Reforms of state-owned liquor monopoly may finally begin

VILNIUS - Two weeks ago at the opening session of the Lithuanian Parliament, Prime Minister Algirdas Brazauskas announced plans to push ahead with privatization of state-owned spirituous beverage producers, a reform the government has been discussing for 18 months.

Currently, the Lithuanian state owns majority stakes in all producers of liquor with an alcoholic content over 22 percent, with the exception of Stakliskiu Midus, a producer of traditional mead liquors.

In a country which has been slow to reform, at least compared to neighbors such as Estonia, some regard this reform as long overdue.

Guoda Steponaviciene, policy analyst at the Lithuanian Free Market Institute, is skeptical that the latest reform plan is for real.

She and her colleagues have advised on economic reform since the institute was founded in 1990 and specifically on privatization of liquor producers for the last two years.

The mind-set of successive Lithuanian governments had hindered reform, said Steponaciviene. "State businesses are harmful to the market and we see most corruption cases in government-run companies," she said.

But in this case there may be real danger attached to Estonian-style rapid reform. This month's mass poisoning in the Estonian city of Parnu, in which bootleg liquor has so far killed more than 60 people, demonstrates that a privatized alcohol sector should be strongly regulated and monitored.

It may be argued that such a disaster could occur anywhere, but the chances of it happening on such a scale would be greatly reduced by government controls.

Lithuania's outgoing Agri-culture Minister Kestutis Kristinaitis says that the first step toward privatization is legislation which would align production standards with those in the European Union. "The Lithuanian government and the Agriculture Ministry are putting forward EU-standard requirements which I expect will be passed in this fall's parliamentary session," he said.

Actual reform of the alcohol production sector and privatization of state-owned liquor production should be completed in 2003-4, he said. He blamed a lack of interest on the part of previous governments for the slowness of reform, but added that, "too quick a privatization will not make for safe products."

One must hope that the Lithuanian state can privatize its alcohol monopoly responsibly and create a free market, while using the less visible hand of good government to regulate production.

But Elena Leontjeva, president of the Free Market Institute, questions the speed and sincerity of the reform effort currently envisaged. "It's time to switch from the declaration of an idea to real action, and here we encounter the resistance of the bureaucracy," she said.