April's deep freeze
Is he in or is he out? When all was said and done, treasury minister Sławomir Cytrycki was indeed finally out, after only a three-month tenure.
Cytrycki's dismissal was the result of his disagreement with Prime Minister Leszek Miller over the privatization strategy for state-controlled insurer PZU and the on-again, off-again sell-off of Rafineria Gdańska, which will likely not go through this year. Likewise, the government's sale of a 30% stake of PKO BP, from which it intended to raise about 899 million-1.35 billion (zł. 4 billion-zł. 6 billion), will be kept on hold.
The lack of headway with privatization does not bode well for the government's unrealistic expectation of amassing 2 billion (zł. 9.1 billion) in revenue this year, which will in fact only reach an amount in the range of 787 million-1.24 billion (zł. 3.5 billion-zł. 5.5 billion).
For the rest of the year, privatization will continue to take a back seat to other issues that are at the forefront of the government, such as the debates over economic policy and the upcoming European Union referendum. Furthermore, there is little need for privatization revenue this year, since the government is selling treasury bonds and notes like crazy to ensure enough funds to finance its fiscal deficit, a short-term issue that will have no immediate disastrous impact on the economy.
Despite the news of Cytrycki's departure and his replacement by his deputy, Piotr Czyżewski, markets remained neutral for the most part with the złoty only weakening a nudge, as investors realized that such musical chairs in the treasury ministry is business as usual.
And although the government has demonstrated a lack of commitment to a coherent and binding privatization strategy concerning the largest companies, coupled with the botched efforts in selling off politically sensitive assets like PZU, investors will not be discouraged from bidding on state-owned stakes in the future. They will, however, exercise caution, viewing these developments as additional black spots on the country's image as a place for investment.
The pace of privatization will eventually pick up again. But investors will have to wait until Miller is dethroned for the possibility of a new government to implement a clear-cut policy on privatization - an unlikely event for next year unless early elections are held. Yet even then, new elections would not necessarily guarantee a change in the "no privatization" policy since any new parliament would likely be more fragmented than the current one.
Nonetheless, privatization will have to be accelerated once the country votes to join the EU and has to fork over hefty contributions to the union's coffers. In the meantime, PZU, PKO and Rafineria Gdańska are in good enough shape so that delays in their privatizations will not affect their competitiveness.
Miller's choice to slow down privatization was a tactical move, not a strategic one, and his appointment of the new minister is a signal that he still retains substantial influence on the country's privatization policy. Until he goes, investors will continue to be held at bay.
