Tobacco privatization moved to back burner

The Council of Ministers, early in 1995, accepted a plan to sell five of the country's tobacco firms to foreign or Polish investors, a plan which met with some opposition from the Polish Peasants' Party (PSL) in Parliament, with claims that the government was selling off the national jewels.
But late last month the government accepted bids for the five tobacco firms located in Augustow, Radom, Krakow, Poznan and Lodz. But even after the tender was announced, officials made it very clear that the government was under no obligation to complete the privatization of all five factories by the end of the year (WBJ Nov. 3-9).
Around eight firms placed bids, including Reemtsma, Philip Morris, R.J. Reynolds and British American Tobacco (BAT). Others rumored to be interested are Tabacalera, House of Prince, Japan Tobacco and Rothman's.
But Kaczmarek said that the offers weren't in line with ministry expectations.
"We are not satisfied with the offers in general," Kaczmarek told a news conference last week. "One is good, two are negotiable, and two of them don't seem to be serious offers."
But some of those close to the tender process said they weren't surprised by Kaczmarek's statement that all the tenders won't be completed by year's end, pointing out the political pressure surrounding the minister and also technical aspects of evaluating offers.
"I think that Mr. Kaczmarek is in a difficult political situation, and he's expected to send signals to the world about privatization," said one bidder who requested anonymity, pointing to the recent call by the PSL for a vote of no confidence. "I wouldn't put too much weight on what he's saying."
Jan Wierzbicki, general manager of Reemtsma International (Poland) Sp. z o.o. and vice president of the National Tobacco Industry Association, said that he thinks the ministry would have a hard time evaluating all the offers by the end of the year anyway.
"You have to remember that there are only about four people working on this - reading all these offers, evaluating, negotiating, reevaluating. It's quite a task," Wierzbicki said. "I think this could be read as 'We're working as fast as we can.' I certainly don't envy them."
As far as the offers themselves are concerned, most players agree that it's difficult to determine what is a good, acceptable offer. The Council of Ministers required that bids contain five points concerning investment, sale price, workers' social package and share for tobacco growers. "Everyone can read these points with a slightly different attitude," Wierzbicki explained. "The question is how you weight it - which point is more important.
"Is it because the offer is bad, or simply that the expectations are different?"
Wierzbicki remained confident that the firms would be privatized, the only question being "when and how." He pointed out, however, that many of the factories are losing ground to imports.
"Relatively, the value of these firms is falling fast," Wierzbicki said. "There will probably need to be a discount in some form for those not privatized first."