Latvia, Детальна інформація

Privatization of land, housing, and enterprises...



Privatization vouchers are being used in the privatization of land, housing, and medium and large scale enterprises. The distribution of vouchers began in 1993, and is based on the recipients number of years in Latvia and their citizenship status. Restitution of land to its former owners is open to both residents and foreigners. This first phase of voucher distribution has proceeded quickly, with numbers jumping from 4,000 at the end of 1989, to 57,500 at the end of 1993. The second phase, restitution of ownership rights, has proceeded at a much slower pace. The Land Registry became fully operational in 1994, and has spent the past several years dealing with over 300,000 claims (EIU, 1995). The process of land restitution and privatization has proceeded most rapidly in rural areas, which is covered by different laws. The law on urban land reform restored ownership rights to former owners regardless of citizenship. Claims for restoration of land ownership rights were submitted to local governments. Privatization of apartments was accomplished by giving priority to existing tenants and then opening the rest to a public sale. Foreign investors were not allowed to purchase housing.



In 1994 the Parliament created, through the adoption of laws, the Latvian Privatization Agency and the State Property Fund. Both agencies are independent, although they are supervised by the Ministers of Economy and Finance, respectively. The State Property Fund is responsible for all state-owned enterprises. The agency is responsible for the monitoring of enterprise operations using standard commercial criteria. "The State Property Fund oversees the corporatization and restructuring of the enterprises, along with the appointment of their boards.".(IMF, 1995). The agency also is responsible for overseeing the privatization of the Latvian Universal Bank and the State Savings Bank. The agency receives income from enterprises, and uses some of theses funds to reinvest in the structuring of other enterprises. Public utilities have remained state owned, and it is unlikely that they will be privatized. (IMF, 1995).



The Latvian Privatization Agency is a nonprofit state-owned company. "Under privatization laws, the privatization of state enterprises can be initiated by anyone who submits a proposal to this agency.".(IMF, 1995). The Latvian Privatization Agency submits proposals to the Cabinet. After Cabinet approval of the proposal, the State Property Fund transfers the enterprise to the Privatization Agency, who announces the initiative to seek privatization of the enterprise and proposals. The Latvian Privatization Agency uses auctions, corporatization, and liquidation methods for privatization. Revenues from the privatization go to the agency to cover expenditures. The remainder goes to funds within local and state government.



The Latvian Privatization Agency has been criticized by some consultants as being slow-paced and selling companies off too cheaply. Privatization was sped up in 1994 due to goals of the Latvian Privatization Agency, in hopes of privatizing 200 companies a year and 75% of all state enterprises by the end of 1996. In addition to the privatization of land, enterprises, and banks, the government set up a number of institutions to provide support to small businesses. The centers are nonprofit organizations which provide information, counseling, and training for small to medium sized firms.







The reopening of the stock exchange...



A stock exchange has also been set up in Riga to trade shares in privatized companies. Latvia's stock exchange reopened on July 25, 1995, after being closed for 55 years following the country's annexation by the Soviet Union. The exchange originally listed five company shares. Trading takes place once a week on Tuesdays.







Recommendations for further structural reforms...



The World Bank has encouraged further structural reforms by encouraging growth in the private sector which reduces large budgetary deficits, the high ratio of expenditure to GDP (39%), and the large tax burden on businesses. "Further privatization of enterprises and property, the enforcement of financial discipline on banks and enterprises, and the improvement of the efficiency of the market through the adoption of cost recovery plans will play important roles in private sector development.". (World Bank, 1995). Structural reform in the public sector should focus on providing sufficient funding for maintenance and public investments, the reform of local finances to improve cost effectiveness of social services, the reform of intergovernmental fiscal transfers, the consolidation of small local government units, the reform of social insurance to lower costs and improved services, adoption of a regulatory framework for a privately managed pension system, improved tax administration through improved effectiveness in tax collection, and the strengthening of the institutional capacity for management of public finances through "improved management of public borrowing and monitoring of public expenditures"(World Bank, 1995).







Latvian Outlook...



Latvia's economic policy was restrained by the fiscal deficit inherited from the outgoing government, which amounted to $177 million by the end of the year.(IMF, 1995). IMF suggests that the government must continue with a program of large cuts, creating job loss and reducing infrastructure spending. Economic recovery will most likely continue at a slow pace due to reduced government spending, the banking crisis, and the fiscal deficit. Since 1994, the number of banks has shrunk from 64 to 39. In 1995 alone, another ten banks were shut down and a number are under criminal investigation. According to the 1995 audit, only 16 banks made a profit and among these, around six are believed to be viable and properly managed. "More banks will continue to disappear as more than half of the banks have been barred from taking deposits.". (IMF, 1995). Confidence will return slowly to the banking sector.