Doing the business

The Celtic Tiger has a first cousin in Poland's booming economy, a Baltic Tiger, no less. The mood of confidence in Warsaw is palpable, not least among the foreign business community.

The Irish deputy general manager of Citibank, Edward Ward, makes no bones about it: "This is a great place to do business - a huge market of 40 million, fast growing economy, and its young people, bright, well-educated with a strong entrepreneurial spirit."

Padraic Coll of Enste Securities Polska is an enthusiast too: "It is a very good time to buy companies cheap here on the stock exchange at less than their book value." Although the economy is booming, he says, the Russian crisis has lowered expectations of those selling out in the price they can get.

And, as Andrzej Zaleski, president of the Confederation of Polish Employers, is quick to point out some two-thirds of national produce now comes from the thriving private sector. There are still hugely problematic privatisations and rationalisations ahead, he admits, but is convinced that the determination is there to press ahead.

His colleague, Jerzy Nowak, points to healthy changes in the country's pattern of exports away from low-value-added products like steel and coal.

That business confidence stems largely from the presence in government of one man. Leszek Balcerowicz is back in the driving seat, to the delight of the business community. The Deputy Prime Minister and Finance Minister, architect of the country's crash programme of marketisation in 1990, is widely credited with the success the Poles have made of their economic transition from state control.

His presence is all the guarantee foreign investors need to be assured their money is secure, says Ryszard Bankowicz of the influential Polish Business Roundtable - a reality reflected, no doubt, in the $6 billion in foreign investment that has flowed into the country this year.

Balcerowicz's Freedom Union (UW) acts as a counterweight to the populist tendencies in the Solidarity coalition AWS with which he shares power.

And he makes no bones about being involved in a hard struggle to keep the government and its supporters on what he sees as the straight and narrow. Only last month he failed to persuade members of the Sejm to cut corporation tax all the way from 40 to 32 per cent, having to content himself with 34 per cent.

And, at a recent meeting of the American Chamber of Commerce, when challenged over what foreign businessmen saw as a slowdown in the privatisation programme, he simply told them to address their complaints to his cabinet colleagues.

Yet despite some reservations from business and even the opposition SLDs' spokesman on privatisation, former minister Wieslaw Kaczmarek, progress is dramatic and the state plans the privatisation of some 70 of the largest firms still in state hands next year.

Last month also saw the start of the biggest yet with the launch of the sale of some 15 per cent of Telecommunikacja Polska (TPSA). With profits last year of some £200 million the sale is expected to raise over £400 million, despite the fall in share prices associated with the Russian crisis.

In part they need the cash to keep down the budget deficit, says Ward, in part it is a determination to be seen as still committed to the process. Key banking privatisations are also underway.

DESPITE reservations about the tempo, however, Ward says that privatisation has been done well in Poland, unlike the experience in the Czech Republic. Here the process has brought in new foreign and domestic investors rather than leaving the assets in the control of state-owned banks.

The biggest industrial problem is still the restructuring of the old dinosaurs of coal, steel, armaments and petrochemicals, employing some 500,000 workers, 240,000 in coal alone. And near to 20 per cent of the electorate has connections to heavy industry - progress depends on the most unlikely yet apparently successful compromises between Solidarity and Solidarity, the union and its Government.

In June, the government proposed a major coal reform package likely to cost some £3 billion and involving individual payments of nearly £9,000 a head to persuade miners to leave the industry.

Too costly, says Bankowitcz, of the Polish Round Table, arguing that it will raise expectations in other sectors. But 16,500 miners have already agreed to go, perhaps gambling that they will find other jobs easy to come by in booming Silesia.

The government's target is ambitious - to reduce the numbers employed in the industry to 132,000 and close up to 25 pits and it is negotiating with the EU and World Bank for loans to help the process. But there is no option but to reform, as Bankowicz points out, coal imported from South Africa to Gdansk is cheaper, despite transport costs, than that produced locally.

It has also published in June a reform plan for steel and pledged to reduce to zero tariffs on EU steel by 2000. The Commission has broadly endorsed the restructuring plans although member states with steel interests are suggesting that Poland is overestimating likely domestic demand and needs to plan for real cuts in productive capacity as well as manpower.

Not so, says Jaroslaw Pietras, secretary to the key co-ordinating Committee on European Integration, pointing out that their plans still provide for steel imports and the member states are not exactly impartial in this matter.