News round-up  09 - 17 May 1998


Czech Republic: on 14 May the Deputy Minister of Industry and Trade, Vaclav Petricek, said that the Ministry of Industry and Trade is involved in talks with Vietnam on trade expansion. The Ministry is also considering initiating talks with Russia and the Russian Federation, to expand trade contacts and eliminate trade barriers.

On 12 May the Czech Statistical Office (CSU) said that the Consumer Price Index (CPI) rose 0.3 per cent from March to April, and 13.1 per cent from April 1997. The average inflation in the last twelve months was 10.5 per cent.

Also on 12 May, the Ministry of Labour and Social Affairs confirmed that the unemployment rate in the Czech Republic in April stood at 5.4 per cent, compared to 5.5 per cent in March and 3.8 per cent in April 1997.

Estonia: the Board of the Fisheries Union fears that exports of Estonian fish products into European Union (EU) countries will be cut as of 1 July. According to Fisheries Union Deputy Board Chair, Peeter Vohu, "It has been said that our enterprises do not meet EU standards, but in fact there are quite a few things which government agencies have failed to do. If the requirements are not met, export into the EU will be cut as of 1 July."

Last month the assets of the Bank of Estonia grew by 2.7 per cent to a total of 11.191 billion kroons (US$793.7 million). The demand for base money increased by 304 million kroons or four per cent, while the demand for cash grew by 923 million kroons or 1.75 per cent. At the end of April, base money stood at 7.9 billion kroons ($560.3 million). In April the Bank of Estonia's foreign currency reserve grew by 3.16 per cent to 10.096 billion kroons.

Hungary: the Central Statistical Office (CSO) reported that industrial production in March rose by 20.7 per cent (Y/Y) in terms of volume and 14.1 per cent in real terms.

According to the figures released by the CSO on 13 May, Hungary's foreign trade deficit totalled 115.1 billion forints ($549.9 million) for the first quarter of this year, six billion forints more than the same period last year. The value of exports grew by 52.9 per cent and imports by 46.5 per cent.

On 12 May, Lazlo Csaba, the Deputy Secretary at the Ministry of Finance, confirmed that the deficit of the central budget was 171.1 billion forints ($817.5 million) in the first four months of the year, 14 billion forints less than for the same period in 1997. Revenues to the budget in April amounted to 241 billion forints, while expenditures amounted to 235 billion forints.

The European Bank for Reconstruction and Development (EBRD) released a report on Hungary's progress in preparing for the annual forum in Kiev. According to this report, Hungary's economic progress was unaffected by the crisis in Asian financial markets last autumn, but was instead reinforced by major structural reforms implemented between 1995 and 1997. In its report the EBRD predicts that negotiations on EU accession will provide fresh impetus for further re-structuring of the Hungarian economy. The privatisation process in Hungary will be completed in 1998, after the last two state owned large companies have been sold - Raba in 1997 and Ikarus in January this year. Hungary has been increasing investment to improve its infrastructure, and the Government has signed a credit agreement with the EBRD to develop Hungary's rail network. The EBRD report also notes that Hungary's banks are the strongest in the region. The Government made further steps in January to liberalise the capital market. The EBRD reports also state that Hungary launched a compulsory private pension scheme with the help of a $150 million loan from the World Bank at the beginning of this year.

Latvia: the State Employment Service said that the unemployment rate in Latvia remained stable at 7.1 per cent in April compared to March. As of 30 March, 88,342 people were seeking employment.

According to the Finance Ministry, on 7 May the Latvian internal debt was 178.371 million lats ($265.9 million). The direct internal debt was 154.229 million lats or 86.4 per cent of the total internal state debt. The most widely traded T-bills were those maturing in one year, as their sales volume amounted to 76.784 million lats.

On 7 May the Ministry of Finance reported that the Latvian foreign debt was 230.710 million lats ($397.8 million). The biggest lender to Latvia was the World Bank, which had extended credits worth 96.173 million lats or 41.6 per cent of the total foreign debt. The International Monetary Fund's (IMF) loans to Latvia amounted to 44.132 million lats, while G-24 credits accounted for 34.297 million lats. Credits from the Japanese Import and Export Bank stood at 25.716 million lats. Latvia borrowed a further 30.392 million lats from other foreign financial institutions.

According to Prime Minister Guntars Krast, a credit rating given to Latvia by Standard & Poor's shows that the estimate of the country's economic stability has not changed. Standard & Poor's has given Latvia a credit rating that is the same as a year ago, including a BBB long-term foreign currency rating, A- long-term local currency rating and short-term ratings of A-3 and A-2, respectively. Standard & Poor's concluded that the outlook of the long-term credits is stable.

Poland: according to the Minister of Telecommunications, Marek Zdrojewski, the leading Polish telecomm operator, Telekomunikacja Polska SA, TP SA, and smaller private operators, will have to spend $14 billion on capital investments if Poland is to catch up with Western European standards of phone density. At present Poland has 20 phones for every 100 citizens, while the European average is 45. Full liberalisation of the Polish telecomm market is planned for the year 2003, when international traffic will also be handled by independent operators, in addition to TP SA.

On 13 May the National Bank of Poland (NBP) said that in April, Poland's money supply rose by 1.7 per cent to 3.05 billion zlotys ($902.8 million). NBP added that money supply in March grew by 1.3 per cent, or 2.26 billion zlotys.

Several Polish financial institutions, including the largest banks like Bank Handlowy, PKO BP and insurance companies, Heros Life, Polisa, PZU, Warta, Commercial Union, Amplico Life and Nationale Nederlanden, are interested in establishing the new pension funds under the reformed pension scheme.

On 10 May, Jacek Janiszewski, the Agriculture Minister, said that his Ministry is currently negotiating with the World Bank for an investment loan for the agricultural sector. The loan will be in the region of $100 million. He also mentioned that between 1992 and 1993 Poland received approximately $300 million in investment credits under the ASAL loan.

Sales of liquefied petroleum gas, LPG, went up by 22 per cent in Poland in 1997 compared to the previous year. LPG sales are going up by an average of 20 to 30 per cent annually, with five million households using it. Adam Kubiak, Head of the Polish Organisation of LPG, said that LPG sales for cars are rising the fastest. Poland is the third country in Europe, after Italy and Holland, regarding LPG car consumption. At present over 100 firms distribute LPG in Poland, including Shell Gas, Gaspol, Plock oil refinery and BP Gas. Most of the gas is imported, with only 21 per cent of LPG sold in 1997 coming from national refineries.

During the Business Forum in Kiev, Hanna Gronkiewicz-Waltz, President of the NBP, said that Poland intends to maintain its high economic growth. She confirmed that Poland's Gross Domestic Product (GDP) growth in 1997 was 6.9 per cent, and added that Poland did not plan to have a budget deficit in the year 2003, with planned inflation in the year 2000 being under five per cent.

Slawomir Zawadzki, Deputy Minister of the Committee for European Integration, KIE, said that by mid-May, Poland should submit proposals on how it plans to draw on this year's Phare funds. If Poland fails to submit the plan, a Union Phare management committee, comprising experts from the 15 member states, may not be able to approve the Polish programme for Phare funds for 1998. The European Commission also expects Poland to name which ministry will oversee a national fund which would handle future inflows of EU aid.

The CSO reported that the production of motor vehicles and other transport equipment increased in the first three months of 1998. The biggest rise was reported in the production of freight cars, whose number went up by 126.4 per cent to 317 units, and passenger cars, which rose 32.1 per cent against the corresponding period of 1997 .


Estonia: Toshiba, a leading Japanese industrial conglomerate looking into the possibility of bringing part of its production operations into Eastern Europe, is having talks with the leaders of the computer firms MicroLink and Elkoteq, said Masahiro Ogura, Head of Toshiba's International Division. Toshiba currently has four factories in Europe, Germany, Britain and France. The Japanese concern makes a large range of home electronics and high-tech products. In 1996 Toshiba's turnover was $44 billion, including $16 billion in European factories. The concern, which employs about 200,000 people, made a profit of $541 million in 1997.

Latvia: Latvia's Liepaja Special Economic Zone, SEZ, and the British company, Cartwel Ltd, intend to build a coke factory. The expected investment of about $200 million will be the largest ever investment in the SEZ development, said Department Head, Gundars Bojars. The coke factory will be built in the Karosta region of the Liepaja port. It will occupy one-tenth of the SEZ territory.

Poland: on 12 May, Polish and French entrepreneurs met in Katowice, southern Poland in order to establish initial co-operation in operating joint venture projects for the future. The meeting was sponsored by the EU's programme, JOP '98.


Czech Republic: following the company's general meeting, Lovochemie, the largest Czech producer of industrial fertilisers, announced that it will raise its present share capital, worth 892 million crowns ($27.4 million) by 30 per cent, in order to meet one of the EBRD's conditions for a long-term loan, which is expected to be granted by a group of banks. Lovochemie will increase share capital through the issue of new publicly tradeable bearer shares, at a nominal value of 1,000 crowns per share.

Benzina a.s., a fuel distributor which holds 25 per cent of the Czech's fuel market, reported a 69.152 million crown ($2.12 million) loss in the first quarter of 1998 on revenues from fuel sales worth 3.139 billion crowns. The main reason for the loss was the interest on five billion crowns worth of loans. The company has external funds of 8.131 billion crowns and share capital of 1.7 billion crowns. Last year Benzina reported a 59.93 million crown loss ($1.84 million).

Estonia: Forekspank reported a pre-tax profit of 18.6 million kroons ($1.3 million) in the first four months of 1998, and a growth in the pre-tax profit of 7.3 million kroons ($0.5 million) in April alone. Forekspank's total assets increased by 2.82 per cent or 71.4 million kroons ($5.03) in April, and stood at 2.6 billion kroons ($183 million) at the end of the month.

The Baltic Ship Repair Yard (BLRT) is planning to issue 5,000 new shares, bringing the company's share capital up from ten to 15 million kroons ($1.06 million), said Galina Aleksandrova, the company Chief Economist. It is necessary to increase a stock capital by five million kroons to fulfil the company's 1998 investment plan. According to preliminary non-audited figures, last year the BLRT group produced nearly 100 million kroons ($7.04 million) in profit on a turnover of 95 million kroons. Most of the profit will be channelled into investments.

Hungary: Ross Mould Inc., the US-based glass manufacturer, is planning to invest up to $15 million in the motor parts company, Miskolci Mechanikal Gepgyarto Kft., MG. On 14 May, George Bowyer, Chief Executive for Ross Mould, said that his company will continue with the production of motor parts at the plant, and will also concentrate more on glass mould.

Matav Rt., a telecommunications company, reported a consolidated pre-tax profit for the first quarter of 1998 of 15.28 billion forints ($73 million), a 67.8 per cent rise over the same period in 1997. After tax profit stood at 15.108 billion forints, a rise of 67.6 per cent on the same period last year, while net profit was up 49.6 per cent at 13.172 billion forints ($62.9 million).

Globus Canning Rt., a food processing company, is planning to raise capital through public offer and private placement of new shares, in order to finance a programme of acquisitions, as well as ongoing purchases. The raise is expected to be between 800 million forints and two billion forints, respectively.

MOL Rt., the oil and gas company, projects a 35 per cent rise in its profits for the first quarter of this year, with estimates in the region of between 17 billion and 19 billion forints ($90.8 million). MOL Rt.'s profits for 1997 stood at 13.5 billion forints. The increase is largely due to lower import costs.

Latvia: Latvia's Unibanka reported a net profit of 2.3 million lats ($3.9 million) in the first four months of this year, and 486.000 lats in April alone. The Bank's capital and reserves were 32.699 million lats at the end of April, including paid up share capital of 24.922 million lats.

Poland: Stalexport's, a large trading company, stated that the sales revenues in 1997 stood at $742,455, 54 per cent up from 1996. Stalexport's President, Ryszard Harhala, said that the greatest growth was recorded in home trade, which rose 81 per cent against the 1996 level. Exports went up by 51 per cent over the same period. The company President stated that the dynamic growth of sales was made possible by increasing the company's share portfolio in steelworks.

According to the company's press service, Renault Polska sold 8,020 cars in the first four months of 1998. In the corresponding period of last year Renault Polska sold 11,351 cars. With the plan for this year's sales of 30,000 units, Renault Polska will gain a five per cent share of the market.

The Optimus SA computer company, which gained 27 million zlotys (about eight million dollars) in net profit in 1997, expects this year's profits to be at a similar level, said the company President, Roman Kluska. Optimus is Poland's largest computer manufacturer.


Czech Republic: the bearish trend, which began at the end of April, dominated the Prague bourse in the week ending 12 May, with a majority of large stocks weakening and affecting the stock index negatively. The ZB-index dropped two per cent to 494.7 points. In a week-on-week comparison, all the blue chips edged lower, except for Ceska Sporitelna and the Cokoladovny chocolate producer, which strengthened moderately, said Pavel Sobisek from Zivnostenska banka's analytical department.

Poland: Bank Rozwoju Eksportu, BRE, SA will sell 810,868 shares of Polski Bank Rozwoju SA at a price of 28.5 zlotys ($8.42) per share on the Warsaw Stock Exchange (WSE). Subscriptions for the share sale will be held between 14 May and 15 June at BRE Brokers÷ offices. The aim of the move is to acquire enough shares to give BRE SA a 100 per cent vote at PBR's general shareholders' meeting.

According to Dariusz Salajewski, the Deputy President of Bank Czestochowa, the Bank plans another share issue in the first half of next year. The issue is aiming for the Bank to get a foreign currency licence and broaden the range of its services. Subscription for 835,000 shares of the C series will end on 22 May. In 1997 the Bank reported a net profit of 2.06 million zlotys ($0.6).

The third largest Polish steel producer, Huta Zawiercie, will issue commercial bonds worth 40 million zlotys ($12 million), which will be organised by the Raifaissen Centrobank.


Estonia: most of Estonia's closed-ended investment funds plan to wind up operations because their income is subject to double taxation, and trading with shares in the fund is under their net value. Under effective laws, the investor pays the tax on the growth of realised capital, and the fund pays the tax on income from dividends. "The difference has become so wide that there is practically no opportunity to launch new issues for a closed-ended fund", said Kristjan Hanni, Managing Director of Hoiupanga Fondid, Savings Bank Funds.


Czech Republic: on 10 May the Civic Democratic Party's (ODS) Executive Council unanimously approved the manifesto with which the Party would be running in the Parliamentary elections in June, said Miroslav Macek, ODS' Deputy Chair. The manifesto would only be disclosed at its pre-election conference in Prague on 24 May. The four articles which form the manifesto's backbone were published by the ODS Chair, Vaclav Klaus, for his meeting with ODS mayors in Podebrady, Central Bohemia in March. The right-wing ODS has about 40 deputies in the 200-member lower house and 29 senators in the 81-seat upper house.

Hungary: the first round of Hungary's General Election showed a low 56.27 per cent turnout, with two counties in eastern Hungary registering less than 50 per cent - their votes were declared invalid. Current figures show that five parties achieved the five per cent threshold required to enter Parliament - the Hungarian Socialist Party, MSZP, 32.25 per cent; the Fidesz Hungarian Civic Party, Fidesz-MPP, 28.19 per cent; the Smallholders' Party, FKgP, 13.77 per cent; the Alliance of Free Democrats, SZDSZ, 7.88 per cent; and the Hungarian Justice and Life Party, MIEP, 5.55 per cent. Under the Hungarian Election Law, 176 of the total 386 parliamentary seats go to candidates coming first in individual constituencies, and 152 seats are awarded on the basis of the number of votes cast for regional and Budapest party lists. A further 58 seats are awarded under a complicated system, but all go to the parties which achieved the five per cent threshold in the first round. The allocation of these 58 seats tends to benefit the parties with the largest share of the vote in the first round.

Poland: on 13 May, Bronislaw Gieremek, the Foreign Minister, had talks in Prague with the Czech Prime Minister, Josef Tosovsky, and the Foreign Minister, Jaroslav Sedivy, on the partnership between both countries and their regional and integration policies.


Exchange rates (17 April)

£ US$ D-Mark
Albania Lek 256.2 156.7 88.6
Armenia Dram 822.1 502.4 284.0
Azerbaijan Manat 6464.2 3950.0 2233.2
Belarus Rouble 108418.2 66250.0 37454.8
Bulgaria Lev 2889.5 1765.6 998.2
Croatia Kuna 10.5 6.4 3.6
Czech Republic Koruna 53.3 32.6 18.4
Estonia Kroon 23.2 14.2 8.0
Georgia Lari 2.2 1.3 0.7
Hungary Forint 342.5 209.3 118.3
Kazakhstan Tenge 129.1 76.6 42.4
Kyrgyzstan Som 31.0 18.7 10.4
Latvia Lats 0.9 0.6 0.3
Lithuania Litas 6.7 4.0 2.2
Macedonia Denar 93.1 56.9 32.2
Moldova Leu 7.7 4.7 2.7
Poland Zloty 5.5 3.4 1.9
Romania Leu 13943.0 8520.0 4817.0
Russia Rouble 10.0 6.1 3.5
Slovakia Koruna 55.8 34.1 19.3
Slovenia Tolar 269.9 164.9 93.3
Tajikistan Tajik rouble 1264.4 754.0 408.0
Turkmenistan Manat 6925.0 4165.0 2247.0
Ukraine Hryvna 3.3 2.0 1.6
Uzbekistan Soum 143.0 85.0 46.7
Yugoslavia New dinar 17.4 10.6 6.0

Rates derive from the FT as of 11 May 1998.
Rates for Georgia, Kyrgyzstan, Tajikistan, Turkmenistan, Uzbekistan provided by the National Banks of each country

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