Privatization in Poland: A Statistical Picture

The tables that follow, based mostly on data from the Main Statistical Office, provide a statistical picture of Poland's progress so far

Privatization in Poland: A Statistical Picture

The Polish private sector has expanded dramatically in the past three years and now accounts for more than half of all economic activity and nearly 60% of total employment. The privatization of state firms "from above" has proceeded more slowly than the growth of new private firms "from below." Still, about one in four large state firms has embarked on one of the many paths to privatization. The amount of foreign investment in Poland has remained fairly low but is expected to rise rapidly in the coming years. The tables that follow, based mostly on data from the Main Statistical Office, provide a statistical picture of Poland's progress so far.

Private sector economic activity accounted for 45% of Poland's gross domestic product (GDP) in 1992. This proportion is expected to rise well above 50% in 1993. The total for each of the past four years (plus the 1993 estimate) as calculated by the Main Statistical Office (GUS) is shown in Figure 1.

Private Sector Employment

As of the end of the first quarter of 1993, overall private sector employment amounted to 58.6% of total employment. Excluding the 4 million people working in agriculture. The proportion of private sector employment w as 44 5% at the end of the first quarter of 1993. The comparable figures for private sector employment outside agriculture for the past four years are shown in Figure 2 As the graph indicates, statistics on private sector employment can be confusing. In response to the systemic changes initiated in the Polish economy in 1990, the GUS altered the basic classifications for economic activity. The division of the economy into "socialized" and "non socialized" sectors was replaced by a more market-oriented division into"public" and private" sectors.

When this change w as made, the category of "cooperatives" w as shifted from the old socialized sector to the new private sector. This shift worked to inflate the statistical proportion of private sector employment (many would argue that Polish cooperativesÑat least under the communist systemÑwere essentially state firms with a different name). The GUS thus continues to provide statistical information on the"old" private sector (private sector employment excluding cooperatives). The two categories may be converging however.

SOURCES: The figure for 1992 and the one for 1993 (the latter is an estimate) were reported by Wirtschawtswoche, 2 July 1993. Official GDP figures for 1989 through 1991 are from Rocznik Statystyczny 1992 [Statistical Yearbook, 1992] (Warsaw: Main Statistical Office, 1992).

Employment in cooperatives has dropped dramatically since 1989 (from 12.6% to 9.1% of total employment between 1989 and 1990 alone). The decline in employment in cooperatives and the transformation of many cooperatives into joint stock companies seem to be aligning employment in the new" and 'old" private sectors.

Some sectors of the economy are now almost completely in private hands. Private sector employment in retail trade amounted to 91% at the end of the first quarter of 1993. In construction. 75% of employment was in private firms by the same point. Private firms also accounted for 83% of overall construction output. The proportions are somewhat lower for industry, but still rising. The private sector accounts for 32% of industrial production and 43% of employment in industry. In transport, 27% of employment is in private sector firms; these companies are also responsible for 42% of turnover.

Number of Firms in the Private and Public Sectors

The total number of registered private firms in Poland has risen to more than 1.7 million over the past four years. The overwhelming majority of theseÑmore than 1.6 millionÑare firms run by private individuals using their own savings and are not legally registered as companies. By the end of the first quarter of 1993 there were 11,473 joint ventures and 61,437 domestic private companies. In addition. there were 19,446 cooperatives. By the end of the first quarter of 1993, the number of state firms in Poland had droppecl to 6,838. Also included in the "public sector" were 470 firms belonging to local governments, 792 joint-stock companies owned by the State Treasury, and 784 joint-stock companies owned by state agencies and institutions. Tables 1 and 2 show some of the changes in the number of public and private sector firms since 1989.

Number of Privatized Firms

Roughly one in four state firms or a total of 2,149 had embarked on one of the many paths to privatization in Poland by the end of March 1993. Of these. 491 were earmarked for capital privatization: they underwent commercialization," meaning that they were transformed into joint-stock firms wholly owned by the State Treasury. Of these 491 firms, 309 were set aside for sales of shares to domestic or toreign investors; the other 182 were earmarked for the much-delayed mass privatization program. Only fifty-nine of the total 491 firms earmarked for capital privatization had completed the process by the end of the first quarter of 1993.

The number of firms with stocks traded on the Warsaw Stock Exchange was sixteen at the end of 1992 and eighteen at the end of June 1993. Liquidation privatization had been applied to 1,658 firms by the end of the first quarter of 1993; 617 of these have completed the liquidation process. Liquidation can take place under two different pieces of legislation: the 1990 Law on Privatization (Article 37) and the 1991 Law on State Firms (Article 19). The former method works more rapidly and has yielded a total of 463 new companies run by management and/ or employees.

The latter moves more slowly and not infrequently ends in bankruptcy. As Table 3 indicates, the rapid pace of privatization achieved in 1991 slowed in 1992 and the first months of 1993. This was due partly to political instability and partly to negotiations over the "pact on state firms," which put the privatization process on hold. Since the spring, however, the pace has picked up dramatically. Privatization Minister Janusz Lewandowski indicated in July that twenty-three firms had completed capital privatization in the first six months of 1993 more than the total for all of 1992. i In the same period, more than 800 firms began liquidation privatization. Similarly, the passage in April of revised mass privatization legislation has enabled the Privatization Ministry to set that process in motion; about 440 invitations to participate were sent out to candidate firms in June 1993.

In addition, by the end of March 1993. the state had taken over 873 of a total of 1,495 state farms (Poland's minuscule collectivized agriculture sector) that were designated for privatization under legislation passed in 1992. In other words, 58% of all state farms had become the property of the State Treasury. The assets and land from these state farms are now being sold or leased to the public by the State Treasury's self-financing Agricultural Property Agency . By the end of the first quarter of 1993, only 1% of the land from state farms had been sold; another 7% had been leased.

Foreign Investment

The total amount of investment committed to Poland since the transformation program began has been estimated at $4-4.5. 5 billion. PlanEcon puts the total for 1989-1992 at $4.0 billion 6 But only about $2 billion of this amount has so far actually found its way to Poland. Moreover, one huge investment distorts the picture. With the purchase of the FSM auto plant in Tychy, the Italian automaker FIAT pledged to invest $1-2 billion within eight years. The FIAT deal plus the Italian purchase of the Lucchini steel (formerly Huta Warszawa) in Warsaw makes Italy the leader in pledged foreign investment in Poland, followed by the United States. Germany is conspicuous by its absence among the leading foreign investors. Figure 3 provides a breakdown of pledged investment by country of origin. Figure 4 and Table 4 provide a more detailed breakdown of actual, as opposed to pledged, foreign investment from 1991 through June 1993. Figure 4 excludes $250 million of "international capital" (investments by multinational corporations and foundations). Table 4 lists the largest corporate investors.

Economic analysts expect the pace of foreign investment to pick up significantly in 1993.

Privatization Legislation

The three most important pieces of legislation governing privatization are the Law on the Privatization of State Firms, which took effect on 1 August 1990; the Law on State Firms, originally dated 25 September 1981 but overhauled in 1991 and revised five times since; and the Law on National Investment Funds and Their Privatization (the revised "mass privatization" legislation), which is dated 30 April 1993 and took effect on 14 June 1993.

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