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Western Press Review: The Economic Pulse Of Central And Eastern Europe

  • Lisa McAdams



Prague, 24 January 1997 (RFE/RL) - Economic considerations in Russia and the emerging economies of Central and Eastern Europe featured heavily in Western press reports today.

In Russia, crime and corruption remain rife and the gap between those who have done well under the transformation from communism to capitalism, and those who have struggled or fallen into poverty, is reported on the rise. President Boris Yeltsin's rivals and opponents have grown eager of late to push him aside, propelled in part by mounting economic problems.

FINANCIAL TIMES: Yeltin's illness has created a political vacuum

In commentary today for the London paper Chrystie Freeland in Moscow reports that the Kremlin came under fresh political fire yesterday when the Federation Council, the upper house of Parliament, censured Boris Berezovsky, one of Yeltsin's most prominent aides. Freeland comments,"The attack heightened the impression that Mr. Yeltsin's illnesses have created a political vacuum which is gradually eroding the Kremlin's authority and its ability to work with other branches of government." Freeland also comments, "The hostile initiative was a change from the normally obedient behavior of the Federation Council, which is composed of Governors of Russia's regions."

Freeland writes,"Analysts predict the chamber is likely to become increasingly defiant following Autumn's round of regional elections, which gave many governors political independence from the Kremlin." And, as she put it, "More trouble could be in store for Mr. Berezovsky today." Berezovsky is deputy head of the Security Council and one of the bankers behind Yeltsin's re-election campaign last year.

Meanwhile, Russia's Central Bank Chief Sergei Dubinin, yesterday urged the government to put its finances in order, warning of debt dangers. This, as Britain's Home Secretary, Michael Howard, prepares to visit Moscow next Tuesday to discuss "organized crime" with officials from the Russian Interior Ministry.

FINANCIAL TIMES: A perception of huge potential attracts investors to Russia

Despite the obvious obstacles, Anthony Robinson in commentary for today's writes,"The number of companies from the former Soviet bloc joining the European "500" is set to rise steadily in the next few years, as Central European companies in particular benefit from high growth rates in the private sector, improved access to domestic and foreign capital and stronger financial markets." Robinson comments,"Russia failed to deliver the hoped for return to overall economic growth last year and capital incomes remain small. But greater macro-economic stability and a perception of huge potential continues to attract investors anxious to tap into one of the world's greatest under-developed markets." According to Robinson,"The real value of Russian companies remains 'a riddle wrapped in an enigma,' as Winston Churchill once memorably described the Soviet Union."

HANDELSBLATT: Analysts are skeptical about the Czech market



A differentiated picture for the chances of success on the volatile East European exchanges is illustrated in an unsigned report in today's edition based on analysis of the Berlin Bank Society. The report states,"After the really successful year of 1996, in that considerable rises in stock values were realized in the exchanges of Prague, Warsaw and Budapest, experts are now advising on a selective approach.... the Polish exchange offers an entire row of undervalued or fairly valued shares." However, the analysts are skeptical in considering the Czech market, "still lacking as a working regulation framework for the trading of shares" in Prague, so the critique says. As to Budapest, the Bank Society advises investors to take their profits, resulting from the historical high-point of the market.

Albania



The Western press was laden with other business news from the region today. In Albania the parliament yesterday passed a law banning pyramid investment schemes and warned the operators could face a minimum of 20 years in jail and confiscation of assets. More than 100 people were arrested -- some for their role in the financial scams and others for their part in anti-government demonstrations in the wake of the schemes and the loss of their savings.

The schemes rely on a stream of new deposits to pay out interest on the old ones. This requires an ever increasing flow of cash. They collapse when the cash flow stalls, often resulting in the loss of savings.

LONDON INDEPENDENT: Arrests did not affect pyramid schemes



Andrew Gumbel writes in a special report today, "Clearly the aim was to intimidate the Albanian opposition into silence, while trying to reassure up to half a million disappointed investors that the government had nothing to do with the pyramid schemes or their failure."

Gumbel adds,"In a country as autocratic as Albania, it seems inconceivable that the pyramid schemes could have flourished without the government's consent. Revealingly, the arrests did not affect pyramid schemes still in business."

WALL STREET JOURNAL: Poland wants to become an automotive center

Further North, in Poland, the paper's Daniel Michaels reports that Isuzu Motors will invest nearly $220 million to build a diesel-engine plant in Poland. According to Michaels, the venture is the largest Japanese investment in Poland. Michael says: "The announcement marks a significant step forward in Poland's efforts to become a European center for automotive production."

WALL STREET JOURNAL EUROPE: Ukraine may soon attract more multinationals

Neighboring Ukraine's automotive production future will depend heavily on politics, according to Mathew Brzenzinski, commenting in today's edition. Brzenzinski writes,"Will it be Nexia hatchbacks or Opel Vectras? That's the politically charged question in Ukraine, as the government tries to decide whether to give South Korea's Daewoo Group or General Motors Corporation the approval to form a joint venture with the country's only car plant, Avtozaz."

According to Brzezinski,"The Avtozaz deal not only promises to help salvage Ukraine's ailing auto industry, but it also being touted as the showcase investment everyone has been waiting for. It could nearly double foreign investment in one fell swoop and help put Ukraine on the radar screens of many other multinationals (companies) that to date have given Ukraine wide berth."

INTERNATIONAL HERALD TRIBUNE: The Czech Skoda is revving up

Meanwhile, Peter Green, in a special report, says the Czech Republic's Skoda auto concern is revving its engines in Eastern Europe. Green reports,"Skoda, with its well-trained work force, established markets and reputation for quality, has allowed VW (Volkswagen) to take on the Asian automakers with their own weapons: state-of-the-art assembly lines, cheap skilled labor and just-in-time delivery." VW bought 70 percent of Skoda from the Czech government in 1991, edging out Renault to the tune of 1.400 thousand DM up front.
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