Central Europe Review - Latvian News Review

Curbing corruption

A World Bank sponsored study on governance in transition countries has reinvigorated the debate on how to curb corruption in Latvia. Latvian political decision-making is strongly influenced by private interests, the study says.

Many politicians tried to shrug off the issue, claiming the report used faulty methodology, but the advisory Foreign Investors Council (FICIL) seized the momentum to push for change. The FICIL's annual meeting made a series of recommendations to Prime Minister Andris Bērziņš, which included stepping up criminal prosecution of corrupt officials. If implemented, they would bring Latvia closer to nearby Scandinavian countries, which have the lowest levels of corruption worldwide, said Jukka Härmälä, CEO of Scandinavian forest products group Stora Enso, who chairs the FICIL.

Responding to public concern, Prime Minister Bērziņš issued two decrees creating more working groups to study the problem and to offer solutions. President Vaira Vīķe-Freiberga said she would submit to the Saeima a bill obliging officials to prove the legality of their income and property if political parties prove to be hesitant in doing so.

Spending defensively

The Latvian Parliament started to review a draft bill on national defense financing, specifying allocations required for national defense, security and integration in NATO over the next three years. The draft sets the allocations at 1.31 percent of GDP for next year's budget, 1.75 percent in 2002 and two percent in 2003.

Special friends visit

The United Kingdom regards Latvia as its "special friend," visiting Speaker of the House of Commons Betty Boothroyd told the Latvian media. US Deputy Assistant Secretary of State Daniel Hamilton was more outspoken. He told reporters that "the US is not a passive observer of the NATO enlargement, but is actively involved in creating conditions for Baltic NATO membership." Deputy Secretary of Treasury Stuart Eizenstat, who made a short stop in Rīga after the International Forum on Holocaust Era Looted Cultural Assets in Vilnius, praised Latvia for its legislation and policies on returning Jewish property.

Arresting the past

The Prosecutor-General’s Office has formally protested the court decision not to issue an arrest warrant for Konrāds Kalējs before the trial, claiming the court’s move obstructs further investigation. Meanwhile, the media quoted American and Australian reports about Hillary Clinton's letter to Australian Prime Minister John Howard asking him to take concrete measures to call Kalējs to justice. The move was seen as an attempt to win support for Clinton’s US Senate campaign from the Jewish constituency in New York state.

Interestingly, both left- and right-wing politicians in Parliament questioned the prosecutor's move and suggested that the International War Crimes tribunal in The Hague should decide on charges against Kalējs.

Sophisticated pre-election tactics

Right-wing party For Fatherland and Freedom/LNNK laid out new tactics in view of the March 2001 municipal elections "to remove negativism from its political rhetoric and to concentrate on the party’s strengths and positive achievements." The party also announced that it will draft and submit to Parliament a bill on compensation for the Soviet occupation. The draft is said to be similar to the law on compensations adopted by the Lithuanian Parliament. Lithuanian calculations of the possible amount of compensation, however, have not been made public.

In the meantime, For Fatherland's rival—and coalition partner—the People's Party submitted to the Saeima a draft law that proposes a ban on wearing former Soviet order medals and other decorations.

Nordic telecom invasion

NetCom, Sweden's second-largest telecommunications company, agreed to buy Baltkom GSM for USD 277 million to benefit from an expected surge in mobile phone users in Latvia. NetCom will acquire all of Latvia's number two cellular company, which has 90,000 clients, from shareholders including Western Wireless International Corp, Metromedia International Group Inc and Pēteris Šmidre, Baltkom's current CEO, who owns approximately 50 percent of the company.

Some 15 percent of Latvia's population has mobile phones, compared with the Western European average of about 40 percent. Latvia's largest cellular company is Latvian Mobile Telecom (LMT), partly owned by Telia, NetCom's biggest rival at home, and Finland's Sonera. The purchase completes NetCom's presence across the Baltic states.

Newspapers reported that NetCom is exercising an aggressive marketing policy on the Estonian market. Two and a half years ago, when the company launched its operations in Estonia, it offered clients inexpensive telephones for signing a 12-month contract.

Higher tariffs for cargo

Latvia's state-run railway, Latvijas Dzelzceļš (LDz), "received a telegram" from the Russian Transport Ministry stating that it would raise favorable (regular) tariffs from 1 October until 31 December for all three Baltic states.

The company hoped the rise in tariffs would not hurt its cargo turnover, since, unlike in 1998 and 1999, Latvia would not be an exception. Higher tariffs will be also applied to cargo going through Estonia and Lithuania. Russia scrapped discounts on goods bound to and from Latvia in 1998 in a campaign of economic sanctions against the Baltic state. In April 2000, LDz and the Russian Transport Ministry signed a cooperation agreement that guaranteed Latvia the same favorable tariffs as other countries.

CME Energy launches Latvian arm

US-based CME International, an energy sector project firm, set up a Latvian arm—in addition to its Pan-Baltic regional office—to attract investment to the sector. Last autumn, CME International and Caterpillar Power Ventures announced an investment of USD 70 million to build a 74 megawatt natural gas power generation plant in the western Latvian town of Liepāja by 2002. CME has said earlier it was looking at other regional projects worth a total of USD 200 million, though no details were given.

Privatization moves ahead

A Chase Manhattan-led consortium will advise the Latvian government on the sell-off of fixed-line telephone monopoly Lattelekom. The consortium will also advise Latvia in its talks with Lattelekom minority stakeholder, Tilts Communications, on the shortening of the firm's monopoly by ten years to 2003.

The United Nations Conference on Trade and Development's annual UNCTAD World Investment Report has meanwhile recognized Latvijas Kuģniecība (Latvian Shipping Co, LASCO) as the biggest non-finance transnational company in Central and Eastern Europe. Some 90 percent of LASCO's total USD 504 million in assets has been invested abroad. The Latvian Privatization Agency, advised by Dutch company BDO New Markets, hopes to find a strategic investor for LASCO by the end of the year. Some 90 percent of state-held shares in the company will be sold at that time.

And in other news...

Prime Minister Bērziņš said that broader access to the Internet for Latvia's residents will depend on whether Lattelekom would be able to meet its obligations under the umbrella agreement with the Latvian government, something that the company failed to do so far, according to Bērziņš. "They have promised to put fiber-optic cables in each farm by 2002. Their task was to digitize all of Latvia," the Premier said. He said the company is behind schedule in implementing the agreement.
Dati, "the largest software development company in Eastern Europe," opened a new training center in Rīga. It will allow at least 600 IT experts to graduate each year.
Bank of Latvia President Einārs Repše and Economics Minister Aigars Kalvītis agreed that the bank should conduct a thorough cost-and-benefit analysis of pegging the Latvian national currency to the SDR (Special Drawing Rights) currency basket. The euro's falling exchange rate is said to threaten exports to the eurozone, which is the major destination of Latvian exports. Repše said the peg of the LVL (Latvian lats) to SDR is optimal, but the bank agreed to conduct further analysis.
New flats in newly-built houses in the center of the Latvian capital Rīga remained the most expensive new apartments in the Baltic states in October, Ober Haus real estate company reported. A new single-room flat in a new house in central Rīga costs from USD 1100 to 1600 per square meter. In the Estonian capital of Tallinn, the price is USD 762 per square meter and, in the Lithuanian capital Vilnius, it is from USD 900 to 1300 per square meter.

Exchange Rates
As of 6 October 2000

Currency Latvian
lats
(LVL)

1 US dollar 0.62

1 British pound 0.90

1 German mark 0.28

1 euro 0.54

Daria Kulagina, 6 October 2000

Moving on:

Sources:

Diena
Reuters
Neatkarīgā Rīta Avīze
LETA
BNS
Dienas Bizness
Bizness Baltija