RIGA - It is possible for the government to invest in infrastructure projects without overheating the construction sector, Prime Minister Krisjanis Karins (New Unity) said today at the weekly Cabinet meeting.
At Tuesday's meeting, ministers heard the Economics Ministry's report on changes projected in labor force and prices of building materials in the construction sector and their impact on the economy. The ministry does not forecast the construction sector to overheat until 2024, according to the report.
Economics Minister Janis Vitenbergs (KPV LV) said at the government meeting that the construction sector is not facing the overheating risk in the next coming years. "There are free capacities available in the construction sector," the minister said.
At the same time, Vitenbergs said that as it plans investment in infrastructure projects, the government should give time to the construction industry to prepare for this investment, which should be channeled into the sector gradually.
The prime minister wanted to hear experts' opinions about competition in the construction sector. "I have got the impression that we have very few foreign companies participating and winning tenders. This raises suspicions that we are keeping prices high as a cartel," Karins said.
Olga Feldmane, director of the Economics Ministry's Construction Policy Department, said that following the Competition Council's recommendation, the government in February tasked the Economics Ministry with working out proposals on how to improve the procurement system. The proposals might be ready by the end of this year, she said.
Feldmane also indicated that foreign companies, mainly Estonian and Lithuanian firms, are already operating in the Latvian construction market, while contractors from larger countries are uninterested in the Latvian market due to its small size.
There are currently an estimated 4,500 construction firms registered in Latvia, which is a sufficiently high number for the Latvian market, Feldmane said.
On hearing the experts, Karins concluded that it is possible for the government to invest in infrastructure projects without running the risk of overheating the construction sector. The European Union's (EU) Recovery Fund was mentioned as one of the funding sources for such projects.