Hungary: Hungary and Israel have signed their first bilateral free trade agreement. The agreement is expected to boost trade between both countries. Last year, trade showed a US$10.5 million deficit for Hungary, after a $2.4 million surplus in 1995. The Hungarian Minister of Industry, Trade and Tourism, Szabolcs Fazakas, said that the agreement will take effect from 1 January 1998, after ratification by each country's parliament. The agreement will eliminate tariffs on 97 per cent of all Hungarian industrial exports to Israel, which totalled $40.4 million in 1996. Israel is one of the largest investors in Hungary, with a total investment to date of $400 million. The majority of Israel's investment is located in shopping malls and the pharmaceutical and machine tool industries.

Gyorgy Suranyi, President of the National Bank of Hungary, confirmed during his visit to London last week that the country's net external debt amounted to US$10.5 billion in July. He pointed out that the debt is expected to decrease to $10 billion by the end of the year. He also said that inflation is running at 18 per cent, but is planned to fall by five per cent next year. GDP for this year is likely to grow to four per cent, higher than the projected 2.5 per cent, mainly because of the strong export market and investment.

Poland: The 1998 draft budget prepared by the outgoing Polish Finance Minister, Marek Belka, stated that next year's privatisations should contribute about 6.5 billion zlotys (US$1.9 billion) to the budget, compared to this year's revenue of 4.45 billion zlotys. The Treasury Ministry reported that a large part of 1997's revenue has been helped by the sale of Polska Miedz (KGHM) and Bank Handlowy. According to the budget draft, inflation will fall to 9.5 per cent next year, GDP will continue to grow by 5.6 per cent and will reach 511.1 billion zlotys, compared to the forecast of 437.3 billion zlotys for this year.

Poland's Finance Ministry has announced the introduction of a new currency law from the beginning of 1998. The new law is aimed at adjusting Polish regulations to European Union standards and would make the zloty externally convertible in current account transactions, payments and transfers. The bill has been developed jointly by the National Bank of Poland (NBP) and the Finance Ministry. The draft law liberalises capital flows to match standards imposed by Poland's membership within the Organisation for Economic Co-operation and Development (OECD), but retains several restrictions, such as the requirement of a permit from the NBP for Polish residents directly investing in non-OECD nations or purchasing securities issued by those countries.

Russia: Vladimir Mau, Head of the Working Centre of Economic Reforms, announced that prices in Russia went down in August and September, for the first time in seven years. According to the analysis done by the Centre, this marginal drop (0.2-0.3 per cent) is expected to continue. Mr Mau also noted a positive trend of investment activity and structural changes in the Russian economy. The most profitable sectors were food, fuel and power, and mechanical engineering.

The total volume of foreign investment in the Russian economy between 1992 and January 1997 amounted to US$13.5 billion. This news was announced by Yakov Urinsov, the Vice-Premier of the Russian Federation, at the third conference on Russia's markets of capital and investment, held in Moscow this week. Mr Urinsov stressed that the relatively small volume of investment is related to the foreign investment law, currently under revision, and to current taxation. To overcome the investment crisis, it is important to carry out tax reform and to liberalise trade barriers. The changes will include an adoption of laws on free economic zones and concession agreements.

Russia's Deputy Prime Minister and Minister of the State Property, Maxim Boiko, said in Moscow that the revenues from privatisation in 1997 will exceed 14.5 trillion roubles (US$ 2.5 billion). He also confirmed, at a special cash auction, the sale of 84 per cent of the shares in Eastern Oil Company, 49 per cent of Tyumen Oil Company, and one per cent of Lukoil. He also mentioned that no final decision had been made on the privatisation of Roseneft, another oil giant, which was due to be sold no later than the second quarter of 1998, and the Aeroflot privatisation, supposed to be auctioned next year.

As a result of negotiations within the bilateral Russian-Indian working group on energy, the First Deputy Minister of Fuel and Energy, Vitali Bushuev, said that Russia can supply natural gas to India and is ready to consider extending a pipeline from Siberia. It would also like to co-operate with India to build a hydropower plant and power transmission lines, and to help modernise existing power facilities.

Russia will complete the restructuring of the foreign debt owed by the former Soviet Union next year, after completing the restructuring of a US$5-6 billion deal on suppliers' credits (money owed to foreign suppliers of goods and services). This news was confirmed by Andrei Kostin, President of the Vneshneconombank (the state-owned bank responsible for servicing Russia's foreign debt), after completing the negotiations with the London Club of creditors (News 5-12 October). Russia has also restructured its $40 billion of the former Soviet debt owned to foreign governments, grouped in the Paris Club, and will now focus on pursuing its own debtors, starting with Vietnam and Algeria.

Poland: Orbis SA, the largest hotel chain in Poland, plans to invest US$250 million over the next five years in modernising its 53 existing hotels and buying new ones after its listing on the Warsaw Stock Exchange (WSE) later this year. Ireneusz Weglowski, a member of the board, said that Orbis is planning to keep its leading position in the Polish hotel industry and also intends to invest in other sectors such as banking and insurance.

On 22 October Gdansk Shipyard signed an agreement for the construction and financing of another vessel for the German firm Scholler. The construction will be partially financed by the Gdansk Shipyard Association and a US$26 million loan from PEKAO SA bank, through the Build Ship company. The contract was signed by Andrzej Wiercinski in the presence of the Solidarity Election Action (AWS) leader, Marian Krzaklewski. According to Mr Krzaklewski, the government intends to promote the shipbuilding industry, once a 'flagship' of Polish heavy industry, as a motor of the economy.

Russia: The Republic of Tatarstan has established a US$571 million joint venture with Malaysia to produce fertilisers. The Tatarstan Neftekhiminvest holding company will hold 30 per cent of the shares and Malaysian Mikrosore Trade Development the remainder. The Vice-President of Tatarstan, Ravil Muratov, said that the contribution to the authorised fund of the venture will be made in kind. Tatarstan will transfer the Novomendeleyevsk ammonia nitrate production plant with annual capacity of 450 thousand tonnes, while the Malaysian partner will build, in Novomendeleyevsk, ammonia and carbamid production plants with capacities of 1,800 and 2,000 tonnes every 24 hours respectively. Mr Muratov noted that production will supply the demand of the Russian Federation in mineral fertilisers while some will be exported.

Poland: The British sugar company, Tate & Lyle ( T&L;), has purchased an 80 per cent stake in the sugar plant Garbow SA, situated in the province of Lublin. The British company has already bought shares in sugar plants in Hungary, Slovakia and the Czech Republic, and is planning to develop the Polish plant as a base for its Eastern European operations. Maciej Kotowicz of T&L; Polska said that the mother company will compete in all tenders to buy shares of Polish sugar plants. The T&L; company will help to modernise the plant and will introduce new technologies to improve the quality of sugar.

The Austrian company, Voest-Alpine, one of the largest steel concerns, has placed a bid to purchase shares of Huta Sendzimir steelworks in Krakow. The President of Voest-Alpine, Peter Strahammer, said that the company would like to become a strategic investor in the steelworks and intends to buy more than 50 per cent of the shares. The Polish steelworks company will need about US$1 billion of investment within the next five years in order to make it competitive, and Voest-Alpine is prepared to invest $300 million.

Powszechny Bank Kredytowy (PBK) made its debut on the Warsaw Stock Exchange (WSE) on Tuesday 21 October, at 8050 zlotys per share (US$ 23.68). Trade in PBK shares amounted to 29 per cent of all transactions in the Tuesday session. One of the buyers was the insurance company, Warta, which bought a further 6.9 per cent of PBK shares to increase its total to 13 per cent.

Russia: The Ministry of Finance of the Russian Federation announced that it plans to increase the volume of the issue of its ten per cent bonds with the redemption term in 2007 by US$400 million. The additional issue of bonds will be carried out by JP Morgan Securities Ltd and SBC Warburg Dillon Read. It is expected that the price of the bonds of the new tranche, which will be consolidated with the current bond issue and will be worth $2 billion, will be fixed at 9.30 am New York time on 23 October (RIA Novosti).

Russia: Moscow will host the second international conference on investment projects in the car sector in Russia and the CIS. The organisers of the conference, ASM-Holding, said that the event will analyse the investment climate in the car manufacturing industry and the possibility of restructuring its existing potential. Many international car-building companies, including General Motors, Fiat, Toyota, Ford, domestic car manufacturers like VAZ, ZIL, GAZ and Moskvitch, as well as commercial banks and investment companies have confirmed their participation.