OMRI DAILY DIGEST
No. 125, 28 June 1995

RAIL ACCIDENTS IN HUNGARY. International media report that seven people
died on 27 June in two separate rail accidents in Hungary. Six people
died and five others were injured when a bus and a train collided near
Nyul, west of Budapest. All the victims were bus passengers. Hungary's
state railway officials are investigating the cause of the accident. A
second collision, involving a train and a van, took place in Barcs near
the Croatian border. MTI reports that the van driver was killed and one
passenger seriously injured when the van failed to heed a warning
signal. -- Jiri Pehe, OMRI, Inc.

ILIESCU AT CANNES. Romanian President Ion Iliescu on 27 June attended
the European Union summit in Cannes, where he was to present Romania's
recently completed "national strategy" for joining the EU. He told Radio
Bucharest that the strategy is supported by all parliamentary parties.
On the same day, Iliescu met with Hungarian Prime Minister Gyula Horn.
In a statement after the meeting, he described the talks as "positive
and constructive," and said relations between the two countries were
better than they were occasionally perceived in the West. Iliescu
stressed that the two sides were seeking a solution to the problems
posed by the drafting of a new basic bilateral treaty. According to
Radio Bucharest, the foreign ministers of the two countries will meet in
the first half of July to discuss the treaty issue. --Dan Ionescu, OMRI,
Inc.

[As of 12:00 CET]

Compiled by Steve Kettle

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Wednesday, 28 June 1995
Volume 2, Issue 124


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


**SIX KILLED AS TRAIN HITS VAN**
  Six people were killed and seven hurt Tuesday when a locomotive
  hit a van on a railroad crossing in western Hungary.  The
  collision took place between the villages of Pannonhalma and
  Gyorszabadhegy about 75 miles west of Budapest.  All 13
  victims were railroad employees. There were no injuries on
  board the locomotive, which was traveling between stations and
  not pulling any cars.


**BOMB HOAX AT BUDAPEST STOCK EXCHANGE**
  An early morning bomb threat delayed trading at the Budapest
  Stock Exchange for three hours on Tuesday. Police say an
  unidentified caller phoned the bank's offices twice, warning
  that the building would explode at 12:30 local time. Hungarian
  police searched the building but, according to police
  spokesman Zoltan Peto, found nothing.  "The call was a hoax,"
  he told reporters, "it happens all the time".  The delayed
  trading session was shortened by an hour.



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

**HUNGARIAN POWER UNIONS PREPARE ANTI-SELL-OFF STRIKE**
  A trade union umbrella group representing workers at the
  Hungarian electric utility MVM says it plans to hold a
  two-hour warning strike to protest against the privatization
  of MVM. The unions are demanding guarantees from the Hungarian
  government that it will not sell off a majority stake in the
  utility, a move which they fear would result in large-scale
  layoffs.


**HUNGARIAN PARLIAMENT PASSES SUPPLEMENTARY BUDGET**
  The Hungarian parliament Tuesday overwhelmingly  approved a
  supplementary budget for 1995. The measure sets the budget
  deficit at 3 percent of Hungary's Gross Domestic Product, well
  below the 5.4 percent planned in the original budget. Laszlo
  Akar, state secretary in the Ministry of Finance says savings
  envisaged during negotiations over the passage of the
  government's stabilization package had to be pared down.  The
  spending plan makes up for those lost revenues

  "The final outcome of the stabilization package was minus 3
  billion forint that we lost during the discussions, so the
  equilibrium level remains as it was originally planned," Akar
  told CET.

  New sources of income in the supplementary budget include an 8
  percent surcharge on imports, backdated to March, as well as a
  crackdown on the black economy and tax evasion.  However, the
  conservative opposition says the supplementary budget will do
  little to improve Hungary's trade imbalance. They claim  that
  the 1.2 billion dollars the government plans to receive in
  privatization revenues this year is unrealistic. Gyorgy Rasko,
  member of parliament for the conservative Hungarian Democratic
  Forum and former Agriculture Minister, maintains the budget
  will adversely affect what he calls the monetary balance of
  the Hungarian economy. As a result, Rasko thinks the
  government will have to present a second supplementary budget
  in October.




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

**POLAND CHEWS OVER CAPITAL GAINS TAX**
  By Tom Hoover

  It's decision time in Poland over a planned new capital gains
  tax.  A capital gains exemption adopted in 1993 runs out at
  the end of this year and the Polish government seems eager to
  tax such revenues and boost state revenues. The proposal,
  adopted by the government on Friday but still to be approved
  by Parliament, calls for a 20 percent capital gains tax on
  individual investors, beginning at the start of 1997, while
  institutional investors would continue to pay a 40 percent
  income tax on their general profit.  The capital gains tax
  would be assessed on the basis of gains and losses over the
  course of a year and would be paid separately from personal
  income tax.  Losses on investments over the year would be tax
  deductible for the next three years.

  Warsaw Stock Exchange President Wieslaw Rozlucki termed the
  proposal "a good place for negotiations to begin", but said
  the tax should not be introduced before 1998. Rozlucki agreed
  with Polish stock analysts who warn that a premature
  introduction of the tax would depress the Polish share market.

  The 20 percent capital gains tax suggested in Poland compares
  with a 28 percent corporate and individual capital gains tax
  in the United States and a 10 percent rate for individual
  investors in Hungary.  David Keresztes, an investment banker
  in Budapest, described the sudden increase from zero to a 20
  percent capital gains tax as "dramatic" and added that many
  countries impose no tax on equities.

  Polish deputy finance minister Witold Modzelewski said, however,
  that the capital gains tax would only apply to security
  investments held for less than 183 days.  He said the tax
  would  bring an estimated $9 million to the budget from small
  investors in its first year and should generate over $31
  million from institutional players.  Modzelewski also pointed
  out that gains on government treasury bills and bonds will be
  exempt from the tax.

  However, Leonard Furga of the Foreign Relations Department at
  the Warsaw Stock Exchange believes  it is premature to believe
  that the tax will even be a reality.  "The issue has really
  come up just because the exemption has run out.  It's just a
  suggestion at this point,"  he said.  "The government said
  that it wouldn't introduce this tax until Poland's economic
  transformation is complete.  I seriously doubt that process
  will be finished by 1997." Indeed, Poland's privatization
  scheme has stalled somewhat in the last 9 months, with more
  than 400 firms yet to be transferred to the agency charged
  with their coupon privatization. Furga candidly admitted that
  Polish analysts don't have the experience to say what effect a
  capital gains tax would have on foreign investment in Poland.
  "Maybe you can tell us," he said.



                 

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Editorial- Expand NATO?

  RICHARD COHEN
  
  (C) 1995 THE WASHINGTON POST (LEGI-SLATE ARTICLE NO. 232504)

     ISTANBUL, Turkey -- Could it be that geography, not demography, is
destiny? Geography is such a frumpy science (Have you ever seen a geographer
interviewed on television?) that it is only sexy when gussied up as "geo
politico." But this ancient city, where Europe stages a stunning finale
before plunging into the Bosporus, both dazzles and instructs. As the Clinton
administration will discover in attempting to expand NATO, in foreign affairs
-- as in real estate --  location is what really matters.

     Europeans, of course, already know that. In Greece, for instance, I was
asked by one foreign policy expert about the expansion of NATO and waxed
Lippmannesque for a moment or two before the clearly impatient think-tanker
cut me off: Didn't I understand? The countries slated for early NATO
membership are all in "the German sphere of influence."
     I confess to not having seen things that way. It's true, of course, that
the Czech Republic, Hungary, Poland and Slovakia were all, to one extent or
another, in the German sphere of influence -- one, incidentally, that pre
dated the Nazi period and was as much cultural as it was political. Franz
Kafka, that morose Czech, lived in Prague, but wrote in German -- as did
numerous other Central and Eastern Europeans whatever their nominal
nationality.
     It's not likely that Europe will return totally to its old ways of
thinking and doing. But at least in this region, more and more people seem to
assume that the old days are coming back -- and with them the old ways of
looking at the world. Greek businessmen are hopping planes for Tirana, the
Albanian capital, attempting to restore traditional trading patterns. The
Northern Greek city of Salonika is once again being seen as a financial and
commercial center for Bulgaria and Romania. With the end of the Cold War,
geography is once again reasserting itself. Greece is back in the Balkans --
and don't think Turkey hasn't noticed.
     But the debate over expanding NATO proceeds as if the old Cold War
verities still applied and the old rules of geography remain suspended. In
strategic terms, London was once accorded as much importance as San
rancisco, Bonn with New York, Paris with Rome and Davenport, Iowa. What did
it matter? Attack one and you have attacked the other.
     As long as godless communism was the enemy, that could work. But
Americans, too, are creatures of geography. From Kansas City, it's not only a
long way to Tipperary, but it's even farther to Bratislava, the grim capital
of Slovakia. How is the administration -- which wants NATO expanded -- going
to explain to some guy in Kansas the strategic importance of Bratislava? Most
Americans probably think Bratislava is a sausage. Whatever it may be, it's a
long way from both America and American concerns.
     Usually, NATO expansion is debated over the question of Russia: How will
it react? My question, though, is different: How will the American people
react? Does the United States really want to get involved in quarrels in
which it has no stake? Bosnia is a day at the beach compared with the
Caucasus or the traditional problems between Romania and Hungary. Hitler and
Stalin together did an absolutely super job at tidying up Central and Eastern
Europe, but even they left minorities lingering in most countries. In each
and every country, a problem of sorts remains. They are all interesting and
sometimes they are painful, but it's hard to connect any of them to anything
approximating the American national interest.
     The imperatives of geography are once again taking hold. As before the
Cold War (and World War II), Americans see themselves as being in the middle
of nowhere -- a shrinking world notwithstanding. Europeans, on the other
hand, once again see themselves as being in the middle of everywhere. They
are again finding themselves creatures of their own geography and, in a
sense, blowing the dust off old texts to see how things were handled in the
past. Poorly would have to be the conclusion, but maybe inevitably so.
     The case for (1) retaining NATO and (2) expanding it, is well worth
arguing -- although the latter has me more worried than excited. But such a
case has not yet been made to the American people, not by the White House
anyway, and certainly not by expansion advocates who brandish Chamberlain's
umbrella and yell "neo-isolationist" at their critics. They will simply have
to do better.
      The blessings of geography traditionally enabled America to avoid the
insane feuds of the Old World. The world has shrunk, sure, but given the
demise of the Soviet Union, what's the new "politico" that compels us to give
up our "geo" advantage? If there is an answer to that question -- and there
well may be -- the Clinton administration has yet to provide it.

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

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Reposting is supported by Hungarian Human Rights Foundation News
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