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Wednesday 28.09.2016 | Name days: Sergejs, Svetlana, Lana
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Economic Diary of Latvia. How to accomplish the best results with limited resources

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Baltic news, News from Latvia, BNN.LV, BNN-NEWS.COM, BNN-NEWS.RUAs a small country with a small and gradually ageing population, Latvia has to address the matter of accomplishing the best possible results with limited resources. With that, the Employment Council launched a cycle of discussions on the topic of labour market reformation this week.

The information with which ministers commenced efforts to combat demographic trends are not too promising, to say the least. The country’s population continues declining and ageing at the same time. This trend is expected to continue. In addition, the population in general seems to have education that does not comply with requirements of the modern economy.

There is currently an excess of humanitarian and social science specialists in Latvia. What the country lacks, however, are highly-qualified specialists in natural sciences, ICT, engineering sciences, and generally workers with vocational education, as mentioned in Economy Ministry’s report. A significant number of youngsters enter the labour market without any qualifications. There is also a large proportion of low-qualified workers.

The Employment Council discussed the matter of educating adults in accordance with global changes in the structure of labour organization, which requires new knowledge and skills. Ministers participating in the meeting agreed that it is important to create a flexible education system for adults in Latvia to help them adapt to the market’s requirements more easily.

It is planned to reduce the number of low-qualified workers from the current proportion of 31% to 20% by the year 2020. This will be done at the expense of the reduced number of secondary school graduates who do not continue their studies, but rather enter the labour market without a specific profession.

At the end of the meeting, ministers agreed on three main principles. First – education offers will be developed in close cooperation with employers and industry experts. Second – a long-term strategy for the future development of education for adults will be developed to encourage companies and people to participate and enhance their knowledge and skills. Third – new proposals on involving higher and secondary education institutions will be developed to assist with the education situation.

Russia closes the valve

Another challenge Latvia will have to face in the near future is related to Russia’s plans to completely halt exports of oil products through Baltic ports by the year 2018. The neighbouring country continues its work to divert supplies of oil products through its own ports – Ust-Luga, Primorsk and Novorossiysk, as conformed by the head of Russian Transneft Nikolai Tokarev. In 2015, around 9 million tons of oil products were handled by Baltic ports. This year, the volume is 5 million tons. Russia plans to have reduced the cargo flow to Baltic States to zero by 2018.

Latvijas Dzelzceļš is preparing for the moment when all Russian oil products will no longer be handled by Baltic ports, as confirmed by LDz Chairman Edvins Berzins. He did not say how the company prepares. It is possible Russian oil will be replaced with Chinese goods. This first such test train is scheduled to be sent to Latvia before the end of 2016, as promised by Transport Minister Uldis Augulis.

According to him, Latvia’s geographic location makes it a natural bridge that connects the west and the east. This is why Latvia with its well-developed infrastructure, three major ports, modern logistics and distribution centres remains interesting to many – Asia, Russia and CIS, western and northern Europe and the Black Sea region.

According to Augulis, development of relations with China is especially important here. To help out with the development of the world economy, it is necessary to work together, not compete with each other. Development of a transport corridor between China and Europe can help tremendously.

A single tariff for railway cargo transport has been developed to accommodate Chinese transports. According to Augulis, the new tariff is the result of his visits to China. Active work continues with Chinese and Belarusian partners to create the best possible model for the use of Latvian ports in the context of the Belarusian-Chinese projects Great Stone, he added.

Silent backwater

But even Latvia has a backwater location that seems immune to labour market trends and geopolitical storms. And this magical place is the State Revenue Service. This week, the Saeima approved amendments to the Law on Remuneration of Officials and Employees of State and Self-government Authorities that permit the launch of a pilot project aimed to increase wages of key employees in SRS. This pilot project is intended to see it is possible to increase wages in the government sector as a whole.

According to the legal draft, the wage of the director general of SRS will be EUR 4,020 with added option of bonus pay equal to 60% of the monthly wage. The current wage of the head of this institution is EUR 2,000-3,000 a month.

As stated by Finance Minister Dana Reizniece-Ozola, money to increase the wage of the head of SRS was taken from this year’s state budget.

Martins Krievins, director of the State Chancellery, had previously mentioned that SRS was chosen for this pilot project as an institution the successful function of which benefits society in a direct way. Results of the pilot project are planned to be evaluated in 2017.

The current state of the institution is indicated by the total amount of tax debts. At the beginning of September, it was EUR 1,421 billion, which is 0.3% less in comparison with August. It can be said that the overall work efficiency of the institution responsible for tax administration is equal to zero. Whether or not it becomes better after the increase of wages will become apparent in 2017.

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