International Bank for Reconstruction and Development
                         International Development Association
                           International Finance Corporation
                       Multilateral Investment Guarantee Agency
                                     FOR OFFICIAL USE ONLY
                                                                                          87447
                                   CONFIDENTIAL

                                                                                         EDS99-289
                                                                                  September 15. 1999
                                                                                        06:16:28 PM

    Statement by Valeriano F. Garcia
    Date of Meeting: September 16, 1999


                        Poland - Country Assistance Strategy Progress Report

            Since 1990 Poland has had a sound market-oriented program, wherein a rapid growth
    and stabilization brought down inflation to a single digit. In spite of last year's Russian crisis,
    growth is yet in the positive range, foreign direct investment has continued, and the
    international community has given its support. Also, negotiations are under way for Poland to
    become a member of the European Union.

            Because we are broadly in agreement with the staff paper, we underline some points
    only to emphasize them: privatization; the macro-front; further improvements to build up a
    modern society which can be effectively integrated into Europe; and working on the
    governance areas, among others.

            We are concerned by the pressure on the state budget, resulting from the introduction
    early this year of reforms in the health and pension systems as well as the impact of
    government aid to farmers to compensate the loss of Russian markets, and additional aid for
    miners. Furthermore, government revenue has been reduced after approval by the Parliament
    of controversial tax-cutting policies.

           In the monetary front, the concern is mainly focused on the exchange rate appreciation,
    the high interest rate, and the recent capital controls. This situation has left no room for
    complacency, so it is important to pursue the whole structural reform, focusing on the medium
    term, to achieve a reasonable trend of growth and stability.

            On the area of privatization, we commend the authorities' commitment and their efforts
    to carry out a structural reform. In this regard, the government hopes to double last year's
    privatization revenues. But it is important to remember that many of the remaining state-owned
    assets may require large injections of fresh capital. The sale of a 25-35% tranche of Telecoms,


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which estimated worth is 4 to 5 billion dollars, was launched in early August. This sale is a
strategic step, in addition to the Polish State Railways (PKP) restructuring and privatization to
increase PKP' s competitiveness as EU accession approaches.

        The government is also accelerating privatization of the banking sector to attract new
funding and know-how. The disposal of a 52% stake in Bank Pekao, which is a former foreign
currency savings institution and has around 20% of the sectors' deposits, loans and assets,
generated over one billion dollars in revenue. The government also intends to sell up to 80 %
of the Wroclaw-based Bank Zachodni, and preparation for privatization of PKO BP, the state
savings bank and the country's second largest bank in terms of assets, is under way. This
privatization program includes insurance companies and LOT Polish Airlines before the end of
the year. We welcome the authorities' efforts in this regard.

         As far as EU accession is concerned, Poland has completed EU negotiations on 7 of 32
accession chapters: science, education, small and medium-sized enterprise development,
statistics, telecommunications, industry policy and consumer protection. This shows an
important advance and calls for persevering in this regard. We understand that the negotiation
is not an easy task, because several issues will touch sensitive areas and involve political
agreement. We encourage the authorities to persist in this important task.

        We welcome the Bank's CAS Progress Report, which summarizes the effectiveness of
the Bank and the Polish authorities in their common effort to put in track this CAS. The report
is accurate and timely. Consequently, we encourage the Polish authorities to follow this
interesting, though not easy, process of transformation.