POLAND Careful approach to ensure long-term benefits
BEFORE PUTTING STATE ENTITIES ON THE BLOCK FOR PRIVATIZATION, THE GOVERNMENT SEES THE NEED TO CREATE MARKET COMPETITIVENESS. ENERGY AND DEFENSE HAVE BEEN EARMARKED FOR RESTRUCTURING

As Poland heads down the rugged road to full European Union membership and sustainable economic growth, it walks a fine line between privatizing state entities that are truly ready to meet the challenges of competition and the temptation to sell off public holdings for the simple sake of privatization.

Experience has shown the current administration that pulling out of a state company without giving it a reasonable amount of sustainability over the medium term is a no-win situation. The policy of the Polish government and the Ministry of State Treasury, which oversees the privatization process, is now only to sell to strategic investors who make a commitment to invest in the company and only after that company has been given the chance to be competitive.
"If you look back over the last four years of privatization, you will see that the process was about selling state-owned assets without focus or without concentrating on industrial goals to improve the competitiveness of Polish enterprises. There was little concern about restructuring or fighting to get the highest share of the market. The only concern was the budget, and this was very dangerous," recalls State Treasury Minister Wieslaw Kaczmarek.
The minister points to the 25% sale of the Polish telecom giant Telekomunikacja Polska S.A. (TPSA) to France Telecom. TPSA, still a Polish state monopoly, is now in effect partially controlled by a monopoly from another country. Mr. Kaczmarek, who supports the privatization of TPSA, argues that the first step should be to make the market competitive.

"This kind of privatization provided high revenue, but market-wise happens to be very dangerous. We now look for more connections between the industrial policies of the Ministry of Economy and the Ministry of State Treasury in order to improve enterprises or entire sectors of the Polish economy," Mr. Kaczmarek points out.
"Right now my ministry has challenges to face with industries like defense and energy. The steel industry is even more complicated because we have to make it attractive first before privatizing, and that won’t happen before completion of a restructuring plan that might take six months," says Mr. Kaczmarek.
Revenue from privatizations carried out during the previous administration was redistributed into different budget sectors and was not invested for the long-term good of the economy. "Today, we will continue the privatization process case by case," Mr. Kaczmarek says. "But in the energy sector and the defense industry, we will be looking for investors with commitment for the realization of investment programs. We will not calculate simply in order to draw big revenues from privatization."

The Polish Agency for Foreign Investment (PAIZ) will help weed out the committed investors from the mere speculators. Last year the investment promotion agency focused on attracting Japanese investors, while this year its focus–in keeping with government policy–has shifted to the European Union.
"PAIZ is a state agency for foreign investment, so we are fully linked to the government," says PAIZ President Antoni Styrczula. "We carry out government policy and are professionally ready to be active in all sectors. The government has recently given us two projects on which to concentrate: one for the chemical industry and one for the metal industry."

"We maintain good relations with U.S. investors that are already present in Poland and try to encourage them to invest more," Mr. Styrczula adds. "PAIZ was also involved in drawing up the new investment law that will support foreign investors with a government-financed program that provides training sessions and calls on local authorities to improve the investment climate in their areas."