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S Korea's foreign reserves touch USD 229.46bn. An increase in the translation value of other foreign currencies against a weaker US dollar has enabled S Korea to earn higher operating profits from its foreign exchange reserves. As a result, S Korea's foreign exchange reserves touched USD 229.46bn at the end of October 2006; a m/m increase of USD 1.24bn over the previous month's reserves of USD 228.22bn.

Poland to use 30% of available EU funds by end-2006. Poland would have used around 30% of the European Union funds allocated for 2004-2006 by the end of this year, and the remaining 70% – which can be used on the basis of n + 2 years – will be used by the end of 2008, according to statements made on Tuesday by regional development minister Grazyna Gesicka. Simultaneously the minister upheld forecasts that the sum from EU structural funds may this year comprise around 2.8% of Poland 's GDP . At the end of September, the use of EU funds was 23%, she added. ISB, tom

PM Erdogan signals reduction in electronic communications tax. PM Recep Tayyip Erdogan signalled that the government considers reducing the tax on electronic communication services. Erdogan said that the government was studying on a plan that envisages reducing the tax on GSM services, fixed-line telephone services and internet services. The telecommunication board officials prepared a report and proposed reducing the special communication tax levied on the GSM services gradually to 5% from the current 25%, reported the daily Referans . At the first phase, the tax rate could be reduced to 15% and afterwards to 5%, officials from the telecom board told the daily. On a related note, transport minister Binali Yildirim said that the total number of GSM subscribers in Turkey exceeded 50mn, while the corresponding figure for fixed-line telephone services is 19mn.

Armenian president visits Kazakhstan, discusses cooperation. During his visit to Kazakhstan , Armenia ’s president Robert Kocharyan met with his Kazakh counterpart Nursultan Nazarbayev. They discussed the prospects of further cooperation. According to Nazarbayev, trade turnover between the two countries is very small. It stood at only USD 16.5mn in Jan-Aug 2006 and at USD 45.2mn in 2005 according to Kazakh statistical agency’s data. The Kazakh president considers that one of the reasons for such lower indicator is the lack of legal framework for cooperation between the 2 countries. During the visit several agreements were signed, which should boost the level of cooperation. The most important deals endorsed in Astana were: accord on encouragement and mutual protection of investments, accord on the international automobile transportation and on passenger travel. Besides, a convention on exclusion of double taxation was signed. In turn, Kocharyan expressed hope that his visit would encourage investment activity of Kazakh businessmen in Armenia .

Power utility HEP to issue EUR 68mn bonds. The state-owned power utility HEP is set to issue HRK 500mn (EUR 68mn) 7-year bonds after it got the approval of the financial regulator HANFA yesterday. The decision to issue bonds was approved by the management of the company on May 10 and by its Supervisory Board on Jun 12 this year. The papers will have nominal value of HRK 1 and will be listed on the Zagreb Stock Exchange. The subscription will last for 5 days. The joint arrangers of the issue are Privredna banka Zagreb , Raiffeisenbank Austria and Zagrebacka banka, while Societe Generale - Splitska banka is a co-arranger.

Tax revenues to exceed plan by 4.3% in 2006. The budget should collect SKK 9.3bn in extra revenues this year, which would represent 4.3% above the target for the year, the finance ministry estimated. The highest contribution for the strong collection was expected from the corporate tax revenues, which should provide SKK 6bn more than the plan due to the robust economic growth, reflected in a more than proportional increase in the corporate profits. The improvement of the financial situation of the companies was also shown in a strong real wage growth, inducing high private consumption growth and correspondingly, high revenues from VAT. The latter should come above the target by some SKK 4bn and compensate a SKK 2.6bn shortfall from excise tax revenues. The collection of excises was negatively influenced by stock accumulation last year, preceding the hike of the excise tax rate on tobacco. It favourably affected the revenue collection in 2005 but had a mirror effect for the execution in this year. The positive revenue performance should help the budget contain its deficit to 3.7% of GDP for 2006 or below the originally planned 4.2% of GDP deficit for the year, including the costs of the pension reform.

Korean car maker Kia Motors to start production in November. The plant of the Korean car maker Kia Motors was scheduled to launch serial production in November or December this year, the spokesman for the facility Karol Dvorak informed. The plans of the investor to raise its initial plans for the plant capacity were confirmed during the visit of the economy minister Lubomir Jahnatek in Korea . The Slovak factory should thus produce 300,000 cars annually up by 50% from the original intentions. The total cost of the investment would accordingly rise by EUR 200mn to EUR 1bn. Dvorak stated that the full capacity of the plant would be reached in 2009. At present, the facility was employing 1,500 people and their number was expected to rise to 2,000 by March next year and to 3,000 by the end of 2008.

Sarajevo Europa hotel sold for EUR 4.8mn. Sarajevo canton Privatisation Agency has signed contract with domestic company Astrea and Rasim Bajrovic for the sale of 95.15% of the state–owned capital in Sarajevo-based Europa hotel for KM 9.4mn (EUR 4.8mn), ONASA informed. Pursuant to the contract, the buyer is obliged to invest KM 30mn (KM 10mn per year in the next 3 years) in the hotel’s restoration and rehabilitation, for which domestic HVB Bank has provided the needed guarantees. In addition, the new owner has pledged to preserve the present 44 employees in the next 3 years and hire another 120. Bajrovic, who also owns Sarajevo ’s Astra and Astra Garni hotels, expects the hotel to become 4-stars graded place with 22 rooms, 10 apartments and underground garage. Astrea is a trading company which also provides hotel-tourism services.

People's Bank of China permits lend and borrow bonds. According to a Reuters report, China's central bank announced on Monday that Chinese banks will be permitted to lend and borrow bonds in the inter-bank market from Nov 20. Banks will also be allowed to borrow or lend securities for a maximum of 365 days. The measure is expected to boost liquidity and facilitate short selling, thereby reducing price swings and improving the efficiency of the market. At present, short selling is difficult and risky; owing to poor liquidity.

Cairo Amman Bank decides to increase exposure in Jordan by 12%. Cairo Amman Bank (CAB) issued a statement saying that given the current situation in the Palestinian territories, the management of Cairo Amman Bank (CAB) has decided to allocate JOD 5.25mn (USD 7.4mn) for Palestinian clients. These funds will be given to Palestinians as credit. The bank also decided to increased credit facilities in Jordan by 12% to JOD 493.3mn.

EU forecast identifies risk of unsustainable external gaps. The EU Autumn Forecast anticipates continuous broad-base recovery with the GDP growth bouncing back to 7.2% this year and remaining robust above 5% over the next two years, but it also identifies the risk that pro-cyclical public expenditure policy to add to household consumption and generate an excessive expansion of domestic demand and an unsustainable widening of external imbalances. The CA gap is expected under the baseline scenario to hit 13.3% of GDP in 2008, up from 8.7% last year. This year’s CA gap is seen at 10.3%, 1pps above the government’s forecasting body projection issued earlier this week. The fiscal deficit projections were downward revised on the back of better than expected tax collections and the Property Fund project (generating fiscal deficit under EU accounting standards) advancing only slowly. Thus, the general government’s budget deficit is seen at 1.4% of GDP this year and 2.6% in each of 2007-08 years. However, the share of current expenditures, namely social transfers, wage expenditures and similar will increase as a share of GDP. The investment expenditures will also grow faster than GDP.

Komercijalna Bank receives no acceptable takeover bids. The leading local lender Komercijalna Bank announced that it has not received an acceptable bid for the 52.8% stake in it offered for sale by a group of shareholders. In May, shareholders of the lender, controlling 52.8% of its shares, have concluded an agreement to examine the possibilities for selling their stake to an international bank. Komercijalna Bank hired UK-based Nomura International as an advisor. However, in its yesterday’s announcement, the lender comments that it will continue to operate with the existing shareholder structure. The bank did not comment on the limited international tender announced for the stake, which ended on November 1. Unofficially, the names that have so far appeared in the media as potential buyers of the majority stake in the bank have been the French Societe Generale, the Italian Intesa, the Austrian Raiffesenbank, and the Greek Alpha Bank. After the announcement that the sale has failed, the price of Komercijalna Bank’s shares has dropped 9.9% yesterday. The net profit of the lender has increased by 35.4% y/y to MKD 429.8mn (EUR 7mn) in Jan-Sep. However, we estimate that the performance in Q3 was poor, with the net profit dropping 70.3% y/y to only MKD 39.4mn in that quarter. Last year, the total assets of the lender increased by 10.9% to MKD 36.9bn (EUR 603.8mn) at end-2005. In 2005, the bank posted a net profit of MKD 357.1mn, down 49%. The lender is listed on the Macedonian Stock Exchange and is included in its blue-chip index.