White House Fact Sheet on Proposed Assistance for Poland and Hungary

In his speech today to the Polish Parliament, the President presented a comprehensive package of six measures to help Poland meet the historic challenges of the 1990's. The measures take into account the ongoing, hopeful, democratic change in Poland.

The measures recognize that successful market economic reform and democratization in Poland, and elsewhere in East Central Europe, can lay the basis for European stability and security.

The package of measures consists of the following:

Intensified Concerted Western

Action for Poland and Hungary

Proposal

The President is proposing that nations of the Summit Seven intensify their concerted action to support economic reforms based on political pluralism in Poland and Hungary. Complementary efforts by leading industrial democracies will provide a powerful impetus to economic recovery and progress in these nations as they face a turning point. Other interested countries could contribute to this process as well.

Scope

Efforts will involve work with the Polish and Hungarian Governments, and with other official and independent organizations in those countries, to gather information and provide feedback on issues of mutual concern. Involved governments will also work as appropriate with representatives of the IMF, World Bank, EC Commission, and other multilateral and private sector institutions.

Specific issues addressed could include:

Needed economic reforms;

Timing and conditions for new credits; and

Concrete support for privatization and private business, environmental projects, management and training initiatives, social safety nets to accompany restructuring, housing, etc.

These efforts would not undercut or replace existing institutions such as the World Bank, Paris Club, or IMF.

Next Steps

The President will discuss this proposal in Paris with the leaders of the other Summit Seven nations -- the United Kingdom, Federal Republic of Germany, France, Japan, Italy, and Canada.

Polish-American Enterprise Fund

Proposal

Poland's economic recovery will require a strong entrepreneurial sector, growing fast and generating wealth to benefit the whole nation. To support this process, the President has proposed the U.S. and Poland establish a Polish-American Enterprise Fund. The President is asking Congress to provide $100 million for this initiative. The Fund will be managed by a board of distinguished U.S. and Polish representatives.

Purpose

The Fund will promote the development of the private sector in Poland. It will be empowered to disburse hard currency loans or venture capital grants for approved projects, including:

Private sector development (business loans/grants, possible establishment of a private sector development bank);

Privatization of state firms (e.g., provide funding for entrepreneurs to buy into state firms);

Technical assistance or training programs in support of or run by Poland's private sector;

Funding of export projects partly or wholly private;

Joint ventures between private Polish and American investors (e.g., encourage participation of private Polish firms in joint ventures).

World Bank Loans

Proposal

The President will encourage the World Bank to approve two economically viable project loans for Poland totaling $325 million. The loans for industrial restructuring and agricultural industrial development are intended to improve the competitiveness of Poland's exports.

Background

The industrial restructuring loan ($250 million) is to be used for import of technology and equipment used in restructuring projects in plants producing chemical fibers, petrochemicals, polypropylene for packaging, particle board, and nitrogen; and the foreign currency costs associated with outside technical assistance for these projects.

The agricultural industrial development loan ($75 million) would be used for purchase of equipment and technology licensing abroad, and foreign exchange costs for technical assistance for plants engaged in frozen fruit and vegetable processing, meat and other food processing.

The loans are for 17 years with a 6-year period of grace before repayment begins.

A Polish bank will relend the money to individual firms. These loans to and repayment by sub-borrowers will be in dollars -- facilitating repayment of the overall loan to the World Bank.

U.S.-Poland Bilateral Rescheduling Agreements

Proposal

The President will ask his counterparts in the Paris Club to support an early and generous rescheduling of Polish debt.

Background

Poland's foreign debt of nearly $40 billion is owed mainly to Western government creditors.

The United States Government's share of this debt is about $2.2 billion, mostly in the form of credit guarantees extended by the Commodity Credit Corporation and the Export-Import Bank.

The Paris Club agreed to reschedule Poland's debt service to official creditors 4 times in the past 8 years.

However, until March 1989, Poland had not proceeded to negotiate and sign the bilateral agreements from the last two reschedulings, in late 1985 and 1987.

Negotiations on the two outstanding bilaterals were revived earlier this year when the Government of Poland sought to resolve this issue with its creditors.

The Agreements and Next Steps

On July 10, the U.S. and Poland will sign the two pending bilateral agreements covering the 1985 and 1987 reschedulings.

This paves the way for further agreements between Poland and its creditors on rescheduling the country's official debt.

A Paris Club rescheduling on debt service obligations falling due in 1989 would allow Poland to defer payments of about $5 billion.

A new Paris Club rescheduling agreement would normalize Poland's financial relations and would provide export credit agencies a legal basis for resumption of credit if governments decide such credits are warranted.

Environmental Initiatives

Proposal

The President has stressed the need for fresh international efforts to preserve and improve the environment, humanity's common heritage. Following up on his Mainz speech, which singled out East-West cooperation on the environment, the President has proposed three environmental initiatives for Poland totaling $15 million, concentrated in the magnificent medieval capital of Krakow. This splendid city, designated by UNESCO as a world monument, is suffering from severe pollution.

Retrofit an Existing Coal-Fired Plant

This is a $10 million initiative to retrofit an existing coal-fired plant in the Krakow area with advanced clean coal technology. This retrofit will reduce sulphur dioxide emissions from a 100 MW plant by 60 to 65 percent. Nitrogen oxide emissions will also be reduced.

The initial phase of the project will include an assessment of the major coal-fired plants in the Krakow region to determine the best control strategies for these facilities. A specific plant would then be selected and the optimal technology for installation at this facility would be chosen.

Following selection, the project will proceed into the design phase. This would involve the fabrication and installation of the equipment.

The final phase of the project would include operation and analysis of the data. It is assumed that Poland will take over responsibility for the operation of the project and that the data would be made available to the U.S. The U.S. will provide technical support to Poland as needed.

Air Quality Monitoring Network

This is a $1 million project for an air quality monitoring network in the Krakow metropolitan area, as part of Poland's national air monitoring network, to include monitors and related equipment for measuring sulphur dioxide, nitrogen dioxide, particulate, carbon monoxide, ozone, and lead; and data storage/processing equipment.

Water Quality and Availability

This is a $4 million initiative to improve water quality and availability in Krakow.

Using the city's 1986 - 2010 program of environmental protection and water economy as a guide, EPA and Polish experts will perform a comprehensive assessment of Krakow's current and future drinking water and wastewater needs to select and test treatment methods best suited to local conditions.

To determine the optimal, least-cost engineering solutions, the program will examine streamflow records and data on the health of a variety of aquatic species, test for stream and drinking water purity, and identify water quality standards according to use.

The program will emphasize recycling, pollution prevention, and low-cost approaches such as land treatment of effluents.

Agreement on Exchange of Cultural Centers

Purpose

The President has called for the U.S. to support imaginative educational and cultural programs with Poland. The agreement signed on July 10 will allow the U.S. to establish a cultural and information center in Warsaw and allow Poland the right to establish a similar center in the United States.

Background

This will be the first time either country will be able to conduct public information and cultural programs at a site physically removed from the Embassies or consulates. The centers still will be considered an integral part of the diplomatic services of the two countries.

The American center in Poland will be under the direction of the U.S. Information Agency, which operates similar centers in many countries around the world.

A site in Warsaw still must be identified and renovated for the new American center, but we would hope to open it sometime in early 1990. First-year construction and operational costs are expected to be $1.1 million.

Operation

The centers will serve as focal points for a wide range of cultural and information activities, including:

Operating a full-service library including reference use and lending of books, periodicals, films, videocassettes, and other materials;

Sponsoring of concerts, recitals, exhibits, film, television, and video showings;

Seminars featuring professionals, scientists, and cultural personalities from various fields;

Courses of English or Polish language.