Privatization process in Lithuania


           HISTORIC OVERVIEW OF PRIVATISATION PROCESS IN LITHUANIA

Privatization process was launched in Lithuania in September 1991 and  since
then it has constituted an integral part of  Lithuania's  economic  reforms.
The entire privatization process may be divided into three major stages:

 . The first stage covers the privatization that took place  from  September
   1991 until July 1995. This phase may be called a mass  privatization  for
   vouchers with some elements of cash sales. The voucher method was  chosen
   as the most effective way of transferring the  ownership  of  the  state-
   owned enterprises. The privatization of state assets in Lithuania  during
   that phase has been based on the Law on Initial  Privatization  of  State
   Property passed in late 1991 and amended in 1993. As  a  result  of  that
   phase, Lithuania has  become  a  country  with  a  majority  of  the  GNP
   generated in the private sector.

 . The  second  phase  of  privatization  started  in  July  1995  with  the
   introduction of  a new  Law  on  Privatization  of  State  and  Municipal
   Property.  A  State  Privatization  Agency  and  a  State   Privatization
   Commission were established in  late  1995  to  administer  the  process.
   According to the Law, the second phase will call for  cash  privatization
   of remaining state and municipal property at  market  prices.  Local  and
   foreign investors will have equal  rights  in  purchasing  the  companies
   offered for the privatization in Lithuania. During the  second  phase  of
   privatization the government will have to decrease  its  control  in  the
   sectors of economy generally recognized as the state monopoly through the
   cash sales. According to the Law on Privatization all bidders have  equal
   rights in the privatization process. Previously existing concessions  for
   the employees and management have  been  eliminated  from  the  new  Law.
   During the second phase of privatization the amount  of  investment  into
   Lithuania was comparatively small. Investors had to lodge documents  with
   many different institutions, and therefore  the  privatization  procedure
   took some time. Individual ministries were not interested in  preparation
   of objects for privatization. Besides, legally the  former  privatization
   institutions had no right to transfer obligations of enterprises  to  the
   purchasers because they were not real managers of enterprises.

 . New laws of privatization and State Property Fund (SPF)  were  passed  in
   November  1997.  According  to  the  aforementioned   Law   restructuring
   Lithuanian Privatization Agency established the SPF and other related  to
   privatization and property management institutions. SPF holds  in  trust,
   uses, disposes and privatizes securities and other  state-owned  property
   transferred to it by the Government of the Republic of Lithuania.

  There are several possible methods of privatization:

 . public subscription for shares;
 . public auction;
 . public tender;
 . direct negotiations;
 . lease with an option to purchase;
 . transfer of the state or municipal control of an enterprise controlled by
   the
      state or municipality.

THIRD PHASE OF PRIVATISATION, 1998 TO DATE

    A new, amended privatisation  law  has  been  approved  in  the  Seimas
recently, November 1997. The law amends the current privatisation  law.  The
proposed changes into the law are following:
   i) to establish the State Property Fund (SPF) as the  successor  to  the
      enterprise founder found in the current law;
  ii) to bring certain  procedures  of  the  current  law  into  line  with
      operation of proposed SPF and;
 iii) to do technical changes (but not substantial) to the current law.

    The key policy change, proposed by the new law, is the  replacement  of
the role  of  enterprise  founder  and  many  of  responsibilities  of  the
Privatisation Agency by the SPF. SPF holds in  trust,  uses,  disposes  and
privatises state-owned property. As time showed, the branch ministries  had
too many conflicting policy objectives and wished to keep enterprises  that
the Government has decided to sell, so, in brief, privatisation process  by
new law is made less bureaucratic. The SPF co-ordinates  the  privatisation
process in Lithuania and directly organizes privatisation of largest state-
controlled entities in industry and infrastructure. Privatisation of  these
enterprises is carried out through  transparent  competitive  procedure  of
international tenders prepared and  executed  by  internationally  renowned
advisors and arrangers. First of all, public tender is announced to prepare
the privatisation program for the company by retaining a  leading  adviser.
During  the  tender,  consultants  having  an   extensive   experience   of
privatisation in the relevant sector are selected to prepare an  attractive
privatisation program and provide financial, technical and legal advice for
the Government of Lithuania concerning the  enterprise  to  be  privatised.
When the program is to be approved by the Privatisation Commission and  the
Cabinet of Ministers a tender is to be announced for the  privatisation  of
the company where the object shall be sold.

    Recently  Public  Limited  Companies  Lithuanian   Telecom   ("Lietuvos
Telekomas") and Hotel Lietuva (Vie?butis "Lietuva")  have  been  privatised.
Privatisation of  these  enterprises  is  carried  out  through  transparent
competitive procedure of international  tenders  prepared  and  executed  by
internationally renowned advisors and arrangers. For the  enterprises  which
have a strategic importance to the Lithuanian economy,  the  Government  has
devised a special procedure of two stages for their privatisation  and  some
of them are already privatised. Public Limited Companies Lithuanian  Telecom
(Lietuvos  Telekomas)  has  been  purchased  by  the  strategic  investor  -
Consortium "Amber Teleholding" of Sweden "Telia" and Finnish  "Sonera".  The
Government accepted sale option  of  60  per  cent  shares.  In  the  energy
sector, the oil refinery AB "Ma?eikiu  Nafta"  is  also  being  prepared  to
privatisation. Using the International tender,  a  consortium  of  financial
and other advisors, led by Banque Paribas, has been selected as  the  winner
of tender. At the  moment  it  is  under  the  negotiations  with  potential
investors. The Government of Lithuania is  also  privatising  two  airlines:
"Lietuvos avialinijos" and "Aviakompanija Lietuva". Recently, the  companies
have been consolidated so that "Aviakompanija Lietuva" became  a  subsidiary
of a major airline. The privatisation of the company is foreseen in 1999.

    Privatisation of these entities is expected to  achieve  the  following
goals:

1) to increase the efficiency of management  and  operation  by  introducing
   new  technologies,  investing  additional  funds   and   exploiting   the
   experience of investors in the relevant area;
2) to promote the development of enterprises and markets;
3) to liberalize monopolistic markets.

  Institutions taking part in the privatisation of strategic objects are  as
follows:

1) the Property Fund,  the  role  of  coordinator;  prepares  companies  for
   privatisation and carries out the technical work,
2) the Privatisation Commission is responsible for  the  approval  of  final
   decisions and control of the privatisation process.
3) International tenders for privatisation of strategic objects are  carried
   out by   specially appointed Public Tender Commissions for the sectors of
   energy, transport and telecommunications.

    Public Tender Commissions determine the criteria for the preparation of
privatisation programs based on the Government policy as  well  as  practice
and experience of other countries.  The  main  priorities  of  privatisation
include not just maximising the revenue from  the  privatised  objects,  but
also attracting potential investors and  their  contribution  to  Lithuania.
Privatisation of the largest objects in  Lithuania  is  carried  out  in  an
open, transparent, efficient and rapid manner.



Sources:

   I. Lithuanian Development Agency. Website: ссылка на сайт удаленаcontact:\\www.lda.lt
  II. ''Lietuvos Rytas" Nr. 8 (360)/ 1999 m. sausio 30 d; "  Valstyb?s turto
      fondo veiklos ap?valga". p.16;
 III.  Republic   Of   Lithuania   Law   On   The   State   Property   Fund.
      Website:ссылка на сайт удаленаcontact:\\www.lrs.lt