Privatization failure offers tough choices

RIGA - After the fourth failed attempt to privatize the state-owned Latvian Shipping Company, the government has to decide now whether to extend the deadline for the only potential bidder, to make new privatization rules and a new tender or leave the company in the state's hands.

Meanwhile, Latvian politicians are looking for scapegoats. After the Social Democrats failed to oust Economics Minister Aigars Kalvitis on May 3, Latvian Privatization Agency's head Janis Naglis came under fire.

Four of 12 members of the Latvian Privatization Agency's council will propose to dismiss Naglis during an upcoming emergency meeting of the agency's council on May 10, blaming him for choosing the wrong consultant for the shipping company's privatization process, which, they say, resulted in failure.

The proposal was submitted to the agency's state proxy, Kalvitis, by LPA council members Normunds Lakucs, Judite Oskalne, Orvils Henins and Sergejs Dimanis.

Politicians should take full responsibility for all activities linked to the Latvian Shipping Company since 1992, including the recent failure to privatize it, Kalvitis said in interview on Latvian state radio May 7.

He said that in-fighting and intrigue surrounding the company would continue until its privatization is complete.

"Economic and political powers in Latvia have merged, and therefore the Latvian Shipping Company should be privatized in order to discontinue such relations," the minister explained.

Kalvitis' party's chairman, the People's Party's Andris Skele, said the shipping company's privatization had been discredited from the start with allegations of bribery. "No serious investor willing to invest funds in Latvia would do so in a company of which such things are spoken of in society," said Skele.

Kalvitis admits that as of now there is no bidder for the Latvian Shipping Company, and therefore the government must decide immediately whether to extend the deadline for the security deposit, to launch the company's privatization process from the beginning or not to privatize the company at all.

Kalvitis supports proposing new regulations for the shipping company's privatization and a new selection of bidders.

"No deviations from the Latvian Shipping Company's privatization regulations are admissible and the privatization must not be continued by extending the deadline for the security deposit," Kalvitis said during a joint meeting of the parliamentary economy, agriculture, environment and regional development commissions and the parliamentary investigative commission looking into the privatization of the Latvian Shipping Company on May 8.

The Latvian Shipping Company's financial consultant proposes extending the deadline for the security deposit for both bidders and LPA backs this proposal. None of the bidders for the Latvian Shipping Company's privatization paid the $5 million security deposit by the April 27 deadline.

The Latvian Shipping Company's privatization regulations stipulate that the 68 percent share in the company or 136 million shares will be sold to a strategic investor in one package, but 15 percent or 30 million shares will be sold in a public offer for vouchers.

Six percent or 12 million shares will be sold to the company's employees and pensioners for privatization vouchers; 10 percent or 20 million shares will be turned over to the national special pension budget; and 1 percent or 2 million shares will be transferred to privatization reserves.