This week was notable mostly thanks to the honesty of our President. Namely, he publiclly admitted the fact we’ve all suspected. Latvia has no more reliable instruments for long-term storage of money.
The left, they’re leaving, and they’ll keep on leaving
Among other bad, but arguably predictable news, the following one should be noted: more than 30 thousand people left Latvia last year. Thus, the largest wave of migration in the past 18 years has been officially registered. According to Professor Mikhail Khazan of the University of Latvia, migration balance in 2009-2010 was -80 thousand people, while the Central Statistical Bureau of Latvia offers only -12.6 thousand for the same period.
Economists are worried because an absolute majority of migrants are within working age (82.8%) and children (13.2%). In other words, as SEB Bank economic and social issues specialist Edmunds Rudzitis said, the present and the future are leaving the country.
Nevertheless, bank economists speculate that immigration rates should decrease in the coming years. Even so, life in the country is slowly, but steadily improving, and the EU (the main «consumer» of our citizens), on the other hand, is becoming less attractive «thanks» to the Eurozone crisis. According to Peteris Strautins of DNB Bank, the outflow of people from Latvia will stop being massive after four to five years. E. Rudzitis agrees with him. M.Khazan, on the other hand, refrained from predictions, only noting that, so far, he sees no signs of a sufficient slow-down of immigration rates. However, even if Strautins’ prediction comes true, this will not mean the end of our troubles: by that moment some industries will suffer a serious lack of specialists.
All things considered, even the relatively positively positive specialists agree that the situation is more than troubling. Swedbank economist Lija Strasuna compares it to an unattended illness, the treatment of which requires medicine in the form of the reformation of economic, social and education policies.
One thing is clear: work on a reasonable migration policy must be started now, so it is not left for the last moment. Furthermore, measures that would discourage people from leaving Latvia and motivate those that have already left to return home, considering the fact that not everyone is as well-settled as they claim to be.
How far is it to Kuwait?
There was, of course, some relatively positive news this week as well. The appearance of the Kuwait Petroleum International Company (KPI) on Lithuania’s market can be considered as such. Its international «daughter» International Diesel Service (IDS) has expanded its network of petrol stations for cargo vehicles at the expense of opening a station in Mariampolis, next the Polish border, by signing a contract with a local operator Stateta. The station on the south-west of Lithuania entered the Kuwait network, which has 600 24/7 petrol stations in 22 European countries. The IDS already has three diesel fuel stations along the Russian-Latvian border: in Pskov, Sebezh and Ubilinka.
The company does not have any specific plans on opening petrol stations in Latvia and Estonia, at least for the nearest year. But, as it was stated in KPI regional centre in Dusseldorf, this could be an interesting area for the company to explore. The closest target of the company in Eastern Europe is the market of Ukraine.
Aside from servicing commercial transports, KPI is also engaged in servicing cars. Its retail network, working under Q8 brand, has over 4.4 thousand petrol stations in Italy, Belgium, Holland, Luxembourg, Denmark and Sweden. The company also engaged in trading aviation fuel and lubricants.
KPI is 100% a state owned company and is the largest company of Kuwait in terms of the volume of assets (74.5 billion dollars in 2010). The corporation’s turnover for 2009/2010 was 84.59 billion dollars. The concern collected 3.1 billion barrels of oil during the reporting period.
Latvia will have its own development bank
One more positive thing that happened this week: Latvia will create its own development bank by the end of 2013. This bank will unite four institutions that are responsible for offering state aid to national economy. These institutions include ministries of finance, economy, agriculture and environmental protection and regional development that are currently working on creating a relative draft law. The government plans on adopting it in August, the development bank is planned to be founded on the base of Latvian Mortgage and Land Bank.
This new structure will be responsible for state support programs of business. These programs are currently realized by Latvian Guarantee Agency, Foundation for Rural Support and the Environmental Investment Fund. According to plans, the model of the united institutions will be specifically attuned to Latvian conditions. Its activities must be directed towards correcting market mechanism flaws. «It is important to attract the private sector in this process, instead of competing with it,»- Finance Minitry press-secretary Agnese Belgevica noted. Ideally, the new organization will not only offer support to business activities, but also stimulate innovations and Latvia’s marketing on global markets.
How safe is it?
«It is clear that there are no safe investments types left that would allow safe storage of money in a long-term perspective. What solutions are there? They need to be sought together, so that there would be something left to save. I allow for the possibility that the «Law on State Funded Pensions» could be reviewed in this regard. It should be done in a way that would allow more money to be invested in Latvia,»- Andris Berzins said before leaving for his vacation.
Earlier, the head of the state said the following: «If we hope to have a second pension level, saying that there will be something there in ten years, I am prepared to argue with that – there will be nothing there. It is self-deception and support of specific groups of people, not long-term thinking.»
According to the data from the State Insurance Agency, the total volume of savings of the second pension level of 1.17 million Latvians was 943.47 million LVL on July 1.