To sell or consolidate sugar sector trys to decide
The logjam in the sugar sector looks set to break up by mid-December with state treasury and parliamentary officials competing to find separate solutions to transform the ailing industry.
Which solution crosses the finish line first is likely to determine who ultimately stands to control the future of the nation's sugar industry, the third largest producer in Europe.
For months, trade unions have lobbied to create a national sugar company, Polski Cukier, to save the industry from being sold off to large, foreign investors. The government, meanwhile, has been pursuing strategic investors as part of a privatization plan to pump much-needed cash into outdated technology and production facilities.
Under the trade union plan, all unprivatized sugar mills would be grouped under the umbrella Polski Cukier holding, generally along the guidelines of British Sugar, giving workers and farmers a stake in the industry. Opponents said the union's plan had one major defect: who will provide the capital enabling this sector to compete once trade barriers are lowered and Poland enters the European Union (EU).
Despite broad opposition, trade unions recently found allies among elected Solidarity Election Action (AWS) parliamentarians, who now are rapidly closing in on the end-point of putting the Polski Cukier plan up for a Sejm vote.
"This is a race," said Jan Wyrowinski, a Freedom Union Sejm deputy from Torun and one of the vice chairmen of Parliament's agriculture committee. "The ministry is racing with a group of deputies. If decisions are made, it won't be possible to reverse them."
Next week, the Sejm is due to vote on an AWS-led resolution calling for the government to take steps to create Polski Cukier. While not legally binding, if the resolution is passed, it would place pressure on the government to back farmers' trade union demands to keep Poland's floundering sugar industry from being sold off to foreign sugar giants, in essence derailing the government's privatization direction.
While on the surface the competition between the Treasury Ministry and AWS deputies appears to be over the direction of the privatization of Poland's sugar industry, at stake ultimately is who will control the entire industry, Wyrowinski said.
"There is really a lot of money and a certain market at stake here," Wyrowinski said.
For its part, the government is stealthily moving privatization forward. As early as next week, the ministry could announce which companies submitted offers to buy the Slaska Spolka Cukrowa, a holding based in the Opole voivodship, ministry officials said.
The sell-off of the Slask holding would not only mark the formal beginning of the long-awaited privatization process, but finding an investor there would essentially block the creation of the Polski Cukier initiative, market watchers said. Once the Slask holding is sold off the remaining three sugar holdings would be broken up and sold off in small groups of mills, according to the ministry's plan.
The steady, but behind-the-scenes progress of the government's program is unnerving backers of Polski Cukier, specifically trade union officials.
After enlisting the support of AWS in October, trade union officials have watched support for the Polski Cukier initiative ebb.
"I am worried," said Roman Wierzbicki, chairman of the Individual Farmers Solidarity trade union, the prime promoter of the Polski Cukier initiative. "(The government) is doing everything to sell off at least part of the mills."
The tender for the Slask holding, which was announced last August, involves a purchase of 10% or just under 9.8 million shares in the holding. In an effort to avoid derailing the sale, the ministry is not commenting on who submitted an offer. The earliest any announcement will be made is around Dec. 10, once the ministry has responded to the initial offers in writing, ministry officials said.
In an unprecedented move that irked the banking industry in Poland, the central bank and Banking Supervision Commission (KNB) signed onto a government-backed, loan-guarantee scheme to push banks to extend credit to the sector. The government move to ease the debt burden was aimed at improving the liquidity of the sector and thereby maintaining a higher sale price of mills put up for privatization, said those involved with the sector.
"Improving the financial liquidity of the mills even at the cost of state treasury guarantees should help maintain the price of the mills," said Jozef Jerzy Pilarczyk, a Democratic Left Alliance (SLD) MP and deputy chairman of the Sejm's agriculture committee. "A lack of liquidity impacts the price of the privatized sugar mills."
Secondly, after initially vascillating, AWS' own Treasury Minister Emil Wasacz began pushing hard for privatization. "Minister Wasacz, who at the beginning didn't want to offend anybody, now has become more radical," Wyrowinski said. In a recent correspondence with the agriculture committee, Wasacz argued that the privatization process "must be continued and that any initiatives to create Polski Cukier must be backed with a business plan and feasibility studies, Wyrowinski said.
Critics across the political spectrum argued that Polski Cukier would be the nail in the coffin of the Polish sugar industry. Without cash to maintain a competitive edge against European producers once the market opens, many say that the nation's mills need foreign partners with deep pockets and extensive know-how.
"(Polski Cukier) is populist and unrealistic," Pilarczyk said. "Given the situation the sugar industry is in right now, the best solution is for privatization to be sped up."
The Polski Cukier initiative has not only held back the privatization process and discouraged international investor interest in the sector, it has also held back the passage of a sugar law designed to bring guidelines for the sector in line with EU standards and requirements, industry watchers said.
Despite widespread disapproval of the Polski Cukier plan, the outcome of next week's vote is far from a foregone conclusion and SLD looks ready to play a pivotal role in the Sejm vote, officials said.
"It's difficult to say how SLD will behave," Wyrowinski said. "They declared that they will withhold. How they behave in the end is difficult to say."
