Transition   Privatization   

Privatization in Latvia

By Robin Miranda

The Latvian legislature adopted ten privatization-related laws between March 20, 1991, and November 4, 1992, and its government issued nineteen privatization decrees during the same eighteen-month period.  The principal four laws on privatization include:

 

   Privatization of Establishments of Trade and Commerce, Restaurant and the Service Sector  -  this law authorizes the transfer of ownership rights over small businesses from the state to municipalities

 

On Land Privatization in Rural Regions  -  by virtue of this law, claims for restoring land property in rural regions could be filed, before December 31, 1992, and unclaimed land properties outside of population centers thereafter remained state owned and subject to privatization

 

 On the Procedures for the Privatization of Objects of State and Municipal Property  -  this law encompasses state or municipally owned properties, excepting enterprises whose productive activities are permitted only by state or municipality owned  establishments

 

 On Privatization Certificates  -  residents of Latvia, defined as citizens or permanent residents, receive an assigned number of certificates in accordance with their length of  residence.

As in a number of Central and Eastern European countries, privatization vouchers were designed to play a major part in Latvia's program to transfer land and other state and municipal property into private hands.  With minor variations within the region, the primary determining factors for the number of certificates allowed to an individual include his age, the number of years he resided and/or worked in the country, and the amount of compensatory payments due him by the state, if any.  Distribution of these vouchers began in September 1993, and certificates held by an individual may be used when purchasing a dwelling unit, land, a small enterprise, or shares in large joint stock companies. 

 By law, all properties that were illegally nationalized, collectivized, expropriated, or confiscated during the Soviet occupation, must have been returned, if possible, to their rightful owners.  However, Latvia's privatization progress, has been slow.  In 1992, only 2,026 buildings had been returned to their legal owners, 10,000 apartments privatized, and 302 shops and service units sold (Baltic Independent, March 5, 1993). 

The large privatization program had barely begun when it was virtually halted by the Parliament in 1991 and again in the first half of 1992.  The official reasons given were the rapid ruble devaluation and the government's indecision over a proper mechanism for redistributing privatization certificates (Baltic Independent, March 1993).  Latvia's overall slow progress may also be explained by other factors, such as:  First, Latvia lacks a centralized privatization agency, leaving the privatization initiative and pace to the discretion of disparate founding ministries.  Second, the problem of a diffusive privatization structure is compounded by extensive confusion plaguing the nation's major privatization laws.  Third, the law on privatization certificates was adopted on November 4, 1992.  Until then, only foreign investors with hard currencies qualified as participants in the privatization of large enterprises, delaying speedier implementation of the nation's large privatization program.  And lastly, two-fifths of the nation's current population is non-Latvian.  Because privatization is founded on the premise of property ownership rights, the rights of the non-Latvian producers and consumers need clearer articulation. 

Though it seems from above that the future of Latvia's progress remains uncertain, there is evidence today that the foundations of the market economy have been surely strengthened by such reforms.  The share of people employed in the private sector at the beginning of 1996 reached 62% of total employment (Latvian Homepage), and more than half of GDP in 1995 was produced by the private sector.

In the beginning of 1996, the Cabinet of Ministers handed over for privatization, 318 state enterprises, companies and their structural units. Currently, the government has handed over to the Latvian Privatization Agency almost all state property units planned for privatization.  To conclude, it looks as though Latvia is on its way to a road of successful recovery, from the Communist overtakings of previous years.

Baltic Independent.  Tallinn: The Baltic Independent, Inc.

Latvia - Recent Economic Developments.  International Monetary Fund, Washington, D.C.  1995.

various pages on the World Wide Web, including the Latvia Homepage on Latnet.

     

 

 

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