The further policy of Latvia ensuring effective management of public assets J.Pūce, State Secretary

Legal framework  State can be engaged in business in the subsequent cases:  If the market is unable to protect collective interests of a community  In sectors with a natural monopoly  In strategically important sectors  In new sectors  In capital intensive sectors  In sectors, where is need to achieve the highest standard of quality

Statistic Statistics  Latvia is a shareholder in 142 enterprises which includes 74 enterprises where state holds 100% shares  At the end of 2009 total asset value of enterprises amounted to LVL 7,15 billions - however the total turnover was LVL 2,26 billions

Statistics  More than 52 thousand people were employed in state-owned enterprises; the average profit and turnover ratio was 5.9%in 2009  Total return on equity of state-owned enterprises was 7% in 2009 (financial sector is not included)

Governance State-owned enterprises:  Governance is decentralized  Managed by the correspondent line ministries  Managed in accordance with the state established sector policy and social needs

Disadvantages  Low capital return  Non-transparent supervision  Unprofessional supervision  Political aspects of operative decisions  State-enterprises which acts as state administrations

Reforms  Strategy setting principles for engagement of public person in business activities – aims to reassess the public person (state, local) business:  State-owned companies which are based on performing public administrative functions are going to be re-organized into national regulatory authorities  The objects whose activities affect public safety and provide important public services are going to be maintained as state-owned companies (Latvenergo, Post of Latvia, International airport, Railway of Latvia, Air Traffic State Forests of Latvia)

Reforms  To offer CoM to support for one of the following solutions for public person’s business:  Public person is not subject to restrictions for commercial activities  Reduce the public person's rights to behave as entrepreneur meanwhile to determine that a public person is able to do a commercial activity if major national (public) interest is required  Determine that public person is entitled to do a commercial activity if market failure is identified

Reforms  Strategy of state asset management – aims to centralize and improve governance of state-owned enterprises:  Developing business apart of sectoral policy issues  Centralized public asset management  Defined in state capital investment goals  Measures for return on assets and value enhancement

Reforms  Constantly available data on state assets, a detailed study provided, transparent information ensured, annual reports prepared;  Establishment of professional Councils with independent members  Reform of Board members salary, linking salary levels to the results achieved  Differential applicable dividend policy;  Regulary analyzed the state co-partnership in the capital companies

Schedule  Strategy setting principles for engagement of public person in business activities :  To submit the strategy to the CoM before the end of March, 2011  To submit draft laws and regulations to the CoM for consideration till July, 2011  Strategy of state asset management :  A public consultation - April, 2011  To submit the strategy to the CoM before the end of July, 2011  To submit draft laws and regulations to the CoM till the end of 2011

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