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Where there is no law, but every man does what is right in his own eyes, there is the least of real liberty
Henry M. Robert

Raising capital, using Polish experience

Aleksander GRAD: Nine Ukrainian firms operating on Warsaw Stock Exchange over the past two years
22 September, 2011 - 00:00
Photo by the author

Poland is the only EU country known to have kept the growth rate during the world economic crisis while actively raising capital, attracting foreign inland investments from the West and East. Not so long ago, Kyiv hosted IPO Roadshow and IPO Summit. Among the officials present was Polish Finance Minister Aleksander GRAD who kindly agreed to the following interview.

Mr. Grad, how do you feel about the ongoing EU crisis, particularly in the Eurozone? How do you think the Union will get over it?

“I think all of us are waiting for the last Eurozone bids. I also think there is no telling what will happen next. One thing is clear: none of the member countries will call it quits, for this would be hazardous to the Eurozone and European Union; I think this process would become uncontrollable. That’s why the EU foreign ministers will meet this weekend to work out the best way to overcome this crisis. I think it is important for the governments of certain countries to discuss economic programs and work out implementation methods. Their privatization programs should be carried out as soon as possible. Here in Poland, after four years, we can see that this is a complicated process. Yet this process has to be accomplished. In our country, this process took place in normal conditions, without anyone having had to act at gunpoint. Now imagine this in a country where one has to act at gunpoint, with a strong opposition in parliament. At the moment, I can’t see a single country withdraw from the Eurozone, for this would become an uncontrollable process. No stabilization funds would help. We need structural reforms. Such funds can be used, but they just won’t work. This is a very trying period for the European Union. We need more solidarity and European integration. In this situation the egotism shown by certain countries is hazardous and a threat to EU integration. We have to build a healthy basis for the development of our economies, management, and uniform currency support. I can’t tell you what course events will take. Perhaps the situation will become clearer toward the end of September or in early November.”

Europe proposes two EU levels, with one including Eurozone countries, thus getting over this crisis which ex-Austrian Chancellor Wolfgang Schussel described as a crisis of European morals.

“Poland now presides over the European Union. I think this isn’t the time to discuss who should join what club. Now is the time for all of us to sit at the same table. I think this crisis is proof that now is no time for singling out good or bad players, countries showing good or bad progress.”

Poland intends to introduce the euro. Do you think this crisis has influenced this intention?

“Back in 2008, Poland named the date of introducing the euro on its territory, but Lehman Brothers Holdings, Inc. went bankrupt and this triggered off the world financial crisis. Adopting the euro remains our strategic objective, but we have to get prepared and meet certain requirements and criteria to join the Eurozone, including keeping the public debt within a certain framework, and the same applies to inflation and exchange rate. We will have our state budget deficit restricted under these criteria by 2015. I can’t tell you when Poland will join the Eurozone.”

Has your zloty currency been any help in surviving this financial crisis?

“Exports make up 30 percent of the Polish economy. The low zloty exchange rate allowed for bigger exports. There were also imports. We had positive balance under the circumstances. However, considering investments and capital market, there are growing risks for the Polish national currency in the long run.”

I recently watched a news bulletin with a reporter saying Greeks were complaining about the euro, insisting they would be better off if given back their drachma, when the prices were lower. Would you care to comment on this?

“No, I wouldn’t. Let the Greek administration take care of this matter. One ought to remember what benefits Greece received after joining the European Union. The important thing is for all EU members to meet the membership criteria.”

You were directly involved in IPO Roadshow and IPO Summit in Central and Eastern Europe. Would you enlarge on this project?

“Four years ago, when our government was formed and I was appointed Minister of Finance, I had to supervise the privatization process. I was tasked with attracting foreign capital. I was interested in implementing the largest possible number of privatization projects and direct them to the Warsaw Stock Exchange, to make Warsaw the Eastern European financial center between Frankfurt and Moscow; to make all those companies interested in operating at the [Polish] stock exchange, thus adding to our national purse. We did it. In four years the Warsaw stock had increased, reaching almost 210 billion dollars, although this is less than in several European counterparts. IPO hasn’t been a priority of late. Its listing includes over 130 firms/companies, also an investment bank and [several] consulting companies. We have succeeded in developing an architecture that allows to make attractive offers to firms/companies in other regions [of the world], specifically in Ukraine. Over the past two years, nine Ukrainian companies have started playing at our stock exchange (previously there were only two). This event is meant to show that Warsaw is now a good place for investments with liquidity. Our stock exchange has introduced a special index, WiG Ukraine. Today’s sitting was plenary, attended by businessmen representing companies interested in the Warsaw Stock Exchange. The Polish side wanted to demonstrate that the government sees one of its priorities in strengthening the Warsaw Stock Exchange, made up of government, foreign, private, even local individual funds. Poles are very interested in this stock exchange. Of late, half a million more broker accounts have been registered, which is 30 percent growth. This is where professional market operators can add to their revenues.”

How does the Warsaw Stock Exchange attract Ukrainian companies?

“Every company can choose between stock exchanges, for example, in Warsaw, London or Frankfurt, or make a double listing. In my opinion, the Warsaw Stock Exchange offering is pretty good; nor do I think that the emergence of nine Ukrainian companies over the past two years has been coincidental.”

How do you feel about the Ukrainian stock exchanges?

“Ours used to have the status yours now have. There are lots of stock exchanges [in Ukraine], but I don’t think they can help create the capital market. This takes experience. I think it is necessary to upgrade their performance, their instruments and legal basis. This is a necessary precondition for the development of stock exchanges and capital markets.”

What makes Poles buy stocks?

“There are clear-cut principles of relationships between the go-vernment — the Ministry of Finance as the issuer of stocks — and the buyer. There is a ban on the purchase of stocks using bank loans. Previously, anyone could sign up for any number of stocks, but then the government set the maximum number and started selling smaller stocks. This didn’t require bank loans. There were also educational programs, public meetings with finance ministry officials and stock exchange and brokerage managers. They told people how to reduce their financial risks to a minimum. This proved effective. Also, there were media reports quoting people who had earned from using the stock exchange. Now that the stocks are dropping, one would be better off keeping quiet, waiting for the sky to clear, venturing no speculations.”

By Mykola SIRUK, The Day