News round-up  January 1999


Moldova: Moldova is to receive a US$35 million loan from the International Monetary Fund (IMF). However, the IMF stated that it was concerned about the country's weak budget and poor tax collection. It urged Moldovan authorities to quicken implementation of reforms in health and education, energy consumption and compensations, pensions, agricultural support and public administration. Should the reforms be on target, Moldova will receive an additional $70 million this year and a further $30 million in the year 2000. Moldova is one of the six former Soviet Republics to be receiving extra support from the international community following Russia's financial descent.

Russia: in 1998 inflation in Russia came to 84.6 per cent year-on-year, wiping out the gains of stabilisation of past years, when inflation was brought down to 21.8 per cent in 1996 and 11 per cent in 1997. The official year-end rouble rate was 20.65 per dollar, meaning a 240 per cent year-on-year devaluation. The RTS stock index closed at 58.93, down from 397.08 a year before and a peak of 571.66 on 6 October 1997.
Russian authorities switched on the money machine after the devaluation in August. One of the macroeconomic 'explanations' for this has been that monetisation of the Russian economy is one of the lowest in the world - money supply M2 as a per cent of Gross Domestic Product (GDP) was only 16 per cent before the devaluation and declined to some eight per cent after the devaluation. However, this does not take into account the stock of cash dollars which Russian citizens hold and which is estimated to be the biggest in the world after the United States (US).

Latvia: Latvian Q3 GDP growth is up by 1.9 per cent year-on-year and rests on domestic demand, which, in relative terms, has not been hit to the same extent as exports. Industrial output fell by three per cent year-on-year in Q3.

Lithuania: on the other hand, Lithuania still enjoys reasonable growth. Industrial output was still up by over five per cent year-on-year in Q3 and 4.5 per cent year-on-year in November, while Q3 GDP grew by 3.2 per cent year-on-year. However, given Lithuania's relatively big trade exposure to Russia, a further slowdown in the economy is expected, with a lag compared to both Latvia and Estonia. (Estonian Q3 GDP was up 1.8 per cent year-on-year.)

Tajikistan: this year Tajikistan is expected to display an economic growth of two per cent, the same as 1998, before rising to three per cent in the year 2000. According to the Economist Intelligence Unit's fourth quarter report, 'Trade is likely to suffer this year, while prices for key export earners - aluminium and cotton - are not expected to do well in 1998-2000.'


Slovakia: on 5 January the Slovak concern, DMD Holding Trencin, held a shareholders' meeting to remove the company's board. Trencin's former management believed the meeting to be invalid because only 55 per cent of common stock shareholders participated, while there were no holders of preferred stock. They claimed that, 'The holdings articles require the participation of more than 30 per cent of each group of shareholders for a meeting to be valid.' However, the Economy Ministry argued that the regional court in Kosices annulled this limit on 16 December 1998.

Hungary: at a press conference on 11 January, Managing Director, Jyrki Jalasto, announced Nokia's plans to build a mobile phone factory in Komarom, north-west Hungary. According to Jalasto, the plant will have the capacity to produce millions of mobile phones a year for the domestic and regional markets. It is expected to be up and running in the year 2000. Nokia will benefit from a six-year full local tax break and the city of Komaron will also provide HUF 60 million in infrastructure support.

Czech Republic: Czech Prime Minister, Milos Zeman, recently announced how declaring bankruptcy aided Zbrojovka Vsetin. The company which declared bankruptcy in April 1998 continued to produce weapons, ammunition, detonators, textile machines and tools at its six principal plants. Zeman remarked how, 'If bankruptcy proceedings are executed properly they can actually help a company recover.'


Moldova: Moldova has threatened to leave the Commonwealth of Independent States (CIS) Interparliamentary Assembly if the Russian State Duma passes a resolution acknowledging the independence of the Dnestr region. In a statement to the Russian Federal Assembly the Chair of the Moldovan Parliament, Dumitru Diacov, said that the, 'The Dnestr region is an inseparable part of Moldova and is recognised as such by the entire international community.'

Czech Republic: The Czech Prime Minister, Milos Zeman, has approved a move by Petr Necas, Deputy Chair of the Civic Democratic Party (ODS) Deputies' floor group, to ask ODS deputies to approve the Government's draft budget. Zeman stated that 'The Government should not be blackmailed in budget talks with irrational demands and I consider the Communist party's demand for lowering defence spending to be one of them.'He expressed his surprise at the Communists pushing for such a proposal, especially since a lot of their voters were in the army.

In an effort to curb rising unemployment in the Czech Republic, the Government is requesting that all 'green card' applicants produce documentation to prove they were not involved in any criminal activity in their home countries. Further measures are also being planned to prevent illegal immigration.

Slovakia: on 11 January, former Slovak Economy Minister, Jan Ducka, was found shot dead outside his home in Bratislava. He was a close friend of former Premier Vladimir Meciar and ex-Director of the Slovak Gas Industry.

Former Yugoslavia & Albania: Yugoslav President, Slobodan Milosevic, stated that Belgrade would not 'tolerate terrorist acts' by ethnic Albanian separatists. Later the same day a leading ethnic Albanian rebel was shot dead in Kosovo while international arbitrators continued to negotiate the release of eight Yugoslav soldiers.

Kazakhstan: large numbers of Kazakhs flooded polling stations in their first presidential election since independence. However, this was a controversial election which many felt favoured the incumbent Nursultan Nazarbayev. His re-election by a significant majority exhibits the preference for power to remain in the hands of Soviet-era leaders with autocratic methods.

Former Yugoslavia: North Atlantic Treaty Organisation (NATO) peacekeepers defended their killing of a Bosnian Serb war crimes suspect by arguing that it was his fault for trying to run down troops with a car full of children.


Hungary: Napi Gazdasag reported that seven banks, including Inter-Europa Bank, Bankgesellschaft Berlin AG, and insurance company Hungaria Biztosito Rt (HB) have bought the privatisation tender prospectus of Konzumbank. Two of the prospective buyers, including Bankgesellschaft Berlin AG, do not yet have subsidiaries in Hungary. Bankgesellschaft Berlin AG's Hungarian representative would not comment on the information. Inter-Europa Bank, 65 per cent of which is owned by foreign investors, chiefly the Istito Bancario San Paolo di Torino, and which is assumed to expand its retail office network through the acquisition, did not deny the news. HB confirmed that at its request the deadline for the submission of bids was postponed to 15 February, but said the company would not disclose any information before the bidding finishes.

Estonia: Estonian insurance concern Polaris is to sell ten per cent of its shares to the German insurer Alte Leipziger. Alte Leipziger will probably be disappointed by the decision because it hoped to have the controlling stake in the company. At present Pro Invest holds a 51 per cent stake in Polaris, while ERA Pank owns 49 per cent. Andres Bergmann holds the controlling stake in both these enterprises. However, the Bank of Estonia has placed ERA Pank under moratorium, which may mean difficulties for Polaris.

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