Just before Christmas 1995, the new Government asked the PA for ideas on how to speed up the privatisation process. Discussions were also held regarding possible amalgamation with the SPF. As a result, it was decided that the State Privatisation FUnd (SPF) could be liquidated and that privatisation could be sped up by assigning all remaining state-owned enterprises (SOEs), whether previously held by the SPF or in Ministries, to the PA for privatisation. This meant that lists which had previously been prepared for Cabinet were immediately submitted for approval and new master listings of all enterprises remaining to be assigned for privatisation were prepared. The only exclusions were firms such as those deemed to be of national strategic interest or cultural value (sports clubs, etc).

This Government initiative resulted in the following amalgamated lists being passed by Cabinet:

Nearly 200 organisations are not assigned for privatisation. They include regional road maintenance units, agricultural units (such as research stations and laboratories), many other culturally oriented entities, and some strategic enterprise units such as ports, the postal service and the railway company. This remainder includes few, if any, truly 'business' oriented organisations. Hence, one can conclude that once the PA completes the privatisation of the firms now assigned, Latvia will have completed its transition to a market economy, with all real business units residing in the private sector.

Given the above developments, the PA hopes that by the end of the first half of 1998 the privatisation programme will have been basically concluded and will contribute to the new Government's stated objective to complete the transformation of the Latvian economy.

In order to cope with this very challenging workload (current inventory of more than 800 properties to privatise), and in recognition of its limited resources, the PA is counting on donor organisations to contribute to the final phase of the transformation, which it is commencing immediately.

The PA utilises several approaches to privatisation, among which are international tenders, direct sales or public auctions of enterprises, sale of the shares of enterprises to employees and pensioners, and the sale of shares by public offering.

In 1995 and the first half of 1996, five public offerings took place. Thirty-seven enterprises were privatised in this manner. The PA is planning to continue the public offering programme in order to ensure that as many residents of Latvia as possible become shareholders.

To attract foreign investment, the Privatisation Agency has organised four international tenders. International tenders are financially supported by the Ministry of Finance of Germany. A total of 153 companies have been offered during four tenders. The deadline for the fourth tender, offering 28 companies, was 1 August 1996.

As at 1 September 1996, 805 state enterprises (asset units) had been assigned by the Cabinet of Ministers for privatisation and 68 state enterprises for liquidation. Also, state-owned equity holdings in 136 enterprises had been assigned for privatisation, and 25 properties (real estates) for sale. The PA is involved in the valuation of 187 restitution cases. Privatisation regulations have been approved for 621 state enterprises (asset units) or their parts, for 42 state-owned equity holdings and 20 properties. Sales agreements have been concluded for 435 state enterprises (asset units) or their parts, for 29 state-owned equity holdings, for 17 enterprises to be liquidated, and for 14 properties.

As one initiative to help the process of privatisation, the Government is introducing legislative measures which will make investing in Latvia more attractive to foreigners. Examples of positive changes are as follows:

• foreigners can now purchase privatisation certificates directly on the secondary market to use in privatisation at the face value of 28 lats (market is less than 1 lat) allowing for substantial discounts;
• foreigners may soon be able to purchase the land associated with an enterprise being privatised, if an investment protection treaty has been signed with the respective country;
• extractive industry restrictions on foreigners are to be amended to make them far less restrictive;
• protection has been implemented for privatisers against undeclared liabilities appearing after a company has been privatised.

Latvia's investment policy reflects the need to create a business environment which is attractive to both local and foreign investors. Indeed, Latvia understands the important role which foreign investment can play and is gradually adjusting its legislative and regulatory business framework and standards to reflect those in the European Union. As a step in this direction, Latvia has concluded agreements with many countries on mutual promotion and protection of investments, as well as international tax conventions to avoid double taxation, and is continuing work on these issues.

The PA will try to increase participation by foreigners in privatisation through the use of the Internet, which is more and more becoming an interface for commercially oriented transactions. It is planning to combine this new technology with a proactive international out-reach programme and expects this approach to greatly increase the international exposure of the Latvian Privatisation Programme by ensuring wide availability of information, concentrating on direct marketing and servicing information requests in an effective manner. EC-PHARE assistance is being provided to ensure realisation of this new initiative.

For further information, please contact: PRIVATIZACIJAS AGENTURA (Latvian Privatisation Agency), K. Valdemara 31, Riga LV-1887, LATVIA. Tel: +371-7-332082 Fax: +371-7830363 E-mail: lpa@mail.bkc.lv