Dombrovskis’ eight commandments

RIGA - Prime Minister Valdis Dombrovskis (New Era) has come out with his new economic development program, one that is based on eight key tasks for Latvia to achieve over the next four years, reports news agency LETA. The program was endorsed by the board of the political association Unity on July 30.

Dombrovskis’ program deals with improving the competitiveness of the Latvian economy, promoting employment, industrial development and exports, strengthening the rule of law in the economy, and introducing a fairer and more efficient tax policy. The new program continues the prime minister’s economic stabilization program that averted the insolvency of Latvia and has been steadily leading the country out of the crisis, the Unity board said in a statement to the media.
The new program emphasizes that by 2018, Latvia must become the leader in the Baltic countries in terms of the key quality of life indexes as well as in terms of national development and global competitiveness indexes.

The program calls for Latvia’s gross domestic product to increase 20 percent in the next four years, and that Latvia will be utilizing European Union funds more efficiently than its neighbors already by next year. The number of companies per 1,000 residents will be increased from 31 to 50 by 2013. The program also envisages the establishment of a national development bank.

The economic program emphasizes that any solutions that may be handy must be used to reduce the high unemployment rate in Latvia. Employment must be promoted via the creation of micro-enterprises, development of production and competitive services throughout Latvia, so that the employment rate would reach 70 percent in four years and the unemployment rate would drop to 7 percent. The program also aims to see the return of at least 20,000 residents who have left Latvia in the next four years.

The program says that industrial development and exports must be promoted to create a balanced national economy. It also emphasizes that competitive local products should be given preference in public procurement.
The program says that the proportion of industrial production in the GDP must be increased from the current 10 percent to 14 percent, whereas the proportion of the export of goods in the GDP structure should rise, from 27 percent in 2009 to 40 percent in 2013.

Attracting foreign investment plays an important role in promoting employment and in the improvement of the key economic indexes, which is why the economic program also aims to increase foreign direct investment, from 36 million lats (51.4 million euros) in 2009 to up to 1 billion lats in 2013, with up to 20 percent of foreign investment going into the processing industry and up to 12 percent into transport and communications.

Taking charge of regional development, the plan calls for major investment in projects in every region of Latvia by 2013.
The program’s section on tax policy says that Latvia must remain a country of relatively low tax burden, making up about one-third of the GDP. The program indicates that higher taxes should be imposed on consumption, capital and property, while personal income tax should be reduced to 22 percent in 2013, at the same time increasing tax-exempted minimum income. The principles for introduction of a progressive income tax must be analyzed and debated next year.
The authorities will have to step up their efforts to fight the shadow economy, which the program says must be reduced by about a half by 2013.

Another goal of the Unity group is to achieve an ‘A’ level credit rating for Latvia by 2013, introduce the euro in Latvia in 2014 and make it possible for Latvia to have a non-deficit budget.
By 2013, Latvia must rise from 68th place to 40th place in the global competitiveness index, and from the current 27th position to 20th in the World Bank’s “Doing Business” index, says the program.
Unity was established on March 6 by three political parties: New Era, Civic Union and Society For Different Politics.