News round-up  February 1999


Estonia: the Estonian Government recently approved the introduction of four free economic zones in the towns of Valga and Voru in southern Estonia. These towns would be regarded as border stations, with officials being given rights to perform customs examinations on goods coming from Russia. Both towns already have several customs warehouses and will construct handling and packaging centres and customs warehouses. Mart Siimann, Estonian Prime Minister, described it as a regional policy decision which is expected to increase investor interest in south-east Estonia.

Czech Republic: according to a Czech Statistical Bureau (CSU) survey conducted among enterprises which made up for 38 per cent of Czech exports and 23 per cent of imports last year, imports are expected to fall in the first three months of this year while exports are predicted to rise by a nominal two per cent, year-on-year. The decline emphasises the continuance of a serious recession which the country has been experiencing since 1998.

Slovakia: Moody's Investors Services confirmed its Ba1 sovereign country rating of Slovakia, but decreased the outlook from a 'stable' to a 'negative'. The agency also confirmed its Ba2 rating for long term foreign currency bank deposits, but again changed the forecast from a 'stable' to a 'negative'.

Belarus & Lithuania: Belarussian Ambassador Vladimir Garkun has assured Lithuania that his country will pay its debt of 374.5 million litas (US$93.6 million) for electrical supplies to the state-owned Lithuanian Energy by the summer. The Lithuanian Government has threatened to reduce or cease energy exports should Belarus not keep its promise.

Poland: Polish legislators recently passed the final version of the 1999 budget, with the Lower House agreeing to a Senate proposal to offer more funds to the agricultural sector. According to the Ministry of Finance, the additional expenditure is not expected to increase the budget deficit, which is estimated to fall to 2.15 per cent of Gross Domestic Product (GDP) compared to last year's estimated 2.5 per cent. The draft will now be passed to President Alexander Kwasniewski, although he cannot veto the legislation.


Hungary: Hungarian oil and gas giant Mol announced 1998 profits of HUF34.5 billion ($161 million) with net revenues of HUF375.1 billion ($1.7 billion). Mol's Director of Capital Markets said profits had increased by 44 per cent (26 per cent in US$ terms) compared to 1997. Managing Director Laszlo Mandoki said approximately 12 per cent of revenue was lost (23 per cent in US$) compared to 1997. This was attributed to the implementation of a flat-rate excise levy from the beginning of January 1998.

Russia: Russia's largest oil producer, LUKoil, plans to obtain a 30 per cent stake in Timan Pechora Co LLC, a joint venture to develop oil reserves in the Russian Arctic. According to LUKoil's First Vice-President Ravil Maganov, the company is expected to sign a memorandum on its participation in the project during the United States (US)-Russia commission meeting scheduled for March.

YUKOS, Russia's second largest oil producer, has estimated its crude output for 1998 to be 44.85 million tonnes. This was an increase of 9.25 million tonnes or 26 per cent compared to 1997. However, this increase only occurred because 1998 data included production by the Eastern Oil Company, which YUKOS bought at the end of 1997.

Estonia: Eesti Telekom, an Estonian holding company, has elected Ulo Jaaksoo as head of the company council. Eesti Telekom currently has majority stakes in the mobile telephone provider Eesti Mobiitelefon (EMT) and fixed-line monopoly Eesti Telefon (ET).


Romania & the Ukraine: following talks with the Romanian Foreign Minister Andrei Plesu, the Ukrainian Foreign Minister Borys Tarasyuk stated that the two countries were moving closer towards settling unresolved issues dating back to the communist era. A post-communist treaty had been signed by both countries in 1997, but delicate issues, including establishing borders in areas which both countries believe to be rich in oil and gas deposits, have remained unsolved. However, rather than appealing to the international courts, Tarasyuk stated that 'We are determined to reach a compromise involving concessions on both sides.'

Estonia: the Economics Committee of the Estonian Parliament believes that the Government has not secured sufficient measures to resolve a shipping dispute with Finland. The Committee released a statement which emphasised the importance of current decrees and foreign economic relations. It also affirmed respect for good business practices and standards of free competition.

Poland: a bill to introduce 'clear procedures' for granting government subsidies was approved by the Polish Government. This was a move necessary to qualify for European Union (EU) membership. Deputy Economy Minister Wojciech Kutner told a news conference that 'The bill on public aid can be called a backbone of the economy. It adjusts our regulations to standards of the EU'.


Russia: LUKoil has bid in a tender for 51 per cent of the Bulgarian oil products' retailer Petrol. The bid was submitted on 12 February, but despite missing the 19 October deadline, a LUKoil spokesman told Reuters in Moscow that it had been accepted. However, an official at the Bulgarian Privatisation Agency said that although the bid had been received by the agency, he could not say whether or not it had been accepted.

The German-based energy firm RWE/EVS lost its bid for the Hungarian power expansion tender despite the secret agreement which it had made with the former Socialist government in 1995. The German firm was guaranteed the rights to build two 400-megawatt capacity lignite-fuelled power stations but the agreement collapsed when those political leaders involved were replaced. According to independent analysts, the government's move against RWE/EVS was unavoidable due to rising mining costs.

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