News round-up  27 April - 06 May 1998


Belarus:according to the Ministry of Statistics, the Consumer Price Index (CPI) index in the first quarter accelerated to 2.5 per cent from 2.1 per cent in the first quarter of 1997. The annual projected inflation for this year is 21 per cent against 63.1 per cent in 1997.

Bulgaria: the World Bank has approved a three year funding strategy for Bulgaria, which is going to be between US$300 million and $700 million, depending on the country's needs and performance. The Bank has already lent Bulgaria $493 million for various projects in the sectors of telecommunications, transport, water supply, health and public administration.

Czech Republic: the Organisation for Economic Co-operation and Development (OECD) stated that the Czech's agricultural sector is the least subsidised of all European countries. The indicator values the production subsidies equivalent and measures, as the value of taxes and proceeds from food sales received by farmers reached only 11 per cent in 1997, compared to an OECD average of 34 per cent.

The European Investment Bank (EIB) said that 730 million crows (ECU 20 million or $22.4 million) of its ECU 200 million loan to the Czech Republic was allocated to cover 1997 flood damages and was available by the end of April. Czechoslavakia will use the loan to re-construct its highways, railroads and for other infrastructure projects in Moravia and eastern Bohemia.

Georgia: according to the State Department of Statistics, the Gross Domestic Product (GDP) rose by 11.2 per cent in the first quarter of 1998. Inflation in March rose 0.04 per cent over February and 5.7 per cent over March 1997.

On 25 April the President of Georgia, Eduard Shevardnadze, signed an order to restore and develop the tea industry. From the industry's budget he allocated about two million lari ($1.5 million) in 1998, ten million in 1999, and between 12-15 million in the year 2000.

Hungary: on 26 April the Hungarian Prime Minister, Gyula Horn, said that Hungary is expected to establish a network of industrial parks by the year 2000, bringing Budapest up to the range of a development centre for Eastern Europe. The first centre, Infopark Rt., was established in 1996, with 74 per cent of shares owned by the Ministry of Industry, Trade and Tourism. The rest of the company is jointly owned by the Budapest Technical University and the Lorand Eotvos University of Sciences. The tender for the Infopark property development was won by a consortium of two German companies, Industrie Vermogensgesellschaft Immobillen GmbH and Deutsche Telekom Immobollen GmbH.

Karoly Lotz, the Minister of Transportation, Communication and Water Management, said that the Government wants to speed up construction of the M7 motorway, which will form part of the 'fifth corridor' linking Trieste and Kiev. The Ministry will soon announce a tender for the project, which will be partly financed by the Government (350 billion forints - $1.7 billion allocated over the next ten years) and partly by the National Road Fund and the European Union (EU). The project is expected to be completed by the year 2003.

According to European Union (EU) officials, Hungary would need to invest approximately one trillion forints ($4.7 billion) in order to upgrade its sewage system to meet the EU's standards.

The modernisation of the Hungarian railways up to the requirements of the EU will need 878 billion forints ($ 4.2 billion) which is one per cent of Hungary's GDP.

Hungary and Croatia will establish a joint Hungarian-Croatian economic chamber, to help development of the bilateral trade and economic relations between the two countries, announced Lajos Tolnay, President of the Hungarian Chamber of Commerce and Industry.

Latvia: on 27 April, Finance Minister, Roberts Zile, said that Latvia will join the Multilateral Investment Guarantees Agency this year. This is the World Bank's organisation dealing with the insurance of political guarantees. This move would give foreign investors the chance to secure themselves against political risk in Latvia.

Roberts Zile also confirmed that Latvia hopes to settle issue concerning accession to the World Trade Organisation (WTO) this year.

Romania: on 7 May, the National Statistical Board (CNS) reported that Romania's trade deficit fell to $127.6 million in February from $145.7 million in January, but was up 17.6 per cent from February 1997 ($108.5 million).

Russia: on 5 May the State Statistics Committee said that the CPI index in April was 0.4 per cent against 0.6 per cent in March, and one per cent in April 1997. In the first four months of this year total inflation stood at 3.5 per cent against 6.4 per cent in the same period of 1997.

Last week the Russian Minister of Agriculture, Viktor Khlystun, said that he signed a protocol with a union of American and European banks to form an international corporation aiming to develop Russia's agricultural sector. The main source of credits for Russian agriculture is a fund set up in 1997, which should be valued at around $1.63 billion in 1998. The Ministry of Finance confirmed that $212.2 million had been set aside in this year's budget to deposit in the fund.


Belarus: Austrian engineering group, VA Technologie AG, confirmed that it won a contract worth $60.5 million to supply a steel rolling mill to BMZ steelworks in Shloblin Belarus.

Czech Republic: according to the Citybank's analysts, foreign direct investment to the Czech Republic in the first quarter of 1998 stood at $500 million.

Hungary: the Austrian based Leier group will invest some 450 million forints ($2.1 million) in constructing a material plant in central Hungary. This will increase the total investment of the group in Hungary to over seven billion forints ($33.4 million).

Ukraine: the European Bank for Reconstruction and Development (EBRD) is currently planning to invest about one billion dollars into a few different projects in the Ukraine. The forthcoming projects include a $130 million credit line to develop small and medium-sized businesses, which is an extension of a $121.4 credit line that started in 1995, and a $30 million involvement in the reduction of energy cost and wastage, which will be implemented by the State Committee of Ukraine for Energy Conservation. The EBRD is the biggest investor in the Ukraine, with investments in all major sectors of the Ukrainian economy, such as metallurgy, chemicals, transportation, telecommunications, machine-building, agri-business, energy, consumer goods, oil and gas, automotive, banking and finance. (Reuters)

Ukraine attracted only two billion dollars in foreign investment since its independence in 1991, one of the lowest in the region, due to complex laws, corruption, high taxes and a slow pace of privatisation.


Albania: the Albanian oil company, Albpetrol, signed a contract with the Hungarian oil and gas company, MOL and Premier Oil BV, to establish a consortium to search for hydrocarbon in southern Albania. Albpetrol acquired a 30 per cent stake in the consortium, while Premier Oil and Mol both have a 35 per cent stake.

Croatia: Rijeka based ship repair company, Viktor Lenac, reported a 9.8 per cent rise in the net profit to 18.1 million kuna ($2.8 million) on a total income of 244.6 million kuna. The company's shares are quoted on the Zagreb Stock Exchange.

Czech Republic: last week Brno based Alta Brno signed a $119 million contract with the Belarussian car producer Belaz, to modernise Belaz's production lines. It is the largest Czech order from the former Commonwealth Independent State (CIS) country since 1989.

Skoda Auto announced that in the first quarter of this year, the number of cars sold by the company has been increased by 27 per cent to 20,817 units. The majority of sales, 60 per cent were sales to Europe and only 8.5 per cent to the Czech Republic.

Hungary: a new corporate law has been introduced in Hungary which aims to make company registrations more effective. According to the new law, the director of the company is responsible for reporting any change in the company's ownership structure and any administrative changes. Since the company's losses relate to faulty administration, all the directors are equally responsible. All financial claims related to the company dissolvency can be submitted to the former director for up to one year. The heads of the companies cannot buy a stake in other companies that operate in the same field, unless they have an agreement from their company's board.

British bank, Singer & Friedlander (S&F;), will provide 18 billion forints ($86 million) for the Postabank Rt's pending capital increase. Postbank AGM approved a maximum increase of 24 billion forints on 10 April, and the bank's main shareholders, the State Privatisation and Holding CO and the Hungarian Development Bank (MFB) will provide 7.1 billion forints.

The pharmaceutical giant, Richter Gedeon Rt, reported a first quarter after tax profit of 6.3 billion forints ($30.1 million) on revenues of 16.6 billion forints. This was due to an increase in exports, which amounted to $57 million, an 18.5 per cent increase from the same period last year.

Latvia: shareholders in the pharmaceutical company, Olainfarm, have approved a co-operation agreement signed on 25 November 1997 with Aroma Ltd. This agreement involves establishing an international concern which will merge three factories, Olainfarm, Rigas Farmaceitiska Fabrika and Lithuania's Endokrinai Preparatai. Olainfarm owns 30 per cent of Endokrinai Preparatai.

Russia: Norilsk Nickel, mining and smelting giant, has received a syndicated credit of ten million dollars organised by ING Barings. The credit is guaranteed by supplies of Norilsk Nickel copper and is repayable at Libor plus four per cent. At the end of 1997 ING Barings organised another syndicated credit of $75 million for Norilsk.


Czech Republic: Mostecka Uhelna (MUS), the largest Czech brown coal producer, sold 49.98 per cent of the company to Swiss based company Investenergy. The National Property Fund, which holds a 46.3 per cent stake in MUS lost control over the same coal mine.

The State plans to call a public tender to sell its 31 per cent stake in the insurance company, Ceska Pojistovna. This is expected to take place after the June elections, said Deputy Finance Minister, Richard Chvojka.

Russia: the shares of the United Energy Systems (UES) of Russia were the most traded shares at the Moscow Stock Exchange in the first quarter of this year, with the volume reaching $1.635 billion. Lukoil oil company came second ($1.24 billion) and Mosenegro company third ($395 million). Shares of the Russian gas company, Gazprom, were fourth, with a total traded volume of $300 million.


Croatia: a secondary offering of 2.48 million shares in Pliva, the largest pharmaceutical company, will leave 27 per cent of the company in the Government's hands. Thirty per cent of Pliva was already sold to foreign and domestic investors in April 1996. Merrill Lynch and Daiwa Europe are joint global lead managers.

The privatisation programme for this year includes companies from banking (Slavonska Banka), food processing (Podravka), manufacturing (electrical manufacturer Koncar, Elka) and oil and gas sectors (Janaf, Ina).

Poland: on 6 May, Barbara Jarzembowska, Deputy Head of the Polish Foreign Investment Agency (PAIZ), said that in 1997, Poland attracted $6.6 billion in foreign investment and expects to get up to eight billion dollars this year.

Russia: on 30 April, Finance Minister, Mikhail Zadornov, said that the Government should collect about $2.3 billion from privatisation in 1998. He said that the privatisation plans had been confirmed by the Government and includes sales of stakes in oil company Rosneft and several other oil companies, as well as telecommunications holding company Svyazinvest.

Ukraine: the State Property Fund of the Ukraine has announced plans to privatise a total of 900 companies in 1998, which should bring an income of 1.04 billion hryvnias ($.507.5 million). The fund has raised 133 million hryvnias in revenues in the first quarter. The list of companies to be privatised include a 26 per cent stake in the oil derivatives company AT Luhansknaftoproduct, a 55.98 per cent stake in industrial manufacturing company Frehat, and 17 and 13 per cent stakes in the country's largest alumina plant Mykolayivsky Hlynozemny Zavod (MHZ).


Central Europe: the debate on the Czech Republic, Hungary and Poland's North Atlantic Treaty Organisation (NATO) accession was resumed in the US Senate on 27 April. The Congressmen are praising the development of stable democracies in these countries. However, opposition to the accession claim that they are lacking sufficient parliamentary supervision of the national armed forces. The final vote is expected to take place by the end of the week.

Belarus: the Belarussian President, Alexander Lukashenko, made a joint statement with the Russian President, Boris Yeltsin, concerning the Russian-Belarussian Union. In the statement they praised the Union achievements and they stressed the importance of further integration and co-operation in the field of economy, science, technology, environment and culture. Both presidents also underlined the importance of deep co-operation in defence.

Czech Republic: President Vaclav Havel is still in hospital in Innsbruck, Austria, following the emergency operation which he underwent in April.

Kazakhstan: the President of Kazakhstan, Nursultan Nazarbayev, changed the name of the capital of Kazakhstan from Akmola to Astana, which means 'capital' in Kazakh. The new name will be official as of 10 June.

Latvia: on 29 April, the President of Latvia, Guntis Ulmanis, went on an official state visit to Italy, where he met with the President, Oscar Luigi Scalfaro. Both parties discussed Latvia's integration into the EU and NATO, the state of the reform process in Latvia, and Latvia's relations with Russia. Both countries will hold a meeting in September in Riga.

Russia: on 5 May, President Boris Yeltsin said that he had completed the line-up of his new Government, promising greater independence for the Government of the Prime Minister Sergei Kiriyenko, who was confirmed on 24 April.

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