Government action needed to support rural industry

RIGA - Business activity in Latvia’s distant regions is dying out, according to a study by Lursoft, based on the Latvian Register of Enterprises’ data, reports nozare.lv. “The number of companies is shrinking in 21 regions; this results in lower tax revenue, lower employment and increasing emigration – emigration to another part of Latvia at best, and abroad at worst,” says Lursoft representative Ainars Bruvelis.

According to data provided by local government leaders, however, the statistics data do not include cases where a company’s registered legal address is in Riga, but the real business activity is done in another municipality, which means that the actual number of enterprises operating in outlying regions could be higher than the official figure.
“These are very worrying data. If action is not taken at the state or local government level, we can soon find ourselves in an unenviable situation regarding the number of local residents, the unemployment situation and all of the resulting social consequences it brings,” warns Bruvelis.

In most regions the number of companies that close exceeds the number of new businesses being started. This situation, however, is just the opposite close to Riga. In Bruvelis’ opinion, the situation is not very promising in 29 out of the 118 municipalities in Latvia, and it cannot be ruled out that, due to the government’s actions in response to the crisis, the situation could become worse.

Some of the individuals responding to the poll pointed out that a political decision needs to be taken, to promote business activity in Latvia, and by facilitating access to EU structural funds and changing tax policy. Additional resources need to go into long-term projects in those regions, including investment in the infrastructure, which is generally in poor condition.
The chief of the Association of Local and Regional Governments of Latvia, Andris Jaunsleins, says that municipalities have very limited chances to promote business activity and that state support is needed. Bruvelis believes that the situation in municipalities could improve to some extent after the administrative territorial reform is completed and the number of persons working for local governments and in state administration institutions is reduced.

He emphasizes that action must be taken urgently to prevent the constant outflow of human resources from Latvia’s provinces, otherwise, in terms of population density, Latvia “will soon resemble a desert.”