News round-up

10 -17 August 1997


Azerbaijan: A compromise deal on the development of the disputed Kyapaz oil deposit in the Caspian Sea may be near, announced Azerbaijani President Geidar Aliyev last week, following his official visit to the United States. The dispute between Russia, Azerbaijan and Turkmenistan centres around the accord on development of the oil field signed in Moscow in July of this year. Turkemenistani claims on the deposit were not taken into account in the accord, which was signed by Mr Aliyev, the Azerbaijani State Oil Company and Russian oil giants Lukoil and Rosneft.

Czech Republic: Intel, the US computer chip manufacturer, has shortlisted the Czech Republic, along with Portugal and Egypt, as possible locations for a new US$500 million assembly plant. In an attempt to secure this investment, the Czech authorities are considering the introduction of a number of investment incentives including tax breaks or cut-price land, in line with similar incentives offered to investors by other Central European countries. The total inflow of foreign investment into the Czech Republic stagnated in 1994 and 1995, and fell further in 1996, from $2,525 million to $1,200 million.

Hungary: According to estimates by the Hungarian Government, joining NATO will force Hungary to increase defence spending from 1.2 per cent of GDP to 1.8 per cent. This increase in spending will be mainly due to the need to modernise the Hungarian army, based on estimates by the US Defence Department that the expansion of NATO will cost between US$27 billion and $35 billion over the next 13 years.

Poland: Polish Prime Minister Wlodzimierz Cimoszewicz is facing a vote of no-confidence instigated by the rival Polish Peasant Party (PSL) over the grain prices dispute. Mr Cimoszewicz, a member of the Democratic Left Alliance Party (SLD), refused to accept a 120 million zloty (US$34.3 million) plan to finance advance payments to farmers willing to deliver 400,000 tonnes of grain at a later date. This year's harvest is expected to be very low due to the earlier floods in many parts of the country. According to agriculture minister Jaroslaw Kalinowski, the present stock of some 3.5 million tonnes of grain will be reinforced by a further 24 million tonnes from the expected harvest. This is approximately two thirds of the normal amount of grain that Polish farmers expect to sell each year.

According to Zbigniew Kuzmiuk, head of the Polish Economic Strategy Monitoring Unit (RCSS), Poland remains on target to reach the earlier projection of 5.7 per cent growth in 1997, and inflation is expected to reach 13 per cent as planned. Unemployment too is expected to fall, as 150,000 new jobs are being created in the construction sector, which is currently enjoying a growth rate of 27 per cent.

Russia: Rasikh Khamitov, Chair of the State Geological Committee of Bashkortostan, confirmed that estimated gold reserves in the republic amount to 32 tonnes, which would make them the second largest in the region after those of the Sverdlovsk Oblast. The bulk of the gold is extracted from copper pyrites deposits with a content of pure gold ranging from 1.5 to two grams per tonne.

Five more Moscow based private banks have been declared bankrupt by the Russian Central Bank, bringing the total of Russian banks that have lost their licences so far this year to 71. The bankrupt banks, all of which were owned by private individuals, are as follows: April Bank, Universalny Torgovy Bank, Basis, Elaton, and the Shareholding Commercial Bank for Interindustrial Integration.

Anatoly Chubais, the Russian First Deputy Prime Minister, has announced the budget proposals for 1998, which he will present to Parliament by 25 August. Mr Chubais said that the budget would be the toughest since Russia began its programme of market reforms and would be aimed at securing the first positive real growth this decade. There will be further cuts in spending, and the budget deficit is planned to be 0.43 per cent of GDP. As a result of these measures it is hoped that inflation will fall to five per cent (from the 40 per cent planned for this year) and economic growth will be between 2.5 and three per cent.

Russian Privatisation Minister Alfred Kokh resigned on Wednesday amid allegations of misconduct over the handling of two recent major privatisations. Both the telecommunications company Svyazinvest and the nickel mining company Norilsk Nickel were acquired by Oneximbank, whose head, Vladimir Potanin, is closely linked with Mr Kokh. It is hoped that Mr Kokh's resignation will clear the way for foreign interest in the forthcoming auction of state owned oil company Rosneft, which is due to be sold off later this year.

Serbia and Montenegro: Federal Deputy Prime Minister Danko Djunic has insisted that his Government's proposal of two months ago to the London Club - concerning their demand that 80 per cent of the country's US$2.4 billion debt be written off - be accepted because the Federation can only afford to pay $500 million. The Government proposes to restructure part of the debt to the value of $481 million through a 25 year syndicated loan with a nine year grace period. If the proposal is accepted it would require approval for servicing of the debt from the official creditors, the Paris Club and the International Monetary Fund (IMF). The other former Yugoslav republics, with the exception of Bosnia, did obtain limited write offs from the London Club.

The Serbian Government and its President, Slobodan Milosevic, have been accused of misappropriating funds from the sale of their 49 per cent stake in the telecommunications company Serbia Telecom. The company was sold for DM1.6 billion to OTE of Greece and STET of Italy. Mr Milosevic and his Government have been accused of using the money to reinforce their party's position in the forthcoming parliamentary and presidential elections on 21 September. The privatisation money was supposed to have been used to spur structural reform of industry and to boost export oriented industries in particular. In addition, some £33.3 million was to have been set aside to pay pension arrears.


Georgia: Georgian President Eduard Shevardnadze met with Abkhazian leader Vladislav Ardzinba on 14 August in an attempt to find a solution to the Abkhazian conflict. Following the separation of Abkhazia from the rest of Georgia in 1993, the region has been occupied by Russian peacekeeping troops. Russia does not recognise Abkhazian independence, and has imposed a blockade on the province. Previous attempts to solve the problem have broken down over the issues of Abhkazian sovereignty and of refugees. Abhkazian leaders have proposed a joint Georgian-Abkhazian confederation, but Georgia has rejected this and insists on a unitary state with full Abhkazian autonomy.

Albania: The last of the multinational military forces stationed in Albania left the country on 11 August. The aim of the mission, which began in April this year, was to ensure free elections and to protect convoys of humanitarian aid sent to Albania after the collapse of several pyramid schemes led to a breakdown of Government control including the near total loss of law and order in the country.

Tajikistan: Fighting has broken out again near Dushambe, the capital of Tajikistan, only a few weeks after Tajikistani President Imomali Rakhmonov signed a peace agreement with Islamic opposition guerrillas.


Russia: The Federal Commission for the Securities Markets (FCSM) of the Russian Federation has drafted a document on the Methodological Recommendations on the Organisation of Operation and Procedures of the Specialised Depositary of Unit Investment Funds. According to the document the depository will store information about the unit funds. The FCSM plans to open 15 corporate funds.

Hungary: APV Rt, the Hungarian privatisation fund company, has announced that Hajdu Bet Belkereskedelmi Rt, the 46th largest Hungarian company ranked on the basis of sales revenue, has won a privatisation tender for Del-Pesti Kozert Rt, a food retail chain.

Poland: Bank Handlowy of Poland and Polish telecommunication company Telekomunikacja Polska SA (TSPA) have signed an agreement to issue short-term commercial papers with a debt limit of 350 million zlotys (US$10 million). The programme, to last three years with a possible extension, involves the sale of the papers by auction, and will target institutional investors. According to Bank officials, the amount of each tranche will depend on TPSA's needs and on the market rates established at the auction. Money from the issue will be used to finance investment in broadening telephone access in Poland.

Ukraine: Ukraine made its debut on the international capital markets on 11 August with the issue of a US$450 million eurobond, underwritten by Japanese securities house Nomura. According to Dan Jackson, a Nomura representative: "Many investors were impressed by the high yield on the one-year bond, which offered a spread of 3.25 percentage points over Libor, the rate at which banks lend to each other." However, many investors will require special dispensation to invest in the bond, since Ukraine has yet to be awarded an investment rating by any of the international credit rating agencies. As the Ukrainian economy continues to improve, there is speculation that such a rating from US or Japanese agencies may be awarded before the first Ukrainian Samurai bond (yen-denominated) is issued later this year. In total, the Ukraine plans to raise $1 billion in bond issues this year.

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