Unseating privatization's "Iron Lady"

An unlikely coalition of left-wing and right-populist parliamentarians are calling for a vote of no-confidence in the Treasury Minister. Aldona Kamela-Sowinska may be the next casualty of a post that seems to damage the careers of most of its holders.
By : Juliet D. Golden

   The government's privatization program came under fire last week when deputies from across the political spectrum moved to end Aldona Kamela-Sowinska's four-month reign as head of the Treasury Ministry.

   Charged with bungling privatizations and mismanaging treasury assets, the motion for a no-confidence vote was signed by deputies from the post-communist Democratic Left Alliance (SLD), Peasants Party (PSL) and a renegade group of right-wing politicians from the governing Solidarity Election Action (AWS) party.

   While it is unclear when or if the actual no-confidence vote will take place, the specter of drawn-out conflict looming over the Treasury Ministry and the minority AWS government could not only mean

   key delays in the sell-off of state-owned companies, but could also signal serious shortfalls in meeting revenue targets from privatizations planned for this year.

   “My big concern is that if the treasury minister goes, the continuity of the privatization process could be jeopardized,” said Krzysztof Rybinski, chief economist at ING Barings. “To put it simply, the privatization process could slow, which means that the budget would not receive the (revenue) projected for this year.”

   To date, the government has brought in only 7% of the planned zl. 18 billion ($4.5 billion) in privatization revenue targeted for 2001.

   At the heart of the debate about Kamela-Sowinska is who should keep control over powerful state-owned companies such as insurance giant Powszechny Zaklad Ubezpieczen (PZU), oil concern Polski Koncern Naftowy Orlen (PKN Orlen) or copper producer KGHM Polska Miedz. The sell-off of treasury holdings in these companies means that the government plans to take a back seat to strategic investors.

   Through the sale of 18% in PKN Orlen this year, the state’s share would be sliced to roughly 37%. Similarly, by relinquishing 10% of KGHM through privatization deals, the government’s stake would drop to 34%.

   Diminished control over shares means lost rights to profit. Net profit last year at both PKN Orlen and KGHM surpassed zl. 650 million ($147 million), according to ING Barings.

   “These profits from PKN and KGHM are very handsome,” Rybinski added.

   For right-wing MPs from AWS, the key issue remains the fate of Poland’s vast sugar-producing potential, the fourth largest in Europe. For more than two years these deputies, along with farmers trade-union leaders, have lobbied to keep the sugar industry in Polish hands by creating a national sugar holding, Polski Cukier, from all unprivatized mills. The Treasury Ministry meanwhile, has been pursuing strategic investors as a part of a plan to pump much-needed cash into outdated technology and production facilities.

   While the AWS government has committed itself to making Polski Cukier happen, it has failed to make a clear statement as to how many mills will be included in the concern. The lack of clarity on the issue has meant that international investors that have all but concluded drawn-out negotiations with the treasury and sugar-mill workers and planters are still uncertain whether they will be able to finalize privatization deals.

   One case in point is French sugar producer Saint Louis Sucre (SLS). Since signing a contract last November to acquire 95% of Poland’s largest sugar holding Slaska Spolka Cukrowa (SSC), SLS has not been able to finalize the deal due to the Interior Ministry’s refusal to sign off on the deal.

   When she took office in February, Kamela-Sowinska vowed to move decisively on sugar privatizations and the formation of Polski Cukier, but the controversy surrounding the sector has lead to further stalemate rather than stellar progress.

   “Kamela-Sowinska lost control,” said Jan Wyrowinski, a Freedom Union (UW) deputy from Torun. “The war is still going on.”

   The controversy over sugar figured prominently in the two no-confidence votes held last year against Emil Wasacz, the first treasury minister appointed by the AWS-lead government. The issue also came into play when Kamela-Sowinska’s predecessor Andrzej Chronowski tendered his resignation earlier this year. For two weeks in February, the head of the Sejm’s agriculture commission, Gabriel Janowski, had been camped out in Chronowski’s office protesting the sell-off of Poland’s sugar mills to foreigners.

   Despite her determination, during an address to the British-Polish Chamber of Commerce in April, Kamela-Sowinska alluded to the controversy surrounding sugar privatization as a potential cause for her premature exit from the government.