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Friday 17.11.2017 | Name days: Uga, Hugo, Uģis

Economic Diary. Latvia Week 14 of 2012

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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.


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Wage rules violations most often associated with envelope wages

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Management of Unity’s Saeima faction to change in December

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EP prepared to commence talks with EU governments on reforming asylum system

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Estonia to pour into Finnish-Estonian cultural fund 700 000 euros

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Russia in UN vetoes extension of Syrian chemical attack investigation

At the UN Security Council, Russia has used its veto powers to block a resolution with which it would be allowed to continue the international investigation into a chemical attack this spring in Syria, which prompted the U.S. to launch missile strikes on a Syrian airbase.

Latvia’s birthday expected to be windy

A precipitation zone will reach Latvia from the west on Friday, 17 November. The precipitation zone will, however, pass over Latvia quickly, making rainfall short and periods of clear sky more frequent and longer. Air temperature is expected to stay within +5° C… +8° C, as reported by State Environment, Geology and Meteorology Centre.

State of emergency in force in flood-hit Greece

Rescue services in Greece are looking for no less than five people, who have gone missing following unexpected and disastrous floods on Wednesday, November 15, that killed 15 people; however, bad weather is still expected.

Laupīšanas 101 director: Latvia’s film industry has yet to reach its potential height

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Medical cannabis bill paves way in Lithuanian legislature

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Latvian sentenced to ten years in prison for fighting on the side of ISIS in Syria

On Thursday, 16 November, Latvian citizen Mārtiņš Grīnbergs was sentenced by Riga Regional Court to ten years and three months in prison for fighting on the side of Islamic State terrorist organization.

European Parliament: Africa’s development requires a new stimulus

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Latvian Chamber for Commerce and Industry proposes preventing new MPC reforms

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Matīss: LDz cannot raise tariffs and perform rail electrification under cargo anti-record

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Lithuania and Latvia placed in top 10 in climate policy index

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Bite Latvija buys Stream Networks and Latnet

Mobile commutations operator Bite Latvija has signed a purchase agreement for 100% of shares of Stream Networks and its subsidiary Latner Serviss, as BNN was informed by Bite manager in Latvia Kaspars Buls.

airBaltic carried three million passengers in first ten months of 2017

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Kaljulaid sees African opportunities to outplace EU in digitalisation

During a visit to Ethiopia, Estonian President Kersti Kaljulaid has discussed African-EU relations with the African Commissioner for Trade and Industry and recommended investing into digital development that would be beneficial for the continent itself.

Most employed people in Latvia are satisfied with their jobs

More and more often employers experience lack of qualified labour force, as well as increase of employees’ confidence about their competitiveness on the labour market and their openness for better job offers.

Estonian railways operator happy about increasing freight volume

Freight carried on the infrastructure of the Estonian state railway company Estonian Railways in October amounted to one million tons, which is a 10.4% hike compared to October 2016.

European Parliament: rule of law in Malta should be monitored more closely

Malta should strengthen the rule of law and the European Commission should follow the situation in the country more closely to ensure objective protection of rights, members of the European Parliament say.

Greece hit by sudden, disastrous floods

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