The Polish government has no plans to sell key assets back into private hands after the previous nationalist administration increased the state’s role in the economy.
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Published on 03 Sep 2024 • 3 minutes of reading
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(Bloomberg) — Poland’s government has no plans to sell key assets back into private hands after the previous nationalist administration significantly increased the state’s role in the economy.
However, the new minister responsible for managing state companies, Jakub Jaworowski, seeks to rejuvenate growth prospects by improving corporate governance standards, including by giving minority investors more oversight over Warsaw-listed state-run companies.
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“As for privatization, there is no direct privatization plan,” Jaworowski told reporters in Warsaw, in his first public comments since becoming state assets minister in May.
For eight years, Poland’s nationalist leader – who is losing power in a 2023 election – has pushed state-controlled companies to buy competitors, effectively pushing out foreign banks and utilities while building a national champion. Big companies, such as oil group Orlen SA, are getting bigger, but stock investors are unimpressed as their prices on the Warsaw stock exchange lag behind their peers, exposed to political risks.
The current pro-European coalition’s track record with stock investors is better, although sectors such as utilities have underperformed due to a lack of clarity on the government’s energy transition plans. Warsaw’s WIG20 index has jumped 36% in dollar terms since last October’s election, more than double the gain of the MSCI Emerging Market stock benchmark.
A stark contrast
While Prime Minister Donald Tusk has criticized his predecessor’s nationalization deal, he has no plans to reduce the level of state ownership, Jaworowski said. That is in stark contrast to Tusk’s previous power from 2007 to 2014, when the cabinet sold shares in companies, boosting Warsaw’s capital market.
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The government also does not plan to increase its portfolio, especially in the banking sector, according to the minister.
“At the moment, the share of the national and state capital in the banking industry is quite high and it is hard to imagine that we will increase more,” Jaworowski said. “This will exceed the goal, which is to take care of domestic interests in the event of a crisis.”
Jaworowski, a former consultant at McKinsey & Co Inc., said that some of the smaller companies in the portfolio do not have the scope of economic activity that would justify state ownership. His ministry has yet to examine the holdings in detail and decide which shares can be sold.
Jaworowski has met with private shareholders in state-owned companies and criticized them for not being more vocal over the past eight years, when the previous government’s political goals often trumped corporate goals. He wants his representative to get a seat on the supervisory board of state-run companies in an effort to improve transparency and governance.
Pressure to extract revenue from state-owned companies is mounting, with the government raising 5.4 billion zlotys ($1.4 billion) in dividends this year, or 1.1 billion zlotys more than planned. Next year, the minister sees a payment that contributes 4.9 billion zlotys to the budget.
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The Ministry of State Assets has conducted audits of the companies it oversees, following Tusk’s promise to eliminate corruption and political interference. In some cases, the actions of managers hired by the government have previously led to notices to state prosecutors, Jaworowski said, with potential costs for companies including Orlen and Grupa Azoty SA running into billions of zlotys.
“The companies are too big and the irregularities are too many,” he said. “In September, we want to say that this basic justice has been done and we can move forward and build the value of the company.”
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