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The Warsaw Voice » Other » October 22, 2008
Privatization in Poland
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Problems with Privatization
October 22, 2008   
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Tomasz Kwieciński, legal advisor, co-founder of and senior partner at WKB Wierciński, Kwieciński, Baehr law firm, talks to Beata Gołębiewska.

What do you think about the progress of privatization in recent years? What important issues still remain to be resolved?
Unfortunately, privatization processes were slowed down in the past few years. This is confirmed by statistical data from the Ministry of the State Treasury. In 2006, the Treasury Minister initiated indirect privatization in just six single-owner companies owned by the State Treasury. In 2007, indirect privatization was begun in 25 single-owner State Treasury companies that had come into being as a result of "commercialization" [or the transformation of companies so they operate under market rules].

In 2006, the Ministry approved just 10 applications for direct privatization, and 20 such applications in 2007. At the end of last year, 181 companies still had state-owned status. Many previously "commercialized" companies remained single-owner State Treasury companies or ones with a substantial Treasury stake. Privatization has been replaced in recent years with consolidation carried out in some sectors.

Do you consider this a negative trend?
It's hard to offer an unequivocal opinion. However, it needs to be stressed, that consolidation should only be one of the different stages. The next stage has to involve privatization of the consolidated companies. It's necessary to accelerate privatization in the power industry, heavy chemicals, pharmaceuticals, and many other sectors.

Are legislative changes needed to force through and facilitate the completion of privatization?
I don't think the privatization law needs changing. The August 30, 1996 law on "commercialization" and privatization has been amended approximately a dozen of times. Recent years saw changes to regulations that defined and expanded employee rights. Today, there is no time for legal changes, but for efficient, properly paced completion of privatization.

Do you really think current legal regulations are complete and allow privatization to be carried out without unnecessary delays?
One issue requires a legal framework and changes to the government policy.

I mean reprivatization, where Poland-alongside Lithuania-is the only new European Union country that has yet to solve this problem. Over the 20 years that have passed since the transformation [after the end of communism], no government-regardless of the political colors of successive coalitions-has been able to resolve the problem of reprivatization. Many draft laws were drawn up, and none came into existence. Meanwhile, reprivatization is not just compensation for the wrongs done to owners whose property was taken away from them, but also a form of privatizing previously nationalized assets. I believe that the reprivatization (compensation) law should encompass only those cases in which nationalization was carried out in accordance with the legal regulations from 1944-1989. In situations where nationalization (expropriation) was carried out in violation of those regulations, based on the current legal order such assets should be returned in kind to their owners or full compensation should be paid. Unfortunately, not only has Poland not passed a reprivatization (compensation) law, but the practice of state bodies in cases of illegal nationalization gives cause for concern. The State Treasury prolongs compensation proceedings, questions the rights of owners, and refuses to hold conciliatory talks. Compensation proceedings can take over 10 years. In terms of both legislation and the practice of state bodies in this area, significant changes have to be made. They will not only have an impact on the state's image, but will also close the endless disputes involved.

Is reprivatization the biggest problem today?
It is extremely important. However, there are other equally important matters. In my opinion, it is very important to urgently expand the range of applied privatization techniques, especially in indirect privatization. Privatization via the stock exchange has dominated over the past years. The crisis on the securities market could lead to further deceleration of privatization. This means there is a need to search actively for buyers of shares in a public offering, a public tender, and especially by means of negotiations undertaken on the basis of a public invitation. Selling shares in this way to a strategic investor could be the best technique. When regulatory bodies function properly, privatization of even such sensitive sectors as the power industry can be a good way of ensuring energy security for our country. Applying this technique in fact does not rule out the possibility of simultaneously using other forms of selling shares in other cases.
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