French mustard
Both Vivendi and France Telecom are major investors in Poland, the telephony near-monopoly easily the daddy of them all after its €3 billion acquisition of a major slug of TPSA. It is indeed an irony that France, the EU state which more than any other has resisted the lure of privatisation in its own backyard, is now with some €11.5 billion, the largest national investor here, mostly on the back of state-sponsored sales. Three years ago investments decorated with the tricoleur had reached just €2.5 billion.
Both countries are fond of parading a traditional amitie. Unquestionably, France is the one European country which over the centuries counted as a fraternal ally, even if it was always a distinctly one-sided relationship. For a while, a small statelet, the Grand Duchy of Warsaw, which had been beckoned into existence by Napoleon Bonaparte, was the only tangible testimony to the yearning for Polish independence from the tripartite occupying powers. In truth, it was little more than a convenient recruiting ground for brave Polish warriors, who served with distinction throughout Napoleon's long continental wars. But the emperor did not enjoy discussing Polish aspirations for their freedom, even with his mistress, the ravishing Mlle. Walewska.
The modern French presence is distinctly more enduring. Wherever one looks, there are signs of traditional French elan and expertise subtly at work. Danone, the water, biscuits and dairy products combination, is, with its Polish acquisition Bakoma, securely lodged in the number one market position on the supermarket shelves. Auchan doesn't say officially, as a privately owned company, exactly what it has spent on supermarkets, but it is probably around €700 million. Charles de Gaulle once famously asked how anyone could expect him to govern a country with 500 cheeses. For the small strategic investor Celia, this seems to have been an invitation. Its locally made brand of Camembert flavoured with paprika and appropriately named Napoleon has turned out to be a popular antidote to the bland sameness churned out by domestic producers. To go with the cheese, there's the smooth President beurre.
Millions of Varsovians commute every year on a bus network operated by Connexe, a Vivendi subsidiary, and the firm has five more operations scattered around the country, including Tchew on the Baltic coast. The French, alone so far, have made a significant breakthrough into the municipalised citadels of urban transport. A quarter of all the cars sold here are French, dominated by Renault. More than 250 retailers of les autos fran˜aise represent a substantial investment, if a rather less immediately visible one than the production lines Peugeot Citroen may establish.
French SMEs seem especially attracted by market opportunities and have quietly gone about securing niche positions for themselves without fanfares of publicity. A small company called Lasaffre, itself almost unknown at home, has secured about half the market in yeast. It has opened a school where French bakers teach their skills to Polish students as an interesting example of know-how transfer. To the considerable relief of deprived French expats, authentic croissant is now being produced here. Magnifique!
According to M. Marc Bouteiller, the commercial and economic counsellor at the French embassy in Warsaw, there are 90 "heavy" investors and around 700 subsidiaries of French economies with an active registered presence, defined as having a formally established base, such as an office. Thus, towering investors such as Michelin sit alongside companies like Thion, which heats the homes, offices and schools in Kalisz, and Saur, which takes away the rubbish in Gdańsk. And they all have Societe Generale to bank with.
Power attracts power. The national energy monopolist Electricite de France is transformed into a horse of a markedly different coleur once in Poland, providing combined heat and power (CHP) services in small towns scattered around the country, in tandem with Vivendi's energy arm. They will be bidding together to take over the unit in Poznań. While firmly frustrating competitors in their own backyard - to the fury of monopoly busters in Brussels - the French want to see much more of the energy sector put under the hammer here. This includes the alluring distribution companies which are in the spotlight following the sale of Warsaw energy distributor Stoen to a German firm by the supposedly privatisation agnostic Wiesław Kaczmarek.
There is a snag. EdF currently has its eye off the ball because of domestic distractions during negotiations with fearsome and traditionally obdurate national trade unions and with the government, over an increase in its share capital, the war chest it needs to expand in countries like Poland. But, says Bouteiller, this is merely a momentary diversion and EdF will soon be back with renewed energy, either wearing its own cap or that of its German subsidiary, ENVB.
Diplomats and potential investors in the sector frown on the excise duty which was attached to the power industry by the outgoing AWS administration, which they warn has served to destabilise the market and consequently lower price expectations even for the choicest items on offer.
"Its inevitable the level of offers are reduced if revenues are affected," warned Bouteiller, adding: "Even Kaczmarek agrees."
Executives from Gaz de France also shed its monopolistic raiment as soon as they got off the plane. The company expects natural gas to appear in Poland from all directions and replace coal as the main fuel for electricity generation in quite a short time. Thus, the compelling appeal of PGNiG due to be sold in 2004. GdF sees choice pickings among the six regional distributors, with possibly the chance to bag more than one of them.
The name Kaczmarek intrudes frequently. The relationship veers between love and hate. French interests are disturbed by the chaos in the sugar industry, which lies within the minister's purview. They are much upset by the lšska Spółka Cukrowa affair and the projected acquisition of the 16-mill holding group by Saint Louis Sucre, but are encouraged by the decision of the National Administration Court to condemn the Ministries of Internal Affairs and Labour for prognostication. Meanwhile, the situation of the sugar industry, plagued by political interventions, continues to decline.
"Kaczmarek has created Polski Cukier, but he's going to need money for it since there's none in the budget," Bouteiller observed. "€150 million (the price tag for lšska Spółka Cukrowa) would be very useful."
France is well known as a major recipient of largesse from the EU's common agricultural policy. A Franco-German fait accompli in Brussels will make sure matters stay that way until 2013. Yet the country has more experience than any other in Europe (with the exception of the Dutch horticultural industry) in modernising farming by means of advanced and sophisticated co-operatives. Can the French lend a helping hand to an impoverished and grotesquely inefficient sector, generating a few percentage points of GDP with 27% of the population? Not directly, despite noble efforts promoted by President Aleksander Kwaniewski to advance the Gallic model of co-operativisation.
The difficulty lies, according to Bouteiller, in the absence of formal structures, like the syndicats d'initiatives which abound in France and have no direct parallel here. It makes interface and transfer of knowledge and expertise difficult. The Polish peasant also fears the very ring of the term "co-operative", for it bears about it the dreaded implication of collectivisation. And yet something radical is being achieved. The canning firm Bonduelle has come into the market via the ingenious route of providing small farmers with seeds (peas, for example), supplying export know-how to grow them, then buying up the product which is sold on the domestic market.
There are stubborn areas which have so far defied French ingenuity, sectors where they see the government taking a long time do nothing. The French national rail company SNCF has opened an advance base and is tipped in partnership with Deutsche Bahn to snap up PKP Cargo, that is as soon as the government lets go of it. Motorways are another rueful subject. "They had a chance to do something in the mid- 90s and dropped it," Bouteiller said. "All sorts of companies spent millions here. It was all wasted. The example could have been France in the 60s, when the government had no money for motorways so the private sector built them through public-private partnerships."
Bouteiller bemoans stifling bureaucracy, the atrophy afflicting the legal system and the lack of clear and consistent strategies at the government level as deterrents to more foreign investment, from any country.
"FDI is slowing down; there is no doubt about it," he said. "Public debt is very high; the opportunity for manoeuvre is very limited. Kaczmarek will get only half his privatisation target of €1.68 (zł. 6.7 billion). And the aim of 3.5% growth projected by Kołodko is simply "incredible".
"We are entering a new phase," Bouteiller said. "It is no longer sufficient for the government to say, come to Poland. There is a changed situation with EU accession because for the first time they will have to look for new forms of co-operation and in strong competition with other new member states joining from the East."
TPSA is the flagship French investment. In the end, was it worth it, given the telephone provider's apparent inability to shake off the image of an unlovable company with an inbuilt motorway bypass around consumer care? Had not the buy-in tarnished the image of France?
Bouteiller: "It was definitely worth it. You know, TPSA was like France Telecom at the end of the 1960s and early into the 1970s. The company was a PTT (post and telecoms), with a director general, the whole thing part of a ministry, which was the 100% owner. So you got all the worst possible aspects of the public sector."
Even Pompidou hated the wretched company and told jokes about it: "First you wait years to get the telephone. And then you wait for years to hear the beep."
France Telecom became a good example of transition. It remained overstaffed, but it was facing competition and had succeeded in mobile telecoms, becoming number one in the market.
The prospects for TPSA in French hands were good. "Competition will be difficult to organise in Poland; it's not easy to fight a monopoly like TPSA on prices. On criticism of pricing, especially broadband access charges," Bouteiller said. "The government sold it at a very high price, so it is not possible to play on two boards at the same time."
The French do not expect to retain the laurels as top national investor forever. It was an enormous push, propelled to the top notch finally by TPSA. They also watch with growing concern the afflictions of Vivendi, with its tendrils in so many sectors - Canal Plus and entertainment, energy, the environment and public transport. A sum-of-the-parts breakup may see some of these prized operations passed into non-French hands, perhaps even so far as visual media is concerned, le monstre Rupert Murdoch. Danone is tipped by analysts to fall shortly to a bid from America's Kraft Foods. Nothing is forever.
In conclusion, is there such a thing as a French model of capitalism, and if so would that prevail here? Bouteiller has an elegant response. "The Poles are unlikely to adhere closely to the British model, which itself is based on the American one," he said. "It is more likely to be a country where there are partnerships between the public and the private sectors."
In short, one just like France.
Mais oui!
