Azerbaijan: the Islamic Development Bank (IDB) confirmed that it will deposit US$10 million to Azerbaijan for the reconstruction of the Samur-Absheron drinking water canal to Baku. This is the third infrastructure project in Azerbaijan assisted by the IDB.

Czech Republic: consumer prices in July grew 1.9 per cent over June and 10.4 per cent in real prices (year-on-year basis), announced the Czech Statistical Office on 10 August. In July 1997 inflation reached 3.5 per cent month-on-month and 9.4 per cent year-on-year.

Ceskoslovenska Obchodni Banka (CSOB) projects that by the end of this year, annual inflation will be running at 8.8 to 9.9 per cent, and net inflation at 4.4 to 5.4 per cent. This bright forecast sees net inflation possibly below the 4.5 to 5.5 per cent set by the Czech National Bank.

At the end of July unemployment stood at 6.1 per cent compared to 5.6 per cent at the end of June, said the Ministry of Labour and Social Affairs on 11 August. At the end of July 1997 the unemployment index was 4.3 per cent.

Finance Minister, Ivo Svoboda, is to submit a proposal for a balanced budget for 1999 to the Government. At a news conference on 13 August, Mr Svoboda said his proposal appeared to have the support of the majority of cabinet ministers. The Minister considers the cutting of interest rates to be essential for kick-starting economic growth as of the year 2000. He also confirmed the intention to maintain the entire system of public budgets, namely the state and municipal budgets and the future regional budgets, as balanced in the long-term.

On 13 August, the Czech National Bank (CNB) announced that it is to lower its benchmark interest rates from 13 per cent to 11.5 per cent in an attempt to inject life into the economy as the pace of inflation has slowed. Since the currency crisis of May 1997, CNB has kept interest rates relatively high to overturn the faster growth in consumer prices that the crisis caused.

Estonia: in the first seven months of 1998 Estonia's State budget received 8,992 million kroons ($633 million) in revenue, 58.8 per cent of the total planned for the year. Revenue from corporate income tax totalled 1,518 million kroons, 30.9 per cent more than planned.

According to the Statistics Department, consumer prices in Estonia rose 0.6 per cent in July over June and 10.5 per cent from July 1997. Inflation rose 6.4 per cent in Estonia during the first seven months of 1998, down from eight per cent during the same period of 1997.

Unemployment in Estonia fell to 3.4 per cent in July this year from 8.5 per cent in July 1997. The rate was down one per cent from June.

The aggregate total assets of Estonian commercial banks at the end of July stood at 43.046 billion kroons ($3.03 billion), up 0.7 per cent in one month. The increase year-on-year from July 1997 was 31.1 per cent.

Hungary: Hungary's average wage rose by 19.9 per cent in the first six months compared to the same period last year, mainly due to higher income for state workers in the healthcare and education sectors. In June this year the net average wage per month was 42,996 forints ($193.67).

Industrial output in June went up 5.7 per cent from May. It rose by 18.3 per cent from June last year. In the first half of the year, output rose by 13.8 per cent compared to the first half of 1997.

Construction industry output went up by 22.5 per cent from June 1997 to June 1998, and by 6.9 per cent from the previous month, said the Central Statistical Office on 12 August.

Hungary's foreign trade balance in the first half of the year showed a deficit of $1,309 billion, $46 million more than last year. In the first half of the year exports were up 23.4 per cent from the same period last year, amounting to $10,787 billion. Imports came to $12,096 billion, up 20.9 per cent from last year.

Hungary's budget deficit in the period from January to August was 212 billion forints ($981.9 million). The Ministry of Finance expects deficits of 40 billion forints in August, around 25 billion forints in September, and a surplus in October.

Latvia: on 17 August, Helmut Ancans of the Bank of Latvia said that Latvian commercial banks which have considerable investments in Russian state securities will have to revise their profit forecasts, taking into account a possible loss after Russia introduced a floating rouble rate within the limits of a currency corridor from six to 9.5 roubles against the dollar.

Latvia's current account deficit in the first quarter of 1998 was 51 million lats ($85 million), or 5.9 per cent of the Gross Domestic Product (GDP). In the first quarter of 1997 the current account deficit was 20 million lats, or three per cent of GDP. The current account deficit in 1997 was 201 million lats ($335 million), 6.3 per cent of GDP.

Poland: on 11 August the National Bank of Poland (NBP) said that the trade deficit in terms of payments rose to US$6.3 billion after the first six months of 1998, compared to $5.759 billion in the corresponding period of 1997. According to the NBP, in the January-June 1998 period, Poland had a $193 million deficit on its current account compared to a surplus of $243 million a year earlier.

Central bank's official gross reserves at the end of June grew to $25.257 billion, up $4.587 billion from last December's figure.

Foreign insurance companies have become a rival to national monopolist PZU Zycie. PZU, which controlled as much as 87 per cent of Poland's insurance market in 1995, now only has a 69 per cent share. Foreign insurers recorded highs, with Britain's Commercial Union booking a 57.6 per cent rise in life policy sales and a 49 per cent rise recorded by the United States (US) company Amplico Life. The Dutch Nationale Nederlanden group is also strong on Poland's insurance market.

The Central Statistical Office (GUS) reported a rate of deflation of 0.4 per cent in July. This means that the annual rate was 11.9 per cent at the end of July (12.2 per cent at the end of June). In response to this news, Hanna Gronkiewicz-Waltz, President of the NBP, said she was 'pleased with this inflation because it brings the 9.5 per cent target (for the year) within reach, which I had thought was possible to achieve'.

Wroclaw province (south-western Poland) has received three million European Currency Units (ECUs) from the European Union (EU) Phare fund to help repair the damage suffered during last year's heavy floods. One and a half million ECUs were granted to the City of Wroclaw itself. The money will be used to rebuild plumbing systems and install environmental safeguards.

In July, output in the construction industry was 4.5 per cent higher than in June and 15.7 per cent higher than in July 1997, said GUS on 18 August. Construction output in the first seven months of 1998 rose 16.4 per cent against the corresponding period of 1997, GUS added.

Poland has become the 31st member of the Council of Europe Social Development Fund. The Fund was created in 1956 to finance social investment projects. During the last ten years the Fund has granted loans worth seven billion ECUs.

Hungary: the Central Statistical Office announced that the capital investment volume was 12.7 per cent higher in the second quarter of 1998 than in the corresponding period of 1997. In the first half of the year, capital investment increased by 10.6 per cent from the same period a year earlier. Investment was up in all sectors except for home construction.

The world's largest producer of gypsum, the British BPB Plc, is to invest four billion forints ($17.9 million) in a gypsum producing factory in eastern Hungary, said Tomas Foldi, Managing Director of Rigips Hungaria Kft, a subsidiary of BPB. The plant, due to open in the year 2000, will produce around 70,000 tons of plaster per year for domestic use and for export to Croatia, Slovenia, Slovakia and Ukraine.

Latvia: this week, Latvia's Ventplac, a stevedore company, and Belgian company, Nord Natie NV, signed a contract to construct one of the most advanced container terminals in the Baltic Sea. Nord Natie will own 40 per cent of the capital in the new company, called Nord Natie Ventspils Terminals, while Ventplac will hold 60 per cent. The total investment into the project will be US$70 million. Nord Natie NV is one of the oldest and largest stevedore companies of the port of Antwerp; its turnover in 1997 was $200 million.

Poland: a cement works with a yearly capacity of 800,000 tons will be built in the Special Economic Zone in Katowice. The 67.5 million Deutsche Mark plant will be put up by the Ekocem company, a partial subsidiary of Josef Klosters KG of Germany. The cement works will be operational in the year 2000.

TPI, a Belgian concern based in Luxembourg, will invest US$250 million in five production plants, a hotel and a recreation centre in the Kramsk commune of Konin province (central Poland). Kramsk commune head, Jozef Karmowski, said that the projects, which include an aluminium plant, a roof tile factory, a linen plant, a Turkish bakery and a slaughterhouse, will take two to three years to complete.

The German-Polish joint venture company, Scheidt Gliwice, is to begin production of transformer units in November this year. The company aims to produce 1,200 transformer units annually. Construction work is to be completed in the next three months. The investment costs amount to around four million zlotys ($1.16 million). Witold Szczecinski, the company President, said that 'the market for our production will be guaranteed by the privatisation of the Polish power industry'.

Czech Republic: in 1997 the chemical company Chemapol Group recorded a consolidated loss of 5.85 billion crowns ($189.9 million), mainly due to provisioning for financial investments and claims.

The Severomoravska Energetika regional power distribution company posted a net profit of 406 million crowns ($13.2 million) in the first half of 1998, 100 million crowns higher than expected.

Moravskoslezske Teplarny, a leading domestic producer and distributor of heat and electricity, recorded a 454.41 million crown ($14.7 million) gross profit on revenues of 2.136 billion crowns ($69.3 million) in the first half of 1998.

According to Jitka Komankova, spokesperson for Transgas, the state-owned gas importer, the company year reached a 1.999 billion crown (US$64.9 million) gross profit on revenues of 22.455 billion crowns ($729.06 million) in the first half of this year.

The Finnish company, Nokia, has signed a US$200 million contract with the mobile telephone operator Eurotel Praha to supply GSM 9000 equipment over the next three years. Klara Tomesova of Nokia said that, under the contract, Nokia will remain Eurotel's exclusive supplier of high capacity exchanges and other products, including equipment facilitating access to the Internet via GSM telephones. Nokia will also be charged with constructing, operating and improving the system.

The Budejovicky Budvar brewery generated revenues of 1.132 billion crowns ($36.7 million) in the first half of this year, up 15.6 per cent year-on-year, and a pre-tax profit of 287.603 million crowns ($9.3 million), up 21.7 per cent against the same period last year, said the company's Economic Manager, Petr Jansky.

Kovohute Bridlicna, a leading domestic aluminium processor and producer of aluminium foil for the construction and tobacco industries, has reported a 70.5 million crown (US$2.3 million) gross profit for the first half of this year, up eight per cent (year-on-year basis). The growth was possible mainly thanks to investments aimed at increasing Kovohute's production capacity. Kovohute Bridlicna is the parent company of a group with the same name which is the biggest Czech producer of aluminium sheeting and packaging for the food, tobacco and pharmaceutical industries. It is also a leader in powder metallurgy. The holding group is composed of the parent company and its subsidiaries Pramet Sumperk, Pramet Decin, Tapa Tabor, Hloubetin Development, Pramet Deutschland, Pramet Slovakia and Pramet Bulgaria.

The Ceske Drahy (CD) railway company cut its first half of 1998 loss by 37.7 per cent against the same period last year to 1.075 billion crowns (US$34.9 million), said spokesman Ondrej Vanek. Compared to the first half of last year, CD also managed to cut its debts by 1.044 billion crowns to 3.914 billion crowns.

CD railway company is calling for a new tender for an order of high speed trains following a substantial change in price by the original supplier. Ondrej Vanek said the company cannot accept a change in price from 4.3 billion crowns to 7.45 billion crowns (US$241.8 million) for an order of ten high speed trains from CKD Praha.

Biocel Paskov, a leading Czech sulphite pulp producer, made a net profit of 23.937 million crowns (US$0.777 million) in the first six months of 1998, compared to a loss of 221 million crowns in January-June 1997, said Jana Smajdorova of Biocel Paskov. Biocel exports 80 per cent of its output.

The Ministry of Industry and Trade is considering raising the share capital of the Czech Export Bank (CEB) as part of the Government's pro-export policy, said the Minister of Industry and Trade, Miroslav Gregr. Raising its current 1.5 billion crowns ($48.7 million) share capital would widen the possibilities of financing Czech exports. Last year, CEB had a profit of 35.4 million crowns ($1.15 million). (Hospodarske Noviny, 20/08/98)

The council of the Czech National Bank (CNB) is to remove the banking licence of Pragobanka as, a small bank controlled by the Ceska Pojistovna Insurance Company. Pragobanka has failed to meet the requirements of the CNB's stabilisation programme for small and medium-sized banks, and was dropped from the programme on 30 June 1998.

Estonia: Estonia's Tallinna Sadam port company has announced a pre-negotiated tender for the leasing of state-owned land and building a 400 million kroons (US$28.2 million) container terminal in the port of Muuga. The deadline for the tender is 1 October. The terminal's full capacity will be 200,000 standard containers a year.

Estonia's Forekspank group has posted a loss of 8.8 million kroons (US$0.62 million) for the first six months of 1998 on total assets of 2.68 billion kroons ($188.7 million). The increase in total assets during the 12 months was 925.4 million kroons or 52.8 per cent.

Uhispank reported that profits for the first seven months of the year dropped to zero following its merger with Tallinna Pank. As a result of the merger, the total assets of Uhispank grew by 2.7 billion kroons to 14.7 billion kroons (US$1.03 billion) at the end of July. Uhispank's profit in the first six months of the year was 82 million kroons ($5.7 million), while Tallinna Pank lost 35.3 million kroons ($2.5 million) in the same period.

Hansapank's unconsolidated profit in July was 10.6 million kroons (US$0.75 million). However, this result does not include the profit of Hoiupank after the transfer of Hoiupank's assets to Hansapank following a merger of the two banks on 31 July. During the first seven months of 1997, Hansapank earned a profit of 224.4 million kroons ($15.8 million), while Hoiupank's profit in the same period was 116 million kroons ($8.2 million).

Hungary : OTP Bank Rt reported a pre-tax profit of 13.679 billion forints (US$63.3 million) in the first half of 1998, 47.7 per cent more than in the same months last year. Total assets at the end of June were valued at 1,496.3 billion forints ($6.9 billion), 12.7 per cent more than in June 1997.

Fuzvoi Papir Rt envisaged a loss of 70.5 million forints (US$0.33 million) on net sales revenue of 2.84 billion forints ($13.2 million) in the first half of 1998. The company also reported a loss of 44.1 million forints ($0.2 million) on financial transactions.

Human Rt pharmaceutical company reported pre-tax profits of 665 million forints ($3.08 million) for the January-June period, 18.8 per cent more than in the first half of 1997. Net sales were 9.444 billion forints ($43.7 million), up 18.9 per cent. Of this, 1.351 billion forints were made on exports, up 11.5 per cent from 1997.

Finance Minister Zsigmond Jarai warned shareholders of Postabank Rt at their special shareholders' meeting that the bank had got into difficulties by over assessing the value of its assets. He said that the bank is in need of a further capital injection from the state, between 40 and 100 billion forints (US$186 million to $465 million), in order to stabilise. The state will continue to hold its 75 per cent stake until the bank's financial problems are resolved, after which a sale to a strategic investor or a float on the Budapest Stock Exchange is likely.

The Hungarian Oil and Gas Co, Mol, has obtained the rights to explore oil and gas in Pakistan. The concession was granted to the Mol Pakistan Oil and Gas Co BV consortium for the period of three years, with a possibility of extending it to a further 20 years if the consortium will find large fields of both commodities.

Latvia: Latvia's Ventspils Nafta oil terminal and the Russian Lukoil concern will draft jointly a project for increasing the capacity of the Latvian port, said Aivars Lembergs, Mayor of Ventspils, following his meeting with the Lukoil's President, Vagit Alekperov in Moscow. A working group formed from both companies will have to reach an agreement on participants in the project and the investment of each participant.

Lithuania: Shareholders of Lithuania's Klaipeda Free Trade Zone and FTZ Management Company will establish a development centre for the Klaipeda and Siauliai Free Trade Zones. The centre, a limited liability subsidiary of the FTZ Management Company, will be involved in marketing investment opportunities in Lithuania and searching for new investors for the zones.

Lithuania's Vilniaus Bankas earned a net unaudited profit of 38.777 million litas (US$9.7 million) over the first seven months of the year as compared to 28.794 million litas during the same period last year. At the end of July, the bank's assets were 2.186 billion litas ($546 million), up from 1.157 billion litas on 31 July 1997.

Lithuania's Industrijos Bankas has reported a net profit of 785,000 litas (US$0.2 million) for the first seven months of the year, more than projected target of 700,000 litas. The bank, established in 1996, was restructured into a corporation and received a full license for operations in mid-July this year.

Poland: The Polish insurer, PZU Zycie, has lodged an application for setting up a pension fund, according to PZU Zycie's spokesperson, Juliusz Bolek. PZU Zycie will hold a 100 per cent stake in the fund with its own capital at 200 million zlotys (US$58.2 million).

BIG bank Gdanski has signed an agreement with Eureko BV to establish a pension fund. The company's stock capital will be 16.8 million zlotys (US$4.94 million) in which BIG Bank Gdanski will hold a 55 per cent stake.

Bank Rozwoju Eksportu SA reported earnings of 20.6 million zlotys (US$5.98 million) in July 1998, compared with 13.8 million zlotys in July 1997. Profit from January to July of this year was around 127.7 million zlotys ($37.6 million) higher than the 82.1 million zlotys of last year.

Petrochemia Plock SA refinery posted a 353.769 million zloty (US$100 million) net profit in the January-June 1998 period, seven per cent higher than that reported a year earlier. For the whole of 1997 the refinery posted a 644.682 million zloty ($189.6 million) net profit, 206.5 per cent higher than in 1996.

The Plus GSM, Netia Telekom SA and Telefonia Lokalna SA cellular telephone operators plan to co-operate on the Polish market. The companies plan to have direct links between the three networks, joint services and billing schemes as well as the common use of telephone broadcasting installations. GSM President, Wladyslaw Bartoszewicz, said co-operation will help all three operators to lower their operational costs.

Wapienica SA, a tool plant in Bielsko-Biala, raised its sales to the Far East by 30 per cent against last year. Currently the company exports 40 per cent of its products to the Far East, mainly to Afghanistan, Pakistan and Bangladesh.

Russia: Two Russian banks, Mosbiznesbank and the Bank of Moscow, are planning to merge. Following their merger the banks may claim a place among the country's top five largest credit institutions, with their aggregate holdings exceeding 25 billion roubles (US$3.97 billion). The affiliate net of the banks will consist of 37 subsidiaries in Moscow and 53 branches across Russia.

Czech Republic: The City of Prague concluded on 10 August its first 3.5 billion crowns (US$105 million) Euro-syndicated loan, confirmed Zdena Javornicka from Prague City Council. The loan has been organised by the Prague subsidiary of ABN Amro Bank, Bank Austria Vienna, Bankgesellschaft Berlin, BNP-Dresdner Bank (CR), the Prague subsidiary of Deutsche Bank, National Australia Bank, WestLB Dusseldorf and Zivnostenska banka, and is to be used to finance Prague's infrastructure projects. The loan is to be repaid within five years.

The new government of Prime Minister Milos Zeman has presented a bill to parliament to approve the sale of bonds to the value of 15.7 billion crowns (US$509.7 million) with a maturity of 15 years, in order to cover this year's budget deficit. Until the bill is approved, the budget deficit will be financed by state treasury bill issues.

The Securities Commission suspended trading in the participation certificates of the Podnikatelsky Trzni Podilovy Fond mutual fund. The fund is managed by the Investicni Spolecnost Podnikatelu Investment Company. According to David Gladys from the Securities Commission, KCP, the decision was taking immediate effect and would be valid for one month in order to prevent large financial losses.

Estonia: The Tallinn-based confectionery company, Kalev, has issued 10 million kroons' ($0.704 million) worth of one-month commercial papers through Talinvest-Suprema Vaartpaberite AS, Talinvest-Suprema Securities Ltd. The papers carrying an interest rate of 11.05 per cent will be sold directly to selected buyers. The funds from the issue will be used to cover short-term debts until the arrival of a syndicated loan, the company's management has said.

Shareholders in the construction company Koger & Sumberg Group have approved a merger of the company with FCM builders. The new entity is to be named FKSM. To carry out the merger, the shareholders decided to increase stock capital by 14,860,400 kroons (US$1.05 million) by issuing 1,486,040 new shares for FCM shareholders. The share exchange rate will be 1:1.2383666 and the two merging companies will own equal parts of the new firm. Pricewaterhouse Coopers has been chosen to assess FCM's property to be handed over to Koger & Sumberg in the merger.

Estonia's national energy producer and distributor, Eesti Energia, has issued 38.2 million kroons (US$2.7 million) in three-month bonds carrying an interest rate of 12 per cent.

Latvia: Latvia's insurance company Austrumu Alianse reduced its foreign shareholding by issuing 350,000 new shares addressed to national owners. The company has raised its stock capital to 1.1 million lats (US$1.8 million). Following the issue, more than 50 per cent of the company's shares will be in the hands of Latvian shareholders. Baltijas Holdings will own 25.36 per cent of the shares, individual Bakhtiyar Abidov 22.72 per cent, Lukoil 22.72 per cent, Wess Investments 10.18 per cent, Polyplast 10.18 per cent, Eesti Turvateenistuse 5.36 per cent, and the board 3.45 per cent. The decision to reduce the company's foreign shareholding is expected to strengthen its market position.

Poland: The Polish Amerbank SA has begun selling 40 million zlotys (US$11.76 million) in shares in the hope of bringing in new investors. Two German banks, Bayerische Landesbank AG and DG Bank AG, have said they are interested to increase their voting rights to 33 per cent and 29 per cent respectively. Banque Bruxelles Lambert SA also expressed an interest to increase its voting rights in Amerbank from 21.6 per cent to 25 per cent. (Prawo I Gospodarka, 11/08/98)

Lithuania: Shareholders of Lietuvos Energija, a Lithuanian power utility company, approved on 18 August a five-year 1.5 billion lits (US$375 million) borrowing programme to be implemented by issuing average maturity bonds. Merrill Lynch, the United States investment bank which is the main creditor of the bank, will advise Lietuvos Energija.

Western investors have demanded Lithuania's Mazeikiu Nafta oil refinery to redeem a US$73 million bond emission. Mazeikiu Nafta issued a three-year $76 million Eurobond emission to finance turnover funds on 12 September 1997. The lead manager of the bond emission was the US CS First Boston Bank. In keeping with the conditions of the agreement, the investor has the right to demand redemption of the emission after one year. In connection with the financial crises in Asia and Russia, investors made use of this right and demanded the repayment of $73 million.

The European Bank for Reconstruction and Development will extend a 20 million Deutschmark subordinated loan to Vilniaus Bankas. This is the first non-convertible subordinated loan to be extended by the EBRD to a Lithuanian commercial bank. The loan aims to secure the bank's further growth with retaining a strong capital base as well as strengthening the leader's positions on the local market. This is the fourth subordinated loan to be extended to Vilniaus Bankas this year, 10 million Deutschmarks were received from the German investment and development agency DEG, $2.5 million came from the Latvian Unibanka, and $3 million was received from the Swedish investment agency Swedfund Financial Markets.

The European Bank for Reconstruction and Development and Deutsche Investitions-und Entwicklungsgsellschaft mbH, DEG, is extending a 20-million Deutschmark or 10.1-million Ecu subordinated loan facility to state-owned Lietuvos Zemes Ukio Bankas, the Agriculture Bank of Lithuania, EBRD said in a statement. The financing aims to strengthen the bank's capital base before its privatisation.

The financing consists of a 15-million Deutschmark loan from the EBRD and a parallel five million Deutsche mark loan from DEG, both for a period of seven years. The loans are structured so that both EBRD and DEG can convert their debt into ordinary shares in Lietuvos immediately after privatisation or at a later stage, subject to approval by Lietuvos' shareholders.

The US credit rating agencies Moody's and Standard & Poor's downgraded Russia's sovereign credit rating: Moody's cut was from B2 to B1 and Standard &Poor;'s from B plus to B minus.

Czech Republic: According to Hospodarske Noviny, the state would like to gain majority stakes in gas distribution companies. Currently the state's stakes in the companies range from 46 to 48 per cent. The state could gain a majority if the state firm Transgas, the monopoly supplier of gas for the Czech Republic, were to gain stakes of three to five per cent in the distribution firms. There are eight gas distribution firms in the Czech Republic, representing a total share capital of 8.6 billion crowns (US$279.2 million). (13/08/98)

The Japanese investment bank Nomura, which early this year bought a stake in state owned Investicni a Postovni banka (IPB), confirmed its interest in taking part in the tender for the privatisation of Ceskoslovenska Obchodni Banka (CSOB). CSOB is to be privatised as the first of the three remaining large banks (Komercni banka, Ceska Sporitelna). A total of 15 entities, among them 13 major foreign banks, have shown interest in the 51 per cent stake.

The National Property Fund agreed for the Chemapol Group (CHG) to purchase the 36.73 per cent state owned stake in Spolana Neratovice, said CHG financial director Vaclav Nestrasil. The privatisation contract will be signed in September and the shares will be transferred to CHG by the start of next year at the latest, he added. Spolana will then be incorporated into the new Aliachem chemicals conglomerate.

Estonia: The first presentation of Eesti Telekom, the telecommunications holding company, due to be privatised at the end of the year, has been scheduled for September. A total of 49 per cent of Telekom shares should reach the Tallinn and western European bourses by the end of the year. Around 15 per cent of the stock will be sold in Estonia. ABN Amro Bank NV and NM Rothschild & Sons, a consortium including the Japanese investment bank Nomura and Estonia's Uhispank, won an international tender for consulting the privatisation. Eesti Telekom expects to make a net profit of 240 million kroons (US$16.9 million) in 1998.

The Swedish bank, which holds a 10.3 per cent stake in Hamsapank is planning to further increase its stake in Estonian bank, Swedbank Vice-President, Lars-Olof Odlund, said on 18 August. Swedbank was the largest separate shareholder of Hoiupank with a 19.9 per cent stake before Hoiupank merged with Hansapank.

Latvia: Janis Naglis, head of the Latvian Privatisation Agency, said on 17 August that shares in Latvijas Gaze (LG) gas company could be quoted on the Riga Stock Exchange, starting late November or early December, following its public offering. Up to 5.4 million shares in LG are being offered publicly for privatisation vouchers from 3 August to 25 September. After the public offering is completed, the state will hold 33.83 per cent of LG's shares, while the private capital share in the company will be 66.17 per cent. From this, the German and Russian strategic investors will hold 18.26 per cent each. LG earned a profit of 1.8 million lats (US$3 million) in 1997 on a turnover of 87.6 million lats ($146 million). In the first five months of 1998 the company's profit was 4.4 million lats on a turnover of 37.9 million lats. The company increased its share capital from 36 million lats to 39.9 million lats, issuing stocks in both public and closed emission.

Latvian Economics Minister, Laimonis Strujevics, called for the speeding up of the privatisation of Latvia's major state owned companies, in order to ensure the planned revenues into the State Property Privatisation Fund. It planned to transfer 52 million lats ($86.6 million) into the fund this year, but the Latvian Privatisation Agency has forecasted that these revenues might be only some 30 million lats in the event that the privatisation of the large companies is delayed. Delay in the privatisation of LASCO shipping company, Latvenergo energy utility and Latvijas Gaze gas company endangers the fund's revenues.

Lithuania: The Lithuanian Privatisation Commission has approved the privatisation deal of the state's 89.5 per cent stake in Klaipedos Smelte stevedoring company to Western Lithuanian Industry and Finance Corporation. The investor agreed to pay for the stake the initial price of 45 million litas (US$11.2 million) and invest another 75 million litas ($18.75 million) into the company over the next five years.

The Lithuanian State Assets Fund has proposed selling a 22.9 per cent stock package in the Lithuanian/US closed stock company Alytaus Coca Cola Gamykla at a public auction. The US investor presently controls 70 per cent of the Alytus plant. Its share capital comes to 18.95 million litas ($4.74 million), with 4.35 million litas ($1.08 million) in face value shares in the hands of the state.

Poland: A General Electric Corporation subsidiary, GE Power Controls, is to buy an 18 per cent stake in Elester SA, an industrial switches maker and subsidiary of Elektrim SA. Elektrim has already made an international co-operation agreement last week, to go into joint production of some products with Schneider SA of France. Elektrim is looking to increase its position in Poland by working with foreign partners.

Treasury Minister Emil Wasacz said that the government's proceeds from privatisation next year should reach around 15 billion zlotys ($4.615 billion). Mr Wasacz presented a project bill entitled 'Directions in Privatisation in 1999', which will be included as an annex to next year's budget law. The proceeds achieved from privatisation will be used for reforms of the social welfare system, bridging the budget deficit, compensation for public employees, and reprivatisation schemes. Most of 1999's privatisation schemes will be carried out in the power, steel, alcohol and sugar industries, as well as in parts of the coal industry. Privatisation procedures currently underway at Telekomunikacja Polska, the LOT airline, banks and insurance companies will also be continued in 1999.

Over 90 per cent of the arms industry enterprises will be privatised, deputy Economy Minister Dariusz Klimek said on 19 August. The restructuring of the defence industry sector prepared by the Economy Ministry envisages various forms of privatisation. Only some strategic enterprises should remain under the State Treasury's control, Mr Klimek said.

Russia: Sergey Kiriyenko, Prime Minister of the Russian Federation, has instructed the State Property Ministry and the Russian Federal Property Fund to sell five per cent of Gazprom shares in 1998. Plans call to auction off the shares in a single lot, involving Russian and foreign investors.

The Russian Federal Property Fund has chosen financial consultants to conduct negotiations on behalf of the Russian government with western investors wishing to take part in a tender for a 25 per cent minus two shares stake in Svyazinvest. Igor Shuvalov, acting fund head, said at a news conference in Moscow on 19 August that the financial consultants on the sale of shares in the telecommunication holding Svyazinvest are the banks Merryl Lynch and HSBC Investment Bank. The stake's starting price is fixed at US$1.35 billion. The winner is expected to invest $516 million in the company. The closing date for bids is 13 October, with results to be announced on 16 October.

Slovakia: VSZ steel group, Slovakia's biggest industrial company closely linked to the HZDS, the ruling party led by the Prime Minister Vladimir Meciar and its allied shareholders, is to raise its 50.5 per cent stake in Slovenska Poistovna, the country's biggest insurance group.

Estonia: The new investment fund, Beeta Kapital's East European Interest Fund, has been registered by the Estonian Securities Inspectorate on 12 August. The new fund will diversify the range of products offered by Beeta Kapital and will allow clients to invest money in East European debt instruments. In the initial phase, the fund will focus on the Estonian, Russian, Ukrainian, Latvian and Lithuanian markets, with a later exposure on the markets of Hungary, Poland and the Czech Republic. The new fund will be the second after the Russian Growth Fund, managed by Beeta Kapital.

Czech Republic: The minor right-wing parties in the Chamber of Deputies, the Freedom Union and Christian Democrats (KDU-CSL) and the extra-parliamentary parties the Civic Democratic Alliance (ODA) and Democratic Union (DEU) have agreed to form a coalition for November's Senate elections. The decision was ratified by the Freedom Union's national committee on 15 August. The Freedom Union's Chair, Jan Ruml, said that his party believed that this was the only way to stop the governing Social Democrats (CSSD) and the main opposition Civic Democratic Party (ODS) gaining a majority in the upper house, which would allow them to make changes to the constitution.

The Chamber of Deputies voted confidence in the minority cabinet of the CSSD. It is expected that the Prime Minister Milos Zeman's government will smoothly pass through the Chamber thanks to the 'opposition agreement' signed by the CSSD and the main opposition party, ex- Prime Minister Vaclav Klaus' ODS, after the early general election in June. In the agreement the ODS pledges to secure confidence for the new government in the 200-seat Chamber. The ODS's 63 deputies will leave the Chamber during the vote by which they will decrease the quorum necessary for the motion to be passed so that the 74 Social Democrat deputies are capable of outvoting the rest of the Chamber. Though the ODS is sharply critical of the government policy statement, it has repeatedly made it clear that it will honour the agreement.

Hungary: The Hungarian government does not want to build a new dam on the Danube river, but is looking for another solution to comply with the Hague court verdict on the Hungarian-Slovak dispute over the issue, government spokesperson, Zoltan Borokai, announced after a cabinet meeting. According to the Slovak-Hungarian agreement of 1977 on a hydroelectric works on the Danube, a dam at Hungary's Nagymaros is supposed to be built by Slovakia, but Budapest unilaterally withdrew in the early 1990s.

Poland: The Democratic Left Alliance (SLD) would win the elections if the elections were held in August, said a mock election poll by the Demoskop public polling institute. SLD has gone up two percentage points in the ranking since July, with AWS two points down. According to Demoskop, SLD would get 30 per cent of the votes and AWS 23 per cent if an election were held now. Fifteen per cent of votes would go to the co-ruling Freedom Union, nine per cent would go to the Polish Peasant Party and seven per cent to the Union of Labour.

Poland's arms industry may count on considerable assistance from NATO for building its infrastructure due to the country's strategic importance, said Deputy Defence Minister Romuald Szeremietiew on 19 August. "As in the case of Turkey and Norway, NATO will want to finance the expansion of the military infrastructure system in Poland from its own resources. This means a considerable financial booster for the domestic industry," the Deputy Minister said.

Serbia: A new peace plan for Kosovo province has been proposed by the six- nation Contact Group (the US, Russia, UK, France, Germany and Italy), which gives Kosovo broad autonomy as a 'special part' of Serbia, or a 'constituent unit' of the Federal Republic of Yugoslavia, which currently comprises the republic of Serbia and Montenegro. The Contact Group expressed its "willingness to provide political, economic technical and other support for the implementation of the plan".

Slovakia: The ruling Movement for a Democratic Slovakia (HZDS) has raised a protest against the registration of the biggest opposition party, the Slovak Democratic Coalition (SDK) for the general elections set for September, Slovak Supreme Court judge Milan Lipovsky told journalists. The Supreme Court now has five days to decide whether the SDK can fight the election.

Exchange rates (31 July)

Rates derive from the FT as of 31 July 1998.
Rates for Georgia, Kyrgyzstan, Tajikistan, Turkmenistan, Uzbekistan provided by the National Banks of each country