Latviski English По-русски
Friday 23.02.2018 | Name days: Haralds, Almants

Economic Diary. Latvia Week 14 of 2012

(No Ratings Yet)

The coming Easter festivities did not weaken political and business activity in the country. On the contrary: several iconic events took place in Latvia during this short week.

Passport replacement

The event we have been waiting for a decade, has finally happened. Starting from April 1, ID-Cards – modern passport replacements, which will be able to hold additional holder’s information, such as his/her driving license, can now be officially issued. Keeping in mind the possible uses for these cards, it is unsurprising why thousands of people have already filed in their requests.

The necessity of introducing ID-Cards has been talked about on the highest political levels since the 90s, when the specific concept was developed. However, at first, the realization was hampered by the absence of electrical signature system in the country, then – the introduction of new passports with biometric data, which were necessary for the country to be included into the Schengen Area. Our neighbors resolved these issues quicker than we did: Estonia issues ID-Cards since 2002, Lithuania – since 2003 (and, according to Latvian car rental companies, employ them for a long time now).

Nevertheless, progress has come to us as well. The introduction of the electronic equivalent to a paper passport is estimated to cost the country LVL 9 million. In most cases the ID-Card can become a full replacement to «the document» with two exceptions: it cannot be used to participate in elections, and cannon be used to visit third countries. It can, however, grant access to e-services.

The end of gas monopoly is nigh

One more event which will undoubtedly touch all Latvian residents is linked to the negotiations between the Ministry of Economy and Latvijas gaze (LG) company about the cancellation of LG monopoly on the Latvian gas market. Most likely, it will happen before LG’s exclusive rights expire in 2017.

Latvia is troubled by the realization of the so called EU Third Energy Package, which proposes the division of the natural gas sales and transport business. The Ministry of Economy plans to present the government their report with specific proposals. Latvia, Estonia, and Finland all have the right not to adhere to the requirements of the Third Energy Package, but only until they acquire some alternative source of blue fuel. They are currently 100% dependent on supplies from Russia. The same goes for Lithuania, which, on the other hand, decided not to wait last year and approved the law which dictated the division of the transmission and distribution capacity in Lietuvos dujos Company until 2014. The Russian Gazprom Concern, which owns 38.9% of shares, filed a plea against the Lithuanian government to the Arbitration Tribunal of the UN Commission on International Trade Law.

After alternative sources are found in Baltic States, Latvia will need to separate the transport system operator and allow third party access to gas transport and storage infrastructure. According to the privatization agreement with the government, LG has the right to monopolize gas trade until 2017.

It is unlikely that a new natural gas source could be found before then. But it is possible that Baltic States could reach an agreement about creating a unified regional LNG terminal. Right now, though, each country wants to build the terminal on their own territory, and this is why the European Commission is conducting surveys to determine where the terminal’s construction would be most beneficial.

We can when we really want to

The other event, linked to the EU, can be considered to be sensational. Latvia, which silently followed every single requirement since its inclusion into the European Union, suddenly started to defend its interests. During the visit of the European Commissioner for Regional Policy Johannes Hahn, which took place this week, the Latvian Minister of Finance Andris Vilks suddenly rained down on the Commissar with criticism.

The reason lies in the European Commission’s proposal to impose a limit on the EU 2014-2020 budget for member countries to receive money from European Funds. It is possible that this limit is going to be 2.5% of a given country’s GDP. According to the calculations of the Ministry of Finance, Latvia would lose EUR 1 billion (LVL 700 million) worth of funding, or 20%, compared to the plan period of 2007-2013. The Commissar was met with similar criticism in Lithuania, which would lose around LTL 1 billion (LVL 200 million) as a result of the changes in the funding system.

«Latvia has done enormous work to ensure macroeconomic stability, which is reflected in both GDP indexes and future projections. However, the level of our country’s development is only 51% of the average European country development level. This puts us in the category of the least developed regions», – Vilks claims. According to him, it is vital for Latvia to preserve the current level of support (3.8% of GDP) for the next period.

European Commissar Johannes Hahn admits that the arguments of the Latvian government are sound. According to him, negotiations about the future budget will continue across 2012. The final decision will be made by the European Council, but the European Parliament needs to give their consent as well. Clearly this statement means that Latvia still has a chance.

Baltic paradox

This week, the KPMG Company presented their latest research on the Baltic business environment, during which surprising facts were uncovered. A particular paradox was discovered: only 1% of businessmen in Lithuania, 15% in Estonia consider Latvia to be a good place for foreign investments. However, in the next three years’ time Estonians and Lithuanians (23% and 14% of respondents respectfully) plan to invest their capitals in Latvia.

Senior Manager of KPMG Baltics Edgars Bolskis explains this significant difference between business evaluation and business plans with Latvia’s negative reputation, which was formed under the influence of the constantly changing tax policy of the country and the general uncertainties about the application of collected tax funds. Still, it is good to know that, despite these inconveniences, businessmen from our neighboring countries are prepared to invest money in Latvia.


Leave a reply

Baltic States ask European Commission to maintain EU Cohesion Fund financially strong

Baltic finance minister ask the European Commission to keep the European Union’s Cohesion Policy financially strong and aim it towards results, BNN was told by Finance Ministry.

Police commence investigation on possible money laundering schemes at ABLV Bank

Latvia’s State Police has commenced an investigation about the possible money laundering operations at ABLV Bank, which were reported by Financial Crimes Enforcement Network (FinCEN) US Department of Treasury.

S&P Global affirms Latvia’s credit rating at «A-»

On Thursday, 22 February, S&P Global reaffirmed Latvia’s credit rating on the «A-» level, retaining a positive outlook for the future, as BNN was informed by the State Treasury.

Kristovskis: state officials should be equally strict to Lembergs and Rimšēvičs

«Lack of consistency – such a conclusion appears after looking at the behaviour of state officials in regards to their request for Ilmārs Rimšēvičs’ to step down as governor of the Bank of Latvia,» says Ventspils City Council member Ģirts Valdis Kristovskis.

LSRTC: Zaķusala TV Tower’s reconstruction will cost several dozen million euros

According to chairman of Latvia’s State Radio and Television Centre (LSRTC) Jānis Bokta, reconstruction of Zaķusala TV Tower will cost several dozen million euros.

Trade union worried teachers may not have time to prepare for new education content

Teachers may not have enough time to prepare to work with new education content, said manager of Latvian Education and Science Workers' Union Inga Vanaga in an interview to Rīta Panorāma programme of LTV.

Judins, Loskutovs, Čigāne and Dālderis to continue working in Unity’s faction

Saeima members Andrejs Judins, Aleksejs Loskutovs, Lolita Čigāne and Ints Dālderis will continue working in Unity’s faction and coalition.

Saeima supports member’s proposal to publish wages of Bank of Latvia employees

Latvia’s parliament has decided to support Ints Dālderis’ proposal to publish wages paid to employees of the Bank of Latvia, education institutions, as well as municipal capital associations.

More snow expected on weekends; air temperature to drop even more next week

On the night to Friday, 23 February, air temperature in most of Latvia declined to -21° C… -27° C. It was only warmer in Kurzeme and some parts of Vidzeme, as reported by Latvia’s State Environment, Geology and Meteorology Centre.

SEB Bank: more employment options will open up and workers will become more selective

«It is becoming easier to change jobs nowadays. The largest selection of employment options are found in regional centres and cities, especially Riga and Pieriga. We see fewer employment options in regions even though there is still considerable demand for workers there,» predicts SEB Bank’s macroeconomics expert Dainis Gašpuitis.

ABLV Bank’s manager claims the bank is ready for cancellation of payment restrictions

ABLV Bank is ready for cancellation of payment restrictions, said the bank’s chairman Ernests Bernis during a press-conference on Thursday, 22 February.

62.9% of Latvia’s population was employed in 2017

Compared to the year before, in 2017 employment rate grew by 1.3 percentage points and number of employed persons by 1.5 thousand. Employment rate among men grew faster than among women – by 1.6 percentage points and 1.0 percentage points, respectively. 894.8 thousand people or 62.9 % of Latvia population aged 15–74 were employed in 2017.

Lithuania and Latvia: the tale between two sisters marked with rivalry

Relations between Lithuania and Latvia, two tight-knit Baltic neighbours, may exemplify a sisterly relationship from the first sight, but just over the course of a single week, several pings rang, signalling that rivalry is, and has always been, a component of coexistence.

Lembergs unable to organize his private life because of intense court proceedings

Lembergs unable to organize his private life because of intense court proceedings

Unemployment level in Latvia decreased to 8.7% in 2017

85.4 thousand people aged 15–74 in Latvia were unemployed in 2017. Compared to 2016, the number of unemployed persons has dropped by 9.9 thousand or 10.4 %.

Council member: ECB is openly dissatisfied with restrictions imposed on Rimšēvičs

The European Central Bank (ECB) is openly dissatisfied with restrictions imposed on one of its council members – governor of the Bank of Latvia Ilmārs Rimšēvičs, said council member of the Bank of Latvia Edvards Kušners in an interview to 900 seconds programme of LNT.

Defence expenditures in Latvia planned at EUR 234 million in 2018

Latvian government plans to spend EUR 234 million on defence projects, including procurement of transports, ammunition, armaments and individual equipment, in 2018 as confirmed by Defence Ministry.

Ministry cancels mandatory procurement component permits for five CHP plants

Latvia’s Economy Ministry has made a decision to cancel the permit to sell electricity within mandatory procurement component for five other renewable energy co-generation plants plants: SIA Madonas Eko, SIA Eiro-Āzijas investment agency, SIA EVOKEM, SIA M Parks, and SIA Eco Latvis.

NSC proposes Maizītis for a second term as Chief of Constitution Protection Bureau

Members of Latvia’s National Security Council have decided to propose the current head of the Constitution Protection Bureau Jānis Maizītis for another term at the helm of this institution, as BNN was informed by the State President’s Chancellery.

Latvijas gāze’s subsidiary Gaso proposes reducing gas transmission price

Latvijas gāze’s subsidiary Gase has turned to Public Utilities Commission with a proposal for a new natural gas transmission system service’s tariff project, providing for a reducing gas transmission price by 18-46% for more than 95% gas consumers.

FCMC invites Bank of Latvia to provide ABLV Bank with yet another emergency loan

The Finance and Capital Market Commission (FCMC) has invited the Bank of Latvia to issue ABLV Bank another emergency loan.

Crime rate in 2017 was the lowest in Latvia’s history

Last year’s crime rate turned out the lowest in Latvia’s history, as reported by Prosecutor General Ēriks Kalnmeiers in his annual report.

LEC: government priorities should include searching for causes and solutions, not the guilty

Latvian Employers’ Confederation (LEC) is worried about ongoing events and their negative effect on the stability and future development of the country’s economy. LEC believes that stabilization of the financial situation requires careful coordination of actions between institutions and the government.

Producer price level in Latvia grew 0.9% in January

Compared to December 2017, level of producer prices in Latvian industry rose by 0.9 % in January 2018. Prices of products sold on the domestic market went up by 1.2 % and prices of exported products by 0.6 %.

Latvian President believes country’s financial system is stable; prime minister plans to report to European Council

«Latvia’s financial system is stable, and there is no reason to worry about possible instability of the banking system. Banks continue working as usual,» says the President of Latvia Raimonds Vējonis.