Central Europe General: During the fourth European Forex Conference in Vienna last week, a poll conducted among the participants showed that three Central European countries, the Czech Republic, Hungary and Poland, are unlikely to join the European Economic and Monetary Union before the year 2010, and not, as expected, by 2002. Of the poll's respondents, 74 per cent expect the Czech Republic to be integrated by 2010, 61 per cent believe Hungary will be, and 51 per cent Poland. The new EU entrants will have to adopt rules such as participation in the EU exchange rate mechanism, central bank independence, co-ordination of economic policies and public sector deficits not financed by means of a central bank. Other important issues to be restructured include pension reform, further banking privatisations, restructuring of the state-owned enterprises and the deregulation of utilities.

Azerbaijan: The Property Fund of Azerbaijan announced the latest developments in voucher privatisation, providing details on the eight rounds of the auction which was scheduled for 14 October. Shares in 49 small and medium-sized enterprises, with a face value of 20.997 billion manats (US$ 5.3 million) were offered for auction. Most of the applications were submitted for auctions of stock in the wood-processing enterprise, Alyat. The report also said that the Azerbaijani government earned more than 60 billion manats this year through its small enterprise voucher privatisation programme, which is more than in 1996, while the sale of state-owned enterprises brought in to the budget only 15 billion manats.

Bulgaria: The Prime Minister, Ivan Kostov, confirmed that Bulgaria is planning to privatise up to 73 per cent of its state assets over the next three years. Bulgaria has earned US$898.5 million since the privatisation programme started in 1993, privatising 18 per cent of the country's property. Majority shares of state companies will be privatised through the stock exchange and through tenders to strategic investors. The forthcoming privatisations include the banking sector. The first of six banks to be privatised, the United Bulgarian Bank, was sold to the European Bank for Reconstruction and Development (EBRD), Bulbank and the US Oppenheimer & Co. The sale of the next bank, Expressbank, has been postponed, after the government returned the bids of the two potential buyers, Daewoo Securities and Raiffeisenbank Bulgaria, with the possibility of being offered through tender at a later stage.

According to the International Monetary Fund (IMF) Bulgarian mission leader, Anne McGuirk, the economy will recover under a reform programme backed by the IMF. The first move imposed by the government is the increase of interest rates for next year, in order to restrict government borrowing and money printing. The expected interest rates will be established at a level of between nine and ten per cent, raised from this year's 5.2 per cent. The currency has stabilised, and inflation has been curbed.

Czech Republic: The 1998 draft budget sent to parliament by the Czech Government's coalition Prime Minister, Vaclav Klaus, has been highly criticised by the Independent Deputy and Chair of the Budget Committee, Jozef Wagner. Mr Wagner told parliament that he will not support the draft in its first reading, because he considers that "the expenditure side can mean nothing but further stagnation of the economy". If the budget does not pass the first reading, the Government must submit another draft within 30 days. If the next draft budget is also unsuccessful, then parliament must create its own provisional budget for 1998 by the end of this year.

Georgia: President Eduard Shevardnadze said after the meeting of the 12 former Soviet republics in the Kyrgyz capital, Bishkek, that his republic will not sign up to the latest CIS integration proposal from Moscow. Moscow has proposed for a single tax system and a single economic market under a common administration, which the President has described as "an attempt at recreating an economic system with the trappings typical of the Soviet economic structure". He called for a new Russian Caucasus Policy, which would allow all of the Caucasus republics to preserve their national identity.

In his weekly radio broadcast President Shevardnadze said that the Georgian economy is making significant progress, indicating that GDP for the last nine months soared to 12.1 per cent over the same period last year. Monthly inflation based on consumer prices rose only 0.3 per cent, compared to 1.15 per cent over the same period last year. Industrial output is growing steadily; in September it showed growth of 6.6 per cent over August, and 6.2 per cent over last year's level. President Shevardnadze said that total budget revenues from January to September were 500.9 million lari (US$ 385.3 million), or 87.6 per cent of the projected revenues, with a budget expenditure of 695.4 million lari and a closing deficit of 194.5 million lari.

Georgia has passed to the second stage of its economic reform, with the main aim of overcoming poverty and raising living standards. The target of this stage, which should end by the year 2000, is to bring GDP per capita to over eight to ten per cent of the current US$410 and the budget deficit to less than three per cent of GDP. The main task of the second stage reform is to maintain the country's food sufficiency, support and upgrade industries and speed up privatisation of major companies. The guidelines of the reform policy are to let exports grow nine per cent faster than imports - boosting budget revenues by 15 to 16 per cent against GDP - and also to improve financial and banking institutions.

Kazakhstan: On 10 October, President Nursulan Nazarbayev told parliament, government and members of the public that he had outlined the country's strategy up to the year 2030. He said: "Kazakhstan must determine its own path of development suitable to the condition it is in, as the Kazakhstan future is in the energy of free people devoted to their country." He also said that he is seeking to turn Kazakhstan into a new Asian tiger by the year 2030 and into a model for other developing countries. The first step to determine this vision was the recent government reshuffle, and the replacement of the Prime Minister, Akezhan Kazhegeldin, by Nurlan Balgimbayev, the former head of the state oil company. With this move Mr Nazarbayev wants to consolidate power "in a southeast Asian type of strong government".

Kyrgyzstan: Dastan Sarygulov, head of Kyrgyzaltyn, a state-owned mining concern and the country's biggest mineral developer, told the Interfax news agency that Kyrgyzstan will produce 15 tonnes of gold in 1997 - 13 tonnes more than in 1996 - and will become the third biggest CIS gold producer after Russia and Uzbekistan. The large increase in output was possible thanks to the development of the Kumtor gold field by the joint venture between Kyrgyzaltyn and Canada's Cameco, named the Kumtor Operating Company. Mr Sarygulov said that the company aims to achieve annual gold output of 20 tonnes during the next few years.

Kyrgyzstan's National Statistics Committee announced that GDP had grown by 19.2 per cent in the first nine months of this year compared with the same period last year. The growth was due to increased output in the agricultural sector, which contributed 59.8 per cent to GDP (September 1997). Industrial production rose 45.9 per cent over the same period in 1996 and was attributed to the fact that most of the troubled companies which had to reduce or halt production have resumed normal operations. Annual inflation had risen to a total of 10.3 per cent since the beginning of 1997.

Moldova: The International Monetary Fund (IMF) delegation, headed by David Owen, came to the capital of Moldova, Chishinau, for a two-week visit to discuss the progress made according to the agreement signed in 1996 with the IMF, to support Moldovan reforms with assistance of US$250 million.

Poland: The newly elected Prime Minister, Jerzy Buzek, said that further negotiations on Poland's entry to the European Union (EU) are planned for the beginning of 1998. The government will ask the EU to help in adjusting many industrial sectors like steel, textile, mining and agriculture to the EU norms, and also to assist in protecting some industries with tariffs and quotas, and financial help to continue the economic reforms. A special investment fund will be established to assist the general restructuring of companies, before being privatised. Mr Buzek expects that within four years 80 per cent of the Polish economy will be in private hands, up from the current 64 per cent. The Prime Minister stated that the government "will conduct all actions to help fast economic growth, by which it means seven to eight per cent of GDP growth a year".

Romania: The Finance Minister, Mircea Ciumara, said that a new comprehensive income tax system will be introduced from January next year. Under the existing tax law, Romanians pay up to 60 per cent tax on their wages, but no taxes are levied on interest, dividends and other income. The new law is one of the key elements in the 1998 budget and will make all income taxable.

The Romanian Government will renegotiate the terms of a US$410 million credit programme with the International Monetary Fund (IMF), which was granted for one year for the ambitious market reforms. The IMF delegation, headed by the Romanian mission chief, Paul Thomsen, is due in Bucharest next week to examine progress in meeting the targets given by the IMF. On 26 October, the Romanian Prime Minister, Victor Ciorbea, said that Romania will try to extend the credit by up to three years.

Serbia: Serbia is to introduce a new privatisation law from 1 November which allows workers, pensioners and farmers to buy up to 60 per cent of enterprises, and diminishes foreign investors' rights to hold majority stakes. Serbia's Privatisation Minister, Milan Beko, said that the new law will be harmonised with the start of privatisation of the state-owned strategic companies. Foreigners could invest in all of the privatised companies, except those in the military, post, telecommunications and media sectors. The Minister was speaking after the government gave approval to sell shares of 49 Serbian companies, worth an estimated US$50 billion.

Slovakia: The official news agency, TASR, quoted the Slovak Finance Minister, Sergei Kozlik, after his visit to Russia, as saying that both countries agreed to conduct part of their bilateral trade on a barter basis. Slovakia will pay for 30 per cent of the nuclear fuel and for 20 per cent of its crude oil deliveries from Russia with goods. Both countries signed a series of long-term contracts aimed at enhancing the supply and flow of natural gas deliveries to Central and Eastern Europe.

The Slovak Finance Ministry is planning to issue bonds denominated in Slovak crowns on foreign markets. The Ministry spokesperson, Josef Mach, said that Slovakia needs to tap international financial sources through issues of crown denominated bonds, and foreign investors through T-bills, to help cover the state budget deficit, which totalled 27.9 billion crowns for the first nine months of this year. At present, foreign investors are only allowed to participate in the sale of state bonds with maturities of one year and longer. Mr Mach also added that the ministry had asked the National Bank of Slovakia to create a special register for state T-bills owned by non-residents.

Slovenia: Slovenia's Finance Minister, Mitija Gaspari, said that from 1998, after the Association Agreement with the European Union (EU) is enforced some time in the spring, that competition amongst its banks will increase. The Association Agreement, signed in June 1996, states that Slovenia needs to start liberalising its banking sector. Minister Gaspari stated that Slovenia has already prepared a new banking law in line with EU requirements. Slovenia hopes to become a full member of the EU in 2002. The new law will enable foreign banks to open fully licensed branches, whereas the current law only allows them to set up subsidiaries requiring a substantial capital outlay.

The Federal Republic of Yugoslavia: The Foreign Trade Minister, Borislav Vukovic, announced that, starting from January 1998, a new three-year trade liberalisation programme will be introduced. The programme aims to complete reforms of a post-sanctions economy, and the gradual lifting of foreign trade quotas should open the way for introduction to the World Trade Organisation (WTO). The major part of Yugoslavian GDP is generated by trade in goods and services, and it is hoped that the programme will protect high value added industries, such as textiles and agriculture products until 2004, whilst liberalising others. Mr Vukovic added: "This programme, together with comprehensive reforms like ownership transformation and changes to the tax system, should lead to the increased flexibility and competitiveness of the Yugoslav economy." At the same time, the government will also adopt anti-dumping laws to protect its domestic economy from unfair foreign competition. Mr Vukovic said that the introduction of the three-year programme will help the most profitable industries to recover (New Europe, 26 October-1 November).

Czech Republic: Radomil Stepanek, Finance Director of the newly formed petrochemical conglomerate, Unipetrol, said that the company expects a full year 1997 consolidated after tax profit of US$56.5 million. The company forecast total sales of 55 billion crowns (US$ 1.7 billion ) in 1997 and intends to raise it to 63 billion crowns next year. He also said that the company will invest 55 billion crowns in its own development. Unipetrol started trading on the Prague Stock Exchange in the summer and has the fourth highest market capitalisation.

Romania: Shell Gas Romania, a joint venture between Royal Dutch Shell and three local state-owned petroleum products distributors, stated that Royal Dutch Shell will invest more than US$4 million in a railway terminal in Northern Romania to serve liquefied petroleum gas (LPG) from Russia and Ukraine. The terminal, built at Halmeu, near the border with Hungary and Ukraine, will have an annual capacity of 100,000 tonnes.

Yugoslavia: Yugoslavia's commercial bank, Prva Preduzetnicka Banka, announced the sale of 4,000 ordinary shares with a face value of 1,500 dinars, which can be purchased by domestic and foreign companies, banks and private buyers, in order to increase its capital. The total value of offered shares is US$1.1 million and the sale is expected to raise the foreign stake from ten per cent to 25 per cent. Prva Preduzetnicka Banka reported a 1.9 million dinar profit for the first nine months of 1997.

Czech Republic: Chair of the Prague Stock Exchange, Tomas Jezek, told Czech Television News that the new independent Czech Securities Commission planned to be set up for next year will start relicensing all securities brokers.

Hungary: The privatisation agency, APV, launched on 22 October the sale of telecommunication group MATAV. The 20-27 per cent sale of MATAV will be conducted by the agency and a joint venture between Ameritech of the US and Deutsche Telecom. The privatisation is expected to raise up to US$1.2 billion. MATAV's listing on the Budapest Stock Exchange will increase market capitalisation by 50 per cent. The shares will be priced on 13 November and confirmed by 20 November. Next month MATAV will be listed on the New York Stock Exchange, the first Hungarian company to do so. Merill Lynch and CSFB are global co-ordinators, while Creditanstalt Securities will lead and manage the domestic retail offering. At present, MATAV is 67 per cent owned by MagyarCom and 25 per cent by APV.

Romania: An aluminium smelter, ALRO, made a good debut on the Bucharest Stock Exchange, as the twelth leading stock. It started trading on 16 October, with more than 107,000 shares at the price of 25,000 lei per share (US$3.3). The price hit a maximum quote of 80,000 lei during the first trading day, and ended at 67,500 lei. ALRO has a share capital of 318.9 billion lei ($41.9 million). The State Ownership Fund (FPS) has a majority of 65.3 per cent and the rest is held by individual shareholders, who acquired shares in exchange for coupons in a mass privatisation. Each coupon, with a face value of 975,000 lei, fetched 39 shares. ALRO is the sole Romanian aluminium producer, with turnover of 880.9 billion lei ($115 million) and with a net profit of 85 billion lei in 1996. An ALRO representative said that a few foreign companies, including Daewoo Group, Balli, Glencore, Toyota, Sumitomo and also its long-term partner, French aluminium producer, Pechiney, expressed interest in buying a stake.

Azerbaijan: During a meeting in Baku on 18 October with the US Ambassador to NATO, Robert Hunter, President Heidar Aliyev said that Azerbaijan would like to have a special partner relationship with NATO and participate in the Partnership for Peace Programme. He also pointed out that Azerbaijan, with its strategic position on the Caspian coast, wants to maintain and promote its co-operation with the Western world.

Georgia: The presidents of Georgia and Russia, Eduard Shevardnadze and Boris Yeltsin, will meet in Moldova at the end of this week to discuss Georgia's claim that it should be compensated for military hardware worth billions of dollars taken by Russia between 1991 and 1993, just after Georgia gained its independence. Georgia warned Russia that lack of compensation could result in a deterioration of relations between the two countries.

Hungary: The Hungarian Prime Minister, Gyula Horn, confirmed at a press conference that Hungary will hold a referendum on NATO membership on 16 November, despite controversy between the President and parliament on some domestic policies concerning the change of regulations governing foreign ownership of farmland.

Kazakhstan: President Nursultan Nazarbayev issued a decree on the timing of moving the Kazakhstan capital from Almaty to Akmola for 10 December. The decision of transferring the present capital from the southern to the central part of the country was brought forward for "the state interest". However, according to President Nazarbayev, Almaty would still remain "the southern capital", and a large regional financial and cultural centre. He also confirmed that Almaty will remain the residence of the government and of the head of the state. President Nazarbayev also agreed to the special status of Almaty: once the parliament moves to the new capital, the city will take over the utilities and state packages in the stock of privatised enterprises.

Russia: Aman Tuleyev, the former Communist party presidential candidate, won 95 per cent of the votes in the local elections in the Siberian region of Kemerovo. He received strong support from the coalminers of the Kuzbass, which lies in the Kemerovo region.

Tensions easaed this week between the Russian Government and parliament, after problems last week when Russia's Communist party threatened the Government with a no-confidence vote. President Boris Yeltsin and Prime Minister Victor Chernomyrdin held a meeting on 21 October with all parliamentary party leaders in an attempt to resolve the conflict between the executive and legislative branches of the Government over the 1998 budget and tax code. Gennady Seleznev, the Communist Speaker of the Lower House of Parliament, said that if the government would compromise over the economic policy, an agreement could be reached and the no-confidence threat scrapped. The Yabloko liberal party insisted however that "further changes must be made to the draft tax code in order to withdraw the no-confidence motion". Grigory Yavlinsky, leader of the Yabloko party, said that "changing the tax system is the key question for the party's relation with the government".

Boris Yeltsin is still considered one of main candidates for the next term of presidency. The presidential campaign for the next elections, due in 2000, has already started and Mr Yeltsin, Russia's president since 1991, is backed by his own camp. The opposition candidates include the Communist leader, Gennady Zyuganov, the liberal leader, Grigory Yavlinsky, and General Alexander Lebed. However, the latest favourites are the Mayor of Moscow, Yuri Luzhkov, and the Russian First Deputy Prime Minister, Boris Nemtsov.

Slovakia: President Michal Kovac and Prime Minister Vladimir Meciar issued a joint statement promising to co-ordinate their efforts to regain national credibility with the European Community (EC). Slovakia was a leading candidate for the EU and NATO but failed over its commitment to democracy. In their joint statement last week however, they said: "The President and Prime Minister confirm the need to enhance the stability of constitutional institutions, respect of their jurisdiction and the development of their mutual co-operation." Slovakia hopes to win approval from the EU after a summit in Luxembourg in December. In July, the EC said that because of poor progress on political reform, Slovakia was ruled out of the first round of talks. The differences between the President and the Prime Minister were also a factor undermining democracy. In their statement, both statesmen said that the "will refrain from any kind of expressions which would undermine the principle of their co-operation". Commercial banks and investment companies have confirmed their participation.