POLAND - The International Monetary Fund (IMF) has urged Poland to follow through with scheduled privatisation plans.
In its latest report on the Polish second pillar pension system, the IMF said: "The supply of suitable domestic financial instruments [for the accumulation and the payout phase] could be significantly expanded by completing the privatisation programme."
It added: "This programme should include the floating of the remaining shares of the companies that were listed, but in which the government still keeps a majority control. This process should be accompanied by better corporate governance standards in state-owned companies as this will facilitate the transition to listing at the exchange".
Privatisation has been a disputed issue in Poland for several years. Just before the turn of the century the government made a promise to withdraw state ownership from a large group of companies - a promise that successive governments have failed to fully honour.
Currently, several foreign companies, including Dutch-based insurer Eureko and German sugar company Nordzucker, are attempting to get compensation from Poland for unfulfilled privatisation promises. Since 1999 Eureko has been waiting for the state to reduce its stake in former monopoly insurer PZU and Nordzucker wants to acquire five Polish sugar factories.
The first cohort covered by the new pension system will begin to retire from 2009, a period which, the IMF report said, was "hardly sufficient" to design an appropriate payout phase". The fund also warned that with-profits and variable annuities "may be difficult to regulate and supervise in a decentralised and competitive model".
For the accumulation phase the IMF has recommended an overhaul of investment regulations. In particular, it urged a reconsideration of limits on corporate bonds and foreign equity holdings, and a ban on the use of futures.
The IMF also expressed concern about the blocking of pension fund mergers by the authorities. It also noted the government's demands that fees to be cut considerably. Mergers might be necessary for smaller pension funds "to gain scale and reduce cost", the IMF report said.
The report can be accessed on http://www.imf.org/external/pubs/cat/longres.cfm?sk=20544.0