The Latvian Forest Sector Trade Union (LMNA) categorically objects to the proposal to lift the ban on privatising companies that manage strategic state resources. Particularly alarming is the idea of listing the shares of AS “Latvijas valsts meži” (LVM) on the stock exchange.
None of the EU's state forest companies are listed on a stock exchange – not in Finland, not in Sweden, not in Estonia, not in Lithuania. These companies are 100 % state-owned. Latvia is the only country currently considering abandoning this principle, and it is doing so without any clearly formulated public benefit or detailed assessment of the risks. Privatising LVM would not only jeopardise the status of Latvia's forests as the common property of society, but would also pose a real threat to sustainable management. The history of privatisation in Latvia is bound up with the sell-off of state enterprises to narrow interest groups, the weakening of economic sovereignty and the sacrifice of long-term national interests for the sake of short-term fiscal gains. We cannot afford another such experiment.
The sustainability of forestry is under threat
Forestry is a long-term industry. The forest cycle – from planting to timber harvesting – often lasts up to a hundred years. Investment in sustainability cannot be measured in quarterly profit figures. No private investor will act in the public interest – their aim is profit. LVM's mission, by contrast, is not merely to maximise profit, but to preserve and sustainably manage an asset that belongs to society. It is precisely this function that makes the company an irreplaceable instrument of the state in delivering sustainable policy.
Privatising LVM would run counter to the positions set out by the European Commission, including the Nature Restoration Regulation, which stresses the importance of preserving biodiversity and natural resources. European forest management policy rests on the principle that state forests are not to be subjected to market mechanisms. They are a shared resource of society.
The Ministry of Finance's proposals give no answer as to how the anticipated increase in financial returns is to be reconciled with the tasks the state has assigned to LVM – such as forest regeneration, improving public welfare or meeting climate targets. LVM has carried out these tasks to date, but a stock exchange listing will force a change of priorities. What will replace these functions? Who will ensure the balanced development of forest land for the next 50, 70 or 100 years?
Risks to employment and regional development
Over its many years of operation, AS “Latvijas valsts meži” has served as a pillar of stability for Latvia's forest sector – not only as a manager of resources, but as a reliable, predictable partner in a long and complex value chain. It is LVM that ensures the sector has a clear, long-term view of the availability of timber resources – a precondition for investment by forestry and wood-processing companies, for the development of high value-added products, and for employment in the regions.
The forest sector as a whole – forestry, wood processing and related services – directly employs more than 40 000 people in Latvia. At least as many again work in it indirectly – in logistics, repairs, services, energy, education and elsewhere. The structure of the sector is markedly regional – located precisely where other employment opportunities are limited or do not exist at all.
These risks are recognised by international trade union organisations as well. The European Trade Union Confederation (ETUC) and the European Federation of Public Service Unions (EPSU) have repeatedly stressed that natural resources and their management must remain under public control. Privatisation creates risks not only for employment and labour rights, but also for the quality and sustainability of services.
ETUC points out in particular that liberalisation in the natural resources sector can lead to an erosion of the public good, because a company's activities become subordinate to the interests of investors rather than the needs of society. This threatens job stability, social guarantees and social dialogue.
EPSU notes that privatising strategic resources increases inequality and weakens democratic control over shared property. Handing resources over to the control of the stock market is regarded as a step away from transparent, socially responsible governance and may have irreversible consequences for regional development.
This is also a significant question of productivity – an area in which Latvia's wood industry already lags considerably behind. Higher productivity is possible only if companies can plan their development over the long term, investing in people and equipment. Without predictable access to resources, that incentive disappears. This in turn drives the sector into a trap of low wages and low added value.
Consideration must also be given to the quality of the working environment and to social protection. Experience shows that, when state companies are being prepared for a stock exchange listing, “efficiency” campaigns are often carried out – staff numbers are cut, structural reorganisations take place, investment in occupational safety and training falls, and experienced specialists leave the company.
On paper such measures look like cost savings, but in real life they mean:
– a reduced payroll fund and instability,
– a weakened employee voice in the company's governance,
– a greater burden on the social budget in the form of unemployment and benefits,
– threats to occupational safety and health,
– reduced motivation to invest in local communities and infrastructure.
For regional development this would mean an exodus of residents, stagnating local economies and even deeper social inequality. The consequences of privatisation have so far been similar everywhere in the world: a company's strategy becomes oriented towards returns for investors rather than benefits for society. Such an approach is not compatible with the goals of regional sustainability, with the interests of society or with the objectives of national policy.
In the view of the international trade unions, such a course of action runs counter to the European social model and to the principles of sustainable development that Latvia has undertaken to observe. That is precisely why LMNA fully endorses what ETUC and EPSU have said – the state must not relinquish control over resources that are essential to society.
LMNA takes the view that the state must not run the risk of destabilising one of the few sectors in Latvia that is growing, internationally competitive and capable of exporting, especially at a time when so much is being said about raising productivity and achieving sustainable growth. As a public partner to this sector, LVM is irreplaceable – destabilising it means undermining the very foundations of the entire forest sector.
National security – gambling with sovereignty is not acceptable
Latvia's land and forest resources are not merely an economic matter – they are part of national security. LVM manages vast territories which, if they become partly private, could end up under the control of foreign investors of unknown origin. At present such a possibility cannot be ruled out – transparency of ownership on the stock exchange is limited.
In the present circumstances, any transfer of shares to the stock exchange – especially at a time when the security situation in Europe is fragile – is not merely an economic risk: it is a strategic threat.
The state's governance capacity – currently inadequate
The annexes to the report make it clear that the state as an owner is currently unable to carry out strategic oversight properly: there is no unified leadership, no strategic coordination, no mechanism of accountability. Until the state restructures its capacity as an owner, any disposal of shares is risky – because in practice the state's position may prove weaker than the pressure exerted by minority shareholders.
Investors' interests are clear – dividends and profit. The interests of the state – the environment, employment, future development – require a different approach. These two approaches cannot coexist if the state is unable to be an active player with values of its own, as we see with SIA “Tet” and SIA “Latvijas Mobilais Telefons”, where the state is unable to pursue its interests because the private investor blocks them. In such circumstances, it is irresponsible to talk about reducing state participation in strategic companies. If the governance system is not in order, even retaining a majority stake is no guarantee of influence – especially if professional investors are better able to manage information, initiatives and the dynamics of decision-making.
A considered approach is needed – not a hasty political step
We do not understand why a single “umbrella” decision is being pushed through covering all state-owned companies. LVM is not the same as Latvenergo, Air Baltic or Riga Airport. These companies operate in different sectors, with different functions, financial indicators and development potential. They must be assessed separately – with a clear objective, an analysis of the benefits and the involvement of the public.
If the aim is to attract investment, other capital market instruments should also be considered – a bond issue, for example, which does not change the composition of ownership. A listing is not in itself a guarantee of development. Any action involving LVM shares would be acceptable only if it served a specific goal of importance to society – for example, an LVM-led deep wood-processing project in one of the regions.
As long as the purpose of listing LVM shares remains hazy – “developing the capital market” or “increasing state budget revenue” – privatising the company is unacceptable.
We call on the government to abandon any plans to privatise state companies without delay, to retain full state ownership and control, and to begin a genuine discussion with the public. This is not merely an economic choice. It is a decision about Latvia's identity, about our attitude towards common property and about the future of our society.