Poland’s radical rightwing government has hailed the recent acquisition spree of the country’s large and powerful state-owned enterprises (SOEs) as the “repolonisation” of the economy, but critics argue it often does not make business sense, is making the economy too state-dominated, and is being driven by a narrow party political agenda.
In December,
Orlen said the acquisition would give its retail sales drive a boost, as it would utilize big data to know its audiences better and, therefore, target them with its fuel offerings more efficiently. Critics thought a more likely explanation was that the regional newspapers and news websites would extend the Law and Justice (PiS) party’s domination of the country’s media scene.
Moreover, Orlen’s diversification into the media business is by no means the only example of the state harnessing the companies it controls for purely political goals, with little obvious business logic. Insurer PZU, for example, is an important sponsor of events and campaigns that push the government’s agenda, such as the overhaul of the country’s judiciary.
The government wants the state, through the SOEs, to raise its participation in strategic sectors, including energy and banking, and then carry out government policy right across the economy. Poland’s SOEs – which already make up 11 out of the 20 companies in the WIG20 index of the largest stocks on the
"As strong and dynamically developing companies, [SOEs] play a key role in the implementation of aid packages [in times of crisis like COVID-19]. These companies also contribute to the achievement of the objectives of the state's economic policy, and in times of crisis they help mitigate the effects of recession. Polish SOEs invested just over PLN37bn in 2019, 70% of all investment outlays of companies listed on the WSE," said a recent report by state-controlled bank Pekao.
Right of veto on strategic assets
The government can make a good argument for orchestrating some expansion, such as the insurance giant PZU’s investments in the banking sector, which had long been dominated by foreign entities. The percentage of Polish capital in the banking sector is now close to 55%, versus just 28% in 2008, data from Poland’s financial market watchdog KNF shows.
Proponents of the increased role of the state in the banking sector say that this enables domestic banks to have greater independence than when they are part of international groups with headquarters in other countries.
It also should make financing of strategic sectors of the domestic economy easier – even though that could be a problem as well. In Poland’s case, there is a festering problem with the coalmining industry, as Polish utilities – mostly state-controlled as well – struggle to shift away from coal-fired power generation to gas and renewables.
Although the political strength of the mining sector is not what it used to be, analysts are worried that state-controlled banks could in theory be used to prop it up. Now it seems that fear may have been overblown and the pendulum will in fact swing the other way – also no doubt pushed by political decisions – so that the banks will support more promising industries such as offshore wind or electric cars.
Other examples of
Significantly, Enea had a distinct advantage in clinching the deal thanks to the government’s right of veto on assets deemed strategic for energy security. Poland’s Act on the Control of Certain Investments orders national security-related screening of acquisitions in high-risk sectors. This includes: energy generation and distribution; petroleum production, processing and distribution; telecommunications; media and mining; as well as manufacturing and trade of explosives, weapons and ammunition.
There was speculation last year that
Also in 2017, Polish anti-monopoly body UOKiK cleared the state-controlled power conglomerate PGE to take over the Polish assets of French peer EDF. Once again, the deal was seen as part of an effort to broaden state-ownership in the Polish energy sector.
Building a Polish national champion
Orlen, which critics of the government say is now likely to further stifle the freedom of the media in
The government’s plan for Orlen appear aiming at creating a strong company with international importance and also one that – possibly – would be capable of taking part in Poland’s plans to build a nuclear power plant.
“The [merger with Lotos] is aimed at creating a strong, integrated company capable of better competing internationally, resistant to market fluctuations through utilisation of operating and costs synergies between
After the
However, according to critics, the merger has exposed the drawbacks of boosting the role of the state in strategic sectors. For example, Orlen will need to divest a 30% stake in a Lotos refinery in Gdansk, with the purchaser having the right to approximately half of the refinery's diesel and gasoline production, while also giving the purchaser access to storage and logistics infrastructure.
The attempt to build state-owned national champions has also been criticized for making the economy even more state-dominated than it already is. SOEs already represent 10% of GDP, compared to 6% in
"The role of SOEs should be a source of concern, as both the simple comparison of basic indicators and research reviews indicate that SOEs are less productive than their private counterparts. The reluctance of both the current and previous Polish governments to privatise SOEs means that they will continue to play an important role in the economy,"
As the state-owned enterprises grow and they become more and more central to government policy, it is not out of the question that the government-business connection will become even tighter one day. There has been speculation recently that Orlen’s CEO
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