Renationalization project popular across party lines

The government last week started talks to take over the Szczecin Shipyard, opening the way to more large-scale renationalization projects, according to political and economic observers. The Szczecin renationalization is the first since the fall of communism in 1989. The Democratic Left Alliance (SLD)-led government may engineer more as Poland's economic troubles send an increasing number of companies to the state looking for a bailout. The left-of-center government is likely to have the support of most opposition parties. "Nationalization is a worthy idea," said Roman Giertych, one of the leaders of the right-wing League of the Polish Families (LPR), the smallest opposition party in Parliament. "This idea could also be applied in other companies," he told the WBJ. The Treasury Ministry will take over a majority stake at Szczecin Shipyard Porta Holding, the company that owns Poland's second-largest shipyard, according to Minister Wiesław Kaczmarek. "The only alternative to the takeover is bankruptcy," Kaczmarek said after talks with the management group that holds a 35% stake in the company that owes its 700 creditors a total of zł. 1.8 billion ($450 million) and ran out of money last October. The shipyard was privatized in 1993 through a management buyout but the same group of managers last week agreed to sell their shares for "a symbolic złoty." The treasury wants to take a majority stake, according to Kaczmarek. Foreign investors have criticized the treasury minister for stalling privatization but the Szczecin buyout is this government's first project giving the treasury a majority stake in a company. The renationalization reflects the current mood in Polish politics - only one of four opposition parties represented in the Sejm, the Civic Platform (PO), opposes the idea.

"The political motive was the crucial factor here," said Wiesław Walendziak, chairman of the Sejm's Treasury Committee and an MP with the right-of-center Law and Justice (PiS) party. "The government fears public unrest in the (Szczecin) region." Workers at Szczecin Shipyard have staged repeated protests since February, when the plant stopped production. While chastising the treasury for having no detailed plan to bail out the ailing company, Walendziak said that renationalizing and saving the yard from bankruptcy was the best solution because the plant has prospects for recovery due to its good technological equipment and a skilled workforce. The shipyard has some 6,000 workers and an order book worth $1.2 billion. Nationalization is justified in cases where the company is a crucial element in the country's economic system, Walendziak said. "A collapse of the Szczecin Shipyard would cause a collapse of many more companies among several hundreds of the shipyard's suppliers," Walendziak said. In exchange for the stake, the government will provide loan guarantees for the company to start production and get back on its feet. LPR also was quick to throw its support behind the state rescue. "The shipyard has orders, the workers and the technology but it lacks money to operate," Giertych said. "But banks in Poland are in foreign hands and they are not interested in financing production in Polish companies."

Repeat renationalization The Szczecin scenario may repeat in other companies across the country, as the economic slowdown has led firms to call for government support and the shipyard's case sets a precedent, politicians and economists across the board said. "The government should (work to) stabilize labor markets and intervene in big companies that are important to the economy and have thousands of workplaces," said Ryszard Zbrzyzny, an SLD MP and vice-chairman of the Sejm's Treasury Committee. The government should sell the assets at a later stage, when the company recovers, boosting state coffers, he said. "The government doesn't have to invest much to take control of the shipyard and later, the company may be worth much more than now," Zbrzyzny said. The Szczecin precedent will encourage other ailing companies across the country to step up pressure on the government to provide aid or even to take them over, said Richard Woodward, economist at the Center for Social and Economic Research (CASE). The current leftist government will not remain unreceptive, he added. "There's a tendency in the current government to maintain and even increase state property," Woodward said.

Daewoo-FSO next? The government's leanings towards renationalization also emerged during talks on the future of the automaker Daewoo-FSO, the Warsaw plant of bankrupt Korean Daewoo Motor Corporation. Daewoo-FSO owes some zł. 1.2 billion ($300 million) to Polish and Korean banks and another zł. 3 billion ($750 million) to its Korean parent company. The government last week began talks with the Polish and Korean lenders to form a new company on the basis of existing assets, hoping to save the plant from looming bankruptcy and sell it at a later point to a new strategic investor. The opposition's Walendziak backed the concept. "If there is a prospect of (future) investment by an investor who will make cars in Warsaw, then I call this a positive plan," he said.