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The Warsaw Voice » Business » January 16, 2008
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Privatization Drive
January 16, 2008 By Andrzej Ratajczyk   
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Poland's new government led by Donald Tusk and his economically liberal Civic Platform (PO) party is determined to speed up privatization. According to the Treasury Ministry, receipts from the sale of state assets this year may reach zl.5.5 billion, up from zl.622 million in 2007.

In the last two years, when the country was governed by the conservative Law and Justice (PiS) party, privatization largely ground to a halt. In 2006, gross revenue from privatization totaled zl.622 million, accounting for only 11.3 percent of the zl.5.5 billion target planned under the budget law. In 2007, gross receipts from privatization reached zl.1.95 billion, or 65 percent of the zl.3 billion target.

Under the 2008 budget bill, the government's receipts from privatization should total zl.2.3 billion this year, and there is every indication that they will be even higher. According to Treasury Minister Aleksander Grad, "if the conditions are good," receipts from privatization may reach zl.4.5-5.5 billion. The government is preparing to review a four-year privatization plan under which receipts from privatization are projected to come to zl.25-30 billion in 2008-2011. The government is likely to approve the plan in February, Grad said.

More than 300 state-owned companies are slated to be privatized in 2008-2009, according to a list drafted by the Treasury Ministry. At first glance, the plan seems to be ambitious, experts say, but most of the companies on the list have already been privatized in part, and the government now only wants to sell the remaining minority stakes, some of them smaller than 1 percent. The ministry would like the companies' majority shareholders to buy these minority stakes. Under a law that is expected to come into force July 1, 2009, companies partly owned by the government would be subject to detailed reporting requirements, similar to those applying to publicly traded companies.

Almost 80 companies are slated for privatization after 2008, but they may in fact be privatized earlier, the ministry says. A priority for this year is the privatization of companies in which the Treasury holds stakes that it does not really need, said Grad. These include companies in sectors such as agriculture, furniture and tourism. Plans for various strategic companies active in the fuel and energy sectors, such as PKN Orlen, Lotos, KGHM and PGNiG, will be unveiled in February, the ministry says.

The largest of the companies that the government wants to start privatizing this year operate in the power sector. "Preparations for the privatization of Enea and Polska Grupa Energetyczna are already well advanced," said Jan Bury, deputy Treasury minister responsible for the power sector. "Enea will be listed on the stock exchange in the first quarter, while Polska Grupa Energetyczna will hit the trading floor in the second quarter." Shares in the Bogdanka coal mine will be floated in the latter half of the year.

Defense sector companies such as Gamrat and Huta Stalowa Wola will also be privatized this year. The privatization of press distributor Ruch will be completed in the second half of the year, and the Rzeczpospolita publishers, a company 100-percent owned by the government, will be offered to the public.

The Warsaw Stock Exchange (WSE) company is also set aside for privatization, though the government will retain a 51-percent stake in it. Some 10-15 percent of the stock will be sold through a public offering and the remaining 30-35 percent will go to investors "capable of ensuring stable shareholding," the ministry said. At present the government holds a 98.8-percent stake in the WSE; the remaining 1.2 percent belongs to banks, brokerages and securities issuers.

The national air carrier LOT Polish Airways will be fully privatized. The law regulating LOT's operations will be amended to repeal a provision that guarantees a majority stake to the government. The decision on how to privatize the company-through the stock exchange or by selling it to a strategic investor-has yet to be made. The government now holds almost 68 percent of LOT.

The Treasury Ministry is also preparing ownership decisions concerning PKO BP, Poland's largest retail bank. According to Deputy Treasury Minister Michał Chyczewski, PKO BP should remain a "national bank predominately in state hands even if it is privatized further." At the moment, the government holds a 51.5-percent stake in the bank in line with regulations under which its interest in PKO BP must be no lower than 50 percent.

The government's 37.32-percent stake in Bank Gospodarki Żywno¶ciowej will also be sold, said Chyczewski. Moreover, the ministry wants to get rid of its minority stakes in other financial institutions such as BWE, Bank Millennium, BPH, Bank Handlowy, BZ WBK, Bank Polskiej Spółdzielczo¶ci, Polskie Towarzystwo Reasekuracji and Bank Pekao SA.

Even though the sale of state assets has caused a lot of controversy recently, due to various irregularities that accompanied some of these transactions, on the whole privatization has produced good results in Poland, Grad said. To avoid irregularities in the future, all privatization transactions will be transparent, Grad added. "A separate file will be kept for each privatization deal," he said. "It will be clear when the process started, who worked on it, and when the decisions were made. The file will be available for public inspection."

The ministry is also determined to "free Treasury-owned companies from political control," Grad said. The appointment of supervisory board members in such companies will be transparent and depend on these people's qualifications, not on their political affiliation, while management board members will be selected through competitions, Grad said.
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