Macro and Government Notes
In Warsaw, on the first in a series of visits to Central and Eastern Europe, the environment commissioner agreed with Poland's Environment Ministry on closer cooperation on tackling pollution. Poland's National Fund for Environmental Protection is the largest in Eastern Europe, and the country has also pioneered an Ecofund, based on debt-for-environment swaps with external creditors, a plan unique in the region. Poland's own institutions are providing up to 95% of environmental investment, including energy saving. But a key issue is how best to make use of the other 5% that comes from other sources. One outside source is the European Union's Phare Aid Programme, out of which some ECU 130 million ($164 million) has been absorbed by Poland's environmental sector since 1990. The nine countries of Central and Eastern Europe which are associated with the EU and seeking full membership must adjust their laws, including many on the environment, to the union's standards as set out in a May 1995 white paper.
Polish industrial output extended its three-month decline in January, but analysts said the fall was seasonal and did not pose a threat to the economy's sustained growth this year. According to figures released by the Central Statistical Office (GUS), industrial output fell 4.9% in January from December, but was strong in year-on-year terms, growing 6.9%, against a 10.2% overall 1995 increase. Analysts said industrial output could again fall in February, as it did a year ago, but that the loss would be limited to no more than 2%. They said the economy, which grew 7% in 1995 and was seen rising another 5.5% this year, was making a difficult transition from export-led growth to one based more on internal demand, because of a slowdown of western European economies. Analysts said this switch toward domestic demand should be cushioned by last year's 19% increase in investment, which paved the way for more efficient production. January's solid 9.6% year-on-year growth in manufacturing indicated that Poland's production base was fundamentally strong.
Criticism mounted last week against Finance Minister Grzegorz Kolodko for overlooking loopholes in tax laws that could cost the budget hundreds of millions of dollars in lost revenue. Kolodko was attacked for creating and then failing to amend a tax law that allows people to deduct up to 15% of their income for certain donations to individuals. Treasury offices have few means of verifying the reported donations to people such as impoverished relatives. The regulation on tax deductions was introduced in 1994, in a wider tax package, but few people took advantage of it until this year, when the media extensively publicized it. Many media reports have suggested people are likely to invent donations to deduct from their taxable income. Prime Minister Wlodzimierz Cimoszewicz said last week he feared that such actions could cost the budget several hundred million dollars in lost revenue. Kolodko has said he will plug the loopholes and made an angry statement last week calling all those who took advantage of the imprecise law "hypocrites who scoff at their own country." He added that tax avoidance was a sin.
Registered unemployment rose by 0.5 points in January to 15.4% of the workforce because of a seasonal drop in part-time work and planned labor code changes, a labor ministry official said. The new labor rules, to take effect in May, would force employers to replace renewable short-term contracts with permanent employment. The proposed changes will make it more difficult to employ part-time and temporary workers, and employers are laying off part-timers whose work may be performed by permanent workers. The ministry also expects that new rules on unemployment compensation, which come into force next month and make it harder to receive benefits, could also have triggered a rise in jobless numbers. But Deputy Labor Minister Maciej Manicki stressed that the long-term unemployment trend was declining and the jobless rate was still lower than 16.1%, the rate a year ago.
Czech Prime Minister Vaclav Klaus will meet his new Polish counterpart Wlodzimierz Cimoszewicz on March 3 in Poland. Klaus did not specify the place of the meeting, saying it would be announced later. The Czech and Polish presidents, Vaclav Havel and Aleksander Kwasniewski, were to meet on Feb. 23 in the Czech Republic, but the meeting was postponed after Havel underwent minor oral surgery. A new date has yet to be set. Both countries list joining the European Union and NATO as top foreign policy priorities. The Czech Republic last December was the first former East Bloc country to join the OECD, the group representing the 26 most advanced economies. Poland is expected to join the OECD later this year.
The Agriculture Ministry and food producers agreed last week on minimum prices of wheat and rye that will be in force from April 1 to March 31, 1997. The deputy agriculture minister said the minimum price of wheat was established at zl. 400 ($160) per ton and of rye at zl. 280 ($112) per ton. The prices will be subject to government approval. The Farming Market Agency (ARR), a state body created to keep the agriculture market in balance, will intervene if market prices fall below these minimum levels. Wheat and rye now stand at about zl. 520 ($210) and zl. 330 ($135) per ton, respectively.
President Aleksander Kwasniewski reassured Slovakia last week that he supported its aspirations to join the European Union (EU). Earlier Bratislava's foreign ministry criticized Kwasniewski for saying in Budapest that Slovakia's turbulent domestic politics meant it might take longer to join the EU than Poland, Hungary and the Czech Republic - the other members of the so-called Visegrad group. A presidential spokesman said Kwasniewski supported the aspirations of all countries seeking EU membership, including Slovakia. The speed with which new countries joined was up to the EU and to their own progress in adapting their legal and economic systems to the union's requirements, he added. Poland and other countries of the former Soviet bloc, which collapsed in 1989, want to quickly join the EU, and membership talks are due to start after the end of the union's inter-governmental conference which begins this year.
Swedish Foreign Minister Lena Hjelm-Wallen began an official visit to Poland last week by discussing two-way ties and international issues with her Polish counterpart, Dariusz Rosati, PAP news agency said. She also met President Aleksander Kwasniewski and Prime Minister Wlodzimierz Cimoszewicz last week. The talks were centered on European integration and security as well as regional cooperation and the prospects of Polish-Swedish bilateral contacts. Swedish business circles, 11th among countries investing in Poland, had already invested about $180 million and had declared another $100 million.
Poland plans to liberalize its capital flow laws by the end of this month in order to fulfill OECD membership criteria and enter the prestigious club in the middle of 1996. The capital flow liberalization planned for March 30 is intended to ease Poland's entry into the Organization of Economic Cooperation and Development. Poland hopes its entry in the OECD, a Paris-based 26-member group of the world's richest nations, would serve as a platform for future European Union membership. So far, Poland has failed to meet the group's rigid entry standards, and if the mid-1996 OECD membership date holds, it would be the third post-communist country to join the club after the Czech Republic and soon-to-be-member Hungary. The deputy finance minister told a news conference the planned liberalization included lifting direct foreign investment limits placed on Polish firms and an easing of foreign entry restrictions. The liberalization would allow foreign entities to issue financial papers worth up to ECU 200 million ($252 million) in Poland through a public offering, he said. Further capital flow liberalization is planned for December, which would allow Poles to buy foreign financial papers through authorized banks or brokers. He said that these regulations could limit the growth of the country's booming foreign currency reserves, which doubled to more than $20 billion in 1995, but that reserve growth was primarily linked with the economy and the profitability of Polish financial instruments to foreign investors. Late March regulation changes would also allow companies to freely issue financial papers of more than one-year in length. In its efforts to join OECD, Poland is also working on tailoring its tax verifying regulations as well as laws on limits on shipyard subsidies and environmental protection.
Polish industrial output extended its three-month decline in January, but analysts said the fall was seasonal and did not pose a threat to the economy's sustained growth this year. According to figures released by the Central Statistical Office (GUS), industrial output fell 4.9% in January from December, but was strong in year-on-year terms, growing 6.9%, against a 10.2% overall 1995 increase. Analysts said industrial output could again fall in February, as it did a year ago, but that the loss would be limited to no more than 2%. They said the economy, which grew 7% in 1995 and was seen rising another 5.5% this year, was making a difficult transition from export-led growth to one based more on internal demand, because of a slowdown of western European economies. Analysts said this switch toward domestic demand should be cushioned by last year's 19% increase in investment, which paved the way for more efficient production. January's solid 9.6% year-on-year growth in manufacturing indicated that Poland's production base was fundamentally strong.
Criticism mounted last week against Finance Minister Grzegorz Kolodko for overlooking loopholes in tax laws that could cost the budget hundreds of millions of dollars in lost revenue. Kolodko was attacked for creating and then failing to amend a tax law that allows people to deduct up to 15% of their income for certain donations to individuals. Treasury offices have few means of verifying the reported donations to people such as impoverished relatives. The regulation on tax deductions was introduced in 1994, in a wider tax package, but few people took advantage of it until this year, when the media extensively publicized it. Many media reports have suggested people are likely to invent donations to deduct from their taxable income. Prime Minister Wlodzimierz Cimoszewicz said last week he feared that such actions could cost the budget several hundred million dollars in lost revenue. Kolodko has said he will plug the loopholes and made an angry statement last week calling all those who took advantage of the imprecise law "hypocrites who scoff at their own country." He added that tax avoidance was a sin.
Registered unemployment rose by 0.5 points in January to 15.4% of the workforce because of a seasonal drop in part-time work and planned labor code changes, a labor ministry official said. The new labor rules, to take effect in May, would force employers to replace renewable short-term contracts with permanent employment. The proposed changes will make it more difficult to employ part-time and temporary workers, and employers are laying off part-timers whose work may be performed by permanent workers. The ministry also expects that new rules on unemployment compensation, which come into force next month and make it harder to receive benefits, could also have triggered a rise in jobless numbers. But Deputy Labor Minister Maciej Manicki stressed that the long-term unemployment trend was declining and the jobless rate was still lower than 16.1%, the rate a year ago.
Czech Prime Minister Vaclav Klaus will meet his new Polish counterpart Wlodzimierz Cimoszewicz on March 3 in Poland. Klaus did not specify the place of the meeting, saying it would be announced later. The Czech and Polish presidents, Vaclav Havel and Aleksander Kwasniewski, were to meet on Feb. 23 in the Czech Republic, but the meeting was postponed after Havel underwent minor oral surgery. A new date has yet to be set. Both countries list joining the European Union and NATO as top foreign policy priorities. The Czech Republic last December was the first former East Bloc country to join the OECD, the group representing the 26 most advanced economies. Poland is expected to join the OECD later this year.
The Agriculture Ministry and food producers agreed last week on minimum prices of wheat and rye that will be in force from April 1 to March 31, 1997. The deputy agriculture minister said the minimum price of wheat was established at zl. 400 ($160) per ton and of rye at zl. 280 ($112) per ton. The prices will be subject to government approval. The Farming Market Agency (ARR), a state body created to keep the agriculture market in balance, will intervene if market prices fall below these minimum levels. Wheat and rye now stand at about zl. 520 ($210) and zl. 330 ($135) per ton, respectively.
President Aleksander Kwasniewski reassured Slovakia last week that he supported its aspirations to join the European Union (EU). Earlier Bratislava's foreign ministry criticized Kwasniewski for saying in Budapest that Slovakia's turbulent domestic politics meant it might take longer to join the EU than Poland, Hungary and the Czech Republic - the other members of the so-called Visegrad group. A presidential spokesman said Kwasniewski supported the aspirations of all countries seeking EU membership, including Slovakia. The speed with which new countries joined was up to the EU and to their own progress in adapting their legal and economic systems to the union's requirements, he added. Poland and other countries of the former Soviet bloc, which collapsed in 1989, want to quickly join the EU, and membership talks are due to start after the end of the union's inter-governmental conference which begins this year.
Swedish Foreign Minister Lena Hjelm-Wallen began an official visit to Poland last week by discussing two-way ties and international issues with her Polish counterpart, Dariusz Rosati, PAP news agency said. She also met President Aleksander Kwasniewski and Prime Minister Wlodzimierz Cimoszewicz last week. The talks were centered on European integration and security as well as regional cooperation and the prospects of Polish-Swedish bilateral contacts. Swedish business circles, 11th among countries investing in Poland, had already invested about $180 million and had declared another $100 million.
Poland plans to liberalize its capital flow laws by the end of this month in order to fulfill OECD membership criteria and enter the prestigious club in the middle of 1996. The capital flow liberalization planned for March 30 is intended to ease Poland's entry into the Organization of Economic Cooperation and Development. Poland hopes its entry in the OECD, a Paris-based 26-member group of the world's richest nations, would serve as a platform for future European Union membership. So far, Poland has failed to meet the group's rigid entry standards, and if the mid-1996 OECD membership date holds, it would be the third post-communist country to join the club after the Czech Republic and soon-to-be-member Hungary. The deputy finance minister told a news conference the planned liberalization included lifting direct foreign investment limits placed on Polish firms and an easing of foreign entry restrictions. The liberalization would allow foreign entities to issue financial papers worth up to ECU 200 million ($252 million) in Poland through a public offering, he said. Further capital flow liberalization is planned for December, which would allow Poles to buy foreign financial papers through authorized banks or brokers. He said that these regulations could limit the growth of the country's booming foreign currency reserves, which doubled to more than $20 billion in 1995, but that reserve growth was primarily linked with the economy and the profitability of Polish financial instruments to foreign investors. Late March regulation changes would also allow companies to freely issue financial papers of more than one-year in length. In its efforts to join OECD, Poland is also working on tailoring its tax verifying regulations as well as laws on limits on shipyard subsidies and environmental protection.
