Polmos problems

   The good news: Poland's cherished vodka industry was given a welcome shot in the arm in 2000 as the treasury began privatizing the 21 state-owned Polmos liquor and spirit producers. The bad news: To date no company has been privatized and only nine have been put out to tender.

   Polmos Poznan is the only producer close to being sold off, but is still waiting for the ministry to name its strategic investor, expected in mid-December.

   Meanwhile, liquor producers struggled to maintain production levels as consumption of alcohol declined by about 50% since 1994.

   Jozef Kapela, the president of Polmos Bielsko-Biala and head of the National Spirits Industry Council (KRPS), predicted that the Polmoses' combined sales will be 10-15% less than in 1999 when producers sold 75 million liters of pure spirits.

   According to the the Polmoses, the Finance Ministry is to blame for the fall in sales. The ministry increased excise taxes on liquor by 4% in March and an additional 2% in September. The Polmoses said the state, rather than earning additional revenue from the tax, will lose about zl. 350 million ($80 million) a year because of the drop in sales. They also said the higher price of Polmos vodka has lead to an rise in illegally produced alcohol and liquor smuggling, from which the state earns nothing.

   Pawel Jagiello, the president of Pro-Invest International, a management consulting company advising the treasury on the privatization of the 10 Polmoses, said that despite the sector's initial moves to privatize, there's little to be optimistic about.