Poland revs up privatisation drive
As Poland pushes privatisation in the midst of a record public deficit, there are some who have doubts whether mass privatisation is indeed realistic during a global recession.Tarnow -- Poland, the EU's top performing economy, is revving up its privatisation drive as it scrambles to bridge what is expected to be a record public deficit in 2010.
"Thirty-six billion zloty (8.8 billion euros, 12.7 billion dollars) -- that's the amount we want to earn from privatisation in 2009-2010,” Adam Leszkiewicz, a senior Polish State Treasury official told captains of state-owned companies gathered at a privatisation forum in Tarnow, southern Poland, this week. "This money will certainly support the state budget. Of course, in times of crisis you could say that you sell more for less.”
"But on the other hand privatisation in difficult times can save companies, facilitate their development and be a source of capital for investment when the state budget is weak," he added.
Poland expects the 2010 state budget deficit to hit a record 52.2 billion zloty (12.7 billion euros, 18.2 billion dollars) or 3.8 percent of gross domestic product (GDP), twice the 2009 deficit.
The overall public deficit is expected to balloon to 6.0 percent of GDP this year and up to 7.0 percent in 2010, far exceeding the 3.0 percent of GDP ceiling required for entry into the eurozone.
This and a drastic decline in the value of its currency amid the crisis has forced Poland to drop its 2012 deadline to adopt the euro. No new target date has been set.
On the bright side, with its population off 38 million, Poland is the only state in the 27-member European Union to sustain economic expansion this year and is expected to score around one percent annual GDP growth.
Its ambitious privatisation drive targets over 700 companies between 2008-2011.
Stars on the auctioning bloc include the Warsaw Stock Exchange, KGHM, Europe's second- ranked copper miner, energy companies Enea, Tauron, PGE and Energa and chemicals giant Ciech.
Shares in TP, Poland's main telecoms operator, leading bank Pekao S.A. as well as PKO BP S.A. and the Lotos Group S.A. fuels company are also on offer as are stakes in hundreds of others ranging from pharmaceutical companies to health spas.
"At the moment we're conducting 500 privatisation procedures and 200 have already been completed," Leszkiewicz said.
Poland has earned 3.9 billion zloty (949 million euros, 1.38 billion dollars) in privatisation revenue so far this year, less than half of the 12 billion zloty target for 2009, according to state treasury figures.
The spectacular failure last month of a high-profile deal to sell two ailing Polish shipyards to Qatari investors has cast doubt as to whether mass privatisation is indeed realistic in the midst of a global recession.
"In the first half of this year we couldn't find investors for 50 companies -- this number is increasing and it is a clear indicator that it's more difficult to privatise in times of crisis," Leszkiewicz said. "But on the other hand why should we wait and is it indeed worth waiting?"
Wojciech Papierak vice president of PKO Bank Polski S.A., a leading Polish bank up for privatisation in which the Polish State Treasury owns a 51.24 percent share, is optimistic.
"We're a green island in a red sea of recession in Europe ... this means we'll attract greater investment capital," he told the Tarnow forum, part of the larger annual Krynica Economic Forum -- known as the 'Davos of the East' -- held this week in the eponymous nearby southern mountain resort.
Andrzej Kleksyk, head of Poland's state-controlled PZU S.A. insurance giant, told the forum he expected a record 55 billion zloty (13.4 billion euros, 19.4 billion dollars) profit this year.
PZU is, however, not up for sale. The gem is at the centre of a bitter and protracted row between the state treasury and Dutch investor Eureko.
Holding 32.12 percent minus one share in PZU, Eureko insists it is entitled to a further 21 percent -- for a controlling stake -- under the terms of the original 1999 privatisation contract.
With Poland's state treasury currently commanding a 55.08 percent controlling stake in PZU, a string of Polish governments from both the left and right have fought the Dutch insurer's bid for majority control.