Polski Cukier future uncertain; sale of sugar mills stalled
Union leaders last week accused the government of backing out of its commitment to create a cooperative-style national sugar company, Polski Cukier.
"There is a question right now as to whether Polski Cukier will exist at all," said Stanislaw Lubas, chairman of the sugar industry trade union. "Right now the government's position is still not clear."
The sugar sector is mired in controversy over whether its privatization should focus on bringing in foreign investment or if the industry should stay in Polish hands through the creation of one large cooperative, Polski Cukier.
Faced with debts reaching upward of zl. 1.7 billion ($415 million), the sugar sector would be best helped through the direct sale of mills to foreign investors, government officials have said. At the same time, foreign sugar producers have been eager to gain a foothold in Poland, the third-largest sugar market in Europe.
That government position is directly at odds with some unionists and many Solidarity Election Action (AWS) parliamentarians, who support the Polski Cukier idea of grouping as many as 30 now independent mills into one large cooperative. A coalition of the AWS and Freedom Union (UW) parties, the government was forced to deal with many parliamentarians acting against their own party.
The conflict spilled over into national politics last month and AWS deputies backing Polski Cukier helped to push for the no-confidence vote that Treasury Minister Emil Wasacz faced Jan. 22.
Sugar was also Wasacz's savior. In the days prior to the vote, many AWS deputies said that the government's decision to back Polski Cukier was one reason they backed off Wasacz. After saving his job by a thin margin, Wasacz immediately went to work to put together Polski Cukier.
But a month after the crisis, union leaders said they are beginning to feel that the government's moves were only show. Union leaders said that a lack of support for Polski Cukier among many government officials had led to heated debates last week between the treasury and labor ministries. By week's end, the fate of Polski Cukier looked to be uncertain, union leaders said.
"In the opinion of the (Treasury Ministry), the creation of Polski Cukier is not possible," Lubas said. "I am under the impression that the activities around the creation of Polski Cukier were tied only to the (potential) dismissal of minister Wasacz."
Farmers and trade unions were not the only groups waiting for news about Polski Cukier's fate. International investors who submitted offers two weeks ago to buy one major holding, Slaska Spolka Cukrowa, were wondering if the government would actually sell the entity. They had doubts despite the fact that the government was on the verge of announcing a tender finalist.
Under the original government plan, Slaska Spolka Cukrowa, the largest of Poland's four main sugar holdings, would be sold off in its entirety by March this year to foreign investors. The remaining three holdings would be broken up and sold off in small groups of mills later in the year. Given the tight deadline for Slaska's sale, investors said they are hoping the government this week will announce the tender winner.
While four West European sugar giants had expressed interest in buying the Slaska holding, only three companies ultimately submitted an offer, the Business Journal has learned. The original four slated for participation in the Slaska tender include France's Saint Louis Sucre together with Eridania Beghin-say, Germany's Sudsucker and Pfeiffer and Lange. Sources close to the privatization process did not disclose which company ultimately backed out of the process. The companies submitted bids on Feb. 11.
But if the debate over Polski Cukier continues to rage, the government may keep those investors in the wings. The sugar conflict combined with the Polski Cukier discussion already almost derailed the sale.
"Objectively, the tempo of privatization has slowed down," said Jan Wyrowinski, a Freedom Union (UW) deputy from Torun. "That doesn't mean that it is being stopped, but everything is moving forward much more slowly and that has me concerned."
To keep the privatization ball rolling, Wyrowinski two weeks ago appealed to Finance Minister Leszek Balcerowicz to do "everything possible" to ensure that the sell-off to international strategic investors continued. The government could stand to lose billions of dollars if the government's privatization concept does not move forward, Wyrowinski said. He said a report detailing these potential losses is now circulating in the Treasury Ministry and government itself. Wyrowinski declined to reveal any details about the report.
"We are talking about billions of dollars," he said.
The lack of a resolution over the privatization of the industry could also mean another year of deepening crisis for the sector as a whole. With the next sugar season just around the corner, a lack of clear ownership of mills and holdings could lead to outfits being unable to sign contracts to sell their beets. As a consequence, cash-strapped beet growers may have difficulty securing credit to plant this year's crop.
"Companies selling seeds may decide not to credit purchases if they don't have certainty that everything's O.K.," Wyrowinski said. "They will want cash."
