Kaczmarek: 'There was no one right pattern'
After graduating in 1981, he taught at the university until taking the post of deputy director of Foreign Investors' Chamber of Industry and Commerce in 1989. From 1991-1993 Kaczmarek was a director of the Warsaw branch of the First Commercial Bank in Lublin. Since October 1993 he has been privatization minister. Kaczmarek is a member of the post-Communist party (SdRP) and has been a member of Parliament since 1989. WBJ staff reporter Malgorzata Halaba recently spoke with Kaczmarek about the possible effects on privatization of Prime Minister Jozef Oleksy's resignation and the general privatization agenda.
Q. What was your reaction to Oleksy's resignation?
A: I highly regret it. Oleksy was a very good prime minister, the best I worked with. Efficient, with good knowledge of the economy. I will never believe that he could be anybody's spy. I only hope that the truth will be revealed and he will be cleared of all the accusations.
Q. How will the prime minister's resignation impact privatization?
A. It was only the prime minister who resigned. Now the coalition negotiates a new candidate and is very close to reaching an agreement. I don't think that the change of government can stop privatization in Poland. One of the most important elements of Polish transformation is that the economy became independent from politics.
Q. What is the investors' reaction?
A. I didn't notice them fleeing. Rather, they are trying to make sure that the ongoing projects will continue. The present situation has another impact: We implement projects faster.
Q. Do you mean that you guarantee whatever was started is going to continue?
A. I think that they already have such guarantees. Past experiences can prove it: I implemented everything my predecessor started. It just cannot be another way. Besides, I think that working on a company's prospectus does not depend on who is in power.
Q. Tobacco privatization caused you a lot of troubles from the Peasants Party, who called for a no-confidence vote on your policy? Why was that and what's the status of the sector's privatization right now?
A. I would rather say that it caused emotions in an extreme group of parliamentary members who were eager to criticize it, but didn't have their own proposals. Right now the project comes to its completion. We hope to close the deals by the end of January. By that time, I hope to finish privatization of the four major tobacco companies. We have already sold two and (last) week we (expected to) close up negotiations about selling the other two. Then we will be able to say that three-fourths of the sector has been privatized. We will have lodz, for which we are looking for a strategic investor, and two smaller factories, one in Radom and one in Lublin. We plan to finish the whole sector's privatization by the end of the third quarter.
Q. Who are the investors?
A. The investors are very different, but I can say that they all are top global companies, such as British-American Tobacco, Philip Morris, Reemtsma and some other companies... Next week we will finalize two projects, one in Poznan, the second in Krakow, with Reemtsma and Philip Morris. This is all I can say today. The Krakow project, with Philip Morris, will be the biggest deal during last five years. The project consist of four parts: price per share, investment package, social commitments and future cooperation with tobacco growers.
Q. What is the timetable for privatization in the copper sector?
A. On Jan. 23 we had a meeting with Polska Miedz SA management, with the Prime Minister's participation. During the meeting Polska Miedz presented its financial results for 1995. In terms of first stock quotation - we want it to be on Dec. 4. Polska Miedz is going to be the first Polish international company, a company that will be active not only in Poland. Simultaneously with WSE quoting, we want to place Polska Miedz shares on the London Stock Exchange. This is a real challenge. For Polska Miedz we have to find additional capital, because of the limited life-time of such a company. Copper deposits are limited, so we started a number of diversification activities, for example, creation of Dolnoslaska Spolka Inwestycyjna (Lower Silesian Investment Company), a capital holding company. Another example of diversification: Polska Miedz is a member of a consortium that applied for the GSM license. We also hold negotiations with General Motors to open an assembly plant in Polkowice. Polska Miedz is going to be a large capital and industrial group, not only a technological firm focused on copper mining. We would also like to develop processed materials sales, to make Poland an important exporter of processed copper. I hope it will be one of the largest capital privatizations, a flagship of Polish privatization - 1996 will definitely be Polish copper year.
Q. This year also seems to be an oil year in Poland.
A. A year of the Polish chemical sector, I would rather say. Oil is only one of elements, though a very important one. In general, the Polish economy is based on the chemical industry, as a result of investments done back in 1920s and 1930s. What's more, I think the sector survived the most difficult time after the transformations began. In 1996, we plan to establish a sectoral investment fund. Apart from refineries and CPN, we want to take care of pharmaceutical companies, mainly in Poznan, Krakow, Starogard, Tarchomin and Rzeszow. The so-called heavy chemical sector is another strong group, for instance Blachownia, Oswiecim and Kedzierzyn-Kozle. We also have a whole group of fertilizer producers, like Tarnow, Pulawy, Wloclawek. And there are plastics, like Gamrat and Stilon. This sector is quite attractive to the investors and the Janikosoda example proved it. And we still will have sulfur and phosphorus. Until now, only paints, varnishes and cosmetics were privatized.
Q. Concerning the Mass Privatization Program (MPP), when will the National Investment Funds (NIFs) be scheduled for quotation on the Warsaw Stock Exchange (WSE)?
A. I think 1996 will be a trial year, because this year management agreements signed by supervisory boards will be verified. Presumably, we can expect some conflicts. Giving NIFs to management companies is quite a new experience for all of us. So this is the first task. Another challenge for supervisory boards will be to prepare issuing prospectuses that will have to be approved by the Securities Commission. In 1997, the NIF shares will be gradually quoted on stock exchange. (Then) we will be able to start another part of the operation - replacement of the certificates by NIFs' shares. And there is a third area - 1996 will be a year of certificate distribution that ends on Nov. 22, 1996.
As at Jan. 20, 1996, 5.2 million Poles, about 20% (of those eligible for shares), took part in the program by taking their certificates. It shows that the program has been accepted by citizens, that they are confident about its outcome. This is an unquestionable success. The action became nationwide, although it doesn't include "give away" elements, like in the Czech privatization. Our program has certain financial elements built-in. But in terms of financial results, let's talk about it in the middle of 1997, provided, of course, I am still minister.
Q. What are your conclusions about the supervisory board's decision to dismiss the Yamaichi management team and its later retraction?
A. I think that the conflict here was a result of bad communication, lack of experience or nervous reactions. This will be a subject of my careful analysis. For me, the presence of such important participants of the financial market, like Yamaichi, is the best legitimization for the whole program, a positive signal for the investors that MPP is rational and sensible.
Q. Do you see a tendency in the ministries to avoid using foreign advisers in the MPP scheme?
A. It depends to what degree the foreign advisers will prove to be useful. In some cases supervisory boards are not happy with the adviser's involvement or services. It should be a signal for the management company that something is going wrong. Because we are talking big projects and big money, our requests are also big. It might happen that after a certain period the management company will be verified. Any decision, however, should be justified, not made for decision's sake only. That's why I have appealed to supervisory boards that there are other possibilities to be exhausted first before they show a red card.
Q. Is the ministry involved in bank consolidation?
A. According to law, the Privatization Minister's competencies do not include four areas: banking, defense, energy and mining. There are also individual cases, like TPSA (Telekomunikacja Polska SA), LOT (Polish Airlines). Telecommunications is a challenge for 1997 and 1998. It will be an enormous operation that cannot be compared to the operation in Hungary, for example. Here we are talking about more than $10 billion. And of course, the Polish capital market is not prepared to absorb this kind of operation. So, part of TPSA has to be distributed for the needs of pension funds, but this is only a small part of it. It might be a public offer, combined with looking for a strategic investor. But as I told you, it is going to be a very complicated operation that cannot be completed within one year. In Deutsche Telekom, these processes took four years. Anyway, the processes have to start. As someone on the outside, I can tell that TPSA is a very conservative structure and needs very serious restructuring from inside.
Q. How many state-owned enterprises have been privatized?
A. In 1990, we had 8,441 registered state-owned enterprises. Until now, we have completed or we are in the process of privatizing 3,520 enterprises. So it would be more than 40% of the total number. In the group of state-owned enterprises we separated a group of 800 enterprises, the assets of which make up 88% of total economic potential of the state sector. After privatization of this group, we will be able to say that privatization is over. Of course, statistically we will still have some state-owned enterprises, but 1,200 are those that employ less than 50 persons. These firms are really not important to the economy. So this is what the privatization map looks like. This map is not very impressive, I must say.
Q. Why not?
A. Because the number of enterprises that may be attractive gets smaller and smaller, there are few 'cherries' left, like the energy sector, defense, liquors, trade enterprises and a part of the steel industry. And then we have individual firms, like Zelmer in Rzeszow, like Swiecie and Polska Miedz. So you see that this map is no longer a rich one. I won't make anybody happy selling him Ursus, for instance, because its size extends the limits set up by common sense. In general, the main problem of Polish enterprises is their size. In Europe, for instance, you will not find a shoe factory that employs 6,000 persons. And we had such factories, like Podhale, Chelm or Radom.
Later on we have 'painful' enterprises, like Cegielski in Poznan or Wroclaw's Pafawag, and the remnants of Polish electronic firms.
Q. Do you expect any changes in the privatization process, like its speed and techniques?
I think 1996 might be the most condensed year for privatization, with a decline later on. We will have to change the privatization techniques - to stop selling assets and rather put companies' shares into pension funds. Another feature of the next two years will be consolidation, or sectoral privatization. It has already happened in the oil industry and maybe in part of the chemical industry. Shipyards, for instance, should not act individually, but as one sector, together with their suppliers. For instance, this could solve Cegielski's problems. Only with such consolidation will Polish shipyards be able to maintain 5% of world production.
Q. There was a lot criticism related to commercialization as a first step in privatization. Is the ministry going to change it?
A. This is another example of Polish paranoia. It shows how political beliefs deprive some people of the ability to think logically. We cannot start a public offer without transferring a state-owned company into a commercially structured company. This is just necessity, and we cannot avoid it. Fighting commercialization is total economic nonsense or a kind of hypocrisy of some politicians. (Leszek) Balcerowicz, who was the first to criticize (commercialization), was doing the same. Less emotion, more common sense. Remember, the state sector exists in other countries as well, in a form of capital companies. If Polish enterprises want to remain state-owned, their structure should be clear and transparent to their foreign partners who, hopefully, won't be foreign in a united Europe. We have to speak the same language, and this means the language of the commercial code.
Q. How would you evaluate Polish privatization against other Eastern European countries? What sort of mistakes have been made here?
A. A lot of cardinal mistakes were made in Poland. The first one - we didn't solve the problem of restitution (returning confiscated property). Secondly, the bodies responsible for privatization were not equipped with the proper tools. I mean the legal framework, number of staff, technical infrastructure. The third mistake was that the privatization process was not accompanied with a widespread educational campaign. Privatization was used as a political tool and public TV is the first one to blame (for misinformation). Media in general failed to understand the scope of the operation and the responsibility involved. Instead of trying to create a positive climate for privatization, they caused a lot of harm. We had to spend all 1994 to rebuild public confidence.
Q. Any positives in privatization?
A. First, that we always tried to find an owner. Second, a lot of ways of privatization - there was no one right pattern. I am sure that Polish privatization, compared to other countries, will win. It has been designed as a long-term project. All coupon privatization projects are only on paper and I think the Czech example proves it. Look what happened: the state issued the coupons, citizens deposited the coupons into management companies and investment funds that are controlled by banks. And banks are state-owned. The circle closes. To me, the cases of Estonia and Slovenia seem to be promising. Anyway, everybody has started, but nobody has finished the projects. The future will show who was right.
Q. What was your reaction to Oleksy's resignation?
A: I highly regret it. Oleksy was a very good prime minister, the best I worked with. Efficient, with good knowledge of the economy. I will never believe that he could be anybody's spy. I only hope that the truth will be revealed and he will be cleared of all the accusations.
Q. How will the prime minister's resignation impact privatization?
A. It was only the prime minister who resigned. Now the coalition negotiates a new candidate and is very close to reaching an agreement. I don't think that the change of government can stop privatization in Poland. One of the most important elements of Polish transformation is that the economy became independent from politics.
Q. What is the investors' reaction?
A. I didn't notice them fleeing. Rather, they are trying to make sure that the ongoing projects will continue. The present situation has another impact: We implement projects faster.
Q. Do you mean that you guarantee whatever was started is going to continue?
A. I think that they already have such guarantees. Past experiences can prove it: I implemented everything my predecessor started. It just cannot be another way. Besides, I think that working on a company's prospectus does not depend on who is in power.
Q. Tobacco privatization caused you a lot of troubles from the Peasants Party, who called for a no-confidence vote on your policy? Why was that and what's the status of the sector's privatization right now?
A. I would rather say that it caused emotions in an extreme group of parliamentary members who were eager to criticize it, but didn't have their own proposals. Right now the project comes to its completion. We hope to close the deals by the end of January. By that time, I hope to finish privatization of the four major tobacco companies. We have already sold two and (last) week we (expected to) close up negotiations about selling the other two. Then we will be able to say that three-fourths of the sector has been privatized. We will have lodz, for which we are looking for a strategic investor, and two smaller factories, one in Radom and one in Lublin. We plan to finish the whole sector's privatization by the end of the third quarter.
Q. Who are the investors?
A. The investors are very different, but I can say that they all are top global companies, such as British-American Tobacco, Philip Morris, Reemtsma and some other companies... Next week we will finalize two projects, one in Poznan, the second in Krakow, with Reemtsma and Philip Morris. This is all I can say today. The Krakow project, with Philip Morris, will be the biggest deal during last five years. The project consist of four parts: price per share, investment package, social commitments and future cooperation with tobacco growers.
Q. What is the timetable for privatization in the copper sector?
A. On Jan. 23 we had a meeting with Polska Miedz SA management, with the Prime Minister's participation. During the meeting Polska Miedz presented its financial results for 1995. In terms of first stock quotation - we want it to be on Dec. 4. Polska Miedz is going to be the first Polish international company, a company that will be active not only in Poland. Simultaneously with WSE quoting, we want to place Polska Miedz shares on the London Stock Exchange. This is a real challenge. For Polska Miedz we have to find additional capital, because of the limited life-time of such a company. Copper deposits are limited, so we started a number of diversification activities, for example, creation of Dolnoslaska Spolka Inwestycyjna (Lower Silesian Investment Company), a capital holding company. Another example of diversification: Polska Miedz is a member of a consortium that applied for the GSM license. We also hold negotiations with General Motors to open an assembly plant in Polkowice. Polska Miedz is going to be a large capital and industrial group, not only a technological firm focused on copper mining. We would also like to develop processed materials sales, to make Poland an important exporter of processed copper. I hope it will be one of the largest capital privatizations, a flagship of Polish privatization - 1996 will definitely be Polish copper year.
Q. This year also seems to be an oil year in Poland.
A. A year of the Polish chemical sector, I would rather say. Oil is only one of elements, though a very important one. In general, the Polish economy is based on the chemical industry, as a result of investments done back in 1920s and 1930s. What's more, I think the sector survived the most difficult time after the transformations began. In 1996, we plan to establish a sectoral investment fund. Apart from refineries and CPN, we want to take care of pharmaceutical companies, mainly in Poznan, Krakow, Starogard, Tarchomin and Rzeszow. The so-called heavy chemical sector is another strong group, for instance Blachownia, Oswiecim and Kedzierzyn-Kozle. We also have a whole group of fertilizer producers, like Tarnow, Pulawy, Wloclawek. And there are plastics, like Gamrat and Stilon. This sector is quite attractive to the investors and the Janikosoda example proved it. And we still will have sulfur and phosphorus. Until now, only paints, varnishes and cosmetics were privatized.
Q. Concerning the Mass Privatization Program (MPP), when will the National Investment Funds (NIFs) be scheduled for quotation on the Warsaw Stock Exchange (WSE)?
A. I think 1996 will be a trial year, because this year management agreements signed by supervisory boards will be verified. Presumably, we can expect some conflicts. Giving NIFs to management companies is quite a new experience for all of us. So this is the first task. Another challenge for supervisory boards will be to prepare issuing prospectuses that will have to be approved by the Securities Commission. In 1997, the NIF shares will be gradually quoted on stock exchange. (Then) we will be able to start another part of the operation - replacement of the certificates by NIFs' shares. And there is a third area - 1996 will be a year of certificate distribution that ends on Nov. 22, 1996.
As at Jan. 20, 1996, 5.2 million Poles, about 20% (of those eligible for shares), took part in the program by taking their certificates. It shows that the program has been accepted by citizens, that they are confident about its outcome. This is an unquestionable success. The action became nationwide, although it doesn't include "give away" elements, like in the Czech privatization. Our program has certain financial elements built-in. But in terms of financial results, let's talk about it in the middle of 1997, provided, of course, I am still minister.
Q. What are your conclusions about the supervisory board's decision to dismiss the Yamaichi management team and its later retraction?
A. I think that the conflict here was a result of bad communication, lack of experience or nervous reactions. This will be a subject of my careful analysis. For me, the presence of such important participants of the financial market, like Yamaichi, is the best legitimization for the whole program, a positive signal for the investors that MPP is rational and sensible.
Q. Do you see a tendency in the ministries to avoid using foreign advisers in the MPP scheme?
A. It depends to what degree the foreign advisers will prove to be useful. In some cases supervisory boards are not happy with the adviser's involvement or services. It should be a signal for the management company that something is going wrong. Because we are talking big projects and big money, our requests are also big. It might happen that after a certain period the management company will be verified. Any decision, however, should be justified, not made for decision's sake only. That's why I have appealed to supervisory boards that there are other possibilities to be exhausted first before they show a red card.
Q. Is the ministry involved in bank consolidation?
A. According to law, the Privatization Minister's competencies do not include four areas: banking, defense, energy and mining. There are also individual cases, like TPSA (Telekomunikacja Polska SA), LOT (Polish Airlines). Telecommunications is a challenge for 1997 and 1998. It will be an enormous operation that cannot be compared to the operation in Hungary, for example. Here we are talking about more than $10 billion. And of course, the Polish capital market is not prepared to absorb this kind of operation. So, part of TPSA has to be distributed for the needs of pension funds, but this is only a small part of it. It might be a public offer, combined with looking for a strategic investor. But as I told you, it is going to be a very complicated operation that cannot be completed within one year. In Deutsche Telekom, these processes took four years. Anyway, the processes have to start. As someone on the outside, I can tell that TPSA is a very conservative structure and needs very serious restructuring from inside.
Q. How many state-owned enterprises have been privatized?
A. In 1990, we had 8,441 registered state-owned enterprises. Until now, we have completed or we are in the process of privatizing 3,520 enterprises. So it would be more than 40% of the total number. In the group of state-owned enterprises we separated a group of 800 enterprises, the assets of which make up 88% of total economic potential of the state sector. After privatization of this group, we will be able to say that privatization is over. Of course, statistically we will still have some state-owned enterprises, but 1,200 are those that employ less than 50 persons. These firms are really not important to the economy. So this is what the privatization map looks like. This map is not very impressive, I must say.
Q. Why not?
A. Because the number of enterprises that may be attractive gets smaller and smaller, there are few 'cherries' left, like the energy sector, defense, liquors, trade enterprises and a part of the steel industry. And then we have individual firms, like Zelmer in Rzeszow, like Swiecie and Polska Miedz. So you see that this map is no longer a rich one. I won't make anybody happy selling him Ursus, for instance, because its size extends the limits set up by common sense. In general, the main problem of Polish enterprises is their size. In Europe, for instance, you will not find a shoe factory that employs 6,000 persons. And we had such factories, like Podhale, Chelm or Radom.
Later on we have 'painful' enterprises, like Cegielski in Poznan or Wroclaw's Pafawag, and the remnants of Polish electronic firms.
Q. Do you expect any changes in the privatization process, like its speed and techniques?
I think 1996 might be the most condensed year for privatization, with a decline later on. We will have to change the privatization techniques - to stop selling assets and rather put companies' shares into pension funds. Another feature of the next two years will be consolidation, or sectoral privatization. It has already happened in the oil industry and maybe in part of the chemical industry. Shipyards, for instance, should not act individually, but as one sector, together with their suppliers. For instance, this could solve Cegielski's problems. Only with such consolidation will Polish shipyards be able to maintain 5% of world production.
Q. There was a lot criticism related to commercialization as a first step in privatization. Is the ministry going to change it?
A. This is another example of Polish paranoia. It shows how political beliefs deprive some people of the ability to think logically. We cannot start a public offer without transferring a state-owned company into a commercially structured company. This is just necessity, and we cannot avoid it. Fighting commercialization is total economic nonsense or a kind of hypocrisy of some politicians. (Leszek) Balcerowicz, who was the first to criticize (commercialization), was doing the same. Less emotion, more common sense. Remember, the state sector exists in other countries as well, in a form of capital companies. If Polish enterprises want to remain state-owned, their structure should be clear and transparent to their foreign partners who, hopefully, won't be foreign in a united Europe. We have to speak the same language, and this means the language of the commercial code.
Q. How would you evaluate Polish privatization against other Eastern European countries? What sort of mistakes have been made here?
A. A lot of cardinal mistakes were made in Poland. The first one - we didn't solve the problem of restitution (returning confiscated property). Secondly, the bodies responsible for privatization were not equipped with the proper tools. I mean the legal framework, number of staff, technical infrastructure. The third mistake was that the privatization process was not accompanied with a widespread educational campaign. Privatization was used as a political tool and public TV is the first one to blame (for misinformation). Media in general failed to understand the scope of the operation and the responsibility involved. Instead of trying to create a positive climate for privatization, they caused a lot of harm. We had to spend all 1994 to rebuild public confidence.
Q. Any positives in privatization?
A. First, that we always tried to find an owner. Second, a lot of ways of privatization - there was no one right pattern. I am sure that Polish privatization, compared to other countries, will win. It has been designed as a long-term project. All coupon privatization projects are only on paper and I think the Czech example proves it. Look what happened: the state issued the coupons, citizens deposited the coupons into management companies and investment funds that are controlled by banks. And banks are state-owned. The circle closes. To me, the cases of Estonia and Slovenia seem to be promising. Anyway, everybody has started, but nobody has finished the projects. The future will show who was right.
