1. Basic Data
COUNTRY NAME
Conventional long form: Latvijas Republika/ Republic of
Latvia
Conventional short form: Latvija / Latvia
| Population: |
2.346.000
persons (in 2002) |
| Area: |
64.600
sq. km |
| Density
|
37 inhabitants
per sq. km |
| Distribution |
69 %
urban population, 31 % rural population |
| Neighbours |
Lithuania
(576 km border), Estonia (343 km), Russia (282 km),
Belarus (167 km) 1 |
| Ethnic
profile |
Latvian
origin 58.2%, Russian origin 29.2%, other origins
(Belarussian, Ukrainian, Polish, Lithuanian, others) |
| Languages |
The official
language is Latvian. Russian is widely spoken; English
is increasingly used as a second or third language. |
| Religion
|
Lutheran,
Roman Catholic, Russian Orthodox |
| Life
expectancy |
Average:
65.2 years (male), 76.6 years (female). |
| GDP/capita
2002 : |
8500€
(Purchasing power standard) ; i.e 35% of the EU-15
average |
| Currency
|
1 Lat
(LVL)=100 santims; is pegged to the IMF Special
Drawing Rights
1 Euro = 0,67 Lats; 1Lat = 1.50 € (February
2004) |
| Overall
trade balance (2001) |
Exports:
€ 2246 million; of which 61% to EU
Imports: € 3935 million; of which 53% from
EU
Balance: (-) € 1689 million; of which -€
699 million with EU |
1 Approximate since
border demarcation not finalized
for more statistical information: see
http://ec.europa.eu/eurostat;
www.csb.lv
2. Geography, history, culture (Snap shot)
Latvia lies on the Eastern coast of the
Baltic Sea, in between Estonia to the North, Lithuania to
the South and Russia and Belarus to the East. It is as large
in area as Belgium and the Netherlands together. It is a
land of forests, plains, lakes, river valleys and white
sandy beaches. The highest point is 311 meters. The climate
is temperate with long, sunny and warm days in summer. The
main river is the Daugava, which played an important role
in trade. About one third of the population (747 000) lives
in the capital city Riga and its surroundings. Other important
cities are Daugavpils (113000), Liepaja (88000) and Jelgava
(71000).
The Letts, who were Indo-European Balts, arrived around
BC 2500 and gradually assimilated the Finno-Ugric Livs
who had settled since 6000 BC. In ancient times, trade
links (involving amber) existed with the Mediterranean
world. By the 9th Century AD, trade routes and trade centres
had developed with the river Daugava as an important link
in the route from the Baltic Sea Region to the Black Sea.
In 1201, German crusaders brought Christianity and were
followed by traders, and a land owning class. Ports, cities
and agriculture were developed. In 1282, Riga joined the
Hanseatic League; and in the decades that followed, seven
more Latvian towns joined the League. In the following
centuries, Swedes, Poles and Russians have been present
in Latvia or in parts of its territory. With the Great
Northern War of 1700-1721 between Sweden and Russia, Tsar
Peter gained control of the Eastern Baltic. Throughout
these centuries, agriculture, trade and as of the 19th
century also industry developed, making Latvia, and especially
Riga, at times a prosperous territory.
In November 1918, after the end of World War I, Latvia
proclaimed its independence which was recognized in a
peace treaty with the Soviet Union in August 1920. A period
of further and intense economic and cultural development
followed which came to an end with World War II. In October
1939, Soviet troops arrived in Latvia, and as of June
1940, the country was effectively occupied. A year later,
Nazi Germany took over until 1944-1945 when the Soviet
regime was restored. During both occupations, many people
were deported or fled, and economic structures were destroyed.
After the war, Latvia became fully integrated in the Soviet
Union and was subject to collectivization and central
planning. As the country had a solid agricultural and
industrial tradition, much of its production from collectivized
farm and from new factories was destined for other parts
of the Soviet Union. A significant migration took place
and Russian became the predominant language. As a result,
by the late eighties, native Latvians formed only just
over half of the population. With the new policies and
openness introduced by Mr Gorbatchev, the Soviet Republics,
including Latvia, obtained i.a some economic autonomy
and Latvian identity gradually manifested itself again.
Finally in August 1991, Latvia regained its independence.
This was followed by the installation of democracy and
of a market economy. An intensive co-operation emerged
with democratic nations, including and foremost European
Countries and the European Union. This process is leading
to Latvia’s accession in 2004 to both NATO and the
European Union.
Nature and culture – especially music and songs
– are very important in the life of Latvians. The
country has had several composers who took their inspiration
from folk music. Outstanding performers in recent times
include Ms Baiba Skride who won the prestigious Queen
Elisabeth of Belgium International Violin competition
in 2001 and Marija Naumova who won the 2002 Eurosong Festival.
Also literature has been flourishing. Works of painters
and sculptors, including contemporary artists, can be
admired and bought in the many galleries of Riga. In the
early Nineteen hundreds, many Art-Nouveau buildings were
erected in Riga. Today most of them can still be admired,
some of them beautifully restored. One of the architects
was Latvian born Mikael Eisenstein, father of the famous
filmmaker Sergei Eisenstein. Latvians scored high in several
Olympic disciplines. Romans Vansteins was the World champion
cycling in 2000. Friedrich Cander, an engineer and inventor
born in Riga in 1887, was one of the pioneers of rocket
building and jet propulsion, and was the first to precisely
calculate the distance to Mars. His contemporary, Vilhelm
Ostwald, received the Nobel Prize for developing nitrogen
mineral fertilizers.
For more information : see website of Latvian
Government and Latvian Institutions : http://www.gksoft.com/govt/en/lv.html
3. Political context
| Constitution |
Latvia’s
Constitution entered into force in 1922; its application
was interrupted in 1940 and reintroduced in 1991. |
| Parliament |
The
Saeima (Parliament) is a unicameral assembly of 100
members, elected for four years. Only parties which
obtained at least 5% of the votes (in the elections)
are admitted at Saeima. Universal direct suffrage
for citizens as of 18 years. As supreme legislative
authority, Saeima, has the final say on budgetary
and legislative matters
Latest elections took place on 5 October 2002; 73%
of the electorate participated.
Representation of parties in Saeima: see
annex 1 |
| Head
of State |
President,
elected by Saeima for a term of 4 years, once renewable.
Ms Vaira Vike-Freiberga (no party affiliation) is
the head of State, since July 1999; she was re-elected
in June 2003. |
| Prime
Minister |
Mr
Einars Repse (New Era), since November 2002, resigned
in February 2004; a minority government continues
as care taker. |
| Foreign
Minister |
Ms
Sandra Kalniete (nominated by New Era), since November
2002. As she has been designated European Commissioner,
she will leave the post of Foreign Minister as of
1 May 2004. |
| European
integration |
The
Ministry of Foreign Affairs is in charge of overall
co-ordination of EU matters. |
| Current
government |
Prime
Minister Repses centre-right majority coalition of
New Era, Greens and Farmers Union, Latvia’s
First Party and For Fatherland and Freedom/LNNK broke
down in February 2004. Soon after, the Prime Minister
and his minority Government resigned. Negotiations
with a view to form a new coalition Government are
now being conducted. The Government headed by Mr Repse
was the 9th since the first Saeima elections in 1993
after regaining independence. All governments were
centre-right and pursed the same objectives. There
has thus been continuity in policy.
Composition of the present government:
see annex 2 |
Three-level
administration
|
- Central government (capital: Riga)
- 26 districts (Rajons): not directly elected
- Local self-governments (70 cities and
480 Pagasts); 7 cities have competence for both
local and Rajons levels.
- In addition, the Government decided that there
will be five “Planning Regions”
corresponding broadly to historical regions. They
are: Latgale (East), Zemgale (South), Kurzeme
(West) Vidzeme (North) and the Riga region; they
serve as references for economic planning and
development.
|
Foreign policy
Since 1991, Latvia’s main objective
has been to preserve its regained independence and to promote
its identity in good relationship with its neighbours. Accession
to European and Western political and economic frameworks
and to the transatlantic security structure were seen as
the main instruments. Thus Latvia became a member of the
OSCE (Organisation for Security and Co-operation in Europe),
the Council of Europe and WTO. In May 2004, it will accede
to the European Union and also to NATO in the same year.
The Border demarcation with Belarus is not yet finalised;
with Russia it has been agreed in 1997, but has not yet
been ratified. The ratification of the sea border demarcation
agreement with Lithuania is expected soon.
Domestic policy
The establishment of a democratic society
and of market economy were the first priorities and major
tasks throughout the nineties.
The reconciliation of the preservation of the national culture
and identity, with the rights of all people living in the
country has required significant efforts and legislative
work. The nation building, assuring that all people living
in the country participate in society and in national development,
is an ongoing task demanding continued attention from both
politicians and society at large. Building of a solid, well-staffed
and equipped public administration and of the judicial system
at the service of society are other major tasks requiring
significant efforts. Also the acceleration of economic development,
including the creation of additional jobs and the narrowing
of the gap which separates lagging regions are mobilising
legislative, administrative and financial resources. In
all these areas progress and in some cases significant progress
has been achieved in a rather short time, much of it supported
in the framework of Latvia’s preparation for accession
to the EU.
[for more information see website of Saeima
and of Latvian Government at the following addresses : http://www.saeima.lv
and http://www.mk.gov.lv
]
4. The economy
Following the break away from the Soviet
Union and the restoration of democracy and market economy
in 1991, it is estimated that GDP had contracted to about
half its value. As of 1996, the economy started to grow
significantly with a short stagnation in 1999 as a result
of the financial crisis in Russia. Average annual GDP growth
since 1996 has been around 6%, so that the gap with the
average GDP per inhabitant in the EU is narrowing. In 2003,
average income per inhabitant was just over one third of
the EU average, up from 28% in 1998.
By the end of the nineties, the macroeconomic
situation had stabilised and offered a favourable basis:
GDP growth (over 5%); low inflation (less than 3%), low
budget deficit (around 2%), acceptable level of foreign
debt (total stock of 46% of GDP in 2001), stable currency
(pegged to the IMF Special Drawing Rights). Interest rates
lowered to less than 10% in 2002.
As it is acceptable for an economy in transition, the trade
balance is negative (imports were covered for only 57% by
exports in 2001; the negative balance amounted to 20% of
GDP). The trade deficit is to a great extend compensated
by net export of services (transit trade) and by net foreign
direct investments. As a result of transition and of the
Russian crisis in 1998, foreign trade was extensively redirected
towards Western Europe. In 2001, exports to the EU represented
61% of total Latvian exports, and EU supplied 53% of Latvia’s
imports. Wood and wood products, textiles and base metals,
which are mostly low value added goods, make up 60% of total
Latvian exports.
Unemployment (around 13-14% according to the ILO methodology)
remains a concern, especially as it does not significantly
decrease, in spite of strong economic growth. As in all
transition countries, labour productivity is still significantly
lower than in the EU (33% in 2002). The strong difference
in economic activity, income and social standards between
Riga and most the other parts of the country also remains
a concern. In order to secure sustainable growth and continuing
development, efforts are required to widen and strengthen
the economic basis. More diverse activities, including manufacturing,
producing more high value-added products are needed. Exports
are essential for production, as the Latvian market is too
small.
Until 2000-2001, exports (mainly to the EU) contributed
most to economic growth; as of 2002 domestic demand took
over as the main engine for growth, complemented with exports
to Russia and to other CIS.
The main sector contributing to GDP in
2001 was services with 70%, followed by industry 19%; construction
6% and agriculture incl. forestry and fisheries with 5%.
Services are to a large extend made up of transit transport
to and from Russia and CIS. In this, oil is important with
Ventspils, which used to be the largest Baltic sea oil transit
port. New port facilities built by Russia in the Finnish
Gulf near St Petersburg at Primorsk started operations and
are taking over part of the oil traffic. However, the route
through Ventspils with a practical ice free port and an
oil pipeline from Russia, remains economically and environmentally
advantageous. Also the ports of Riga and Liepaja play a
role in transit trade and in export of Latvian goods (mainly
timber).
Other main contributors to economic activity are whole sale
and retail trade (19%), food processing (5%), wood industry
(3%) and textiles (2%). Much of the manufacturing industry,
for which Latvia had a solid tradition, closed down in the
process of economic transition. However, chemical, electrical
machinery, and pharmaceutical factories remained, as well
as one steel plant.
[ for more information on the economy:
see i.a http://www.ebrd.com
; http://www.lem.gov.lv
; http://www.csb.lv
]
5. EU - Latvia Relations
Since Latvia regained its independence
in August 1991, relations with the EU developed dynamically
including a rapid succession of agreements, which each time
were more ambitious.
5.1 Important dates and events include :
| September
1991: |
granting of unilateral
EU trade concessions and continuation on a bilateral
basis with Latvia of the Trade and Economic co-operation
agreement which had been concluded with the Soviet
Union; part of the TACIS (Technical assistance to
Community of Independent States) was reserved for
Latvia; as of 1992, Latvia benefits from PHARE. |
| March 1993: |
entering into force of the Trade
and commercial and economic co-operation agreement
bilaterally negotiated with Latvia. With reference
to commitments taken in the Conference for Co-operation
and Security in Europe (i.a. Helsinki Final Act; Charter
of Paris for a New Europe) the agreement includes
a clause on the respect of democracy and of human
rights. Continuation of unilateral EU trade concessions. |
| June 1993: |
declaration by the European Council
at Copenhagen that the associated
countries from Central Europe may become members of
the Union when they are able to assume the obligations
of membership and when the Union will be ready to
absorb new members. |
| December
1994: |
adoption of a “strategy
to assist the associated Central European countries
in their preparation for accession”
by the European Council at Essen. |
| January
1995: |
entering into force of the Free
Trade Agreement. This included the reciprocal abolition
of both tariffs and quantitative trade restrictions
for all goods, except for most agricultural products
which are subject to a preferential treatment. The
abolition of barriers was “asymmetric”
meaning that the EU introduced its concessions earlier
than Latvia. As of January 1995, almost all EU trade
restrictions were abolished; Latvia had four years
to achieve this. The agreement also includes the introduction
by Latvia of competition rules, including state aid
legislation, similar to those applying in the EU,
as well as the enforcement structures. The economic
co-operation and other aspects of the former agreement
remained in force; also the participation in Phare
continued.
text of Europe Agreement: /enlargement/financial_assistance/phare/index_en.htm |
| May 1995: |
adoption by the Commission of
the “White Paper” on integration
of candidate countries into the Internal Market”
as a guide for preparing candidate countries. |
| October
1995: |
introduction of Latvian
application for EU membership. |
| July 1997: |
Commission opinion on Latvia’s
application for EU membership. It concluded that accession
negotiations should be opened as soon as Latvia had
made sufficient progress in satisfying the conditions
of membership. The conclusion was endorsed at the
European Council in December 1997.
Commission opinion:
/enlargement/dwn/opinions
/latvia |
| February
1998: |
entering into force of the Europe
Agreement which had been signed in June 1995. In addition
to the trade and trade-related dispositions of the
Free Trade Agreement, this association agreement
provides i.a. for reciprocal liberalisation of trade
in most services, for opening of public procurement
markets, for “national treatment” of enterprises
for their establishment and operations in the territory
of the other party to the Agreement, and for economic,
financial and cultural co-operation. An Association
Council (ministers), an Association Committee (high
officials) and its sub-committees, and a Parliamentary
Association committee are established to manage the
implementation of the Agreement. Additional
protocols to the Europe Agreement were concluded,
i.a. to further liberalise trade in agriculture and
fisheries products, to allow for the lifting of technical
barriers to trade in certain manufactured goods (mutual
recognition of conformity assessment - PECA), and
to provide for Latvia’s participation
in European Community Programmes and Agencies. |
| November
1998: |
adoption by the Commission of
the first Report on Latvia’s progress in its
preparation for EU accession (Regular Report). Further
progress reports were adopted in autumn of each following
year, with the last one in October 2002.
Progress reports: /enlargement/
arch_countries/latvia |
| March 1999: |
Start of the “bilateral
screening of the acquis”. This is the
technical examination of Latvia’s position vis-à-vis
the body of the EU legislation rules and practices. |
| October
1999: |
The Commission adopts the
“Accession Partnership” which
sets out the priorities for Latvia’s EU accession
preparation and brings together all the different
forms of EU support within a single framework. It
was revised in February 2000, and a new “Accession
Partnership” was adopted in November 2001.
Accession Partnerships: /enlargement/report2001 |
| February
2000: |
opening of formal
EU accession negotiations. |
| October
2001: |
Latvia participates in the
European Convention, which will formulate
proposals for the revision of the EU treaties. |
| December
2002: |
|
| April 2003:
|
signing of Accession Treaty at
Athens. As of the day of signing the Treaty and prior
to accession, the candidate countries will take part
in the meetings of the European Parliament, the Council
and in the various committee meetings organised by
the Commission; however, without voting rights.
http://www.europarl.europa.eu/
enlargement/access_draft_en.htm |
| September
2003: |
Latvian referendum
on EU accession (69 % in favour). |
| November
2003: |
adoption by the Commission of
the “Comprehensive monitoring report”
on the implementation by Latvia of necessary reforms
and on all commitments in the field of Community acquis. |
According to a Latvian opinion poll in February 2004, EU
support has decreased to 55%.
5.2 Development of EU - Latvia trade
In 2002, the EU bought 61% of Latvia’s
exports and provided 53% of its imports.
From 1992 to 1995, trade of EU-12 Member States (Finland,
Sweden and Austria joined the EU in 1995) with Latvia more
than doubled to reach 1.5 billion Euro (0.6 EU exports and
0.9 billion € EU imports). From 1995 to 2002 trade
of the EU enlarged to 15 Member States with Latvia again
more than doubled, and the balance had turned in the favour
of EU. Investment goods (machinery and electrical equipment,
transport equipment, chemical products) are among the most
important goods exported from EU to Latvia and together
represent about half of the EU total. Agricultural goods,
including those processed and textiles, some of which meant
for outward processing, are also among the main categories
of goods exported to Latvia. Wood and textiles represent
about 60% of the EU’s imports from Latvia.
5.3 EU financial support for accession preparation :
As of the year 2000, total financial pre-accession
assistance allocated to Latvia amounts to over €100
million per year, consisting of 35 to €47 million from
Phare, €22 million from SAPARD, and €36.4 to €57.2million
from ISPA.
PHARE
From 1992 to 2003 a total of €404
million was allocated to Latvia. In the early years, Phare
supported the transition to democracy and to market economy;
as of 1998 it was exclusively reserved for EU accession
preparation. As of 2000, most of the funds were in support
of continuing “Institution Building” by which
public administrations and institutions were strengthened,
so as to be in a position to apply and enforce the “acquis”.
A smaller part of the funds could also be used for strengthening
“Economic and Social Cohesion” in the country.
The allocation for the 2003 Phare Programmes amounted to
around €49million of which nearly €45.65 million
for the National Programme, €3million for Cross Border
Co-operation in the Baltic Sea Region and €0.42 million
for the Nuclear Safety Programme. The National Programme
continues to address the Political criteria, such as the
integration of society, civil society and anti-corruption
measures, it provides support for the strengthening of the
administration with a view to EU accession. Priorities include
subjects of Justice and Home Affairs including border management,
Free movement of goods and company law, Agriculture, Social
Affairs, Employment and Public Health, Energy, Customs Union
and Public Finance Management as well as Regional policy
matters including actions of the European Regional Development
and of the Social Development Fund types regarding economic
and social cohesion. The 2003 budget has been the last of
Phare support for Latvia. In order to ensure continuation
of Institution Building support on issues not covered by
the Structural Funds a “Transition Facility”
has been set up, which will co-finance actions until budget
year 2006.
ISPA
ISPA started as of the year 2000 and can
be seen as a forerunner of the Cohesion Fund. It finances
major environment and transport infrastructure projects.
In Latvia, the priorities for environment infrastructures
concern: drinking water and wastewater treatment and waste
management. The upgrading of the Via Baltica (Road Corridor
I) and of the East-West railway link are transport priorities.
The measures approved between 2000 and 2002 have a total
value of about €390million with an ISPA contribution
of €277million.
SAPARD
SAPARD was set up in 2000 to assist candidate
countries in preparing for the application of the Common
Agricultural Policy and in addressing in a sustainable way
agricultural and rural sector problems. Revenue generating
investments (mostly projects proposed by enterprises) require
50% co-financing from the project owner. The indicative
SAPARD allocations for Latvia for the four years 2000-2003
amount to 91.6 M€. The agreed objectives to be pursued
are development of sustainable agriculture, integrated rural
developments and improvement of the environment. Projects
financed include: investment in agricultural holdings, improvement
of agricultural and fisheries product processing and marketing,
development and diversification of economic activities providing
alternative income, improvement of general infrastructure
and environmentally friendly agricultural methods.
5.4 Latvia as an EU member as of May 2004
Upon becoming an EU member, Latvia will
benefit from all rights and will also have to comply with
all obligations of membership. These are set out in the
Accession Treaty which will be signed on 16 April 2003 in
Athens. Latvia will delegate 9 members out of a total of
732 to the European Parliament, will dispose of 4 votes
out of a total of 321 in the Council of Ministers, and will
have: one Commissioner in the European Commission, one judge
in the Court of Justice, one judge in the Court of First
Instance, and one member in the Court of Auditors. Latvia
will also delegate members to the Economic and Social Committee
and to the Committee of Regions and will be represented
in various EU Committees and other bodies.
text of Accession Treaty: http://www.europarl.europa.eu/enlargement/access_draft_en.htm
It has been estimated that during the first
three years of accession (2004-2006) Latvia will receive
net payments from the EU budget of around 830M€ (1117
M€ receipts from the EU budget less 287M€ contributions
to it), most of which for investments in structural improvements
to allow for accelerated development, including improved
environment.
In a number of areas, restricted both in scope and in time,
Latvia is allowed transition periods for applying the acquis
to the full. Management of these transition periods will
be closely monitored. This will i.a be the case for purchase
by non–residents of agricultural and forest land in
Latvia (up to 7 years). 117 food processing plants are given
more time to allow them to make the investments needed to
meet the EU norms. Several phasing in periods in matters
of road transport (i.a cabotage, tachographs) are provided.
The level of excise duty on cigarettes has until end 2009
to adjust to the EU level, and several other taxation arrangements
are foreseen. Latvia is given until end 2009 to build its
safety stocks for oil. Eight transitional arrangements are
granted in matters of environment. It has been agreed that
in Latvia the level of turn over under which persons have
no obligation to register and to pay value added tax is
the equivalent to 17200€ (); which is more favourable.
A maximum quota for milk of up to 728.648t in 2006 has been
agreed along with some other specific quota and references
for the application of the Common Agricultural Policy in
Latvia. In addition, Latvia has been allowed to top-up direct
payments to farmers, some of which can be financed from
EU funds. Further, Latvia is allowed to maintain its traditional
fishing of small size Baltic Herring (10gr) for human consumption
as a derogation from the standard rule.
|