Deals, legislation wait for new PM, coalition
But investors are still nervous that the crisis could adversely affect planned privatizations and economic policy. In the balance are $1 billion in deals and major legislation needed to continue the country's transformation to a market economy.
"People may be put off in the short-term," said Martin Gollner, London analyst with Nomura Research Institute. Foreign investors are closely watching local sentiment here to get a clearer picture of the impact of the political change, he said.
For the moment, though, most investors and pundits are confident the government will hold. Government and party officials scrambled earlier in the week to save the present coalition between the post-Communist Democratic Left Alliance (SLD) and Peasants Party (PSL), although the two partners had failed by mid-week to nominate a candidate for prime minister, who must also be approved by law makers.
President Aleksander Kwasniewski on Tuesday turned up the heat on negotiators, saying he would appoint a prime minister by Thursday, if the groups could not agree on a candidate, Reuters reported.
Failure to find a new chief would result in the dissolution of Parliament and new elections. This worst-case scenario would likely bring privatization to a standstill and threaten the pace of economic reform.
Even if the coalition is preserved, though, dangers abound.
In the likely cabinet reshuffle that will follow the selection of a new prime minister, the PSL will seek key spots to expand its power base, analysts said. If successful, the party could slow, if not brake, some privatizations.
"A stronger Peasants Party might be bad news for privatization and economic policy in general," Gollner said.
In this vein, the PSL may look to oust Privatization Minister Wieslaw Kaczmarek, who has often been at odds with the agrarian-based party.
But sources close to the minister said he has received assurances that he will keep his post.
Finance Minister Grzegorz Kolodko also appears to be safe.
"They can't touch the finance portfolio," said Krzysztof Bledowski, chief economist with Pioneer First Polish Trust Fund.
Despite the uncertainty caused by the political upheaval, the markets have taken events in stride.
The day following Oleksy's announcement, trade on the Warsaw Stock Exchange rose 4.8%. By mid-week, the market continued its month-long rally that has pushed the WIG index up nearly 32% since the beginning of January.
But strategic investors are a bit more rattled. Uncertainty about the new government's future economic policy could stall major deals, they said.
"Forget about privatization now," said Andrzej Szczesniak, director of the chamber of liquid fuels that represents 90% of Poland's gas and oil sector. "It's a bad time for the private sector. Today is awful," Szczesniak said the day following Oleksy's announcement. "It is a nightmare."
Others took a more reserved view.
"I think the resignation will have to be viewed with what follows," said Jacek Siwicki, senior vice president with Enterprise Investors in Warsaw and former deputy privatization minister. Maintaining the status quo would be a step in the right direction, he added.
At stake in the current political poker game are a $3.2 billion oil restructuring project and the sale of at least one large tobacco plant in Poznan.
Although the government completed a tobacco privatization this week, it is under pressure to sign three more large tobacco deals.
Privatization Minister Kaczmarek told the Business Journal last week that the ministry hoped to sell its state-owned Poznan plant by the end of January. The government is currently looking for a strategic investor for the lodz plant and two smaller factories in Radom and Lublin.
"We plan to finish the whole sector's privatization by the end of the third quarter," Kaczmarek said. (See Interview, Page 6-7).
The government has already sold 33% stakes in both the Augustow and Radom plants to the U.K.'s British American Tobacco Industries for $88 million and France's Seita for $64 million, respectively.
Jan Wierzbicki, director of Reemtsma International Poland Sp. z o.o., declined to comment on his company's negotiations for the Poznan plant. But he did say Oleksy's resignation should not cause a problem as long as there is some continuity on the government's part.
"Politicians are determined by time," he said. "They come and go. What is more important is the policy."
Industry Minister Klemens Scierski announced last week that the restructuring of the oil sector will proceed as planned, but he does not expect final signatures until there is a new government. Administrative delays could last at least a few weeks, Scierski said.
Poland's oil sector needs $3.2 billion to boost its competitiveness with Western producers, and the clock is ticking before European Union trade barriers fall. So far, Poland's oil sector has been unsuccessful in attracting foreign investors.
Underlining the need for the maintenance of the coalition is the need for the Parliament to act on major structural legislation. Dissolution of the body would wipe the slate clean on regulation that would pave the way for $18 billion in investment needed to upgrade the energy sector. The high price tag necessitates foreign capital.
A law currently before the Sejm would deregulate access to Poland's power grid, allowing third-party access, and would create an independent regulatory body that foreign investors say is key to opening the door to investment. The law is expected to be passed by mid-year.
In the long run, the need for such huge investment programs will keep Poland on investors' radar screens no matter what the political turmoil.
Foreign investors in Poland have always had a "high tolerance level" for political uncertainty, said Nomura's Gollner.
"People may be put off in the short-term," said Martin Gollner, London analyst with Nomura Research Institute. Foreign investors are closely watching local sentiment here to get a clearer picture of the impact of the political change, he said.
For the moment, though, most investors and pundits are confident the government will hold. Government and party officials scrambled earlier in the week to save the present coalition between the post-Communist Democratic Left Alliance (SLD) and Peasants Party (PSL), although the two partners had failed by mid-week to nominate a candidate for prime minister, who must also be approved by law makers.
President Aleksander Kwasniewski on Tuesday turned up the heat on negotiators, saying he would appoint a prime minister by Thursday, if the groups could not agree on a candidate, Reuters reported.
Failure to find a new chief would result in the dissolution of Parliament and new elections. This worst-case scenario would likely bring privatization to a standstill and threaten the pace of economic reform.
Even if the coalition is preserved, though, dangers abound.
In the likely cabinet reshuffle that will follow the selection of a new prime minister, the PSL will seek key spots to expand its power base, analysts said. If successful, the party could slow, if not brake, some privatizations.
"A stronger Peasants Party might be bad news for privatization and economic policy in general," Gollner said.
In this vein, the PSL may look to oust Privatization Minister Wieslaw Kaczmarek, who has often been at odds with the agrarian-based party.
But sources close to the minister said he has received assurances that he will keep his post.
Finance Minister Grzegorz Kolodko also appears to be safe.
"They can't touch the finance portfolio," said Krzysztof Bledowski, chief economist with Pioneer First Polish Trust Fund.
Despite the uncertainty caused by the political upheaval, the markets have taken events in stride.
The day following Oleksy's announcement, trade on the Warsaw Stock Exchange rose 4.8%. By mid-week, the market continued its month-long rally that has pushed the WIG index up nearly 32% since the beginning of January.
But strategic investors are a bit more rattled. Uncertainty about the new government's future economic policy could stall major deals, they said.
"Forget about privatization now," said Andrzej Szczesniak, director of the chamber of liquid fuels that represents 90% of Poland's gas and oil sector. "It's a bad time for the private sector. Today is awful," Szczesniak said the day following Oleksy's announcement. "It is a nightmare."
Others took a more reserved view.
"I think the resignation will have to be viewed with what follows," said Jacek Siwicki, senior vice president with Enterprise Investors in Warsaw and former deputy privatization minister. Maintaining the status quo would be a step in the right direction, he added.
At stake in the current political poker game are a $3.2 billion oil restructuring project and the sale of at least one large tobacco plant in Poznan.
Although the government completed a tobacco privatization this week, it is under pressure to sign three more large tobacco deals.
Privatization Minister Kaczmarek told the Business Journal last week that the ministry hoped to sell its state-owned Poznan plant by the end of January. The government is currently looking for a strategic investor for the lodz plant and two smaller factories in Radom and Lublin.
"We plan to finish the whole sector's privatization by the end of the third quarter," Kaczmarek said. (See Interview, Page 6-7).
The government has already sold 33% stakes in both the Augustow and Radom plants to the U.K.'s British American Tobacco Industries for $88 million and France's Seita for $64 million, respectively.
Jan Wierzbicki, director of Reemtsma International Poland Sp. z o.o., declined to comment on his company's negotiations for the Poznan plant. But he did say Oleksy's resignation should not cause a problem as long as there is some continuity on the government's part.
"Politicians are determined by time," he said. "They come and go. What is more important is the policy."
Industry Minister Klemens Scierski announced last week that the restructuring of the oil sector will proceed as planned, but he does not expect final signatures until there is a new government. Administrative delays could last at least a few weeks, Scierski said.
Poland's oil sector needs $3.2 billion to boost its competitiveness with Western producers, and the clock is ticking before European Union trade barriers fall. So far, Poland's oil sector has been unsuccessful in attracting foreign investors.
Underlining the need for the maintenance of the coalition is the need for the Parliament to act on major structural legislation. Dissolution of the body would wipe the slate clean on regulation that would pave the way for $18 billion in investment needed to upgrade the energy sector. The high price tag necessitates foreign capital.
A law currently before the Sejm would deregulate access to Poland's power grid, allowing third-party access, and would create an independent regulatory body that foreign investors say is key to opening the door to investment. The law is expected to be passed by mid-year.
In the long run, the need for such huge investment programs will keep Poland on investors' radar screens no matter what the political turmoil.
Foreign investors in Poland have always had a "high tolerance level" for political uncertainty, said Nomura's Gollner.
