RIGA - Latvia's government approved on August 4 its economic recovery plan, setting the goal of reaching gross domestic product growth of an average of five percent per year from 2011 's 2015, reports news agency delfi.lv.
The plan sets the strategy of improving economic performance through the raising of the country's competitiveness and efficiency, and focusing efforts on production of goods and services with a high added value. The plan includes support for small enterprises, and defines the priority sectors of the economy, which will receive strong financial backing from the state, reports news agency LETA.
Assumptions are that inflation will remain moderate throughout the period, and that at the end of the period GDP will stand at 17 billion lats (euros 24.2 billion euros). Expectations also are that unemployment stabilizes at eight percent. Research and development are to receive 1.5 percent of GDP in support funding.
Priority areas as defined by the Economy Ministry are wood processing, food production, the chemical industry and production of electric and optical equipment.
Latvia's social partners however do not share the same view as the Ministry, and suggest including on the list other areas such as financial brokerage, tourism and education, which should be made more accessible to people from abroad.
Special Advisor to the European Commission on Energy Juris Ozolins points out that it is not that important to define priority sectors right now, but better to boost export and domestic consumption, and to improve the business environment. "All energy should now be focused on developing infrastructure. There is catastrophically little attention being paid to it," he said.
Ozolins says that "neglecting the need to develop infrastructure has resulted in deterioration of economic structures, the flourishing of speculative investments; the workforce has become inflexible and immobile, which makes education and the innovative potential suffer." He also assesses the energy market of Latvia as over-regulated, with the state playing too large a role.
The government appointed advertising professional Armands Slokenbergs as the new director of the State Tourism Development Agency. Slokenbergs says that "it is important for Latvia to define competitive products and regions that it could offer on the tourism market, whereas tourism marketing must reorient itself to new technologies."
He believes that "Latvia can attract many foreign tourists with its cultural richness and diversity, as well as the coastline of almost 500 kilometers."
What's missing in the discussion on priorities, and from the recovery plan, says the Association of Hotels and Restaurants of Latvia (LVRA) executive director Santa Graikste, is a real stress on tourism, on hotels and catering.
Graikste pointed out that in the first quarter of 2009, "Turnover for hotels and restaurants in Latvia plunged 40 percent, while on average in Europe it dropped only by 10 percent. The increase of value-added tax on hotel services significantly reduced Latvia's competitiveness in the region; furthermore, the State Tourism Development Agency now receives less funding for marketing activities abroad."
Riga Mayor Nils Usakovs also believes that it is time tourism became one of the priorities in the economic growth of the country. "Apart from the decisions the state has made, Riga municipality will do everything for further development of this industry in Riga and to attract more and more foreign tourists. The action carried out by the government, not including tourism in the list of priorities, is very thoughtless," said the mayor.
"Food producers want to see that their sector is also among the high priority targets for the national economy, and want to see specific instruments to promote the development of the food industry," says executive director of the Latvian Food Producers' Federation, Noris Kruzitis.
Though food production is on the list, Kruzitis says that "defining priority sectors is important, yet even more important is for businessmen to know those instruments and the planned law amendments that will be used to promote the development of the food industry." "The government must specify the instruments that it will use to attain its goals. So far, there have been no specific proposals regarding tax matters, aid for exports, public procurement for the local market," he says.
EU Energy Commissioner Andris Piebalgs complains that the Latvian government is lacking in decisions on long-term goals. He says that he sees only "very short-term activity".
"Activity that could be called strategy does not exist. The Latvian nation's foundation 's its legislation and clear objectives - is intact, but what is lacking is an implementation program that corresponds to the state's affluence," he said. This is partly due, he says, to "A severe lack of uniformity in Latvia, which is first and foremost seen in politics."
