Reform of state-run firms fizzles in Cabinet

The government has been unable to bring about any of the recommended key changes to the way state-owned companies are managed, reported LTV investigative news program De Facto Sunday.

The Cabinet of Ministers is scheduled to again consider its options on how to operate a wide range of state-owned enterprises Tuesday at its weekly meeting, however the broad reforms called for by the OECD and European Commission (EC) have all but been abandoned, according to the De Facto report.

Reforms introduced in 2011 at the behest of the State Chancellery by the Reform Party and steered by former Economics Minister Daniels Pavļuts have now fallen by the wayside along with the fate of the now-dispersed political party.

The ministries were reluctant to tinker with the existing system, wherein state-run enterprises with profits in the tens of millions of euro help determine a ministry’s ‘weight’ during coalition-forming talks; ensure jobs for those close to the political parties as a form of favor; and organize large-scale procurements.

There had been hopes that a professional centralized bureau of administrators might be created to handle the largest state enterprises, such as those operating under monopoly conditions, or charged with earning profits. However its mandate was narrowly circumscribed by Saeima and it now serves as more of a ‘center of competence’, explained Economics Ministry Legal Department deputy director Kaspars Lore.

Instead of the envisioned independent super-agency, the government instead put the coordination job in the Cross-Policy Sector Center (PKC) under the Prime Minister’s authority. The PKC’s mandate, however, remains one of issuing guidelines and setting strategic goals, like a mini think-tank inside the government.

Still, ministries have balked at giving up direct ownership of the lucrative and influential companies under their purview, even objecting that the PM has undue control of their fields of activity through the PKC.

Latvia has been repeatedly criticized by both the OECD, to which it hopes to accede, and the EC in its latest country report for dragging its feet on the reform of its state-owned companies despite years of mulling the various recommended options.

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