Mc Gill UniversityCenter for continuing Education

CENTRAL AND EASTERN EUROPE OVERVIEW REPORT

Course title: North American and Global Economy

Course number: CPL2-561-1B36

Presented to professor: Kenneth N. Matziorinis

Presented By: Carola Arenas and Roxana Valencia

February 20, 2003

TABLE OF CONTENTS

INTRODUCTION P.3

CZECH REPUBLIC

CANADA’S RELATIONS WITH CZECH REPUBLIC P.4CZECH REP. : GENERAL POLITICAL AND ECONOMIC REVIEW P.4CZECH REP. ECONOMIC DATA IN RELATION TO CANADA: P.6CANADA’S AND CZECH REPUBLIC TRADE BALANCE P.7CZECH REP. AND ITS BORDERS P.8CANADA’S FDI IN CZECH REPUBLIC P.10

HUNGARY

CANADA’S RELATIONS WITH HUNGARY P.11HUNGARY: GENERAL POLITICAL AND ECONOMIC REVIEW P.11HUNGARY ECONOMIC DATA IN RELATION TO CANADA: P.12CANADA’S AND HUNGARY TRADE BALANCE P.13HUNGARY AND ITS BORDERS P.15CANADA’S FDI IN HUNGARY P.16

POLAND

CANADA’S RELATIONS WITH POLAND P.17POLAND: GENERAL POLITICAL AND ECONOMIC REVIEW P.17POLAND ECONOMIC DATA IN RELATION TO CANADA: P.18CANADA’S AND POLAND TRADE BALANCE P.19POLAND AND ITS BORDERS P.22CANADA’S FDI IN POLAND P.23

SLOVAKIA

CANADA’S RELATIONS WITH SLOVAKIA P.24SLOVAKIA: GENERAL POLITICAL AND ECONOMIC REVIEW P.24SLOVAKIA ECONOMIC DATA IN RELATION TO CANADA: P.25CANADA’S AND SLOVAKIA TRADE BALANCE P.26SLOVAKIA AND ITS BORDERS P.27CANADA’S FDI IN SLOVAKIA P.28

CONCLUSION P.29

SOURCES P.30

INTRODUCTION

The purpose of this document is to give a good overview of Central Eastern Europe’s region as an international trade partner for Canada. In our report we present the information regarding Czech Republic, Hungary, Poland and Slovakia since there current situation presents a great deal of opportunities for Canadian and international firms.

The main issues covered in this report are: Canada’s relations with the region for the individual countries, the current political and economic facts, trade relations with Canada, the up to date information regarding the accession of these countries to European Union (EU) and finally the foreign direct investments (FDI) from Canada to the region.

We expect that the information provided here will clarify the perception about this region and will help Canadian firms and investors make a wiser decision when considering the Central and Eastern Europe.

CANADA’S RELATIONS WITH CZECH REPUBLIC

Czechs generally view Canada as a loyal friend, largely thanks to Canada's sheltering of Czechoslovak political refugees in 1948 and 1968, steadfast support for dissidents throughout the Communist period and the strengthening of Canada-Czech personal and family ties since 1989. And, of course, hockey. In 1997, Canada re-imposed a visa requirement on visiting Czechs and the Czech Government decided to do the same, effective April 1st, 2001.

There is regular ministerial-level contact between Canada and the Czech Republic. The dialogue, as with other middle-power allies, has become as much multilateral as bilateral. The Czech Republic is a partner in Canadian human security initiatives, particularly as these involve control of small arms and child soldiers. Parliamentary relations have also developed swiftly.

Since January 1993, CIDA's technical cooperation programme in the Czech Republic has generated nearly $20 million in connection with over 230 projects aiming to support the Czech Republic in its transformation to a free market democracy. Furthermore, smaller projects financed by the Canadian Fund for Local Initiatives continue to play an active role in the program's priority sectors, such as promotion of democracy and good governance, development of NGOs, participation of women in the economy and the promotion of values such as tolerance and diversity.

At the heart of Canadian activity in the Czech Republic is the promotion of Canadian values, illustrated by Canadian interest here as one of Europe's cultural centres, and in turn by Czech interest in Canada's bilingual and multicultural mosaic. Canada supports major Canadian Studies programs which play a very active role in the universities in Prague and Brno. The Canadian Studies centre at Brno's Masaryk University is the hub for the coordination of Canadian Studies programs in the Central European region.

CZECH REP. : GENERAL POLITICAL AND ECONOMIC REVIEW

The Czech Republic has several advantages, such as an advanced economy (second highest per capita income in Central Europe after Slovenia) and a long industrial tradition as well as a superb location in Central Europe from which 100 million customers can be reached.

GENERAL DATA: October 2002

Capital: PragueTotal area: 78,864 sq. km.Population: 10.3 millionCurrency: Czech Koruna CAD$1 = 24.55 CZK, 2001average rateLanguage: CzechNational Day: October 28

POLITICAL DATA:

Type of State: Republic

Type of government: Bicameral ParliamentaryDemocracy

Head of State: Václav Havel (elected in February1993, re-elected in January 1998, for 5 years)

Head of Government: Vladimir Spidla

Main political parties:Minority Government: Czech Social Democratic Party,( f SSD = 74)Opposition: Civic Democratic Party, (ODS = 63);Communist Party, (KS f M = 24); Christian DemocraticUnion, (KDU-f SL = 20); Freedom Union, (US = 19).

Chamber of Deputies: 200 members elected for 4years

Senate: 81 members elected for 6 years( f CSD =23, ODS =25, KDU-f SL = 17, ODA (CivicDemocratic Alliance) = 7, US = 11, KS f M = 4)

Ministers:Finance: Bohuslav SvobotkaIndustry and Trade: Jiri Rusnok

Foreign Affairs: Cyril Svoboda

The government has tackled economic reform by adopting Euro-centrist, anti-corruption and business-friendly measures, including the privatization of many state-owned monopolies, to accelerate Czech readiness for membership in the European Union. Large scale structural adjustment in the transition to a free market was accompanied by increasing poverty levels and income inequality, and many Czech households experienced a significant fall in their standard of living.

CZECH REP. ECONOMIC DATA IN RELATION TO CANADA:

Czech Rep. CanadaGDP: $ 85.63 (in billions, at

current prices)$ 1,083.86(in billions, at current prices)

GDP per capita: $ 8,314 $ 34,389

GDP growth rate: 3.3 % 1.5 %

Unemployment rate:8.5% (2000) 7.4 %(2000)

Inflation rate: 3.9 % 2.5 %

Banks forecast that low inflation will translate into lower interest rates and less income for the country's financial institutions.

Personal consumption and investment are projected to grow at solid rates. So far, GDP growth has been relatively immune to the slowdown in the EU, but lower demand from Germany, the largest buyer of Czech exports, is expected to curtail the growth rate in 2002. Attracting foreign investment to increase the flow of capital and expertise in the country’s leading companies will be a government priority to boost economic growth

CANADA AND CZECH REPUBLIC TRADE BALANCE

Although trade relations have improved, the volume of bilateral trade, $229 million in 2000, has remained virtually unchanged over the past five years. Canada's main exports to the Czech Republic are aircraft and aircraft parts, pharmaceuticals, electronic data processing equipment, electrical machinery, textiles and agri-food products.

EXPORTS:

to Canada: $ 166 millionto world: $ 44.75 billion (2000)

IMPORT:

from Canada: $ 52 millionfrom world: $49.55 billion (2000)

CZECH REP. AND ITS BORDERS

Since the 1950s, a political and economic entity of global importance has been developing in the neighbourhood of the Czech Republic, the European Communities, later the European Union. After 1989, the EU has become Czech Republic's largest trading partner with more than 65% share of its foreign trade and EU member states are now the largest investors in the country. Czech Republic's proximity to the Union is clearly shown not only by the fact that the country shares its longest part of the border with EU member states. More importantly, the Czechs have always shared the European civilisation and cultural values, they have been a substantial part of European history. It is therefore no surprise that since 1989, the accession to the EC (later EU) has been perceived by a majority of the

Czech population as a historic necessity and full integration into the EU is supported by all parliamentary parties in the Czech Republic. 

Over the past decade, the Czech society has undergone dramatic changes. After the political changeover in November 1989, the Czech Republic quickly became a pluralist democracy, the centrally planned economy was turned into a functioning free-market economy. Almost 75 years after its foundation, former Czechoslovakia split up peacefully in 1992 and gave birth to an independent Czech Republic. Europe Agreement The Czech Republic submitted its application for membership together with the explanatory memorandum on 23 January 1996. However, already in 1995 another important document entered into force: the Europe Agreement establishing an association between the Czech Republic on the one part, and EC and their Member States on the other part (known also as the Association Agreement), which is one of the most important agreements the Czech Republic has signed in its short history. The Agreement is a legal basis for the creation of a free trade area in industrial products between the Czech Republic and the EC, completed by the end of 2001. Besides, the Agreement commits both parties to co-operation in areas such as culture, education, but also energy, telecommunications, small and medium-sized enterprises, economic competition etc. The Agreement and its protocols form also a legal basis for the participation of the Czech Republic in various Community framework programmes, such as those for research and technological development, environment, education etc. Internal Preparation It should be noted, however, that the Agreement does not mean any automatic right of the Czech Republic for the membership. It is the internal preparation of the country, which is crucial for the success of its accession to the EU. Since a number of years the Czech Republic has developed a vast network of internal preparation activities, which are being constantly intensified. Harmonisation of legislation in many fields is one of the key elements of the domestic preparation and requires an efficient co-operation between the Government and the Parliament. The Czech Republic proceeds successfully and by January 2003 almost 80% of laws have been fully and another 20% partially harmonized. Attention is continuously paid also to non-legislative measures, such as the reform of the public

administration, which has already well advanced, or reform of the judiciary. The national economy has been going through many positive structural reforms, which is reflected by the increasing volume of FDI inflow (over 7 bil. EURO in 2002), low inflation at just over at just over 2% (November 2002) and growing GDP (despite the downturn in the world economy). Key document for the preparation of the country for membership has been the National Programme for the preparation of the Czech Republic for EU membership. It lists systematically and in detail all short and medium term priorities that need to be dealt with to comply with the accession requirements. These include inter alia preparation in the areas of justice and home affairs, environment, regional policy, agriculture, fight against organised crime and other fields. Increasing attention is paid also to the information and communication strategy of the Czech Government on EU affairs.

CANADA’S FDI IN CZECH REPUBLIC

Canadian direct investment in the Czech Republic is currently estimated at $400 million. This amount does not include all investments made through European subsidiaries of Canadian companies or some consortium investments. Privatization, industrial restructuring and domestic demand in sectors such as telecommunications and transportation are attracting foreign capital. More and more, Canada is gaining a reputation as a top-notch supplier of high-tech products. Promising sectors in the Czech Republic for Canadian companies are information and communications technologies, construction, environment, security, sporting goods, biotechnology, plastics industry, agri-food products and transportation.

CANADA’S RELATIONS WITH HUNGARY

Canada and Hungary enjoy excellent bilateral relations. Hungarians in general are very well disposed towards Canada; our early, strong support for NATO enlargement and fact that Canada was the first existing Alliance member to ratify it have also been noted positively. Also often remembered is the fact that Canada received many refugees from Hungary after the 1956 uprising against the then Communist rule.

Canada has a CIDA Technical Assistance programme in Hungary and, since its inception in 1989, projects have focussed on issues of good governance, private sector development, financial sector reform, and education and training. Canadian programs emphasize capacity building through the transfer of knowledge, expertise, skills and technology, rather than large capital projects. Human resource development, institution building and the provision of policy advice are the primary forms of cooperation. To date, some 140 projects have been approved in a programme valued at $ 21 million.

Foreign Minister Manley attended the May 29-30, 2001, NATO Ministerial that was held in Budapest. The most recent high level bilateral visit from Canada to Hungary was by Trade Minister Pettigrew in September 2000. Hungarian Foreign Minister Martonyi made a successful official visit to Canada February 18-20, 2001 and the Minister of Social Welfare and Family Affairs, Peter Harrach, was in Canada for discussions from June 5-8. On March 04, 2002 Min. Jane Stewart from Human Resources Development Canada visited Hungary and a Social Security Agreement between Canada and Hungary was signed.

The return to Hungary in October 1999 of a painting, Nozze de Cana, by Italian Renaissance artist Giorgio Vasari augurs well for closer cultural relations with Hungary during the next few years, particularly in the field of visual arts. Nozze de Cana had been an object of dispute between the Hungarian Museum of Fine Arts and the Montréal Museum of Fine Arts which had acquired it in 1963 and finally sold it to the National Gallery of Canada in 1999; on October 28,1999, during Prime Minister Orban's visit to Ottawa, Prime Minister Chrétien, in a gesture of goodwill towards Hungary, offered him the painting as a gift from Canada.

On December 5, 2001, because of a large number of unfounded refugee claims by Hungarians, Canada imposed a Visa requirement for Hungarians wishing to visit Canada.

HUNGARY : GENERAL POLITICAL AND ECONOMIC REVIEW ( April 2002)

Hungary has an area of 93, 030 sq. Km and contains a population of 10 million inhabitants. The capital of is the city of Budapest, where a most of the economic activity is located. The national currency is the Hungarian Forint and the average exchange rate (2001) was of CAD$1 = HUF .

The national language is Hungarian, however due to it’s large trade with Germany, most people learn German as second language. Hungary ‘s national holiday is celebrated August 20 (Saint Stephen’s Day).

Hungary is a democratic republic and has Ferenc Madl as head of state since June 6, 2000. Head of Government: Dr. Viktor Orbán (elected May1998)Hungary has many political parties , howerver the most important ones would be the Governing Coalition: FIDESZ , the Hungarian Civil Party . The opposition is the Socialists MSZP, the Free Democrats and the Hungarian Justice and Life The Foreign Affairs miniter is Dr. János Martonyi. And

Hungarian representation in Canada is as follows:Canada ’s Ambassador to Hungary: Marta MoszczenskaHungary’s Ambassador to Canada: Sándor Papp (Ottawa)Montreal:Consul General: Laszlo Csaba PapToronto: Consul General: István Emri

HUNGARY ECONOMIC DATA IN RELATION TO CANADA: (numbers are $CAN for 2001 unless stated)

Hungary Canada GDP: $ 80.05 (in billion, at

current prices)$1,083.86 (in billion, at current prices)

GDP per capita:$ 8,005

$ 34,389

GDP growth rate: 4.5 % 1.5 %

Unemployment rate:5.7 %

7.4 %

Inflation rate: 9. 4 % 2.5 %

CANADA AND HUNGARY TRADE BALANCE

After rising 14-fold to C$96 million in the decade leading to 1998, Canadian exports to Hungary have decreased steadily since, to C$40 million in 2000. The decrease in pork exports, from C$17 million in 1998 to less than C$2 million in 1999, was a significant cause of the decline. Other significant Canadian exports to Hungary include telecommunications equipment, computers and peripheral equipment, machinery and agri-food products. Other significant areas of opportunity for Canadian exporters include transportation equipment, construction and building products, health-related goods and services and environmental technologies.

EXPORTS to world: 22.6 million (est., 2000)to Canada: 40 $ million

Significant Canadian exports to Hungary include telecommunications equipment, computers and peripheral equipment, machinery and agri-food products. Other significant areas of opportunity for Canadian exporters include transportation equipment, construction and building products, health-related goods and services and environmental technologies.

Food Man. 38 %Chemincal Man. 12.6 %Primary Metal Man. 10.4 %Mining ( except Oil & Gas) 9.2 %

Others 29.8 %

IMPORTS

from world: 25.1 billion (est., 2000)from Canada: 157 $ million

Trans. Equ. Man. 58.9 %Crop Production 13.8 %Paper Man. 9.8 %Others 17.4 %

HUNGARY AND ITS BORDERS

Hungary’s growth slipped below 4% in 2001, after recording 4 consecutive years in excess of 4.5%. Hungary ships roughly 70% of its exports to the EU, compared with roughly 40% at the turn of the 90’s. While export demand has ebbed, Hungary retains its status as one of the premiere destinations forforeign direct investment. Since the opening up to the West, Hungary has received roughly $US 2,000 in cumulative per capita FDI, compared with a mere $500 on average into the other countries in Eastern Europe and the CIS.

Region leading growth, substantial fiscal deficits, high real interest rates, and limited political uncertainty dominate the outlook for Hungary. A sluggish recovery in the European Union (EU), Germany in particular, has constrained the country's growth prospects for the current year. The government will likely complete European Union accession negotiations by the end of this year, but has pushed back its plans to join the European Monetary Union (EMU) until 2007.

The government wants to reduce the shortfall in the public accounts, and it plans to do so by performing significant spending cuts more specifically in the health care and education sectors, all this in order to meet EMU criteria.

EXPORTS (TO EU in millions) (in 2001) IMPORTS (FROM EU) ( in 2001)Energy 1.9%=387 euro Energy 1.1%=200 euroChemical Products 5.3%=1062 euro Agricultural Products4.0%=720 euroTextiles and Clothing 7.1%=1424 euro

Textiles and Clothing7.7%=1,385 euroAgricultural Products 7.3%=1463 euro

Chemical Products 12.3%=2,318 euro

Transp. Materials 30.2%=6080 euro Transp. Materials 27.8%= ,021 euroMachinery 48.3%=9710 euro

Machinery 46.6%=8,413 mln euro

TOTAL 100%=20,126 mln euro TOTAL 100%=18,057 mln euro

CANADA’S FDI IN HUNGARY

With Canadian direct investment in Hungary at roughly C$1 billion, Canadians have a prominent presence in Hungary. Hungary is strategically located at the crossroads of Europe, potentially a gateway to a much larger market area. It has excellent connections to Ukraine, Russia and the Balkans. The Trade Commissioner Service in Budapest is responsible for Hungary, Slovenia, Croatia and Bosnia-Herzegovina

CANADA’S RELATIONS WITH POLAND

Relations between Canada and Poland are excellent, with broad high-level political contact, expanding trade and investment, and increasing military co-operation and academic relations programmes. Canada is home to a vibrant community of approximately 800,000 Polish-Canadians, and visitor traffic from Poland to Canada, accounting for over 30,000 visitors per year, is increasing annually.

In February 1998, Canada was the first NATO country to ratify Polish accession to the North Atlantic Alliance. For the Polish government, this single action propelled the importance of the bilateral relationship to new heights, opening the door to new areas of co-operation. In January 1999, Prime Minister Jean Chrétien made the first-ever official visit by a Canadian Prime Minister to Poland, accompanied by International Trade Minister Sergio Marchi and a large business delegation.

Canada has become a leader among NATO countries in language and peacekeeping training in Poland, with hundreds of Polish officers and senior general staff having received training in Canada and Poland. CIDA has committed $75 million for technical cooperation projects in Poland in the 1990s to support the country's transformation to a free market democracy. Canadian Studies Centres and programmes are flourishing in Polish universities: up to date, four Canadian Studies have been established and seven Polish universities offer curricula in Canadiana

POLAND : GENERAL POLITICAL AND ECONOMIC REVIEW

Poland is considered the largest economic market in the region , is has a total Area of 312,683 km 2 and holds a population of 38.6 million, generally concentrated in the Capital Warsaw, the Historic city of Krakow and the Northern city of Gdansk. About 98 % of the population are ethnic Poles, however there are large minority groups of Ukrainians, Belarusians, and Germans.

The national currency is the Polish Zloty and the average exchange rate (2001) was of CAD$1 = 2.64 zloty. The national language is Polish , a West Slavic language, however due to it’s long communist political history most Polish citizens speak Russian as a second language. It is important to note that the most important second language of choice is German, due to their extensive trade with Germany . Poland ‘s national holidays are May 3rd and November 11th

In terms of education , approximately 98 % of the population over the age of fifteen is literate. Institutions of higher learning include universities, polytechnical schools, and specialized academies such as medical and agricultural schools, in which Canada has vested some investment or co-operation programs.

In terms of transportation, Poland has 25 000 KM of railroad runing all over the country and has a large locomotive fleet to be fully modernized for the EU accession.

It also has an extensive road system runing from all important points in Poland, needing once again heavy repairs and improvements. It is important to note that Poland’s main source of crude oil comes from Russia throught the Druzhba pipeline. Poland has large Baltic harbors: Gdynia, Gdansk, Swinoujscie, and Szczecin. These ports have regualr lines to London, Asian ports, Australia, and some African and Latin American countries

Poland is a democratic republic and has Aleksander Kwasniewski as head of state since December 1995 ( re-elected in 2000). Poland has many political parties , however the most important ones would be as follows: Minority Government: Coalition of the Democratic; Left Alliance and Labour Union and Polish Peasants’ Party . The opposition: Citizens’ Platform , Samoobrona , Prawo I Sprawiedliwosc; Catholic LPR. The Foregin affairs minister is Wlodzimierz Cimoszewicz

Polish representation in Canada is as follows:

Canada’s Ambassador to Poland: Ralph Lysyshyn (Warsaw)Poland’s Ambassador to Canada:Ottawa: Ambassador: Pawel DobrowolskiMontreal: Consul General: Witold SpirydowiczToronto: Consul General: Jacek Junosza-Kisielewski

POLAND ECONOMIC DATA IN RELATION TO CANADA:(numbers are $CAN for 2001 unless stated)

Poland CanadaGDP:

$ 276.54(in billions, at current prices)

$ 1,083.86(in billions, at current prices)

GDP per capita:$ 7,164 $ 34 389

GDP growth rate:2.5 % 1.5 %

Unemployment rate: 16.2 % 7.4 %Inflation rate: 5.7 % 2.5 %

CANADA’S AND POLAND TRADE BALANCE

After Russia, Poland is Canada's largest market in Central and Eastern Europe. Canada has extended GPT (General Preferential Tariff) status to Poland and agreed to Most Favoured Nation treatment.

Bilateral trade may be under- reported by as much as 40%, however, when trade shipments through Canada's traditional EU partners are taken into account. Canada's main exports to Poland in 2000 were medicaments, jet engines and parts, durum wheat, cinematographic projectors, building components. Imports from Poland included jet engine parts, railway rolling stock parts, parts of power transmission equipment, wooden furniture, gears and gearing and iron/steel products.Poland's dynamic economy has created opportunities for the Canadian private sector.

Priority sectors of opportunity include agriculture/agri-food, information technology and telecommunications, construction (residential and commercial) and environmental products and services plus a wide range of infrastructure projects in the transportation and oil- and -gas sectors.

EDC has characterized Poland as the "star of Central Europe" and has expressed its willingness to significantly increase long-term export credit financing activity in this market. Canadian investment in Poland is estimated at $300 million with an

additional $346 million committed. Major Canadian investment projects include the Europort Grain Terminal, a grain handling facility and terminal at the port of Gdansk, McCain Poland with a frozen french fry factory in Strzelin valued at US $54 million, and Royal Europa, a US$ 34 million investment of Royal Technologies Group of Ontario in a manufacturing facility producing building products. While Canadian investors are very welcome in Poland, presence, partnership, and patience are essential to their success. A new Canadian embassy was opened in Warsaw in October 2001. The building received extensive media coverage and acclaim for its open design reflecting Canadian values and culture.

EXPORTS

Exports to the world: $ 43.8 billion (2000)Exports to Canada: $296 million

Polish exports to Canada totaled $296 million in 2000, up from $185 million in 1999. Bilateral trade may be under- reported by as much as 40%, however, when trade shipments through Canada's traditional EU partners are taken into account.

Export to Canada included jet engine parts, railway rolling stock parts, parts of power transmission equipment, wooden furniture, gears and gearing and iron/steel products.

High interest rates and widespread unemployment have decreased consumer spending and have given rise to public frustration and discontent. After six consecutive interest rate cuts in 2001, Polish interest rates remain high, at 8-9%.

Inflation has reached a post-communist low of 4.3%( 2001). With a current unemployment rate of 16.2%, access to EU labour markets has become a critical factor in EU entry negotiations. Analysts say the economy will need to achieve an annual growth rate of 5% a year for unemployment to drop.

Trans, Equip. Man. : 26.5 %Machinery Man. : 12.6 %Primary Metal Man. : 10.5 %Furniture and Rel. Prods. Man.: 7.2 %Food Man. : 6.4 %Wood Prod. Man. : 5.2 %Electrical Equip. App. & Component Man. : 5 %Chemical Man.: 3.6 %Others 19.3 %

IMPORTS

Imports from the from world: $ 63.64 billion (2000)Imports from Canada: $ 155 million

Canadian exports to Poland totalled $155 million in 2000, down from $161 million in 1999. Canada's main exports to Poland in 2000 were medicaments, jet engines and parts, durum wheat, cinematographic projectors, building components.

Trans. Equip. Man. : 7.4 %Machinery Man. : 13.8%Fab. Metal prod. Man. : 12.6 %Mining( except Oil and Gaz).:12.4 %Food Man. : 13.5 %Crop production. : 8 %Comp. & Electrnic Prod. Man. : 7.8 %Chemical Man.: 9.5 %Others 15.1%

POLAND AND ITS BORDERS

Poland is the fourth largest market for EU products and the 7 th argest exporter to the EU, after USA, Switzerland, Japan, China, Russia and Norway. Eu countries are the main sources of foreign direct investment in Poland. In 2001, $7.15 US billion came

into Poland in direct foreign investment. EU countries invested 5.85 billion US$, which represents 81.86 % of all direct investment in Poland.

The largest investor in Poland is France with $2.4 US Billion , then Germany with $1.4 US billion and in third place USA with $700 US millions. As of 2001, the total accumulated foreign investment in was $56.83 US billion, with an average of $1500 US per capita.

Poland’s most important trade partners in the EU are Germany with exports of 32.7 % and imports 24.1 %, then France with exports at 6 % and imports of 7 %.

EXPORTS TO EU IN % IMPORTS FROM EU IN %Machinery 23 % Machinery 29 %

Transportation Equipment: 16.2 % Chemical Products 12.3 %

Non-precious Metals 11.5 % Mineral Products 11.9 %

Textiles 9.7 % Transportation Equipement 11.6 %

Furniture & Related Products 8.8 % Non-Precious Metals 9.5 %

Mineral Products 6.3 % Manufactured Products8.7 %

Textiles: 7.4 %

The biggest Individual investments to name a few are:1-France Telecom ( France)$ 3.2 billion US2-Fiat ( Italy) $1.7 billion US3-HBV GMBH $1.36 billion US4-Vivendi ( France) $1.20 billion US

CANADA’S FDI IN POLAND

Canadian investment in Poland is estimated at $300 million with an additional $346 million committed. Major Canadian investment projects include the Europort Grain Terminal, a grain handling facility and terminal at the port of Gdansk.While Poland's dynamic economy has created opportunities for the Canadian private sector. Priority sectors of opportunity include agriculture/agri-food, information

technology and telecommunications, construction (residential and commercial) and environmental products and services plus a wide range of infrastructure projects in the transportation and oil- and -gas sectors.

CANADA’S RELATIONS WITH SLOVAKIA

Relations between Canada and Slovakia are excellent, particularly since Canada took a lead in supporting Slovakia's entry into the OECD. The two countries are linked by several bilateral accords as well as a Memorandum of Understanding on trade and investment cooperation. Since 1990, CIDA has overseen a technical cooperation programme aiming to promote democratic development and good governance, and to support Slovakia's transition to a market economy.

Canada maintains an office in Bratislava which overseas the technical cooperation programme, provides emergency consular services and provides some trade and public affairs services.

There have been a number of Ministerial visits, as well as a meeting between Prime Minister Chrétien and Prime Minister Dzurinda Spetember 12, 2001. Unfortunately, the rest of the visit was curtailed due to the Sept 11 attacks in New York.

SLOVAKIA : GENERAL POLITICAL AND ECONOMIC REVIEW

GENERAL DATA: April 2002

Capital: BratislavaTotal area: 49,000 sq. kmPopulation: 5.4 millionCurrency: Slovak Koruna $1 = 24.54 SK (2001average rate)Language: SlovakNational day: September 1 (Constitution Day)Independence day: January 1, 1993

POLITICAL DATA:

Type of State: Republic

Type of government: Unicameral Parliamentary Democracy

Head of State: Rudolf Schuster (1999)

Head of Government: Mikulas Dzurinda (1998)

Main political parties:

Gouvernment: Slovak Democratic Coalition(SDK = 42); Left Democratic Party (SDL =

24); Hungarian Coalition (SMK = 14); Civic

Understanding Party (SOP = 13);Opposition: Movement for a Democratic

Slovakia (HZDS = 43); Slovak National Party(SNS = 14).

National Council: 150 members elected for 4 years

Ministers:Foreign Affairs: Eduard KukanFinance: Brigita SchmognerovaEconomy: Lubomir Harach

Next elections: September 2002 (legislative)

Slovakia is a member of several international organizations, including the UN and the OECD, and has participated in a number of peacekeeping missions. Top priorities for the current government are joining NATO and accession to the EU. Improved relations with neighbouring countries is also a priority, particularly through active participation in the Visegrad group of countries (Poland, Hungary, the Czech and Slovak Republics).

The Government is aware of the importance of transformation changes, economic progress and stability and sees them as an important precondition for the successful implementation of its integration strategy. At the same time, the experience gained so far confirms that there is also the opposite relation - every successful step towards integration helps to revive the economy and reinforce Slovakia's democratic system as a solid part of the zone of stability, democracy and prosperity.

SLOVAKIA ECONOMIC DATA IN RELATION TO CANADA:

Slovakia CanadaGDP: $ 30.81 (in billions, at

current prices) $ 1,083.86 (in billions, at current prices)

GDP per capita:$ 5,706 $ 34 389

GDP growth rate:3 % 1.5 %

Unemployment rate:18.6 % 7.4 %

Inflation rate: 7.2 % 2.5 %

CANADA AND SLOVAKIA TRADE BALANCE

Bilateral trade between Canada and Slovakia dropped from $87 million in 1998 to approximately $42 million in 2000. Canadian exports to Slovakia consist primarily of wood pulp, machine parts and precision instruments. Slovak exports to Canada consist primarily of iron, steel, machine parts, chemicals and glass. Canada's anti-dumping action against steel products in 1999 had a significant effect on the volume of Slovak exports.

EXPORTS:to world: $ 18.3 million (2000)to Canada: $ 40.4 million

IMPORTS:from world: $ 19.7 million (2000)from Canada: $ 9.1 million

SLOVAKIA AND ITS BORDERS

EU

Relations between Slovakia and the EU are based on the Europe Agreement on Association, which was signed on 4.10.1993 and entered into force on 1.2.1995.

Slovakia, together with other associated countries from Central and Eastern Europe, is engaged in the EU enlargement process.

Since the establishment of the sovereign Slovak Republic in 1993, the entry into the European Union has been one of the priorities of Slovak foreign policy. Current relations between Slovakia and the European Union have a stable legal and institutional base and are dynamically developing in political, economic and other areas.

TRADE

For the territorial point of view, in the first half of 2001, Germany, with a 25.9% share in total imports and 27.6% share in total Slovak exports, and the Czech Republic, with a 14.5% share in total imports and 16.4% share in total Slovak exports, remained to be our most important foreign trade partners.

The most positive trade balance this year was recorded in trade with Austria (SKK 12.0 billion), Italy (SKK 8.0 billion), Hungary (SKK 7.2 billion), and Poland (SKK 6.7 billion). The highest year-on-year improvement in trade balance was recorded with Austria, which rose by SKK 2.7 billion.

Our largest trade deficit is from trade with Russia - SKK 51.8 billion, and with a rise by SKK 8.3 billion, this is also the second largest year-on-year deficit increase after Germany. The main problem is the import of crude oil and natural gas. However, we have recoded a slowdown in the rise of imports of these commodities. Compared with the same period of the past year, there is a significant decrease in year-on-year growth in imports of these commodities (by 68% in total). In the case of crude oil, this has been caused by the reduced growth in prices (year-on-year increase by 5.8%) and a small rise (by 7.6%) in the volume of imports. In the case of natural gas imports, there was a tangible year-on-year increase in price (by 43%), but the volume of imported gas is simultaneously decreasing (to 84%).

CANADA’S FDI IN SLOVAKIA

Although there has been relatively little Canadian investment in Slovakia in the past, this has recently been increasing with investments by Bombardier, Nortel, Semex (cattle semen), Bel Novamann (pharmaceuticals), Candom (prefab houses), McCains, Argosy (geological woks), Spacejoist and Torovil (fibre optic lighting), totalling several million.

CONCLUSION

The most important trade factor to be taken into consideration when dealing in this region is the accession to the EU. Poland, Czech Republic, Slovakia and Hungary are all candidates to the EU and each individually closed at least 24 chapters in their compliance to the acquis communautaire.

All countries in these region has made considerable progress in consolidating and deepening the stability of its institutions guaranteeing democracy, their rule of law and human rights, despite their past histories or political turmoil and corruption. This is essential to trade as it provides foreign investors as sense of security when doing business in the region.

The gradual accession to the EU has pressed the countries in this region to improve many sectors of their economies, mainly areas such as agriculture and environment, transportation, social policy and fiscal control. Efforts need to be pursued in particular to agriculture and the environment, in terms of policy, legislation and infrastructure. The resent state of the infrastructure is technologically weak and upgrading machinery and equipment as well as improving sanitation processes, identification of animals and registration systems are a priority. In regards to economic and fiscal matters most of the region has a high level of alignment with EU monetary union. Policies have allowed the free movement of capital, as there has been progress on removing restrictions on acquisitions of real estate and regulations of cross-border credit transfers. Taxation, excise, Vat and customs are still areas that need to be strengthen for the region to fully benefit from trade. On the social sphere, completion of alignment seems to be slow. Many legislations have to be approved in regards to free movement of labour between the region and the EU. Most importantly in the mutual recognition of professional qualifications and a complex review of the salary structure and the gap between earning in the public and private sector as well as a reduction of the growing black market (under the table workers) is necessary.

Needless to say that all these efforts for change in the present region infrastructure at all levels is a wealth of opportunity for people wanting to either invest or start trading with the region. With improved banking and transfer systems, a need for technology and a source of professional workforce, this region should be seriously considered when wanting to do trade.

SOURCES

www.exporter.pl/krajek/k_europa/unia_2001 htlm

http://www.scotiabank.com/cda/content/0,1608,CID6083_LIDen,00.html (Scotia bank Economic Forecast, 2002)

Department of Foreign Affairs and International Trade http://www.dfait-maeci.gc.ca/canadaeuropa/country-en.asp (Czech Rep., Hungary,

Poland and Slovakia)http://www.mzv.cz/index.html (Ministry of Foreign affairs of the Czech Rep.)

http://www.foreign.gov.sk/En/index.html ( Ministry of Foreign affairs of Slovakia)

Ms. Anna Kisielweska, consultant in Central European Politics and trade

BusinessCentralEurope,TheAnnual2000

EUROSTAT,StatisticalYearbook,Newsweek

UN(Metropol,May28,2002)

Gazeta Srodkowoeuropejska (GW)