OMRI DAILY DIGEST
No. 162, 21 August 1995

NATO "WHY AND HOW" STUDY VAGUE ON DETAILS. The year-long study on the
why and how of NATO expansion will be vague on details, Der Spiegel
reported on 20 August. Potential applicants will be briefed on the draft
plan this fall and it will be formally endorsed at NATO ministerial
meetings in December. The study will contain no timetable nor precise
criteria for membership. Der Spiegel quoted one German diplomat as
saying, "No one should be able to say, `We fulfill all the criteria so
now you have to take us in.'" The weekly reports that NATO has
informally agreed to admit East European countries in stages, with the
Czech Republic, Poland and Hungary forming the first group and Romania,
Slovakia, Bulgaria and Slovenia the second. New members will not be
required to base foreign troops or nuclear weapons on their territories.
-- Michael Mihalka, OMRI, Inc.

FIRST PFP EXERCISES BEGIN IN U.S. The sixth major NATO Partnership for
Peace exercise began at Fort Polk, Louisiana, on 18 August,
international agencies reported. Soldiers from 3 NATO and 14 former
Warsaw Pact countries were represented in the first such exercise to be
held in the U.S., which simulates peacekeeping operations on a island.
Participating countries include the United States, Britain, Canada,
Albania, Bulgaria, the Czech Republic, Estonia, Hungary, Kyrgyzstan,
Latvia, Lithuania, Poland, Romania, Slovakia, Slovenia, Ukraine and
Uzbekistan. The exercise ends on 26 August. -- Michael Mihalka, OMRI,
Inc.

CEFTA MEETING ENDS IN WARSAW. Trade ministers from the Czech Republic,
Hungary, Poland, and Slovakia, countries belonging to the Central
European Free Trade Agreement (CEFTA), ended a two-day meeting in Warsaw
on 18 August and agreed to lift tariffs on many industrial products as
of 1 January 1996. Slovenia's trade minister was also present. The next
meeting is scheduled in Brno, the Czech Republic, in September, where
CEFTA is to admit Slovenia as a full member, Polish and international
media reported on 19 August. -- Jakub Karpinski, OMRI, Inc.

HUNGARY TURNS OFF BOSNIAN PIPELINE. Hungarian radio announced on 19
August that, at the request of the United Nations, Hungary has shut a
natural gas pipeline leading to Sarajevo. The UN asked Hungary on 15
August to turn off the pipeline after Bosnian government complaints that
it had not received any gas through it since May. Bosnian Serbs, who
hold the territory through which the pipeline passes, are believed to
have diverted the gas to their own use. In another development, five
busloads of refugees, mostly Muslims from eastern Bosnia, arrived in
Hungary on 18 August saying they had been expelled by Bosnian Serbs,
international media report. According to Hungarian border guards, the
261 refugees were the biggest single group to arrive from former
Yugoslavia this year. A border guard spokesman told journalists that "as
further humiliation, the Serbs forced the refugees to pay considerable
sums for their trip, as if they (the Serbs) were some sort of travel
agency." The refugees were granted temporary asylum and sent to camps in
Nagyatag and Bekescsaba. -- Jiri Pehe, OMRI, Inc.

[As of 12:00 CET]

Compiled by Steve Kettle

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A tovabbterjesztest a New York-i szekhelyu Magyar Emberi Jogok
Alapitvany tamogatja.

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Monday, 21 August 1995
Volume 2, Issue 161

REGIONAL NEWS
-------------

**HUNGARY'S ARMS OPEN TO WAR EXODUS**
  Two hundred sixty-one refugees from the former Yugoslavia
  crossed into Hungary on Friday.  It was the biggest wave of
  war refugees to hit Hungary so far this year.  The refugees
  were taken to camps in Nagyatad and Bekescsaba and some
  accused the Bosnian Serbs of brutality.  The refugees are
  mostly Moslem and Croatian, from the Banja Luka area of
  western Bosnia.  They claim the Bosnian Serbs forced them out
  of their homes with only two hours notice.  The refugees also
  said the Serbs demanded large payments for letting them go and
  threatened to force the men among them to fight for the Serb
  army if they refused.  The refugees said they paid almost
  $1,200 as a passport fee before the Bosnian Serbs let them
  board buses to Hungary.  They claim the Serbs demanded $270
  more as a Hungarian entry fee when they were on the buses.
  Hungarian officials insist they didn't collect entry fees from
  the refugees.  Some of the refugees also accused the Bosnian
  Serbs of beating them.  One Croat said armed Bosnian Serbs
  repeatedly struck his two pre-teen boys when family members
  were driven from their home.  An elderly man said he was
  beaten by Serbs before being expelled from his home.  The
  elderly man also said some people, mainly men of military age,
  were taken off his bus during the drive from Banja Luka and
  were sent back to an unknown fate.  All of the refugees
  insisted on anonymity. --David Fink


**NO-BRAINER TAKES 4 MONTHS**
  Hungary has turned off a natural gas pipeline leading to
  Sarajevo at the request of the United Nations.  The UN asked
  Hungary on Tuesday to shut off the pipeline after the Bosnian
  government said it hadn't received gas since May.  The
  pipeline also goes through territory controlled by Bosnian
  Serbs.  They're thought to have been siphoning off the gas and
  using it themselves.



BUSINESS NEWS
-------------

**HUNGARY DEFIES CORPORATE POWER TO KEEP RECORD COMPANY**
  The Hungarian subsidiary of the Dutch music recording giant
  Polygram said it'll sue the Hungarian privatization body APV
  unless APV reverses its decision on the privatization of a
  record company.  A week ago APV rejected a bid from Magyar
  Polygram Hanglemezkiado for Hungaroton Magyar Hanglemezgyarto.
  Instead APV decided to sell Hungaroton Magyar to a Hungarian
  artists' consortium.  APV said even though Magyar Polygram's
  bid was higher than the consortium's, the Dutch were
  disqualified because their bid didn't comply with tender
  specifications.  It also said Polygram wanted guarantees APV
  wasn't prepared to give.  But Magyar Polygram General Manager
  Laszlo Hegedus says "the sole purpose of disqualifying us was
  to give Hungaroton to the consortium without having to compare
  the bids from a professional view".  Hegedus said if APV or
  Privatization Minister Tamas Suchman don't change the decision
  by early this week, Magyar Polygram Hanglemezkiado will file a
  lawsuit.  Polygram sent a letter to APV last Thursday
  protesting the decision.  Hegedus said Polygram has asked the
  Dutch government to mediate in the case.  Polygram is 75
  percent owned by the Dutch electronics and home appliances
  group Philips.


BUSINESS FEATURE
----------------

**REGIONAL EXCHANGES SLOW BUT CONSISTENT**
  By Duncan Shiels

  It was a week of consolidation on Central Europe's stock
  exchanges, with even a slight rise in Prague, despite
  disappointing first half results from Czech utility CEZ, the
  market's second largest issue.  First half results in Hungary,
  meanwhile, showed the first evidence that the government's
  austerity measures are beginning to benefit exporters.  CET
  spoke to Tom Chadwick of Smith New Court in London and first
  asked him to explain why CEZ's first half results, which saw
  profits of $210 millon, are seen as disappointing.

  Chadwick:  Basically the pre-tax results were unchanged under
  Czech accounting standards but the company came out with a
  forecast that overall earnings in '95 were actually going to
  fall.  It's basically caused by the rising financing and
  production costs, and this is despite an increase in demand
  for electricity.  In fact electricity prices rose in the first
  half by over 12 percent.

  CET:  I mean they're not bad enough to actually scare people
  away, particularly in view of the new investment in CEZ?

  Chadwick:  No, and I think generally speaking CEZ is only one
  company, and as you know there are a vast number of companies
  on the Czech exchange.  I don't see that as a damning
  indictment of the rest of the market by any way.

  CET:  Moving on to Warsaw, very quiet last week.

  Chadwick:  Yes, then again, I think that what we're looking at
  there is the potential for interest rates to be cut in
  mid-September.  The National Bank of Poland announced that
  they want to keep real interest rates at 2 percent, but if
  inflation starts to fall, which they're expecting, then there
  is room for a rate cut by the middle of September.  I think
  that one thing that slightly contradicts that is that
  inflationary pressure may continue to come through from the
  public sector wages which rose by 6 percent over the first
  part of the year.

  CET:  So quite a lot of imponderables, really, at the moment?

  Chadwick:  Yes, that's right, and I think with that kind of
  imponderable you can't necessarily guarantee the market is
  going to have a solid direction.

  CET:  Right, now Budapest, Fotex, Graboplast...

  Chadwick:  Yes, a fairly interesting week for results.  The
  principal benefit that has happened at Graboplast is that
  they've seen export sales to the CIS rise by 60 percent.  It
  still remains a fairly small part of sales but it's pretty
  encouraging, and I think for Graboplast, the fact that they
  have a large export content has really helped them in the
  first part.  Fotex, by contrast, saw its sales grow, largely
  due to acquisitions, but its net profit has actually declined
  38 percent, caused by the fact that they have to import a
  substantial amount of their product, and their earnings are
  denominated in local currency.

  CET:  Well, these are two interesting examples really.
  Everyone's been talking about the difficulties ahead for
  companies who have to import to produce, and Graboplast is the
  other way.

  Chadwick:  The other way round, yes.  Basically any company that
  has foreign exchange-denominated earnings and local costs is
  going to do well in 1995.



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A tovabbterjesztest a New York-i szekhelyu Magyar Emberi Jogok
Alapitvany tamogatja.

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