RIGA - The Latvian parliament on Nov. 2 approved a law extending by one year the validity of privatization vouchers, with which citizens can buy shares in state property or buy their own homes. The head of the Latvian Privatization Agency, which will close on Jan. 1, 2001, said the voucher scheme has been a success.
But the reasons for the stalling of Latvia's privatization process remain unclear, says one economist.
Privatization vouchers will now be valid until Dec. 31, 2001. The scheme has contributed to the creation of a capital market in Latvia, said Janis Naglis, the Latvian Privatization Agency's director general, in which 115,000 legal entities and individuals in Latvia now hold shares.
The body that will replace the Latvian Privatization Agency will not have to supervise the liquidation of inefficient state enterprises and may be structured differently, said Naglis.
Greater openness on the part of the successor organization and the Cabinet of Ministers is essential if the public is to be won over to privatization, he says.
The privatization of a key state utility, energy company Latvenergo, was blocked in Parliament this summer after a campaign led by the Social Democratic Workers Party. But interest in the public utilities from investors remains strong, says Naglis, due to the lack of risk attached to such investments. But Latvenergo is unlikely to be privatized until after the next general election, scheduled for October 2002, he said.
This month could be an important one for the Privatization Agency as the Cabinet of Ministers is scheduled to review the agency's sell-off rules for the Latvian Shipping Company on Nov. 14.
The agency said last week that a strategic stake scheduled to be sold would be "at least" 50 percent, according to news reports. Another 15 percent could be publicly auctioned.
Naglis said in a press conference last week that the controlling interest could be sold by the end of the year.
The Privatization Agency also floated the idea earlier this month of splitting the state stake in Ventspils Nafta. A small share, perhaps 5 percent, could be sold on the Riga Stock Exchange, while the rest could be offered internationally by the end of the year.
The World Bank has been closely eyeing the sell-off process of the large companies like the Latvian Shipping Company.
It accepts the Privatization Agency's pending closure, says Toms Baumanis of the Bank's Latvia office, providing its functions remain the same. While the results of discussions last month between the Bank and Latvian officials have not yet been published, "understanding" of the government's privatization schedule was reached, says Baumanis. The success of the privatization process may determine whether Latvia continues to receive World Bank loans on favorable terms to pay off other foreign debts, judging by comments made in September by Basil Kavalsky, its country director for Poland and the Baltic states.
Naglis praised the World Bank's input in the privatization process.
"I'm very happy with their cooperation and advice," he said. "Their clear demands on time schedules, procedures and transparency have been very important in this very politicized environment."
The campaign against privatizing Latvenergo was very public, but the reasons for the slowness of the overall privatization process are far from clear, says Morten Hansen of the Baltic states' Eurofaculty and the Stockholm School of Economics in Riga.
"The process of privatizing these seriously big enterprises has stalled, but it's difficult to see why," he said. "It may be for political reasons, or because of fat cat big business people trying to get a piece of these huge companies, but it's hard to substantiate."
But arguments about local business interests are irrelevant in the case of the massive Latvian Shipping Company, says Naglis.
"Although all bidders will be subject to the same conditions, I don't think the Shipping Company will be taken by a lone Latvian investor," he said. "It will be too expensive."
Please enter your username and password.
2024 © The Baltic Times /Cookies Policy
