July 2025

The Latvian Forest Industry Federation expresses serious concern about the proposal set out in the informative report to divest, by 2029, at least 10% of the shares in state-owned enterprises through a public offering, including in those companies currently subject to a privatisation ban. The LKF categorically objects to such a step in respect of AS "Latvijas valsts meži" and calls on the government to review this policy, in view of the considerations set out below:

1. Assets of strategic importance must not be subject to privatisation

The forest sector as a whole, and the state-owned enterprise AS "Latvijas valsts meži" in particular, is of not only economic but also environmental, social and security importance. These companies manage the nation's wealth, ensure sustainable forestry, provide employment in the regions and support local processing. The partial privatisation of such companies, even of only a minority shareholding, creates long-term risks — including pressure to maximise profit at the expense of environmental and public interests.

2. Capital market development must not come at the expense of public property

We understand and support the need to develop Latvia's capital market. However, alternative avenues should be sought for capital market objectives — for example, encouraging private companies to list on the stock exchange, improving legislation, or easing the conditions for attracting new issuers. Selling off the state's strategic assets is not a sustainable way to develop the capital market, as these are resources with limited scope for renewal.

3. The risk of reducing national economic security and influence over industries

State control over the most essential resources — including forest land and its management — is an instrument through which balanced and well-proportioned development of the sector can be ensured, particularly in times of crisis. Weakening such control through shares sold in a public offering creates risks both to the availability of forest resources and to the long-term competitiveness of local industry.

4. Potentially low returns — high risk

The proceeds from selling 10% of the shares would not be significant for the state budget, whereas the risk of losing control over the company's strategic direction is substantial. Experience in other countries shows that such sales often serve as a precedent for further privatisation. This is therefore a dangerous policy direction, one that could have an irreversible impact on the national economy.

The Latvian Forest Industry Federation calls on the government to maintain and strengthen state participation in strategically important enterprises, particularly in the management of natural resources, and to ensure that short-term budgetary problems or capital market development challenges are not addressed at the expense of weakening the management of public property.

The Forest Certification Council of Latvia supports the position of the Latvian Forest Industry Federation