Poland planning mass privatisations

Poland plans to privatise hundreds of businesses in a move that will halve the state-owned sector’s contribution to the economy and give a shot in the arm to the Warsaw stock market.

The state will retreat from large areas of the economy – including tourism, shipyards, publishing and construction – under plans to sell off 740 companies within four years, the Treasury minister has told the Financial Times.

Aleksander Grad said the sell-off would reduce the footprint of Poland's government-owned companies from 20 per cent of GDP to no more than 10 per cent. “The role of the state in the economy will be much more limited,” he said.

The programme is expected to bring in about 30bn zlotys ($13.7bn, €8.9bn, £7.1bn) over four years.

The government has only a minority stake in about half the companies to be privatised and selling these stakes made financial sense, said Mr Grad. “We analysed whether it is better to sell the remnants or count on the dividends. We worked out that it is much better to sell.”

Nineteen companies, including the Warsaw Stock Exchange, Lot Polish Airlines and power generating companies, will be sold through the stock market. “We aren't afraid of listing on the exchange,” said Mr Grad.

Some of Poland's largest companies, including KGHM copper miner, PKN Orlen and the Lotos Group oil companies, and PGNiG, the natural gas supplier, are off the table.

“These companies need to be restructured first,” said Mr Grad. “At the moment we are not looking beyond the next four years.”

Nevertheless, Mr Grad's methods mark a revolution compared with the Treasury’s slumbering approach under the previous Law and Justice party government. Wojciech Jasinski, his predecessor, was unenthusiastic about selling state assets, preferring to squeeze companies for dividends instead.

The plan has been approved by cabinet and will start this year. Most of the privatisations will be handled through the ministry, a strategy Mr Grad said would prevent President Lech Kaczynski, of Law and Justice, exercising a veto over the sales.

Parliament will vote on a bill to speed the process of selling off companies. The bill will also end a decade-old cap on executive pay at state-controlled companies, which made Polish groups less attractive to the best managers and encouraged executives to create subsidiaries for little reason other than setting up extra board seats to boost their pay. “It was hugely destructive to the state,” said Mr Grad. “It ended up costing companies a lot more than if it had not been imposed in the first place.”

About 40 per cent of the money raised by the sell-off will be used to shore up the pension system, with the rest being split among education, compensating people for property nationalised during the communist era and reducing public debt.

“We have moved away from tying the proceeds of privatisation to current budgetary aims,” Mr Grad said.

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Government’s plans to sell off ailing shipyards all at sea

Poland’s shipyards helped supply the muscle crucial to overthrowing communism, but they have struggled since 1989 and two of the largest are still in government hands and looking desperately for a buyer.

The historic Gdansk shipyard, cradle of the Solidarity labour union, has been bought by Ukraine’s Donbass group, but yards in Szczecin and Gdynia are still unsold. The government is determined to get rid of them, under pressure from the European Commission, which is threatening to demand repayment of billions of euros in past state aid unless they are privatised.

Zlomreks, a scrap metal company, backed out of negotiations to buy both yards last week, claiming they could not be made profitable even with extensive government help. The government has invited in potential investors and hopes to meet the Commission to explain the delay in selling them.

“There is no agreement on our part to see the shipyards go bankrupt,” said Aleksander Grad, the Polish Treasury minister. “It is not a problem of the Polish government. The problem lies with the economic condition of the shipyards and with the interest of investors; we can’t force anyone to buy the yards.”