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Tuesday 22.05.2018 | Name days: Emīlija
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Economic Diary of Latvia. Debit and Credit

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Baltic news, News from Latvia, BNN.LV, BNN-NEWS.COM, BNN-NEWS.RUThe process of Latvia’s entry into the Organization for Economic Co-operation and Development has entered the final stage, as announced by Foreign Ministry of Latvia this week.

A meeting of the Corporate Management Committee was held in Paris this week. During this meeting, officials discussed the progress Latvia has achieved in the realization of recommendations provided to Latvia by OECD. The decision in regards to Latvia’s compliance with OECD standards will be made as part of a written procedure in the next couple of weeks.

Latvia still awaits conclusions from OECD’s work group for combating bribery in international transactions. As previously reported, this work group had carried out an in-depth assessment of Latvia’s progress in improving legislative borders to better combat bribery and reducing money laundering risks.

If OECD’s committees provide a positive decision, Latvia will receive formal conclusions from 21 committees of OECD in regards to Latvia’s road map for joining this organization.

It is planned to sign the agreement on Latvia’s joining of OECD at the beginning of June 2016.

What we lose and what we find

What is particularly interesting is that while announcements regarding Latvia’s level of readiness of joining the rich countries club were being actively discussed this week, officials continued counting the direct and indirect costs of Latvia’s membership in another prestigious organization – the European Union.

This week, there was a second meeting of experts organized by Finance Ministry. The topic was ‘Political and economic union between Latvia and EU – how much does it cost?’

Comparison of amounts received by Latvia from EU funds and paid by the country to the EU budget is too simple of an approach for calculating losses from EU member ship. Such an opinion was voiced during this meeting.

Considering that last year’s published five presidents plan provides for deeper economic and fiscal integration of the European monetary union, talks have begun in regards to the pros and cons of membership. The plan provides for the creation a single European treasury. This task is to be completed by 2025.

Aldis Austers, expert of Latvia’s Foreign Policy Institute, hoping to measure how much Latvia has gained from EU membership, has come to the conclusion that the balance of services is negative. This causes Latvia losses worth EUR 1.6 billion. There are, however, benefits from the use of finances provided by European funds are quite tangible.

According to the experts, the bulk of losses were caused by emigration. Nearly 250,000 residents have left Latvia to live in foreign countries. Considering the size of national income per capita, losses of Latvia’s market caused by membership in the EU reaches EUR 3.6 billion.

Austers noted that he does not want to thereby say joining EU was a mistake. He believes it is more about showing the risk that Latvia may not achieve the level of quality of life found in core European countries.

Counting losses

500 days have passed since Russia established counter sanctions against Europe. Entrepreneurs are not very happy, to put it mildly. Mutual sanctions between Russia and Europe are costing businessmen tremendous losses every day.

Cargo transport between Latvia and Russia has declined 40% over the course of 2015. The main amount of losses was noted in food, fish processing, light industry and cargo transit.

According to information from Latvia’s Agriculture Ministry, the dairy industry has lost EUR 60 million and exporters of agricultural and food products have lost nearly EUR 170 million as a result of mutual sanctions.

Logistics sector has suffered considerable losses as well. According to estimates of Agriculture Minister Janis Duklavs, losses of this sector were EUR 120-240 million in 2015.

Logistical transport was also impacted by sanctions – transit of Russian cargoes through Latvian ports has declined 15%. Considering that transport and logistics secures 12% of GDP, losses in the transit sector could have reached EUR 50 million.

Tourism has been impacted as well. The flow of tourists from Russia declined 35% in 2015 (110,000 people).

United in architecture

There was some good news this week. Estonia, Latvia and Lithuania plan to take part in the 15th International Architecture Biennale in Venice together in a joint project – Baltic pavilion.

Geography experts, geologists, economic experts, culture experts, anthropologists, artists, philosophers and museum workers will take part as well. The total area of the Baltic pavilion will be 1,600 m2.

The final look of the exhibition will be formed only with the opening of the Baltic pavilion in Venice.

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