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The Warsaw Voice » Other » May 28, 2008
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Privatization to Pick up Pace
May 28, 2008 By A.R.    
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The economically liberal government led by Donald Tusk and his Civic Platform (PO) party is determined to speed up privatization. The government has unveiled a four-year privatization plan that calls for the sale of state-owned shares in 740 companies to generate up to zl.30 billion in extra revenue for the Treasury.

In the last two years, when the country was governed by a conservative coalition led by the Law and Justice (PiS) party, privatization largely ground to a halt. In 2006, gross revenue from privatization was just zl.622 million, followed by zl.1.95 billion in 2007. This was much less than earned in previous years, and also less than planned in the budget. The current government coalition made up of the PO and the Polish People's Party (PSL)-which was formed in the wake of parliamentary elections last fall-is determined to accelerate privatization. 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.

Under the government's privatization agenda for 2008-2011, unveiled at the end of April, the next four years are expected to see the privatization of most of the 740 companies still owned or part-owned by the Treasury Ministry. Privatization will also cover two companies controlled by the Economy Ministry, and 16 companies controlled by the Ministry of Defense, plus another two controlled by the Ministry of Infrastructure. "The key priorities of privatization are transparency and fairness," said Treasury Minister Aleksander Grad. "We want to earmark some of the revenue for what is known as a demographic reserve fund, strengthen the stock exchange, and complete the process of the state's withdrawal from most sectors of the economy. If trends on the stock market are good, privatization revenue could reach as much as zl.30 billion."

The sale of companies through the stock exchange will continue to be the preferred method of privatization "to guarantee an objective valuation of assets and wide public approval," Grad said. However, this method cannot be always used, he added. Small enterprises or small blocks of minority stakes may fail to attract investors and that's why the ministry will also try to reach new owners through auctions and negotiations. The energy sector, for example, cannot be privatized exclusively through the stock exchange, Grad said.

Grad added that the attractiveness of a bid would not be judged on the basis of what country the investor comes from but what terms they offer. "We don't want to classify capital into better and worse; we have no bias. Anyone who comes to us with a better deal will have a better chance of being selected," Grad said.

Privatization is expected to either begin or continue in a number of key sectors such as finance and the power industry, chemicals and the oil industry, in addition to industries such as machine building, metallurgy, electronics, electrical engineering, spirits, foodstuffs, wood and paper, furniture, clothing, transport and forwarding, trade and services. The government will also sell minority stakes in many companies and withdraw from businesses covered by the National Investment Fund Program.

The Treasury Ministry plans to sell stakes in 13 financial institutions, including retail bank PKO BP, the Warsaw Stock Exchange company, Bank Gospodarki Żywnościowej, and the National Depository for Securities. The privatization of Poland's largest insurer, PZU SA, will continue once the government settles a dispute with Eureko BV, a shareholder in the company.

Ownership changes in the power engineering sector will involve power groups such as PGE SA, Tauron Polska Energia SA, Energa SA, and Enea SA. The scope of their privatization will depend on a program for the power sector that is being developed by the Economy Ministry. By the end of 2011 the government wants to complete privatization in industries including tourism, pharmaceuticals, foodstuffs, construction, electronic, spirits, shipbuilding, chemical, printing, publishing and wood processing.

Under the privatization program, 19 Treasury-held companies will hit the Warsaw Stock Exchange by 2011. These will include the Warsaw Stock Exchange company itself, Bank Gospodarki Żywnościowej, LOT Polish Airlines, PKP InterCity, Enea, PGE, PKP Cargo, Zakłady Azotowe Tarnów, Zakłady Azotowe Kędzierzyn, Polskie Towarzystwo Reasekuracji, Sklejka Pisz, Lubelski Węgiel Bogdanka, Wałbrzyskie Zakłady Koksownicze Victoria, Katowicki Holding Węglowy, Energa, Tauron, Zakłady Tworzyw Sztucznych Gamrat, Jastrzębska Spółka Węglowa and Kombinat Koksochemiczny Zabrze. Most of these privatizations are planned for 2008 and 2009. In addition, the ministry has a list of 11 companies that may reach the WSE, but in each case the decision will be made after more detailed analyses, Grad said.

On the other hand, the government will not privatize infrastructure companies and those related to the state's security. The list includes 25 companies, among them Polskie Górnictwo Naftowe i Gazownictwo SA oil and gas company, Gaz-System SA gas pipeline operator, PERN Przyjaźń oil pipeline operator, PSE-Operator SA power transmission enterprise, Bank Gospodarstwa Krajowego, Totalizator Sportowy Sp. z o.o. lottery company, Wieliczka Salt Mine, the Polish Security Printing Works, the Polish Information and Foreign Investment Agency, the Polish Press Agency, and PKP Polskie Linie Kolejowe railway network management company. In the case of PKN Orlen SA and Grupa Lotos SA oil refining giants, KGHM Polska Miedź SA copper group, and Bumar Sp. z o.o. machine and defense production company, only subsidiaries of these corporations may be privatized.

Carrying out all these transactions in 2008-2011 requires an amendment to the privatization law. The Treasury Ministry has drafted such a bill. It provides for greater openness and transparency of privatization, along with the possibility of selling shares in a public auction, shortening the time it takes to complete a privatization, and simplifying the procedures involved. The possibility of transferring Treasury-held shares to local governments for free will be extended to cover all companies with Treasury involvement.

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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