WORLD TRADE
ORGANIZATIONG/SCM/N/25/POL
10 March 1998
(98-0919)
Committee on Subsidies
and Countervailing MeasuresOriginal:  English
SUBSIDIES
Updating Notifications Pursuant to Article XVI:1 of the GATT 1994
and Article 25 of the Agreement on Subsidies and Countervailing Measures
POLAND
The following communication, dated 26 February 1998, has been received from the
Permanent Mission of Poland.
_______________
The following notification covers the specific subsidies applied in Poland in 1996 in the
industrial and agricultural sector as well as subsidies not previously notified applied in the agricultural
sector in 1994-1995.
All data concerning the amounts of subsidies contained herein are given in new Polish Zlotys
(PLN).1
                                                     
1The average exchange rate between Polish Zloty and US dollar was:
-  in 1994 – PLN 1 = US$ 0.4405
-  in 1995 – PLN 1 = US$ 0.4132
-  in 1996 – PLN 1 = US$ 0.3709...G/SCM/N/25/POL
Page 2
Table of Contents
Page
A. Subsidies applied in 1996 in the Industrial Sector continued from previous years 4
1. Loan from EFSAL Funds ........................................................................... 4
2. Investment Tax Reductions ........................................................................ 53. Direct Grants for Extra Charges to Products and Services ........................ 5
4. Assistance for Restructuring of the Banking Sector .................................. 6
5. Reduction of Liabilities resulting from Social Insurance Premiums .......... 8
6. Warrants and Guarantees from the Treasury .............................................. 9
7. Credit Warrants for Small- a nd Medium-Sized Enterprises ....................... 9
8. Support for Regiona l Programmes ............................................................. 10
9. Restructuring Programme fo r the Mining Sector ....................................... 11
10. Restructuring Programme for the Iron and Steel Industry ......................... 12
11. Restructuring Programme for the Non-Ferrous Metals Industry ............... 13
B. Programmes for the Industrial Sector Commenced in 1996 ............................. 14
1. Forgiveness of Certai n Taxes (abo lished) .................................................. 14
C. Subsidies in Support of Exports ........................................................................... 17
1. Insurance System for Export Contracts, Guaranteed by the Treasury ....... 17
2. Interest Subsidies on Certain Bank Loans .................................................. 17
3. Investment-Related Tax Rebates Connected with Results of Export Activities 17
4. Special Economic Zone in Mielec ............................................................. 18
D. Specific Subsidies Applied in the Agricultural Sector in 1994-1996 ................. 19
1. Grants to Support Production of Calcium Fertilisers Production ............... 19
2. Financial Support fo r Sugar Exports .......................................................... 20
3. Financial Support from Central Budget for Interest on Bank Loans
Extended to Business Entities in 1991-1994 ............................................. 21
4. Financial Support for Interest on Investment Loans Extended
to the Agricultural Sector, Food Processing Industry and
Agriculture-relate d Servic es ...................................................................... 23G/SCM/N/25/POL
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Table of Contents (Cont'd)
Page
5. Financial  Support for Interest on Working-Capital Loans for Purchase
of Means of Agricultural Production, Purchase of Produce and
Storage or Purchase of Seasonal Surp luses of Agricultural Products ........ 25
6. The ASAL - 300 Programme ..................................................................... 27
7. Intervening Purchases of Agricultural Produce by the Agricultural
Market Agency in 1994-1996 .................................................................... 29
8. Intervening Purchases of Agricultural Produce by the Agricultural Market
Agency in 1994 and 1995 .......................................................................... 30
9. Intervening Purchases of Agricultural Produce by the Agricultural
Market Agency in 1995 and 1996 .............................................................. 31
10. Intervening Purchases of Agricultural Produce by the Agricultural
Market Agency in 1995 ............................................................................. 32
11. System of Credit Warrants for Small and Medium Enterprises
in 1994, 1995 and 1996 .............................................................................. 33
12. Grants for Biological Progress in Agriculture in 1994-1996 ..................... 3413. Grants Applied in 1994-1995-1996 to Finance Costs of:
- combating contagious and infectious animal diseases;
- monitoring aimed at detecting chemical and
biological residues in foodstuffs of animal origin
and in tissues and body fluids of slaughter animals ...................... 36G/SCM/N/25/POL
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A. SUBSIDIES APPLIED IN 1996 IN THE INDUSTRIAL SECTOR2 CONTINUED
FROM PREVIOUS YEARS
1. LOAN FROM EFSAL FUNDS
1.1. Amount of assistance granted (in PLN)
In 1996 assistance was granted from the second tranche of EFSAL funds in the amount of
PLN 54.5 million, out of which grants represented PLN 5.7 and loans – PLN 48.8.
Approx. 62 per cent of funds from EFSAL loan were utilized.
1.2. Beneficiaries
No. Branch of economy Total
assistance
granted in
1996Grant Loan Global aid
structure
1. pharmaceutical industry 1,452,500 192,500 1,260,000 2.7%
2. cereals industry 3,576,335 50,471 3,525,864 6.6%
3. metal industry 6,958,597 958,597 6,000,000  12.8%
4. light industry 5,029,655 789,655 4,240,000 9.2%
5. chemical industry 7,250,000 – 7,250,000 13.3%
6. meat industry 2,161,100 361,100 1,800,000 4.0%
7. pulp and paper industry 5,605,200 – 5,605,200 10.2%
8. shipbuilding industry 7,190,000 – 7,190,000 13.2%
9. leather industry 762,1 9 762,191 – 1.4%
10. precision mechanics
industry4,000,000 – 4,000,000 7.3%
11. electrical machinery
industry4,643,102 1,903,102 2,740,000 8.5%
12. construction industry 761,0 5 161,056 600,000 1.4%
13. automotive industry 1,257,620 57,620 1,200,000 2.3%
14. transport 3,371,000 – 3,371,000 6.2%
15. trade 499,7 0 499,707 – 0.9%
Total 54,518,063 5,735,999 48,782,064 100%
                                                     
2This section of the document only provides amounts of subsidies received by enterprises in 1996 while
the remaining data and detailed description of the programmes are not repeated as they were described in thenotification on specific subsidies pursuant to Article 25 of the Agreement on Subsidies and Countervailing
Measures for 1994-1995.G/SCM/N/25/POL
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2. INVESTMENT TAX REDUCTIONS
2.1. Amount of assistance granted
I. Investment tax reductions under the Regulation of the Council of Ministers of
24 January 1995 on the Deduction from Income of Investment Expenses and
Decreases of Income Tax in Communes Threatened with Particularly HighStructural Unemployment (Journal of Laws No. 14 item 63 and of 1996 No. 63 item
293) amounted to PLN 23.6 million in 1996.
II. Investment tax reductions under the Regulation of the Council of Ministers of
25 January 1994 on Deduction from Income of  Investment Expenses and Decreases
of Income Tax (Journal of Laws of 1996 No. 39 item 171 and No. 63 item 294)
amounted to PLN 1,911.3 million in 1996.
2.2. Beneficiaries
I. 171 beneficiaries took advantage of the reductions specified in 2.1.I and the average
subsidy per subject was PLN 138,200;
II. 2,505 beneficiaries took advantage of the reductions specified in 2.1.II and the
average subsidy per subject was PLN 763,000.
3. DIRECT GRANTS FOR EXTRA CHARGES TO PRODUCTS AND SERVICES
3.1. Amount of assistance granted
Total objective grants in 1996 amounted to PLN 755.2 million.
3.2. Beneficiaries
According to Article 17 of the 1996 Budget Law the following objective grants were
provided, as in previous years:
in PLN ‘000
(i) meals sold in milk bars 11,221(ii) passenger transport in domestic railway connections 571,500
(iii) inter-city bus transport of passengers 163,570
incl. grants for inter-city transport in Katowice agglomerationorganized (ordered) by self-government of communes and
communal unions
(iv) publishing of specialized school and academic books 8,916G/SCM/N/25/POL
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4. ASSISTANCE FOR RESTRUCTURING OF THE BANKING SECTOR
4.1. Amount of assistance granted
In 1996 total assistance granted to the co-operative banking sector amounted to approx.
PLN 855.6 million, including:
- Treasury bonds for restructuring of Bank Gospodarki Żywnościowej S.A. (BG Ż),
co-operative banks and newly established regional banks – PLN 764.6 million;
- loans from the National Bank of Poland (NBP) – PLN 41 million;
- tax reductions – PLN 50 million.
4.2. Beneficiaries
Assistance from the state for restructuring of the co-operative banking sector and Bank
Gospodarki Żywnościowej S.A. was continued in 1996.
According to the 1996 Budget Law and the related Minister of Finance’s Regulation on terms
and procedure of transferring bonds for Bank Gospodarki Żywnościowej S.A. to increase its own
funds (Monitor Polski No. 52 item 497) the Minister of Finance issued bonds totalling PLN
700 million intended for increasing BG Ż’s own funds, including the restructuring of debt, taken over
by the Treasury Agricultural Property Agency from former state-owned farms, the debt not being
serviced currently.
Moreover, restructuring of co-operative banks with the use of Treasury bonds issued in 1994
was continued in 1996.
Under the issue of bonds in 1996 bonds worth PLN 44.6 were allocated to regional banks and
bonds worth PLN 20 million were allocated to four regional banks, established pursuant to the Act of
24 June 1994 on the restructuring of co-operative banks and Bank Gospodarki Żywnościowej and on
amendments to certain acts (Journal of Laws No. 80 item 369) for increasing their reserve capital.
Using the received bonds, the regional banks undertook restructuring of doubtful and lost debts
belonging to the associated co-operative banks.  In total, the process involved approx.
380 co-operative banks.
In accordance with terms of issue, the Treasury bonds will be successively redeemed in
1996-2000.
I. REPAYABLE ASSISTANCE FOR CO-OPERATIVE BANKS CARRYING OUT REPAIR
PROGRAMMES
Following the Resolution undertaken by the Parliament of the Republic of Poland on
12 July 1995 on actions to support repair programmes in co-operative banks, PLN 40 million were
allocated as repayable assistance to co-operative bank s in critical situation and those taking over other
co-operative banks.
The decision on granting assistance from those funds is to be taken by the President of NBP in
consultation with the Minister of Finance and the funds assigned for assistance decrease the sum of
payments to be made by NBP from profit to the central budget.  In 1996 a total of 25 banks took
advantage of the assistance, totalling nearly PLN 30 million.G/SCM/N/25/POL
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The legal framework for additional assistance was the resolution adopted by the Parliament on
11 January 1996 on monetary policy guidelines for 1996, according to which the President of NBP, in
consultation with the Minister of Finance, had the obligation to support restructuring of co-operative
banks.
Following the Parliament’s resolution, the Management Board of NBP decided to allocate
PLN 40 million for repayable assistance for banks taking over co-operative banks in critical situation.
The assistance can be used by any banks, including commercial banks, that decided to take over a
co-operative bank under threat.
In 1996 the assistance was used by six banks and the total amount used was approx.
PLN 11 million.
II. TAX REDUCTIONS FOR CO-OPERATIVE BANKS
Additional financial support was allocated to co-operative banks pursuant to the Regulation of
the Minister of Finance of 29 January 1997 on relinquishment of corporate income tax collection from
certain co-operative banks (Monitor Polski No. 5 item 39).  The Regulation provides for
relinquishment of the following:
- 70 per cent of corporate income tax due from co-operative banks forming regional
banks pursuant to the Act of 24 June 1994 on the restructuring of co-operative banksand Bank Gospodarki Żywnościowej and on amendments to certain acts (Journal of
Laws No. 80 item 369, of 1995 No. 142 item 704, and of 1996 No. 106 item 496);
- corporate income tax due on income earned in 1997 by other co-operative banks
which had the right to become associated at a regional bank pursuant to the Act of
24 June 1994 on the restructuring of co-operative banks and Bank GospodarkiŻywnościowej and on amendments to certain acts - in the amount equivalent to
70 per cent of tax due for 1996.
Entitlement to the tax reduction is conditional upon transferring at least 80 per cent of balance
sheet surplus for 1996 to the indivisible resource fund of co-operative banks, and upon transferring
the total amount of relinquished income tax due for, respectively, 1996 and 1997 to theaforementioned fund.
The total financial effect for the budget resulting from execution of the above-mentioned
Regulation for 1996 are estimated at approx. PLN 50 million.
Moreover, pursuant to the Regulation of the Minister of Finance of 4 July 1996 (Monitor
Polski No. 42 item 406) relinquishment of income tax refers to certain income earned by Bank
Gospodarki Żywnościowej S.A., regional banks and co-operative banks, connected with Treasury
bonds received for restructuring of the co-operative banking sector.
The total financial effect resulting from the above-mentioned Regulation until 2009 are
estimated at PLN 620 million.
The restructuring of co-operative banks’ debts, commenced in 1995, has covered approx.
700 co-operative banks so far (i.e. 60 per cent of all banks executing the Act of 24 June 1994).
Actions taken as well as other forms of support (e.g. relinquishment of income tax for 1996)
have significantly contributed to improvement of the financial standing of co-operative banks.G/SCM/N/25/POL
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This was reflected in the increase of their net own funds, total accounts receivable and
improved liquidity ratio in co-operative banks, while the amount of irregular (threatened) receivables
and total losses in those banks declined.  Another positive phenomenon is the increase of the balance
sheet total in those banks and the increase of deposits, both at a rate higher than the inflation rate.
The assistance granted has had a major impact on the situation in Bank Gospodarki
Żywnościowej S.A., carrying out a repair programme.  This was reflected in the Bank’s financial
performance in 1996, affected both by income from Treasury bonds and by income from regular
activities, as well as in the significantly improved solvency ratio.
5. REDUCTION OF LIABILITIES RESULTING FROM SOCIAL INSURANCE PREMIUMS
5.1. Amount of assistance granted
Pursuant to Article 20 of the 1996 Budget La w of 1 February 1996 (Journal of Laws No. 19
item 87), like in 1995, the option for state-owned enterprises and companies where the Treasury is ashareholder to receive support was maintained in 1996.  The support may take the form of grants from
the budget for the aforementioned entities for restructuring of their indebtedness caused by
non-payment of social security contributions.  It covers entities in relation to which the following
legal acts became effective:
- court decision on approving the agreement pursuant to the President of the Republic
of Poland’s Regulation of 24 October 1934 – Law Concerning the Compound
Procedure (Journal of Laws No. 93 item 836, of 1950 No. 39 item 349 and of 1990
No. 55 item 320);
- bank agreement concluded pursuant to the Law of 3 February 1993 on Financial
Restructuring of Enterprises and Banks and on Modification of Some Acts (Journal ofLaws No. 18 item 82).
The time, allocation rules and procedure of transferring grants for restructuring of the said
debts in 1996 were regulated by the Council of Ministers’ Regulation of 7  May 1996 on
Determination of Time-limits for Submission of Appl ications, Principles of Division and Procedure of
Transfer of the Budget Grants for Restructuring of Debts Resulting from Social Insurance Premiums(Journal of Laws No. 56 item 254).
In 1996, the total of PLN 249.9 million was allocated from the central budget for restructuring
of indebtedness caused by failure to pay social security contributions by state-owned enterprises and
companies with the Treasury as a shareholder.
5.2. Beneficiaries
In 1996, 82 business entities received the grants in question, including:- 55 enterprises and companies subordinated to government ministers;- 27 enterprises and companies subordinated to voivods.