Latvian privatization drags on

  • 1999-01-28
RIGA (BNS/DOW JONES) Latvia will not complete privatization of the major state owned companies before the end of 1999, The Wall Street Journal predicted.

When Vilis Kristopans became prime minister in November, it was expected that this pro-business politician would accelerate Latvia's drawn-out privatization program.

Only 58 million lats ($101.76 million) in privatization revenue flowed in last year, and the real plums haven't yet been sold, The Wall Street Journal reported.

Kristopans, a banker and former transport minister, immediately told the Latvian Privatization Agency to go back to the drawing board on the planned sale of the Latvian Shipping Co. He also called into question the sale schedule for Latvian Gas and Latvenergo, the energy utility.

Late last year, Janis Naglis, the LPA's chief, predicted that these large sales would be concluded in 1999 - but now all bets are off.

"Privatization will not be completed in 1999. Latvenergo definitely will not be privatized this year, and I doubt whether next year either," said Raivis Cakuls, an analyst for brokerage house Talinvest Suprema Securities.

The prime minister said the selection criteria must be changed to raise more money to meet fiscal challenges following the Russian financial crisis. "I simply think the Latvian Shipping Co. and other firms need to be sold for the highest price," he said in an interview.

Earlier, the emphasis had been on finding strategic investors with clear development plans and technology-transfer capabilities.

Analysts, meanwhile, say his proposals will slow down the process, as the rules must be rewritten - and might actually bring a lower price. That is because privatization vouchers can apparently be used in lieu of cash, even for these large companies. The vouchers - unless this changes, too - were handed out for free to individuals, and a secondary market for them has emerged.

Domestic companies may stand to gain, analysts say. Although they do not have big cash reserves - and cannot offer what a foreign strategic investor might - some of them have many vouchers.

Ventspils Nafta is one example. The company, which ranks as the largest oil-reloading firm on the Baltic Sea, made a bid for the shipping company in 1997 but did not make the LPA's cut. But a reshuffling of the criteria could put it in better stead.

The Wall Street Journal did not rule out that foreign rivals might just be scared off by the mixed signals.