Year's missteps, reforms leave room for improvement

The biggest challenge facing the government is reform of the social security system, an inheritance from the communist era that absorbs almost 20% of budget revenues and burdens employers with a 48% employee tax. The government is currently working on plans which would link privatization with the creation of pension funds by distributing shares in state-owned companies to citizens, and these shares would then be used to capitalize pension funds.
Privatization is another area where analysts would like to see more activity, especially as concerns large monopolies like Telekomunikacja Polska SA (TPSA - telecommunications), energy, utilities and petroleum.
While more than 50% of GDP is now generated in the private sector, there are still around 4,000 companies in state hands, and selling these is getting more difficult - either because they are leftovers or considered strategic industries.
The Polish government also made some decisions last year that sent chills down the spines of foreign investors.
While mobile telecommunications took a huge step forward with the opening of tender for two Global Systems Mobile (GSM) operators' licenses, disputes between the government and partners in Centertel (presently the only cellular operator) have clouded the entire industry and led some to question the reliability of the government's word (see related story, p. 1).
The international community, including investors, also reacted negatively to a decision taken in late November to include publicly listed Bank Przemyslowo-Handlowy in a bank-merger scheme. While there could be some positive effects of the merger, the decision was taken by the government (which holds 49% of the bank) without consulting first with the other major shareholders.
There is also a fear that Centertel and BPH may be a sign of a return to the old way of doing business, when decisions were made with little regard for their effect on the private sector.
These fears have been exacerbated in some with the election of former-Communist minister Aleksander Kwasniewski as president, putting investors and business leaders on the lookout for possible abuses of power as both the Parliament and presidency passed into the hands of one political alliance. While most say they are convinced of Kwasniewski's commitment to reforms, they are keeping a wary eye on the government, now that checks on authority have been removed.
"It's the small things that can make people change their mind - it can take us off track," says Leslaw Paga of Deloitte & Touche. "You cannot make business against the rules. Companies need stability - in business nobody likes surprises."