Wednesday, January 12, 2011

Dividends don't lie, but ministers can

"We are not going to drain state companies of cash by paying dividends." - This is a mantra each Polish treasury minister* repeats, for a time at least. It is very likely the current Treasury Minister Aleksander Grad will say much the same in coming weeks as state-controlled companies announce 2010 results. Grad will be mindful of any criticism of the government using corporate cash as part of the never-ending attempt to plug the always wide budget gap. Of course, later it turns out the reality is different and dividends end up flowing to the budget.

But is the criticism really justified? Not necessarily. It might be if state companies had any idea of what to do with their hard-earned cash. But looking at the sorry state of investments in the heavily state-dominated energy sector, railways, or any other industry dominated by state players one has to wonder. Maybe using that cash to finance the ever growing appetite of the central budget is not that much worse. The cash is wasted anyway, but if it is paid as a dividend to the state, then at least some of it finds a way to the private sector since the heaviest dividend payers have a growing share of private minority shareholders.

* The Treasury Ministry is a funny beast. Unlike in some other countries it has nothing to do with state finances, which are the domain of the Finance Ministry. Previously named the Privatisation Ministry, due to the glacial pace of privatisation in the early 2000s, it was renamed the Treasury, as all state assets are preciousssssss, my precious, . . ., er, I mean, treasure.

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