News round-up  April 1999


Russia: Moody's Investors Service stated that the City of Moscow has accumulated a substantial debt. This debt is largely denominated in foreign currency which makes the City increasingly vulnerable to refinancing risks and a changeable exchange rate. In response to this, Moody's downgraded the domestic and foreign currency bond ratings of the City to
Caa 1. Moody's noted that the city's finances were under great pressure from diminishing corporate tax revenues, increasing tax arrears and non-cash settlements.

At a meeting with local leaders, Moscow Mayor Yury Luzhkov said that a new economic crisis could occur in Russia in May to June 1999. Luzhkov, who is a potential candidate for Russia's presidential elections in 2000, commented that the Russian Prime Minister Yevgeny Primakov has prevented this catastrophe till now, but that Russia is gradually sinking. He said, 'If Primakov's Government takes no measures to support production, we will collapse, and the consequences will be even more horrible than after August 17'.

Czech Republic: the Czech Statistical Bureau (CSU) reported that the nation's economy should recover from its recent decline by the year 2000. This will be achieved through increased investments, domestic demand and a reduced trade deficit. A regular forecast revealed a 0.6 per cent drop in Gross Domestic Product (GDP) for the entire year. This is a little more positive than the 0.8 per cent drop that the CSU had predicted in February.

Slovakia: in February, Slovakia#39;s unemployment rate stood at 16.5 per cent or 463,625, up 0.2 per cent from January. Although 439,845 of the total unemployed were capable of working if an appropriate position arose, there were only 10,894 vacancies. From January to February there was a 2.8 per cent rise of individuals claiming unemployment benefits, an approximate figure of 148,386.

Hungary: according to the Government Commissioner for anti-flood measures, Kalman Katona, Hungary has spent approximately HUF 6.0 billion dealing with the floods in the eastern part of the country. Katona said that loans, state funds and construction materials would be shared amongst those who had suffered loss. Public work programmes will also help reconstruction.


Slovakia: the Chair and President of the management board for Slovnaft revealed that the Slovakian oil enterprise is looking for a strategic partner. The move has been made in response to universal globalisation and measures adopted by similar enterprises to form alliances with strong partners. President Slavomir Hatina stated that 'Slovnaft's future partner must bring the necessary 'know-how', which will permit Slovnaft, which is already a modern company, to take a higher position on the scale of petrochemical companies'.

Hungary: the Hungarian Telephone and Cable Corporation (HTC) has been given more time to repay its outstanding debts worth US$170 million to Postabank. Postabank had given the company a 45-day extension while negotiations continued, but it has now been decided that the money must be paid by the year 2006.

Russia: Oleg Belov, General Director of Rostelecom, may be moved to the position of General Director of the telecommunications holding company Svyazinvest. The total volume of services of Svyazinvest was 24.7 billion rubles without value added tax (VAT), which is 11.5 per cent more than in 1997, but the real revenue was 25 per cent less than in 1997 because of the dollar growth. However, shareholders will review the issue of electing a company general director at the annual shareholders' meeting on 27 April.

Czech Republic: Czech Industry and Trade Minister Miroslav Gregr has said that the Kosovon crisis will affect trading activities in the Balkan region of engineering company Skoda Plzen. The most important deal between the Czech Republic and Yugoslavia is the supply of equipment to construct a co-generation power plant. The total cost of developing the plant is $300 million, whereby Skoda Plzen would receive one-third of this figure. According to Minister Gregr, the company has a very good reputation and tremendous prestige in Yugoslavia.


Slovakia: the Slovak Parliament was flooded with debates concerning the crisis in Kosovo. The Government's opposition parties bombarded the ruling coalition over the action the Cabinet had taken in Yugoslavia. Prime Minister Mikulas Dzurinda's address over Kosovo provoked varying reactions. Slovak National Party (SNS) member Anna Malikova said the western military alliance was a 'criminal organisation'. Other deputies of the opposition attacked the Government for offering Slovakia's airspace to the North Atlantic Treaty Organisation (NATO). However, the parliamentary Foreign Committee has already voted on the Kosovo report and it approves of the steps which the Cabinet has taken.

Latvia: the Latvian Foreign Minister Valdis Birkavs has expressed approval of Russia's position regarding NATO air strikes against Yugoslavia. The Minister remarked on the importance that all effort is made to end the problems in Kosovo, but added that air strikes would not resolve the issue. With reference to the Russian Prime Minister's visit to Belgrade he said, 'I place rather large hope in this visit, because in principal, further escalation of events, would, of course, not be desirable. I support the visit and wish Mr Primakov success, because every means, every opportunity to stop the violence and humanitarian catastrophe should be used.' He continued that although the Latvian Government may consider providing aid to the region, they would not enter Kosovo without an invitation.

Poland: a lawsuit valued at DEM 2.0 billion ($1.1 billion) has been filed against the Federal Republic of Germany. The country is being sued by approximately 22,000 Poles for time spent in Nazi concentration camps. A German lawyer representing the claimants said 'We are demanding that the justice system take action and do something that the legislative branch has failed to do'. It seems doubtful that the claim will be supported by the German court as Poles are excluded from claim entitlement under Germany's 1956 compensation, and 1969 was set as the deadline for filing compensation claims.


Czech Republic: the Czech Regional Court in Ostrava informed the major shareholder of Pivovar Radegast, in particular IMP Finance, that the plans that Bass International Brewers had for having IMP Finance prohibited from voting with the Radegast shares it currently holds was dismissed from court. IMP Finance attorney Karolina Horakova said 'The court rejected Bass' petition because no need has been proved for a court injunction in this case, and Bass had not provided proof of the allegations on which the petition was based.

Estonia: Leks Kindlustus, an Estonian insurer, has revealed plans to sell its life insurance subsidary to Estonian Uhispank. The deal is valued at 24 million kroons and would link Uhispank, Lek's largest shareholder with a 44.7 per cent stake to Leks Elukindlustus and its own life insurance subsidary Hansapanga Elukindlustus. Leks also announced that the council had given the board permission to sell its 78.1 per cent share in Latvian subsidiary Saules Laiks, or to select a strategic partner for it. 'Both options are possible. We want a better position on the Latvian market. It depends what is better for Leks and our shareholders.'

Poland: a State Treasury official said that a consortium of a Warsaw branch of ING Bank NV and Nicom Consulting Ltd had been chosen as a consultant in the sale of a strategic stake in telecomms firm Telekomunikacja Polska SA (TPSA). In 1998, the Government started the privatisation of TPSA by floating a 15 per cent stake on the Warsaw market and abroad. The stake was sold for about $900 million. The Ministry is likely to announce a tender for the 25-35 per cent stake in late April.

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