New regional World Bank head visits Latvia

RIGA - The newly appointed head of the World Bank's operations in the Baltic countries and Poland, Michael Carter, made his first visit to Latvia recently. He said he had come to listen and learn more about the region he'll be working in, although he will be based in Poland.

During his visit, Carter met with Prime Minister Andris Berzins, Minister of Finance Gundars Berzins, Minister of Economy Aigars Kalvitis and Welfare Minister Andrejs Pozarnovs, to get more insight into ongoing World Bank projects in the country.

The bank is currently working on some 21 different projects throughout Latvia. Most of them are successful, but there are projects that might never see the light of day.

Last year saw the beginning of Riga's new heating project, sponsored by various lending institutions, the City Council and the World Bank, which promised to contribute $36.2 million.

Approximately 7,235 buildings were going to get new heating substations installed. Old corroded pipes would be replaced and a river-crossing pipe would be constructed. This pipe would connect the right and left banks of the river Daugava which runs through Riga. But the project may not see the light of day.

Aivars Veiss, head of public treasury at the Ministry of Finance, said it may be pointless to proceed with the project, and the Ministry of Finance will not sign any state guarantees for it.

"The heating market in Latvia has been liberalized, Rigas Siltums will not hold onto its monopoly and people can choose today how they want to obtain their heating," Veiss said. "We are not rejecting the project completely, but we have to decide which parts of the project are needed."

Carter agreed that there are some uncertainties whether the Latvian government will continue with the project but did not go into details.

However, spokesman for the World Bank's office in Latvia Toms Baumanis said what is lacking in the heating project is a signature from the Minister of Finance Gundars Berzins, which would give a state guarantee for the implementation of the project.

This signature is not likely to come, according to the Finance Ministry.

Another project shrouded in a mist is the education project. The World Bank is ready to put in 28.29 million euros ($31.1 million), but the bank is not sure where the money would go.

"We have to be clear on what the government is really aiming at in the sector as such, if any restructuring is needed, like down-sizing on higher education instances," Baumanis said.

Carter said the World Bank considers Latvia to be a politically stable country, though Latvia is currently on its third government since the last national election. This he referred to as a part of the democratic process.

So far the bank has one running project in the education sector – at Mezares Primary School in the Jekabpils region – and is currently in negotiations on more contracts.

Carter could not define as of yet how the relationship between the World Bank and the Latvian government would be on the education project since it is something Carter feels should be further discussed before any hasty decisions are made.

The Latvian education improvement project is aimed at providing Latvia with the best possible education system by launching two initiatives. The infrastructure improvement will focus on implementing upgrades to the maintenance and operation of schools, and the quality improvement component will increase the relevance of education to the needs of individuals.

Carter did not only speak of different projects in Latvia, but he spoke of how Latvia is doing in the eyes of the World Bank and on the importance for the country to join the European Union.

"For me as a newcomer, it's very clear that Latvia has made a lot of progress by looking at the economic results today," Carter said. "The challenge for the World Bank will be to build on Latvia's success."

The new regional World Bank head managed to give quite a few examples of Latvia's success.

"Latvia has a stable macro-economic situation despite the shock of the Russian crisis and the decline of the euro," he said. "Latvia has achieved a lot of restructuring in its economy, going from a planned economy to a market economy."

Still, he would not like to speculate whether Latvia would ride the first wave of countries to join the EU.

"It is not for the World Bank to know, but we hope Latvia will clear EU accession. In that case, Latvia will not be a borrower in the future," Carter said and continued. "Latvia faces a broad agenda on EU accession issues such as legislative changes, pension reforms and social welfare, and this will all take time."

When asked if the World Bank is expecting Latvia to be able to pay its ample bank loans back, Baumanis said the World Bank has no problems with Latvia repaying.

"We have never had any problems in our financial relationship between us," he said.