Financial Services, Latvia, Legislation, Real Estate

The State Audit Office has concluded that the privatization process has been in the final stages for at least the last seven years. During the period, only three% of the apartments still owned by the state have been privatized and 2% of the remaining privatization vouchers have been used. Few properties available for privatization are left, including 20 residential buildings, 81 apartments and 695 plots of land, and the interest in privatization of those properties has been low in recent years.

Only slightly over 2% of the privatization vouchers issued in Latvia in the early 1990s still remain unused. Maintaining the privatization voucher accounts costs the state over EUR 300,000 annually, but 62% of the individual accounts hold no more than one voucher each which means that majority of the Latvian individuals have already used their vouchers for privatization of state-owned and municipal assets.

Due to the above-mentioned, the State Audit Office has called on the Economics Ministry to consider setting a specific deadline for completion of the privatization process and use of the privatization vouchers. Reluctance to set such deadline might lead to extra public expenditure in the future, the state auditors warned.

The State Audit Office pointed out that the LPA income is made up of deductions from the privatization proceeds and these had been lower than the agency's operating costs since 2013, even though the government in 2015 increased the deductions due to the LPA to 50% from the original 7%. The remaining costs have been paid from the reserves which also are dwindling.

Therefore the state auditors have suggested that the Economics Ministry should review the current situation with the privatization process and consider whether it was reasonable to let the LPA continue functioning at its current capacity of three board members and 56 employees with a total payroll of nearly EUR 2 million.

The State Audit Office also called for improved management of the LPA. Altogether, state auditors made a total of 13 recommendations as a result of the audit about the situation with the privatization process in Latvia.