Eastern Europe general: According to Nicolas Stern, Chief Economist at the European Bank for Reconstruction and Development (EBRD), direct foreign investment to Central and Eastern Europe will reach US$16-18bn by the end of 1997, a 50 per cent increase on 1996. The investment mainly targets Russia and Poland. The bank also expects that, this year, Poland, Hungary and the Czech Republic will acquire a large increase in portfolio investment, possibly reaching $50bn.

Poland: Poland will be assisted by Denmark to enter the European Union, it was announced on 29 September. Danish ambassador to Poland Claus Juul Nielsen and Polish minister for European Integration Danuta Hubner signed a co-operation agreement in accordance with which Denmark will train Poland÷s civil administration staff employed in justice, customs and police work to adapt the EU practices. The ambassador stressed that it is vital for both countries that Poland becomes a full EU member as soon as possible.

Romania: Another fall of industrial production has been recorded in Romania in August. A 7.4 per cent drop from July followed the government's austerity programme, tight monetary policy and high interest rates. Industrial production in July fell ten per cent from June and 16.3 per cent from last year, during the same period . The inflation in August rose to 3.5 per cent, from 0.7 per cent in July.

The European Bank for Reconstruction and Development will provide a US$65m nine year loan and a further $10m in equities to finance the development of the GSM phone network. The EBRD, together with a commercial bank syndicate, will offer a total of $190m to MobiFon, a telecom company owned 60 per cent by Telesystem International Wireless of Canada to build a $370m GSM system. MobiFon will render its services to 35 per cent of the Romanian population and intends to increase this to 89 per cent by the end of 1998. A further $45m will be raised by the Export Development Corporation of Canada and the Nordic Investment Bank, from whom will come $25m and $20m respectively. The main MobiFon rival, Mobil Romania, owned in 51 per cent by France Telecom, launched its network in June this year.

Russia: Russia completed a deal to restructure more than US$26bn of the former Soviet Union debt after 18 months of negotiations with the London Club of creditors. The Russian Finance Ministry confirmed on 30 September that more than 90 per cent of the defaulted debt had been "reconciled" and mentioned also that the London Club of creditors chaired by Deutsche Bank had not forgiven any of the original debt. Russia will benefit from the extension of the maturity on the debt by up to 20 years. The debt will be converted into bond-like interest-bearing paper for overseas investors Vnesh bond, upon the Vneshekonombank, the bank which held the negotiations.

Bosnia: Two days of informal meetings of the NATO defence ministers started in Maastricht on 1 October, to discuss any reduction and mandate of the international peace-keeping forces in Bosnia. The mandate of the 36,000 force expires in June 1998. The mission is supposed to be reduced in stages by 50 per cent during its 18 month term and is in line with the Dayton peace accord. It appears that the mission faces the prospects of backing the elections to the Bosnian-Serb parliament due in November. The US national security advisor Sandy Berger expressed his view last week that the US is considering retaining troops in Bosnia after the middle of 1998, but it is yet to be decided what form this will take. Defence Ministers of Poland, Hungary and the Czech Republic were invited to join the meeting in Maastricht along with the Russian defence minister, Igor Surgeyev, who will be present at some of the talks for the first time.

Serbia Montenegro: Serbian riot police attacked, on Tuesday 30 September, a crowd of demonstrators marching through Belgrade, the capital of Yugoslavia, in support of Zoran Djindjic, leader of the opposition Democratic party. Mr Djindjic became mayor of Belgrade in February this year and organised three months of street protests against the president Slobodan Molosevic and his Socialist party in order to force him to recognise the victory of the opposition Zajedno(Together) in municipal elections. Mr Djindjic was dismissed as the mayor of Belgrade by a city assembly vote led by his former coalition partners, the Serbian Renewal Movement (SPO), and backed by the ruling Socialist party and the ultra-nationalist opposition, Serbian Radicals. During the week, the demonstrations spread to other parts of the country and were particularly bad in Kosovo, the mainly Albanian populated province which Belgrade stripped of its autonomy in 1989.

Poland: Gdynia Shipyard, one of three Polish shipbuilders, will receive a US$-61m loan from a bank consortium organised by Mitteleuroaelshe Handelsbank AG Deutach-Polnishe (MHB) for the construction of two container ships. Both ships will be built for German shipowner KG Projex. Two Polish banks, Bank Handlowy SA and Bank Pekao SA and also Arab Banking Corporation are shareholders of MHB consortium. MHB's credit director Claus Drieesen said also that will also be possible future loans to the Gdynia Shipyard. Janusz Szlachta, Gdynia Shipyard president, said to Rzeczpospolita, the Polish daily , that Gdynia Shipyard expects to make a net profit of 20 million zloty ( US$5.9m) in 1997.

Ford car manufacturer launched on 29 September the Ford Bank Polska, which will provide credit to its customers in Poland directly. It is the first car manufacturer which has opened such a facility. Olaf Nitzsch, the bank's president, said that a loan will be granted to each of Ford÷s 48 Polish dealers.

Petropol, the Polish petrol trading company located in Piotrkow Trybunalski, central Poland, has been sold to the Swedish fuel firm Preem Petroleum. Preem plans to spend US$25m on the construction of the liquid fuel terminal in Port Gdynia Holding SA.

Poland attracted French Citroen to assemble its C15 model car in the city of Nysa, south-west Poland. Citroen, which has decided to relocate the assembly of this model from Spain to Zaklady Samochodow Dostawczych (ZSD), also announced the launch of the assembly of the Berlingo model at the same plant. ZSD director Marian Smutkiewicz said that the plant is planning to assemble trucks for Polonez Truck and its Peugeot partner and by the year 2000, expects to double its production and manufacture 60,000 cars.

Bank Handlowy SA and Zurich Insurance Co signed an agreement to launch two insurance companies in Poland, one providing life insurance and another non-life insurance. With this move Bank Handlowy has expanded into the insurance market, said the bank'president Cezary Stypulkowski. The bank concluded the sale of a 24 per cent stake to JP Morgan, Swedbank and Zurich Insurance group on 19 September.

IBCA credit rating agency has awarded Powszechny Bank Kredytowy (PBK) with a long term rating of BBB minus, indicating the low risk associated with the bank. PBK improved the quality of its loan portfolio, with the ratio of bad loans to the total credit portfolio falling to 15.6 per cent at the end of 1996.

Centertel, a mobile telephone operator, owned 66 per cent by Telekomunikacja Polska SA and 34 per cent by France Telecom, has signed a US$100m contract with Finland÷s Nokia and US-Canadian Nortel for the delivery and installation of transmission stations and telephone exchanges for the new DCS 1800 network.Centertel has a licence to build networks in Warsaw, Krakow, Poznan, Lodz, Lublin, Bydgoszcz, Szczecin, Katowice and the neighbouring cities.

Russia: A new US$800m venture between Russia÷s biggest auto company, Gaz, based in Nizhni Novgorod, 400 km east of Moscow, the Italian Fiat industrial group and the European Bank for Reconstruction and Development has been set up following the agreement signed in Moscow during the official visit to Russia of Italian prime minister Romano Prodi last week. The final contract will be sealed when the Russian president Boris Yeltsin will visit Italy in February 1998. The new venture plans to start producing 150,000 Fiat Marea, Siena and Palio models later next year and will also start production of auto components.

Czech Republic: The City of Prague is awaiting an approval from the Czech Ministry of Finance for the decision on two foreign investment banking arms which will manage a US$260m, 5 year bond issue following a recommendation from city councillors. The investment arms of Nomura of Japan and Credit Lyonnaise of France were selected from 22 bidders. Nomura has already succesfully managed the city's bond issue in 1994.

Hungary: The Hungarian Privatisation Agency (APV) announced the sale of 30 per cent of Raba, the state owned maker of spare parts for commercial vehicles, to five investors with the remaining stake to be sold in a global public offering in November this year. The company is one of the most successful state companies and the buyers include the Bank for Reconstruction and Development, the Jersey based First Hungary Fund, the Malaysian group DRB Hicom and an investment group set up by Raba's management. The price and share allocations will be announced shortly. However, it is expected that the sale will bring US$25m. Eighteen per cent of the remaining stake will be kept by the local Hungarian municipal governments. Raba has a registered capital of $61m.

Poland: The Polish Securities Commission (KPW) spokeswoman Beata Stelmach said on 25 September that from late October multiple trading in the same stock would be possible during a single session on the Warsaw Stock Exchange. She said that "the amendment to the regulation was signed by the Securities Commission chairman on 22 September."

Wedel, the top Polish confectionery company 83 per cent owned by Pepsi Cola, signed a letter of intent to sell its Syrena plant to the Leaf Group, a subsidiary of Finland÷s Huhtamaki confectionery concern. The sales agreement should be signed within two months, said Marek Matysek, Wedel's spokesman. Syrena÷s actual book value is estimated between US$8-10m and expects to reach a sales revenue in 1997 of $16m.

According to Polish daily Gazeta Wyborcza, the Treasury Ministry announced on 30 September share prices for the sale of Powszechny Bank Kredytowy (PBK). One share in PBK's 52 per cent institutional tranche (11,232 million shares) will cost 71 zloty (US$20.6) while every share in its 18 per cent retail tranche (3,888 million shares) will be priced at 69 zloty each ($20). Both tranches' subscription will take place between 2 and 10 October and share allocation for the retail tranche on 11 October and for the institutional tranche on 12 October. The first listing of PBK's shares on the Warsaw Stock Exchange is set to take place on 21 October.

Russia: The city of Moscow awarded ING Baring and CS First Boston with a mandate to lead and manage its second eurobond after the eurobond debut earlier this year was led by CS First Boston and Nomura International. The new bond will be issued within the next six weeks and is expected to total US$500m .

Ukraine: The yen-denominated bond of an unspecified size will be placed in the Japanese Samurai market, the market for international issuers. It will be followed later this year by the country÷s first dollar eurobond, which is expected to be between US$300m and $500m with a maturity of five years.

Kazakhstan: The first closed-ended fund with a focus on Kazakhstan has been launched by Pelegrine Securities and will be listed in Dublin. The US$90m fund will invest in both listed and unlisted companies which are able to seek listing within the next three to five years. The fund will also participate in the Kazakhstan privatisation programme.

The new investment fund focusing on Moldova, Serbia, Ukraine and Bulgaria and concentrating mainly on sovereign debt with maturity of less than 12 months and debt of companies and banks closely linked to the state, has been launched on 1 October by ANZ Investment bank. The open-ended fund will require the minimum investment of US$25,000 and is due to start trading on 15 October.