More growth needed to cover EU costs

  • 2001-03-29
  • Jorgen Johansson
RIGA - Latvia's European Union integration price tag is slowly becoming clear. Finance Ministry officials are crunching the numbers and put preliminary estimates at about 1.2 billion lats ($1.93 billion) over the next decade.

Daiga Lapina, deputy director at the ministry's budget department, said Latvia is following a national integration program and the Finance Ministry can only estimate costs.

"So far we have made three different estimates, and over the next 10 years our estimate is around 1.2 billion lats in costs for our ministries," Lapina said.

Edvards Kusners, director of the Latvia's European Integration Bureau, disagrees with the Finance Ministry's estimate, calling it a wish list beyond reality.

"Those are not correct figures," Kusners said. "This is a maximum cost program, and it does not reflect one-time investments, just ongoing payments."

The state will cover most of the costs - 646 million lats. Lapina said the rest would be paid by grants and loans from the EU.

The most expensive of Latvia's ministries in terms of EU integration costs is the Ministry of Environmental Protection and Regional Development. Some 800 million lats are expected to be spent on shaping up the country's garbage collection industry, improving water quality in households and controlling air and industrial pollution.

Another expensive ministry will be the Ministry of Welfare. Considerable funds will be needed to continue the reform of Latvia's welfare system and social security and assistance systems.

But EU integration is a tough task. According to a survey conducted by the EU's statistics office Eurostat, Latvian gross domestic product per capita is only 28 percent of the average of member states, but this figure could change; official statistics for last year are yet to be released.

"We started at a very low level. After the Soviet Union we lost 60 percent of our GDP and Estonia lost 40 percent of their GDP," Kusners said. "This is not our mistake. It's what we were left after the break-up of the Soviet Union."

Olegs Baranovs, director of the macroeconomic analysis and forecast department at the Ministry of Economy, told The Baltic Times that there is a chance GDP per capita could go up slightly because the Latvian population is decreasing.

"It's difficult to say how precise this Eurostat survey is," Baranovs said. "It is based on information from our statistics office and the early Ô90s statistics are wrong because of inflation and overestimates in economics."

Of the EU candidate countries, only Bulgaria's GDP per capita - 22 percent of the EU average - is worse than Latvia's. Romania shares Latvia's position in the survey.

Estonia and Lithuania have 37 percent and 31 percent of the EU average, respectively. Slovenia tops the list of candidate countries, with 69 percent of the EU average.

Kusners said that Latvia's GDP per capita is a problem but nothing that can't be tackled. "All we can do is to boost economic growth," Kusners said.

Baranovs stressed Latvia needs to continue with its economic reforms to improve the business environment.

"We need to increase competitiveness in local and foreign business," he said. "Between 1995 and 2000, investment picked up by 18 percent annually, and last year it was up by 23 percent."

The survey also showed that the situation in the region of the applicant states in general is much worse than in the member states.

However, the Czech Republic capital, Prague, exceeded the EU GDP per capita average by 15 percent.