Baltics: according to a report presented in the Baltic Times 19-25 February, banks in Estonia, Latvia and Lithuania are expected to see mergers and consolidations this year, due to competition from the local and foreign banks. The report states that the banking system will need this to be able to modernise and face the challenge of meeting western standards. The three Baltic states have 54 banks with combined total assets to the value of US$7.15 billion.

Eastern Europe: investment from the US in Eastern European venture capital funds rose sharply to $3 billion during 1997, and is expected to grow further this year. Private US investors are seeking to raise more than $1 billion for Eastern European deals, investing mainly in large regional funds that diversify risk.

Hungary: the International Monetary Fund (IMF) announced on 16 February the end of its standby arrangement with Hungary, due to its satisfaction with the state of the Hungarian economy. Hungary signed an arrangement with the IMF in 1996 for loan facilities, but never drew any loan. However, the existing arrangement helped Hungary to obtain a $264 million credit from other sources. The IMF representative, Mr Mark Allen, said that the Hungarian economy is expected to grow by five per cent in 1998.

Kazakhstan: Prime Minister Nurlan Balgimbayev announced that the government has decided to stop privatising its oil sector. The statement was supported by the view that an aggressive privatisation policy and the practice of selling big companies off to the highest bidder had yielded few results and that foreign investors appeared to be more interested in investing in offshore companies than in revitalising the country's economy. He also declared that foreigners would not be allowed to buy more than 30-40 per cent of large companies.

Kyrgyzstan: Kyrgyzstan and Australia's largest mining company Normandy Mining have concluded an agreement to develop the country's second largest gold ore deposit in Dzherui. The President of Kyrgyzstan's gold mining concern, Kyrgyzaltyn, said the Australian company will invest $31 million of its own funds and $50-60 million from other financial institutions.

Poland: according to Hans van den Broek, the European Union's Foreign Affairs Commissioner who visited Warsaw six weeks before Poland's membership negotiations with the European Union (EU), by the middle of the year Poland will present a draft plan for the re-structure of its steel industry. The assessment of the draft plan will help the World Bank and the European Bank of Research and Development (EBRD) to provide some funding for the social costs of the re-structuring.

Richard Czarnecki, the Head of the European Integration Committee, said that Poland wants the EU to extend the same agricultural support policies to its farm sector, after getting membership to Western European Farmers. Mr Czarnecki expressed his concern that the EU will want to limit access by Polish farmers to agricultural support and structural funds, once inside the EU. (FT 17/02/98)

Polish authorities have made a fourth appeal to the EU since the organisation imposed a ban on Polish dairy products three months ago. Poland asks for the joint EU-Polish commission to be established in order to inspect some of the dairy producers closest to the EU standards.

Daewoo, the South Korean industrial group which has a substantial operation in the Polish automotive industry, gave reassurances about its $1.5 billion investment programme in Poland. On 18 February, Jin Chul Suk, the Managing Director at Daewoo's FSO plant in Warsaw, said that the company is considering further investment. The Korean company has already spent $830 million on developing production capacity from about 120,000 units at the beginning of l990 to a planned 350,000 by the end of this decade. During the course of 1998, Daewoo will spend $360 million on plant and buildings at FSO, and is also developing a delivery van plant in Lublin in eastern Poland.

Hanna Gronkiewicz-Waltz has been nominated by President Aleksander Kwasniewski as the Polish National Bank President for a second term.

Russia:during his speech to the Russian Parliament on 17 February, President Boris Yeltsin called for more spending cuts in reaction to the rising cost of borrowings, and for an approval of a new tax code. He also pointed strongly to the Government's market reforms strategy, giving support to the market reformers Anatoly Chubais and Boris Nemtsov.

Ukraine:last week the Ukrainian Parliament approved a privatisation programme submitted by President Leonid Kuchma, ending a freeze on the sale of state assets imposed in November. The privatisation of the telecommunications, power generating industries and grain silos will go ahead, but land is to remain in Government hands.

According to the Ukraine's State Statistics Committee, direct foreign investment in the Ukraine in 1997 totalled $759.2 million, up by 42.9 per cent from 1996. The stock of FDI as on 1 January was $2.054 billion.

Hungary: Matav, the Hungarian telecommunications group, reported net profits of $209 million in 1997, up 63 per cent from 1996. On 16 February, Elek Straub, Managing Director of the company, said that Matav would invest $450 million every year over the next three years, $50 million more than previously reported. Matav has the monopoly on Hungarian international and inter-regional calls until 2002.

Romania: the Romanian State Ownership Fund has nominated a consortium led by Daiwa Europe to advise on the sale of the 51 per cent stake of the second Romanian bank listed for privatisation, the Romanian Development Bank. The first Romanian bank to be privatised, Banc Post is advised by a consortium led by ABN Amro of the Netherlands.

Estonia: Eesti Uhispank (United Bank of Estonia) launched the country's first offering of Global Depositary Receipts on 16 February, to raise up to $50 million to finance its expansion and lending operations. The offering comprises 3.72 million GDR, which will be listed in Luxembourg and quoted on Seaq International, and each GDR represents three ordinary shares. The issue covers 27 per cent of the bank's enlarged capital.

Poland:The Treasury Ministry responsible for privatisation announced its plans to privatise, by the end of 1998 through public offer, Petrochemia Plock, Poland's largest oil refinery, together with CPN, the state-owned petrol distribution network. Petrochemia Plock reported net profits last year of $215 million and together with CPN, an owner of 1,400 stations, represent a market value of about $1 billion. Dresdner Kleinwort Benson and Polish consulting company, BMF, are advising the Government on the deal.

Russia: The Federal Securities Commission, Russia's stock market watchdog, annulled a controversial convertible bond issue by Sidanco, one of the largest oil companies, on 17 January. The decision is a response to the complaint from minority investors in Sidanco, who claim that their holdings would be heavily diluted by the issue.

Baltics: Estonian President Lennart Meri and Lithuanian newly elected President, Valdas Adamkus, met in Tallin to discuss a joint Baltic foreign policy, stating as the most important issue the enlargement of both the EU and NATO. Both presidents expressed their view that the Baltic states should act in ways that would benefit all three countries.

Czech Republic: Jiri Skalicky, the Deputy Prime Minister, has offered his resignation over the controversy about secret donations to his Civic Democratic Party (ODA). ODA officials alleged last week that $172,000 was donated to the party. Last November the coalition government of the former Prime Minister, Vaclav Klaus, fell following an allegation that the party accepted a donation from a Czech entrepreneur whose company had benefited from the privatisation of a big steelworks.

Russia: Boris Yeltsin has said that he intends to discuss the Government's performance, but he gave assurances that he will not make any cabinet changes. This is a move towards foreign investors, who, since the outbreak of the Asian markets crisis, have been taking a close look into Russian equities. The Central Bank of Russia announced that it would lower its refinancing rate to 39 per cent. The Government is also hoping for a new disbursement of the IMF's three year $10 billion loan, once Russia's economic policies are approved by the IMF.

Exchange rates (13 February)

Rates derive from the FT as of 13 February 1998.
Rates for Georgia, Kyrgyzstan, Tajikistan, Turkmenistan, Uzbekistan provided by the National Banks of each country