Poland Eyes Governance Boost for State Firms, Shuns Asset Sales

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(Bloomberg) — Poland’s government has no plans to sell any major assets back into private hands after the previous nationalist administration significantly boosted the state’s role in the economy. 

Instead, the new minister in charge of managing state companies, Jakub Jaworowski, is seeking to rejuvenate growth prospects by improving corporate governance standards, including by giving minority investors more oversight over Warsaw-listed state-run firms.

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“As far as privatization is concerned, there are no direct privatization plans,” Jaworowski told reporters in Warsaw, in some of his first public comments since he became state assets minister in May.

For eight years, Poland’s nationalist leaders — who lost power in 2023 elections — drove state-controlled firms to buy up competitors, effectively pushing out foreign banks and utilities while building national champions. Big companies, such as oil group Orlen SA, got even bigger, but stock investors weren’t impressed as valuations on the Warsaw bourse lagged peers, hit by political risk.

The current pro-European coalition’s track record with stock investors is better, even as sectors such as utilities underperform due to a lack of clarity about the government’s energy transition plan. Warsaw’s WIG20 index has jumped 36% in dollar terms since last October’s election, more than twice the gain of the MSCI Emerging Market stocks benchmark. 

Stark Contrast

While Prime Minister Donald Tusk criticized his predecessors’ nationalization deals, he doesn’t plan to reduce the level of state ownership, Jaworowski said. That’s a stark contrast to Tusk’s previous stint in power from 2007 to 2014, when his cabinet sold stakes in companies, boosting Warsaw’s capital market.

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The government isn’t planning to increase its portfolio either, especially in the banking sector, according to the minister.

“At the moment, the share of national and state capital in the banking industry is quite high and it’s hard to imagine we would increase it further,” Jaworowski said. “It would exceed the goal, which is taking care of domestic interests in case of a crisis.”

Jaworowski, a former consultant at McKinsey & Co Inc., said that some smaller companies in his portfolio didn’t have a scope of economic activity that would justify state ownership. His ministry is yet to review its holdings in detail and decide which stakes it could possibly sell.

Jaworowski has met with private shareholders in state firms and censured them about not being more vocal during the last eight years, when the previous government’s political goals often trumped corporate ones. He wants their representatives to gain seats on more supervisory boards of state-run companies in an effort to boost transparency and governance.

Pressure to extract results from state firms is increasing, with the government raising 5.4 billion zloty ($1.4 billion) from dividends this year, or 1.1 billion zloty more than planned. Next year, the minister sees the payouts contributing 4.9 billion zloty to the budget.

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The State Assets Ministry has been running audits at the companies it supervises, seeking to make good on Tusk’s pledge to root out corruption and political interference. In some cases, the actions of managers hired by the previous government have led to notifications to state prosecutors, Jaworowski said, with potential costs for companies including Orlen and Grupa Azoty SA reaching into billions of zloty. 

“The companies are gigantic and the irregularities there are also immense,” he said. “In September, we would like to say that this elementary justice has been done and we can move forward and build the value of the firms.”

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