Poland enters privatization path

By Bogdan Turek

WARSAW (UPI): After two years of political squabbling, Poland's mass privatization program gets under way last week, well behind similar programs to shed state assets elsewhere in the former East Bloc.

Officials begin a month-long process July 17 to allocate 413 large state-owned plants among 14 National Investment Funds (NIF), which are essentially holding companies for the enterprises.

"It will be sort of a lottery," said Privatization Ministry spokesman Andrzej Wiesniewski. "Of the 413 plants put on the table, each Nif will have to choose (to manage) about 28 or 30 plants."

Altogether, the enterprises are estimated to be worth US$30 billion.

The way was cleared for the allocation process to begin last week, when the executive boards of the NIF signed contracts with managerial firms, whose task it will be to advise the NIF on investment policy, obtaining credits and restructuring.

Many well-known Polish and foreign banks and consulting companies are represented among the managerial firms.

After the initial two-week selection process, the NIF will have another two weeks during which they may exchange enterprises among themselves, in order to avoid possible monopolies if one fund were to draw too many plants with the same profile.

The NIF will control 60 percent of the shares of the privatized plants, the managerial firms will get 2 percent, 15 percent will be distributed free of charge among the workers of the plants and the rest will belong to the state treasury.

Beginning Nov. 15, shares in the NIF will be distributed to all adult Poles -- an estimated 29 million are eligible -- for a registration fee of about $20.

Each Pole is entitled to one certificate, which will be worth about $40 if all those eligible participate. Experts forecast that less than 10 million Poles will participate initially, which would more than double the initial value of the certificates.

After a year, when the NIF are listed on the Warsaw Stock Exchange, the certificates can be traded for one share in each of the 14 NIF.

The complicated system, unique in Eastern Europe, barely survived a long period of political bickering. The program was enacted by Parliament in May 1993, but was blocked by former Prime Minister Waldemar Pawlak, whose leftist coalition defeated the Solidarity government in parliamentary elections four months after Parliament approved the plan.

Badgered by foreign investors and facing intense international pressure, Pawlak finally approved the privatization of 413 large plants out of an original prospective list of 450 last December. It took several months of preparation before Privatization Minister Wieslaw Kaczmarek could finally announce the kickoff for July 17.

"The mass privatization program is being implemented," he announced with evident relief at a news conference last week. Many economists argue that it took much too long to start the process. Other East Bloc countries, inspired by Poland's "Big Bang" of economic reforms in 1990, are well on their way toward attracting investors, especially Estonia and the Czech Republic.

The Czech Republic now boasts the highest ratio of shareholders in the world.

But the Poles argue their system is better, because it is based on the experiences of the others.

Poland is skeptical of the Russian system, where recipients underwent an initial selling frenzy, and where the remaining shareholders in many cases are holding practically worthless certificates because restructuring of the plants is slow or nonexistent.

As for the Czech coupon privatization scheme, the Poles say its purpose was to revive private ownership, while in Poland the concept was never eliminated -- not even under communism.

"Our system puts an emphasis on the fast restructuring of the plants with the aid of foreign capital coupled with Polish (capital)," Wisniewski said. "The focus is on improvement of the plants."

The Polish Pko Bp bank won the right to distribute the certificates in more than 1,200 outlets across the country. The authorities say they hope to avoid the Russian experience -- the massive resale of certificates at the outset of the program -- and will seek to persuade Poles to keep them and watch their value grow.

Kaczmarek said that another group of more than 100 plants is ready to join the mass privatization program, possibly as early as September.

"These are medium-size plants with annual turnover of d10 million, bringing some profit or even generating zero profit but no loss," he said.