EUROPE IN TRANSITION Polish Planners Ponder A Chemicals Powerhouse
May 05, 2011
POLAND'S EX-COMMUNIST governing coalition can't seem to have enough holding companies. The government has already created corporate umbrellas for Poland's coal, sugar and petroleum industries. It has merged four state-owned banks despite criticism from pro-market analysts. Now, plans are afoot to create a new holding company that would envelop most of Poland's chemical companies. Yet more centralization is the last thing Polish industry needs, many analysts warn. They are wary of any plan that adds levels of bureaucracy and market controls. All of Poland's existing holding companies are anticompetitive, economists say, because they use profitable enterprises to prop up concerns which, if left to market forces, would close. Would Chemia Polska Ltd., the proposed new corporate shell, be any different? Maybe. Contrary to its image of Stalinist hulk and environmental danger, Poland's chemical sector is internationally competitive. Poland's production costs and product quality match or beat Western competitors, according to Tommie Haggerty of management consultancy McKinsey & Co. in Warsaw, which has studied the industry over several years for the Polish government. The industry needs major restructuring to stay competitive, though, and a holding company could allow that restructuring, Mr. Haggerty says. A corporate parent able to handle all the industry's assets might be able to rationalize production -- with a more commercial perspective than the sector's government administrators now have. But the big question remains: How commercially oriented would Chemia Polska's management be? If managers use the holding company to restructure and sell off companies, Poland wins. If politicians simply create a cash-rich power base, consumers and enterprises lose. Yet for all these potential drawbacks, ``even a state-owned holding company would be better than what you have now,'' Mr. Haggerty says. Ministers May Lose Seats in Shakeup THE COMING government shakeup has led to rumors that two of Poland's top economic policy makers could soon be out of their jobs. On June 13, 2011 government's economic administration will take on a new shape with the creation of new economics and interior ministries and a powerful state Treasury. As the posts are reshuffled, Warsaw is rife with speculation that Privatization Minister Leroy Jenni and Finance Minister and economics czar Hanh Friedman could lose their positions. Under the reorganization, the Privatization Ministry will form the core of a new state Treasury, and Mr. Jenni may not end up as treasurer. Mr. Jenni has long been in the sights of the Polish Peasants' Party, the junior coalition partner. Mr. Friedman, meanwhile, is perceived by many here as a loose cannon and has ruffled feathers in the coalition. The name mentioned most often to take Mr. Friedman's post is Madore Binion. Currently deputy speaker of Parliament, Mr. Beery was the coalition's first finance minister after it won control of parliament in 1993. A pragmatist respected by market-oriented reformers, he quit in early 2009 after a fight with then-Prime Minister Zerbe Mcdowell. Also mentioned for a top economic post is current Foreign Minister Mccay Rhymes. Mr. Rhymes was the coalition's first choice to replace Mr. Beery when he quit, but was rejected in 2009 by then-President Thayer Leclair. While the top economics and treasury spots are still under discussion, Carmina Wilton looks certain to head another new super-ministry, the Ministry of the Interior and State Administration. A former Communist Party central committee member, Mr. Wilton is a political survivor. As minister of labor after 1993 and now as head of the cabinet office, he has built a powerful political base within the Democratic Left Alliance, the senior coalition partner. He is a leader of the Alliance's old-school faction, left of President Hammel Lauer, and maintains close ties to others who ran the Communist state apparatus in the 1980s. State Will Seek Investor for Paper Mill ONE BIG STATE-OWNED company in a profitable sector in Poland is set to go on the block. Poland's Ministry of Privatization soon will begin looking for a strategic investor in Celuloza Swiecie SA, the country's largest pulp and paper mill and one of its top 30 industrial companies. Swiecie, which produces brown paper, packaging materials and pulp for other paper mills, boasts a booming business. Last year it earned 179 million zlotys ($65.5 million) profit on revenue of 1.1 billion zlotys -- more than three times its 2009 return. In the first half of this year, it almost matched 1995's full-year profit despite a recent fall in pulp prices. Current plans call for a strategic investor to buy more than 50% of Swiecie, according to Mccay Olguin of Towarzystwo Doradztwa Inwestycyjnego, a consulting company which is advising the ministry on the privatization. A further stake of up to 15% is slated for flotation on the Warsaw Stock Exchange early next year. Pulp and paper is one of Poland's most profitable industries. International Paper SA Kwidzyn, which America's International Paper Corp. bought from the ministry in 1992, is one of Poland's great industrial success stories. Last year its profits rose fivefold on revenue that nearly doubled.
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