Turning the screw on privatization

   Selling off the family silver is always fraught with emotional difficulties. Sibling rivalry often scuppers lucrative deals and that prized tea set is put back in the cupboard and sold only when times are tight. Unfortunately, heirlooms can often go down in value as well as up.

   The sale of Poland's state-owned assets is a highly charged affair. No vodka drinker likes to see his favorite tipple bought out by a foreign concern. The same goes for the old-economy industries such as mining, shipbuilding and railways. Buyouts mean layoffs to most workers, who are the last to be told that bankruptcy is lurking just around the corner.

   This year, Poland will launch a concerted effort to privatize what's left of its prized silverware – and unfortunately there's not much of it. The key sector up for grabs, and still fairly attractive to a foreign investor, is energy. The rest, however, is not going to be such an easy sell.

   Critics say the government has held on to the chemical industry and vodka manufacturers for too long. With the latter sector in terminal decline, looking for eager foreign buyers could become a herculean task. The treasury recognizes this problem and probably curses itself at not having acted sooner on many borderline state-owned companies.

   So today there's a scrabble to sell as much as possible before many state companies go under. That's the government's dilemma. It's currently earmarking privatization for hundreds of companies. But the search for investors may not be easy. Recent controversies surrounding the Eureko/Powszechny Zaklad Ubezpieczen (PZU) privatization have made investors wary. But this shouldn't ultimately affect any corporate decision making on the part of foreign investors. As Eureko's COO Ernst Jansen says in this week's intervew, Poland is worth investing in and that's why the company is going to such lengths to fight the treasury over the issue.

   In a yearly report published last week by consulting firm A.T Kearney, Poland emerged as a country still highly prized by the chief executive officers of the 1,000 largest international companies who were asked where they would like to invest their money.

   More upbeat still is a recent survey by the Polish Agency for Foreign Investment (PAIZ), which said that five times more foreign investors are bullish about doing business in Poland than seven years ago.

   By mid-2000, foreign capital invested in Poland exceeded $43 billion, establishing it as the region's direct foreign investment leader.

   Investors still see good economic growth, low labor costs and a large market as the country's main attractions. Banking, telecommunications and Poland's workforce are all more highly regarded by foreign investors than even before the Russian crisis, when PAIZ conducted a similar report.

   The treasury's job now is to stop fudging the issue and keep up the privatization momentum – before many companies lose their investor appeal. After all, no one wants to buy leftover scrap after the silverware has gone.