A working group of experts from the Baltic Institute of Corporate Governance (BICG) has prepared a report on state-owned enterprises (SOEs) in Latvia.
On the 8th of September, the Annual Review 2009 was presented to the Cabinet of Ministers’ Reform Steering Group meeting. The aim of the initiative is to highlight the link between the state and the individual and emphasize that all assets owned by the Latvian state is the property of Latvian citizens, and it is a direct obligation of the government to manage it with due care and in a responsible manner.
The report provides detailed information on the financial performance of companies that are fully or partly owned by the government. BICG experts have analyzed the profitability of companies in the energy, telecommunications, forestry, transport, real estate, healthcare and other sectors. According to the compiled data, the Latvian state is a shareholder in altogether 142 companies with their aggregate turnover comprising 18% of Latvia’s GDP in 2009. In per capita terms, the value of state-owned shares and assets is 1,646 LVL. The total value of state-owned assets is 3.68 billion LVL, including state shareholdings in companies 2.06 billion LVL worth. The balance sheet total of SOEs is 7.15 billion LVL. In 2009, SOEs contributed 185 million LVL to the state budget by dividend payouts; the number of employees totals to about 53 thousand.
According to Baltic Guidance on the Corporate Governance of Government-owned enterprises developed by the BICG and a group of international level corporate governance experts, compiling a publicly available annual report about SOEs and their performance appraisal is among the recommendations to be followed towards a more efficient and professional management of state-owned assets.
“The Review is the first ever document of this type in Latvia. Its preparation has been a voluntary work donated by the BICG and its expert team. The goal is to improve transparency in Latvia and create a benchmark for SOE evaluation in the years to come, thus contributing to their better performance,” said Kristian Kaas Mortensen, President of the BICG.
The report also assesses the financial performance of SOEs as compared to their peers in other countries, including in the Baltic Sea region. The conclusions are that better-governed SOEs and their more efficient operations would bring higher returns to the government budget both in the form of regular and one-off dividends.
On Wednesday, the 8th of September, the Reform Steering Group meeting discussed the Review and decided to set up an intersectoral working group and charge it with a task of drafting a policy document regarding the management of government-owned assets, with an aim to increase the revenue to the government from investment in SOEs.
“Finding the right levers and tools to make the operations of companies more efficient will be one of the main challenges for the working group”, admits Daiga Auziņa-Melalksne, a Board Member of BICG. “The Review outlines a number of possible alternatives, including establishing a central professional management body similar to those in Nordic countries. Further steps involve an evaluation of the compiled data and assuring an efficient management at all SOEs. Improved management of SOEs potentially may raise their value, increase the dividend payout amount and underline the role of a transparent and advanced corporate governance for the development of business environment. “
The report was prepared in two months and involved the participation of the leading experts on the Latvian and Baltic financial markets, including international audit companies and investment banks. There was an immense support from the Ministry of Economics and other ministries in the form of contributed financial data on SOEs and assets.
Similar reports are published also in Finland and Sweden. Recently Lithuania has prepared its report, and right now an in-depth audit is in progress with a goal to enhance the financial performance of SOEs.
About Baltic Institute of Corporate Governance
Baltic Institute of Corporate Governance is a non profit, non governmental initiative, working towards creating better governed public and private companies in the Baltic Sea region. BICG pursues global class transparency and competitiveness of public, private and state or municipality owned enterprises in the Baltic region through the promotion of leading corporate governance practices.
The document presented to the Reform Steering Group and the Presentation (in Latvian) is available on the website of the Cabinet of Ministers: http://www.mk.gov.lv/lv/aktuali/zinas/2010gads/09sept/080910-mp-07/.
Prepared by:
Kristian Kaas Mortensen, President, Baltic Institute of Corporate Governance, phone: +370 6111 33 44, km@corporategovernance.lt.
For any comments about the Review and conclusions, please contact Indars Aščuks, head of the working group, phone +371 29119096, indars.ascuks@nasdaqomx.com.
