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The Warsaw Voice » Other » October 22, 2008
Privatization in Poland
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Top Priority: Privatization
October 22, 2008   
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Under its privatization agenda for 2008-2011, the Polish government plans to sell 740 companies to private owners. Of this, more than 300 privatization projects are already in progress. The government says it is ready to talk with prospective investors about any company on the privatization list.

Treasury Minister Aleksander Grad talks to Aleksandra Maj and Urszula Imienińska.

The government has set out to privatize a total of 740 companies over the four-year period from the beginning of 2008 to the end of 2011. Is this plan doable?
I must admit we drew up the program as a four-year plan because we do not want to waste time each year discussing the privatization of new companies. We hope that having a plan in place that spans the government's entire term will make it possible to work faster.

The beginnings of our work on ownership changes have not been very spectacular because we have focused on resolving fundamental issues for future activities, and that's always time-consuming and not done in public view. Meanwhile, many barriers have been overcome: we have prepared the procedures and law amendments, which now allows us to speed up privatization, reduce its cost and even introduce new privatization instruments. Setting such machinery in motion took time.

As for the program itself, I would say this: it's easy and pleasant to privatize a few large companies for which investors are lining up, but the delayed privatization of small and medium-sized enterprises is equally if not more important. Today the privatization program encompasses companies of varying size from various sectors of the economy. The program is ambitious but can be completed within the scheduled time-for one thing because it contains no restrictions as to the type or origin of investor capital. Thanks to different privatization paths, both domestic and foreign entrepreneurs and investors can take part in the program.

What have you done so far?
We have around 400 privatization projects in progress and are preparing more. Also, if only there is interest among prospective investors, we can start working on projects that are further along on the privatization list, meaning companies slated for sale in 2010 and 2011.

As the Treasury minister, which projects do you consider to be the most important?
Without a question, that would be the privatizations we will carry out via the stock exchange. We want to use this form of privatization as a means of strengthening the Polish financial market and turning the Warsaw Stock Exchange (WSE) into a major bourse where large transactions are made. More than 20 companies will be floated on the stock exchange, including giants from the power and chemical sectors. These companies need privatization in order to develop without hindrance.

Ownership changes won't bypass the stock exchange itself. If we privatize the WSE, we will increase its competitiveness and increase the possibilities for capital alliances. It's essential that we reverse the bad trends-such as attempts to decelerate privatization-that have a political undercurrent and harm the Polish economy. Privatization is the best way of ousting politics from companies. A privatized company is one in which economic considerations, not political factors, are of primary importance.

Privatization has often run into resistance from company employees. Do you think this attitude will change?
I see a growing understanding of privatization among the public. Employees and trade unionists have grown aware of the fact that privatization could be a chance to preserve jobs. At the most recent meetings of the Tripartite Commission [which includes officials representing the government, labor unions and employers] none of the four trade union organizations voiced reservations toward the government's program. I believe this is the result of our work, which shows that we simply want to privatize businesses in an honest way.

Your list of companies slated for privatization is missing 26 Treasury-owned companies. Why is that?
The companies left off the list are those directly linked to Poland's energy security as well as public radio and television stations. The list also excludes privatization projects being handled by province governors. Apart from that, we want to privatize some companies through package transactions by offering more than one company to the same investor.

How much does the government expect to earn from privatization?
We take a different approach than previous governments to the influx of money into state coffers from privatization. We look at privatization revenue as funds for a specific purpose. We no longer view it as a means of meeting the budget targets for a given year. This money will be used to support long-term investment projects. We want to consider which long-term projects the money should go to. We have already decided how some of these funds will be distributed. For example, 40 percent of the revenue will be channeled to form a demographic reserve that will serve as a guarantee for the pension system to benefit future generations. This money must simply make more money. Another 15 percent will be assigned to an enterprise restructuring fund that will be used in crisis situations. Some of the revenue will also be contributed to science and reprivatization funds. This last aspect is related to the law, currently being drafted, on compensation for the Polish communist authorities' decisions stripping people of private properties. This bill should be submitted to the parliament in the fall, because if we want to protect private ownership rights today, we have to square accounts for the decades of neglect, delays and nonfeasance on the part of the state in this area.

Other new European Union member countries are also busy privatizing their economies. Why should investors choose Poland and not the Czech Republic or Slovakia?
According to the World Bank's Doing Business report, last year Poland topped the list among EU countries in terms of protecting investors. Besides Poland has an optimal location in Europe at the crossing of East-West and North-South routes. We have a market of almost 40 million consumers ready to buy many goods and services. Last year Poland's economy grew 6.6 percent, and this year it has been growing fast as well. The Polish economy has great development potential, largely thanks to our access to EU funds. Poland will be the greatest beneficiary of EU funds in 2007-2013. It is eligible for a total of 67.3 billion euros, which will benefit the entire country. Among other priorities, these funds will be used to finance infrastructure and the modernization of rural areas. Besides, it's also worth investing in Poland because we have simplified our privatization procedures, reduced the costs, expanded the roster of companies that are slated for sale by auction, and abolished restrictions on local governments as to what they can do with shares transferred to them by the Treasury ministry.

Moreover, very attractive sectors such as power engineering and transport will be privatized. Companies from these sectors could be an attractive offer for investors. We also have highly qualified managers and workers who want to and can be trained to upgrade their professional skills.

Beside purely business considerations, Poland is a country of friendly and hospitable people, with a rich culture, good cuisine and plenty of tourist attractions. Foreign entrepreneurs and their families can feel at home here, develop their interests and continue their education.

Would you say that the Euro 2012 soccer championships that Poland will co-host should be an added incentive for foreign companies to invest here?
It's true that Euro 2012 offers an additional incentive for development in many areas of the economy. We have to be aware though that our predecessors wasted two years of an economic boom. If more Treasury-owned companies had made it to the stock exchange at that time, we would be further ahead today. Meanwhile, we have to work hard to make up for lost time. Perhaps in connection with Euro 2012 we have been watching increased interest in companies that mine rock materials and produce goods for the construction industry, as well as companies from the electrical engineering sector. This is undoubtedly a good trend as far as privatization is concerned.

The government's privatization program is huge. Are you happy with what has been achieved so far?
I am satisfied because we have done a great amount of work, without which the program could never have taken off. All that is left now is to carry out the project, which is not all that simple. In other words, work on privatization is only just beginning…
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