Italy and only resumed once stadium safety measures had been properly instituted.

The awarding of the European Championship finals to Poland and Ukraine is made all the more surprising by the fact that it was widely thought that Uefa was looking to move away from joint bids after the 2008 championships in Austria and Switzerland.

However, Fifa president Sepp Blatter had lent his support to the Poland/Ukraine bid, which may also have won them some friends within the Uefa delegation.

Speaking after the award of the tournament finals had been made, Polish Football Association chairman Michal Listkiewich said: "Dear friends and dear colleagues I can't express the emotions I am overcome with.

"We have committed our hearts and our efforts for three years to win this bid.

"We thank you for this fantastic chance which we have been given and the trust placed in us by awarding us this tournament."

Grigory Surkis, the Uefa delegate from Ukraine, also thanked the committee and its members and hailed the tournament as "a chance for us to realise ourselves as an independent state".

"Independent Ukraine was born to us 15 years ago but finally in this moment we have a chance to present ourselves to the world," he said.

"It is a new challenge and brings new emotions and new impetus'. I am grateful for those who gave their efforts to ourselves and Poland to win this bid and I am grateful to my colleagues for their trust in me. We will do it.

"Finally the great European football tournament is going to the east of Europe to the Slavic people who have had no chance to improve our football.

"This big tournament will be a milestone in the common history of two of Europe's largest countries, Ukraine and Poland."

Flights to Poland

Novea - Business in Poland

Rising costs may deflate home building 'bubble' in Poland

Shares of home builders are up more than any other industry on the Polish stock market during the past year, but rising costs are clouding the future.

Industry profit will be hurt by rising costs for materials and wages as emigration shrinks the work force, said Tomasz Adamus of Credit Suisse Asset Management Polska.

The shares of builders like Dom Development and Echo Investment have gained, helped by a doubling in house prices in Warsaw since Poland joined the European Union in May 2004. Home values rose more than 50 percent during the past year, according to redNet Property Consulting, a Warsaw research firm.

"The whole frenzy about developers in Poland reminds me of the Internet bubble we had in 2000," said Piotr Zarebski, of PZU Asset Management in Warsaw. "Both then and now, the valuations of many stocks were completely divorced from reality."

The surge has made building companies more than twice as expensive as the overall market. Construction stocks in Poland trade at an average of 37.5 times estimated profit compared with 15.7 for the benchmark WIG20 index, according to data compiled by Bloomberg.

Shares of Dom, the second-largest Polish home builder, have more than doubled since its initial public offering in October. Echo, a developer that gets 40 percent of sales from home construction, has jumped 64 percent in the past year.

A gauge of 26 Polish construction stocks including home builders has soared 128 percent in the past 12 months, the biggest gain among seven industries tracked by the Warsaw Stock Exchange. The WIG20 has risen 20 percent, underpinned by the fastest economic growth in a decade.

Some companies are taking advantage of the rally by issuing shares. J.W. Construction, the largest Polish home builder, plans an initial public offering by mid-May. Erbud, a builder of houses and hospitals, said last week that it would raise about 150 million zloty, or $53 million, selling stock to pay for acquisitions.

Polnord's stock has been among the best performers, rising more than tenfold in the past year. The company, which has posted an annual profit only once in the past five years, said in August that it would focus on home building rather than commercial projects. The company forecast cumulative earnings of 2.9 billion zloty by 2012.

Shares of BBI Development NFI are up 266 percent in the past year even though the company will not complete its first major projects, including the conversion of a 19th-century distillery into luxury apartments, until at least 2010.

The price of Masters has almost tripled since mid-March after the company, a clothing manufacturer, said that it might start building apartments in eastern Polish cities.

"People are buying the shares because they see the house price rally and expect developers to show solid profits," said Adamus. "But the big risks for their future profitability are rising costs."

The average cost of apartment building in Warsaw jumped by about 800 zloty per square meter, or 10.76 square feet, in the past year to more than 4,000 zloty, excluding land costs, Zbigniew Koryl of the Union of Polish Developers, an industry group, said. Apartments in Warsaw sell for an average 8,000 zloty per square meter on average.

The average monthly wage for construction workers has risen 30 percent in the past year to 3,500 zloty after taxes, Koryl said.

Koryl figured that at least 150,000 construction workers, or a fifth of the industry's work force, have left Poland to seek better-paid jobs in Western Europe since the EU entry.

Borrowing costs in Poland will probably rise this year for the first time in almost three years, further slowing demand for apartments. According to the median forecast of economists surveyed by Bloomberg News, the central bank will probably raise its benchmark interest rate by a quarter of a percentage point as soon as this month.

"Last year was exceptional for Polish developers," Ryszard Matkowski, the president of J.W. Construction, said. "House prices cannot rise forever because Poles' purchasing power is limited."

Source: By Paweł Kozlowski Bloomberg News, iht.com

Flights to Poland

Novea - Business in Poland