Holding all the cards

Before the Democratic Left Alliance (SLD) took office last year, Wiesław Kaczmarek told the WBJ that it wasn't his party's philosophy to fund the budget with privatization revenue and that he wouldn't aggressively pursue state sell-offs for that purpose. How true the future treasury minister's words turned out to be. So far this year, the government has sold a fraction of the projected zł. 6.8 billion ($1.6 billion) in revenue from 179 state-owned companies scheduled for privatization (zł. 2.5 billion through the end of May). While the target was hardly ambitious to begin with - Poland still owns some 3,000 companies - the SLD's lack of urgency on this issue is worrisome. Earlier this month, the Organization for Economic Cooperation and Development (OECD) condemned Poland in its annual report for having too much of an ownership position in the economy. The majority of companies where the government has a stake, it says, are overstaffed and would be unfit for competition inside the European Union. The OECD also gave Poland poor marks for its approach to privatization, saying it isn't doing enough to eliminate bureaucracy and to create the conditions for investors to want to buy. Poland's notorious social and investment clauses are other factors deterring would-be buyers.

The fact is, Poland's government isn't much interested in selling off what remains of the family silver. For SLDers like Kaczmarek, his handling of the Powszechny Zakład Ubezpieczeń (PZU) affair proves that this leadership is hardly up to honoring current privatization agreements, let alone starting new ones. This government is also of the opinion that foreign interests already control too many of Poland's key industries, such as banking. If the SLD does have a "philosophy" about state-owned firms, it would seem to be that these companies exist to fulfill government policy goals. In the case of PZU, the SLD is anxious to maintain control of the firm to funnel its profits into other government ventures desperate for cash. Which brings up the OECD's next criticism: The SLD's parachuting political pals into state-owned companies means that government interests have priority over shareholders' interests. While the OECD stopped short of stating outright that Poland's leadership had taken a dangerous turn to the left, it emphasized the likely outcome of its actions: That the government starts thinking it knows what's best for business - a development that could threaten interest in future privatizations. The longer this country's state-owned enterprises are deprived of the investment and know-how they need, the less they will be worth when the government gets around to selling them. That is, if they even still exist when Poland joins the European Union. Some philosophy.