This is the latest annual report on the stateowned enterprises and shares prepared by the Cross-Sectoral Coordination Centre of the Republic of Latvia, and it provides information on the governance of state-owned enterprises and performance results in 2016.
Dear cooperation partners and citizens, State-owned enterprises play an important role in the national economy of Latvia. State-owned enterprises not only eliminate market failures, manage strategic assets of the Latvian State and carry out important tasks for the society, but also promote the development of the national economy, provide significant financial benefit to the public and provide affordable and high quality services in general. 2016 has been an important time of change in the sector of governance of the state-owned enterprises. According to the Law On Governance of Shares and Enterprises owned by Public Entities and Corporate Governance guidelines of state-owned enterprises of the Organization for Economic Cooperation and Development (OECD) professional supervisory councils were established in the large commercially oriented state-owned enterprises, the transition to the use of International Financial Reporting Standards in the preparation of the annual reports of large state-owned enterprises was launched, the development of medium-term operational strategies in state-owned enterprises and the evaluation of annual performance results using common standards were continued. During the reporting period CrossSectoral Coordination centre has developed series of guidelines in such essential matters as development of medium term operational strategies, selection and evaluation of management board members and supervisory council members, evaluation of the performance of state-owned enterprises, determination of strategic objectives of state ownership, disclosure of information on state-owned enterprises. When assessing an experience in management board and supervisory council member’s nomination process, the Cabinet of Ministers supported the legal framework for the selection and evaluation process of the members of the management board and supervisory council members of state-owned enterprises. With the implementation of the state-owned enterprises governance reform, both the general availability of information
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on the activities of state-owned enterprises and the government’s awareness of strategic issues of governance of state-owned enterprises, consolidated performance and investment plans have improved. Cross-Sectoral Coordination Centre has created an interactive database that allows to select and compare diverse information and indicators about the state-owned enterprises, thus providing the possibility for anyone interested to evaluate and analyse this information in conjunction with developments in the economic process. Work on development of methodologies for determining the desired return on equity is started, because it is important to ensure the effective use of capital invested by the state, setting ambitious financial goals, which simultaneously are balanced with the non-financial targets set by the industry and reflect, in the medium term, the increase in the value of a capital company. This report presents the progress in the corporate governance of state-owned enterprises and allows to assess the effectiveness of the measures implemented, while being open and calling for professional guidance on how to improve the governance of state-owned enterprises. I would like to thank all the co-operation partners who are actively involved in the implementation of reforms and affirm Latvia’s ability to demonstrate progress in the governance of state-owned enterprises, which was evaluated last year by the OECD, recognizing the compliance of governance of state-owned enterprise in Latvia with the recommendations of the OECD!
Pēteris Vilks, Head of the Cross-Sectoral Coordination Centre