WORLD TRADE
ORGANIZATIONWT/L/356
8 June 2000
(00-2283)
Original:  English
REPORT ON THE PRIVATIZATION PROCESS IN LATVIA
Communication from Latvia
The following communication has been received from the Permanent Mission of Latvia, with
reference to the commitments contained in the Report of the Working Party on the Accession ofLatvia to the WTO (WT/ACC/LVA/32).
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Summary
Summarising the results of privatization in Latvia since 1992, it should be noted that mass
privatization can be considered complete in Latvia. Within nearly eight years, 97 per cent of all state
owned enterprises and companies have been designated for privatization, more than 1,500privatization agreements have been concluded. As a result of implementing the privatization program,
in the first half of 1999, the private sector accounted for 66 per cent of the GDP, and 70 per cent of
the economically active inhabitants were employed by the private sector in Latvia. In such sectors as
industry, agriculture, fishing, construction, and trade, the share of private companies exceeded 90 per
cent of the GDP.
Public offering program (privatization for vouchers)
The Latvian public offering program has been recognised as one of the most successful
among those implemented in economies in transition. It has facilitated development of a wide stratumof shareholders. By the end of 1999, stock of 83 companies had been offered for privatization
vouchers within the public offering program. As a result, 110,887 natural persons and legal entities
have already became shareholders in the above companies. Of the 66 companies listed on the Riga
Stock Exchange, 60 companies are privatized companies.
Action plan for the year 2000
In 2000 the Latvian Privatization Agency (LPA) – the governmental agency under
supervision of the Ministry of Economy - will put emphasis on drafting the strategy for privatization
of the remaining large state owned companies and commencement of privatization activities, and
acceleration of land privatization process. The LPA will also facilitate the control of compliance with
the concluded privatization agreements, as well as will implement gradual transfer of the LPA
functions to other governmental institutions.
Privatization is generally completed with exception of four large companies – State owned
joint stock company “Latvenergo” (Latvian Ener gy), State owned joint stock company “Latvijas
kugnieciba” (Latvian Shipping Company), Joint stock company “Ventspils Nafta” (Ventspils Oil) and
the Limited liability company “Lattelekom”. On February 2000 the Government has announcedrestructuring and privatization of “Latvenergo”. The Latvian Privatization Agency will sell a minority
share of the co-generation system to strategic investors by November 2000. In “Ventspils Nafta” stateWT/L/356
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is a minority shareholder. It is foreseen to place state share portfolio on the international market by the
end of 2000. In case of “Latvijas Kugnieciba” after several unsuccessful attempts to find strategic
investor the Government has decided to hire reputed investment advisor to work out appropriate
privatization model. The limited liability of company “Lattelekom”, partially owned by the State (51
per cent), will be fully privatized when negotiations with private shareholder regarding reduction ofmonopoly period from 2013 to 2003 will be finalised.
Information on the Progress of the Privatization Process of State Enterprises
1 May 1994 - 1 May 2000
Activity Total Small objects
(less than 50
employees)Medium-sized
objects
(50-500 empl.)Large objects
(More than 500
empl.)
Enterprises assigned for privatization 888 596 257 35
Enterprises transferred from the Ministry ofAgriculture310 214 96 0
Enterprises transferred for liquidation 165 65 46 7
Repeated privatization 18 13 5 0
Privatization objects after split of enterprises 1,676 1,341 295 40
Privatization cancelled or enterprises merged with
other companies198 186 9 3
Privatization temporarily stopped 8 5 2 1
Restitution process initiated 60 54 6 0
Liquidation or insolvency procedure initiated 92 32 32 7
Privatization Regulations approved 1,301 427 222 34
Transactions concluded:
- purchase agreements signed 1,068 357 169 24
- invested into private companies 4 2 2 0
- privatized without majority owner 4 0 2 2
- privatized by the Ministry of Agriculture 261 165 96 0
Proceeds of sale in LVL1 million:
- cash 107.5
- privatization vouchers 162.4
In 1999:
− The LPA approved 578 basic principles for privatization of state owned property objects and
620 privatization regulations for the property objects, including 491 basic principles and 450
privatization regulations for privatization of land plots.
− Seven state owned enterprises were transformed into statutory companies.
− Purchase agreements for 43 state owned property objects were concluded, the total purchase
price of the sold state owned property objects amounted to 3.39 million LVL. 31.3 per cent of
the total purchase price had to be paid in LVL and 68.7 per cent - in privatization vouchers2.
− Pursuant to purchase agreements, the purchasers assumed obligations for the amount of 9.09
million LVL.
− The purchase agreements stipulated retention of 1,757 jobs.
− Four of the above state owned property objects were sold for a symbolic price – 1 LVL. Their
purchasers assumed obligations of the property objects in the amount of 2.43 million LVL
and undertook to secure 228 jobs.
− Purchase agreements of 25 state owned real properties (buildings) were concluded, total sale
price of the property objects – 0.38 million LVL. Means of payment for the property objects
were: 24.6 per cent in LVL and 75.4 per cent in privatization vouchers.
                                                     
1 1 LVL = 1.66 US$
2 Information on the volume of privatization transactions in 1999 is subject to updatingWT/L/356
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− State owned equity holdings in 24 companies were sold for the total purchase price of 7.25
million LVL. Means of payment: 48.4 per cent LVL and 51.6 per cent privatization vouchers.Natural persons paid 28.95 per cent of the total purchase price, legal entities paid 71.05 per
cent of the total purchase price.
− 372 purchase agreements were concluded for the sale of state owned land plots. The total sale
price of land plots – 17.9 million LVL. Means of payment: 19.7 per cent LVL and 80.3 per
cent property compensation vouchers. Total area of the land plots sold was 6 810 306 squaremetres.
− Purchase agreements of nine state owned real properties (buildings with land plots) were
concluded. Total sale price of the above properties – 0.38 million LVL. Means of payment:
53.8 per cent LVL, 20.6 per cent privatization vouchers and 25.5 per cent propertycompensation vouchers. Total area of the land plots sold was 16,812 square metres.
− Liquidation process was completed for 32 enterprises.
− Purchase agreements for the state owned assets in four enterprises to be denationalised were
concluded. The LPA reviewed three denationalisation cases.
− Four lease buy-out purchase agreements were concluded. The total purchase price stipulated
by the agreements – 0.49 million LVL.
− The LPA concluded 8 pledge agreements to secure for the purchasers’ obligations.
− Shares of three companies were sold for privatization vouchers via the public offering (state
JSC Rigas Starptautiska Autoosta  (Riga International Bus Terminal) , state JSC Lauku
Projekts  (planning, designing and construction works in rural areas) , state JSC Rigas
Elektromasinbuves Rupnica (Riga Electrical Machinery Plant). Total nominal value of thefirst two companies was 1.3 million LVL; as a result, 228 natural persons and legal entitiesbecame shareholders.
− Total nominal value of shares sold to the enterprise employees and pensioners for
privatization vouchers amounts to 0.3 million LVL, 815 natural persons had became
shareholders. Total nominal value of shares sold to the enterprise management (25 persons)for privatization vouchers amounts to 0.4 million LVL.
− 15 agreements were concluded about the sale of the equity holdings established as a result of
budget debt capitalisation for the total sale price 1.23 million LVL. Means of payment: 62.8
per cent in LVL and 37.2 per cent in privatization vouchers.
− The LPA passed decisions about the change of payment means in 61 privatization cases, upon
exercising its right stipulated by Part two of Article 52 of the Law On Privatization of StateOwned and Municipal Asset Units. The purchasers are allowed to pay 708,101 LVL in
privatization vouchers.
− Pursuant to the Cabinet of Ministers Regulations No. 34 of 27 January 1998, 2.66 million
LVL were allocated for the settlement of the employees claims from insolvent and liquidated
enterprises, including 2.2 million LVL to be transferred to the budget, 0.46 million LVL for
debt payment to the employees. Besides, pursuant to the Cabinet of Ministers’ Order, 0.93
million LVL were allocated for the settlement of JSC Dauer  (electrical machinery production)
employees’ claims, including 0.45 million LVL to be transferred to the budget, 0.48 millionLVL for the settlement employees’ claims.
− 5,039,000 LVL were transferred to the State Property Privatization Fund, 2,383,400.95 LVL
were transferred to the municipal property privatization funds.
The most significant privatization transactions in 1999
The largest privatization transaction in 1999 according to both the number of employees and
the sale price – sale of shareholding of the state JSC Rigas Elektromasinbuves Rupnica (RigaWT/L/356
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Electrical Machinery Plant)  to the Russian Commercial Bank Baltijskij Bank . Sale price of the
shareholding – 1,008,994 LVL, the purchaser shall pay 15 per cent in LVL and 85 per cent in
privatization vouchers.
The largest transaction of the sale of the state owned equity holdings is the sale of state owned
shares in JSC Cesvaines Piens  (milk processing enterprise) to SIA Bluminals  for 1.6 million LVL.
The purchaser shall pay 50 per cent in LVL and 50 per cent in privatization vouchers.
The state owned land plot at 16 Audeju iela, Riga, was sold to JSC Universalveikals “Centrs”
(department store) for 620,000 LVL.  Land plot at 26 Kugu iela, Riga, was sold to JSC Pasaules
Tirdzniecibas Centrs (the “World Trade Centre”) for the same price. The purchaser shall pay 20 per
cent in LVL, 80 per cent in property compensation vouchers.
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