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TT Business Intelligence Report Vol. 2, No. 39, 5 February 2003 Business Intelligence, Crime, Corruption and Debt in C&E/SE Europe and the former Soviet Union  UPCOMING CONFERENCES ADAM SMITH INSTITUTE'S "CIS & EAST EUROPEAN STEEL SUMMIT" To take place on 5-6 February 2003 at the Radisson SAS Portman Hotel, London, United Kingdom. For further information, contact Tom Blackwell on tel: +44 (0)20 7490 3774 or e-mail: [email protected], W: www.asi-conferences.com ADAM SMITH INSTITUTE'S "THE RUSSIAN AUTOMOTIVE SECTOR" To take place on 18-19 March 2003 at the Marriott Grand Hotel, Moscow, Russia. For further information, please send enquiries to [email protected] or call Louise Pasha on tel: +44 (0)20 74903774, W: www.asi-conferences.com BEM'S "THE CASPIAN BANKING & FINANCE SUMMIT 2003" To take place on 19-20 March 2003 at the Hilton Convention Centre in Istanbul. For further information, contact Daniel Morrissy, Director of Caspian Region, BEM on direct tel: +44 (0)20 8951 1563, or e-mail: [email protected], W: www.bemltd.com BULGARIA LABOUR UNION PODKREPA OPPOSES PLANNED PRIVATISATION CHANGES Konstantin Trenchev, leader of Podkrepa labour union, criticised the privatisation amendments voted by the parliament in first reading and urged for a presidential veto or sanctions by the Constitutional Court if the bill passes a second reading. He viewed specifically the case with Bulgartabak tobacco holding, hinting that the cabinet tried to pass unconstitutional amendments designed to favour isolated privatisation interests. Trenchev would also seek co-operation with the other largest labour union in the country, KNSB, to organise protests in case that the law amendments were enforced. As recalled, the privatisation amendments would introduce a new sale regime for a list of 12 companies and would ban court decisions on their privatisation. The list comprises the state telecom BTC, Bulgartabak tobacco holding, 3 military firms, and 7 retail power distributors. (IntelliNews 05.ii.03) CROATIA IMF GIVES GREEN LIGHT TO SUPPORT ECONOMIC AND FINANCIAL PROGRAMME UNTIL 2004 The International Monetary Fund's executive committee on Monday, February 3, gave the green light to Croatia's request for a 14-month stand-by arrangement, worth 105.9 million crowns of special drawing rights (approximately $146 million), the purpose of which is to support the Croatian economic and financial programme until April 2004. The Croatian government plans to treat this arrangement as a precautionary measure and does not intend to use funds from the loan. The IMF director's first deputy, Anne Krueger, commended Zagreb for the adoption of the 2003 economic programme, which is focused on fiscal consolidation and structural reform with an emphasis put on the stabilisation of the ratio between the public dept and gross domestic product, a flexible labour market and progress in privatisation. (NewsBase 05.ii.03) CZECH REPUBLIC COALITION FAILS TO FIND JOINT CANDIDATE FOR PRESIDENT Talks of the government coalition on a joint presidential candidate failed yesterday after academics Helena Illnerova, Ivan Wilhelm and Pavel Klener had given up their candidacies. PM Vladimir Spidla now has little chance to push through his idea of nominating a personality that is not linked to any of the political parties since CSSD MPs have proposed Deputy PM and Justice Minister Pavel Rychetsky. This development has increased the likelihood of direct presidential elections. (PBJ 05.ii.03) PAYMENT DISCIPLINE OF CZECH COMPANIES DETERIORATES, DUN & BRADSTREET SAY The payment discipline of Czech firms has deteriorated in January, according to a regular Dun & Bradstreet survey, conducted among 3,557 local companies. Local companies have delayed their payments by an average of 20 days, which is by 2 days higher than the previous month. The agency also for the first time downgraded the average D&B rating of Czech companies to 2.635 points in January from December's 2.624 points. The agency has previously warned about the possibility of lowering the country's ratings and especially the Risk Indicator due to lax fiscal policies. The agency also commented that the assessment of the Aug flood damages, put at CZK 70bn (EUR 2.2bn), is most probably underestimated. (IntelliNews 05.ii.03) ESTONIA PARLIAMENT PASSES NEW BANKRUPTCY LAW Lawmakers approved a new bankruptcy act on 22 January with 54 votes in favor in the 101-seat legislature, BNS reported the next day. The government had proposed the legislation, which is aimed at speeding up bankruptcy proceedings and making supervision of trustees more effective. The new law reduces the number of stages in which creditors are entitled to payments from bankrupt estates, establishes a limit on the extent to which holders of secured claims must cover the cost of proceedings, and introduces special terms for bankruptcy proceedings for individuals. Backers say it also offers an improved framework for the recovery of companies facing insolvency, rather than liquidation, and provides more clearly defined rules for preventing abuses by people involved in bankruptcy proceedings. (RFE/RL 31.i.03) HUNGARY BSE TAKES ROAD SHOW TO LONDON AND NEW YORK The Budapest Stock Exchange is to hold a road show in London on Feb. 26 and in New York on Feb. 27, CEO Zsolt Horváth announced on Tuesday. The government will be represented by István Salgó, deputy state secretary at the Finance Ministry. Representatives of listed stock issuers, including Matáv, MOL, OTP, NABI, Globus, the State Debt Management Rt (ÁKK) and FHB, will attend the event in London. Representatives of MOL, OTP, ÁKK and FHB will participate in New York. (BBJ 05.ii.03) KESZ TO CONTINUE AS 'CENTRAL EUROPEAN BUILDER AND ASSEMBLER' Kesz is to continue its activities under the name of Central European Builder and Assembler, in the light of a decision made at the company's recent general assembly, said Istvan Arvai, communications director. The company is to establish a ferro-concrete manufacturing firm in the Ukraine and further factories in Croatia and Yugoslavia. In the past few years, Kesz, one of Hungary's largest building firms, has been expanding intensively in the region and it intends to continue this strategy. Factories have been established formerly in Romania and Slovakia. Istvan Arvai, communications director believes that in the Ukraine, increasing foreign investment will create a massive demand for ferro-concrete units. Kesz, in Hungarian ownership, has achieved a 10% revenue increase in 2002 and a slightly less pronounced rise in profit. In 2003 the company seeks to sustain its financial results as analysts forecast a recession in the market. (NewsBase 29.i.03) KAZAKHSTAN KAZAKHSTAN'S PRESIDENT BEGINS OFFICIAL VISIT TO ITALY Nursultan Nazarbaev arrived in Rome on 3 February and met the following day with his Italian counterpart Carlo Azeglio Ciampi and with ENI Managing Director Vittorio Mincato, khabar.kz and eurasia.org.ru reported. Ciampi noted Kazakhstan's role in promoting stability in Central Asia and Afghanistan, according to Russian news agencies. Mincato, whose company is engaged in oil and gas extraction in Kazakhstan, praised the level of cooperation between ENI and the Kazakh government. (RFE/RL 05.ii.03) U.S. HAILS AGREEMENT BETWEEN KAZAKH GOVERNMENT, OIL CONSORTIUM A U.S. State Department spokesman on 29 January expressed satisfaction with the agreement reached four days earlier between the Kazakh government and the Tengizchevroil consortium on financing the second stage of development of the vast Tengiz oilfield, according to the 30 January issue of the weekly "Kazakhstan News Bulletin" circulated by the Embassy of the Republic of Kazakhstan to the United States and Canada. "The $3 billion expansion project is one of the largest foreign-investment projects in the former Soviet Union. It will play a major role in developing the Caspian Basin and helping to diversify the world's oil supply. The Tengizchevroil expansion project will showcase American know-how, create 7,000 jobs, and help develop Kazakhstan's economy," the spokesman said. (RFE/RL 31.i.03) LATVIA APPEAL TO WTO OVER RUSSIA'S OIL POLICIES WEIGHED Foreign Ministry spokesman Rets Plesums said on 21 January that Latvia is considering lodging a complaint with the World Trade Organization (WTO) over a decision by Russian state-owned oil exporter Transneft not to ship any oil to the port of Ventspils in the first quarter of 2003, AFP reported. On 17 January, Foreign Minister Sandra Kalniete sent a letter to the European commissioner for external relations, Chris Patten, expressing concern that Russia might wield undue political influence through its decisions on the transit of oil through Latvia's ports. "In our view it is incompatible with Russia's aspirations to become a member of WTO," Kalniete wrote, reaffirming Latvia's wish to resolve issues jointly with the EU and become actively involved in the EU-Russia energy dialogue. (RFE/RL 31.i.03) MOLDOVA PRESIDENT BANS MEDIA ACCESS TO MEETING ON CORRUPTION On 24 January, President Vladimir Voronin ordered journalists to leave the room where the session of the Center for Combating Economic Crimes and Corruption was being held. According to Voronin, who was chairing the session, the meeting was to examine "working issues" and journalists had nothing to "investigate" there. (RFE/RL 27.i.03) POLAND KREDYT BANK REPORTS FIRST NET LOSS IN NINE YEARS' TRADING Yesterday Kredyt Bank (KB), a unit of Belgian banc-assurance group KBC, reported the first full-year net loss in its nine-year stock market history after bad debt provisions doubled in 2002. KB, which has large loan exposure to the ailing construction, shipbuilding and manufacturing industries, suffered a zl. 331 million net loss in 2002 which contrasts to a zl.79 million net profit a year earlier. The medium-sized bank, whose results will contribute to KBC's figures due on March 5, said net provisions for doubtful loans reached a record zl. 584 million last year. "No one had expected such a result. That could deal another blow to the sector as people will be scared of what other banks will show," said Robert Sobieraj, analyst at Citigroup's Bank Handlowy in Warsaw. KB Board member Malgorzata Kroker-Jachiewicz reiterated an earlier statement that the bank expected to return to profit this year amid signs of an economic recovery. (WBJ 05.ii.03) POLAND PROPOSES EU'S NEW EASTERN POLICY Polish and international media reported last week that Poland, following a commission from the Danish EU Presidency last year, has proposed a paper outlining the expanded EU's new policy with regard to its eastern neighbors: Ukraine, Belarus, Moldova, and Russia. Polish Foreign Ministry official Pawel Swieboda told journalists that the document was sent in early January to the foreign ministries of the 15 EU, the 10 EU-candidate countries, and to the four future EU neighbors. The European Commission is reportedly expected to publish the document in mid-March. (RFE/RL 04.ii.03) ROMANIA SOROS INVESTMENT CAPITAL FUND SETS ITS SIGHTS ON S.E.E. MARKETS The main fields aimed by the Soros Investment Capital Fund on the SEE markets, including the Romanian market, are food, distribution, retail, pharmacy and, possibly, telecommunication. The statement was made by Gavin Ryan, Executive Manager with the Soros Investment Capital Management LLC, the administrator of the Fund. "We are currently exploring investment opportunities in these fields. We have not decided on the amount to be invested on the Romanian market, yet, but it will represent a significant percentage of the fund's total value, respectively $200m," specified Ryan. The Fund's official also added that all the participation to be purchased in Romania would be majority ones, as 'minority stakes create various problems.' Fund's investments have aimed so far telecommunication, cable TV, and banking in SEE. Soros Investment Capital was established in 2000, sponsored and managed by Soros Organisation. The Fund is also supported by Overseas Private Investment Corporation (OPIC), a US Governmental agency. Soros Investment Capital has a total capital of $200m. (NewsBase 05.ii.03) VISA INTERNATIONAL ESTIMATES NUMBER OF VISA CARDS TO REACH 2M BY JUNE 03 Visa International estimates that the total number of Visa cards issued in Romania will reach 2 million by the middle of this year, according to Radu Obreja, Visa International vice president for Central and Eastern Europe. He added increasingly more Romanian banks were preoccupied with diversifying their offer of debit and credit cards, with an emphasis on credit cards. "I advised them to pay more attention to average-income clients, as far as credit cards are concerned," Obreja said. He announced that Visa International was expecting the number of cards issued in Romania to increase from 1.7 million at the end of 2002 to 2.3 million by the end of 2003, which indicates a monthly growth rate of 40-50,000 cards per month. (NewsBase 30.i.03) RUSSIA BUSH PHONES PUTIN ABOUT IRAQ U.S. President George W. Bush called President Vladimir Putin on Tuesday to discuss the latest developments on Iraq, the Kremlin said. Bush telephoned Putin by hotline on the eve of a crucial speech to the UN Security Council by Secretary of State Colin Powell, who will lay out what the United States says is further proof Iraq is hiding banned weapons. "Bush shared [with Putin] basic American assessments of Baghdad's actions in the sphere of disarming," the Kremlin said in a statement. It said Putin stressed that UN arms inspectors had a key role to play "in defining further steps over Iraq." The leaders agreed to maintain close cooperation, the statement said. (The Moscow Times 05.ii.03) ECONOMIC ADVISER SAYS WAR IN IRAQ WOULD HARM RUSSIA President Putin's economic adviser Andrei Illarionov told journalists in Moscow on 5 February that a war in Iraq would have unfavorable consequences for the Russian economy, RIA-Novosti reported. If Iraq's oil infrastructure were damaged, already high global energy prices would rise further, and Russia and the rest of the world would experience "sticker shock." Illarionov said that a peaceful solution to the Iraq crisis would be much better for Russia, particularly one that led to the gradual opening of the Iraqi oil market over a period of 12-18 months. Under such a scenario, Russia would experience short-term problems as energy prices declined, but over the long term would move toward diversifying its economy and overcoming its "addiction to oil," Illarionov said. (RFE/RL 05.ii.03) GREEK OIL BID REJECTED The Greek government late Monday rejected a joint bid by oil major LUKoil and Greece's Latsis Group to buy a 23.5 percent stake in the state-controlled Hellenic Petroleum refineries. "The final offer by the consortium, received today, was not judged to be acceptable for the national interest," the Development Ministry said, adding that it would seek "alternatives" in finding an international partner for the Greek company. LUKoil and the Latsis Group remain open to strategic cooperation with each other in the future and may consider participation in any future privatization of Hellenic Petroleum. (The Moscow Times 05.ii.03) PUTIN PROPOSES ELECTION LAW THAT MIGHT LIMIT FREEDOM OF PRESS President Putin has submitted to Duma a number of amendments to the election law, the most important of which sets significant restrictions on mass media coverage of the elections. While the use of illegal campaign methods with the help of the media does pose a certain threat, the new regulations appear too restrictive, which raises concerns over the possible misuse of the new law by the authorities. After the October hostage crisis in Moscow, the Duma approved amendments to the law, which restricted coverage of terrorist actions and anti-terrorist operations by the media. While media representatives agreed with the basic principles of the law, they called for defining a number of its provisions. Subsequently, the law was vetoed by Putin and sent back for reconsideration. Putin's latest initiative may be of indicative nature, however the new amendments need to be adjusted in order to avoid the abuse of the freedom of speech. (IntelliNews 05.ii.03) RUSSIA, PAKISTAN SEEK CLOSER TIES President Putin met in the Kremlin on 5 February with Pakistani President General Pervez Musharraf, Russian and Western news agencies reported. Putin noted that relations between the two countries have developed rapidly since Pakistan joined the international antiterrorism coalition following the 11 September 2001 terrorist attacks in the United States. During his three-day visit to Moscow, Musharraf will work to boost economic ties with Russia and to strengthen military cooperation, even though Russia is the main military supplier to India, strana.ru commented on 5 February. Moscow is also interested in closer military ties with Pakistan, whose main military suppliers at present are China and Ukraine. Pakistan's trade volume with Russia in 2002 was about $98 million, compared with $1 billion in trade with Ukraine.(RFE/RL 05.ii.03) STRONG ROUBLE, OIL HIT MANUFACTURING The manufacturing industry shrank for the first time in more than four years in January, signaling high oil prices and a strong ruble are taking their toll on firms that have failed to modernize. A survey of 300 Russian purchasing managers carried out by Moscow Narodny Bank showed that Russia's PMI index fell to 49.1 in January from 50.4 in December, when the sector barely grew at all. A reading of 50 would have signaled no change. It was the first time since November 1998 that the index fell below 50, indicating a decline on the previous month. Roland Nash, chief strategist at Renaissance Capital, said a strong ruble, a slowdown in reform momentum ahead of December State Duma polls and uncertainty about global oil prices had combined to squeeze many companies. "What we will see going forward is much more differentiation between those parts of economy that are restructuring and those parts of the economy that failed to restructure and have been surviving on a high oil price and a cheap ruble," Nash said. MNB economist Paul Forrest said: "Slowdown in output, a dearth of new orders, lengthening suppliers' delivery times and robust inflationary pressures are indicative of the problems that need to be addressed. "With PMI easing below 50 for the first time since 1998, real GDP performance could be expected to be much poorer this year, were it not for the strength of global oil prices and the dynamism of the service sector," he added. Nash said companies such as those in the oil and metal sectors that were in private hands and have been investing heavily were likely to power ahead this year, trailed by food processing, retail and construction firms that have shaken off their Soviet past. He said heavy machinery, textiles and automobile companies -- which were still mired in the Soviet era -- were struggling. "Those sectors were not restructured enough, and those are the parts where you are going to see most of the slowdown," Nash added. (The Moscow Times 04.ii.03) CHARGES FILED AGAINST MMM FOUNDER The Interior Ministry's Investigations Department has filed an indictment on charges of massive fraud against MMM investment company founder Sergei Mavrodi, Russian news agencies reported on 4 February. Police have also asked all those who believe they were victims of MMM's operations to submit evidence supporting their allegations. Investigators believe that more than 100,000 such victims could ultimately be identified, and damages could amount to more than $100 million. Mavrodi faces up to 10 years' imprisonment under the charges, RosBalt reported. Mavrodi was arrested in Moscow on 31 January after being sought for nearly five years. The total number of deceived investors in the case is estimated anywhere from 5 million to 15 million. Business leader and Yeltsin-era insider Konstantin Borovoi, who now heads an association of deceived investors, told TVS on 3 February that it would have been impossible for Mavrodi to build his investment pyramid without the tacit support of the state. Borovoi alleged that only 10 percent of the money that MMM took in went to Mavrodi, while the rest was distributed among a number of entities, including commercial companies and corrupt officials. He also claimed that some of the largest MMM investors were criminal groups using the pyramid scheme as a way of laundering illegally acquired money. (RFE/RL 04.ii.03) ADVERTISING MARKET BOOMED IN 2002 Russia became one of Europe's 10 largest advertising markets in 2002, ITAR-TASS reported on 30 January, citing Russian Association of Advertising Agencies (RARA) President Vladimir Yevstavev. The Russian market totaled $2.7 billion, up by 51 percent from 2001. Television advertising represented the largest share, reaching $900 million. Non-Moscow-based television advertising was worth $190 million. According to RARA analysts, the market is expected to continue its growth this year, and prices of advertising services are expected to rise. RARA estimates the Russian advertising market will be worth $2.73 billion in 2003, $3.43 billion in 2004, and $3.8 billion in 2005. (RFE/RL 31.i.03) PRESIDENTIAL ADVISER SAYS FOREIGN DEBT COULD BE PAID IN 10 YEARS Presidential economics adviser Andrei Illarionov said that Russia could pay off its foreign debts completely within a decade if it continues to follow its current economic course, nns.ru reported on 25 January. In 1998, Russia's foreign debts amounted to $158 billion, but that amount has now fallen to $110 billion. Illarionov noted that in the intervening years, some debt has been paid, some has been restructured, and some has been written off. He added that if Russia pays off its debts, that would open up new paths of economic and political development for the country and alter its standing in the international arena. (RFE/RL 28.i.03) RUSSIA A HAVEN FOR HUNDREDS OF THOUSANDS OF STOLEN EUROPEAN CARS Speaking to reporters in Moscow on 23 January, Walter Schmoelzing, a representative of the leading European insurance companies operating in Russia, said that as many as half of the 1.5 million cars illegally imported into Russia in recent years were stolen in Europe, mainly in Germany, Ekho Moskvy and "Komsomolskaya pravda" reported on 23 and 24 January, respectively. However, only a few hundred of the vehicles have been recovered because the stolen cars have been registered in Russia, making it difficult to take them away from their new owners. Schmoelzing said the situation is further complicated by the fact that many state officials, including high-ranking Interior Ministry officers, are using stolen cars. "Komsomolskaya pravda" noted that no Interior Ministry representatives attended Schmoelzing's press conference. (RFE/RL 28.i.03) SERBIA AND MONTENEGRO YUGOSLAVIA OFFICIALLY ABOLISHED The Yugoslav parliament adopted the Constitutional Charter, and an accompanying law on its implementation, late on Tuesday 4, in a move that officially abolished Yugoslavia and replaced it with a new union of its remaining two republics Serbia and Montenegro. The 40-seat Chamber of Republics adopted the Charter with 26 votes for and seven against. The 138-member Chamber of Citizens voted 84 for and 31 against. The new union, named Serbia and Montenegro, will have a president, a 126-member parliament, and a council of ministers including ministers of defence and foreign affairs. After strong independence demands in Montenegro, the authorities of the two republics agreed last March to reshape the federation into a union of two members under strong EU pressure. However, the two republics will be allowed to hold referendums on full independence in three years. (NewsBase 05.ii.03) UKRAINE NATIONAL BANK ANNOUNCES THAT $2.4bn LEFT UKRAINE IN 2002 In 2002, $2.4bn left Ukraine, the first deputy head of the National Bank of Ukraine, Arseny Yatsenyuk, has said. This was four times as much as Ukraine received in direct investment over the same period. Independent analysts believe that $20bn-$50bn has left Ukraine since independence. Yatsenyuk pledged to adopt very tough measures to prevent capital outflow abroad. He did not specify the measures, though. (NewsBase 05.ii.03) INFORMATION PROVIDERS NEWSBASE NewsBase is a leading provider of business and economic news and intelligence from Russia, Central Europe and the FSU. Daily bulletins and industry specific weekly reports backed by an archive containing over 10 million words combine to provide a comprehensive service to a global blue chip client base. Contact: Jon Laurijssen T: +44 (0)131 478 8537 F: +44 (0)131 478 7001 E: [email protected] W: www.newsbase.com, www.newsbaseworldmonitoring.com NEW WORLD PUBLISHING New World Publishing is a primary source of business-related information for Central Europe, through its publications the Prague, Budapest and Warsaw Business Journals. Contact: Mark Child T: +420 2 4608 6524 F: +420 2 4608 6501 E: [email protected] W: www.ceebiz.com, www.pbj.cz, www.wbj.pl, www.bbj.hu THE MOSCOW TIMES The Moscow Times offers readers an independent and precise view of the political, economic and business life of Russia. Contact: Andrew Boag T: +7 095 232 3200 F: +7 095 232 1761 E: [email protected] W: www.themoscowtimes.com INTERNET SECURITIES, INC. (IntelliNews articles) Internet Securities, established in 1994, is the pioneering provider of electronically delivered emerging markets business information. Contact: Ludek Macha T: +420 2 2421 9055 F: +420 2 2421 9060 E: [email protected] W: www.securities.com RADIO FREE EUROPE / RADIO LIBERTY Radio Free Europe/Radio Liberty is a private, international communications service to Central, Eastern and Southeastern Europe; the Caucasus; and Central and Southwestern Asia funded by the U.S. Congress through the Broadcasting Board of Governors. Contact: Peter Baumgartner T: +420 (0)2 2112 2039 F: +420 (0)2 2112 2012 E: [email protected] W: www.rferl.org TEMPLETON THORP T +44 (0)20 7520 9380 F +44 (0)20 7504 8180 E [email protected] W www.templetonthorp.com |
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