LLAATTVVIIAA Single Programming Document Objective 1 Programme 2004 – 2006
Riga 2003 Single Programming Document for Latvia Objective 1 Programme 2004-2006
Table of Content
1. Introduction...... 13 2. Analysis...... 15 2.1. General Description of the State...... 15 2.1.1. Geographical Situation...... 15 2.1.2. Administrative Division...... 15 2.1.3. Demographic Situation ...... 16 2.1.4. Quality of the Environment and Natural Resources ...... 16 2.2. Macroeconomic Context...... 22 2.2.1. GDP Dynamics ...... 22 2.2.2. Inflation and Monetary Policy ...... 23 2.2.3. Fiscal Policy...... 24 2.2.4. Balance of Payments...... 25 2.2.5. Investment in the Latvian Economy ...... 27 2.2.6. Employment...... 28 2.3. Development of Sectors of Economy ...... 31 2.3.1. Primary Sector ...... 35 2.3.2. Secondary Sector – Industry ...... 36 2.3.3. Tertiary Sector – Services...... 38 2.3.4. New Growth Sectors: Preparing the Ground for a Future Growth of Knowledge Based Economy...... 39 2.4. Development of Entrepreneurship ...... 41 2.4.1. Business Environment ...... 41 2.4.2. Competitiveness (Movement towards Knowledge Economy) ...... 43 2.4.3. ICT Solutions for Business ...... 46 2.4.4. Conformity with Market Standards and Requirements in the Area of Environment Protection, Work Safety and Consumer Protection ...... 46 2.4.5. International Markets...... 47 2.5. Labour Market and Human Resource Development ...... 49 2.5.1. Employment and Unemployment ...... 49 2.5.2. Education, Training and Development of Workforce...... 57 Higher Education and Science...... 57 Initial Vocational Education and Training...... 61
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Adult Continuing Training...... 63 2.5.3. Promotion of Social Inclusion ...... 65 2.5.4. Gender Equality ...... 68 2.6. Infrastructure...... 71 2.6.1. Transport...... 71 Road Transport...... 72 Railway ...... 77 Seaports...... 77 Airports ...... 79 Public Transport...... 79 Transport System Development in the Riga City ...... 80 2.6.2. Information Society and Information and Communication Technologies 82 Access to Telecommunications and Internet ...... 84 2.6.3. Environmental Infrastructure...... 88 Water Services ...... 88 Waste Management...... 89 2.6.4. Energy Sector...... 94 General Information and Main Indicators...... 94 Electricity...... 97 Heat Supply...... 97 2.6.5. Social Infrastructure...... 103 Health Infrastructure ...... 103 Education Infrastructure...... 107 Social Services Infrastructure ...... 111 2.6.6. Tourism and Heritage of Culture and History ...... 115 2.7. Development of Rural Territories, Agriculture, Forest Sector and Fisheries.119 2.7.1. Development of Rural Territories...... 119 Utilisation of Land ...... 119 Rural Infrastructure...... 120 Population and Employment...... 120 2.7.2. Agriculture and Processing of Agricultural Products ...... 123 Development of Agricultural Production...... 123 Processing of Agricultural Produce ...... 125 Human Resources ...... 126 2.7.3. Forest Sector ...... 128
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Forestry ...... 128 Timber Industry ...... 129 2.7.4. Fisheries ...... 132 Fishing...... 132 Aquaculture...... 134 Fish Processing ...... 135 2.8. Balanced Development of Territories...... 139 2.8.1. Kurzeme...... 142 2.8.2. Latgale...... 146 2.8.3. Vidzeme ...... 148 2.8.4. Zemgale...... 152 2.8.5. Riga Region ...... 154 2.9. Experienced Gained from Past Assistance ...... 157 2.9.1. Phare Programme...... 157 Phare National Programme...... 157 Phare Economic and Social Cohesion ...... 157 2.9.2. SAPARD...... 160 2.9.3. ISPA...... 161 3. Strategy ...... 162 3.1. SWOT Analysis ...... 162 3.1.1. Strengths ...... 165 Economy ...... 165 Human Resources ...... 165 Infrastructure...... 167 3.1.2. Weaknesses...... 168 Economy ...... 168 Human Resources ...... 169 Infrastructure...... 170 3.1.3. Opportunities...... 172 Economy ...... 172 Human Resources ...... 172 Infrastructure...... 173 3.1.4. Threats...... 174 Economy ...... 174 Human Resources ...... 174
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Infrastructure...... 175 3.2. The SPD Strategy...... 176 3.2.1. The SWOT Context for the SPD Strategy ...... 177 3.2.2. Mid -Term Objectives...... 178 Promoting Competitiveness Businesses and Employment...... 178 Development of Human Resources ...... 179 Development of Infrastructure...... 180 3.2.3. Long Term Objective...... 182 3.2.4. Horizontal Objectives – Coherence with the Policies of the European Communities...... 183 Information Society ...... 183 Sustainable Development and Environmental Protection...... 183 Equal Opportunities and Gender Equality ...... 184 Territorial Cohesion...... 185 Common Agricultural Policy...... 186 Common Fisheries Policy...... 187 Community Initiatives ...... 188 3.3. Policy Frame of Reference for Human Resources Development ...... 190 3.3.1. Joint Assessment Paper...... 190 3.3.2. European Employment Strategy and Employment Guidelines ...... 191 3.3.3. Joint Inclusion Memorandum ...... 193 3.3.4. ESF Links with Other Structural Funds...... 195 3.3.5. Policy Fields of European Social Fund...... 196 3.4. Single Strategy for Transport and Environment ...... 211 3.4.1. Transport...... 211 3.4.2. Environment...... 214 3.5. Interconnection between the Strategy and Priorities ...... 216 3.6. Programme Indicators and Targets ...... 218 3.6.1. Programme Indicators...... 218 3.6.2. Indicators at the Priority and Measure Level...... 222 4. Priorities...... 234 4.1. Priority: Promotion of Territorial Cohesion ...... 234 4.1.1. Measure: Improvement of Environmental Infrastructure and Tourism...235 4.1.2. Measure: Development of Accessibility and Transport System...... 239 4.1.3. Measure: Development of Information and Communication Technologies ...... 242
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4.1.4. Development of Education, Health Care and Social Infrastructure...... 245 4.2. Priority: Promotion of Enterprise and Innovations...... 249 4.2.1. Measure: Support to Development of Innovation...... 250 4.2.2. Measure: Business Infrastructure Development ...... 252 4.2.3. Measure: Enhancing Business Support Measures for Small and Medium Size Enterprises...... 254 4.2.4. Measure: Access to Finance for Small and Medium Size Enterprises ....256 4.2.5. Measure: Development of Public Research...... 258 4.3. Priority: Development of Human Resources and Promotion of Employment261 4.3.1. Measure: Promotion of Employment...... 262 4.3.2. Measure: Development of Education and Continuing Training...... 263 4.3.3. Measure: Combating Social Exclusion...... 265 4.4. Priority: Promotion of Development of Rural Areas and Fisheries...... 267 4.4.1. Measure : Investments in Agricultural Holdings...... 271 4.4.2. Measure: Setting Up of Young Farmers ...... 274 4.4.3. Measure: Improvement of Processing and Marketing of Agricultural Products...... 275 4.4.4. Measure: Promotion of Adaptation and Development of Rural Areas 278 4.4.5. Measure: Forestry Development...... 282 4.4.6. Measure: Development of Local Action (LEADER+ Type Measure) 286 4.4.7. Measure: Training...... 290 4.4.8. Measure: Adjustment of Fishing Effort ...... 291 4.4.9. Measure: Fleet Renewal and Modernisation of Fishing Vessels...... 292 4.4.10. Measure: Development of Processing and Marketing of Fishery and Aquaculture Products, Fishing Port Facilities and Aquaculture...... 293 4.4.11. Measure: Development of Coastal Fishery, Socio-economic Measures, Aid for Temporary Cessation of Fishing Activities and Other Financial Compensation, Promotion of New Market Outlets and Support to Producer Organisations ...... 295 4.5. Priority: Technical Assistance ...... 298 4.5.1. Measure: Support for Programme Management ERDF...... 298 4.5.2. Measure: Other Technical Assistance Costs ERDF...... 298 4.5.3. Measure: Support for Programme Management ESF...... 298 4.5.4. Measure: Other Technical Assistance Costs ESF...... 300 4.5.5. Measure: Support for Programme Management EAGGF ...... 300 4.5.6. Measure: Other Technical Assistance Costs EAGGF ...... 300 5. Overall Management Framework of SPD...... 301
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5.1. Legal Framework...... 301 5.1.1. Public Procurement...... 301 5.1.2. Planning of Co-financing and Multi-annual Budgeting...... 302 5.1.3. Environmental Protection ...... 303 5.1.4. State Aid...... 304 5.2. Administrative Framework ...... 305 5.2.1. Managing Authority...... 305 5.2.2. Paying Authority...... 306 5.2.3. Intermediate Bodies ...... 307 5.2.4. Final Beneficiary...... 308 5.2.5. Body or Firm carrying out the operation ...... 309 5.2.6. Monitoring Committee...... 309 5.2.7. Steering Committee ...... 309 5.3. Implementation ...... 311 5.3.1. ERDF and ESF...... 311 Aid Schemes ...... 320 5.3.2. EAGGF and FIFG...... 325 5.4. Monitoring ...... 327 5.4.1. Monitoring Committee...... 327 5.4.2. Data Collection and Reporting...... 328 5.5. Financial Management and Control...... 332 5.5.1. Financial Management...... 332 5.5.2. Financial Control ...... 333 5.5.3. Irregularity Reporting ...... 336 5.6. Evaluation ...... 337 5.7. Information and Publicity ...... 338 6. Financial Plan...... 339 7. Standard Section on Additionality for Objective 1...... 344 8. State Aid...... 347 9. Partnership ...... 358 9.1. Stages of Partnership...... 358 9.2. Working Groups...... 358 9.3. Seminars...... 360 9.4. Feedback Evaluation...... 361 10. Publicity ...... 363
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10.1. General Objective ...... 363 10.2. Specific Objectives ...... 363 10.3. Target Groups ...... 363 10.4. Publicity and Information Measures...... 364 10.5. Indicative Budget...... 364 10.6. Responsible Authorities...... 364 10.7. Monitoring and Subordination...... 364 10.8. Evaluation Criteria...... 364 11. Ex-Ante Evaluation...... 365
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Index of Tables 1. Table. Principal Exports of Latvia in 2002 (FOB prices)...... 26 2. Table. Principal Imports of Latvia in 2002 (CIF prices) ...... 26 3. Table. Exports and Imports of Services in 2002...... 27 4. Table. Economic Sectors’ Contribution to GDP, Employment – Development from 1996 to 2002...... 32 5. Table. Cross-cutting Classification of the Sectors of Economy ...... 33 6. Table. Economic Sectors’ Contribution to GDP, Employment, Exports (%) and Labour Productivity (euro), 2001 ...... 34 7. Table. Amount of Economically Active Enterprises (1997-2002)* ...... 41 8. Table. Important Groups of Exported Commodities and Numbers of Exporting Enterprises (1998-2000)...... 48 9. Table. The Structure of Employment by Sectors of Economy ...... 51 10. Table. Rate of Employed Persons and Monthly Average Gross Wages and Salary by Gender and Kind of Activity...... 69 11. Table. Freight Traffic (by Transport Vehicles Registered in Latvia) in the Main Modes of Transport (mln tonnes) ...... 71 12. Table. The Classification of the Latvian Road Network, 2002 ...... 74 13. Table. Deteriorated Sections of State Main Roads and 1st Class Roads and Bridges in Critical Condition, 2002...... 75 14. Table. The Capacity (output) of Ports and Cargo Turnover (thousand tons) ...... 78 15. Table. Passenger Turnover in Ports of Latvia (thousand passengers) ...... 78 16. Table. The passenger Number (departing and arriving) in the Airport “Riga” (thousands of passengers))...... 79 17. Table. Rate of Digitalisation of Fixed Telecommunication Lines in District Centres and District Rural Territories (December 2002)...... 85 18. Table. Energy Efficiency in Latvia, and Average Indicators for the EU Member States and the EU Candidate Countries ...... 94 19. Table. State Support for Heat Supply Sector, mln. EUR...... 102 20. Table. Indicators Characterising Socio-economical Disparities Average, 2002121 21. Table. Main indicators of the fish sector (including fishery, aquaculture and fish processing), 1996-2002...... 137 22. Table. Indicators Characterising Regions...... 140 23. Table. SWOT Analysis Box ...... 162 24. Table. Interrelationship between the Joint Assessment of Employment Priorities in Latvia, Joint Inclusion Memoranda (to be signed by December, 2003), National Employment Plan, Latvia’s Draft Single Programming Document, 4.3. Priority “Development of Human Resources and Promotion of Employment” and the Community Initiative EQUAL draft Programme ...... 204
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25. Table. Allocation of Priorities in Intervention Areas...... 216 26. Table. Financial plan (euro)...... 339
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Index of Figures 1. Figure. Statistical Regions...... 15 2. Figure. Mean Yearly Ozone Concentrations in Ambient Air, 1998-2001...... 17 3. Figure. Total Waste Water Discharge, Emissions of Total Nitrogen and Total Phosphorus to Natural Waters from Point Sources, 1991-2001 (1991=100%)...... 18 4. Figure. Emissions of Zinc and Copper to Natural Waters from Point Sources, 1999-2001 (1999=100%)...... 18 5. Figure. Solid Vegetated Sea Shores with High Risk of Erosion...... 19 6. Figure. Amounts of Produced Hazardous Waste in 2001...... 20 7. Figure. Wood Harvest, Baltic Sea Fish Catch, and Water and Mineral Resource Extraction in 1991-2001 (1991=100%) ...... 21 8. Figure. GDP Growth Rates, 1996-2006 (%)...... 22 9. Figure. Harmonised Consumer Price Index (year on year, %)...... 23 10. Figure. Deficit / Surplus of Latvia’s Consolidated Budget and Average EU Values, According to ESA 95 Methodology (% of GDP)...... 24 11. Figure. Turnover of International Trade of Latvia in 2002 (mln lats)...... 25 12. Figure. Foreign Direct Investments in Latvia (mln USD) ...... 27 13. Figure. Accumulated FDI by Sectors in 2002 (%) ...... 28 14. Figure. Unemployment rate (%) ...... 29 15. Figure. Division of Workforce by Gender and Age Groups in 2002(in thousands) ...... 50 16. Figure. Employment Rate in 2002 (%)...... 51 17. Figure. Unemployment Rate in 2002 (%)...... 53 18. Figure. Division of Students into Thematic Clusters of Education and Training 2001 / 2002 (%) ...... 58 19. Figure. Full-time Academic Staff in Higher Education Institutions in 2001. /2002.g. (%) ...... 59 20. Figure. The Age Structure of Academic Staff in the State Higher Education Institutions in 2001 / 2002 (%) ...... 59 21. Figure. Students’ Choice of their Further Education Path in 2001 (%)...... 61 22. Figure. Division of Adult Education and Training Programmes offered in 2000 / 2001 according to Branches (%)...... 64 23. Figure. Latvian State Main Road Traffic Data, 2002 ...... 73 24. Figure First Class Road Traffic Data 2002...... 74 25. Figure. Dynamics of Car Quantity (thousands)...... 76 26. Figure. Content of the Solid Waste (%)...... 90 27. Figure. Solid Waste Dumpsites in Latvia ...... 92
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28. Figure. Dynamics of GIC and GDP 1990-2002 in %...... 94 29. Figure. Structure of the Primary Energy Resources GIC ...... 95 30. Figure. Heat Supply Demand, 1990-2001 ...... 98 31. Figure. Heat Demand...... 101 32. Figure. Availability of Healthcare Services in the Regions...... 104 33. Figure. Localization Points of EMA Management and Dispatch Centres, Multi-profile EMA Hospitals, and Accessibility of EMA Pre-hospital Teams in 5 Regions ...... 105 34. Figure. 20 Hospitals to be Included into the Unified Blood Donation Information System...... 106 35. Figure. Volumes of Main Agricultural Production (1990, 1998-2002)...... 123 36. Figure. Dynamics and Structure of Agricultural Production, 1996 – 2002...124 37. Figure. Dynamics of foreign trade balance in agricultural produce of Latvia for 2000-2002 (million EUR)...... 126 38. Figure. Felling Volumes Grouped According to Ownership (millions of m 3) 129 39. Figure. Structure of Export of Wood and Wood Products (million EUR) ....130 40. Figure. Use of fish resources in Latvia’s territorial and economic zone waters, 1996-2002 (thousand tonnes)...... 137 41. Figure. Volumes of production of fish and canned fish 1996 – 2002 (in thousand tonnes) ...... 138 42. Figure. Statistical Regions ...... 139 43. Figure. Planning Regions (in accordance with NUTS III) ...... 141 44. Figure Average Territorial Development Index of Districts, 1999 – 2001....142
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1. Introduction
1. The Single Programming Document has been designed as a programming document for European Union Structural Funds Objective 1 intervention in Latvia for programming period 2004-2006. Latvia is regarded as a single NUTS II region, and the whole territory is eligible for Objective 1 Structural Funds support in the framework of the SPD. The SPD covers the priorities of all four EU Structural Funds – European Regional Development Fund (ERDF), European Social Fund (ESF), European Agriculture Guaranty and Guidance Fund (EAGGF) – Guidance Part, and Financial Instrument for Fisheries Guidance (FIFG).
2. The Single Programming Document 2004-2006 is a product of dynamic inter- ministerial relations and social partner dialogue. It is designed to make an additional contribution to the on-going national development planning process.
3. In preparing the SPD the Latvian administration has used “The Structural Funds and their coordination with the Cohesion Fund, Guidelines for programmes in the period 2000-2006” and further indicative guidelines for the candidate countries (Communication from the Commission; COM(2003) 110 final). As such the SPD preparation process has been marked by the principles of partnership, transparency, coherence, quantification and additionality.
4. The SPD outlines in detail how EU Structural Funds will be used in Latvia in the period of 2004-2006. The SPD Strategy is based on: • Long term national development priorities; • Analysis and SWOT of the current socio-economic situation; • Analysis of Pre-structural funding interventions; • Assimilation of EU guidance and policy direction in the areas of competitiveness, employment, information society, equal opportunities, agriculture and environment .
5. Latvia’s macroeconomic stability and conservative approach to fiscal discipline provides the platform for the national development planning process and this SPD. The international credentials of Latvia as a stable open economy have been firmly established. This stability must now be translated into more dynamic and inclusive economic growth.
6. The potential afforded by Latvia’s on-going globalisation, EU accession and comparative economic advantages must be readily utilised. The restructuring of Latvia’s traditional sectors and support to lead and new growth sectors must be well managed. Increasing overall economic competitiveness and the generation of new employment opportunities are key objectives.
7. This SPD can make an important contribution to creating the conditions for new, sustainable and balanced socio-economic growth in Latvia. Due to the short programming period, pragmatic and well-integrated funding priorities have been defined. This approach will maximise the additional impact of EU structural co- funding. Even if high priority will be given to support priorities of upgrading basic infrastructure necessary for fostering development of the country, the SPD is giving a start to unprecedented investments in promoting entrepreneurial activity and human resource development. The emphasis put on the human
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resource dimension of SPD reflects the long-term objective of the development of Latvia – to create ‘a competitive, inclusive, knowledge based economy’.
8. The analysis of Latvia’s economic performance has identified the key challenges facing the economy. All are human resource development related. These challenges include: • Structural unemployment – mismatch between labour supply and demand; • Widening regional disparities; • Weak performance of indigenous industry; • Need to attract increased and new foreign direct investment flows.
9. To begin addressing these challenges the following inter-related Mid-Term Objectives have been devised for this SPD. The objectives are: • To promote Competitiveness and Employment; • To develop Human Resources; • To develop Infrastructure.
10. The SPD priorities and measures flow from the above Mid Term Objectives. The SPD priorities combine with National Development Plan priorities and are well directed by EU policy guidance. A series of performance indicators have been devised to assess the implementation of the priorities.
11. The Priorities outline the specific measures that will be used to achieve the objectives set. The Programme Complement provides more detailed information on the particular sectors covered, state aid schemes used for co-financing, financial provisions and project selection criteria.
12. Latvian development planning is an inter-ministerial and partnership-based process. The SPD will be implemented in the same manner. The exact implementation structure of the SPD is based on the experience key ministries have gained from both the national planning process and the use of pre- structural funding.
13. Maximising the opportunity that SPD 2004-2006 presents for Latvia’s long-term development is the government’s main goal. The lessons learnt from the pre- structural funding experience have proved valuable in designing this SPD. It is important the lessons from the SPD 2004-2006 experience are also captured, to place Latvia on better footing to design, manage and implement future longer- term EU structural funding programmes.
14. The design of SPD 2004-2006 anticipates the challenges associated with successful implementation of the EU co-funded programmes. The objectives are pragmatic to allow for successful implementation in the limited time available. The priorities target what is most required by the Latvian economy. In this manner Latvia can build and work towards a future ‘competitive and inclusive knowledge based economy’.
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2. Analysis
2.1. General Description of the State
2.1.1. Geographical Situation
15. The Republic of Latvia is located in the North-East of Europe within the Baltic Sea Economic Region. Latvia covers 64 589 km 2 of territory. The capital is Riga. The State borders with Estonia (north), Russia (east), Belarus (south-east) and Lithuania (south). Latvia has three important ice-free seaports through which important transit corridors from the East to the West go.
2.1.2. Administrative Division
16. Administratively Latvia is divided into 33 regional level local governments: 26 districts and seven republic cities, which in parallel to the functions of territorial local governments also perform the functions of district local governments. Latvia has 547 territorial local governments, and at the present time a merger of territorial local governments is taking place. The Cabinet has approved an indicative project for the establishment of 102 territorial local governments. In accordance with Regional Development Law five planning regions have been established. The planning regions are to coordinate and facilitate cooperation between municipalities in promoting economic and social development on regional scale. The territories of five planning regions are close to the division of the country in five statistical (NUTS III) regions (see Figure 1).
1. Figure. Statistical Regions
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2.1.3. Demographic Situation
17. At the beginning of 2001 there were 2.36 million inhabitants in Latvia 69% of who lived in cities, with about 1/3 of the population concentrated in the capital city. 54% of all inhabitants are females. Population density is 36.6 per km 2, which is significantly lower in comparison with the average indicators of the EU member states.
18. The size of the population as whole has a tendency to decrease : natural increase indicators have been negative since 1991. Demographic forecasts indicate that the number of workforce will stay stable till the year 2010. The number of economically active population may fall between 2010 and 2020 and this decline will be accompanied by ageing of population and essential changes in the age structure of workforce – fast decline of young people aged 15-24 and the increase of people aged 45-64.
2.1.4. Quality of the Environment and Natural Resources
19. As stressed in the Latvian National Report "Rio+10" to the World Summit on Sustainable Development in Johannesburg, the low number of population and low intensity economy have been the main reasons that determine generally better environmental quality compared to the member states of the European Union. At the same time, developing economy threatens the environment that is confirmed by worsening of selected indices .
20. Trans-boundary pollution and pollution from transport and stationary sources are the main sources of air pollution. The concentrations of sulphur and nitrogen dioxides are lower than the limit values set by the EU. The limit value for human health protection for particulate matter (PM 10 ) has been exceeded in 12% of measurement instances in Riga. Besides, the limit value for ground level ozone was exceeded several times: in Riga there was 1 case of exceeding the norm, Valmiera (3), Olaine (1), and Liepaja (8).
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2. Figure. Mean Yearly Ozone Concentrations in Ambient Air, 1998-2001 Source: Latvian Environment Agency, 2002
21. During the past decade, heavy metal pollution in air has been decreasing, which may be related to modernisation of stationary pollution sources, mainly regarding boiler houses, and a transition to environment friendly fuels such as wood and natural gas (see chapter Energy). Since 1990, mercury emissions have decreased by 51%, cadmium emissions – by 86%, lead emissions – by 90%.
22. During the past 10 years, improvement of water quality has been observed. Due to falling in production and implementation of environmental policy measures, the total amount of waste water and total nitrogen emissions have decreased by half, but the total emissions of phosphorus – threefold (all from point sources). Coverage of arable land, along with application of organic and mineral fertilisers have also declined, which lead to decline of nitrogen and phosphorus load from agriculture.
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140%
120%
100%
80%
60%
40%
20%
0% 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001
W astewaters Nitrogen Phosphorus
3. Figure. Total Waste Water Discharge, Emissions of Total Nitrogen and Total Phosphorus to Natural Waters from Point Sources, 1991-2001 (1991=100%) Source: Latvian Environment Agency, 2002
23. During the last years, the pollution of waste waters with particularly hazardous heavy metals (mercury, cadmium, lead) remains stable. In parallel to economic growth, last years reflect increase in the amounts of zinc and copper emissions (by 78% and 311%, respectively, compared to 1999), especially in Riga. The reasons are use of new zinc and copper containing materials in water sanitation systems, as well as increase in metal works production.
450% 400% 350% 300% 250% Zinc 200% Copper 150% 100% 50% 0% 1999 2000 2001
4. Figure. Emissions of Zinc and Copper to Natural Waters from Point Sources, 1999-2001 (1999=100%) Source: Latvian Environment Agency, 2002
24. In general, the level of eutrophication in the Gulf of Riga is continuing to increase. However, the main causal factor is not external, but rather an internal process – exchange of nutrients between sea bottom sediments and water column.
25. Mean concentrations of heavy metals in the upper sediment layer in the Gulf of Riga are lower or similar to those in the Gulf of Finland, Bothnian Bay and Bothnian Sea. Also, the concentrations of heavy metals in fish are low. The World Health Organisation considers the maximum allowed level of mercury in fish to be 1.000 µg/kg. In 2001, the concentrations of mercury in fish of the Gulf of Riga were 20–420 µg/kg.
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26. Coastal geological processes are of high importance in Latvia, because a high proportion of the population lives in the coastal zone. Observations show a significant rising trend in the yearly mean sea water level. The total length of segments of solid, vegetated shores with erosion risk during storms with a given wind direction, is 62% of the total shoreline. The main measures for conservation of the sea coast are following: dumping the dredged sediments from harbour aquatories and ship route canals in the shallow water belt (0-6 m depth); renewal of trampled, eroded by wind or water, or thoughtlessly excavated foredunes (e.g., with dune grasses, willows and sea buckthorn, wooden fences); renewal of bathing areas and provision of services.
5. Figure. Solid Vegetated Sea Shores with High Risk of Erosion Source: Latvian Environment Agency, 2002
27. In 1998-2001, 251 municipal waste dumpsites not meeting environmental standards were closed, but 252 dumpsites are in operation at present. 55 dumpsites have been re-cultivated. 12% of the operating dumpsites seriously threaten the environment (see chapter Environmental Infrastructure).
28. The produced amounts of hazardous waste tend to decrease. According to expert assessment, only 15% of the produced hazardous waste is collected and processed (see chapter Environmental Infrastructure).
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6. Figure. Amounts of Produced Hazardous Waste in 2001 Source: Latvian Environment Agency, 2002
29. Water, wood, fish, and some mineral resources (peat, construction raw materials) are the most important natural resources in Latvia. At present, the extraction of renewable natural resources does not exceed the renewal rate. Water resources are sufficient to ensure demand at present and in the future. In the Baltic Sea, the resources of several fish species (cod, Baltic herring and sprat) have declined that resulted in following decline in fishing quotas (see chapter Fisheries). Wood harvest is lower than the annual increment. Nevertheless, forest regeneration on private land is not sufficient (see chapter Forestry Sector). At the present rates of extraction, the reserves of the main mineral resources are sufficient to meet the demand for several millennia, but impact of quarries and drained bogs on nature and landscape has to be taken into account.
300% 250% 200% 150% 100% 50% 0% 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 Wood harvest Baltic Sea fish catch Water extraction Peat extraction Sand-gravel extraction Dolomite extraction
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7. Figure. Wood Harvest, Baltic Sea Fish Catch, and Water and Mineral Resource Extraction in 1991-2001 (1991=100%) Source: Latvian Environment Agency, 2002
30. According to agrochemical parameters, worsening in soil quality has been observed in agricultural land. In 1993-1999, the concentrations of phosphorus and potassium decreased by 60% and 70%, respectively. Acidification has occurred in 30%, but organic matter has decreased in 25% of agricultural land. Measures to prevent soil acidification and improve organic matter content are not sufficient in Latvia, e.g., liming of agricultural land (should be about 100,000 ha yearly), application of organic fertilisers, mulching, or growing of perennial grasses.
31. Species and habitats are rare or have even disappeared in other European countries have remained in large areas of Latvia. Coastal wetlands, wet forests, large and nearly untouched raised bogs, as well as natural and semi-natural meadows are recognised to be of national and international importance. Diverse soil and hydrological conditions, along with extensive economy, have determined a high diversity of habitats. However, the diversity of forest habitats is endangered by rapid felling. Also, it can be expected that agriculture in some parts will become more intensive, at the same time a part of the territory will overgrow, resulting in the disappearance of many valuable agricultural habitats. During past years, rapidly increasing construction of small hydropower stations threatens valuable freshwater habitats, as well as blocks fish migration routes.
32. In Latvia, 246 particularly protected nature territories have been established with a total area of 8.7% of the state territory. The average proportion of protected areas in the EU member states reaches 11%.
33. Since 2001, the protected area network of the EU importance (NATURA 2000) is being developed in Latvia. According to the requirements of the European Commission the candidate states will have to report on the establishment of the NATURA 2000 areas immediately after joining the EU. In order to protect habitats and species of EU importance, it is necessary to establish new sites, which involves also large areas of forest habitats. Scientists foresee increase of the area of specially protected nature territories up to 10% of the Latvia’s territory. All NATURA 2000 sites will benefit from the most appropriate national legal status and the same requirements as for nationally protected territories will apply, including certain restrictions of economic activity. For example, for sake of nature protection forestry activities are restricted in 2.7% of the Latvian territory.
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2.2. Macroeconomic Context
34. The following section outlines the economic context for this SPD. The stability of Latvia’s macroeconomic and fiscal environment forms the basis for the design and implementation of the SPD strategic objectives. Despite the various challenges Latvia has maintained this environment as an essential factor for long-term sustainable growth. Key challenges emerge from the on-going restructuring of the economy such as creating new employment opportunities, raising labour productivity, encouraging new business start-ups and negotiating the further rationalisation of traditional labour intensive sectors.
2.2.1. GDP Dynamics
35. Latvia is a small and open economy. Since independence in 1991 successive administrations have prioritised macroeconomic stability and a conservative public spending discipline. This robust approach to economic management helped to overcome the output contraction in the early phase of transition and to return on the stable growth path. Even after the Russian crisis the growth of Latvian GDP remained positive. Average GDP growth rate over the period of 1996-2002 amounted to 5.8% at constant prices. Nevertheless, the experiences of the 1990s demonstrated the challenges facing Latvia of being a small and open economy and the dangers posed by external economic shocks.
10
8
6 % 4
2
0 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006
8. Figure. GDP Growth Rates, 1996-2006 (%) Source: Latvia’s Pre-accession Economic Programme 2003
36. Short to medium term economic forecasts indicate that the level of 5-6% annual growth will remain 1. Favourable external trade factors such as increased foreign direct investments (FDI) confidence induced by membership of the EU and NATO may further increase these rates. However, other forecasts tend to be less optimistic especially given current fears of global recession.
• 1 The National Economy of Latvia Macroeconomic Review 2003
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37. Despite Latvia’s economic growth rates, GDP per capita of 35% of the EU average 2 (in purchasing power parity standards) is well below the desired. The long-term objective of Latvia’s ‘knowledge based’ economic development strategy is to attain the EU per capita average within the next 20-30 years. This remains a fundamental benchmark for the success of the national economic policies. The speed of which will be determined on how effectively national development policies combine with EU support measures in an enlarged Europe and more competitive global economy.
38. Recent economic experience has demonstrated that Latvia cannot fully rely on favourable external factors or existing economic advantages. These advantages have to be further developed by taking active steps to increase Latvia’s labour (and capital) productivity, to pursue the restructuring of sectors in decline, to create a more attractive investment environment, to address business related infrastructure needs and barriers to enterprise, initiative and innovation. Social cohesion, consistent with the EU policy priorities set out in the Lisbon Declaration, has to be aggressively pursued.
2.2.2. Inflation and Monetary Policy
39. During the last three years consumer price index (CPI) as a measure of inflation was constantly below 3% - an important indicator of Latvia’s macroeconomic stability. The current inflation level is comparable to that of the EU average.
5
4
3 % 2
1
0 1998 1999 2000 2001 2002
Latvia EU-15
9. Figure. Harmonised Consumer Price Index (year on year, %) Source: Central Statistical Bureau of Latvia, 2003
40. Taking into account the heavy dependence of the Latvian market on the price fluctuations in the global marketplace, low inflation is ensured by a sound monetary policy and the peg of LVL to the basket of currencies, Special Drawing Rights (SDR).
41. By maintaining the current fiscal and monetary policies the level of inflation should continue to remain below 3%, bolstering Latvia’s sound macroeconomic environment.
• 2 Central Statistical Bureau publication “Latvia and the European Union”, 2003
23 Single Programming Document for Latvia Objective 1 Programme 2004-2006
2.2.3. Fiscal Policy
42. The medium term fiscal policy goal of Latvia is to continue the steady reduction of the budget deficit (within the terms of Maastricht criteria) and the establishment of a stable and transparent taxation system that will ease the tax burden on the business community.
43. Historically, Latvia has successfully implemented a fiscal policy oriented to reduce the budget deficit. Since 1996, (bar 1999 due to extraordinary external circumstances), the budget fiscal deficit did not exceed 3% of GDP.
2 1 0 -1 -2 -3 % of GDP of % -4 -5 -6 1998 1999 2000 2001 2002
Latvia EU-15
10. Figure. Deficit / Surplus of Latvia’s Consolidated Budget and Average EU Values, According to ESA 95 Methodology (% of GDP) Source: Ministry of Finance and Eurostat, 2003.
44. In 2002, general government consolidated budget deficit increased to 3% of GDP, nevertheless, it still remained one of the lowest among the EU candidate countries. In 2002, expenditures on defence and security increased (related to NATO accession), as well as there was growth of expenditures related to the EU accession and expenditure commitments for continuation of remuneration reform in the public education sector, and expenditures related to healthcare.
45. The state debt of Latvia is low compared with the EU average and is significantly lower than that required by the Maastricht criteria (60% of GDP). In 2002 state debt of Latvia stood at 15% of GDP, while EU-15 average was 63%.
46. Over the last years the fiscal policy was oriented towards diminishing tax burdens facing the business community in order to encourage new and increased economic activities. 2003 saw a continuation in diminishing social insurance payment rate from 35% to 33% and corporate income tax rate cut from 22% to 19%. In 2004 it is foreseen to further reduce the corporate income tax rate to 15%.
47. The fiscal situation will initially face major challenges from the reduction in private sector tax returns and the need to identify the necessary co-funding to draw down EU structural funding. In the short term these shortfalls will be addressed by raising efficiencies in budget revenue and expenditure. It is
24 Single Programming Document for Latvia Objective 1 Programme 2004-2006
planned that in the medium to long term the benefits of increased economic activity will supply the necessary revenues to maintain fiscal discipline.
2.2.4. Balance of Payments
48. Historical data of GDP expenditure indicates that improved export opportunities largely drove growth since the 1996. The share of capital formation in the GDP structure increased from 19% in 1996 to 29% in 2002. However, growth of domestic demand exceeded GDP growth year on year, resulting in the growth of imports being above both GDP and export growth. Consequently, the current account deficit in the period from 1996 till 2001 ranged from 6% to 10% of GDP, which is high relative to the EU average (1.5%). In 2002 the current account deficit amounted to 7.8% of GDP.
49. The openness of the Latvian economy means that the exports of goods and services in 2002 constituted 45.5% of GDP, while imports – 56.1%. Since 1996 exports have grown by 64% and imports – 75%.The danger that these deficits pose to the sustainability of Latvian international trade has been recognised by the Latvian administration 3.
50. The driving factor behind the negative current account balances is the rapid growth of investment that exceeds the growth of savings. Importantly, this lessens the potential risk to the stability of the economy because most of the investment flows are non-debt transactions. The growth of investments is related to the modernisation of economy, which will in the longer term increase the productive potential, and competitiveness of the Latvian economy.
Other
Baltic countries
CIS
EU
0 200 400 600 800 1000 1200 1400 mill lats
exports (FOB prices) imports (CIF prices)
11. Figure. Turnover of International Trade of Latvia in 2002 (mln lats) Source: Central Statistical Bureau, 2003.
51. The EU is the dominant Latvian trading partner. In 1996 the share of overall trade with EU member states was 45% but grew to 60,4% by 2002. Similar
• 3 In the period of 1996-2001 a positive balance of services covered 1/3 of negative balance of trade in goods. Via corporate tax decreased the government is taking steps to further strengthen Latvia’s exporting industries.
25 Single Programming Document for Latvia Objective 1 Programme 2004-2006
changes are observed in import flows with the exception of the important role Russian imports play in Latvia’s energy sector.
52. In the main exports growth has been driven by an increase of trade in wood and metal (raw and products). Currently, with improving terms of trade (growing export opportunities to Russia, growth of foodstuffs prices etc.) there have been increases in the export of foodstuffs, chemical products, machinery and mechanical appliances.
1. Table. Principal Exports of Latvia in 2002 (FOB prices) Share, (%) Growth over 2000, (%) Wood and articles of wood 36.3 10.7 Transport vehicles, base metals and articles, 21.5 14.7 machinery, mechanical appliances and electrical equipment Textiles and textile articles 13.6 1.2 Live animals and animal products, vegetable 10.2 29.7 products and foodstuffs Products of chemical and allied industries 7.4 7.7 Source: Central Statistical Bureau of Latvia, 2003
53. In 2002 exports grew in all major groups of commodities. The highest growth was observed in the exports of food products, as well as in the exports of metal- working and machinery products. Consequently, the share of these products increased, resulting in a slight change in the structure of exports.
2. Table. Principal Imports of Latvia in 2002 (CIF prices)
Share (%) Growth over 2000 (%) Base metals and articles, machinery, mechanical 29.7 14.6 appliances and electrical equipment Products of chemical and allied industries 15.4 15.1 Live animals and animal products, vegetable 13.4 18.4 products and foodstuffs Transport vehicles 9.9 18.3 Mineral products 9.7 -0.8 Products of light industry 8.0 5.9 Wood and articles of wood 1.7 42.6 Source: Central Statistical Bureau of Latvia, 2003
54. Taking into account, that Latvian economy has re-oriented to produce more services, the negative balance of trade in goods is partly covered by positive balance of trade in services.
55. Exports of services grew by 3.6% in 2002, whereas imports – only by 0.1%, taking into account that the bulk value of export is higher than the imports, the positive balance grew significantly. This is accounted for especially by the
26 Single Programming Document for Latvia Objective 1 Programme 2004-2006
strong performance of the commercial services sector paired with traditionally strong transport.
3. Table. Exports and Imports of Services in 2002
Shares (%) Change over 2000 (%) Exports Imports Exports Imports Total services 100.0 100.0 5.5 1.0 Transport – 61.7 32.9 -1.2 9.8 – Sea transport 32.9 10.8 -7.7 19.8 – Air transport 4.7 8.9 6.3 0.0 – Other transport 24.1 13.2 7.6 9.5 Travel 12.8 32.4 31.4 0.4 Commercial services 24.0 32.7 5.2 -8.2 Other services 1.5 2.0 -4.6 -1.2
Source: Bank of Latvia, 2002.
2.2.5. Investment in the Latvian Economy
56. During the period of 1996-2000 average annual growth of expenditures on the gross fixed capital formation was 18.3%, being the highest among the EU candidate countries. The share of investment in GDP went up from 18.3% in 1996 to 26.4% in 2002. The sharp growth of investment was mainly driven by investment in the private sector.
57. Latvia in the 90s, similar to the other current EU candidate countries, experienced strong foreign capital inflow. By the end of 2001, in per capita terms Latvia received 990 USD of FDI. Ranked by this indicator Latvia takes up the sixth position among the EU candidate countries.
550 450 350 250 150 mill USD 50 -50 -150 1996 1997 1998 1999 2000 2001 2002
Equity capital Reinvested earnings Other capital
12. Figure. Foreign Direct Investments in Latvia (mln USD) * Other capital includes loans between direct investors and their branch enterprises. Source: Bank of Latvia, 2003.
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58. After a slowdown in 2001, the inflow of direct investment picked up again in 2002. Sustained future growth is very much dependent on Latvia exploiting earlier investments and attracting new FDI flows by making Latvia a more business friendly environment than other competitive countries.
Other sectors Manufacturing 6% 16% Comercial services Energy 23% 4%
Trade 19%
Financial Transport intermediation 7% 17% Communication 8%
13. Figure. Accumulated FDI by Sectors in 2002 (%) Source: Bank of Latvia, 2003.
59. At the end of year 2002 the total accumulated value of Latvia’s FDI was 1.618 billion LVL (2.652 B EUR). The vast majority of FDI was directed towards the sectors mainly oriented to the domestic market (e.g. trade, financial services, and communications). Nevertheless, investment in the manufacturing sector is stably increasing each year. This investment, however, was mainly concentrated in low and medium level technology sectors.
2.2.6. Employment
60. According to the data of Labour Force Survey, population aged 15-64 is gradually decreasing and in 2002 it was 1591.4 thsd (in 1999 – 1600 thsd).
61. The number of workforce in 2002 was 1094.8 thsd in age group 15-64, activity rate – 68.8%. Although the economic activity of women of this age group is comparatively high (64.1%) – higher than the respective EU average indicator (60%), it still needs to be improved. At the same time the participation of male in labour market is considerably lagging behind the EU average. The participation of young people (age 15-24) in the labour market is low – 39%.
62. This age and gender profile may change over the next 10 years due to the entry of persons born in the 1980s and the increased number of full time students into the labour market. This scenario can only occur if increased employment opportunities are created for the 18-24 age group.
63. Since the mid-1990s there has been a shift in the number of jobs out of the more traditional and lagging sectors towards those sectors experiencing growth. Over a five year period, there was an almost 10% exodus from the agriculture and
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forestry sectors and an increase of almost 40% into the more flexible service sectors.
64. Employment rate in Latvia in 2002 has increased by 1.6 percentage points in comparison with previous year and it reached 60.5%. The employment rate in the regions of Latvia differs significantly due to uneven social and economic development. The highest employment rate in 2002 was in Riga region – 64.0% and lowest in Latgale – 52.0%.
65. The share of employers and self-employed persons is comparatively low – 13.2% (Eurostat) of the total number of employed in 2002 (EU average – 15.6%).
66. In Latvia the unemployment rate in age group 15-64 is decreasing gradually and in 2002 it reached 12.1% but it is still higher than the average in the EU (7.4% in 2001).
Unemployment rate
19,4% 20
18
16 14,8% 14,0% 13,5% 14 13,2% 13,1% 12,1% 12
10
8
6
4
2
0 1996 1997 1998 1999 2000 2001 2002
14. Figure. Unemployment rate (%) Source: Central Statistical Bureau. Main Indicators of Labour Force Survey, 2002.
67. Despite the fact that a big share of unemployed has a comparatively high level of education (in 2002 65.5% of all unemployed had secondary or secondary-vocational education and 9% – higher education) and professional qualifications the labour market was not able to supply job opportunities and/or their skill-sets did not match the demands of the market.
68. Even though the economic indicators are constantly improving, increase of the level of public welfare is still low. Increase of income of inhabitants is very uneven. The polarization of material welfare is growing; there are a large number of persons receiving low income. In 2000 20% of the poorest households possessed 10% of the total income of households, the average income per person in these households was LVL 31 (53.17 EUR) and 27% of all residents came from those low income households. Besides, 20% of the more prosperous households with just 18% of the population possessed 40% of total household income.
29 Single Programming Document for Latvia Objective 1 Programme 2004-2006
69. Poverty and unemployment are major risk factors for social exclusion affecting large groups in society and its reduction is primary long-term social policy goal in Latvia.
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2.3. Development of Sectors of Economy
70. As it can be seen from the table below the Latvian economy has gone through a process of transformation since restoration of independence. In the early 1990’s agriculture and industry dominated. Over time sector transformation took place and in the mid-1990s contribution of agriculture and industry in GDP had diminished (agriculture – 7.8 %, industry – 21.3%). The trend remained till the end of 1990s. As a result, in 2001 the service sector formed over 70% of GDP. Industry sector now contributes only 15% of GDP. In less than 10 years Latvia has experienced a scale of restructuring which contrasts with a much longer- term process in most West European economies. This period of rapid, deep and far-reaching restructuring has created significant new economic opportunities. However, it has also created significant challenges for policy makers and the private sector.
71. The stability of Latvia’s balance of payment is dependent, in the short term, on increased productivity (and value-added) in the services sector (e.g. transport) and manufacturing (e.g. more processed goods in the timber sector). As with Western European economies Latvia faces the dual challenge of supporting the growth rates of the new sectors (e.g. some services) and increasing the competitiveness of traditional sectors.
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4. Table. Economic Sectors’ Contribution to GDP, Employment – Development from 1996 to 2002
1996 1997 1998 1999 2000 2001 2002
Sector % of GDP% of GDP% of GDP% of GDP% of GDP% of GDP% of GDP% of % of employment % of employment % of employment % of employment % of employment % of employment % of employment % of employment
Agriculture, 7.8 16.8 5.4 21.1 4.1 18.6 4.0 16.1 4.5 14.3 4.6 14.8 4.5 14.9 forestry Fishing 0.3 0.5 0.2 0.5 0.3 0.5 0.4 0.4 0.4 0.2 0.3 0.2 0.2 0.6 Mining and 0.2 0.2 0.2 0.1 0.2 0.1 0.1 0.1 0.1 0.2 0.1 0.1 0.2 0.3 quarrying
Manufacturing 21.1 19.3 22.3 18.5 17.9 18.6 15.3 17.6 14.6 18.1 14.9 16.3 14.8 17.0
Electricity, gas 5.4 2.2 5.0 2.1 5.3 2.4 4.5 2.3 3.9 2.2 3.7 2.0 3.6 2.2 and water supply
Construction 4.8 5.4 4.8 5.2 6.8 5.5 7.1 6.0 6.7 6.0 6.1 7.1 6.1 6.1
Wholesale and 15.5 12.4 16.0 13.4 16.8 14.7 17.6 14.7 18.0 15.5 18.5 16.7 19.9 15.2 retail trade Hotels and 1.1 1.7 1.3 1.6 1.2 1.8 1.3 2.2 1.2 2.3 1.3 2.3 1.2 2.4 restaurants Transport and 17.2 8.9 16.9 8.3 16.6 8.0 15.3 8.5 15.4 8.4 15.5 8.1 14.5 8.7 communications Financial 5.7 1.5 4.8 1.1 3.6 1.2 5.0 1.2 5.4 1.3 4.8 1.5 4.6 1.3 intermediation Real estate, renting and other 3.3 3.4 5.1 2.6 7.7 3.5 9.4 4.2 10.4 4.8 11.2 4.3 11.1 4.0 business activities Public administration and defence, 5.2 6.3 5.8 5.9 6.5 6.8 6.9 7.7 6.6 7.6 6.6 7.1 6.6 6. compulsory social security
Education 5.2 10.0 4.9 9.3 5.5 8.5 5.4 9.0 5.4 9.3 5.2 9.2 5.4 8.9
Health and social 3.5 6.1 3.4 5.4 3.6 5.3 3.4 5.4 3.1 5.1 3.0 5.2 3.0 6.1 care
Other services 3.7 5.3 3.9 4.9 3.9 4.5 4.3 4.6 4.3 4.7 4.2 5.1 4.3 5.4
Total 100 100 100 100 100 100 100 100 100 100 100 100 100 100
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72. In order to understand better the challenges and opportunities facing the Latvian economy the following sector breakdown is used: • Traditional – sectors in decline which are facing loss of importance in terms of GDP, loss of investment, loss of jobs and undergoing major restructuring, such as agriculture, fisheries and metal (heavy) manufacturing; • Compensating – includes those sectors such as construction, construction materials, non-traditional agriculture, crafts, tourism and other service sectors, which are in expansion and capable of absorbing jobs to those leaving the more traditional sectors; • Lead Sector – comprising current growth areas in terms of economic activity, investment and employment but under-performing in terms of value-added and contribution to GDP, such as services, timber-related industries, food processing and textiles; • Future Growth Sectors describes those sectors with potential growth in the knowledge-based economy with high-technology content – such as information technologies, chemistry and pharmaceuticals, biotechnology, composite materials.
73. This categorisation is useful in directing public sector interventions. For example, the negative impacts of restructuring in the traditional sectors can be addressed by creating opportunities and flexibility in compensating sectors. This allows the opportunity to undertake a more prospective integrated approach to promote future sustainable high-tech knowledge based sector in Latvia. This common framework supports inter-ministerial relations and makes it possible for different parts of Government to work towards common objectives.
5. Table. Cross-cutting Classification of the Sectors of Economy
Sectors Traditional Compensating Lead Future Growth Primary Agriculture, Non-traditional Forestry, Application of high- fisheries agriculture Primary/up-stream tech to forestry food processing production sector, Bio-tech in farm-food sector Secondary Metal Construction Textiles, Composite materials, manufacturing materials, Down-stream food optical electronics, and other Construction, processing, Nano-technologies, manufacturing Crafts timber products Organic chemistry Tertiary Tourism Transhipment / Transport logistics, transport Info technologies, Telematics and multimedia
74. Situation of Latvian economy in 2001 laying the grounds for the sector breakdown described in the table above is presented in the following table.
33 Single Programming Document for Latvia Objective 1 Programme 2004-2006
6. Table. Economic Sectors’ Contribution to GDP, Employment, Exports (%) and Labour Productivity (euro), 2001
Labour Share in Share in Sectors / sub-sectors Share in GDP productivity Employment Exports per worker Primary Sector 5.0 15.1 7.6 - agriculture /forestry 4.6 14.8 6.3 1303.0 - fishing 0.3 0.2 0.2 6680.0 - mining and quarrying 0.1 0.1 1.1 5551.0 Secondary Sector 14.9 16.3 86.5 (manufacturing) Energy, gas and water supply 3.7 2.0 n/a 8352.0 Construction 6.1 7.1 n/a 3820.0 Services 70.3 59.5 n/a - retail and wholesale trade 18.5 16.7 n/a 4940.0 - hotels and restaurants 1.3 2.3 n/a 2491.0 - transport and communications 15.5 8.1 n/a 8274.0 - financial intermediation 4.8 1.5 n/a 13978.0 - real estate, renting and other 11.2 4.3 n/a 11678.0 business activities - public administration and defence, compulsory social 6.6 7.1 n/a 3987.0 insurance - education 5.2 9.2 n/a 2536.0 - health and social care 3.0 5.2 n/a 2593.0 - other services 4.2 5.1 n/a 3644.0 Total 4 100.0 100.0 Source: Central Statistical Bureau and the Ministry of Economy
• 4 The Total is composed of the sum of Primary Sector + Secondary Sector + Energy, gas and water supply + Construction + Services.
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2.3.1. Primary Sector
75. The primary sector covers agriculture, primary forest production (and harvesting) and the fishing industry (for more detailed analysis of these sectors see in SPD sections (2.6.2, 2.6.3 and 2.6.4) and also mining and quarrying (though it is of minor contribution to GDP). All these sectors have undergone significant change and some social and economic dislocation since the early 1990s. The effects of the transition from collective to a market based economy still shape much of the rural economy. However, some parts of rural Latvia have moved more quickly towards modern and viable farm structures (e.g. Zemgale). In these regions there have been investments in technology and up-to-date farm practices. These are areas where modern competitive farming has already taken root. Output is increasingly focused on areas of production where Latvia is seen as having comparative advantage (e.g. milk products, rape, cereals).
76. By the same token, certain parts of the food sector have begun to address issues of quality and international competitiveness. However, this is still very much at an early stage, and driven largely by foreign investors. Despite this progress, upstream primary food processing in many sectors has not reached standards to compete on the world market. Many small food processing firms remain under threat from cheaper and higher quality food products on the home market. Much of the output of the food processing sector is in the form of low value added product for export to the CIS countries.
77. One of the very positive features of the farming sector is the healthy balance between agriculture and the environment. Extensive farming and low use of fertilisers have contributed to the preservation of the rural environment and biodiversity. This situation creates a significant potential advantage for Latvia in such areas as organic farming and rural tourism, provided the investments in product, infrastructure and human resources can be realised.
78. Forests cover 45% of the territory of Latvia. It is an integral part of farming and the rural economy in many areas and provides a source of seasonal occupation. Latvia’s hard wood timber traditionally has had a high value in the international market. However, competitive forestry production is hampered by fragmentation of forested areas and poor road access to forestry resources. On the smaller holdings, standards of forest management are poor to non-existent. There has been a trend towards land consolidation, but this will have to be accelerated if Latvia is to achieve its potential competitive advantage in terms of timber quality. Training in forest management and forestry skills is a pre-requisite.
79. Elsewhere very small farm sizes make it impossible to move to full commercialisation (e.g. Latgale). Subsistence farming continues to dominate production patterns. In 2001, 67% of the total number of farms was producing products for own consumption not for the market. Only 9.6% of farms produce more than half of their output for market. Net income per capita in agriculture (after taxes) is still critically low – average 102 EUR per month (only 52% of the average net salary in the country in 2001).
80. The experience of many EU countries points to the inevitability that agriculture will experience rapid employment shedding. Ongoing modernisation has already caused a significant reduction of employment opportunities in the farm sector.
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However, 45.6% of all rural population are still employed in agriculture and forestry sector. Under-employment is an issue on many of the smaller mainly subsistence farms contributing to under-productivity in the sector. It is a policy priority to build a sustainable competitive farm and food sector and to manage the inevitable process of change in the rural economy to ensure decent and sustainable livelihoods for rural and farm families.
81. Rural communities have felt the brunt of many of these changes over the last decade. Many have had to come to terms with high levels of unemployment, falling incomes, lack of investment, lack of jobs, declining local tax base, weak pubic services, and a growing exodus of their youngest and best to the towns and cities or abroad. The Latvian government has recognised the need to take steps to rebuild the social capital of these communities and local areas. Rural stakeholders, including local government, working together and in partnership with government must be able to develop local strategies to address local needs (for example, the Economic and Social Cohesion Programme 2000 in Latgale and Zemgale).
82. The Government of Latvia has put significant emphasis upon the creation of diversified rural economy, building on the strengths of agriculture and the food sector. The EU SAPARD programme commenced implementation in 2002. There are encouraging signs that it will stimulate investment geared to competitive and environment friendly farming. It is also promoting on-farm and off-farm diversification as a significant measure towards restructuring the farm sector. SAPARD also supports the modernisation of the food sector with particular emphasis upon quality products of high value-added and improved marketing.
83. In the fishing sector, Latvia’s fishing quotas will continue to decrease with knock-on effect of a further reduced fishing fleet (small businesses will become economically unviable). There has been very little new investment given the pessimistic trends for fishing in the Baltic Sea. Most Latvian businesses are small boat owners operating in the Baltic Sea area. Smaller coastal fisheries are also under threat with few alternative opportunities for employment or economic activity. Likewise in this sector, fish products are generally low value-added and destined for sale on the lower margin markets of the CIS. Those regions dominated by the fishing sector have been badly affected by the decline of the industry with few alternative opportunities for economic activity and revenue generation.
2.3.2. Secondary Sector – Industry
84. This includes in the main metal manufacturing, textiles, wood processing, and timber based products and down stream food processing. For more explicit description of timber based products and food processing see section 2.7.
85. Metal manufacturing is considered to be one of the traditional “old economy” sectors in the Latvian economy. It is nevertheless an important sector in terms of current export performance. Over 90% of production, mostly semi-produced products, is exported primarily to the EU (45% in 2001). However, following accession, this industry will be the subject of strict state aids discipline. The reduction of state support mechanisms will result in a major reduction of employment. Without increased investments in new competitive product
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segments, as well as increased research and development, sustaining the sector will prove very difficult. It will be important to continue to develop strategies to assist many of those employed in this sector to find alternative employment through training and counselling and through the promotion of small business start-ups.
86. Other players in the manufacturing sector offer more optimistic growth potential. These lead sectors include timber processing industries, food processing and textiles. These sectors are export driven, exhibit higher levels of labour productivity and make significant contributions to GDP. Well-targeted support measures, particularly in human resource development, should be directed to maintain the productivity of these sectors.
87. Downstream processing of forestry products and foodstuffs feature in bulk exports (over 75% of production is exported), but make a low contribution to the Latvian economy. Important markets for Latvian foodstuffs are in the CIS and Baltic states where price levels are generally lower than in the EU. These sectors need substantial support to address technological, production and marketing weaknesses, including human resources and management, if new, more competitive markets, are to be accessed.
88. Forestry and timber based products related exports dominate Latvia’s total exports (40% in 2001) and play an important role in sustaining the external trade balance. Despite high value raw materials these are low value exports such as semi-processed timber, wooden utensils/artefacts and low cost furniture. A move towards higher value production is dependent on an integrated approach towards the development of the whole forestry sector and related economic sectors. This ‘cluster’ driven strategy would incorporate design services, construction, building materials, transport, research and development, energy training and human resource development. 5
89. The machine tools and textiles sectors are essentially export oriented (in 2001 90% of textile sector production was exported, of which 83% to the EU). Although the sector so far generally operates in low cost segments of the market and is competing with other low wage economies, it exhibits promising growth potential and gradual move towards more value-added production, e.g. in year 2002 exports to developed countries have increased substantially – for example, to Italy by 37%, USA – 42%. Moreover, industries like textiles and clothing offer significant sources of female employment often in rural areas, and provide more flexible labour market outlets to take up jobs lost in agriculture. Therefore, similarly as in forestry sector to promote shift towards high value-added production, an integrated approach to development of textile and related sectors shall be undertaken by combining opportunities provided by design, training and human resource development, logistics and other services. To achieve this cluster type cooperation of the above business sectors and projects will be promoted (e.g. to develop textile design and have appropriately trained human resources).
90.
• 5 Forestry Cluster Strategy for Latvia has been developed with support of the Phare funding.
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2.3.3. Tertiary Sector – Services
91. The rapid expansion and success of the service sector to date provides new and sustainable growth opportunities. Retail services represent a growth in terms of investment and jobs. While financial/business services and retail have all expanded, the construction sector has experienced the most rapid growth rates since the mid-1990.
92. Transport and transhipment are also key factors in the service sector. Over recent years, changes in the competitive environment in the Baltic Sea area (new competitor routes from the CIS and other Baltic neighbours) make it all the more necessary to build on the substantial location advantage enjoyed by Latvia. It is necessary to improve logistical infrastructure and develop the value adding potential, of a long established transit sector joining East with West. New value added opportunities must be identified such as customer friendly packaging of eastern goods destined for western markets and vice versa. In this manner cargo logistics may support the emergence of new regional growth centres.
93. During the period of 1995-2001 the construction sector recorded an average growth of 9%. Significantly the exports of construction services (mainly to the CIS) grew by 200% (total value of approximately 17 million euro in 2001). This growth is forecast to continue with a spill over impact on related activities (e.g. construction materials) due to increases in domestic housing demand and large- scale public infrastructure projects (partly driven by EU co-funding). As a consequence, demand for skilled labour in this sector will increase.
94. Tourism is to be considered as one of the strategic opportunities and priorities of development of Latvia, orientation of the national economy towards services with great added value. 6 The growth in recent years has demonstrated the potential of the sector as an economic “driver” of the national economy. Tourism is becoming a key source of income in many areas of Latvia. The share of export of tourism services in GDP of Latvia equals to 1.9% in 2002. The number of incoming travellers to Latvia has increased from 1.7 million in 1996 to 2.3 million in 2002. The share of persons directly employed in tourism in Latvia is 2.5% and indirectly – 7.3%. For more detailed analysis of tourism sector see also section 2.6.6.
95. The number of incoming travellers is steadily growing – in 2002 in Latvia by 11%, world, respectively – 3%, Central and Eastern Europe countries – average 4%. In 2002 total expenditures of foreigner travellers in Latvia went up by 36% and equalled to 148.7 million EUR, exceeding total annual expenditure of foreign travellers in Latvia in 2001. In 2002 average duration of stay of the foreign travellers in Latvia went up to 2.1 days but average daily expenditure decreased from 40 to 30 EUR. The number of beds in 297 hotels and tourist accommodation places is 19 093 with the average use rate of beds in 2002 – 31%. In 2002, 666 thousand persons stayed in hotels and other tourist accommodation places, which is by 14% more than in 2001. In terms of domestic tourism: in 2002 1.8 million domestic travellers made 8.57 million
• 6 The Long Term Economic Strategy of Latvia, 2001.
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domestic trips with average daily expenditure 20 EUR and total domestic travellers expenditures equal to 103.6 million EUR.
96. Foreign tourists were coming mostly from Lithuania, Estonia, Russian Federation, Finland, Germany, and other countries. Approximately 19% of incoming travellers came here to spend holidays and 20% came to Latvia for business purposes. Most tourists visit Riga, but the number of people visiting other areas has also increased. The mode of transport used by foreign and domestic travellers is road transport (81%), then air and sea transport (both 7%), railway, respectively – 5%. Latvia’s tourism services are not diversified and most of the sector is concentrated in Riga region. Outside of the capital the facilities for providing tourism services are underdeveloped both in terms of quality and quantity and have some structural and distribution deficiencies, which reduce competition possibilities of Latvian tourism products. The challenges faced in the regions of lack and poor infrastructure and road sign system, low accommodation quality, potential of cultural and historical heritage, and generation new tourism attractions, products from existing tourism resources (e.g. natural, historical and cultural heritage) presents immense development opportunities.
2.3.4. New Growth Sectors: Preparing the Ground for a Future Growth of Knowledge Based Economy
97. As stated above, a central plank of the Government’s strategy for sustainable competitiveness will be to set the context for the development of a high-tech knowledge based economy. There are certain capabilities in key areas such as information technology (telematics and multimedia), bio-technology in the food sector, wood sciences again applied to Latvia’s strength in natural resources, material sciences including optical electronics, nano-technologies, composite materials and organic chemistry.
98. There is a need to address the most fundamental impediments to fully implement this strategy. The base point for any effective strategy for building a vibrant economy around high-tech future growth sectors is the development of strong open research and technological development networks. Allowing industries and people who work within them connect easily into the global knowledge-based economy – in terms of access to capital, innovation and worker mobility.
99. At present the contribution of indigenous technological innovation to Latvia’s economy is limited. As identified in the earlier macroeconomic overview, Latvia is very much dependent on FDI to increase new technology based economic growth. Compared to similar sized accession states Latvia’s investment in research and development (R&D) is extremely small (in 2001 the public sector contribution to R&D was only 0.22%).
100. It is the intention of the Government of Latvia to seek to increase the public sector contribution to research and technology driven innovation progressively and in line with absorption capacity, with a view to stimulate private sector investment and to improve Latvia’s competitive position in the high-tech economy. At present, Latvia features in 7th place out of the ten new member states in terms of innovation as measured by patent applications for the period 1998-2000 (2nd Cohesion Report). Access to private sector funding/venture capital is limited for new technology companies. Public or public/private
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funding does not address this funding gap. Moreover, R&D infrastructure in higher education institutions falls well below international standards. Combined with the lack of funding and weak resources, Latvian students are not attracted to the natural sciences and do not pursue post-graduate research in sufficient quantities (less than 20%) to provide the necessary critical mass for Latvian research institutes. The average age of the top-qualified personnel (with PhD degree) exceeds 50 years.
101. In this environment, the short-term potential of technology transfer from Latvia’s research institutes to start-up companies is restricted. This problem has been recognised and measures under the Phare programme have begun the process of identifying solutions to this problem. Linkages between local industry and research establishments are at an early development stage. Latvia’s research community has limited capabilities of a recognised international standard (e.g. hydro-magnetic dynamics). However, there is little effective transfer to commercial innovation. Considerable investment and resources are required to transform these research strengths into commercial products/services. For more detail view on science commercialization and innovation potential of Latvian economy see also section 2.4.2.
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2.4. Development of Entrepreneurship
2.4.1. Business Environment
102. The basis for creation of competitive economy is business friendly environment that will promote growth of both domestic and foreign investments, which would allow economy to undergo restructuring and modernisation.
103. Economic activity in Latvia is small – there were only 18.3 economically active enterprises per 1000 inhabitants in June 2002, while in the EU countries this indicator is 40-60 enterprises.
7. Table. Amount of Economically Active Enterprises (1997-2002)* Amount of enterprises Amount of enterprises per 1000 inhabitants Year Total Small and SMEs as Total Small and SMEs as Medium percentage of Medium percentage of Enterprises Total Enterprises Total
1997 28373 28152 99% 11.72 11.63 99% 1998 31559 31355 99% 13.15 13.07 99% 1999 37603 37324 99% 15.79 15.67 99% 2000 41992 41710 99% 17.76 17.64 99% 2001 40668 40401 99% 17.34 17.22 99% 2002 ~18.3 ~18.2 99% * Data for the end of the year (except for the 2002 – June). Source: Central Statistical Bureau, 2002
104. The main reason for the low indicator of economic activity is low amount of competitive start-ups. At the end of 2001 45.9% of all economically active enterprises were established in the period from 1991 to 1995, and only 15.4% in 2000 and 2001 7. This demonstrates that large number of enterprises established in the first years of transition is still actively working, while the amount of newly established enterprises is relatively small due to difficulties in obtaining sustainable share of the market. Activity of women in establishing enterprises is limited, demonstrated by the fact that in 2001 there were only 40.9% (EuroStat) of women in total number of employers. This problem is also revealed by the facts of the current situation in Latvia – the share of employers and self- employed persons is comparatively low – 13.2% of the total number of employed (EU average – 15.6%).The share of women among entrepreneurs is low (only 1.5% of the total number of employed women are employers, men – 4.8%).
105. Currently when the transition is virtually over, as compared to early 1990ies, much more is demanded on the part of the entrepreneur in order to launch an
• 7 Central Statistical Bureau, Latvian macroeconomics in numbers, 2002
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enterprise. It takes much better understanding of the market processes, tendencies and structure, as well as management skills to start the business now. 8 106. Results of the survey of the households in the Baltic States show that in 2002 only 31% of all households in Latvia had savings (Estonia – 44%, Lithuania – 55%), which significantly shrinks the amount of potential entrepreneurs and investors, since approximately 2/3 of the country residents are lacking even minimal start-up capital. External funding opportunities are hindered by inadequate assessment of collateral. Costs of starting business are made higher due to lack of sites and premises and under-developed infrastructure suitable for the various sorts of business activities. Survey of Latvian entrepreneurs 9 showed that one of the problems is a lack of funding for expansion of business and limited opportunities to finance start-ups. 10 107. Although volume of bank loans (as a share of GDP) have grown as a result of increase of economic activity and declining risks, it is still rather problematic to receive a loan for SME 11 , especially for a start-up SME, since those often do not have sufficient loan collateral 12 and the credit history and lack skills for drawing up a loan application. At the same time, banks incur comparable costs reviewing loan application from an SME or a large enterprise, which makes those more interested in serving larger customers. To solve this problem another State Aid Program providing credit guarantees support has been launched and is implemented by Latvian Guarantees Agency. Also this program has been too small in scale to satisfy the demand.
108. Although high interest rates are not the main problem for the SME financing, those are relatively high, especially in the case of a small or micro enterprises situated in a less developed territories of the country, for the banks have to ensure loan loss provisions. The average interest rate for the business loans is 11%, but for the territories lagging behind it is 4 percentage points higher. In spite of the fact that the interest rates are declining steadily for the loans in the national currency, those are still above the EU average ones (6%). Thus financing for the risky projects of the SMEs is often not accessible, due to higher risk resulting from lack of financial risk expertise and subsequent higher costs of credits. Investment funds are relatively small in Latvia, thus those can only provide limited venture financing for the best performing business projects. As a result of this the exit options (sale of shares) of the venture projects are limited, plus it is not traditional for Latvian business culture to attract external
• 8 Survey performed by market research enterprise “Emor”, September/October 2002 • 9 Research of the Latvian Mortgage and Land Bank ‘Business environment for Small and Medium Size Enterprises in Latvia’, July 2002 • 10 It was 30% in 2001, still lagging behind the indicators of the most developed economies. • 11 According to the survey by the Latvian Mortgage and Land Bank ‘Business environment for Small and Medium Size Enterprises in Latvia’ (July 2002) only 17% of the surveyed enterprises drawn loans from a bank when starting up. • 12 In cases when the deposit is the real estate in the less developed territories, banks have tendency to under-estimate its value, resulting in insufficient amount of credit for the development project at hand.
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financing for the establishment of the enterprise. Around 100 projects are realised in collaboration with investment funds, most of which are providing especially high yield, but due to its low amount the macroeconomic impact is limited.
109. In 1999 the Cabinet of Ministers approved the Concept on of Credit Support to the SMEs, according to which the state owned Latvian Mortgage and Land Bank was made responsible for implementation of SME Credit Programme of in order to promote the SME crediting by provision of 17 million EUR worth state guarantee. By November 2002 total SME credit portfolio was 25.3 million EUR (738 loans), 264 of which were SME support loans worth 9.3 million EUR. In 25% of the cases the start-ups were supported, 29% – SME coming from an especially supported region, 44% – women entrepreneurs. According to an expert assessment, in approximately 50% of the cases the loan provided by the project was the first loan the enterprise received.
110. Since start-ups are lacking current assets to allow purchase business consultations, in the areas like preparation of credit application, accounting and auditing, external financing and others, they exhibit high rate of failure. There is no subsidy or any other support to consultations for start-ups. Owners of the existing SMEs lack current assets to attract external business consultations in such fields as – market research, marketing, accessibility to finance and financial management, quality requirements, project development. To support this initiative the State Aid Program “Project Preparation Support” has been launched, however in unsatisfactory scale due to limited budget resources. Existing SMEs owners are also lacking necessary business skills for operations in the international markets – acquisition of new markets, marketing and promotion. To coupe with this, the State Aid Program “Latvian Export Marketing Support Programme” has been launched, but it was small in volume therefore only a fraction of all companies in need have been supported.
2.4.2. Competitiveness (Movement towards Knowledge Economy) Science, Research, Development and Innovations
111. There is a global trend towards the innovation activities and knowledge economy. The high technology component has become the main factor for the country’s competitiveness and source of value added in all of the sectors of the economy.
112. An average share of the knowledge intensive sectors in the export structure of the EU is 30%, while in Latvia it is only 6%. However, Latvia has set its development milestones in National Innovation Program 2003-2006 for promoting innovative and high-tech sector commercialization and development among businesses.
113. Latvia has globally competitive science potential that may allow restructuring its economy towards knowledge economy. Intensive use of this potential is hindered because of the fact that the existing research base is outdated (both in terms of infrastructure and human resources); there is a weak link between the science and business and poor innovation system.
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114. Applied science is insufficiently developed due to limited funding of the research activities. State funding amounted to 0.2% of GDP in 2001, which is more than three times lower than the average EU level. Private funding to the science and technology is limited: 0.16% of the GDP in 2000 as opposed to 1.2% average in the EU. According to an experts’ assessment, in Latvia one euro worth state support attracts 0.4 euro of the private funding, while in the EU this ratio is 1 against 2. Private funding is limited due to the fact that the research activities are not market oriented. Only 10% of the state funding may be allocated to market oriented research, with the intention to attract private co- financing.
115. The vision for the future development of R&D is defined in the Guidelines for Developing Higher Education, Science and Technology (for year 2002-2010). One of the tasks set up in the document is to increase the role of science in higher education establishments and especially in universities by restructuring the research system. Currently existing independent state research institutes performing basic research will be integrated into universities. Certain state research institutes implementing applied research will be provided with the necessary funding for maintenance and administration. Another measure is concerned with development of academic and scientific personnel by motivating students to enter the doctoral studies and pursuing post-graduate research in universities and research institutes. The document underlines the necessity to promote integrated development of science, technologies and innovation. This task will be achieved by facilitating co-operation between scientific organisations, research institutions and manufacturing companies; creation of an institution to coordinate the innovation system; promotion of industry-initiated research projects; development of innovation support infrastructure (e.g. technology parks and centres); and promotion of innovation and research projects within the EU 6th Framework Programme. The implementation of these measures will result in the gradually increased overall spending for R&D from state budget.
116. 99.9% of the enterprises in the state are SMEs and their current assets are limited, which does not allow investing in long-term projects like R&D activities. Concentration and co-operation of the enterprises is limited (see the chapter on Business Environment) and there is poor access to venture capital, which may have resolved the R&D financing problems.
117. 70% of the R&D funding in the EU countries is provided by the large enterprises. Interest of private, especially foreign, investors is limited because even the EU-certified (European Research Area) Latvian excellence centres and other leading research centres have limited access to infrastructure of the globally competitive level (exceptions are only the ones where private funding allowed provision of specific research infrastructure, like Institute of Organic Synthesis). Research infrastructure of Latvia has been established mostly in the 1970-80ies. The infrastructure has not been renovated since the 1990ies due to limited investments, thus now, according to an experts’ assessment, its depreciation has reached 95% of the set up value. Analysis shows that Latvia currently needs about 17 million EUR worth investments into laboratories only, while current total value of infrastructure is around 2.5 – 4.3 million EUR.
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118. State has a science potential in certain areas of science, where the science schools have traditionally been strong, which may allow the country to compete on the global scale (those are physics of hard particles, modern material sciences, magnetic hydrodynamics, information technologies, biomedicine, pharmaceuticals and wood chemistry). Latvia possess two European level research infrastructure sites – Ventspils International Radio Astronomy Centre and experimental research equipment in the Institute of Physics.
119. Potential of these areas of science is witnessed by the success of Latvian scientists participating in the EU 5th Framework Programme. Total funding absorbed since 1999 exceeds the Latvian co-financing to programme’s budget twice. 13
120. The issue of human resources for the development of science is becoming more acute. Currently R&D activities employ around 1.4 persons per 1000 employed, while the EU average value is 5.1. Insufficient funding for the research activities and lack of the necessary infrastructure result in outflow of the most qualified specialists, especially younger ones from the country or to the private sector that is not related to research activities. Latvia does not attract specialists from other countries. Thus, an ageing tendency is observed – average scientist age is growing steadily and now exceeds 56 years. 3% of the Latvian scientists are younger than 36. In order to improve the current situation the Programme for Renewal of Academic and Research staff has been drafted. The activities under this programme aims at attracting young and active specialists to work in universities and state research centres as well as raise the motivation of students to enter the doctoral studies or pursue post-doctoral research especially in sciences and engineering. The specific programme activities provide: • doctoral grants for studies in Latvia and abroad to the most capable doctoral students in research fields where Latvia lacks academicians; • special post doctoral grants for performing research in research fields significant for state economic development; • grants to Latvian scientists working abroad, to promote return of these scientists to their homeland and to ensure a possibility to participate in scientific grant competitions and to take academic positions in higher educational establishments.
• 13 As to the number of submitted project proposals and those which have been co-financed from the EC the most successful has been the Latvian State Institute of Wood Chemistry (wood chemistry and wood technologies), Biomedical Research and Study Centre at the University of Latvia (LU) (gene technologies, biomedicine, the development of genome data base of Latvian population), Institute of Solid State Physics at the LU (material sciences and optical technologies) Institute of Physics at the LU (magnetohydrodynamics), Institute of Aquatic Ecology at the LU (marine and fresh water ecology). As the most successful should be mentioned also two research groups from Riga Technical University: Laboratory of Biomaterials and Institute of Materials and Structures (composite materials and their s groups). Institute of Solid State Physics at the LU was nominated as the Centre of Excellence in Latvia in the field of material sciences.
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2.4.3. ICT Solutions for Business
121. In the context of the knowledge economy ICT skills of entrepreneurs are vitally important in order to use opportunities provided by the ICT solutions (remote jobs, virtual desks, on-line trading, financial transactions, public services etc.).
122. However, use of ICT is not a common solution in Latvian business. This is due to weak understanding of the opportunities the ICT solutions provide and limited current assets to make investments into new technologies. According to the recent survey by the Central Statistical Bureau (2002) only 39% of the enterprises use computers (76% of the large enterprises are computerised, among small enterprises the share is only 27%). Highest computerisation rate is in Riga region – 43%, in other regions it is between 31-35%. More than half of computers used for business purposes are outdated; only 53% of the enterprises having computers have the Internet access; only 12.5% of them have a homepage in the Internet.
123. The best developed ICT solutions are in the banking sector that is related to electronic transaction systems. According to the data of the news agency EPI- LETA, the number of the Internet bank users reached 117 000 in 2001. Currently there are nearly 40 internet providers operating in the Latvia’s market, prices are decreasing steadily as a result of tight competition. Electronic commerce in Latvia is under-developed. For example, total turnover in business- to-business (B2B) transactions in 2001 equalled to 16 million EUR, and the total turnover in the internet shops (business-to-consumer type of transactions – B2C) 0.47 million EUR. Survey of the businessmen using computers showed that both the entrepreneurs and the customers are not ready to use Internet for business purposes.
2.4.4. Conformity with Market Standards and Requirements in the Area of Environment Protection, Work Safety and Consumer Protection
124. Provision of the high quality outputs that conform with market standards and requirements is a necessity and one of the main competition tools that ensures the ability of companies to supply goods complying with the EU and other international markets requirements. Main issues to be resolved are assessment of compliance, standardisation, metrology and certification. Latvian producers shall follow the mandatory requirements of the EU directives (mostly transposed into the Latvian regulations) in order to be able be competitive in the EU market.
125. Present situation with environment protection among businesses is far from satisfactory. For example, according to the Law “On Pollution” manufacturing companies are classified in three categories A, B, C reflecting their potential harm to pollution. Such companies need to obtain respective licence on compliance with environmental standards. “A category” includes companies that have mandatory obligations to introduce “Best Available Technical Solutions”, “B category” relates to companies that have to introduce cleaner manufacturing principles and “C category” classifies companies that should operate in
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compliance with general environmental regulations. Currently, out of total 62 enterprises in the “A category” that need licensing in order to continue their operations, only 7 have received the licence; in the “B category” – only 28 out of 4000, and in the “C category” – 0 out of 2000. Enterprises operating in sectors not covered by the abovementioned Law also have to meet specific environmental requirements.
126. Regarding the work safety, the results of annual company inspection performed by the State Work Inspection (subordinate to the Ministry of Welfare) in 2002 revealed that in 49% of companies there have been violations of work environment regulations. 85.6% of all the violations were concerned with work- safety compared to 80.9% in 2001. If work safety requirements are not respected it poses a threat both to health of workers and to activities of company in general. An enterprise ignoring requirements is running a risk to be halt in its operations.
127. Consumer protection in EU market is ensured by introduction of conformity criteria and requirements for products and production methods. The main problem in for Latvian enterprises to comply with market standards and requirements is insufficient access to information on mandatory and optional quality requirements and the ways to introduce them into the production process.
128. Conformity assessment infrastructure often is insufficient in Latvia. For example, Latvia does not have time etalon, which means that all Latvian enterprises using time measures in their production process have to order the assessment abroad or need to purchase etalon themselves, which increases costs of production. Less than 3% of the mandatory standards are available in Latvian language, which restricts opportunities to introduce them in production process (often old USSR standards are being used, because they are known to the older workers and are available in language they understand).
2.4.5. International Markets
129. Taking into account limited size of the domestic market (small number of inhabitants, low purchasing power) development of enterprises and national economy as a whole is heavily dependent on export opportunities. However, current volume of export and its structure is not satisfactory demonstrated (see chapter on Macroeconomic situation). Main reason for the small amount of export is limited number of exporting enterprises (in 2001 only 12% of economically active enterprises exported, and only 0.5% had exports worth more than 847 thousand EUR). Another reason is that the main exporting sectors are dominated by the low value added products or are oriented towards low prices markets (mostly CIS countries). Both inability to find export market and low value added of exported products are due to lack of skills necessary to operate in the international marketplace (also in terms of acquisition of a market share), where products may be sold at better terms of trade.
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8. Table. Important Groups of Exported Commodities and Numbers of Exporting Enterprises (1998-2000) 1998 1999 2000 Number of Number of Number of enterprises enterprises enterprises exporting exporting exporting Number of Number of Number of more than more than more than exporting exporting exporting 500 000 500 000 500 000 enterprises enterprises enterprises lats (~850 lats (~850 lats (~850 thsd. EUR) thsd. EUR) thsd. EUR) worth worth worth Wood and articles of 1276 107 1295 103 1293 119 wood Machines, mechanisms 1246 25 1280 18 1380 20 and electric equipment Base metals and articles 687 22 712 19 772 31 of base metals Chemicals and 510 26 518 21 559 22 chemical products Pulp, paper and paper 459 13 522 11 534 10 products Textiles and textile 429 50 449 47 470 50 products Food products, 322 27 280 21 264 20 beverages and tobacco Articles of stone, gypsum, 223 6 242 6 cement, ceramics and glass Total 4929 270 5279 246 5514 278 Source: Central Statistical Bureau
130. The main markets for pulp and paper, foodstuffs and chemistry products are the CIS and Baltic states; but the wood articles and textiles are mostly exported to the EU countries. Exports of machinery and equipment, base metals and construction materials are distributed equally between the main directions of trade (EU, CIS, Baltic States and others). The main driving force for the existing international trade relations are the proximity of the markets, development of certain industries, and co-operation built up historically.
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2.5. Labour Market and Human Resource Development
131. The introduction of active employment policy and balanced and modern educational system meeting labour market demands, ensuring equal opportunities and social inclusion and taking into account the goals set by Lisbon Strategy, the European Employment Strategy and the Employment Guidelines, Joint Assessment of Employment Priorities in Latvia, Joint Inclusion Memorandum (to be signed in December, 2003) is one of the preconditions for the development of Latvia’s economy and workforce that is competitive within the EU and global context.
2.5.1. Employment and Unemployment
132. Demographic forecasts indicate that the number of workforce will stay stable till the year 2010. The number of economically active population may fall between 2010 and 2020 and this decline will be accompanied by ageing of population and essential changes in the age structure of workforce – fast decline of young people aged 15-24 and the increase of people aged 45-64. 14 133. According to the data of Labour Force Survey , population aged 15-64 is gradually decreasing and in 2002 it was 1591.4 thsd. (52.0% of them – women, 42.5% - non-Latvians).
134. The number of workforce in 2002 was 1094.8 thsd. in age group 15-64 (48.5% of them – women, 41.6% - non-Latvians), activity rate – 68.8%. (64.1% - women, 67.3% - non-Latvians). The economic activity of women (64.1%) of this age group is comparatively high – higher than the respective EU indicator (60%), however it still needs to be improved. The participation of males in labour market is considerably lagging behind EU average. The participation of young people (age 15-24) in the labour market is also low – 39%, besides, in the recent years this figure tends to decrease (in 1999 the participation rate was 43.4%), although since 2001 which is a reference year of Joint Assessment Paper (JAP) a small increase by 1.4 percent points can be observed.
• 14 All key employment indicators cited in this document present yearly averages if not stated otherwise.
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300,0
250,0
200,0
150,0
100,0
50,0
0,0 15-24 25-34 35-44 45-54 55-64 Male Female
15. Figure. Division of Workforce by Gender and Age Groups in 2002(in thousands) Source: Central Statistical Bureau. Main Indicators of Labour Force Survey
135. Considering the demographic situation that will emerge when the people born in the 80-ties will start to come into labour market (the birth rate then was twice as high as the present one - in 2002 there were 184.3 thousand people at the age group 15 –19 in Latvia, compared to 161.8 thousand people at the age group of 20 – 24) and the motivation to study, an influx of well trained new workforce in the near future can be forecasted, especially if the support for entering the job market for the first time will be provided. By improving the quality and accessibility of educational and employability training activities, the economically passive part of population that has “dropped out” of the labour market, that constitute more than ¼ of economically passive population, could return into the labour market, thus increasing the participation indicators.
136. The average level of education of Latvian workforce is comparatively high. According to the data of Central Statistical Bureau, in 2002 21.8% of workforce had higher education (more than 50% of the workforce with higher education are women), 63.5% of the workforce had secondary (including vocational secondary) education – while 13.6% had basic or lower than basic education.
137. Significant territorial (NUTS IV) differences in labour market indicators could be explained by the problems in transition period from command to market economy. For example, the activity rate in Riga region in 2002 was 72.1% while in Latgale region (eastern part of Latvia) it was just 62.7%. The concentration of labour force in the Riga region can be explained by better business, employment and education opportunities as well as better infrastructure around the capital city.
138. Employment rate in Latvia in 2002 reached 60.5% (non-Latvians’ employment rate – 57.0%). Comparing to overall employment rate in Latvia in 2001 (reference year of the JAP) – 58.8%, improvement of the situation in the labour market can be observed. There is the tendency of growth of the employment rate
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of women – (according to data of EUROSTAT – 57.6%), which even slightly exceed the EU average level (55.5% - EUROSTAT) however still needs to be improved. Men employment rate (according to data of EUROSTAT – 63.6%) is still significantly lagging behind the EU average level (72.9% - EUROSTAT).
80 72,9 70 64,2 63,6 60,5 60 55,5 57,6 50 EU 40 30 Latvia 20 10 0 Total Male Female
16. Figure. Employment Rate in 2002 (%) Source: Central Statistical Bureau. Labour Force Survey: Main Indicators, 2002.
139. The redistribution process of employed among the sectors of national economy in Latvia still continues: during the last five years, the number of people employed in agriculture and industry has decreased, while the employment in construction and service branches has increased (see the Chapter on The Development of National Economy Branches), which justifies necessity to provide opportunities for re-qualification of labour force.
9. Table. The Structure of Employment by Sectors of Economy
1996 2002
Employed, in total (thousands) 949 000 962 000
Agriculture, hunting, forestry (%) 16.8% 14.3%
Industry (%) 21.7% 19.6%
Construction (%) 5.4% 6.2%
Wholesale, retail sale, repair services (%) 12.3% 15.2%
Hotels and restaurants (%) 1.7% 2.5%
Other sectors (%) 42.1% 42.2%
Source: Central Statistical Bureau. Annual Report of Statistics in Latvia 2002
140. The share of employers and self-employed persons is comparatively low (according to data of EUROSTAT in 2002 it was 13.2%, 40.9% of them -
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women; EU average – 15.6%, of them – 31.4% women). That indicates an insufficient economic activity of people, as well as lack of adequate knowledge and basic entrepreneurial skills. The share of women among entrepreneurs/business people is still quite low (only 1.5% of the total number of employed women are employers, men – 4.8%).
141. The lack of adequate skills for using ICT, modern marketing and management methods , as well as lack of foreign language skills decreases a competitiveness of enterprises (for example, according to the World Bank survey, in Latvia in 1999 the turnover of the companies using ICT solutions increased considerably, compared to the companies not using ICT). Because of limited free financial resources and low evaluated need to develop human resources in top management of small and medium size enterprises (SME) the involvement in the professional development of their employees is low (in Latvia a special training budget has been established in only 4% of the companies, and they are mainly relatively big enterprises). The training of managers on skills necessary for successful management of businesses and related HRD activities in the enterprise is of vital importance.
142. The employment rate in the regions of Latvia differs significantly due to uneven social and economic development. The highest employment rate in 2002 was in Riga region – 64.0% and lowest in Latgale – 52.0%. Lately slight growth was observed in all regions, including Latgale, because of increase of entrepreneurial activities. Regional (geographical) mobility as an important instrument for balancing the demand and supply of the workforce is insufficient due to low economic activity in majority of territories and low density of population, and as a result of inefficient transportation system. In the last years tendency for population to move from cities to regions has started. Data of Central Statistical Bureau reflect that in 1999 50.53% of the total population were living in districts, in 2002 the population in districts have increased to 50.92%; in 1999 49.47% of the total population were living in cities, in 2002 the population in cities have decreased to 48.96%. However population density in cities is still very high.
143. Maintaining wages growth in line with increases in productivity will continue to be important for the promotion of higher employment, and for ensuring Latvia's international competitiveness. Wages have risen significantly over the last years. The Concept on Minimum Wage has been set up prescribing the gradual increase of minimum wage on the yearly basis until it will reach the 50 % from the average wage in national economy in 2008. Average gross wages rose in nominal terms by 60% between 1996 and 2001, giving a real increase of 31% after adjustment for consumer price inflation. Average net wages rose rather more slowly – largely due to an increase in employees' social contributions – but nonetheless increased by 45% in nominal terms and by 19% in real terms. Average gross labour costs also rose more slowly than gross wages between 1996 and 2001 – by 52% in nominal terms – because the rate of employers' social contributions was reduced from 33% in 1996 to 26.09% in 2001. The gender gap in wages has been relatively stable, with female wages being approximately 80% of the male level over the period since 1994. Despite the high economical activity level of women, they find themselves in less favourable economical circumstances. The cause for the economic inequality of men and women is the segregation of the labour market into “male / female
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professions”. The gender-gap in wages exists in private sector – women receive less than men (~80% of the male salary), even in those sectors where majority of the employed are female. Women form the largest part of employed persons in such low paid sectors as education (according to data of the CSB in 2001 monthly average salary for women in education were EUR 232, in 2002 it has increased to EUR 266), health care and social work (EUR 201 in 2001, EUR 225 in 2002). Men dominate in following professions – industry (in 2001 monthly average salary for men in industry were EUR 274, in 2002 – EUR 290), transport, storage and telecommunication (monthly salary in 2001 – EUR 358, in 2002 – EUR 369).
144. The high tax wedge represents a significant barrier to the creation of jobs at moderate wages, and a disincentive to unemployed in taking up such jobs. Moreover, high marginal rate of income tax (for employee 25%) and social contributions (for employer 24.09% and for employee 9%) are likely to promote employment in the "grey economy" (according to the Central Statistical Bureau of Latvia the “grey economy” in 2001 was 17% of GDP, but concerning the evaluation from the Ministry of Finance it may reach even 25% of GDP).
145. According to the data of Labour Force Survey by Central Statistical Bureau, the unemployment rate in Latvia in age group 15-64 is decreasing gradually and in 2002 it reached 12,1% (11.0% – women; 13.1% – men; 9.9% – Latvians; 15.2% – non-Latvians) but it is still higher than the average in the EU.
146.
147.
Unemployment rate
19,4% 20
18
16 14,8% 14,0% 13,5% 14 13,2% 13,1% 12,1% 12
10
8
6
4
2
0 1996 1997 1998 1999 2000 2001 2002
17. Figure. Unemployment Rate in 2002 (%) Source: Central Statistical Bureau. Labour Force Survey: Main Indicators, 2002.
148. Despite the fact that a big share of unemployed has a comparatively high level of education (in 2002 65.5% of all unemployed had secondary or
53 Single Programming Document for Latvia Objective 1 Programme 2004-2006
secondary-vocational education and 9% – higher education) and professional qualifications, still they lack of knowledge and skills essential for the development of modern knowledge-based society – ICT, communication and management skills, basic business knowledge, language skills. In order to ensure relevance of the qualifications and adaptability in the fast changing labour market conditions and foster the business start-ups the accessibility to training and re-training is of special importance.
149. The number of registered unemployed is approximately 1.3 times lower than the unemployment rate estimated according to the methodology of the ILO (LFS). There are several reasons for this difference: not all persons are entitled to receive unemployment benefits; information on other services that provides State Employment Service for unemployed and job seekers to raise their competitiveness is limited; many unemployed are not interested and sometimes are not motivated or are not able to master retraining programs (especially long- term unemployed)); unemployed persons should fulfil all the requirements to get the status of a registered unemployed, however, sometimes they are not motivated enough to do it; service institutions lack capacity (IT system does not ensure timely and qualitative information flow, insufficient resources for research and long term forecasting).
150. Statistics on registered unemployment (Annual book of Statistics of Latvia) indicates that in 2002 there was 50.8% unemployed persons of Latvian ethnicity in the total number of unemployed, 35.4% of Russian origin and 13.8% represented other ethnicities. When comparing the composition of population by ethnicity (58.2% Latvian, 29.2% Russian, 12.6% other ethnicity) with composition of unemployed by ethnicity, the density of Latvians in total number of registered unemployed is less (for 7.4 percent points) than the density of Latvians in the total number of population. The density of other ethnicities in the total number of registered unemployed is a little higher than their density in the total number of population. This shows that ethnicity as such is not an obstacle for unemployed person to register in the SES, and to receive the SES services as well.
151. Active employment measures offered by the employment services are an important tool for raising competitiveness and employability of unemployed. This is indicated by the fact that in 2002 more than 79% of the registered unemployed participating in professional training found the regular job. In year 2002 training has been performed mostly in regional centres, courses were organised as close as possible to living places of unemployed and the choice of courses depends on demand for professions, employers’ forecasts on business development and unemployed background education.
152. Important issue is involvement of social partners in all stages to improve the situation in labour market in local and national level. The collaboration between employment services, local municipalities and social partners has considerably improved. Local employment promotion plans for almost all municipalities have been worked out on a yearly basis.
153. However, still further adjustment of all services according to the needs in labour market is necessary, especially focusing on local development, creating employment measures based on actual needs of regions and local businesses. In this context it is very important to improve the administrative capacity of
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employment services by enhancing the personnel skills and knowledge, improving service quality, developing work methods and working environment as well as strengthening capacity of other key players like municipalities, social partners and educational institutions involved in implementation of employment promotion activities at the local level. The improvement of information systems and accessibility to information on labour market issues, expanding of usage of ICT and e-learning methods in employment services are important as well. Latvian State Employment Service (LSES) and other institutions involved in employment policy receive support related to these issues under Phare programs 2002 and 2003. Assistance is mostly concentrated on preparation of LSES for development in EURES network, development of labour market databases on employment, education and training opportunities, as well as on development of internet-based operational database on employment, education and training opportunities. In order to provide fully qualitative services, further support is still necessary.
154. More emphasis should be put on research, analysis and improvement of information systems for better understanding of structural disparities in labour market. If labour market studies show any obstacles for labour force participation of any group at a disadvantage, e.g. legal immigrants, ethnic minorities etc., additional active employment measures could be supported in years 2005-2006 or in the next programming period.
155. Still a significant proportion of the unemployed is out of work for longer than 1 year . 46.1% (58.3% - in 2001) of the unemployed or 5.6% (7.9% - in 2001) of the workforce had been out of work for over one year in 2002 (the figures of the European Commission reflect that long-term unemployment in 2001 affected 3.3% of the EU workforce). The highest long-term unemployment rate – 59.2% from all unemployed in this group - is between persons at pre-retirement age (55-64 years old), especially between men: 63.6%.
156. Hidden unemployment exists in stagnant or partly working enterprises where a working week is shortened or workers have to take unpaid vacations whenever it is necessary to stop the production process or when it has a seasonal nature as, for example, in agriculture and forestry. In 2002, 11.9% of the people who worked part-time were forced to do that because of limitation in demands.
157. The unemployment rate varies significantly by regions . Comparing with total unemployment rate (12.1% in 2002), regional unemployment rates fluctuates between 10.4% and 11.2% in Riga, Vidzeme and Zemgale, but in Kurzeme it reaches 12.7% (11.4% - women, 21.5% - non-Latvians) and in Latgale 17.1% (14.6% - women, 20.0% - non-Latvians). Comparing with previous year overall situation in unemployment has improved. Decrease of unemployment rate by 2.5 percent points can be observed in Kurzeme and by 1.8 percent points in Latgale, while total unemployment rate has declined by 1.0 percent points.
158. During the period of Soviet Union proportion between nationalities changed drastically and according to the results of the 2000 Population and Housing Census in Latvia only 57.7% are Latvians. However, at the moment 6/7 of the population of Latvia knows the Latvian language. LFS data show some differences between the unemployment rate for Latvians (in 2002 – 9.9%, in 2001 – 10.2%) and for non-Latvians (in 2002 – 15.2%, in 2001 – 17.3%). However, the gap is diminishing and an improvement in the situation for non-
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Latvians in labour market can be observed in 2002. Lack of Latvian language skills is an important factor, which hinders the formation of a multi-ethnic workforce and limits job opportunities for part of the population. According to the Population Census 2000 the level of job seekers in the age group 15-64 was 12.7% for people with Latvian language skills and 20.8% for people without Latvian language skills. The same source shows that the unemployment rate was 11.4% for ethnic Latvians with command of Latvian and 15.0% for non-ethnic Latvians with command of Latvian. Other factors cited include the regional distribution of ethnic groups, the informal economy, the legacy of the Soviet ethnic division of economic labour, the impact of economic restructuring on the sectors supplying Soviet military complex- electronics, heavy industries- which employed the labour force immigrated from the territory of the former USSR, especially during the last decades before the transition. Possessing education and skills necessary in these specific sectors, these persons faced difficulties when re-integrating into labour market.
159. Taking into account that the relationship between ethnic origin, command of Latvian language, regional disparities and employment situation is a complex issue, more detailed analysis and special studies are necessary to evaluate the impact of ethnicity and proficiency of Latvian language on the competitiveness in the labour market in Latvia, before strategic supportive actions are to be introduced and implemented.
160. Considering the current situation in the labour market, in the period of 2004- 2006 priority should be given to: • ensuring early actions and preventive measures in order to reduce inflow into long-term unemployment, • raising effectiveness of active labour market measures to enhance employability; • encouraging job creation by fostering entrepreneurship, • promotion of adaptability, occupational and geographic mobility in the labour market, • reduction in gender gaps in employment rates and unemployment rates, • modernization of labour market institutions to be able to effectively implement active and preventative policies; strengthening co-operation between national, regional and local institutions, • research and analysis of labour market situation and obstacles for entering labour market.
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2.5.2. Education, Training and Development of Workforce
161. Demand for trained and highly skilled workforce in Latvia increases. This factor leaves a considerable impact on the role of development – oriented branches in the increase of GDP. Insufficient quality of education at all levels, lack of co- operation between education, science and the labour market diminishes the potential capacity of educational system in boosting the employability of workforce. Persons with poor skills and insufficient training, in their turn, are disposed to the risk of unemployment and the respective social consequences (See chapter on Employment and Unemployment). Programmes of the three sectors of education – initial vocational education and training (further in the text – IVET), higher education and continuing education, as well as provision and quality of education in regions play an equal role in human resource development and labour force training in Latvia.
Higher Education and Science
162. Due to both inertia and lack of investments, the offer of higher education currently can be characterised by its inadequate response to the needs of national economy. Though there is a positive tendency that the number of people willing to study in higher education institutions is increasing 15 , there is still inadequate structure of educational / study programmes (lack of modules) and their offer, as well as outdated teaching and research infrastructure that impedes training and further development of highly skilled labour force in science and technology intensive sectors, which are essential for development of the national economy. Information-communication technologies (further in the text – ICT) sector encounters the most dramatic lack of human resources (1.5 to 2 times less than necessary, as ICT systems have to be designed and implemented in many other sectors).
163. In the academic year 2000/2001 434 different educational (study) programmes were offered in different higher education institutions – 152 academic, 237 professional programmes and 45 doctoral programmes. Besides, there are problems related to the content of curriculum of the offered study programmes, for instance, there is low share of independent research activities in doctoral studies; the modularisation of programmes is insufficient, thus not ensuring the opportunities for retraining and professional development on the higher education level. The implementation of the main principles of Bologna declaration 16 in the system of higher education is not sufficient, as the offer of 3-
• 15 The number of students has increased twice during the last 5 years, reaching 110 500 students in the academic year 2001/2002. 16 Bologna declaration –main tasks: The establishment of transparent and mutually comparable system of higher education in Europe; The introduction of two-stage (bachelor – master) degree structure; The employability of graduates in European market (including already the bachelor level); The use of credit system for transferring and collecting credits, including life-long learning;
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year programmes, including the ones related to the branches essential for the development of national economy, is low.
164. Division of students that acquire higher education between different thematic clusters and study programmes has not changed considerably during the recent 2-3 years. In the academic year 2001/2002 every second student studied social sciences. In the last two years the most radical decrease has occurred in engineering sciences and technology – from 20.5% in 1997/1998 to 10.2% in 2001/2002. 75% of the total number of students in social sciences is women (among those, who acquire diploma – 81%). The overall proportion of women among students is 61%. Ratio of students of engineering sciences and technology per 1000 inhabitants of the age group 20-29 in Latvia falls below the average indicator in the EU (10%) – only 7 % study in these branches; 35% of the total number of students in engineering sciences and technology are women (in the year 2000). It means that in Latvia there is a deficit of highly trained and skilled manpower in science and technology consuming branches, and it continues to increase.
0,70% agricultural education 1,80% 1,60% 2,50% education in services 2,40% 1,80% 2,20% health, healthcare and social care education 3,60% 2,90% 5,80% humanitarian sciences 7% 7% 4,90% natural sciences 7% 8,10% 7,30% engineering and technologies 10,40% 10,30% 19,70% pedagogical education 16,20% 14,10% 57% social science 51,60% 54,10%
0% 10% 20% 30% 40% 50% 60%
Matriculated 1st year students Total No of students Graduates 18. Figure. Division of Students into Thematic Clusters of Education and Training 2001 / 2002 (%) Source: Ministry of Education and Science
165. Inadequate integration of science and research in higher education institutions leaves a significant impact on the quality of higher education, as it directly influences capacity of teaching staff and the number of doctoral students (1.2% of the total number of students in 2001, if compared to the average figures in the EU country that are 5 times higher). There are a number of problems related to the academic staff: teaching staff is ageing; there is an exodus tendency; the
Co-operation in Europe for providing the quality of higher education: provision of the attractiveness and competitiveness of educational space, in the whole world; The establishment of European dimension in higher education – through the development of common programmes and degrees and coordination in subject area across Europe.
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share of academic staff with a scientific degree decreases. There is a lack of motivation instruments that would help to attract new specialists to scientific and research activities.
Assistants 12% Assistant Researchers professors 4% 27% Professors 10%
Associated professors Lectors
12% 35%
19. Figure. Full-time Academic Staff in Higher Education Institutions in 2001. /2002.g. (%) Source: Ministry of Education and Science, 2002.
Under 30 60 and more 12% 21% 30 - 39 16%
50 - 59 27% 40 - 49 24%
20. Figure. The Age Structure of Academic Staff in the State Higher Education Institutions in 2001 / 2002 (%) Source: Ministry of Education and Science, 2002.
166. Considering the aforementioned, priority in the field of higher education and science should be given to: • Improvement of study programmes in higher education in the science and technology intensive branches, including doctoral level studies; • Raising of a capacity and competence of academic staff and teachers, who are involved in education and training;
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• Fostering of partnerships between social partners, industries and higher education institutions in order to raise quality of education and boost employability.
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Initial Vocational Education and Training
167. A reform process of vocational education and training (further in the text – VET) is commenced. VET standards are determined. Harmonisation between vocational curricula and examination content and occupational standards is initiated. The introduction process of the system of centralised qualification examinations, which ensures comparability of qualifications, is still underway.
168. Restructuring of national economy brings new challenges and demands for VET. In general, division of IVET learners into programme clusters partially reflects the structure of national economy. There are 126, mainly small (250 – 400 students) VET establishments in Latvia, which are not capable to offer sufficiently broad range of vocational training programmes, nor provide their quality, thus creating large differences in the education and training offer from regional and employment viewpoint. Out of the total number of students in VET in the age group of 15-19, approximately 40% are girls.
169. The fact that the drop-out rate in vocational education and training establishments in 2001/ 2002 was 14.6%, out of which 48% were first year students, is an evidence that in the previous educational stage – general education - there is a poor vocational guidance resulting into insufficient understanding about the choice of further path of education. Another possibility to reduce the risk of drop-out is to encourage the education institutions to provide pedagogical correction courses and programmes for those with low basic skills and learning difficulties.
Higher education institutions Vocational education and training institutions
60% 12% 9% 17%
Vocational education and Secondary school 28% Do not 74% training institutions graduates (100%) continue graduates (100%) education
5% 62.5% 32.5%
Basic school graduates (100%)
21. Figure. Students’ Choice of their Further Education Path in 2001 (%) Source: Ministry of Education and Science
170. Basic skills and knowledge of students are at the critically low level. According to the data by the Ministry of Education and Science, on average 44% of students admitted to vocational education and training have one or more
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unsatisfactory marks (16% have graduated from the previous stage of education with unsatisfactory results in 5 and more subjects). According to OECD data 17 the Latvian students’ reading skills are the 2nd worst, but in mathematics tests – on the 14th place (among 18 countries). This results in inability of students to utilise education opportunities utterly, and pursue their career development, posing the risk of social exclusion and hindering processes of social integration.
171. The fact that predominant part of unemployed people is the ones with general secondary or basic education or incomplete basic education 18 evidences the need for vocational and professional qualification when entering labour market. At the same time, 39% of the unemployed are graduates of secondary vocational and vocational education, which shows that the skills they have acquired fail to meet employers’ demands (insufficient level of skills and “obsolete” competencies, poor knowledge of Latvian language and foreign languages), as well as limited capacity of the education system to offer qualitative retraining programmes.
172. The poll carried out in May 2000 among the recent graduates shows that on average only 30% work in the profession they have been trained for, 42% work in other professions proving that they are able to adapt to the demands of changing labour market; however 28% of recent graduates are unemployed. At the same time, many people with vocational qualifications are employed in different profession or become job seekers.
173. Number of job seekers in the age group of 15 to 19 is increasing (36.6% in 1999), thus showing that currently the most topical employment related issue in Latvia is to reduce the ‘reproduction of unemployment’ by improving the content and provision of the initial, vocational and training, and providing lifelong education opportunities.
174. Like in the higher education, the main quality indicators for VET as the main source for human resources development and continued training, is the content of programmes or curriculum, their provision with teaching staff and resources. 57% of the teachers that now work in VET schools are over 40 years of age, and it means that they have acquired their teaching or professional qualifications in 70-ties and 80-ties – in the circumstances and context of soviet economic system. Therefore the improvement of skills and knowledge, especially in the area of technological upgrading of the respective branch, upgrading of methodological skills and use of modern teaching methods, are essential.
175. Resources and material base of the VET schools has not been upgraded since 80-ties. Up to now in the renovation of VET schools and upgrading of their material base, the following investments have been made - (1) in 1997–2001 in total 599 950 LVL (funding from the State investment programme) have been invested in 5 educational establishments. According to the legislative acts, foreseen expenditure for training equipment per one student is 54.50 LVL per year. It means that for maintaining and upgrading the resource base, VET
• 17 OECD PISA study “European Report on Quality Indicators in Lifelong Learning”, 2002 • 18 54% of the total number of unemployed in 1999
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schools need more than 3 million LVL per year. Such an amount is not allocated from the state budget, as the regular funding for schools constitutes only 82% (data from 2001) of the minimum costs. The funding for VET from the state budget has not increased, and it is used to cover schools’ maintenance costs and regular expenses, i.e. heating and municipal services costs, teachers’ salaries and maintenance of schools’ hostels or dormitories.
176. In the academic year 2001/2002, in VET schools the ratio was 11.4 students per one computer (in secondary schools – 26 students per computer). One third of the computers are out-of-date. Comparing to the EU, average figure is 8.6 students per one computer.
177. Taking into consideration the aforementioned, priority in the field of initial vocational education and training should be given to: • Fostering development of carrier education and guidance counselling in the education system; • Improvement of study programmes and teaching quality in the economically relevant branches; • Fostering involvement of social partners in VET, quality assurance and practical training provision; • Raising of competence of teachers involved in education and training.
Adult Continuing Training
178. Continuing training for adults is divided in the following way: • Staff training organised and financed by companies themselves; it mainly takes place in big companies (50 – 249 employees) (in 70% of such companies training has taken place); • Training of unemployed financed by the state within the limits of its financial resources; • Individual continuous education and training chosen and financed by individuals themselves.
179. Due to the limited financial resources the opportunity of continuing education and training is not provided for the groups that need it most, for instance, to small and medium size enterprises (in the year 2000 training has taken place only in 49% of companies), to unemployed, to job seekers and unemployment risk groups. Job seekers without any professional/vocational qualification 19 constitute only 28% of all the participants in adult training programmes (in 1999), but the lack of any vocational qualification is one of the main obstacles to employment today.
180. In 2000, according to the data of Central Statistical Bureau, 196 000 individuals participated in the adult training programmes, and 45 programmes were offered within the framework of both formal and informal education and training systems, which is mainly provided for a fee.
• 19 Persons with incomplete basic education, with basic or general secondary education.
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Services Teacher in-service 11% training Health and social 19% care 7% Humanitarian Agriculture sciences 10% 14% Engineering sciences 4% Computer skills 9% Social sciences, business 26%
22. Figure. Division of Adult Education and Training Programmes offered in 2000 / 2001 according to Branches (%) Source: Education institutions in Latvia in the beginning of academic year 2000/2001: CSB, 2001.
181. Taking into account the fact that the most active continuing education and training providers are private education establishments, programmes are mainly offered in social and humanitarian sciences (total 59%) because of comparatively low costs. There is insufficient offer in engineering sciences and knowledge for economy supporting branches and areas. Participation of public institutions in continuing training is too low. Schools, colleges, universities, NGOs and local libraries should become active in providing continuing education and training, and expand their initiative to offering of programs and modules in the form that is appropriate to working adults and job seekers (including e-learning) in the jobs, skills and qualifications that are essential for individual development and the national economic development.
182. Continuing training strategy with regard to training of Russian speaking teachers, parents of the pupils studying in minority schools, public officers with an aim to stabilise Latvian language as a state language, instruction language, and as a tool for integration of minorities, has been addressed since 1996, using altogether 9 906 725 USD, donated by many states and unions (EU and UNDP) until 2002. EU Phare programme will invest additional 1.5 mln EUR within the Phare 2001, 2002 and 2003 national programmes thus continuing the support till 2006.
183. Considering the aforementioned, priority in the field of adult continuing training should be given to: • Promoting lifelong learning networks and capacity building, strategy and implementation mechanisms development; • Enhancing participation of the social partners in provision of continuing training and education; • Fostering of development and implementation of courses responding to the continuing training needs of greater society.
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2.5.3. Promotion of Social Inclusion
184. Social integration of all groups of population, by creating equal opportunities for all people to participate in social life and development of the potential of national economy, plays an essential role in the sustainable development of national economy.
185. Some groups of society due to low income, shortage of working places, inadequate education, and lack of work experience, stereotypes, inaccessible environment or family situation are endangered by risk of social exclusion much more than others and therefore need special approach for removing barriers for their integration into the labour market. Scope of social exclusion is considerable in Latvia.
186. Using the monetary poverty indicators approved at the Laeken European Council in 2001 20 , it is clear that Latvia has relatively high levels of income inequality and risk-of-poverty index. In 1999 the Gini coefficient characterizing the inequality in income distribution in Latvia reached 31% (EU15 – 29%) and in 2002 – 34%. The ratio between the incomes of the top 20% of the income distribution of the bottom 20% was 5,1 in 1999 (EU15 – 4,6) and 5,5 in 2002.
187. In 1999 as in 2002 16% of the population were at risk of poverty (EU15 - 14% in 1999). Social transfers play a significant role in poverty reduction. If household members didn’t receive any social transfers, the poverty risk index in Latvia would have been 45% in 1999 and 43% in 2002 (EU15 average 40% in 1999). It is important to note that the actual value of the risk-of-poverty threshold in Latvia is very low (49 LVL for a one-person household per month or 589 LVL a year in 1999, 59 LVL and 706 LVL respectively in 2002). In 1999, it was 3,3 times lower than in EU15 countries (in one-person households in EU15 countries the poverty threshold in purchasing power standards was PPS 7263, while in Latvia it was – PPS 2196).
188. In the case of Latvia several risk groups of social exclusion can be identified, which already now have or might have difficulties in future to join labour market. These groups are: unemployed at the age groups 15-24 (youth) and 55- 64 (pre-pensioners), low-skilled and low-educated unemployed, disabled persons, long-term (more than 12 months) unemployed, parents after child-care leave, persons released from imprisonment, single parents, large families etc.
189. Material inequality between cities and countryside is growing. In 2002 the average income at the disposal of household members in the region around capital is 28% higher than in the country as a whole. Significant differences are seen also among the regions as well as between countryside and cities within the regions.
190. Analysing households according to the demographic content, two main types of households can be subject to increasing social risk – households with three and
• 20 Sources for poverty indicator calculations are Central Statistical Bureau calculations and Eurostat publications Statistics in Focus, theme 3-8/2003 and Draft of Statistics in Focus, theme 3 - 03/2003
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more children and single parent households with 1 or more dependent children (very often these households are sustained by a woman). In 2002 39% of the total number of children lived in the poorest 20% of Latvian households 21 . Analysing the population that is most influenced by unemployment, three main target groups can be distinguished – the long term unemployed, young unemployed people and pre-retirement age unemployed people .
191. The average unemployment rate of pre-retirement age (55-64) people in 2002 was 9.6% (11% for man, 7.9 for woman). Compared with the overall unemployment situation, these rates are exceptionally low, but taking into consideration that retirement was 59.5 for women and 62 for men, the active population is reduced by 12.1 percent points comparing to the 44-55 age group. Here the low economic activity of this group (22.3.percent points lower than that of the 15-64 age group) should be singled out. The main reason for unemployment of this group is the out-dated knowledge and lack of skills relevant to the demands of the modern labour market.
192. The statistics show some differences between the unemployment for Latvians (in 2002- 9.9%, in 2001- 10.2%) and for non-Latvians (in 2002- 15.2%, in 2001- 17.3%). However the gap is diminishing and an improvement in the situation for non- Latvians can be seen in 2002. The research and statistical data show that there are no substantial differences in poverty and social exclusion indicators between Latvians and non-Latvians, except very small minority of Roma. The reasons for the differences in unemployment rates are complex. Lack of Latvian language skills is one of the risk factors that hinders the formation of a multi- ethnic work force and limits job opportunities for part of the population 22 . Other important factors are: the legacy of the Soviet ethnic division of economic labour, the regional distribution of ethnic groups 23 and the influence of the shadow economy. Further in-depth research and analysis of the social exclusion risk factors will be applied in 2004 before strategic supportive actions will be introduced and implemented. Groups like disabled persons, persons released from imprisonment, parents after the child-care leave are subject to a larger risk of social exclusion or to several risks simultaneously.
193. Integration of disabled persons into labour market is hindered by the lack of motivation of employers and by the inaccessible environment. The motivation of employers to hire a disabled person is lessened by the widespread stereotypes on the work ability of a disabled person as well as the additional expenses necessary to ensure workspace suitable for a disabled person. Another factors are: comparatively low educational level, lack of appropriate skills of disabled persons, poor access to the communication networks. ICT need to be brought closer to disabled persons providing the environment for e-work, distance learning and skill development. Support network for disabled people is insufficient and it increases their and family member isolation from social
• 21 Data from of Household Budgets Research • 22 Latvian Centre for Human Rights and Ethnic Studies. A. Pabrik „Ethnic proportions, employment and discrimination in Latvia”, 2002, p.43. • 23 Non-Latvians mostly live in the Latgale region with very high unemployment and in the Riga region where the level of unemployment is the lowest.
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processes. This is most likely to cause social exclusion of children from families with disabled parents.
194. Insufficient capacity of State Employment Service in providing appropriate services for disabled persons can be the reason for low registration level of disabled persons as unemployed. However activity of disabled persons is rising. In 2002 1804 disabled persons were registered in State Employment Service that makes 2% of all unemployed. The proportion of disabled persons in number of unemployed was only 1.3% in 2000.
195. Vulnerable group at risk of poverty and social exclusion is ex-prisoners. In 2002 2517 persons (129 women) were released from prison. Social integration of those people is hindered by the negative attitude of society because of their criminal record and lost social skills required for organizing daily life. The majority of ex-prisoners face difficulties in integrating into the labour market due to lack of education, inadequate skills and negative attitude of employers.
196. There is a high unemployment risk for women after the child care leave. This is based on the necessity to improve the previous qualification and skills and stereotypes of employers that women with a child have lower labour productivity. Employers are not motivated to allow the female employees to work a partial workday and to do work at home (using ICT etc). As a research data shows women after the child care leave are much more active than other risk group of social exclusion representatives in using services and active employment measures offered by the State Employment Service. They are better informed on state and municipality offered opportunities and better know how to use them. Another reason increasing risk of unemployment is insufficient provision of public transport in countryside regions. It hinders getting to the workplace and using services of children gardens.
197. Most often are situations where several risk factors are combined together which leads to more serious consequences – it is necessary to undertake various types of investments in order to solve this problem situation. The analysis of the poverty risk for various social demographic groups shows that poverty in Latvia has a pronounced gender dimension. 24 The poverty and social exclusion risk grows for the single-parent families and women with caring responsibilities for children and older and disabled family members. Women when taking upon themselves the duty of childcare are restricted in their economic possibilities.
198. Essential issue for decreasing social exclusion is adequate information of persons on the existing possibilities and motivation to change the situation. Both, the governmental and the non-governmental sector should stimulate it. As poverty and social exclusion is multidimensional and complex problem, co- ordinated and interested co-work at horizontal and vertical levels by the involved institutions, organisations and individuals is required. Even though significant work has been done in Latvia for poverty appraisal, and the Government adapted Strategy for Reduction of Poverty in 2000 the achievements are not sufficient.
• 24 “Who and where is poor in Latvia?”(F.Gassman, 1999.)
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199. The problems mentioned above are addressed in Joint Inclusion Memorandum and its implementation will be a serious challenge in Latvia. This requires the interest of all the involved parties and their readiness to actively participate by increasing the level of knowledge and skills of the institutions for solving this problem as well as improving co-operation and co-ordination.
200. Additional targeted initiatives for special groups will be channelled via EQUAL Initiative. In the period of 2004-2006, the Community Initiative EQUAL will address causes of discrimination and inequality in the labour market, and the associated social exclusion, focusing on the development and testing of innovative approaches in labour market and social inclusion policies, and the exchange of experience between partners from different countries. The Initiative is intended to complement national strategies and EU employment policies, prioritizing: • facilitating integration and re-integration into the labour market of groups under the risk of social exclusion: youngsters, disabled, persons of pre- retirement age, persons released from imprisonment, employed in sectors influenced by structural changes, ethnic minorities (especially Roma), • reconciling work and family life, reduction in gender gaps in employment and unemployment rates.
2.5.4. Gender Equality
201. Gender equality is an essential instrument for the promotion of sustainable economic and social development for the nation. The restriction of participation of men and women in any area of life leads to the passage and implementation of ineffective decisions. Statistical data indicate that in economic terms women are in less favourable position compared to men, which is connected with inequalities in the labour market – employment status, income and segregation of labour market. Therefore it is important to implement gender-mainstreaming approach at all policy levels and stages while dealing with social and economic, political and other issues.
202. One of the main reasons for economical inequalities is gender segregation of the labour market – employment in the so-called female / male sectors. In such low paid sectors as education, health care/ medicine and social care up to 80% of the employed are women (see the table below). Usually these are institutions financed from state budget providing social guarantees. Men, on the other hand, dominate in the well-paid sectors – industry, transport, storage and telecommunications. The less profitable situation of women is characterised by the salary received by women.
203. The average wages in these sectors are lower than in sectors dominated by men. The average gross monthly wages received by women are lower than the wages of men in all occupations. In 2002 wages received by women were approximately 80% of the men’s wage.
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Kind of activity Rate of employed persons (annual Monthly average gross wages average) and salary, LVL Total Females, Males, % Average Females Males population, % by kind thsd of activity Industry 176 41.5 58.5 145.5 131 160 Transport, storage and 78 30.8 69.2 194.5 180 209 telecommunication Education 88 81.8 18.2 143.0 135 151 Health and social work 50 84.0 16.0 128.5 117 140
10. Table. Rate of Employed Persons and Monthly Average Gross Wages and Salary by Gender and Kind of Activity Source: Central Statistical Bureau, Statistical yearbook of Latvia 2002
204. The different possibilities of men and women in the society are influenced by inequalities that exist in the family life . Usually women are responsible for all household duties although the same number of women as men work outside their homes. Working women devote about twice as much time to their household duties as working men and these differences are even more pronounced in households with children. This necessary however unpaid contribution to the national economy has significant consequences for ensuring equal opportunities outside the household, in particular taking in to account the absence of alternative child care models and institutions and, on the whole, the role of both parents in the family. Thus involvement of women in the labour market is hindered as employers often lack motivation to employ women, in particular women of the reproductive age, after maternity leave and taking care of small children. Social partners, especially employers, do not pay sufficient attention to reconciliation of work and family life through flexible working time and new forms of employment.
205. There are 2.5 times fewer women – employers than men-employers (2.2 % of the employed women vs. 5.7% of the employed men).
206. The poverty in Latvia has a pronounced gender dimension. There is a tendency of poverty feminisation . The poverty risk for women grows as the number of family members is increasing. When taking upon themselves the duty of childcare women are restricted in their economic possibilities. Single - parent families with underage children and a woman as the head of the family are exposed to a higher poverty risk. As women receive, on the average, lower salaries than men, their average social contributions and in result pensions are also lower, which poses a threat for their poverty during the whole lifetime.
207. A significant factor characterising health is the life expectancy, which in Latvia is marked by gender differences: the projected life expectancy for men is by 11 years shorter than the life expectancy of women (in 2001 for females 76.6 years,
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males – 65.2). The comparatively high mortality rate among men (particularly in the working age) caused by external causes (specially the high death rate caused by traffic accidents – 44.3 and intentional self harm – 52.2 per 100 000 population in 2001) is a serious problem. Men take less care of their health than women, including their reproductive health.
208. Since the approval of the Concept Paper on Gender Equality Implementation in 2001 network consisting of governmental, non-governmental institutions and research organisations has been set up. According to the governmental decision the institutional mechanism to co-ordinate the gender mainstreaming in the governmental bodies is set up consisting of Gender Equality Council and inter- ministerial working group and programme for implementation of the Concept Paper has been drafted. However the capacity and awareness in the governmental institutions is yet too low to implement gender mainstreaming in all policy levels and stages.
209. The gender equality aspect as horizontal objective is included throughout the SPD, primarily within the priority Development of Human Resources and Promotion of Employment, e.g.: • Output indicators and baseline data are broken down by gender to monitor gender gaps and to measure progress in gender equality; • Additional points in the selection criteria will be assigned to those projects which contribute to gender equality; • Gender balance in Monitoring and Steering Committees will be encouraged; • Specially targeted initiatives will promote employability and entrepreneurship of women, especially of those returning to the labour market after the child- care leave; • Capacity of the institutions responsible for development and implementation of gender equality policy will be strengthened.
210. Additional activities to improve women participation in the labour market and to reduce poverty feminisation will be promoted via EQUAL Initiative.
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2.6. Infrastructure
2.6.1. Transport
211. The geographical location of Latvia – with the Baltic Sea on one side; borders with Russia, Estonia, Lithuania and Belarus on the other side - has enabled our comparatively small country to position itself as a major transport link between the East and the West. Total turnover of Latvian ports exceeded 51 million tons in 2002. Transport, storage and communications comprise approximately 16% of the GDP. The transport and communications sector is one of the most dynamic and accounts for about 30% of all direct foreign investment.
212. The elements of the future Trans-European transport network (TEN-T) are identified as priorities for investment. Taking into account the new EU transport policy, it is envisaged to develop alternatives to road transport (ferry and railway traffic) in international traffic, paying special attention to decreasing the adverse effect of transport on the environment.
213. In Latvia many areas are scarcely populated with roads playing an important role in terms of regional and social development and serve as only tool to connect remote areas with the centre.
214. Rail transport share accounts for 52% of total freight market and 90% of it is catering for the transit services connecting Russia and Belarus with Latvian ports (East –West). Share of railway transport in domestic freight traffic is only 7%.
215. In the total volume of freight traffic, the largest share belongs to the transit cargo, which is transhipped in the three largest ports of Latvia. For example, the amount of transit cargo carried by rail to the ports each year comprises more than 80% of the railway freight turnover. Road transport carries a comparatively small part of the total amount of the transit cargo; however, it dominates in the local freight traffic, which can be explained by comparatively short distances.
11. Table. Freight Traffic (by Transport Vehicles Registered in Latvia) in the Main Modes of Transport (mln tonnes)
1996 1997 1998 1999 2000 2001 2002 Railway 35.3 41.0 37.9 33.2 36.4 37.9 40,1 traffic Road traffic 29.5 25.2 33.8 33.4 32.9 32.3 36,9 Air traffic 0.003 0.007 0.007 0.005 0.003 0.005 0,005 Maritime 10.1 7.7 0 0 0 0 0 traffic* Total 74.903 73.9 71.707 66.605 69.303 70.205 77,005 * Since 1998 is not accounted because the ships do not work under the flag of Latvia Source: Central Statistical Bureau
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216. The total cargo turnover in the ports of Latvia within the period up to 2006 might increase approximately by 3% a year, mainly due to the outbound cargo (90%). The turnover of dry cargo might have a considerable increase – on average 4.5%, however, the turnover of liquid cargo on average also might increase by 1-2% a year. It should be noted that these forecasts mainly reflect the existing tendencies and factors, those do not include the risk factors connected with competition among the Baltic Sea ports, for example, the influence of further development of Russian ports on the flow of transit cargo via Latvia. Consecutively, the increase of the amount of railway cargo by 2% a year may be foreseen. The forecasts of the changes in road cargo traffic in turn is supported by the GDP increase rate and other important factors (for example, number of licenses issued, open access to the EU market), and might reach the average increase of freight 7-8% a year.
217. The present situation and trends in freight and passenger transport can be characterised as follows: • railway and pipeline transport dominates freight transport. The main routes are from the CIS countries to the ports. The railways transport the largest share of freight handled in Latvian ports; • passenger rail transport activity has decreased by 30%, compared with 1995, but it has been increasing during last 3 years and is still very important for commuting round Riga; • a rapid increase in number of road vehicles has been observed and the total number of registered vehicles by the middle of 2003 has increased by 70%, compared with 1995. The number of registered trucks by the 1st of July of 2003 has reached 103 000 vehicles, while the number of passenger cars is 633 000 units. • due to the relatively short transport distances in the country (a maximum of 300 km), road transport dominates in domestic freight transport. The share of railways is only 7%. • cargo turnover at seaports is constantly increasing and has reached 51 million tons in 2002. • in 2002 Riga International Airport served 633 322 passengers and the number of passengers has doubled in comparison to 1993. • traffic flow forecasts on main roads are estimated to increase by 3% - 5% per year till 2005 and 1-3% per year during 2006 to 2015; • the accident rate on public roads is rather high compared to EU countries and has increased by 12% compared to 1995.
218. The transport system of Latvia at the moment ensures the necessary passenger traffic, however, not always at the expected quality. Foreseeing the further development of economy and the increase of the freight turnover associated to it, the carrying capacity of the transport network and level of safety will be insufficient. At the moment, the interconnection between different modes of transport is already inadequate .
Road Transport
219. The density of the Latvia road network is 315 km per 1000 sq. km that can be considered as sufficient, taking into account the population and territory.
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Therefore, construction of new roads is foreseen only for eliminating of bottlenecks (bypasses of cities etc.). LATVIA TRAFFIC DATA - AADT year 2002 STATE MAIN ROADS
> > Estonia ) a rtu n a i T l ( l a > a rg a) T bu av er sk Ainaži ēt le Baltic sea 2740 Valka t.P (P 1540 S ga (24%) ur rb (22%) 1080 te 360 Pē A-1 5860 (25%) t. (25%) S 3320 Riga 2190 (21%) 2340 Russia (27%) Gulf (36%) (22%) Limbaži A-3 Valmiera Al ūksne 2410 A-2 Ventspils 2700 1160 (34%) (22%) 2300 (22%) 2920 A-10 2650 3110 (26%) Cēsis (25%) (25%) (28%) Talsi 15520 7860 3310 (18%) (15%) 2880 > 5080 5450 Gulbene a (24%) rg 3300 (24%) 6610 (19%) u 4080 (21%) Balvi b (29%) RĪGA r (26%) te (26%) 8640 8050 ē Kuld īga 6620 P Tukums (17%) t. 5220 (14%) A-4 (20%) S 12970 Ērg Ĝi Lub āna 980 (21%) 4770 4250 Madona (29%) 13820A-5 14200 (16%) (40%) 5930 (21%) (17%) Ogre 8770 2200 3990 2800 (16%) A-13 (24%) 3030 3500 6140 A-6 (24%) 5020 (55%) 2330 7720 (34%) (30%) 3830 (26%) 1420 2370 (33%) 9900 (22%) (29%) 5170 2120 (22%) (22%) A-9 (34%) 9570 (44%) (34%) (16%) A-7 6390 (24%) A-12 (46%) Ludza Saldus Dobele Jelgava (22%) 1580 2070 Liep āja 5540 2390 4160 1900 (27%) Aizkraukle (57%) 2420 (32%) Ma 4630 4620 5 1610 ska (31%) (34%) (28%) (29%) 6980 (36%) -1 Rēzekne va > (23%) A-8 (20%) Jēkabpils 2040 A (28%) 2180 (27%) 2520 810 Bauska (38%) (20%) 830 (42%) (54%) 2780 A-11 (34%) 3020 Prei Ĝi 610 a (27%) d (25%) K 1990 (30%) a r a 2470 g u (30%) 430 n Ħ (25%) i a Ħ i 1040 3000 (31%) Lithuania Ĝ > a a (47%) (25%) K
d ē < 2120 p i 1590 Kr āslava 4 A-6 a (26%) l 1 (25%) - K A 830 Daugavpils < 990 A-13 (30%) Vitebska > 3260 Average daily traffic (vehicle/day) (49%) 1050 (14%) a (31%) Heavy vehicle (percentage) av rš Byelorussia a V < LAD Strat ēă ijas da Ĝa
23. Figure. Latvian State Main Road Traffic Data, 2002
220. State main roads connect the road network of the Republic of Latvia with the road networks of other countries, as well as, the capital city Riga with district administrative centres. The annual increase of the traffic intensity is expected: 2- 5 % per year up to 2005, and 1-3 % from 2006 to 2015. 87% of the State main roads are the elements of TEN-T network.
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24. Figure First Class Road Traffic Data 2002
221. First class roads interconnect district and regional centres between themselves and provide connections to the state main roads (TEN-T network).
222. Traffic intensity on 1st class roads at various sections in 2002 varies from 100 vehicles per day to 5000 vehicles per day in the vicinity of more populated areas. The increase of the traffic intensity on the first class roads is expected to grow by 2-3 % per year up to 2005, and by 1 % during years 2006 to 2015.
12. Table. The Classification of the Latvian Road Network, 2002
Road classification Length of roads, km
With asphalt With gravel or macadam Total pavement pavement or without coverage State roads, incl.: 7993 12286 20279 Main state roads (A) 1622 - 1622 1st class roads 3879 1434 5313 2nd class roads 2492 10851 13343 Municipal raods and 5141 35052 40193 streets, incl.: Roads 956 31917 32873 Streets 4185 3135 7320 Forest roads - 6985 6985 Private roads 500 3 000 3 500 Total roads 13634 57323 70957 Source: Central Statistical Bureau
223. Road infrastructure in Latvia is outworn and with the available financial resources of the last ten years it was not possible to plan for and perform duly the rehabilitation of the worn asphalt surfacing, renovation of the upper layer of the gravel roads and bridge repairs. The total worth of the delayed construction rehabilitation works in 2003 amounts to 520,26 million EUR. In other words, in order to ensure good driving conditions as well as increase traffic safety on the entire road network this amount would have to be invested into the road infrastructure.
224. The following problems have to be identified in several groups of road classes: • Separate sections of state main roads (TEN-T road network) need to be reconstructed by improving road technical parameters as horizontal and vertical alignment and by increasing the bearing capacity according to modern traffic requirements; • The road technical parameters as horizontal and vertical alignment on the 1st class roads are basically satisfactory for traffic, but the road bearing capacity in those routes is not sufficient to ensure the commercial needs of the traffic 25 , and also some of the road routes lack asphalt surfacing;
• 25 Latvian authorities perform regular controls of the vehicle weight per axe on the road network in accordance with the Latvian national legislation in force [regulations of CoM 222 by 20.06.96.]
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• Improvements need to be made in order to increase traffic safety, especially in residential areas and areas close to them, by reconstructing the crossings and connections, by constructing pedestrian crossings, velo tracks and over- passes. The most intense traffic is registered on the main streets of the capital city – Riga and on the main state access roads to Riga. The most considerable increase of traffic intensity in the near future is foreseen on the main state roads, it can reach 5% a year but on the remaining roads 2–3% a year. A more rapid increase of intensity is foreseen in the vicinity of cities; • An additional problem has been identified on the roads without asphalt, which require limitations on acceptable vehicle weight during the periods of spring and autumn slush as well as during the dry summer period due to dust, which diminishes driving visibility and adversely influences the life and comfort of the nearby living people.
225. In order to reduce the number of road accidents and to improve driving conditions, the Latvian Road Administration within the framework of this programme on annual basis work out “the black spot” (locations with the highest number of accidents) elimination programme. The programme includes measures on traffic safety at the dangerous sections or crossroads, gradually decreasing the number of black spots on the road sections with the most intense traffic. The priority of these measures is improved pedestrian safety as well as rebuilding crossroads. Construction projects are ordered and included in the work programme each year. The order of performing traffic safety audits has been regulated by legislation, and those audits are performed both on road sections in design stage and on road network, especially on sections where a high number of accidents has been identified.
13. Table. Deteriorated Sections of State Main Roads and 1st Class Roads and Bridges in Critical Condition, 2002 Deteriorated Deteriorated % of the total state % of the total state Region sections of state sections of the 1st roads roads main roads, km class roads, km Central (Riga, Vidzeme 188 0.9 676 3.3 Zemgale) Kurzeme 67 0.3 213 1.0 Latgale 123 0.6 189 0.9
Total 378 1.9 1078 5.3
% of the total The bridges of the % of the total number The bridges of the number of bridges main state roads in of bridges of the 1st class roads in of the 1st class critical condition main state roads critical condition roads
Total 50 30 65 20
Source: Latvian Road Administration and Central Statistical Bureau, 2002.
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226. The insufficient financing from the beginning of 1990-s as well as low quality of the construction work during the Soviet period and different technical standards are the reasons why the roads have deteriorated and a considerable number of bridges are in critical condition. It has caused a situation when the deficit of periodical maintenance and reconstruction works aggregated, and it is impossible to eliminate it with the current amount of the available financial resources. A significant problem is also the nonconformity of the roads with the traffic safety requirements . In the year 2001 in Latvia 22 persons per 100 000 of population died in traffic accidents, which is one of the highest indicators in Europe (in the EU this indicator in the year 2000 was 13 persons).
227. The throughput capacity of the state main roads and main streets in cities in the most cases is sufficient , though in many places it is reaching the possible maximum capacity. In the largest cities, the biggest problems already today are caused by the lack of multi-level crossings and unreconstructed one-level crossings, where the traffic is not channelled and an intelligent regulating system of the traffic is not ensured, which makes the drivers to spend more and more time in traffic jams. In the country, there are a considerable number of one level railway crossings with high intensity of car and train traffic that decrease the traffic safety and extend the time spent on the road.
800,00
700,00
600,00
500,00
400,00
300,00
200,00
100,00
0,00 01.01.96. 01.01.97. 01.01.98. 01.01.99. 01.01.00. 01.01.01. 01.01.02. 01.01.03.
cars trucks buses motorcycles
25. Figure. Dynamics of Car Quantity (thousands) Source: Ministry of Transport, 2003.
228. The Ministry of Transport is planning to initiate work at town bypass feasibility study for selecting towns in need of traffic bypasses. The study is to determine economic and social criteria for building a bypass. In cooperation with the local councils these prospective projects are incorporated into regional development plans. The most economically advantageous schedule for the initiation of building bypasses at regional centres will be set.
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Railway
229. The density of railways is 36.1 km per 1000 sq. km, which is a comparatively high indicator, taking into account that the average density of railways of the EU member states is 48.4 km per 1000 sq. km. The electrified lines are 271 km and are located in the vicinity of Riga. The current railway infrastructure corresponds to the current amount of shipped cargo, as well as can ensure larger amount of cargo shipping, with exception of some sections and stations. The main problems that have to be solved are connected with the deterioration of infrastructure, as a result of which the level of safety and throughput capacity decreases. st nd 230. On the 30% (605 km) of the main railways of the 1 and 2 class of strategic importance, the amount of cargo carried exceeds the normative 500 million tons gross, which means that they need to be reconstructed. Due to the deteriorated condition of railways, the technical speed of trains decreases each year. If in 1995 the technical speed of trains was 46.0 km/h, in 2001 it was 43.3 km/h. This indicates that the throughput capacity of railways is insufficient. 26.3 % from the total length of railway lines are not equipped with traffic control systems that correspond to the safety standards of the EU. All the major railway lines serving passenger and cargo traffic are elements of TEN-T.
231. Due to inadequate railway infrastructure in Latvia, direct railway traffic of the necessary quality is not ensured with the countries of the Central and Western Europe.
232. It is planned to carry out the project RAIL BALTICA pre-feasibility study in the area of regional development and spatial planning in 2004-2005 with financial assistance from INTERREG. The financial contributions for the future studies are planned to be diverted from the Cohesion Fund and TEN-T budget. The Rail Baltica project is included in the list of long term priority projects of the High Level Group Report.
233. One of the objectives of the Ministry of Transport of Latvia is to promote the development of combined transport; work is undergoing to establish appropriate legislative and regulatory framework. Due to short distances this type of transport mainly might serve to international traffic, first, from Latvian ports to Russia (Moscow), however a proper infrastructure, equipment, as well as rolling stock are necessary. At present, combined transport terminals are located within the ports and there are no specialized inland combined transport terminals. Operation of shuttle container block trains between Riga and Moscow was started in 1996, but now is irregular while trailer transport on railway is hindered by the lack of specialized railway platforms. The combined transport development might be addressed in the perspective of the coming decade.
Seaports
234. There are three large ports (Ventspils, Riga, Liepaja) and seven small ports (Salacgriva, Skulte, Lielupe, Engure, Mersrags, Roja, Pavilosta) in Latvia. Three biggest ports Riga, Ventspils and Liepaja are elements of TEN-T.
235. The main advantage of Latvian ports is their geographic position. Rather well developed transport infrastructure connects Latvian ports with Russia and other CIS countries, forming one of the shortest and economically advantageous
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transit corridors between Eastern and Western markets. The ports of Ventspils and Liepaja are ice-free. The Riga port uses the services of icebreakers only in especially severe winters. In addition, it should be pointed out that the Ventspils port is connected to Russian oil and oil products transmission pipeline network. The total cargo turnover in Latvian ports in 2002 was 51.5 million t (90% of those were transit cargo), which is one of the highest indicators in comparison to the other Baltic Sea region countries.
14. Table. The Capacity (output) of Ports and Cargo Turnover (thousand tons) Port Capacity, Cargo turnover 2001 1998 1999 2000 2001 2002 Riga 20 000 13 315,3 12 012,5 13 351,7 14 883,9 18 108,3 Ventspils 84 000 36 046,4 34 136,5 34 755,4 37 936,7 28 103,7 Liepaja 7 000 2 296,5 2 324,1 2 964,7 3 260,4 4 318,1 Small ports Salacgriva n/a 305,9 277,6 213,1 174,4 149,2 Mersrags n/a 142,8 102,4 249,6 229,5 238,1 Roja n/a 69,8 56,6 33,3 7,8 7,8 Pavilosta n/a 4,7 3,3 2,6 2,7 3,4 Lielupe n/a 9,5 6,6 4,1 3,9 2,1 Engure n/a 1,3 1,2 2,5 1,8 2,0 Skulte n/a 99,4 105,3 266,0 413,4 622,0 Total small ports 633,4 553,0 771,2 833,5 1 024,6 Total all ports 52 291,6 49 026,1 51 843,0 56 914,5 51 554,7 Source: Ministry of Transport, 2003.
15. Table. Passenger Turnover in Ports of Latvia (thousand passengers)
2000 2001 2002 1st half of 2003 Riga 60,59 51,07 156,77 125,71 Ventspils 2,68 8,37 7,4 2,98 Liepaja 13,31 12,36 14,79 5,06 TOTAL: 76,58 71,8 178,96 133,75 Source: Ministry of Transport, 2003.
236. The capacity of access roads to ports is already near the limit, and, taking into account the foreseen increase of cargo amount, their throughput capacity will be insufficient.
237. In the small ports, the navigation infrastructure is outdated (breakwaters, moles etc.). Especially, the condition of moles in several Latvian small ports is unsatisfactory.
238. The amount of transhipped cargo in the small ports is rather insignificant – only 2% of the transhipped cargo in the Latvian ports, but they are the key elements
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for economic development in the seashore regions. The small ports are the development base for such industries as fisheries, wood and peat processing, tourism and yachting in those coastal territories.
Airports
239. The main elements of the Latvian air transport infrastructure are international airport “Riga” (thereinafter referred to as airport “Riga”), international airport “Liepaja” and airfield “Ventspils”. All the main airports are the elements of TEN-T.
16. Table. The passenger Number (departing and arriving) in the Airport “Riga” (thousands of passengers))
1996 1997 1998 1999 2000 2001 2002
497.2 531.1 554.7 562.4 574.4 622.6 633,4
Source: Ministry of Transport
240. With the increase of the number of passengers and the cargo traffic at the airport “Riga”, the issue of landing of heavy aircraft with a larger passengers and cargo capacity has become topical as far as today the length of the runway is inadequate for that. Modernisation of the runway lighting system is considered as the most important measure for improving the flight safety.
Public Transport
241. The inland passenger transport carries by railway approximately 1/3 of the passengers carried by suburb transport. In particular regions (especially in Riga commuting traffic) the railway is an integral part of the local public transport system. In the surroundings of Riga the road transport intensity might increase significantly and as the result, the private road transport flow might completely paralyse the traffic of Riga access roads and city main streets causing unforeseen congestions. While public bus transport service will not be able to offer adequate service and volume as the traffic intensity and congestions will destroy loyalty of population to public transport.
242. Still, as one of the major factors that hamper development of public transport is insufficient carrying capacity in the city’s streets and organization of the traffic, low quality of the regional roads also is an essential factor. Altogether all these factors directly influence the speed of the public transport that is often insufficient, which makes residents prefer personal or taxi transportation to the public transport services. The above mentioned problems are planned to be solved with support of ERDF. Moreover, ERDF resources are planned to be used for modernisation of electrified railway rolling stock for passenger transportation.
243. Changes (reorganization) are made in route network for transport of suburb areas – separate inefficient railway routes are closed, insuring instead alternative transportation with buses. Intensity is increased and the service is improved in extensively used passenger railway sections. Changes are made in long-distance and regional routes in order to intensify traffic and make public transport services available to population in regions.
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244. According to Law on Road Transport the following institutions are responsible for public transport (regular passenger transport with buses): • City Councils, District Councils –urban routes; • District Councils – regional routes; • The Ministry of Transport – long-distance and international routes.
245. Municipal enterprises have the main market share in regular passenger transportation with buses (approximately 85%), though small and medium private companies prevail in respect of number of enterprises.
246. Passenger transport companies are compensated (grants are allocated) for the expenses associated to the carriage of certain categories of passengers with reduced transport fees. These passenger categories are determined by the Cabinet of Ministers but the expenses of transport companies are covered by the MoT from the state budget or by municipalities from their budgets.
247. Notwithstanding the growth of the amount on provided services and improvement of the quality, the average age of vehicles used in public transport is still very high (in the road transport it is above 11 years, in railway transport – above 22 years). If the question about renewal of rolling stock (purchase of new one, modernisation of the existing) is not solved in near future, the capacity of rail passenger transport will decrease below 50% compared to current. The railway rolling stock for passenger transport is planned to be upgraded and renovated according to the European safety and quality standards in order to develop a higher quality passenger services. The public transport development system in the urban areas is the priority of municipalities. The issues of public transport development in urban areas will be resolved in line of municipal transport planning and development strategy, as the major public transport companies are municipally owned.
248. In the field of public transport services products of an advanced technology are gradually introduced and united system of ticket trade is initiated.
Transport System Development in the Riga City
249. Traffic intensity in Riga has increased twofold during the preceding five years. Currently, the car register in Riga shows 285 car per 1000 inhabitants. In view of the dynamics of motor vehicle increase, it can be forecast that said figure would grow to 450 car per 1000 inhabitants in Riga.
250. The most significant drawbacks of the network of streets are the fragmentary character of main streets and unsolved connections of the bridges over the Daugava river to the network of streets. Capacity of many intersections with regulated traffic and level crossings in the city has been exhausted and therefore the traffic should be organised on several levels. To date, limited funding has been attracted to the maintenance and construction of high-speed and main streets, although most transit traffic is of national importance.
251. The Riga Traffic Concept (1999-2004) sets out key measures for improvement of traffic in the city: • construction of a new crossing over the Daugava river; • rearrangement of the high-speed streets network, which would accumulate main transit flows by-passing the Riga city centre, as well as freight traffic, including port freights.
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252. The Riga Development Plan sets out the high-speed streets chart, with alternatives; the Riga City Council has taken a decision regarding the location of the Northern crossing over the Daugava river and its connection to the street network, as well as the Southern bridge. To date, the city transport layout has been updated and the connections of the main streets network to the TEN-T road network are clearly defined.
253. Currently, the Traffic Management Centre, established in 1984 is operating in Riga, with its main task being the arrangement of "green waves" on spans of 3 streets of Riga. In all, traffic light controllers of 6 different types are used in traffic lights. Only 25% of the traffic light objects have been put in operation less than 8 years ago. The existing operation program of the traffic light controllers does not provide a possibility for switching to another signal plan subject to the hour, week or dynamic changes in the traffic flow. The central controlling panel of the city covers only 45 traffic light controllers and detects the red light position. The other traffic light controllers operate under an autonomous regime.
254. In the City of Riga, passenger traffic is ensured by 2 municipal public transport companies (limited liability company “Rigas satiksme” and non-profit organization, limited liability company “Tramvaju un trollejbusu parvalde”) as well as 8 private companies.
255. The loan of 16.9 million US dollars granted by the World Bank and co-funding of 3.0 million US dollars by the Riga City Council invested in the implementation of bus renewal project was the first step in the improvement of the public transport infrastructure. To date, 60% of the total number of buses are new, modern, with low floor.
256. In the near future, it is anticipated to consolidate two abovementioned municipal companies. On the basis of the tender for bids announced in 2001, by 2005 renewal of the rolling stock of buses in the city routes will be completed. In the period from 2004 to 2007, it is anticipated to purchase new three-axle articulated low floor trolleybuses.
257. Elaboration of a new project has been commenced, namely, installation of GPS on all rolling stock. Currently, the dispatcher service conducts surveillance of traffic of 60 buses, where GPS have been installed, on city routes. In 2003, GPS will be installed on another batch of 60 buses. The preliminary project has been drafted for introduction of a new high-speed low floor tram in the city of Riga, which project was financially supported by the Government of France.
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2.6.2. Information Society and Information and Communication Technologies
258. As a result of development of the information and communication technologies (ICT), information and knowledge become more often used as a tool of production; usage of ICT becomes more widespread also in the social life. With the changes of the social relationships, the creation of a new type of society with a higher organisation – the so-called information society – is taking place.
259. Taking into account low numbers of Internet users and low use of ICT in entrepreneurship, one has to draw a conclusion that information society is underdeveloped in Latvia . In 2000 there were only 6.1 internet users per 100 inhabitants in Latvia, while the EU average indicator is 26.3. The indication of the low use of the ICT in the business practice is low share of enterprises using computers – 39% (See chapter on Competitiveness).
260. There are three preconditions for development of the information society: • necessary infrastructure, • skills of users and specialists, • existence of relevant public services.
261. Currently there are nearly 40 internet providers in Latvia, 70% of which are situated in Riga. This indicates limited accessibility of the qualitative ICT services in the rest of the territory of the state. Accessibility of the internet is also negatively affected by the high costs of the internet use; in Latvia these are higher than in most of the EU member and candidate countries. Only around 3% of the households in Latvia have access to the internet, which is almost tenfold lower amount than in EU average. The number of the public access points to the internet is insufficient, too.
262. In order to make the creation of the information society possible the following skills are necessary – relevant knowledge of the information technologies on the level of users; and ability to maintain and develop the necessary information and communication systems on the level of professionals. The skills on both levels are unsatisfactory . There is a massive deficit of highly qualified ICT specialists and the average level of skills of users in the area of ICT is low.
263. The provision of public services using the ICT technologies is insufficient to lay down a meaningful basis for formation of information society. It was estimated that only 3 out of 21 areas of the public services to be provided via the internet are being addressed at the moment.
264. The national policy in the information and communication (ICT) sector is defined in the National Programme ‘Informatics’ – a complex target program for the time period 1999-2005, consisting of 13 subprograms dealing with various aspects of building information society with the fundamental goal of the National Programme ‘Informatics’ to integrate Latvia into a global development process and to form a basis for development of information society in the country.
265. In order to address the Presidency conclusions at Lisbon European Council on 23-24 March 2000 and eEurope+ elaborated in 2001 the Socio-Economic
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Programme ‘e-Latvia’ was prepared following the principles of the above mentioned documents. This programme was accepted in 2001 and consists of the three main parts: • accessibility of internet (a cheaper, faster, more secure internet), • investing in people and skills (general internet access skills), and • meaningful use of internet (information services and applications).
266. Cabinet of Ministers approved the Concept of the E-government on 20 August 2002, which envisages promotion of the public services via internet. However, currently only three of 21 activity axes are operational.
267. The main emphasis on the development of information society and knowledge- based economy in these policy documents is supported by informational subprograms – the development of state, municipal and branch information systems, telecommunication networks and services and universal information service 26 .
268. Based on these strategic documents, important nation wide projects were launched (Municipal Information System, Latvian Education Information System, Latvian Library Information System etc).
269. The Municipality Unified Information System (MUIS) project is being implemented supported by the resources of the State Investment Programme (SIP). The project addresses all three areas of intervention necessary for development of information society (access, skills and content) by provision of the ICT networks to municipalities, training personnel and assisting to digitalisation of the municipal services. Under the project infrastructure necessary for the information systems were created in 300 municipalities 27 .
270. In order to tackle the issue of skills on the user level, the Latvian Education Information System (LEIS) project is currently being implemented. It covers all the territory of Latvia and all levels of the education system by providing intervention in two areas of information society: the education establishments are being provided with the necessary networks and computers, the teachers are being trained to both provide the training for the students and ensure meaningful use of ICT. There is a lack of highly qualified ICT specialists – an expert’s estimation is that deficit is as high as 2000 specialists. Preparation of the necessary labour force is hindered by lack of relevant curricula and teaching staff in the higher education establishments, which is also addressed by the LEIS project.
271. The Latvian Library Information System project was launched with an intention to re-establish libraries as major information points in Latvia, both focusing on remote areas of the country where information availability is hindered by lack of
• 26 Universal Telecommunication Service is to be introduced to address the districts where the quality of the ICT services is not sufficient by provision of a minimal set of telecommunication services the government defined as necessary to be supplied all over the country. • 27 Taking into account the total number of municipalities (547), the MUIS project has covered only 55% of the total workload.
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access and skills, as well as in the development centres providing meaningful content to the information society in Latvia.
272. All these major projects were provided financing under the State Investment Programme and are under way at the moment; hence additional support by the EU Structural Funds will add a great value to promotion of these projects and formation of information society in Latvia.
273. On 20 April 2003, being aware of the fast changes in technological opportunities and political and economical situation and the approval of eEurope 2005 Action Plan, Cabinet of Ministers decided to update the Socio-economic Programme “e-Latvia” and the National Programme "Informatics" till the end of 2003. The project of this strategic document and action plan is under construction.
Access to Telecommunications and Internet
274. There is low use of information and communication technologies (ICT) in Latvia both among inhabitants and enterprises. This is due to poor ICT infrastructure (especially in terms of telecommunication services and points of public access to Internet) and resulting high costs of ICT use. Fixed-line Telecommunication
275. The fixed telecommunication market has been liberalised, however at the moment there is only one fixed line telecommunication operator providing services to the public at large. The fixed telecommunication operator provides voice, data and network rent services. Coverage with the fixed telecommunication network is low in Latvia – in 2003 around 28.9% of the inhabitants had access to the land line 28 , while the average EU indicator is 86%.
276. Territorial coverage with the digital network is uneven, due to questionable profitability of provision of the services to certain less populated territories. There are territories with less than 10% of the population having access to the ICT services. The regulatory regime for the liberalized telecommunications market set in Latvia by Regulator (the Public Utilities Commission of Latvia) starting from 2002 does not create complicated administrative or financial barriers for entering the market. The telecommunication licensing regime provides that companies applying for the licenses are not obliged to pay a license fee except the fixed registration fee established by the Cabinet of Ministers for any kind of license.
277. By September 2003 the Regulator has issued 160 licenses for construction, development and maintenance of telecommunication networks and for providing of telecommunication services in fixed, mobile and radio-communication networks, as well as it has registered 12 general authorizations for the provision of telecommunication services. Majority of licensees are wishing to provide data communication and Internet services, as well as leased line services in Riga and in main regional centres of Latvia.
28 On the 1 June 2003 there were 28.9 fixed telephone lines per 100 inhabitants; only 84.5% of those were digital.
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278. Most of licensed providers will employ radio access technology or rented infrastructure from other service providers. Only about 10 new licensees up to February 2003 have been applied to Regulator for numbering resources to provide fixed voice telephony services and only few of them are planning to operate outside the Riga city. The same concerns one of the mobile network operators currently operating mobile voice services in Latvia and applying for fixed network operator’s licence, as well as majority of licensed service providers planning to offer voice telephony services through the Internet. Among new licensees having a nation-wide telecommunication infrastructure are Latvian Railway Company, national energy company Latvenergo, and Latvian Radio and TV, but all those serve a very limited number of residential customers as fixed phone line users.
279. Therefore it is not foreseen that liberalisation of the fixed telecommunication market will result in substantial investments made in rural areas of the country for development of the fixed telecommunication network infrastructure including access to these networks. More even coverage of the territory may be ensured by introduction of the universal telecommunication service 29 , which is envisaged in 2004 in case the liberalisation fails to deliver the improvement necessary.
17. Table. Rate of Digitalisation of Fixed Telecommunication Lines in District Centres and District Rural Territories (December 2002)
Private customers Business customers
Digitalisation Digitalisation rate Digitalisation Digitalisation rate rate (%) in (%) in district rate (%) in (%) in district district centre rural territory district centre rural territory RIGA 99.76% 89.97% 99.71% 90.87% KULDIGA 99.91% 66.01% 99.89% 65.01% LIEPAJA 87.72% 30.84% 96.41% 16.55% SALDUS 96.26% 39.60% 99.27% 29.71% TALSI 5.05% 0.94% 45.07% 13.85% VENTSPILS 99.66% 9.05% 98.67% 9.86% BALVI 98.15% 1.55% 98.35% 14.35% DAUGAVPILS 71.55% 0.79% 83.89% 5.21% KRASLAVA 21.63% 0.75% 40.13% 10.57% LUDZA 7.33% 0.28% 35.88% 9.92% PREILI 4.65% 1.28% 29.78% 15.08% REZEKNE 98.60% 4.62% 99.10% 5.78% ALUKSNE 9.45% 0.57% 45.36% 13.84%
• 29 Universal Telecommunication Service is to be introduced to address the districts where the quality of the ICT services is not sufficient by provision of a minimal set of telecommunication services the government defined as necessary to be supplied all over the country.
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CESIS 97.88% 9.56% 98.85% 20.22% GULBENE 100.00% 2.61% 99.01% 6.77% LIMBAZI 99.21% 42.85% 99.43% 53.07% MADONA 19.66% 12.55% 42.18% 28.16% OGRE 100.00% 75.30% 98.61% 69.30% VALKA 92.85% 11.58% 95.90% 22.37% VALMIERA 64.86% 35.61% 83.58% 36.05% AIZKRAUKLE 94.31% 58.12% 89.24% 55.20% BAUSKA 47.06% 31.32% 32.51% 32.80% DOBELE 100.00% 9.13% 98.51% 10.95% JELGAVA 99.68% 25.51% 99.58% 35.56% JEKABPILS 79.34% 24.63% 83.24% 25.86% TUKUMS 49.98% 20.42% 60.30% 30.63%
280. The availability of telecommunication infrastructures and affordable telecommunication services are prerequisites for accessing and using ICT for all, but thorough analysis of the real situation shows digital divide in terms of telecommunication lines’ digitalisation rate between region centres and the rural territory and between business and private customers. Table with data representing digitalisation rate illustrates that the most developed district centre is Riga with 99.76 % in business sector in comparison with digitalisation rates in Talsi district 45.07% in business sector (and 0.94% in private sector).
Mobile Telecommunication
281. The market for mobile telecommunication services currently is dominated by two operators. Use of the mobile telecommunication services is relatively high in Latvia. On the 1 January 2002 there were 657 thousand users of the mobile telecommunication services registered with either of the two operators. This corresponds to 25% of the population covered by the services. In order to promote competition in the market for mobile telecommunication auction was organised for three licences for provision of services in mobile telecommunication UMTS standard and one in GSM standard, but no new applicants were registered. Internet
282. There are 40 providers of internet access and around 70% of those are operating in Riga. Most often services of fixed telecommunication network are used; direct connection using mobile telecommunication or radio link is not widespread. The use of the Internet is low in Latvia. According to the data of Latvia Internet Association, on 1 January 2002 there were 6.1 Internet users per 100 inhabitants, while in the EU the average level is 26.3.
283. In spite of improvements in the area, Latvia remains among the EU candidate countries with the less developed ICT infrastructure. Only 3% of the households have access to Internet, which is ten times lower level than the average EU indicator and also below most of the EU candidate countries. There are only 0.14 points of public access to the internet per 1000 inhabitants. There is
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relatively better provision of ICT access in the education establishments: 3.9 computers per 100 students in primary and secondary schools (1.4 of those with Internet access) and 4.7 computers per 100 students in high schools (2.4 with access to the Internet). ICT also need to be brought closer to disabled persons providing the environment for e-work, distance learning and skill development.
284. Poor access to the communication networks is the main handicap to development of the information society therefore a measure specifically targeted to provision of access to ICT and development and introduction of the relevant technologies was included in the programme.
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2.6.3. Environmental Infrastructure
285. A well-organised and developed environmental infrastructure is one of the key elements facilitating the development of regions. A qualitative living environment and the availability of services are the preconditions for increasing population density, as well as for insurance of successful entrepreneurship particularly concerning services (e.g. tourism, shops, public catering, hotels, and hairdressing) and food industry.
Water Services
286. Water services (water supply, wastewater collection and treatment) are not provided in appropriate quality and in accordance with environmental requirements in most of the settlements in Latvia. In order to ensure qualitative services for as many inhabitants as possible and in order to considerably reduce the environmental pollution, the financing for the development of the water services according to the strategic investment priorities has been allocated to agglomerations with a population equivalent above 2 000. The main financing sources in the pre-accession period have been Phare and ISPA. For the period 2004-2006 the continuation of the development of appropriate water services in these urban agglomerations has been defined as one of the highest priorities in the Reference Framework Document for the Cohesion Fund. At the same time, there are around 750 settlements, where the number of inhabitants is (much) lower than 2 000 and where around one third of Latvia’s population lives. The majority of these settlements are located on the Baltic Sea coast, along the banks of rivers and lakes that are potential tourist places. Small population numbers, employment problems and the absence of the entrepreneurship have a considerable impact on municipal budgets and are limiting their ability to improve the water services. 3 287. Despite rich surface water resources, approximately 13 300 m /capita (average in EU-15 is 7 250 m 3/capita. Only Ireland, Finland and Sweden exceed Latvia in this regard), and the possibility to provide drinking water to the entire territory of Latvia from ground water resources (currently only in Riga surface water is still used as source of drinking water) the protection of water resources and their rational use are not properly ensured. The overall quality of ground water is good in Latvia with the exception of elevated concentrations of iron, manganese and sometimes there are problems with the hardness of water and too high sulphate concentrations. To comply with the drinking water quality standards abstracted groundwater is treated before it is distributed to the final consumers. At the moment appropriate drinking water treatment is being provided to around 35% of the population . Although the quality will be good after treatment the drinking water quality provided to the final consumers is often worsened due to the poor condition of the water supply networks. According to the monitoring data for the year 2001, the overall quality of drinking water supplied to the consumers was not corresponding to the requirements for both the chemical quality (49.5% of the samples) and the biological quality (5.3% of samples). Here it should be noted that the quality of drinking water at final consumer is only controlled at the request (and expenses) of the house owner. Around one third of the water is being lost in the water
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supply networks, which is comparable to other EU-15 and Accession Countries. Estimated network losses vary widely over Europe: e.g. on average 15% in Italy, 30% on average in France, 33% in the Czech Republic. However poor metering and monitoring in some countries makes accurate estimations difficult.
288. According to data provided by the Latvian Environmental Agency, the total amount of produced wastewater was 306.83 million m 3 in 1998 and 220.91 million m 3 in 2001. Being a country where most water is used by the public water supply sector, the biggest wastewater producers are consequently the municipal water utilities. In 2001 they produced 47.6% of the total wastewater amount compared to 29.8% from the industrial sector (including energy and heat production) and 19.1% from the agricultural, fishing sector. Although the total amount of the treated wastewater against the total collected wastewater amount has increased, the big part of the produced municipal wastewater, particularly in small settlements, is still not being appropriately collected and treated. In most of the around 1,100 wastewater treatment plants in Latvia, of which an inventory was made, the technologies applied are not complying with the environmental requirements and are creating surface water pollution. The poor condition of the sewage networks creates leakages and the collected sewerage may pollute groundwater (especially of shallow wells), and thus creating a danger for microbiological contamination.
289. Close attention is focused on improvement of drinking water and sewerage services, on metering (real consumption of resources instead of norms) and cost recovery, the latter is in line with the requirements of the Water Framework Directive, thus implementing the Polluter Pays Principle. The result for the final water consumers is that they will pay tariffs that include both depreciation and operational costs related to the provision of drinking water and sewerage services. As for waste water management the operational costs include Natural Resources Tax: on both the abstraction of water (surface or groundwater) and the pollution of the fresh water into which the treated sewerage is discharged.
290. Water and sewerage tariffs reflect more and more the full costs of providing these services. This implies that the services currently developing, improving and co-financed by the EU, will generate sufficient revenues to continue the services in a financially sustainable manner.
Waste Management
291. Waste management (collection, recycling and treatment) failing to comply with the requirements for environmental protection and for rational use of the natural resources, as well as insufficiently effective measures taken for rehabilitation of the historically polluted sites pose a serious threat to the environment.
292. Around 600–700 thousand tonnes of municipal waste, of which 30% arising in commercial enterprises and institutions, are produced annually. This amount of 250-300 kg/capita/year is small compared to the average of 540 kg generated annually per capita in the EU-15 countries. According to the prognosis, the amount of generated municipal waste might increase by 5% till 2006. The main increase in municipal waste production occurs predominantly in urban areas and especially in Riga. Waste management services are provided to 80% of the urban population and to only 20% of the population living in rural areas. This collection rate of around 50 – 60% is low compared to the EU-15 countries (98-
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100%) and in the lower range when compared to other Candidate Countries (50% in Latvia, 69% in Estonia and 84% in Slovenia).
293. Big part of the recyclable and reusable waste is currently being disposed of due to the fact that the separated waste collection system is still under development. Although data refer to the situation in the end of the nineties, EUROSTAT reported that in Latvia 100% of the municipal waste is land-filled compared to 67% in the EU-15 countries and 92% in the Candidate Countries. At the moment mainly paper, cardboard, glass and plastic are being collected separately for recycling.
food waste
5% 2% plastic 3%
glass 12% 38% wood waste
6% paper and cardboard
metals
16% construction waste
18% health care waste
26. Figure. Content of the Solid Waste (%) Source: Ministry of Environment, 2002.
294. Municipal solid waste contains approximately 1 – 3 % of hazardous waste. Except the recycling of the oil products (approximately 50% are being recycled), accumulators (recycled – 90%), mercury in mercury containing bulbs and tyres, the rest of the municipal hazardous waste is not being appropriately collected and treated.
295. Recycling of different kinds of waste is not well developed in Latvia. Recycling of the waste is performed only in few enterprises, e.g. in Liepaja “Liepajas metalurgs” where the metal is being recycled and in Valmiera “V.L.T.” where the paper/cardboard recycling is taking place. The rest of separated waste is being transported abroad for recycling. This issue is closely linked to the development of the separated waste collection system. So far, separate collection has not been considered as profitable due to lack of recycling capacity and appropriate technologies. On the other hand, the development of recycling activities for separately collected waste fractions is not reasonable, because of the lack of a separate waste collection system, which would ensure a continued load for recycling facilities. In order to implement the legal requirements, Latvia has to address these issues. The separate waste collection points have to be established in all Latvian cities and towns, equipped with special containers for
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different kinds of waste. From the collection points the waste needs to be transported to the regional waste separation centres, where the reusable and recyclable materials are further prepared for reuse/recycling. Only those kinds of waste that are not suitable for recycling and reuse should be disposed of in the regional landfills.
296. One of the main solid waste management problems is the large number, although comparable to some EU-15 and Candidate Countries (e.g. 359 landfills in Finland, 452 in France, 789 in Italy, 216 in Estonia and 1,410 in Poland) of predominantly small dumpsites and their potential adverse impact on the environment. Currently 264 of these dumpsites are closed while 239 dumpsites are still operational. According to legislation, operation of these dumpsites will become illegal after 2009. 55 dumpsites with a total area of 67.8 ha have been re-cultivated in the period from 1998 to 2001. Around 12% of the operating dumpsites and 8% of the closed but not re-cultivated dumpsites are causing serious danger to the environment.
297. Waste management projects, which are now under preparation and will be co- financed under the Cohesion Fund, will be presented as integrated plans for waste management and will contain different elements including the construction of regional landfills, the establishment of separate waste collection points and the recultivation of all old dumpsites located in each solid waste management region. Unfortunately projects, which have already been approved for ISPA co-financing in 2001, do not completely include these elements. The envisaged number of separate waste collection points does not fully cover the needs of inhabitants in the waste management regions. In the North-Vidzeme waste management region, where the implementation of the ISPA project is currently on-going, only 20% or 12 of 66 non-compliant dumpsites will be recultivated. There are also areas, which will not be subject to co-financing from the Cohesion Fund, but where a large number of inhabitants are living and where the number of dumpsites is substantial (e.g. the Riga district where more than 10 % of the total population is living).
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27. Figure. Solid Waste Dumpsites in Latvia Source: Ministry of Environment, 2002.
298. Due to the insufficiency of financial resources received by the municipalities from the Natural Resources Tax, rehabilitation of many historically polluted territories has not been carried out. During Soviet times military and (large) industrial activities polluted the environment and in most of these cases the polluters left (or went bankrupt) without cleaning up their sites. These territories pose a threat to the environment and human health by polluting the surface and groundwater. It is foreseen that by the end of 2003 municipalities will finalise gathering information on all historically polluted sites. Rehabilitation of the largest historically polluted territories is included as a priority for co-financing from the Cohesion Fund in 2004 – 2006.
299. Waste management in Latvia is currently shifting from municipal, local scale to regional scale. The consequences are that the local dumpsites will be recultivated and regional landfills, conforming with the Landfill Directive, will be constructed. For the inhabitants the waste collection tariffs will increase in accordance with the Polluter Pays Principle taking into account increased costs for waste disposal and larger waste transportation distances and, unlike current practise in some municipalities, inhabitants will pay directly for the waste management services provided. The cost for waste disposal includes both depreciation and operational costs that on its turn includes Natural Resources Tax (1.19 EUR / tonne).
300. Besides landfill of (hazardous) waste, abstraction of water and pollution of fresh waters, the Natural Resources Tax is also levied on extraction of natural resources (e.g. soil, sand, limestone), air pollution, soil pollution, imported good and product harmful to the environment (e.g. electric batteries, tyres) and packaging of goods or products (e.g. glass, PET, paper).
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301. Waste management tariffs reflect more and more the full costs of providing these services. This implies that the services currently developing, improving and co-financed by the EU, will generate sufficient revenues to continue the services in a financially sustainable manner.
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2.6.4. Energy Sector
General Information and Main Indicators.
302. In Latvia total consumption of the primary energy resources rapidly reduced during years from 1990 to 1995. Main factors that affected this process were decrease of development of national economy, structural changes of economy and closure of the industries with a high-energy consumption.
120
100 GDP GIC
80
60
40
20
0 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002
28. Figure. Dynamics of GIC and GDP 1990-2002 in %
303. Indicators of energy efficiency in the district heating systems and at the consumer side in Latvia are still low compared to the EU member states, but there is a significant potential for improvements.
18. Table. Energy Efficiency in Latvia, and Average Indicators for the EU Member States and the EU Candidate Countries EU-15 CC Latvia 2000 1999 1999 2001 Energy Intensity 193,8 744,3 703,7 569,6 (toe/MEUR) GIC per capita 3838,8 1921,4 1671,9 1699,7 (kgoe/inhab.)
304. During last ten years also structure of primary energy sources substantially is changed. Energy sources as heavy fuel oil (mazut) and coal, which were widely used before, are replaced by gas and wood.
305. As a result of the energy policy there are qualitative changes in the structure of primary energy resources: • increase of renewable energy sources, • increase of energy production in the cogeneration process, • decrease of import dependence of energy and energy resources.
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5% 3% Solid fue 3% Oil 35% 31% 35% Nuclear 0% Gas 26% Renewables 31% Others 5% 0% 26%
29. Figure. Structure of the Primary Energy Resources GIC
306. The structure of primary energy resources is comparatively diversified. Energy policy pays high attention to security of energy supply because dependence of primary energy import is rather high (dependence of import –58%, EU – 48%).
307. Main aspects of the security of energy supply are defined in the Energy Policy in the Electricity Sector approved by Cabinet of Ministers on September 11 th 2001 and in a strategy of the Ministry of Economics (2003) concerning reduction of state dependence from import of energy resources. Main principles of both these documents are reflected with EU policy document Green Paper on Security of Energy Supply: • to promote development of establishing new generating capacities in Latvia with aim to increase own electricity production from 70% till 90% in total electricity consumption. Special support will be expected for “dissipated generation” especially for development of CHP; • increase of renewable energy resources in production of electricity will not be as intensive as last 3 years because these resources basically already acquire and the share in a balance of total electricity consumption is 44% ( EU – 14,9%). However Latvia has set indicative target for electricity production from renewable energy resources 49% in year 2010; • government task is to create preconditions for successful operation of the Baltic electricity market and establish transparent and non discriminate ambience (structure of the sector, provisions for introduction of new market participants) that necessary for acceptance of decisions concerning investments in new generation capacities if the price signals and price prognoses which are based on right information will be indicative for establishing new capacities; • participation of Latvia in the projects of interconnections between Estonia and Finland “Estlink” and Lithuania –Poland “Power bridge”, which already is included in the project list of the EU TEN-E program, is very significant
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from point of increase of security of energy supply and integration of Baltic electricity market into EU electricity market; • until accession the to EU, Latvia will elaborate and complete legal basis for Latvian gas market opening according to Directive 2003/55/EC, which allows entering of new participants in a gas market of Latvia.
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Electricity
308. The Law on Energy, which was accepted in 1998, describes structure of organization of electricity sector and commercial relations between suppliers and consumers. After addition of Energy Law with regulations of the Cabinet of Ministers and Grid Code approved by Regulator there were created possibilities for opening electricity market with participation of eligible consumers and independent electricity producers. The main participants of the electricity sector are producers of electricity, transmission system operators (TSO), distribution system operators (DSO), traders, consumers and Regulator.
309. Latvia, during the preparation process for accession to the EU, implemented the reforms oriented to establishment of market principles in the sector. One of the aims of energy policy in electricity sector is establishing free choice for consumers and real competition in retail and wholesale. Production and sales functions will be deregulated and that will give possibility for consumers to choose supplier encouraging competition.
310. In January 2003 Regulator approved new methodology for calculation of transmission and distribution tariffs. New methodology allows determining accurate and transparent electricity tariffs avoiding cross-subsidies. Till accession to EU, Latvia is planning to carry out all necessary measures concerning harmonization of legislation according to Directive 2003/54 EC and opening electricity market for all commercial consumers by 1 July 2004. For this target special policy planning document “The Basic Terms for Establishing Preconditions for Electricity Market” has been elaborated. Changes should be made in legislation as well.
Heat Supply
311. Due to weather conditions, density of population in cities, as well as historical developments significant part of population in Latvia are customers of centralized district heating (around 70% of population). Like in electricity supply, also in heat supply substantial decline of demand started since year 1990.
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120
100
80
60
40
20
0 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001
30. Figure. Heat Supply Demand, 1990-2001
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Sector Organization and Plans for Restructuring
312. According to the Energy Law and the Law on Municipalities, heat supply organization in administrative territory is function of municipality. Organization of heat supply in Latvia during 1990ies characterizes relevant changes. State owned district heating companies were transferred to ownership by local municipalities and were registered as Joint Stock Company or company with limited liability. Many district heating companies are still not financially separated from municipalities.
313. District heating companies are working in competitive conditions, due to reason that customers could freely decline district heating system and use own heat production unit. Therefore district heating companies should invest in rehabilitation of systems but on other hand should keep heat energy price level at mark lower than where customers could decide to invest in own local heat production unit.
314. Sector restructuring plan includes the following three steps: • Registration of all state or municipal heat supply companies in Commercial Register till December 31, 2003. This step will allow heating companies operate according to Commercial law and eliminate impact of local municipalities on daily operations; • Increase energy efficiency and rehabilitation of district heating network systems by public support. Objective of this step is to help to reach the sustainability of sector. Investments in energy efficiency only on commercial basis at the moment are not feasible due to relatively high price of heat and insolvency of customers. Additional public support for investments in energy efficiency should accelerate moment when heating tariff reflects all related costs. The aim for investments is to reach brake even point faster; • District heating companies operating in commercial conditions. Problems
315. There are 4 major interlinked problems that endanger sustainability of around 200 district heating companies, services of which are currently used by 70% of population: • low energy efficiency due to already poor and further deteriorating technical conditions of district heating systems; • lack of financing for necessary investments due to low consumer prices and lack of private sector interest; • long term negative externality of air pollution and forgone cogeneration possibilities in case of loosing dense heating loads ensured by district heating systems; • need to comply with the EU Directive 99/32 regarding sulphur content in fuels.
316. Majority of district heating systems in Latvia have been constructed between 1970ies and 1980ies and their elements are approaching limits of their technical life or have even exceeded that. Average annual efficiency of installed boilers does not exceeded 85%, whereas in the EU it is 90%. Average efficiency of boilers rated below 1 MW is 70-75% with liquid fuels, 70-80% with natural gas and 50-60% with low quality solid fuels. For most of the pipeline network
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quality of insulation and construction works has been unacceptable. Besides, heat loses are also influenced by the fact that actual pipeline diameters do not anymore (compared to Soviet times) correspond to those required by consumer loads. Centralized district substations and four-pipe scheme, which was used in networks of the largest towns in areas, constructed during 70-80ies, has neither financially, nor technically justified itself. Heat loses in networks on average are between 25-30%, whereas in the EU it is 12%. In summer when only hot water is supplied losses may exceed 50% of heat produced. Problems are also at the consumer side, since buildings in Latvia in general are in poor conditions causing excessive energy consumption.
317. There is a need for investments in heat generation and transmission systems, which due to bad technical conditions of the heating systems and the current consumer price level do not allow sufficient cash flow for reinvestment. Situation is made even worse by the fact that current prices level of 27-38 EUR / MWh is about the critical at which end-consumers either become insolvent (especially in underdeveloped regions), or switch to their own local heating units. Therefore, rehabilitation of district heating systems based only on commercial justification is not feasible at the moment. Taking into account the planned GDP increase by 6% yearly the planned price for heating will increase at the same rate and in 6 to 10 years will reach level of 53 EUR / MWh (tariff of heat reflecting all expenses).
318. Public investments in district heating systems will ensure faster emergence of break even point and resulting in opportunity to commercialize the sector. In this case heating tariffs will not grow rapidly, but gradually as a result of overall growth of GDP. Maintaining the slowly growing tariffs will prevent insolvent customers switching from district heating to local heating units (where natural gas would be still the main fuel used, although in territories where this option is not available wood and wood chips fuel would be an alternative). Such scenario could lead even to higher price increases for remaining customers and district heating system could collapse due to solvency.
319. Switch over from district heating to local heat units will have two more negative aspects: first, replacement of one emission source will lead to many small emission sources locally with higher impact on air quality; second, in case of reduction of heat demand of district heating systems will eliminate possibility to use dense heating load potentially for cogeneration process, which in long term is negative trend for sustainable electricity supply.
320. Local planning of future heat demands is done by municipalities. Demand projections are reflected in Municipality Development Plans. Although it is expected that heat demand will gradually increase (see Figure 4), the rise in energy efficiency that shall be achieved with support of public investments will compensate most of the demand increase in heat consumption.
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41 39 37 35
PJ 33 31 29 27 25
6 2 02 03 07 08 09 10 13 14 15 0 0 0 0 0 0 0 2 2 2004 2005 200 20 2 2 2 2011 201 20 2 2
31. Figure. Heat Demand
321. An additional problem is a need to comply with Directive 99/32 EC concerning reduction of sulphur content in some types of fuel, which means that those district heating systems should not only renovate their technical systems, but completely switch to another fuel type since otherwise increase of consumer prices could not be prevented as use of HFO, where sulphur content is lower than 1% will lead to fuel cost increase by 30%, therefore heat price increase by 15%. However, switching to other fuel type without additional support for investment would also lead to price increase. Main other fuel types include natural gas, wood and wood chips, coal, however industrial waste is not a significant heat input source. Current State Aid and Need for Additional Support
322. It is estimated that over next 7-10 years investments of around 230 mln EUR would be needed to ensure overcome the critical point for minimal self- sustainability of district heat systems, and investment of around 615 mln EUR would be need to have efficient and fully functional district heating systems as in the developed EU countries.
323. There is already established state-aid scheme for those district heating companies that wish to make investments in technical renovations. Current state policy has been support to district heating system through Public Investment Program (PIP) that covers 30% of investment project in district heating systems for those companies that decide to undertake investment projects and finance rest of costs from credit, municipality budget and other sources. Main criteria for support: necessity to complete running projects; use of local energy resources; project realization benefits for national economy; economic, financial and social conformity with strategy in sector; compliance with energy efficiency strategy.
324. In 2004 71 project applications were submitted for support from PIP amounting to approximately 10 million Euros, but only 9 projects were approved for total amount of around 1 mln EUR.
325. Until the end of year 2002, 1.8 mln. EUR of state support has been granted through Public Investment Program. In 2003 ongoing state support is provided
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in amount of 2.9 mln EUR. These amounts compared to required investment volumes mentioned above are clearly unsatisfactory.
19. Table. State Support for Heat Supply Sector, mln. EUR
Year Total State Municipalities Other
2001 5.623 2.881 1.219 1.552
2002 72.295 1.942 0.726 45.618
2003 6.005 3.081 1.223 1.702
2004 3.013 1.077 0.327 1.608
326. The EU assistance will be used to support existing Public Investment Program. This support would be implemented based on already existing intervention experience. It is planned that investments will be allocated to renovation of district heat transmission network, and also in change of technology of heat generation.
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2.6.5. Social Infrastructure
Health Infrastructure
327. This chapter analyses two major components of Latvian Health care system - primary health care and emergency medical aid. Also short description of the national policy for the reform of health care system has been provided.
328. The primary health care (PHC) system was restructured from the Soviet polyclinics type of services to the modern approach of the family doctors. The family doctors’ praxes now form the basis of the PHC system. PHC implies General Practitioner based outpatient health care services that integrate “traditional” primary health care functions, primary and secondary prevention of non-communicable diseases and personal curative health care services aimed at responding to common health problems and providing alternatives to hospital care. At this moment the network of the PHC services around whole territory of the country has been fixed and agreed with the municipalities. However availability of primary health care services is insufficient due to lack of family doctors and appropriate medical equipment and infrastructure. In comparison with the European countries the number of patients per PHC doctor in Latvia is one of the biggest, particularly in the rural area. There are 1700 to 2100 patients per one PHC doctor in Latvia; in Estonia – 1500 patients per doctor, in Norway – 1205 and in Germany – 679. It is necessary to strengthen PHC capacity by provision of necessary equipment and infrastructure. Increase of the amount of the PHC centres will improve work organization and provide outpatient care thus reducing the hospitalization needs.
329. PHC system has been strengthened with providing education for medical staff, practice arrangements and vehicle purchases as well. Support has already been provided for 252 praxes (approx. 18% of the total number). The municipalities have made their contribution developing the PHC system thus ensuring PHC accessibility for the population of the respective territory. With the World Bank support certain PHC development is reached – PHC praxes in Daugavpils and Kraslava are established and renovated.
330. In accordance with “The Structure plan of National Outpatient and Inpatient Health Care Service Providers” (“The Structure Plan”) improvements and renovation is sill required in eight primary health care centres in the whole territory of the country.
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32. Figure. Availability of Healthcare Services in the Regions (Source: Ministry of Welfare, 2002)
331. The emergency medical aid (EMA) provides accessibility to everyday medical services for a person in emergency medical cases. The EMA system in Latvia has been historically developed as a decentralized structure. The EMA teams located in cities/towns and in the district centres are the basis of pre-hospital EMA structure. Each district manages pre-hospital EMA only in the frames of territory of the district, which cause inefficient use of available resources in a wider perspective. Pre-hospital EMA teams usually transport patients to the district central hospital.
332. Assistance from neighbour districts has not been widely practiced. Sometimes a patient must wait for aid up to 1.5 hours. In Riga and some other cities/regional centres the assistance is received within 15-20 minutes. In the biggest cities of Latvia EMA is estimated as partially satisfactory but in the rural districts it is often poor. Approximately 2/3 of EMA pre-hospital services equipment and ambulance cars are old and fail to meet minimum standards, as well as EU requirements.
333. Hospital ability of admitting patients and providing intensive care is important for providing EMA in the hospital phase. Provision of emergency health care in many hospitals is insufficient. Lack of appropriately qualified specialists and medical equipment results in low capacity of hospitals to provide qualitative health care services.
334. In accordance with the Structure Plan it is foreseen to reorganize EMA system territorially hence increasing its effectiveness. New territorial organization of EMA system implies division of the country into 5 EMA regions. It is envisaged to streamline EMA services within these 5 regions by locating EMA management and dispatch centres in each of the regions and establishing one Key Management Centre in Riga – replacing existing 70 centres.
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335. It is also foreseen to establish a network of 11 multi-profile EMA hospitals serving all five regions being as a backbone of the centralised EMA system complemented by 24 local hospitals. This will replace the existing system when more than 90 hospitals are delivering EMA services around country, providing possibility to concentrate medical equipment and specialists in these hospitals and ensure qualitative health care services throughout the country.
336. Streamlining of the management system and network of hospitals within five regions also leads to necessity of improving network of pre-hospital EMA teams. Provided limited size of the EMA system 30 in Latvia (173 EMA teams during the day and 146 at night) it is necessary to ensure rational management of the resources. In order to achieve the accessibility target (waiting time of 15 minutes in 95% of cases) set by the Structure Plan in each of 5 regions it is necessary to increase the number of pre- hospital EMA teams.
33. Figure. Localization Points of EMA Management and Dispatch Centres, Multi- profile EMA Hospitals, and Accessibility of EMA Pre-hospital Teams in 5 Regions Source: Ministry of Welfare, 2002
337. The efficiency of first aid work is handicapped by the absence of the unified blood transfusion information system including information on available resources, its quality and health status of blood donors. The necessity to establish unified blood donation information system is also required by the fast spread of HIV/AIDS. At present the operational data about donors is given by phone and frequently data is transformed incorrectly. State Blood Centre, the Blood Centre in the city of Rezekne
• 30 There is one EMA team per 15 000 inhabitants in Latvia at the moment.
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and hospital divisions where blood preparation is performed can not comply with the requirements of the EC.
34. Figure. 20 Hospitals to be Included into the Unified Blood Donation Information System Source: Ministry of Health, 2003
338. In order to improve the health care for the population in Latvia and to achieve a rational spending of the financial resources of the national budget allocated for this target the Health Care Reform is carried out. In 1996 the Cabinet of Ministers adopted the Health Care Development Strategy of Latvia whose objective is setting up qualitative and accessible health care in the country. From 1998 The Health Care Reform project with World Bank support was launched. The project included the following components: • A. Health care financing reform; • B. Health care services restructuring and development; • C. Communication strategy implementation for Health reform; • D. Project management.
339. Within the component B the Structure Plan and Consolidated Health Investment Programme (CHIP) were elaborated. The PHC system has been strengthened with providing education for medical staff, practice arrangements and vehicle purchases as well. The pilot project of the hospital restructuring was implemented – 4 hospitals were consolidated in one.
340. The Consolidated Health Investment Programme is a mid-term health care sector strategic investment planning programme which determines the basic principles of investment planning and management, strategy and the total amount of 110 million EUR for structure plan implementation. Cabinet of Ministers accepted this programme as indicative in 2002. At present CHIP programme approach is applied in the national investment projects evaluating.
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Education Infrastructure Structure and Development of Education System
341. In 2002/2003 academic year there were 1213 educational establishments with 504,3 thousands pupils/students. Of those 124 are professional education institutions (vocational education and training schools, further in the text – VET schools) 31 , and 37 - establishments of higher education (7 of them are regional institutions).
342. With regard to the VET schools, there is a decreasing tendency for the number schools. 32 Number of students that undergo VET programmes is stable 33 and in the forthcoming 6-7 years will slightly increase. Except Riga, majority of VET schools are small (about 370 students). Although the total area of the premises in these schools is sufficient 34 , the main problem of VET schools is deteriorated buildings and workshops, and outdated and insufficient material base for practical training.
343. Furthermore, VET schools cannot provide modern teaching laboratories, sufficiently qualified teaching staff, and therefore programs of sufficient variety and quality. 35 Lack of targeted investment in regions delays development of the strong centres of vocational education and continuing education. It is therefore necessary to stimulate development of schools with a sufficient number of students that could ensure a variety of study programs and could assume the leading role in regional institutional network of Life Long Learning (further in the text – LLL).
344. With regard to establishments of higher education, currently 117.5 thousands students undertake higher education, 90.3 thousands of which study in the state higher education establishments. There are 1.3 thousands of doctoral students. Comparing to 1990, the number of higher education institutions has increased by 27 and the number of students – by 73 thousands.
345. Considerable increase in the number of students in higher education in the last 13 years has not been followed by increase in quality of studies, especially in the fields of natural science and technology. That reflects disproportional breakdown of students between different fields – every second student studies social sciences. Education in science and technology is provided in 6 state owned higher education establishments (University of Latvia, Riga Technical University and Latvian Maritime Academy, University of Daugavpils, Liepaja
• 31 Out of those 17 are secondary music and art schools and 9 are private schools with comparatively small number of students. • 32 Compared to 1993, the number of state funded professional education schools has decreased by 11. • 33 Each year it constitutes the 30-33% of the junior secondary school graduates and 10-12% of secondary school graduates. • 34 Approximately 23 m 2 for one student • 35 Efficient utilization of the schools’ premises in countryside is 25% lower comparing to cities.
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Pedagogical Higher School and Rezekne Higher School). Nevertheless, there is a lack of well-targeted investment facilitating development of those study programs that would stimulate development of new products with the high value added thus developing branches of economy, which depend on creation of new knowledge. The main weaknesses of the higher education institutions are outdated laboratory equipment and poor research base, inadequacy of auditoriums and libraries for contemporary needs. Furthermore, regional higher education institutions are not sufficiently developed. To improve situation, it is first of all necessary to invest in the aforementioned state owned establishments of higher education, which provide high level education in natural sciences, technology and engineering, as well as facilitate development of regional universities so that they assume a leading role in human resource development in the regions.
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Assessment of Quality of Infrastructure
346. Subsequent to evaluation of infrastructure that was carried out for the purposes of the World Bank and showed high depreciation level of the buildings of the VET schools (on average – 50%), it was foreseen to upgrade number of schools. Nonetheless, only four VET schools were renovated within the framework of the World Bank loan, therefore further support is required.
347. Within the framework of the National Education Program between 1998 and 2002, around 8 million EUR have been invested in improvement of the school infrastructure. Within the framework of the first stage of Education System Development Project renovation works have been carried out inter alia in 4 higher education establishments.
348. Within the second stage of the ESDP it was foreseen to continue urgent renovation measures for 16 higher education establishments, covering all the state financed higher education establishments that have not been covered in Stage 1 of ESDP. However, in 2003 the government decided to discontinue WB loan project. Strategy for Restructuring of the Sector
349. Relevant strategic documents for development of education system are: • “The Concept of Development of Education for 2002 – 2005”. 36 • “Program of Development of the Vocational Education and Training for 2003 – 2005”. 37 • “Guidelines for Development of the Higher Education, Science and Technology in 2002-2010” 38 and “The Program for Renewal of the Academic and Scientific Personnel”. 39 • Regulation of the Ministry of Education and Science “On Investment Strategy in Education and Science for 2004. – 2008”. 40
350. The main direction for action in VET is to ensure accessibility and quality of VET and continuing vocational education and training (further in the text – CVET) in compliance with labour market needs and sustainable and balanced development of regions. VET schools network development is planned on the level of Planning Regions 41 – Kurzeme, Zemgale, Riga, Vidzeme, Latgale (33
• 36 Approved by the Parliament on October 17, 2002 • 37 Approved by the Cabinet of Ministers by regulation of September 4, 2003. The document presents development priorities and directions for action in vocational education and training. • 38 Approved with the regulation nr. 125 of the Ministry of Education and Science, March 12, 2002 • 39 Prepared in conformity with “The Concept of Development of Education 2002 – 2005”. Both documents present directions for development of the higher education. • 40 The document comprises investment strategy. • 41 The regulation of the Cabinet of Ministers of 25 March 2003 Nr.133 „Regulation on Territories of Planning Regions”.
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VET schools in total – 5 in each planning region, and 8 more in Riga). Main issues for the forthcoming three years will be re-planning and renovation of the learning premises in conformity with the needs of subject standards and study programmes, as well as provision of up-to-date machinery and equipment, and development of mainframe computer networks necessary for implementation of study programmes, which will ensure provision and implementation of qualitative and high level study programmes.
351. The main direction for action in the higher education institutions is to ensure necessary physical base for implementation of qualitative and high level study programmes in natural science and technology, and to promote development of regional higher education establishments, fostering their potential to undertake the leading role in human resource development in regions. Assistance is planned on the state level for 6 state owned higher education establishments 42 that provide education in science and technology, and is strongly linked to the planned ESF assistance for higher education under the “Human resource and promotion of employment” priority measure 2. Indicatively those institutions will be: University of Latvia, Riga Technical University and Latvian Maritime Academy (all in Riga), University of Daugavpils (Latgale), Liepaja Pedagogical Higher School (Kurzeme) and Rezekne Higher School (Latgale).
• 42 The exact list of higher education establishments, where assistance is planned, can be reconsidered on the basis of the priority list of project pipeline.
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Social Services Infrastructure
352. Investments into social services infrastructure include both support to social care and social rehabilitation institutions and support to labour market service infrastructure. Planned investments are justified by commitments of the Government declared in a number of policy documents and legislative acts and are strategically consistent with planned government mid-term investments into human resources. Social Care and Social Rehabilitation Infrastructure
353. The goal of social care services is providing appropriate diversity of services complying with the needs of client and service quality standards. Developing social services is one of the key political challenges admitted as essential to reduce poverty and social exclusion in the Joint Inclusion Memoranda of Latvia (see sub-chapter 3.4.3. Joint Inclusion Memoranda).
354. The Concept “On Development of Provision of Social Care Services” accepted by the Cabinet of Ministers on 12 March 2002 foresees changing principles of financing and receiving social care services and recognizes the necessity to support to municipalities for promoting development of the new types of social care, alternative to long-term public services. According to the concept and supported by the World Bank project evaluation of usefulness and efficiency of maintenance and development of public social care institutions for persons with mental disorders was carried out in 2001.
355. The evaluation methodology included calculating coefficient of efficiency of social care institutions taking into account the provided quality of services, necessity of the institution in the given area (according the territorial socioeconomic coefficients) and amount of investments inputted and still required for implementing the quality standards of long-term social care services. Methodology of evaluation was elaborated by independent expert and adapted and approved by the Ministry of Welfare. Social Assistance Fund carried out the evaluation and its’ results were approved by commission organized by Ministry of Welfare. Besides analysis of client structure of social care institutions was made. Conclusions on further advancement of system of long-term social care services were made concerning both – consistency of the service to the individual needs of the client and infrastructure of the service providers.
356. Concept “Equal Opportunities for All” accepted by Cabinet of Ministers on 30 June 1998 foresees activity implementation for promoting integration of disabled persons into society. Task to ensure the economic and social protection of disabled persons implies provision of timely and appropriate support and services for disabled persons and their families, creation of new services, particularly for persons with mental disorders.
357. Long-term social care was provided for 4681 old age persons in 66 institutions and 4130 persons with mental disorders in 29 institutions in 2002. Long-term social care for persons with mental disorders is the service whose demand most of all exceeds its supply possibilities. There were 644 persons with mental disorders waiting for long- term social care services in 2002. Comparatively there were only 18 day-care centres and two group homes for persons with mental disorders providing services to 575 clients in 2002.
358. If taking into account consistency of the service to the individual needs of the client, part of the persons waiting for long-term social care services as well as those
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receiving them would gain more from alternative services – day care, social rehabilitation and skill, including working skill development, sheltered work, short- term care, group homes, etc. Inaccessibility of appropriate social care and social rehabilitation services restricts independent life and labour market participation possibilities not only for persons with disabilities but also their family members. Diversifying the available services in long-term social care institutions besides developing alternative services at local level would provide the necessary support for those capable of independent life and employment and long-tem social care services for those really in need for it.
359. Extension of alternative services as means of rising employability is important also for mentally ill persons. 26 578 mentally ill persons in age group 18-59 were discharged from hospitals in 2002.
360. Situation of social service infrastructure and inhabitants differs among regions and localities and needs for service development, taking into account the existent services, demographic breakdown, health status and density of population. It is necessary to change proportion of social services in favour of alternative and new kinds of services, simultaneously providing institutional care for those in need for it at appropriate quality, including orientation to independent life and work skill development.
361. ICT support is necessary for administrative system to establish a unified database on disabled persons providing precise statistics and compatibility of the existing databases for efficient use of data and multi-sector cooperation.
362. Consequently for fostering quality of life and way back to the labour market for disabled persons and their family members it is necessary to: • provide modernization and adjustments of the public social care and social rehabilitation institutions providing complex work-oriented services according to the clients needs at regional level; • develop alternative social care and social rehabilitation services; • support ICT provision for administrative system to establish a unified database on disabled persons.
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Labour Market Services Infrastructure
363. The active employment measures play a key role of integration of unemployed and job seekers into the labour market – these services should be accessible, effective, on time and appropriate for needs of target groups. The main implementing institution for labour market policies and programmes for the unemployed in Latvia is the State Employment Service (SES). Strengthening the SES of Latvia administrative capacity and development of the SES infrastructure for implementation of employment strategy and decreasing unemployment are put forward as policy goals Joint Employment Review and National Employment Plan justified by national policy documents and legislative acts on employment 43 .
364. SES operates under supervision of the Ministry of Welfare. There are 28 affiliates and 33 local offices of SES established to cover the whole territory of Latvia. Thus the geographical coverage is ensured, but the part of SES premises does not correspond to SES work particularities. The bad technical conditions of the premises influence the quality of services given by SES as well as effectiveness of work. In part of premises where the services for the clients are given, there are not adequate conditions ensured for the work with people, as well as for organization of information flow within the institution. The premises are not accessible for people with disabilities.
365. The SES has been continuously working on development of appropriate infrastructure for implementation of employment strategy. For this purpose there is a continuous investment from Public Investment Programme. The analysis of conditions of premises of SES affiliates usually is made by building and reconstructing organisations (in each district assessment is done by particular organisation). All assessments are based on evaluation reports and financial calculations for investment needed made by the mentioned organisations. After analysing the overall situation concerning work conditions in SES, some conclusions have arisen: • as there is no possibility to ensure services based on the principle of “one- stop agency” 44 , it causes additional costs for SES clients, usually for attending different places where services are given; • part of SES premises have inappropriate conditions for employees and clients. Up to now inappropriate work conditions is in the board of SES, 18 affiliates and 23 local offices; • the work in inappropriate conditions is the reason for the rise of incredibility to partners (employers, municipalities, job-seekers, unemployed) on quality of services given by SES. This is also the reason for the doubts on capability of SES to be a reliable partner;
• 43 See 3.3. Policy Frame of Reference for Human Resource Development • 44 Client of SES receives all the services he or she needs (services for registration, professional counselling, services of psychology, services to define the professional adequacy for the particular training, etc) in one office place. Service provision by a one stop agency ensures accessibility of services, as well as more qualitative and operational services. These aspects are substantial for the unemployed person with a one stop agency providing easy access to services and relevant information in one place and on time, thus ensuring more efficient operation for both sides – for unemployed as well as for SES.
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• the lack of financial resources for big repairing works for existing SES premises causes the necessity for regular change of the premises (changing the location within particular city). This means, that some additional financial resources are for small repairing works and ensuring information and communication technologies. This is the reason why SES financial resources are consumed ineffectively. In these cases the investments in previous premises are ineffective, too. The big repairing works are necessary for SES board, 6 affiliates and 6 local offices. Smaller repairing works are needed for 20 SES affiliates and 13 local offices; • inappropriate conditions of premises to fulfil the necessary functions, as well as changes of premises, become inconvenient for the clients and partners of SES as well as the decline of image of SES.
366. The assessment of SES situation and all upper mentioned conclusions were included in the project proposal for the Public Investment programme which is elaborated according to Investment strategy for welfare sector for the period 2004-2008.
367. Taking into consideration the problems and difficulties mentioned above, as well as SES role for ensuring and implementing active employment services in accordance with all previously mentioned policy documents and legislation acts, the main investment priorities are: • the improvement of the quality and accessibility of SES services ensuring provision of services based on principle of “one stop agency”(i.e. concentration of services) as well as ensuring accessibility of SES premises for people with the disabilities; • the improvement of work conditions in the affiliates where it is the most necessary; • Modernisation of information technologies and development of information system.
368. As the capacity building of SES to fulfil all the functions declared by different legislative acts becomes a very urgent task, the decision on fund-raising from pre- accession funds was taken. The main Phare investments are planned for development of IT infrastructure in SES, as well as for the improvement of SES services. The EU Phare programme contributes to establishment and development of centralised job placement system database (database for vacancies, CV bank, statistics); development of corporative network within SES (mainly telecommunication equipment) and ensuring the safety of the network; establishment of software for SES vacancy database connection with EURES database. Supply of computer equipment within Phare project will also be carried out, however it is not enough for ensuring the effective and secure work with EURES system in all regions.
369. The provision of necessary IT infrastructure is still required for ensuring effective work with job placement system database and EURES database, as well for the development of previously mentioned databases is set as the main action for ensuring information providence for the people who are out of the labour market and it will help them to return to the labour market more quickly. The system will also improve the accessibility of relevant information on the main situation in the labour market for the employers other groups (unemployed, job-seekers, groups with the risk of social exclusion, etc).
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2.6.6. Tourism and Heritage of Culture and History
370. Attractive cultural environment and developed infrastructure of culture have direct impact on the quality of life of the inhabitants living in each territory and also on the economic development, because number of the directions of culture can promote development of the sectors of the economy. This can also stimulate development and increase competitiveness of the region.
371. Latvia has high potential of rich and varied culture (culture and natural heritage, monuments, museums, festivals etc.) that can be used for the development of the economy and to increase quality of life. However, only small part of this cultural potential is economically activated. In Latvia under state protection are: 3364 architecture monuments, 30% of those are economically activated (the most profitable is Riga historical centre), 2495 monuments of archaeology, 3% of those are economically activated (the most profitable is place Pokaini located in Dobele district), 2414 art monuments, only 20% of those are economically activated and 111 historical monuments, 30% of those economically activated.
372. Museums that can be regarded as economically active are those with the revenues that form more than 20% of their budget. 8.6% of economically active museums are owned by municipalities and state. The heritage of culture and history is not utilised to its full potential to attract domestic and foreign tourists therefore there are no additional revenues and jobs created .
373. World Tourism Organisation has projected significant development of tourism sector in the Baltic Sea Region. Latvia is located on the periphery of the tourism routs of Central Europe and there are many competitors – countries that offer similar tourism packages. The competitive advantage of Latvia as the candidate country of European Union is its reputation as a country with fast development and not yet fully discovered by outsiders. Historical monuments and architectural heritages (medieval towns and fortresses, old manor houses), tradition-based cultural life (music, dancing and handicraft, folk festivals), clean and diversified nature (landscapes, bodies of water, nature reserves) is the main tourism resources of Latvia. Latvian tourism resources are located territorially unequally. Main concentration areas of tourism resources are 45 : • Riga and Jurmala (cultural and recreational tourism, active business and conference environment), • Gauja National Park, incl. Sigulda, Cesis, Ligatne and others (culture and knowledge tourism), • Northern Vidzeme (transit), • Latgale lakeland (natural and cultural resources, recreational tourism), • Bauska region, • Abava primal valley and Kuldiga (recreational, holiday, cultural and nature tourism) • Coastal area of Riga gulf from Kolka to Ainazi, • Coastal area of the Baltic Sea from Kolka cape to the border of Lithuania.
• 45 Tourism to Latvia – Development Plan. ITC Consulting. 1995.
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374. Important tourism resources of Latvia are the specially protected nature areas (occupying approximately 8% of the state territory) that are open to the visitors. Today, only a small part of them have facilities for visitors.
375. Latvian tourism product in the international and local tourism market is: • Several – day trips in Latvia (mainly Riga, Sigulda, Cesis, Rundale, Tervete), • Trip to Riga, visiting Tallinn and Vilnius, • Week-end in Riga, • Active leisure on the whole territory of Latvia, • Spa health treatment, • Conferences (for small and medium number of people), • Exhibitions and fairs, • Celebrations, festivals, other events of sports and culture, • Specialised interest trips.
376. Approximately 19% of incoming travellers came here to spend holidays and 20% came to Latvia for business purposes. Most travellers visit Riga, but the number of people visiting other areas has also increased. The vast majority of travellers to Latvia spend at least some of their time in regions and with proper development this could be increased, because of attractive landscape, presence of cultural, historical and environmental heritage is good prerequisite for the development of tourism. In the coming years tourism is expected to contribute actively to the diversification of economic structure and employment challenge across the country. Tourism is an area that has been explicitly described in the development strategy of each region and is considered a good development opportunity by many local governments. In terms of domestic tourism: in 2002 1.8 million domestic travellers made 8.57 million domestic trips with average daily expenditure 20 EUR and total domestic travellers expenditures equal to 103.6 million EUR.
377. There is a need for development of natural, historic and cultural heritage (cultural and nature tourism) products for current and new visitor markets. These types of tourism products have been increasingly in demand by both domestic and international travellers. Above-mentioned tourism products address many of the current challenges such as the need for more non-weather dependent product and better regional spread. Additional tourism infrastructure will be required to meet growing number of visitors. Funding for infrastructure will also need to grow to both improves the current infrastructure in order to provide new infrastructure required for the number and type of travellers expected to travel to and within Latvia. This is the case for both core tourism infrastructure and wider infrastructure. According to the National Tourism Development Strategy, Latvian strategic tourism product should be: • Able to use strategic tourism resources of Latvia in the most efficient way, • Able to attract tourists from the European countries in the nearest future, • Providing an appropriate, qualitative development level of material, technical, financial, and service infrastructure.
378. Largest part of the cultural heritage sites is in bad condition (only 18% are in relatively good condition) and their renovation is required. Many museums that have unique collections attract very small number of visitors, because their infrastructure is obsolete and it requires modernisation that could substantially
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improve their attractiveness. For example, Bauska and Cesis castle-ruins can not be fully explored for different activities because of the security reasons – the conservation works have not been completed. In 2001 when the Cesis castle- ruins were closed the number of visitors of the museum decreased by 4000. The recently renovated Ventspils medieval castle has promoted and increased number of tourists in the town by 16 000 in 2002, reaching totally 54 200 visitors, the number of visitors compared to 2000 has increased by 49 000.
379. The festivals and other happenings form relatively large part of the cultural tourism services that attract big auditorium. However, cultural heritage sites and other places for festivals lack necessary infrastructure and equipment (stage, seats for spectators and audio equipment).
380. Many owners of the cultural heritage sites and entrepreneurs lack knowledge and competence in the management of those places, many of them do not realise economic potential of such property.
381. There is lack of qualified specialists and craftsmen that are able to perform renovation works in accordance with the set requirements. In Latvia there are 115 certified restaurateurs. One of the reasons of lack of qualified restaurateurs is lack of the financing for the renovation works; therefore even this relatively small number of restaurateurs is not fully employed.
382. There is lack of common and unified information system resulting in limited information accessibility about the sites and upcoming events; there is also lack of necessary signs and other infrastructure necessary for information purposes. There is Museum guide printed that gives information about museums in Latvia; information is also available on the web. For the visitors of castles and manors the information is available in the home page of the Association of Latvian Castles, Palaces and Manors.
383. The political commitment to promote tourism is reflected in the Long-term Economic Strategy of Latvia, National Tourism Development Programme for Latvia 2001–2010 and Action Plan, Tourism Law and other documents. On the national level, National Tourism Development Programme is aiming to determine of the strategic development directions for establishment and development of a competitive tourism sector in Latvia in order to favour development of national economy and increase of population’s welfare, by attracting supplementary flow of tourists and increasing income from tourism. These include: focus on high quality and safety and security standards, marketing, ensuring sustainability of natural, business and social environment, community involvement and other issues. The SPD has been developed with this above-mentioned main aim at its core.
384. The issues of the culture sector are addressed in the National Programme ‘Culture’, which is the main strategic document for sector. The strategy outlines also the main priorities and actions that are envisaged up to 2010. The main objective of the programme is to promote development of culture and its effective integration into socio economic framework of the state by: • Changing the attitude towards culture as important instrument for the development of the national economy; • Balancing development of culture; • Adapting the demand of the education and science to the needs of the culture; • Exploring the culture as an instrument for improving quality of life;
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• Ensuring accessibility to culture; • Coordination of business and non-business aspects of culture; • Developing new solutions for the physical infrastructure of the culture including development of new coordination and services mechanisms.
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2.7. Development of Rural Territories, Agriculture, Forest Sector and Fisheries
2.7.1. Development of Rural Territories
385. Development of rural territories is a substantial element of a balanced development of a country, comprising the development of agriculture, forestry and fishery sectors, as well as the aggregate of other economic, social and ecological activities related to the rural environment. Countryside is providing the society with resources necessary for a sustainable development of the country, satisfying the public demand for agricultural and forestry produce, landscape, traditional lifestyle, clean environment, etc.
386. Restructuring processes of the past decade have contributed to the decrease of employment in rural territories, especially in the agriculture, which by now used to be the most important sector in rural areas. A large part of rural population is unable to carry out independent, economically viable agricultural business, whereas, due to the lack of capital and knowledge, it is difficult for that population to commence a business activity or to find occupation in other sectors of the national economy.
387. The shortage of new workplaces in non-agricultural sector aggravates the socio- economic situation of rural population; restructuring of small agricultural holdings to non-agricultural entrepreneurship is slow. Thus, the competitiveness of rural areas is decreasing as compared to urban areas.
Utilisation of Land
388. Agricultural land (AL) covers 38.3% of the territory of Latvia or 2474.4 thousand ha. During the period from 1996 until 2002, the area of unutilised AL has increased from 15.5% to 21.2% of the total area of AL. Having regard to the future development of agriculture, the implementation of new intensive technologies shall increase the crop yield, therefore, the area of AL needed for the production of food produce shall decrease. The area of unutilised agricultural land is expected to reach around 27% of the total area of AL in 2006.
389. The area of abandoned agricultural land is increasing as it is overtaken by bushes and invasive species. According to the monitoring in 2001 and its evaluation in 2002, the total area overgrown with Giant Hogweed is covering 12 182 ha, 89% of which are open areas, and 2.31% along trenches.
390. Since 1990, the new drainage systems have not been installed . In 2002, drainage systems covered in around 60% of all AL. 113 thousand ha of wetland AL were registered in Latvia in 2002, out of those – 98 thousand ha – in drained land, where drainage systems are not functioning or are functioning only partially. No construction of new waterworks is taking place due to the shortage of financial resources.
391. There are more than 100 thousand ha of overflowed areas in Latvia (80% out of those are AL), where economic activity can be carried out only owing to the
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developed polder systems. More than 10 thousand inhabitants are living in that territory. Hydro technical buildings are outworn, and it is necessary to perform reconstruction of 15 pumping stations, 60 km of levees, 40 km of supply channels, 5 floodgates in the polder areas.
392. According to genesis, the most of the Latvia’s soils are characterised by acidulous reaction (pHkcl 5.5 and lower), which is not suitable for the crop mainly grown in Latvia. Therefore, nearly 40% of the agricultural land without liming is of low fertility due to the reducing efficiency of fertilising. High costs of liming caused the reduction in liming of acid soils by 20 times over the last decade in Latvia. The average cost of liming is 230 EUR per hectare. Due to insufficient liming in recent decades there is increasing need for initial liming of these soils.
393. Upon accomplishment of the first phase of the land reform – re-division of land, 42% of the land properties and tenements created in the result of the reform consist of 2 to 15 separately located parcels of a little area and inconvenient boundaries for cultivation and management of fields. According to the data of the State Land Service as of January 1, 2002 one peasant farm was, on the average, managing 24.1 ha (14.1 ha of AL), whereas household farms – 7.9 ha (4.7 ha of AL).
394. The land reform resulted in a large number of landowners, who lack the capital requirement for the commencement of business. According to the data of Agricultural Census in 2001, only 28.5 of the economically active farms with more than 1 ha of AL had tractors in use.
Rural Infrastructure
395. The economic and social infrastructure established earlier has been gradually depreciating, especially the roads and means of communication. The financing of rural roads has been fluctuating. It decreased from 12.73 million EUR in 1999 down to 5.71 million EUR in 2001; however, in 2002 due to the Rural Road Improvement Programme, financing increased again up to 11.07 million EUR. Not all agricultural holdings are electrified yet. In 2003 there are about 550 rural households still without electrification. Having regard to the decrease in the number of rural population, the maintenance of social and economic infrastructure per capita has become more expensive. The poor infrastructure hinders the development of non-agricultural business activity in rural areas, as well as reduces the accessibility of services for the rural population .
Population and Employment
396. 32.2% of the country’s total population are residing in rural territories. According to the Labour Force Survey made by the CSB, 40.8% of the working population of rural areas are employed in agriculture and forestry sectors in 2002. Limited opportunities of employment and income gaining in other sectors, social depression, insufficient and uncoordinated rural support policy is contributing to the outflow of the economically active, higher qualified rural population and youth to the bigger cities of Latvia (Riga, in particular). This causes the ageing of the structure of rural population.
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20. Table. Indicators Characterising Socio-economical Disparities Average, 2002
Indicators Rural Towns Total Population age below working age 19.7 15.2 16.6 structure, % (0-14) working age (15-64) 64.9 69.2 67.9 above working age 15.4 15.6 15.5 (65 +) Job seekers, as % of economically active 9.2 13.3 12.1 population
Source: Central Statistical Bureau, Labour Force Survey.
397. The number of rural population employed in agriculture and hunting has decreased by 11.9 percentage points during the period of 1996-2002. Forms of hidden unemployment are more widespread in rural areas. For example, the proportion of family members (age group 15-64) involved in unpaid work is 11.8% in rural areas, but 0.5% in towns, the proportion of part-time employees (age group 15-64) is 13.7% in rural areas, whereas only 7.1% in towns in 2002. The increase in unemployment is conduced by two factors: diminution of the role of the agriculture in the national economy and the restructuring of the agricultural sector. Other sectors of rural economy are, for the time being, unable to absorb the workforce leaving the agriculture.
398. One of the reasons for the low economic activity in rural areas is the insufficient level of knowledge and skills that would not correspond with the principles of modern market economy to satisfy the demand for healthy and safe food, the production of which requires for specific knowledge. A similar situation is prevailing among the owners of private forests and foresters, who lack the knowledge about the sustainable forest management and the wood market.
399. The reduction in economic activity in rural areas adds to the growing poverty. During the period from 1996 to 2002, the real income calculated by adjusting the disposable income per one household member according to the inflation rate, has increased by 32.4% in case of urban population, whereas in case of rural population it has increased only by 7.5%. This indicates of the increasing disparities in income levels and segregation among the population .
400. The level of demographical load (number of inhabitants under and above the working age per 1000 working inhabitants) is 659 in rural areas, which exceeds the respective indicator in towns and the average indicator for the country – 603 as of January 1, 2003. Yet, having regard to the higher birth rate in rural areas, the officially registered number of inhabitants under working age in rural areas equals 19.7%, which is higher than in towns – 15.2%.
401. In general, the business activity in rural areas is low: there are only 10.9 enterprises per 1000 inhabitants in districts. Almost in a half of the Latvian parishes, the number of active enterprises (excluding farms and household farms) does not exceed five. Besides, there are 12 parishes in Latvia with no active enterprise situated therein. In those parishes people are employed only with their farms or household farms, institutions and organisations (e.g., local councils, schools, healthcare institutions).
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402. Business activity is mainly developing in such spheres as trade, transport services, agricultural services, processing, wood processing and crafts. Rural tourism is developing rapidly – according to the data of the association “Lauku Ce Ĝot ājs” (Rural Traveller), there were 172 agricultural holdings engaged in rural tourism activities, having served 9 700 tourists as of 2000, whereas in 2002, their number has been increased up to 240 with the number of tourists 14 000. Service providing enterprises are developing in certain parts; however, their development is being substantially hindered by the low purchasing power of the rural population. Food and wood processing enterprises - being also the most significant and economically strongest in rural areas – are major investors and creators of new workplaces.
403. Cooperation among rural inhabitants in addressing the common problems is underdeveloped . This, in turn, impedes the solving of certain problems mentioned in this chapter, for the rural population is quite often unable to elaborate good quality projects or to elaborate the development strategies for their territories. At present there is the Rural Partnership Programme in Latgale region, which forms a successful basis for the further activity under LEADER+ type activities.
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2.7.2. Agriculture and Processing of Agricultural Products
Development of Agricultural Production
404. The main sectors of agricultural production are traditionally the cattle breeding and plant growing. In the structure of agricultural end-produce as of 2002 (current prices), the cattle breeding composed 48% (including milk 23%, pork 11%, eggs 5%), plant-growing 46%, (including cereals 18%, potatoes 12%, vegetables 5%), whereas the other agricultural produce – 6%.
2000 1800 1600 1400 1200 1000 800 600 400 200 0 1990. 1998. 1999. 2000. 2001. 2002. Milk thsd t Crops excl.pulses, thsd t Potatoes, thsd t Eggs, mln Meat, thsd t
35. Figure. Volumes of Main Agricultural Production (1990, 1998-2002) Source: Central Statistical Bureau.
405. The development of agriculture is still affected by the structural changes of transition period. The output of agricultural produce has more than halved over the period from 1990 through 1996, as the consequence of the loss of the market of the former Soviet Union. The situation in agriculture was affected also by the 1998 Russian crisis. As the result thereof, the export of agricultural production to Russia in 1999 had decreased by 80% in comparison with 1997.
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300 8 7 250 6 200 5 150 4 3 100 2 50 1 0 0 1996 1997 1998 1999 2000 2001 2002 Gross product of agriculture, mln euro Share of agriculture in GDP, % 36. Figure. Dynamics and Structure of Agricultural Production, 1996 – 2002 Source: Central Statistical Bureau.
406. However, despite the transitional difficulties, the economically stronger farms are slowly developing. One of the indicators thereof is the use of mineral fertilisers, which has increased by 136% during the period from 1995 to 2002. A moderate increase in the output of agricultural production can be observed over the period of the past 3 years.
407. It must be noted that in rural areas agriculture serves as a social anchor providing a minimum means of subsistence to the majority of rural population. 67.3% of the farms are producing the agricultural products only for their own consumption, and only 9.6% of the farms are selling their production in the market.
408. The efficiency of agricultural production is negatively affected by fragmented production. In some sectors, for example, in crop farming, 92.4% of the farms were farming 38.5% of the total sown area. According to the Results of 2001 Agricultural Census there were 119 092 farms with total sown area less than 15 ha. The total number of farms with sown area of agricultural crops reached 128 852.
409. Low productivity is featuring the major part of agricultural sectors. During the period from 1996 to 2002, the yield capacity of crops has been fluctuating from 1.9 t/ha to 2.5 t/ha, (the average in the EU Member States – 4.7 t/ha). Only with respect to rape, a certain increase in the yield capacity and of cultivation area can be observed over the recent years, for successful sales markets were found for this culture. Although certain augmentation in the milk yield is being observed, the average milk yield per cow in Latvia is lower than in the EU Member States (in 2002, 4.0 tonnes were milked per cow in Latvia, whereas 5.6 tonnes – in the EU Member States). These figures indicate the necessity of raising genetic quality of animals.
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410. Agricultural machinery is critically outdated. In 2002, only 4.7% of the tractors owned by farmers were less than 6 years old. If the state support remains as hitherto, farmers would be able to renew the tractor machinery only by 2% per year in the following years. The major part of production facilities (60-65%) are outdated as well as hazardous both to the environment and the users, for they were built 50 to 60 years ago and no longer meet the requirements of occupational safety, hygiene and animal welfare conditions.
411. According to the data of the Farm Accountancy Data Network (FADN), the agricultural holdings of small economic size (2-8) 46 in Latvia were working with losses in 2002, whereas the average loss incurred by farms in the country was 1775 EUR. However, the farms with the land area above 50 ha and the conventional number of domestic animal units above 20 are mainly operating with profit. Increasing of economical size of farms shows the trend of increase in farm profit.
412. There is insufficient diversification of agricultural activity in Latvia, which might provide certain possibilities of increasing the income of rural population. Organic farming areas covered 0.68% of the AL and involved 355 certified farms in 2002. A little number of farms was engaged in the production of non- traditional plant growing (oyster mushrooms, shiitake, field mushrooms, medicinal herbs, etc.) and animal breeding (fur animals, deer, quails, etc.). For the time being, the demand for produce of non-traditional agriculture is exceeding the supply; however, the competitiveness of this sector in the EU is limited by insufficient investments for launching and developing the production, as well as for the insufficient support aimed at marketing of the specific niche for products from Latvia.
Processing of Agricultural Produce
413. The processing of food produce is still playing an important role in the Latvian manufacturing – in 2002 it provides 28.1% of the total volume of the produce output of the Latvian industry and employs 21.6% of those employed in the industry.
414. As of the end of 2003, there were 678 first stage agricultural produce processing enterprises registered in the country, including 60 dairy processing enterprises, 122 slaughters, 175 meat processing enterprises, 85 grain processing enterprises, 66 fruit, berry and vegetable processing enterprises, 124 fishing products processing enterprises. However, processing enterprises operating in Latvia are small, which are unable to invest into introduction of the EU quality standards, preventing those from being able to compete in the EU market.
415. Concentration of agricultural produce processing enterprises has commenced during the recent years; therefore the number of small enterprises is decreasing, the production is concentrating in larger facilities conforming to the EU
• 46 The group of the economic size of farms shall be estimated by reference to the manual and the area of a farm, number of livestock, etc. – the Latvian State Institute of Agrarian Economics, Results of the Economic Analysis of the Performance by Agricultural Holdings of Latvia, 2001.
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requirements. However, very often the existing equipment prevents the production of produce meeting the EU quality requirements, thus limiting the export prospects.
416. The export prospects are limited also by insufficient performance of marketing activities and by lack of ISO 9000 and other quality systems and controlling management (especially for HACCP system) in agricultural processing enterprises.
417. Inefficiency of agriculture and that of processing of agricultural produce is witnessed by negative foreign trade balance in agricultural produce. Also in 2002, the negative balance in agricultural produce (excluding fishery products) has increased by 27 million EUR. Certain stabilisation of the situation in this sector is, however, being in place, as well as certain increase in the competitiveness thereof. In 2002, the export volumes have increased by 34% in comparison with the previous year. To compare with – the volume of import has increased by 14.7 % in 2002. The major proportion in the export structure of agricultural produce in 2002 was composed by milk and dairy produce – 20.8 million EUR; cereals – 13.2 million EUR; canned fruit and vegetables, juice – 9.8 million EUR. Whereas, the sharpest increase in import is observed in case of meat produce.
600 545 475 500 417 400 300 170 200 127 86 100 0 -100 2000. 2001. 2002. -200 -300 -400 -331 -348 -375 -500
Exports Imports Balance
37. Figure. Dynamics of foreign trade balance in agricultural produce of Latvia for 2000-2002 (million EUR) Source: Central Statistical Bureau, 2002.
Human Resources
418. 14.9% of the population employed in the national economy were employed in the agriculture, hunting and forestry as of 2002 – which was considerably more than in the EU Member States (average 3.9% as of spring 2002-1, Eurostat, LFS). Whereas, the share of that sector in the GDP makes only 2.9%. The low productivity of agricultural activity is the reason why the net income per capita employed in agriculture is low – only 66% of the average net pay in the country as of 2002.
419. Agriculture mainly employs people older than 45 years of age. In 2002, according to the Labour Force Survey made by the CSB their proportion in age
126 Single Programming Document for Latvia Objective 1 Programme 2004-2006 group 45-74 was 56%, but 29.6% were older than 65 years of age. Elderly people often lack the motivation to change their management methods and to apply the new, advanced technologies; therefore, possibilities shall be created for the involvement of youth in agriculture.
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2.7.3. Forest Sector
420. The forest sector includes the forestry (from sowing and planting of forests until lumbering), timber industry (from sawing to manufacturing of furniture) and chemical processing of wood (cellulose, paper, etc.). In the aggregate, the forest sector contributes 10–14% to the GDP of Latvia and employs around 7% of the population employed in the economy.
421. Forests of Latvia are fulfilling the ecological, economic and social functions important to the society; they are providing a substantial contribution to the formation of landscape and to the preservation of biodiversity, maintenance of cultural and historical environment and public health. The total forest area covers 2.9 million ha or 45% of the country’s territory.
422. The forest sector, by successful utilisation of local renewable forest resources, has become one of the most active sectors of the economy of Latvia. It contributes significantly to stabilisation of the foreign trade balance of Latvia (675 million EUR in 2002). The export of wood and timber produce has more than doubled since 1996, reaching 923 million EUR in 2002, which makes 40% of the total volume of export of Latvia in financial terms.
Forestry
423. Sustainable management of private forests and woodlands will be jeopardised unless investment is made for increasing the economic, ecological and social value of forests. Failure to ensure improvement will result in decreasing economic potential of forests, and endangering the sustainability of forest resources as well as forest sector and the development of the national economy as a whole.
424. The land reform resulted in the changed structure of forest ownership. There are nearly 164 thousand small private forest properties (8 ha on average). It is considerably more difficult to implement sustainable forestry principles in small forest properties. Besides, the owners of the newly acquired forests lack the knowledge in forestry and market economy. The establishment of associations of forest owners shall advance their competitiveness in the timber market and promote the sustainable management of private forests.
425. 41-75 % of the total annual increments were harvested in the country over the past decade. The volume of timber harvested in private forests is exceeding the volumes of the renewed forests mainly due to the economic situation in rural areas.
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State Forests Other Forests Total Wood Increment 18 16 14 12 12,162 10,75 11 11,216 10 10,029 8,923 8 mill.m3 6,764 6 4 2 0 1996 1997 1998 1999 2000 2001 2002
38. Figure. Felling Volumes Grouped According to Ownership (millions of m 3) Source: State Forest Service, 2002.
426. The economic objective of owners is to gain profit from each hectare of the woodland. It is largely due to the existence of good quality timber in the age of main cutting. At present, the productivity of forest plantations does not exceed 70-80% of the available growing stock. The renewal of the felled forest plantations with the species of trees most adaptable to the prevailing growing conditions, as well as the timely tending of coppices is vital in growing of a productive forest plantation.
427. With a view to maintain the availability of sustainable resources in the country and to rectify what has been lost over the 10 years of independence, the regeneration of private forests needs to be performed, covering 18 thousand ha per year (8.6 thousand ha were regenerated in 2002) and tending of coppices shall cover 43 thousand ha. The tending of coppices in private forests reached only 13% of the necessary extent in 2002.
428. Forest roads and melioration systems are the main elements of the forest infrastructure. The overall length of forest roads in Latvia is 0.86 km per 100 ha of woodlands, which is less than half of the optimum – 1.6-2 km, and more than three times less than in the developed European countries (this indicators is 3 km in Sweden and Finland, in Germany – 3.6 km). The construction of roads and melioration systems, as well as the repairs of trench networks is taking place only in the state-owned forests and in the limited extent (933 thousand EUR were invested in 2002).
429. Uncompensated limitations on forestry are determined with respect to 377.8 thousand ha of area aimed at fulfilling the nature protection and environmental functions by regulatory enactments, which is causing economic loss to forest owners. The compensation of losses is expected to motivate the private forest owners to protect the nature and to observe the environmental requirements.
Timber Industry
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430. The main produce of timber industry in Latvia is sawn timber, plywood, hardboard and furniture. Owing to the stable and predictable basis of raw materials (good quality, diverse and renewable forests), timely privatisation of wood processing companies, free competition and export of wood products; it has become one of the most prospective sectors of the economy. Although the production of the produce with higher value added and the number of those employed in the sector has been increasing over the past years, nevertheless there are several factors, which are preventing full utilisation of the timber and non-timber values offered by the forests. The products with low value added, which are mainly produced by small enterprises, are still forming a considerable proportion of the total output. There is a shortage of production capacity in processing of small-dimension timber and waste wood, and low-grade wood, as well as for further processing of wood. The investment environment is still not favourable for the development of small and medium sized enterprises.
1000 Other Wood Products 900 Builder's Joinery and 800 Carpentry Packaging material 700 600 Furniture 500 Fibreboard
mill.EUR 400 Particle board 300 Plywood, Veneer sheets 200 100 Sawnwood 0 Roundwood 1996 1997 1998 1999 2000 2001 2002
39. Figure. Structure of Export of Wood and Wood Products (million EUR) Source: Central Statistical Bureau, 2002.
431. Ten major and competitive sawing and logging companies applying modern technologies established in Latvia. Even though the investment into wood processing has increased, and the Latvian wood products are known in export markets, yet the wood manufacturing still remains fragmented – 90% out of nearly 1400 sawmill companies are small and producing the output below 10 thousand m 3 annually. Those are producing 70% of the entire amount of timber and are working with outdated technologies.
432. In spite of the growing consumption of waste wood and small-dimension timber in energy and heat production, it does not undermine the necessity for capacities of further processing of wood, small-dimension timber and low-grade wood processing. In the situation, where the local market is capable of consuming only a minor part (10–15%) of the produce output and the export prospects are mainly dependent on the sales markets in the EU, the competitiveness of the Latvian wood produce may be endangered unless the Latvian wood processing companies attract investments aimed at modernising the technological production processes and specialising the produce. Shortage of financing
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hinders the development of the scientific potential of the forest sector, as well as of human resources capable of adapting to implementation of knowledge intensive technologies in the sector .
433. A support is needed for the cooperation between small enterprises, their mergers or specialisation in producing the produce with higher value added and focusing on provision of local services shall be encouraged. Otherwise, the majority of small enterprises would be constrained to cease their operations. That would, in turn, have a negative social impact in rural areas. The development of export sales markets and diversification of produce shall be promoted by advancing the export outside the markets of the EU Member States.
434. The further development of forest sector is depending on the integrated development of the forest and other sectors related thereto (construction, transport, science and education, logistics, energy) and the attraction of investments commensurate to the contribution by that sector in the economy and its development prospects.
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2.7.4. Fisheries
435. The fisheries sector covers three main spheres of activity – fishing, aquaculture and fish processing. The fisheries sector is closely related to rational and sustainable use of wildlife resources, including the preservation of biodiversity, in the economic and territorial waters of Latvia, as well as inland water reservoirs.
436. The economic zone of Latvia covers more than 10% of the total area of waters of the Baltic Sea. Inland waters cover 2543 km 2 or 3.9% of the country’s territory. Fishing and fish production traditions are well developed in Latvia, and the fisheries sector is mainly based on the local fish resources of the Baltic Sea and those of the Gulf of Riga. The environmental pollution, unfavourable spawning conditions, as well as intensive fishing and other factors, however, negatively affect the condition of fish resources. Due to the poor condition of fish stocks in the Baltic Sea, fishing quotas and the available fish resources are dropping year by year causing negative impact on fishing and fish- processing enterprises, but at the same time increasing the role of aquaculture sector providing alternative fish resources.
437. The share of fisheries in the gross domestic product has decreased from 3.4% in 1996 down to 1.5% in 2002, but in the total export volumes of the country – from 9% down to 3.7% respectively (to compare the share of fisheries in country’s export volume in the EU – 0.53%, Portugal – 1.12%, Denmark – 5.55%, Sweden – 0.54%). Yet, notwithstanding the decrease of the share of fish production in the total export of Latvia, there has been a positive foreign trade balance in fish production since the beginning of nineties.
438. Fisheries play an important role in the regional development of Latvia, as well as in the economy of Latvia in general. The sector employs 13.9 thousand persons or 1.2% of the total economically active population of Latvia (to compare: in the EU – 0.2%, Portugal – 0.67%, Denmark – 0.54%, Sweden – 0.13%). Several coastal regions are characterised by sparse population and non- agricultural lands, which limits the possibilities for alternative occupations. Having regard to the favourable regional particularities and the interrelationship among various sectors of fisheries, the industry needs to be preserved and developed with a view to ensuring the production of competitive fish products in an adequate technical level.
Fishing
439. Latvia’s fishing possibilities and fishing quotas in the Baltic Sea and the Gulf of Riga are based on the long-term environmental and fish resource research both on the national and international levels. Pursuant to the intergovernmental agreements made by Latvia, fishermen can fish also in the areas of economic zones of other countries (EU, Russia) and those under the ruling of the international conventions – NAFO and NEAFC. Based on commercial agreements, Latvian fishermen use the fishing possibilities to fish in economic zone waters of the coastal states of the Central East Atlantic.
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440. The existing technical and safety equipment used by boats for a long time, as well as the fact that a limited state support has been available for the modernisation of the fishing fleet only since 1999 (278543 EUR in 1999, 533287 EUR in 2000, 513105 EUR in 2001, 973943 EUR in 2002), may substantially decrease the competitiveness of the national fishing industry vis-à- vis other countries in the future.
441. Fishing mainly takes place in the Baltic Sea and the Gulf of Riga, where at present 197 fishing vessels with engine capacity above 55 kW and 20 fishing vessels with the engine capacity below 55 kW are fishing beyond two nautical miles. The average age of fishing vessels is 26 years. The majority of vessels fish for various species; e.g. seiners in the Baltic Sea fish for cod and also salmon, whereas trawlers mainly fish for sprat and Baltic herring, and in certain periods – also cod. In total, there are 100 fishing vessels involved in fishing for cod, 140 – fish for sprat and herring, and 32 fishing vessels fish for salmon. The gross tonnage of fishing vessels in the Baltic Sea and the Gulf of Riga is 17827 GT, whereas the average gross tonnage of a single vessel is 82.15 GT, which is by far lower than in the EU Member States. Vessels under construction and modernisation as well as the vessels (boats) fishing in coastal waters, where fishing is performed by individual fishermen who fish with static fishing gears, have not been taken into account in the calculation of gross tonnage. Precise data on the Latvian Fishing Vessel Register will be available from 1 January 2004.
442. All fishing vessels engaged in fishing will be registered in the Latvian Vessel Register and included in the fishing vessel list of the National Board of Fisheries, which comprises the information that will have to be sent to the EU Fishing Vessel Register from 1 May 2004. Entry/exit schemes of capacities are used to include a new vessel in the fishing vessel list.
443. Fishing in the Baltic Sea and the Gulf of Riga has been rather stable over the last years, around 75-80 thousand tonnes annually. Yet, Latvia’s fishing quotas were reduced for Baltic herring and cod. Baltic herring, sprat, cod and salmon are of the main economic value in the Baltic Sea, and the catch thereof comprises almost 99% of the total catch in the waters under the country’s jurisdiction. The degree of utilisation of the fishing quotas allocated to Latvia has considerably increased in comparison with the previous years and reached 99.6% in 2002. The decrease in the fish stocks of the Baltic Sea is expected to result in gradual reduction of fishing quotas available to Latvia over the period until 2006. At the same time new fishing regulation measures are being introduced, including the use of more selective fishing gears, which would result in the decrease of the by- catch of undersized fish. However, it requires higher investments to be made by fishermen and decreases fishing efficiency. Therefore, the renewal and modernisation of the fishing fleet will be necessary and older fishing vessels will have to be withdrawn from active fishing with a view of balancing the capacity of the fishing fleet to the fish resources available to Latvia and minimising the negative impact thereof on fish resources and environment.
444. Inhabitants of coastal regions have traditionally been involved in coastal fishing. Commercial coastal fishing involves nearly 250 fishing vessels (boats). In addition, fishing in coastal waters is also being performed by individual fishermen, whose vessels have not been registered in the Latvian Vessel
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Register at present. In total there are 917 vessels (boats) with the length of less than 10 m, 629 of which are without and 288 with engine having the total engine power of 5888 kW and gross tonnage of around 2500. In conformity with the Latvian Commercial Law, which came into force on January 1, 2002, part of individual fishermen who also sell the fish caught, have to be registered in the Latvian Commercial Register and therefore their fishing vessels will be included in the fishing vessel list. Accordingly, the re-registration will increase the number of the fishing vessels in the Latvian Fishing Vessel Register without exceeding the above mentioned figures.
445. Mainly Baltic herring, salmon, trout, vimba, flounder, eel, pikeperch, and – in smaller quantities – also sprat and cod are being caught in coastal waters. It makes only 4-6% of the total catches in the Baltic Sea and the Gulf of Riga (in 2002 - 4.6 thousand tonnes). Further development of coastal fishing is hindered by the shortage of funds at the disposal of fishing enterprises for the renewal of fishing vessels and fishing gears, as well as for the acquisition of safety equipment. The economic efficiency of coastal fishing may be increased by improving the fishing environment, developing coordinated fish product distribution and marketing, as well as introducing more selective fishing techniques, which would have positive impact on the preservation of biodiversity at the seacoast.
446. Landing of fish is mainly being done at the ports of Liepaja, Ventspils, Roja, as well as Salacgriva, Skulte, Engure, Mersrags, Riga and Pavilosta. The internal infrastructure of ports on the coast of the Baltic Sea and those of the Gulf of Riga is outdated and landing of fish at ports is often being performed in inadequate sanitary and hygiene conditions. Only at the ports of Ventspils, Liepaja, Pavilosta and Engure ice production is ensured. Cold storages are only been built at the ports of Liepaja, Ventspils and Pavilosta. Most of the quaysides used by fishing vessels do not comply with the safety requirements. Improvement of internal port infrastructure is expected to provide better conditions for fish landing and storage. These improvements will facilitate the reduction of chemical and oil pollution risk. However, when performing the reconstruction or construction works at ports, environmental and fish protection measures will have to be followed in port aquatoriums.
447. Fish auction system has not yet been developed in Latvia. Since producer (fishermen, fish and crayfish farmers) organisations play an important role in the process of market organisation and coordination of sustainable use of available fishing resources, support will be provided for the establishment of producer organisations in Latvia during the programming period.
Aquaculture
448. The development of aquaculture gives the possibility to replenish the fish stocks most demanded on the market by utilising fish resources available in inland waters, which would further promote sustainable development of commercial fishing, recreational fishing and angling tourism. Due to decrease of fish resources in the sea, aquaculture shall be developed as an alternative source of fish resources. Yet, such development may involve the increased risk of spreading fish diseases and may also cause negative impact on the rest of the fauna as well as the quality of water as the result of increased organic
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pollution. Therefore, the activities by aquaculture enterprises should be subject to environmental impact assessment and other specific requirements. Fish and crayfish breeding in rural areas is anticipated to become an important alternative occupation to the agricultural sector by 2006, especially in Latgale region, which is rich in waters.
449. The number of aquaculture enterprises dealing with commercial fish breeding has quintupled over the last three years. A large number of aquaculture enterprises focuses on organising the angling tourism which is important for the improvement of rural landscape and for the overall development of rural regions. In 2002, there were 51 private aquaculture enterprises in operation mainly concentrated in the regions of Kurzeme and Vidzeme. A considerable number of agricultural holdings have commenced their business in aquaculture in addition to their business in agriculture. The main fish species bred are carps, less popular are – tench, crucian carp and trout. Crayfish juvenile and commercial crayfish breeding activities are growing. The total area of ponds used for the breeding of fish and crayfish covers nearly 4.3 thousand ha. 430 tonnes of fish were bred in 2002.
450. Yet, further modernisation and development of aquaculture enterprises require support to implement measures for technical advancement of enterprises and improvement of marketing thereof until 2006. Due to high production cost and inability to supply the quantities demanded by the market, the total output marketed is not high enough for the time being. The modernisation of aquaculture enterprises, including construction of incubation and breeding workshops, introduction of new breeding technologies, as well as water and heating or recirculation systems and other activities, may reduce the prime costs of fish and crayfish production and increase its volumes.
451. State aid for the development of aquaculture sector has been available since 1999 (in 2000 – 21 482 EUR, in 2001 – 131 553 EUR, 2002 – 3 954 EUR). At present, support under SAPARD is available for aquaculture (in 2002 – 169 540 EUR), which is one of the ways to diversify rural economy.
Fish Processing
452. Fish processing is among those few sectors of the national economy of Latvia, which is almost fully based on the local natural resources. Yet, due to the shortage of funds, many enterprises work at premises not meeting the hygiene and environmental standards of the European Union and operate with technically outdated equipment, and the production of fish products with higher value added is limited due to the structure of fish resources available to Latvia that could be used for processing purposes . At present 34 out of more than 125 enterprises engaged in fish processing meet the EU hygiene requirements and 12 of them have obtained the EU registration number allowing them to export fish products to the EU Member States. The production process is being improved to meet the hygiene standards also at other fish processing enterprises. At present, the system of Hazard Analysis Critical Control Points (HACCP) has been or is being implemented at 95 fish processing enterprises. It is anticipated that until 2006 the number of fish processing enterprises of Latvia being brought up to the EU hygiene standards would significantly increase. However, the total number of fish processing enterprises
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would decrease by reason of their merging, concentration of production or even closing down those production facilities, which will not be able to adjust to the new requirements, thus causing negative socio-economic impact.
453. There is a general trend of investment into the fish processing sector being increased, which is mainly used for renovation and construction works at the enterprises. Starting since 2002, support under SAPARD has been available to fish processing enterprises to implement measures related to the modernisation of enterprises, introduction of new technologies, increase in the value added of fish products (in 2002 – 370 963 EUR).
454. The total output of fish production in 2002 was equal to 155.7 thousand t. Although the assortment of fish products produced by fish-processing enterprises is wide, a great deal of Latvian fish-processing enterprises produce homogeneous products – canned fish, which share in the total fish production output is around 53%. The structure of fish production has, however, changed compared to 1997. The share of canned fish has considerably decreased, whereas the share of chilled and frozen fish products has increased in the total volume of the fish production output, which means that a considerable part of the locally available fish resources is being exported from Latvia. Nearly 80% of the canned fish are produced from sprat and Baltic herring caught in the Baltic Sea and the Gulf of Riga. The imported fish resources (mainly mackerel and Atlantic herring) are also used for production, which diminishes the impact on the fish resources of the Baltic Sea. Although the possibility of the expansion of less used fish species in processing still remains vital, it, in turn, requires for more investments into market research and the development of marketing.
455. The fish production output of Latvia is, at large, satisfying the demand of the local market, which is stable but also limited. Latvia exports almost 90% of the total fish product and canned fish output. 137.9 thousand t of fish production (including canned fish) for 86.3 million EUR were exported in 2002. This is the largest proportion of fish production exported in the total export balance between the EU Member States and the Candidate Countries. Canned fish is mainly exported to Russia, Lithuania, Belarus, South Asian and Eastern European countries, whereas major export markets for other fish products (chilled, frozen fish, etc.) are EU Member States, Belarus, Russia and Lithuania. Latvia’s foreign trade balance in fish production was equal to 57.7 million EUR in 2002.
456. Having regard to ever increasing consumer requirements, enterprises need to master and gradually develop the production of fish products with higher value added. This would also open up new opportunities for such enterprises to penetrate new export markets.
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21. Table. Main indicators of the fish sector (including fishery, aquaculture and fish processing), 1996-2002 Indicators 1996 1997 1998 1999 2000 2001 2002 Share in Gross 3.40 3.12 2.48 2.06 1.70 1.90 1.50 Domestic Product (%) Share in Total Export 9.00 5.30 3.10 2.90 2.70 4.10 3.70 Volume (%) Export (t) 134 200 124 736 106 710 127 925 141 405 161 666 137 908 Import (t) 44 700 58 000 37 627 26 811 31 076 39 228 34 433 Foreign Trade +95.2 +49.8 +28.5 +28.5 +29.7 +57.5 +57.7 Balance (mln EUR) Source: Central Statistical Bureau.
120,0 107,4
97,4 98,1 100,0 87,1 85,0 83,4 80,3 78,5 77,2 77,0 76,9 78,7 78,4 80,0 70.6
60,0
40,0
20,0
0,0 1996 1997 1998 1999 2000 2001 2002
Quota* Catch
* Quota after quota exchange with other Baltic Sea countries 40. Figure. Use of fish resources in Latvia’s territorial and economic zone waters, 1996-2002 (thousand tonnes) Source: National Board of Fisheries.
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100,0 91,9 88,7 90,0 81,4 80,8 83,0 72,2 80,0 72,3 70,3 72,7 65,5 70,0 59,4 60,0 53,7 50,2 50,0
40,0 34,7
30,0
20,0
10,0
0,0 1996 1997 1998 1999 2000 2001 2002
Fish production Canned fish
41. Figure. Volumes of production of fish and canned fish 1996 – 2002 (in thousand tonnes) Source: Central Statistical Bureau.
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2.8. Balanced Development of Territories
457. Administratively Latvia is divided into (1) NUTS IV administrative territorial units: 26 districts and 7 republic cities, which in parallel to the functions of local governments also perform the functions of district local governments and (2) NUTS V administrative territorial units – 539 local governments. At the present time an amalgamation of local governments is taking place.
458. Latvia has five statistical regions at NUTS III level – Kurzeme, Latgale, Riga, Vidzeme and Zemgale (see Figure 1), the borders of which do not coincide with the borders of the five planning regions. In the description provided further this circumstance is taken into account in the utilisation of district statistical data. Source: Central Statistical Bureau, 2002.
42. Figure. Statistical Regions
459. The Regional Development Law adopted by the Parliament in 2002 defines that for the purpose of the planning, coordination and municipal cooperation municipalities establish five planning regions. Cabinet of Ministers defined the boarders of these planning regions (on the basis of proposals submitted by local governments).
460. It has to be taken into account that the Central Statistical Bureau of the Republic of Latvia compiles the regional statistics on the basis of the protocol signed in 1999 with the Ministry of Environmental Protection and Regional Development regarding the division of the regions of Latvia in accordance with NUTS III level. Unfortunately this division only partially corresponds to the present division of planning regions, which have emerged by voluntary merging of local governments.
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22. Table. Indicators Characterising Regions
Year Latgale Zemgale Vidzeme Vidzeme Kurzeme Kurzeme Riga region
Area (% of the total territory) 5.3 30.7 21.1 20.4 22.5
Number of inhabitants (% of the total number) 2001 40.5 15.1 13.5 14.7 16.2
Changes in the number of inhabitants (%) 1998–2001 -2.6 -2.2 -2.0 -1.6 -2.9
Number of inhabitants per km 2 2001 276.9 23.1 23.6 26.2 26.2
Percentage of urban population, % of the total number of Beginning of inhabitants in the region 2000 85.3 41 62.9 49.7 58.3
GDP, EUR per capita* 2000 4328 1577 2814 1600 1298
GDP share in the national GDP 2000 62.2 8.5 13.5 8.3 7.5
Total amount of industrial production, EUR per capita 2000 1875 878 1114 789 454
Non-financial investment, EUR per capita 2000 1152 349 802 329 289
Accrued foreign investment, EUR per capita 2000 800 100 269 23 263
Unemployment rate 2001 11.1 12.8 15.2 11.2 18.9
Number of the registered unemployed 22830 112253 13346 14494 28719 / number of vacant places of employment offered by the State Employment Service 31.12.2001 / 1225 / 179 / 44 / 205 / 87
Number of economically active undertakings in the 2001 25.7 11.55 13 10 9 private sector per 1000 inhabitants
Level of education (percentage of inhabitants with secondary or higher education of the total number of 2000 51.1 43.3 41.8 42.2 45.0 inhabitants in the region)
Source: Central Statistical Bureau, 2002.
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43. Figure. Planning Regions (in accordance with NUTS III)
461. The process of the amalgamation of local governments mentioned above is taking place in Latvia and its objective is to increase the operational efficiency of local governments. It has been foreseen that they would replace approximately 500 existing first level local governments and will be potential economic growth centres as the development drivers of the Latvia. Currently there are a few municipal centres as the main economic drivers in Latvia.
462. There are significant internal disparities of the development level of the municipalities in Latvia. The calculation of the territorial development index is a method, which is used to determine the disparities between different administrative territorial units. The territorial development index is determined for several groups of districts, cities and parishes. It is calculated using statistics on GDP per capita, unemployment rate, income tax per capita, non-financial investments per capita, demographic burden of population, economically active enterprises on 1000 inhabitants, density of population, land cadastre value, the change in the number of residents for particular administrative territorial unit. In 2001 the disparities between the parish (Nuts IV) with the highest territorial development index and the less developed municipality were 7.2 times, furthermore approximately 64% of the parishes had negative territorial development index, the disparities between the city with the highest territorial development index and less developed city were 4 times, furthermore approximately 74% cities had negative territorial development index and the disparities between the district with the highest territorial development index and the less developed district were 3.1 times and approximately 57% districts had negative territorial development index (see Figure 3).
463. The development disparities between the local municipalities show the necessity for the development of more economic growth centres. The growth centers will be developed in compliance with the regional development programmes of regions and territorial plans. These plans assess development potential of the particular territories at the national, regional, district and local level, creating
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favourable conditions for business development and attraction of investments, to facilitate accessibility of public services and optimal functioning of the transportation system, as well as preserve natural and cultural heritage, diversity of landscapes and biological diversity, as well as to enhance the quality of cultural landscapes and settlements.
44. Figure Average Territorial Development Index of Districts, 1999 – 2001 Source: Statistical Institute, 2002.
464. Although basically problems in all regions of the country are similar – insufficient provision of qualitative local infrastructure, high unemployment rate, low entrepreneurial activity, low level of incomes, high proportion of low value added production in economy. The nature, intensity and causes for these problems differ. In the following chapters each region is characterised separately.
2.8.1. Kurzeme
465. Kurzeme is located in the western part of Latvia and it borders with Lithuania. The region has the longest coastal area of the Baltic Sea and the Gulf of Riga in Latvia. Since ancient times the region is famous for its seafaring and fishing traditions.
466. As regards the transport infrastructure of the region, similarly as it is in other regions, also in Kurzeme the biggest part of the restricted National funding for the maintenance and improvement of roads is foreseen for motor roads connecting the biggest development centres (Ventspils and Liepaja) with Riga. Other roads and in particular those, which connect smaller centres and rural areas in the region, are in a very poor condition. That significantly diminishes the appeal of these territories in the eyes of entrepreneurs and tourists. The mobility of the inhabitants with respect to employment is hindered and they are forced to leave these territories, moving closer to their places of employment.
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The access to ports and airports is important in Kurzeme region and because of its restriction the region cannot make full use of its transport potential.
467. The internal and surrounding infrastructures of the both biggest ports, as well as access roads are being developed according to the financial possibilities and the requirements of the scale. The port infrastructure was formed during the Soviet times and very often it is obsolete and functionally does not meet the modern requirements and its improvement requires large investment. In all ports of the region as regards the development of infrastructure, especially, creation and improvement of access roads, own resources allow only ensuring their minimum operation, but not development.
468. There are three small ports in the region – Pavilosta, Roja and Mersrags where the cargo turnover, which is oriented towards transportation of timber and fish products, is comparatively very small, however, they serve as very significant development incentives for the surrounding territories.
469. Positive aspect of the development of human resources is the operation of universities in Liepaja and Ventspils that allow flexibility in adjusting the training of students to specialities demanded in the market, such as IT specialists, tourism specialists and managers. Universities get actively involved in the promotion of regional development. However, not all graduates after studies can find suitable jobs in the region and therefore move to Riga. In order to prevent the tendency of the movement of population to the largest economic growth center of Latvia, the attractiveness of other municipal centres in this region should be increased by raising the quality of life and improving underdeveloped infrastructure thus creating the base for the development economic activity and generating employment opportunities.
470. The percentage of the inhabitants with secondary and higher education of the total number of the inhabitants in the region – 41.8% is the lowest in the country, although there are two universities. The percentage of inhabitants with higher education in Ventspils city is 8% and that is one of the smallest in the country.
471. The development centres of Kurzeme are the two largest cities in the region – Liepaja and Ventspils, which largely determine the growth indicators for the whole region. The growth has been facilitated by conditions created for business development – in both cities on the basis of laws adopted by the Parliament the Ventspils Free Port and Liepaja Special Economic Zone have been established and local governments have created favourable environment for investments and business.
472. Kurzeme region is the only region in Latvia, except for Riga, were the share of the produced GDP in the total national GDP corresponds to the percentage of the number of the population. This percentage does not demonstrate rapid trends to decrease as it is in other non-metropolis regions. However, from 1996 to 2000 the GDP of the region in average prices of 1995 has had a relatively small increase – only by 10% or the actual increase has been 2% per year on average. At the same time the country’s GDP increase in average prices of 1995 has been 22% or 4% per year. That indicates to the ability of the region to survive not to develop. The unemployment rate in the region is higher than in the country on
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average. The highest rates are in Liepaja city and district, as well as in Ventspils district.
473. The particular growth of Ventspils is ensured by the transport sector. It accounts for approximately one half of the total GDP of the city and it employs 30% of economically active inhabitants. At the same time other branches of economy and particularly manufacturing in Ventspils is underdeveloped. It accounts only for 6% of the total GDP. Although up to now Ventspils has been developing very successfully, its greatest problem is its dependency on one branch as regards both the GDP and employment. Besides, this sector is particularly sensitive not only to economic, but also to foreign policy tendencies of the State. It shows the necessity to intensively develop other sectors, in particular manufacturing and other services.
474. The biggest city in the region – Liepaja – is remarkable for its relatively high level of industrialisation. In Liepaja city there is the biggest total amount of industry in the state per capita – 2238 EUR. The total amount of industry is steadily increasing; however, the problem is the dependency of industry and consequently the employment on few big undertakings, for example, “Liep ājas Metalurgs” which attests to the necessity to develop small and medium-sized enterprises.
475. Taking into account the above characterisation, although both biggest centres of the region are undergoing development, it is insufficient to reach the development speed of Riga region and the average development indicators of the EU Member States. The economy is based on vulnerable sectors with small value added. Other centres of the region – Kuldiga, Talsi and Saldus – are surviving rather than developing. Especially improving of the underdeveloped public local infrastructure and raising the quality of life for local people in other municipal centres that shows potential for the economic growth should promote the development of the economic growth centres throughout the region.
476. One of the most essential features of Kurzeme region is the significantly different development of the territory of the region. During the last decade Ventspils city in its development has considerably overtaken, not only other cities and rural areas of the region, but according to individual indicators has left behind even Riga city. For example, according to the GDP per capita – 8508 EUR (2000) accrued foreign investment – 1014 EUR and work remuneration 342 EUR, Ventspils for several years holds the leading position in the country. These high indicators account for high average indicators for the whole region, which do not correspond to the actual situation and give the impression that the whole region is relatively well developed.
477. Kurzeme is a clear example of unbalanced development of State regions not only when comparing with Riga, but also within the region itself. Although according to several development indicators, Kurzeme region takes the second place after Riga region; according to its structure it more resembles other regions of Latvia. That refers to the number and density of the population, employment indicators, etc. When comparing several indicators, one can find fundamental differences between “big” cities and rural territories, including local governments: GDP per capita in Ventspils almost eight times exceeds that of Ventspils district; amount of inhabitants income-tax per capita in Ventspils is 3.1 times higher than in Liepaja district; 7.6 economically active undertaking per
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1000 inhabitants in Ventspils district is the low indicator against 17.9 economically active undertaking per 1000 inhabitants in Ventspils city.
478. Rural areas, similarly as it is in other regions, are generally underdeveloped. In the last five years the total value added of agriculture has decreased at least ten times and its substitute as concerns the employment – forestry, has seen only two-fold increase, therefore in rural districts significant social depression and degradation prevails. In such rural areas there are whole groups of society that feel totally excluded from the life. Similarly as in other regions, a number of enterprising inhabitants is seeking work in the development centres and in fact moves thereto. Thus, rural areas gradually lose their inhabitants and the potential development factors.
479. When analysing the economy of the region, notable is the fact that 28% of the total value added in the region is produced by the transport (sea-ports) sector and its total value over the period from 1996 to 2000 has dropped, particular decline was observed shortly after the Russian crisis in 1999. The greatest contribution to the transport industry is made by the Ventspils Free Port which is one of the biggest ice-free ports in the Baltic Sea, where 2/3 of the total cargo turnover in Latvian ports are handled – 37.9 million tons in 2001. The port has specialised in shipments of oil and oil products. The cargo turnover in the Liepaja port in 2001 – 3.3 million tons, although is ten times smaller than in Ventspils and five times smaller than in Riga, nevertheless during the past five years is steadily increasing.
480. According to its share in the total value added other important sector in the region is manufacturing accounting 16%. However, it is not evenly distributed across the region. In Kuldiga district the total amount of industrial production since 1996 has increased by half, in Liepaja by 34%, but in Venstpils it is falling since 1997. Liepaja is the biggest industrial producer in the region; it is followed by Talsi district. Industry is mostly concentrated in cities and district centres. Its main problem in Kurzeme, similarly as it is in other regions of Latvia, is relying on low-cost workforce and low value added to the manufactured production respectively. The main industrial sub-sectors are food production, metal and hardware production and woodworking. Taking into account the fact that workforce costs in all regions are steadily increasing, the possibilities for transforming the structure of the industry into more knowledge and capital intensive sectors have to be sought.
481. One perspective, which could provide not only the development centres, but also the development of rural areas, is tourism. The statistics for the last three years attest to rapid influx of tourists in all biggest cities of the region. In Ventspils the number of tourists doubles each year, similar trends are observed elsewhere. Approximately 85 % of tourists are the inhabitants of Latvia. However, the region is not ready for the big tourist influx and not always can provide them with adequate accommodation, public catering services and other infrastructure. That indicates a potential sphere for development of private initiative. However, additional support is needed because the investment required for various infrastructure improvements is beyond the powers of small and medium-sized enterprises alone.
482. The level of entrepreneurial activity in the region is as low as everywhere else in Latvia – 12 undertakings per 1000 inhabitants, except Riga. It testifies the lack
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of initiative, knowledge and resources, which are necessary to start independent management. In the region one can observe big dependence of employment on few branches of economy and few big undertakings. That is a great risk to the region in case external economic processes affect one of them. It shows that entrepreneurial initiative of inhabitants in the region has to be stimulated, small and medium businesses and the development of new industrial and service sectors has to be promoted, thus reducing the dependence on few sectors and undertakings, as well as adding greater value to the production and ensuring more rapid development of the region. Particular support to both education measures and the development of business infrastructure is required. Many former Soviet military and industrial territories are still located in the region, which may be adjusted to modern manufacturing needs and needs of other economic activities.
2.8.2. Latgale
483. Latgale region is located in the eastern part of Latvia and it has the longest total land border with three neighbouring countries of Latvia – Russia, Belarus and Lithuania. Because of its many beautiful lakes the region is known as "the land of blue lakes", however, at the same time Latgale is also "the land of the biggest problems" of Latvia – highest level of unemployment in 2001 was in Baltinava parish in Balvi district – 33.9%, which 19 times exceeds “the best” parish; revenue from inhabitants’ income tax per capita in 2001 in Silmalas parish, which is in Rezeknes district, was 5.59 EUR that is 39 times lower than in the better off local government of this region.
484. Latgale is intersected by East–West (Russia – seaports of Latvia, motor road E22) and North–South (St. Petersburg – Warsaw, motor road E262) transport corridors. Rezekne and Daugavpils are significant railway and road transport hubs. The internal road network of the region is well developed and connected with these transport corridors. However, the roads are in a poor technical condition and in order to improve their quality, large investments are needed. There are airfields in both cities, which at present are minimally used.
485. In order to reduce private risk and costs, the necessary public local infrastructure should be developed and the available territories and buildings improved. That would provide practical support to the economy of the region and would stimulate business activities.
486. Due to the backwardness of the region, educated and qualified specialists leave to Riga and other regions of Latvia posing a threat to the region. In order to prevent the tendency of the movement of population to the largest economic growth centre of Latvia, the attractiveness of other municipal centres in this region should be increased by raising the quality of life and improving underdeveloped infrastructure thus creating the base for the development of economic activity and generating employment opportunities.
487. Significant advantage in the sphere of human resources, which allows hoping that the situation may improve, is the increasing level of education, which is promoted by two higher educational establishments in the region – the Daugavpils Pedagogical University and the University of Rezekne. The fact that inhabitants become more educated gives hope of the private sector development. At present the inhabitants of Latgale are the least enterprising in the country –
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there are only 9 active undertakings per 1000 inhabitants. Because of the social and economic situation inhabitants are not ready to take the risk related to starting business, but the growth of private business activity is one of the possibilities of the region.
488. The quality of drinking water, wastewater treatment and organisation of waste management are all issues of concern in the region. The infrastructure created during the Soviet times has become obsolete beyond repair and it cannot ensure the compliance with the EU environmental requirements. In the Soviet times a significant industrial infrastructure in the cities of the region was created – large industrial territories, which at present are not fully used and are neglected as well as desolated.
489. The drawbacks of the infrastructure significantly diminish the interest of entrepreneurs to develop production in regions. Lack of appropriate infrastructure causes additional costs to entrepreneurs, thus increasing the expenditures and reducing the competitiveness.
490. Latgale is situated furthest away from Riga – the main market of the country, therefore the development of information and communication technologies in the region, which could bring the region closer to the centre of the country, is of great importance. Equally available ICT would promote both the education possibilities and the increase of business efficiency.
491. There are two big cities in the region: Daugavpils, which with 114 481 inhabitants in 2001 is the second largest city in Latvia and Rezekne, which is a significant railway hub (Riga/Ventspils – Moscow; St.Petersburg – Warsaw/Berlin). Both cities can be regarded as the main potential economic growth centres of the region. The industrial production of the region has always concentrated there. The most inhabitants of the region seek jobs in these cities, because of insufficient job opportunities in other municipal centres. Quite often because of the inefficient operation of public transport their commuting from other cities and more distant rural territories to work is cumbersome and they move to the cities. However, due to population migration tendency the rural areas become less inhabited and they lose any hope of economic activity. Improving of the underdeveloped public local infrastructure and raising the quality of life for local people in other municipal centres that shows potential for the economic growth should promote the development of the economic growth centres throughout the region.
492. A significant development potential of the region is the Rezekne Special Economic Zone, whose advantages are its favourable strategic location at the crossroads of international railways and motor roads, the nearby eastern border and the industrial potential of Daugavpils.
493. 16% of the Latvian population reside in Latgale region and its contribution to the total national GDP is only 7%. From 1996 to 2000 the GDP of the region in average prices of 1995 decreased by 11% and the indicators are such at time when the total national GDP in average prices of 1995 has increased by 22%. The GDP per capita in Latgale is the lowest in the country – 1298 EUR in 2000 or two times less than in Latvia on average. Hence the conclusion – the region is not developing, even more so – it is regressing. The process was made worse by the Russian crisis in 1998, as a result of which many undertakings in the region
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almost completely adjusted to the new market conditions, lost a significant export market.
494. It is likely that to a certain extent the GDP percentage of the region in the national GDP reflects the total non-financial investment in Latgale. In 2000 it amounted only to 6.45% of the total indicator for the whole country or 289 EUR per capita which is approximately two times less than in the country on average. The only indicator according to which Latgale is not in the traditional last place is the accrued foreign investment. In total 8% of all foreign investment in the country have reached the region. At the end of 2000 investments amounted to 263 EUR per capita, which is significantly more than in Vidzeme and Zemgale. However, investments are particularly concentrated in Daugavpils – 591 EUR per capita and three times lower in Balvi and Ludza district where this level 4.4 times drops behind on average in country.
495. During all years of independence one of the biggest problems of Latgale region has been huge unemployment. Unemployment is the consequence of closing down many big undertakings and the decrease in agricultural activities. The undertakings employed workforce with high but narrow qualifications and a big proportion of specialists had come from all of the Soviet Union. After Latvia regained its independence many big undertakings of the Soviet administrative economic system were unable to continue their operation under conditions of market economy.
496. In 2001 the proportion of job seekers in the total number of economically active inhabitants was 18.9%. At present the biggest employer in the region is the public sector. Although the level of unemployment shows a slight tendency to decrease, it is still the biggest problem of the region and causes poverty, social alienation, alcoholism, drug addiction, adverse situation in families, which subject several generations to social depression and degradation. Several households, particularly in rural areas, subsist on natural farming, on old age pensions of elderly family members and child allowances.
497. The most significant branch of economy in Latgale, according to its value added, is manufacturing – 13.9%, dominated by food industry, wood processing, manufacturing of electric equipment and engineering. Transport and communications is the second most important branch of economy according to its value added – 11.6%. The main weaknesses of the economic sectors are the small demand in the local market, extensive production capacity, obsoletes manufacturing facilities, low productivity and the lack of investment. As a result the total amount of production in the region is decreasing every year. Since 1997 it has dropped by 34 percentage points and in 2000 accounted only for 6% of the national GDP.
498. Latgale region is characterised by ecologically pure environment, high level of biological diversity, picturesque landscapes and many lakes. That provides possibilities for the development of rural or recreational tourism, which becomes more and more popular among urban inhabitants, in particular the inhabitants of Riga.
2.8.3. Vidzeme
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499. Vidzeme region is located in the north-eastern part of the country and it borders with Estonia and Russia. Frequently it is referred to as Latvian Switzerland since here one can find the highest hills and enjoys the most beautiful landscapes of Latvia. Due to this reason Vidzeme always has been a favourite travel destination among tourists, in particular active tourism supporters.
500. Similarly as elsewhere in Latvia, the road infrastructure in Vidzeme is more or less ensured and qualitatively maintained in the direction to Riga but the movement from one territory to another within the region is encumbered by lack of roads and their critical condition, especially in winter.
501. A positive aspect for the development of human resources is existence of the Vidzeme University College. It is one of the first regional higher educational establishments, which tries to flexibly adjust the training of students to specialities demanded in the market, such as IT specialists, tourism specialists or managers. The College gets actively involved in the promotion of regional development, supporting the creation of information society by its project “Baltic Cybercity”. Despite the great importance of the College in the region, not all graduates after studies can find suitable jobs in the region and therefore move to Riga.
502. The biggest towns of Vidzeme – Cesis and Valmiera, as well as Valka – are the most economically active places. In Vidzeme one may observe the following tendency – to a large extent the distance to Riga, where the biggest internal market potential of the country is concentrated, determines the development of its various territories. By improving the public local infrastructure and rising the quality of life of local population in other municipal centres the base for the development of other potential economic growth centres would be created.
503. However, foreign investment situation in the region is not that even. In this respect Valmiera "stands out" with 323 EUR per capita which is the fifth highest indicator in the country after Ventspils city, Riga city and district and Daugavpils. Comparatively large foreign investments were in Valka district – 66 EUR per capita that allows comparing it with Cesis and Valmiera as concerns the development. Very small foreign investment has reached Aluksne district – 0.31 EUR per capita and attests to encumbered accessibility of the outlying areas of the region. Foreign investments were made to "Valmieras stikla skiedras rupnica" (Valmiera Glass Fibre Factory) and several woodworking undertakings. However, irrespective of the good indicators of Valmiera, a significant aspect has to be stressed – only 2% of the total accrued foreign investments in the country have reached the region. Thus, one may conclude that in general the region has not been attractive to foreign investors and measures have to be taken to build attractiveness.
504. Vidzeme is the only region where more than half of the inhabitants live in rural areas – 59%, consequently the region is the smallest according to the density of the population per 1 km 2.
505. According to its economic indicators, Vidzeme, similarly as Zemgale, may be characterised as a moderately developed region of Latvia. Although 15.2% of the country population reside in the region, only 8.5% of the national GDP is produced here, indicating that the economic activities in the region are based on less productive sectors. The reasons are the high employment in the public
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sector and migration outside the region for employment purposes, as well as a low level of investment and human resources.
506. GDP of the region in average prices of 1995 has not increased and has even slightly decreased since 1996, which indicates that, in fact, the region is surviving and not developing. The national GDP during the relevant time period has increased by 22%. Obviously the pre-conditions, which could stimulate the development, are not sufficient. At the same time it has to be noted that the differences in development levels within the region are not as sharp as in other regions, although the GDP per capita in Aluksne, Gulbene and Madona districts accounts only for one half of the GDP per capita in Valmiera district, which in 2000 was forecast to be 2151 EUR. However, the last indicator is considerably below the country average forecast – 2818 EUR.
507. One of the factors determining even development of the region is the comparatively even distribution of the capital investment. In Valmiera and Cesis up to now these investments have been bigger than elsewhere, but in 2000, the biggest investments per capita were in Gulbene district. Aluksne district, which is furthest away from Riga, up to now, has received the least investment. It is regretful, that the total non-financial investments per capita in the whole region have been more than one half lower than in Latvia on average, which consequently determines the present backwardness of the region if compared to the main development centres of the country.
508. As in other regions, the rural areas of Vidzeme, have limited employment opportunities in the agricultural sector. As a result, socially depressive territories emerge in many places, where the only income for many inhabitants is pension received by the elderly family members and children allowances. Such groups of population, unable to improve their situation by their own efforts, feel socially endangered and alienated from society. Additional knowledge and stimuli should be provided to these people so that they become aware of their possibilities to manage their own lives. Since the number of rural population in Vidzeme is considerable, the promotion of non-agricultural entrepreneurial activities is essential.
509. The rural tourism sector may offer substantial new employment and income generation opportunities. The advantage of Vidzeme is the fact, that the region may offer a wide range of active tourism products both during winter and summer seasons. In summer Vidzeme rivers, trails and visiting of cultural heritage monuments is popular, but in winter Vidzeme offers skiing possibilities. In order to be able to welcome all the guests, adequate infrastructure should be developed in the region.
510. In recent years value added in the agricultural sector has decreased by 50% with some compensation from forestry, which has grown by 26%. In the structure of the total value added produced by the region the manufacturing has the highest percentage – 22% in 2000. Besides, the total amount of the industrial production is steadily increasing in the whole territory of the region. Within a period of five years it has increased by 30%. The main industrial branches in the region are production of wood articles, textiles and food. In the woodworking sector there are a large number of small undertakings, which are not modernised and therefore can produce products with low value added. The leader of textiles
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production (chemical fibre) is stock company "Valmieras stikla skiedras rupnica".
511. For social integration and efficient use of education and business opportunities, rural inhabitants particularly require the access to qualitative information and communication technologies (ICT). Similarly as in other regions, the use of ICT is quite restricted both due to its physical accessibility and costs not only in rural areas but also in the centres of more distant districts. It is clearly demonstrated by a research carried out in 2000, which revealed that the biggest number of Internet users in Vidzeme was in Cesis city – 25%, but the smallest in Gulbene – 9%. At that time only analogous telephone lines were available in Gulbene, which significantly affected the quality of the use of modern communication technologies. Taking into account the increasing role of ICT in the economic development, one can say that accessibility of ITC becomes a decisive factor for further development of every territory and welfare of its inhabitants.
512. Support to the basic local infrastructure necessary for development may promote economic activity, especially in rural areas. Also in Vidzeme region and in district centres in particular, one may find the former military and industrial territories, whose transformation into industrial and business parks may support promotion of new business activities. The lack of natural gas utilisation possibilities in larger cities has to be mentioned as a particular problem of the region.
513. Since the biggest part of Vidzeme inhabitants live outside towns, but employment is concentrated in sectors, which most often are located in towns, it is very important to ensure possibilities of the workforce mobility.
514. The employment structure of the region reflects the results of the economic restructuring process – the number of the persons employed in agriculture is decreasing and the number of those employed in industry and service sector, is increasing. One more feature of employment in the region is the migration to Riga for employment purposes, which deprives the region of the most qualified workforce. In order to prevent the tendency of the movement of population to the largest economic growth center of Latvia, the attractiveness of other municipal centres in this region should be increased by raising the quality of life and improving underdeveloped infrastructure thus creating the base for the development economic activity and generating employment opportunities.
515. The level of business activity in Vidzeme on average is as low as elsewhere in Latvia – 11 undertakings per 1000 inhabitants. Slightly more active are the inhabitants of Cesis and Valmiera – 14 and 13 undertakings per 1000 inhabitants respectively. In comparison with the EU Member States the proportion of large and medium sized undertakings in the region is too high and the proportion of small and micro-undertakings is too low. That means that the inhabitants do not sufficiently demonstrate their initiative in creation of employment/self- employment and the dependency of employment on a few large undertakings is too high. Such situation may have several causes, but the main is the lack of knowledge and financing for the commencement of business.
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2.8.4. Zemgale
516. Zemgale region is located in the central part of Latvia to the south from Riga and it has long land border with Lithuania. Due to the relatively fertile soils since ancient times Zemgale is known as Latvia’s granary.
517. The main highways of the country – Via Baltica (E67) and Riga – Moscow (A6), railways and transmission oil and natural gas pipelines (Ventspils – East boarder of Latvia – Russia), intersect Zemgale. All district centres of the region, except Jekabpils, are situated less than 100 km away from Riga and can be reached relatively fast (1–1.5 h).
518. Similarly as elsewhere in Latvia, in Zemgale the roads to the capital are the only ones maintained in satisfactory condition. At the same time the quality of roads connecting district centres and other populated areas in the region is critical. A significant number of transit cargoes, including dangerous cargoes, are transported through Zemgale region; therefore the infrastructure quality in the region is of particular importance also to prevent potential threats to the environment.
519. Jelgava has developed as the centre of the region due to the proximity to Riga (40 km), Latvia University of Agriculture (one of the oldest universities in Latvia) with its scientific potential in the field of agriculture and processing of its production, as well as in the field of forestry and woodworking and to a certain extent also due to the concentration of industry, in particular mechanical engineering in the city which was developed during the Soviet times. Former Soviet industry failed to adjust to new market conditions. As a result in recent years, stagnation can be observed also in the economy of the city. When the big production units terminated their operation, several thousands of Jelgava inhabitants became unemployed. Due to their narrow specialisation and restricted knowledge of the official language, they manage to find new jobs with enormous difficulty.
520. In Zemgale region there are other potential economic growth centres, but due to the underdeveloped public local infrastructure they are not able to attract investors, visitors, potential entrepreneurs and people to stay. The attractiveness of other municipal centres should be increased.
521. In total 8% of the national GDP is produced in Zemgale region, irrespective of the fact that 14% of the country population reside in region. From 1996 to 2000 the GDP of the region in average prices of 1995 has steadily decreased from 420 to 378 million EUR (10%) and that has happened at time, when the national GDP increase has been 22%. Hence, one may conclude that the region is lagging behind the development tempo of the country. One of the main reasons for the underdevelopment of the region is the economic structure where agriculture and traditionally low value added production sectors have a high proportion. They are supplemented by particular employment and labour market problems discussed below.
522. Until the Russian crisis in 1998 the industry in the region had started to show recovery and in 1999 constituted 25% of the total value added of the region, however, the consequences of the crisis made the total value added decrease by
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25% and consequently the share of the sector in 2000 dropped to 16.7%. The main branches of industry are food production and woodworking.
523. There are still a number of unused former military, industrial territories and building complexes in Zemgale. In Jelgava city there are large territories of former factories, which have failed to attract the interest of investors because their improvement and adjustment to the modern production requirements would need too high investment, in particular in access road and communication infrastructure, including improvement of buildings. Local governments have insufficient own resources for such investment. If such territories and buildings were transformed into industrial and business parks, they would become a significant development potential of the region and would stimulate rebirth of industrial production. Such territories would attract foreign investors and also provide additional support to the local business community.
524. Zemgale, as well as Kurzeme is a very good example of unbalanced development of regions not only when comparing with Riga, but also within the region itself. According to several development indicators, Zemgale region drops behind Riga region, as well as Kurzeme region, and according to its structure, it resembles with Vidzeme region. It relates to the number and density of population, employment indicators etc. When comparing several indicators (e.g. index of territory development) one can see fundamental differences between cities of the region and rural territories. The development index of three districts (Jelgava, Jekabpils and Bauska) is negative. The personal income tax per capita in Aizkraukle town is 2.8 times higher than that of Viesite. For the biggest city of the region – Jelgava – this indicator is only 70% of Aizkraukle indicator.
525. The unemployment rate in the region is high. The highest it is in Jekabpils, Jelgava and Dobele districts. Many inhabitants of Zemgale have found suitable employment in Riga and ten thousands of people commute to the capital every day, returning to the region in the evening. Although the proximity of Riga is an advantage of Zemgale, it deprives the regional workforce market of qualified specialists and creates problems for local entrepreneurs as regards provision of staff.
526. The entrepreneurial activity level of Zemgale population is the second lowest in the State. There are only 10 active undertakings per 1000 inhabitants of the region. That attests to the lack of initiative and knowledge among the inhabitants, which could be eliminated by wide business education possibilities, and practical and financial support for commencing business. It has to be added that traditionally 1/3 of the population of the region was employed in the agricultural sector and they have limited knowledge in other specialities, which could serve as a basis for commencing own business. Provision of such knowledge to both the unemployed and the youth could promote development of non-agricultural entrepreneurial activities in the region.
527. Food processing in 2000 constituted 5% of the total value added in the region. The Russian crisis had a particularly serious impact on the development of this branch as until 1998 a significant number of production were exported to Russia. Many undertakings were forced to terminate their operation. At present food production is mainly directed towards the internal market, which is very saturated with local and import production. Therefore, if the branch wishes to
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develop further, new markets are to be sought and attempts to recover the lost Russian market have to be made. This process requires larger financial investments in the modernisation of technologies to be able to satisfy the EU market requirements.
528. Similarly as in other regions in the woodworking sector the dominating is production of low value added products. A big number of small woodworking undertakings operate in the region whose capacity prevents them from development and attraction of financing for modernisation of technologies. The largest part of production is exported, mostly to the EU countries.
529. The total value added in agriculture and forestry has a tendency to decrease – from 1996 to 2000 by 24 %. In 2000, due to the decrease in industry, the proportion of this sector in the total value added of the region was 19%. At the same time the proportion of these sectors in the total value added in the whole of the country is only 4.5 %. Despite the fact that productivity indicators for various agricultural crops in Zemgale are the best in the country and the only agricultural higher educational establishment in the State is located in the region, the agricultural sector in this region, similarly as it is in the EU Member States, cannot exist without state support. It means that this sector, even if developed up to the EU level, cannot ensure the development of the region and economic activities not related to agriculture have to be promoted.
530. As the second reason for the backwardness of the economy of the region can be regarded the low investment level in the region – both local non-financial investment and foreign direct investment. In 2000 Zemgale had the second lowest non-financial investment indicator per capita – 329 EUR. Only the Aizkraukle district was close to the national average indicator, (671 EUR) and 725 EUR respectively. According to the accrued foreign investment level, the region takes the last place in the country. In 2000 foreign investment per capita was 23 EUR, which is 23 times less than the national average. The region has managed to attract only 0.4% of all accrued foreign investments in Latvia.
531. Due to the fact that the region has such usable natural resources as peat, sand, gravel, dolomite, etc. and there are strong mining traditions, mining industry has significantly developed in the region – the growth from 1996 to 1998 was 27%. However, its proportion in the total value added is very small – 0.6%.
532. Zemgale, similarly as other regions, has great hopes for information and communication technology development. ICT development would provide the region with the possibility to change its present structure of economy and diminish its backwardness. ICT would ensure human resource development and the possibility for them to find employment within the region in sectors with higher value added.
533. Zemgale has rich natural and cultural heritage, which attracts increasing number of local and foreign tourists. Tourism infrastructure is developing around roads but the access road infrastructure and tourism infrastructure is not up to the modern tourist requirements. It is related with limited financial resources and with the lack of knowledge.
2.8.5. Riga Region
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534. Riga region is located in the centre of the country on the shores of the Baltic Sea. Riga region is the Capital Region of Latvia. The region covers 3450 thsd. sq. km. The density in the region is 276.9 inhabitants per square km. In Riga region lives 1.1 million inhabitants or 42% of the total population in Latvia, with 747 thsd. in the Capital city of Latvia – Riga, 59 thsd. in resort city Jurmala and 145 thsd. in Riga district.
535. The Capital – Riga – is the central and largest city of the Baltic States. The city’s location between Western Europe and huge Eastern markets is one of Riga’s attractions for business activities. This favourable location and membership in the Hanseatic League of northern cities has promoted the rapid development of the city since its founding in 1201.
536. Riga region produces 62.2% of the total country GDP. The GDP per capita of the region exceeds the average country GDP per capita more than 1.5 times. From 1996 to 2000 the GDP of the region in average prices of 1995 has increased by 46%, which two times exceeds the average growth tempo of the relevant indicator in Latvia – 22%. Hence, the annual growth of the GDP in the country is largely formed in Riga region.
537. Riga Region is the main transport, financial, business, services, tourism and industrial centre of Latvia. The dominated sectors of production in the region are: food and beverages, wood products, textiles and clothing, chemicals, also electronics, electrical and mechanical engineering. From innovative production branches comparatively rapid development is experienced by information technology sector – software production and computer assembling, as well as by pharmacology. These sectors can attract capital and experience development of small and medium-sized enterprises. In the last years very fast is developing services sector.
538. In 2000 Riga region produced 62% of the total amount of industry produced in the country. Approximately 86% of the industrial capacity of the region is located in Riga city and 11% in Riga district. Industrial production is still dominated by labour and energy intensive branches. From industrial sub- branches the highest contribution to the total value added of Riga region in 1999 was made by food production – 30%, woodworking – 14%, printing and publishing – 12%, manufacturing of chemical substances – 6% and clothing production – 5.5%.
539. Riga region services 80-90% of financial, marketing, consultation and insurance, advertising, etc. transaction branches of Latvia. The region has no equivalent competitors in offering business and higher-level services in the country. Riga region is also the main service provider in the tourism sector.
540. In 2000 the highest percentage in the total value added of Riga region was contributed by wholesale and retail trade sector – 21%. It was followed by three sectors, where each of it has produced approximately 14% of region’s GDP: transactions with real property, lease and other commercial activity, transport and communications sector and manufacturing industry.
541. Agriculture nearby Riga is more diverse than anywhere else in the country because of market outlets in the city.
542. 42.4% of the total labour force was located in Riga region. Unemployment in the region is 11.1% of all economically active people. Data from the Enterprise
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Register indicate that 70% of all registered organisations, institutions and businesses are located in Riga. Although the region boasts the highest business activity – 25.7 economically active undertaking per 1000 inhabitants, Riga still is 50% below the average indicator of the EU Member States (50 enterprises per 1000 inhabitants).
543. Riga region is the hub of a well-developed transportation and communications infrastructure that includes railways, roads, pipelines, a major port facility, as well as expanding international airport. There are four operating sea-ports in the region – the Riga Port of international importance, as well as three smaller ports – Skulte, Salacgriva and Engure, which are of national importance and yachting harbours (ports) as well. One of the major transport corridors in the Baltic countries “Via Baltica” (E67) crosses the region.
544. Three fourths of countries social and cultural potential are concentrated in the Riga region. In the 1997 the central part of Riga, including Old Riga, was designed as a monument of world significance and included in the UNESCO World Heritage List. Riga’s architecture, changing in the course of time, has accepted the novelties of the world’s architecture, at the same time keeping to and preserving local traditions. Among other Baltic metropolises, Riga is especially famous for its ensemble of Art Nouveau style. Riga’s attractiveness four visitors is assisted by the surrounding area. The magnificent sandy beaches, dunes and pine forests and stretch along the bay of Riga, the historic resort Vecaki, the health spa town Jurmala and the Gauja National Park are within a 30 minutes train ride from downtown Riga. Another new protected area of Kemeri National Park was founded in 2001.
545. Riga region is the largest centre of science and researches in Latvia. 26 from 32 Latvia’s high schools are located in Riga. The leading institution in research in Latvia is the Academy of Science which is located in Riga, which has directly or indirectly related more than 15 public research institutes. There are also several private science research institutions in Riga region. The Latvian Technology Centre, for example, is the home to more than thirty percentages of small businesses.
546. There are many former military and industrial territories in Riga region, which could be adjusted to the modern production and business requirements. Support to infrastructure required for business activities could provide additional stimulus for the economic activity in the region. Particular attention should be devoted to sectors with high value added as Riga region is the only region in Latvia with foundations for knowledge-oriented branches of economy, which should be developed further.
547. In recent years the income of inhabitants has increased, however, in Riga region, as it is in Latvia in general, most income and savings are concentrated in a small section of the society – approximately 5%. The middle class of society is very small. Poverty is combated with passive methods – money and other allowances.
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2.9. Experienced Gained from Past Assistance
548. The EU has been contributing to Latvia’s accession to the EU with three pre- accession financial instruments: Phare, ISPA and SAPARD. These instruments were established also with the aim to prepare candidate countries to work with the EU Structural Funds and Cohesion Fund. This chapter gives overview about the previous assistance and the lessons learned in relation to the EU Structural Funds.
2.9.1. Phare Programme
Phare National Programme
549. Since 1997 Phare program is accession driven and therefore aimed to assist candidate countries to adopt the acquis communautaire and to strengthen their institutions to assume the responsibilities of the EU member state.
550. Phare assistance has been largely in line with sectoral needs, both in relation to Government policy and accession priorities. It has addressed, in particular, key issues in regional development, public finance and the social sector, but justice and society integration remain problematic areas.
551. Few if any measurements of the actual impact of the various programmes are recorded. It is expected that the investment components of the various programmes will have a significant impact, notably, as in the case of Latvia, the installation and commissioning of waste and potable water plants that have received assistance from Phare’s environmental programmes. It is also specific, that the Phare assistance has been contributing significantly to institutional and capacity building, notably in the area of regional development at the national and local levels.
552. During the implementation of Phare 1999, 2000 and 2001 programs the main stakeholders have identified that the main problems of the programme implementation are caused by weaknesses of programme designing phase. As a result a number of corrective actions have been taken: • The implementing authorities and EC Delegation were closer involved in the programme design phase, as well as the coordination between implementing authorities and programming authorities was improved; • The quality of project proposals (programming documents) was improved by training of staff of sector ministries directly involved in project designing; • The large investment projects have been accompanied with the technical assistance component for elaboration of technical documentation; however the low capacity of line ministries in preparation of technical documentation is still the weakest point in programme implementation and causes serious delays.
Phare Economic and Social Cohesion
553. Starting from Phare 2000 programme, a special component on economic and social cohesion to support regions was introduced. In the framework of Phare 2000 economic and social cohesion support was provided for two target regions (at NUTS III level) – Latgale and Zemgale. The funding of Phare 2001 and 2003
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economic and social cohesion programme was directed towards the whole territory of the country. Phare 2000 ESC
554. The programme consists of 3 components: • Regional Partnership Projects in Latgale and Zemgale regions; • Grant scheme; • Technical assistance.
555. Special Guidelines for the Phare 2000 grant scheme have been elaborated by the Ministry of Finance, and approved by the Cabinet of Ministers on February 5, 2002 and by the EC Delegation on February 14, 2002. Call for proposals for the programme has been launched on February 15, 2002 with submission deadline in May 13, 2002. 27 project proposals were received. Nine project proposals (seven from Latgale, two from Zemgale) region were approved for financing.
556. In financial terms, the Phare 2000 ESC programme is comparatively small (9 MEUR), but the value added lies beyond the financial contribution. There is an experience gained from the programme implementation that has given the possibility for advanced learning for structural funds, particularly ERDF activities.
557. Lessons learned from Phare 2000 ESC are: • Although all submitted projects did not receive funding from the Phare ESC 2000 programme, all municipalities learned lessons how to prepare projects ( learning by doing ); • One of the main reasons for rejecting a project proposal is lack of proper cooperation among the municipalities; • Experience with Phare ESC 2000 shows that the interest in the regions about programme is high; • The regional grant scheme approach of ESC 2000 with municipalities as main beneficiaries proved to be successful. The project selection was in accordance with Phare rules and was transparent. Phare 2001 ESC
558. For the Phare 2001 ESC programme, the whole territory of Latvia is eligible for support, and the national milestone project approach is applied.
559. The Phare ESC 2001 programme is positioned to tackle the unemployment challenge in Latvia within a long-term strategic appreciation of the need for Latvia to prepare for the competitive challenges of increased integration in the European and Global economies by development of a new dynamism in business, industry, education, research, and public administration under the identified national priority sectors.
560. The sectors defined as priority for this programme are Forestry and Knowledge Economy. The purpose of the programme is to maximise the benefits of ESC by targeting a limited number of projects of national significance. These milestone projects are directed at supporting implementation of key long-term development priorities and ultimately aimed at addressing the level of unemployment and boosting GDP growth.
561. The Phare 2001 ESC programme consists of 4 components: • Preparing, Co-ordinating and Managing Milestone Projects;
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• Investing in Business Related Infrastructure; • Investing in Human Resource Development; • Administration and Management of the Programme.
562. Lessons learned from Phare 2001 ESC: • The programme implementation approach used for the Phare 2001 ESC programme does limit the number of the potential beneficiaries; • Experience with Phare ESC 2001 shows that the projects of national significance seem to be very difficult to identify; • The grant scheme mechanism similar to ESC 2000 is easier to administer and implement than the national milestone approach of ESC 2001.
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2.9.2. SAPARD
563. SAPARD's main priorities, as set out in the SAPARD Regulation, are to contribute to the implementation of the acquis concerning the Common Agricultural Policy and related policies, and to solve priority and specific problems for the sustainable adaptation of the agricultural sector and rural areas in the applicant countries.
564. SAPARD is managed on a unique basis. The other pre-accession instruments PHARE and ISPA involve at least some key points being managed by the European Commission. With SAPARD the European Commission is not involved in any such key points. For SAPARD it is the national authorities in Latvia that assume entire responsibility through fully “decentralised management”.
565. SAPARD assists Latvia to gain practical experience in the procedures and principles of the system operating for Structural Fund rural development programming in the Member States by imposing the following ground rules: • The Rural Development Plan must be prepared by the competent authorities and submitted to the EC only after the relevant institutions and organisations at an appropriate level have been consulted. This promotes the partnership/consultation principles, which is central to the Structural Funds system but innovative for countries of Central and Eastern Europe; • The approved programmes are multi-annual. This allows gaining practical experience in managing the progress of a programme and to analyse and propose adjustments where necessary. In order to achieve this effectively, practical experience is gained in setting up management information systems: collecting statistics, producing annual reports on the Programme and collating other relevant information; • The obligation to set up a Monitoring Committee promotes the idea of on-going consultation and involvement of the relevant partners. It provides practical experience in defining and operating monitoring indicators; • The obligation to carry out ex-ante and mid-term evaluations of the programmes give the applicant countries relevant practical experience.
566. The management of SAPARD aid: • Provides with practical experience in setting-up financial structures and control systems similar to those used in the member states; • Provides practical experience of reporting irregularities to the EC; • Provides practical experience in managing the initial advance and in submitting to the EC quarterly applications for payments in respect of expenditure incurred. This is based on the system for Structural Funds in the member states; • Requires the applicant country to take responsibility for expenditure.
567. Main benchmarks in the implementation of the SAPARD programme in Latvia: • 02.07.2001 National accreditation of Rural Support Service;06.12.2001 Decision of the EC to grant the assistance under SAPARD; • 14.12.2001 RSS launches first call for proposals; • 28.12.2001 Zemgale Regional branch of RSS receives first project application; • 31.01.2002 North-Kurzeme branch of RSS signs first contract; • 15.04.2002 First payment made;
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• 15.08.2002 over 1 million lats (1.6 mln EUR) paid out of SAPARD accounts. Main problems identified in the implementation of SAPARD in Latvia regarding approval of projects: o The project proposal does not correspond to the objectives of the SAPARD programme; In the categories of eligible expenditure contain certain items that are not eligible; o Arithmetic errors in the financial data of the project proposal; o The financial data of the project proposal differs from the accounts of the enterprise; o The information included in the proposal differs from the information included in other documents; o Too optimistic production and price increase projections; o Incorrect specifications for tenders (price quotation); o The expenditure has already been incurred before the approval of the project.
569. Main problems identified in the implementation of SAPARD in Latvia regarding the payments: • Assurance that the product or the production has Latvian origin, specially for production where spare parts are imported from different countries; • Incorrectly filled payment applications.
2.9.3. ISPA
570. The "Instrument for Structural Policies for Pre-accession" (ISPA) is one of the European Community's financial instruments set up to assist the ten Central and Eastern European candidate countries prepare for accession. ISPA provides financial support for investment in the areas of environment and transport, in order to speed up the compliance of accession countries with the European legislation currently in force in these two sectors.
571. ISPA is a hybrid policy, designed to serve as a transition from the EU financial support given to third countries (cf. PHARE) to the financial support offered to the member states (cf. Cohesion Fund). This implies firstly, that ISPA incorporates characteristics of both types of assistance, and secondly, that it will evolve, resembling the Cohesion Fund more closely as accession approaches.
572. In 2000 – 2003 Latvia submitted 30 ISPA applications to the EC of which 21 ISPA measures have received a positive opinion by the Management Committee. The European Commission has signed Financing Memoranda for all these ISPA measures.
573. The ISPA Portfolio and Pipeline in Latvia has been growing considerably, both by number of ISPA measures and by amount of ISPA contribution of the European Commission. However, the main challenge before the accession and transition to the Cohesion Fund will be the implementation of the committed measures under the allocations of the previous years. This will be one of the measurements of the absorption capacity of the EU funding in Latvia.
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3. Strategy
3.1. SWOT Analysis
23. Table. SWOT Analysis Box Strengths Weaknesses
Economy Economy
• Stable macroeconomic and fiscal environment • High structural unemployment • Steady economic growth (5% per annum) • Low labour productivity • Excellent geographical location • Low income per capita (33% of EU average) • Riga is one of the important economic centres in • Serious regional income and unemployment the Baltic Sea area disparities (e.g. Latgale and Riga) • Important international transhipment centre • Widening urban / rural gap • Fast growing services sector (e.g. transports) • Low competitiveness in primary sectors • Strong forestry resources • Limited product diversification in agriculture sector • Very good quality of environment and natural • Low value added in key sectors (services, textiles resources, high biodiversity and foodstuffs) • Limited access to business development services and technology • Failure of enterprises to comply with mandatory requirements of legislation in respect to environmental protection, safety at work, consumer protection • Low investment into research, development and innovations • Low entrepreneurship initiative • Insufficient access to financial support and business consultations for start-ups and SMEs
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Strengths Weaknesses
Human Resources Human Resources
• High level of literacy • Mismatch between education / training and labour • Good general level of education in workforce market demands • Strong science and R&D tradition • Inadequate structure of programmes impedes higher education in science and technology intensive • Increasing number of students in higher education sectors • High level of women- graduates in higher • Insufficient range and quality of vocational training education • Limited opportunities for life-long learning • High employment rate of females • Low investment by employers into human resource • Reducing poverty and social exclusion is defined development as political priority at national level • Employment rate much lower than the EU average, especially for males • Lack of equal opportunities for socially excluded persons • Insufficient experience and involvement of all relevant actors in gender equality policy making and implementation • Insufficient number of specialists of social work with knowledge and skills for work with social exclusion risk groups • ICT support is unavailable for disabled persons
Infrastructure Infrastructure
• Good density of national transport network • Road infrastructure needs reconstruction • Two ice-free seaports of international importance • Urban transport system and public transport needs • 50%-90% of current electricity needs are satisfied to be made more efficient utilising renewable energy sources (hydropower • Infrastructure of small seaports outdated restricting plants) local economic activity • Mobile telecommunications covering most of the • Insufficient traffic safety on the roads territory and already serving 25% of the • District heating system is inefficient and lacks population sustainability • High quality of broadband ICT network • Limited access to internet and modern ICT around connecting major towns territory of the country • Low quality of drinking water and public services (waste collection) outside Riga • The infrastructure and equipment of educational establishments and research institutions is outdated • Inaccessible environment for disabled persons • Insufficient health care and social care infrastructure affecting capacity of institutions to provide timely and qualitative services
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Opportunities Threats
Economy Economy
• Growth of service sectors • Low level of disposable income and private savings • Potential to increase FDI flows and attract new • Interest rates remain high types of FDI • Traditional sectors facing intense competition from • Access to EU internal market EU and international producers (agriculture, • Potential for organic/non traditional fisheries) farming/aquaculture due to clean natural • Increasing competition in textiles from the EU and environment third countries with agreements with the EU • Recovery of agricultural products exports to CIS • Failure of the private sector to invest in applied • Potential to increase value added of agro-forestry R&D and fisheries related exports • Increased exposure of transhipment sector to • Long term potential for high technology activities competition and volatile rate measures • Long term potential to increase income from • Dependency on mono-supplier for gas tourism activities • Enterprises are not able to meet EU requirements in • Employment generation spin-offs from increased area of environmental protection, work safety, use of ICT consumer protection
Human Resources Human Resources
• Success of reform started in vocational education • Slow pace of modernisation of the education and training system • High educational level of workforce offers good • Further decline of students in science and basis to exploit EU co-funded training/retraining technology intensive sectors measures • Increasing pressures on the supply side of the • State training programmes aimed at raising labour market in the long run (e.g. ageing and opportunities for job-seekers decline of population) • Commitment of the Government to deal with • Risk of increasing of social exclusion gender equality and equal opportunity challenges • Depopulation of rural areas • Increasing external migration (brain-drain) • Low share of employers and self-employed
Infrastructure Infrastructure
• Increased competitiveness from up-graded • Failure to use future infrastructure investments to transport network address economic and social development • Improvement of safety and speed of inland imbalances between Riga and the rest of territory transport flows • Failure to target infrastructure investments to • Increase in e-government technical support support growth sectors system • Failure to integrate infrastructure investments with • New employment opportunities in peripheral FDI, education and business support strategies regions through increased transport/communication linkages • Improved quality of water supply and waste management infrastructure
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3.1.1. Strengths
Economy
574. Latvia possesses a strong macroeconomic and fiscal environment. The economy has recorded on average annual GDP growth rates of 5-6% since 1999, which indicates strong catching-up. These growth rates are forecast to continue over the short to medium term. The inflation rate is comparable to the EU average at the level below 3%. The national debt (less than 15% of GDP) is low and the budget deficit (less than 3%) complies with the Maastricht criteria. During the 1991-2001 period Latvia was one of the highest recipients of foreign direct investments (FDI) in all of the Central and Eastern European countries.
575. An excellent geographical location (Baltic Sea Area) and role as a transhipment centre for East-West trade have proved major strengths in attracting FDI and services sector growth. In 2001, 90% of Latvia’s total cargo turnover (57 mln tons) was transit cargo. Ice-free sea-ports ensure year round export trade. Latvia is also rich in natural resources and biodiversity. Forests cover over 45% of Latvia’s territory. The overall environment is of a very high international standard.
576. The Latvian economy has undergone intense restructuring in a limited period. Services now form the most important economic sector. Key sub-sectors include transport/transhipment, construction, commercial services. For example, the construction sector now generates over 6.1% of total employment and 6.1% of value added. Construction services are also exported (mainly to Commonwealth of Independent States (CIS)).
577. Due to the scale of natural forestry resources exports are dominated by forestry related industries (timber, furniture). The forestry sector accounted for over 40% of exports in 2002.
Human Resources
578. Basic literacy is high in the Latvian population. The general level of education in the workforce is very good with 63.5% of the population having secondary/vocational education (well above the EU average 46%).
579. The number of secondary students going on to higher education has doubled since 1997 (to 110,000). The proportion of women in higher education is increasing. In 2002 women represented 61% of workforce with higher education.
580. Latvia has a strong tradition of scientific research. There are research/teaching strengths in specific hi-tech areas where the science schools have traditionally been strong such as physics of hard particles, modern material sciences, magnetic hydrodynamics, information technologies, biomedicine, pharmaceuticals and wood chemistry.
581. The rate of female entry into the workforce is high and increasing.
582. The government adopted Strategy for Reduction of Poverty in 2000 and Latvia joined the Community Action Programme to combat Social Exclusion by
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signing Memorandum of Understanding between the European Community and the Government of Latvia in 2002. Joint Inclusion Memorandum will be signed in December 2003.
583. Women are more active in registering and using the retraining services provided by the State Employment Service.
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Infrastructure
584. The national transport system (rail/road) has a high density. Successful integration into the European Transport system is on-going. The capacity of the national system is sufficient to meet present demands.
585. Latvia has three major sea-ports. Two of these (Ventspils and Liepaja) are ice- free. These ports offer the most competitively advantageous entry and exit points for East-West trade. Latvian ports traditionally have higher annual cargo turnover rates than other Baltic Sea competitors.
586. Between 50-90% of Latvia’s current electricity demands are satisfied utilising renewable energy resources (hydro-electric power-plants). There are seasonal variations in supply outputs due to rivers’ freeze.
587. There is broadband (ICT) coverage connecting all of Latvia’s major towns. Due to on-going liberalisation of the telecommunications sector new providers will enter the market increasing coverage and competition.
588. Mobile communication services have expanded rapidly and are supplied throughout the most of the country. In the beginning of January 2002 there were 657 thousand mobile communication users (25% of the population).
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3.1.2. Weaknesses
Economy
589. Latvia’s GDP per capita remains low despite sustained economic growth rates over the past years (33% of the EU average). Economic growth is not being translated into increased employment and labour productivity. This indicates that the economy is suffering from structural unemployment.
590. Latvia’s low productivity rate is a result of a weak overall business environment. Access to debt finance, business support services (e.g. training, business planning and marketing) is costly and limited especially outside of the capital. Productivity rates are low even in lead sectors.
591. Business start-ups are low. In 2002 the ratio of businesses was 18.3 per 1000 inhabitants compared to 40-60 per 1000 inhabitants in the EU. Latvia has a few large companies. Almost 99% of Latvia’s companies are SMEs or micro- businesses. These companies compete on cost and fail to expand due to a lack of investment and working capital, weak business management and limited use of innovation (e.g. ICT and production technologies). Latvian producers often fail to comply with the mandatory requirements of the EC Internal Market legislation in areas like environmental protection, safety at work, consumer protection, hence not being able to operate in the EU market.
592. There are serious regional disparities in unemployment and income levels. Almost half of the population lives in the Riga region. The GDP per capita in Riga exceeds the national average by 1.5 times. The ratio of private sector enterprises to inhabitants in Riga was 26 per 1000 inhabitants compared to 11 per 1000 inhabitants in less developed regions. Unemployment rate in the Riga region was 11.2% in 2002 compared to the national average of 12.1% in the age group of 15-64.
593. The urban/rural gap is widening due to lack of new employment opportunities in the agriculture sector. The key characteristics of the agriculture sector include an ageing workforce, lack of investment, low productivity, limited product diversification and use of out-dated machinery.
594. The fisheries sector continues to contract. The sector’s contribution to GDP has fallen drastically in the past five years from 3.4% in 1996 to 1.5% in 2002. To maintain competitiveness under future quota restrictions investments are required in all areas from the fishing fleet to processing/marketing.
595. The forestry sector also requires increased investments to develop key infrastructure and human resource gaps. Forest roads need up-grading. Latvia’s forestry exports are mainly low value added products (e.g. timber). The majority of forestry companies are micro-businesses led by owners with insufficient business skills and poor access to new technologies.
596. Manufacturing and processing industries (food, textiles, wood processing) have low productivity rates low added value to its production, and a dependency on low value markets. Foodstuffs are mainly exported to the CIS. Production technology is out-dated. Links between research institutes and processing are
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weak. Latvian companies require increased access to financing in order to modernise and meet the challenges of more competitive markets.
Human Resources
597. In 2001 the total number of economically active persons in Latvia was 1.1 million. This is a decrease of 8% since 1996. However, the percentage split between male (51.6%) and female (48.4%) is almost equal.
598. In Latvia the unemployment rate in age group 15-64 is decreasing gradually and in 2002 it reached 12.1% but it is still higher than the average in the EU (7.4% in 2001). While female employment is high, the employment rate amongst males is much lower than the EU average.
599. The low productivity rates of the Latvian workforce are related to the lack of investment at all levels of education. There is a mismatch between education/training and labour market demands. Higher education teaching and curricula do not address the labour demands of the changing Latvian economy and faces problems of long-term under-investment. There are insufficient training and research opportunities for lead sectors such as transhipment and wood production. Only a few educational institutions (e.g. Stockholm School of Economics in Riga) offer post-graduate business training to a high international standard. Investment in human resource development is not a priority for Latvian employers. There is also lack of partnership between universities and municipalities.
600. The vocational education sector is being reformed and restructured, but faces the problems of historical under-investment. An insufficient range of vocational education is provided. Teachers and teaching resources require up-grading. There are only 124 mainly small vocational educational institutions in the country. Teaching capacities are limited. Few courses are directed towards the new competitive demands facing sectors like wood processing. Apprenticeship schemes are not offered.
601. Though there is a positive tendency that the number of people willing to study in higher education institutions is increasing 47 , there is still inadequate structure of educational/study programmes (lack of modules) and their offer, as well as outdated teaching and research infrastructure that impedes training and further development of highly skilled labour force in science and technology intensive sectors, which are essential for development of the national economy.
602. Even though the total labour population is falling there are limited opportunities for socially excluded persons to access training resources. The State Employment Service has insufficient resources to actively develop instruments to address the training demands of the disabled, youth and long-term unemployed. As a result the equal opportunities gap is widening. Potential labour resources are lost to the market.
• 47 The number of students has increased twice during the last 5 years, reaching 110 500 students in the academic year 2001/2002.
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603. Promoting of active measures to balance the labour market is hindered by lack of information on factors hindering access to the labour market, as well as on reasons of structural disparities in the labour market.
604. Gender equality policy is being developed by several actors and in several spheres without having overall political support and long-term development strategy. The institutional mechanism has been developed, but the awareness in gender equality issues and capacity of involved policy implementing agencies is not sufficient.
605. In 2002 specialists of social work were employed in 349 municipalities out of 551 municipalities of Latvia and only 42% of them had or were receiving professional education in social work. Social worker specialization for work with specific groups of population is still underdeveloped.
606. Limited accessibility to ICT support for people with physical disabilities weakens their chances of participation in the labour market. Adapted ICT (specialized programmes and/or equipment) could serve as a means for skills development, distance learning and e-work for disabled persons.
Infrastructure
607. With the further development of economy and the increase of the freight turnover associated to it, the carrying capacity of the transport network and level of safety will be insufficient. At the moment, the interconnection between different modes of transport is already inadequate. 1st class roads bearing capacity is not sufficient to ensure the commercial needs of the traffic, and also some of the road routes are not asphalted.
608. Certain malfunctioning of urban transport systems have been identified in Riga and other major cities. Most significant drawbacks of the network of streets are the fragmentary character of main streets and unsolved connections of the bridges over the Daugava river to the network of streets. Capacity of many intersections with regulated traffic and level crossings in the city has been exhausted and therefore the traffic should be organised on several levels. Functioning of public transport is undermined because of underdeveloped network and outdated rolling stock.
609. The safety navigation systems of seaports are outdated and in urgent need of modernisation. The capacity of the road network to and from the ports is insufficient to meet demand of future traffic flows. At present efficient inter- modal operations are restricted.
610. The fixed telecommunication network is still of a limited scope. In 2002 only 25% of the population were connected compared with the EU average of 86%. The situation outside the Riga region is considerably worse particularly in rural areas.
611. Internet access is not sufficient to meet the demands of an information society. Access has to be extended outside of urban areas.
612. Appropriate water supply and waste collection services are not ensured to the largest population settlements in Latvia. Urban district heating systems also need significant new investments. At present these systems are not fuel efficient, cause air-pollution and provide low standards of heating. For water, waste
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collection and heating systems, new resources are required in order to comply with EU environmental standards.
613. Healthcare infrastructure is obsolescent. Full access is only available in Riga and other large towns. Infrastructure of labour and social care institutions is underdeveloped in major part of the territory of the country therefore limiting possibility to deliver quality services and to assist inhabitants return to the labour market. Limited accessibility to ICT support for people with physical disabilities weakens chances for their possible participation into the labour market.
614. Training and research facilities in primary vocational education and higher education establishments are outdated and do not allow performance of qualitative study programs especially in technology intensive branches. Premises of education establishments often are not adjusted for the needs of students with physical disabilities as well as do not comply with general safety and hygiene standards. Also lack of modern laboratory equipment in leading research centres undermines scientific and innovation potential of the country.
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3.1.3. Opportunities
Economy
615. Increased integration in the European and global economies will provide significant service based growth opportunities. This combined with Russia’s continued economic stabilisation will enhance Latvia’s position as an East-West transhipment and service centre.
616. Based on this opportunity increased and new flows of FDI can be attracted in both the services and processing sectors. Through processing in Latvia, bulk and semi produced transit cargo, can offer greater export and employment generation opportunities. This offers the potential for new regional growth centres outside of Riga if transit corridors are properly exploited.
617. The on-going economic reform of CIS economies as well as better access to EU internal market will increase demand for Latvian food products. Latvia’s clean environment and natural resources offer significant non-traditional agriculture opportunities. The abundance of fresh-water lakes and low use of artificial fertilizers can provide organic and aquaculture production/processing employment opportunities. The number of firms already involved in aquaculture has expanded rapidly. The rationalisation of the fishing industry and new investments in agro-forestry will offer greater value added market opportunities. The emphasis on an agriculture sector driven by organic farming and use of natural resources will increase the long-term potential of Latvia’s rural tourism sector.
618. With well-directed investment and support, Latvia’s indigenous R&D capabilities can offer economic opportunities in the long-term. Increased linkages between the manufacturing sector and research institutes (particularly in nano-sciences, nano-materials, biotechnologies, wood science and ICT) can support increased growth in Latvia’s lead sectors over the long-term. The increased use of ICT matched with the new growth opportunities presented in services, agriculture and tourism will allow employment generation spin-offs and new business start-ups. Measures by the government to facilitate access to financing will complement this new business growth.
Human Resources
619. Increased investments in Latvia’s higher education institutions and excellent EU level research institutes will result in increase of investments flows in high value added industries, development of knowledge economy and in greater business links with other EU member states.
620. If new and increased training measures are well directed towards the demands of Latvia’s lead economic sectors (e.g. services, forestry related industries) new employment opportunities can be created in the short to medium term.
621. The high literacy rate of the Latvian population and the good education level of the workforce offer a good basis to take advantage of EU co-funded training/retraining measures.
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622. The on-going reform of the vocational education sector provides a timely opportunity to exploit ESF co-funding. The reform process is examining quality standards, curricula, EU comparability of qualifications and general skills for further education.
623. Increased investment in Latvia’s higher education institutions has to result in greater business links in the future. This investment has to target comparative advantages of the Latvian economy.
624. Government has proven it’s commitment to deal with issues of gender equality with the approval of the Concept Paper on Gender Equality. To implementation the concept paper the network consisting of governmental, non-governmental institutions and research organisations has been set up.
Infrastructure
625. The up-grading of the national transport system will increase competitiveness of national economy in general and transhipment services in particular. Increased inter-modal capacities will reduce cargo transit times (Port/Road/Rail). Transit damage to goods will be reduced. Road safety standards will increase and labour-commuting times will be reduced. E-government measures will increase the strategic and technical management of the national transport system.
626. New employment opportunities in the regions will emerge such as the processing of transit cargo. Better quality infrastructure links will support the growth of new regional economic centres. Better access to regional/local heritage sites will support tourism development.
627. The liberalisation of the telecommunications service will increase competitiveness and support the development of a more business friendly environment.
628. Improvements in water supply and waste management infrastructure will improve the overall quality of life, which is an important factor in attracting FDI. This will also contribute to maintaining of population in smaller towns and rural areas.
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3.1.4. Threats
Economy
629. Continued high interest rates will make access to working and capital finance difficult for entrepreneurs and small businesses. High interest rates combined with low levels of disposable income and private savings will result in Latvian businesses not having the financial resources to address productivity and competitiveness challenges. This will have a knock-on negative impact in attracting new FDI flows.
630. Latvia’s traditional sectors (e.g. agriculture and fisheries) will face increased competition from EU and third country producers. These sectors will face further rationalisation if investment and restructuring does not result in superior production and product diversification. Third countries with EU agreements will access traditional markets for Latvian textile markets. As Latvian producers compete on a cost basis, imports from Asian countries could undermine this competitive factor.
631. If the private sector continues to under fund investment in training and R&D, Latvian businesses will not be able to compete with other low cost competitor countries.
632. The increased international integration of the Latvian transhipment sector will result in new competition. Latvian companies have to raise productivity and efficiency levels to meet this new competition and avail of the opportunities presented by this sector. Artificial transhipment rate policy implemented by third countries may also undermine Latvia’s competitiveness in this sector.
633. Failure to diversify production in lead sectors such as forestry and exploit new growth opportunities (off-farm activities, organic farming) will widen territorial disparities and de-ruralisation.
634. Latvia is highly dependent on a single gas supplier. The economy would face an energy problem if this supply source is reduced.
635. Failure to make necessary investments in reaching compliance with EU standards of environmental protection, safety at work and consumer protection will limit capability of Latvian enterprises to compete in the EU Single Market.
Human Resources
636. The active workforce will continue to decline if measures are not successful in providing new training opportunities for marginalized sections of the community (e.g. long term unemployed, non-Latvian speakers). Participation of young people (15-24 age group) has decreased from 43% in 1999 to 39% in 2002. The total economically active population has declined by 8% since 1997. The restructuring of traditional sectors can increase social exclusion risks and create new pressures on employment services.
637. Failure to modernise the education system will result in an increase of strong emigration of talented youngsters from the country and continued mismatch of skills demanded by the labour market. For example, employers seek staff with
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technology skills, but in the last three years student numbers taking technology and sciences in higher education institutions fell by 10%. The economic opportunities presented by trans-shipment services and product diversification in the forestry sector can only be exploited by the application of new production and logistics technologies. This requires training in new business techniques, business management, as well as language skills.
638. Failure of the Latvian population and businesses to exploit the advantages of ICT will reduce competitiveness, maintain regional economic disparities and retard the transition to a knowledge-based economy. ICT based solutions must be directed to SMEs and micro-businesses.
639. There are relatively high levels of income inequality and index of risk of poverty in Latvia. In 2002 the Gini coefficient characterizing the inequality in income distribution in Latvia reached 34% (EU 15- 29% in 1999). The ratio between the incomes of the top 20% of the income distribution of the bottom 20% was 5,5 in 2002 (EU 15- 4,6 in 1999).
640. Internal migration may reduce the critical mass of labour required for regional growth centres to emerge. Increase of flows of labour population to Riga and other towns may create increased pressures on the urban physical and social infrastructure. Without successful agricultural support measures and development of new work opportunities abandonment of rural areas may increase widening the urban/rural gap.
641. If the share of employers and self-employed persons don’t increase due to lack of adequate knowledge and basic entrepreneurial skills, the economic growth of the country is threatened.
Infrastructure
642. Failure to upgrade the national transport system will endanger growth and employment prospects in key sectors such as services and forestry. Infrastructure investments must be integrated with business development services and labour training/education measures. If not the synergic impact to support key lead sectors and address regional imbalances will be lost.
643. Without increased internet access the goal of an information society will be restricted to urban areas. Failure to use infrastructure investments to address territorial imbalances will increase the social and economic divisions between the Greater Riga and the rest of the country. This will maintain low levels of labour productivity, uncompetitive businesses, and tourism development and restrict FDI flows to second cities/rural areas.
644. Failure to direct infrastructure investments into public utilities (water, waste management social) will pose a risk to Latvia’s natural environment, reduce quality of life standards and restrict opportunities in non-traditional farming activities (e.g. organic farming, tourism).
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3.2. The SPD Strategy
645. The SPD strategy is based on the outputs of the SWOT analysis. It is a product of extensive inter-ministerial and social partnership negotiations. Its role is understood as a contribution to address key competitive gaps in the short to medium term and create the conditions necessary for reaching long-term development goal of Latvia to become competitive knowledge based economy. In order to achieve these goals the SPD is closely linked to the principle on- going national development strategies designed to strengthen socio-economic development.
646. The long-term objective is built on the four main pillars of a knowledge based economy – improvement of the policy regime, fast ICT development, changes in the education and training system, and the beginning of national innovation development.
647. Moreover, the strategy is drafted in line with conclusions of European Council of Lisbon and Gothenburg hence addressing issues like building knowledge based economy, promoting sustainable development, employment, territorial cohesion and equal opportunities. This promotes a clear strategic direction and integrated approach to policy making. Under these circumstances synergies between national and EU policy instruments can be readily exploited.
648. Accordingly, the SPD strategy is developed under the framework provided by the Long Term Economic Strategy for Latvia. This document identifies and analyses the possible scenarios between on-going global economic processes and Latvia’s comparative advantages. The fundamental priorities of the state economic development strategy are to: • Form the necessary conditions for a well-functioning economy; • Stimulate the conditions for efficient and competitive economic sectors; • Reduce the risks associated with socio-economic disparities.
649. In combination with the Long Term Economy Strategy the SPD is determined by the following declarations taken by the Cabinet of Ministers to direct economic growth to: • Create an information society and knowledge-based economy; • Improve the quality of health in society; • Provide balanced and sustainable development of Latvia’s territory and high levels of employment generation.
650. As such the national economic development framework and priorities reference all the long-term priorities of European Community Policies including information society, sustainable development, employment, equal opportunities and territorial cohesion. For example, in line with the goals of the Lisbon Council Declaration on Information Society, the eLatvia socio-economic programme identifies ways to intensify the use of ICT to increase competitiveness, national welfare and sustainable development.
651. In short the SPD strategy is designed to help address the acute development needs in order to catch-up with the EU and place Latvia on a better footing to realise the vision of an inclusive knowledge based economy.
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3.2.1. The SWOT Context for the SPD Strategy
652. The SWOT has highlighted the stability of Latvia’s macro-economy as the fundamental platform for the design and implementation of the SPD’s strategic objectives. Latvia’s ability to maintain strong economic growth rates, substantial FDI flows, low national debt and inflation means that new and faster economic growth can take place.
653. The SWOT underlines the need for economic growth rates to be translated into increased employment generation opportunities and a better balance of socio- economic activities throughout the territory. Key lead sectors have been identified such as services and forestry related industries. Furthermore Latvia’s excellent geographical location, transport assets, human and natural resources provide substantial business development opportunities.
654. Based on the SWOT analysis these obstacles are as follows: • Structural Unemployment – Annual economic growth rates are not making in-roads into the consistent annual unemployment rates; • Labour Market and Education – The labour market has to be expanded in quantity/quality and the skills mismatch between labour supply and demand reduced; • Regional Disparities – Economic disparities between the regions and Riga are widening. The on-going rationalisation of the agriculture sector may further widen the urban/rural divide; • Indigenous Economy – Latvian business is not growing and expanding at a sufficient rate to make the necessary contribution to medium-long term growth, employment generation and the public finances; • FDI – Latvia is very dependent on FDI and has to increase inflows in high value added sectors and key lead economic sectors to drive future growth and provide new opportunities for indigenous industry.
655. The SWOT underlines the importance of Latvia addressing its human resource development challenge if these obstacles to balanced economic growth are to be reduced. The SWOT also identifies the need to combine physical infrastructure inputs with human resource development measures if real employment and productivity rates are to be expanded.
656. As such it is necessary to ensure that the SPD objectives are well managed with on-going national development policies (e.g. reform of vocational education) to meet the changing labour demands of Latvia’s economic sectors. Furthermore it is necessary to ensure that all SPD measures (including infrastructure provision and access to finance) are well linked to support human resource development.
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3.2.2. Mid -Term Objectives
657. The limited lifetime of the SPD 2004-2006 programming period means that resources have to be well directed and weighted in order to maximise benefits. In line with the requirements laid down by the Vademecum for Structural Funds Plans and Programming Documents 2000-2006, realistic mid-term objectives (MTO) have been developed. These objectives are: • Promoting Competitiveness and Employment; • Development of Human Resources; • Development of Infrastructure.
658. Reaching above mentioned objectives will also contribute as first important steps towards reaching Latvia’s long term objective of becoming a competitive, knowledge based economy. When aiming at this long term objective the Structural Funds intervention in the first programming period should be concentrated to the creation of necessary environment for transition towards knowledge based economy. It implies providing necessary investments in the business promotion, human resources and infrastructure hence creating favourable conditions for individuals and companies to access knowledge and utilise it to the maximum benefit.
Promoting Competitiveness Businesses and Employment
659. The continued restructuring of the Latvian economy, the need to raise employment generation/productivity rates and EU accession mean that raising competitiveness is a key priority for this programming period.
660. One of the aspects identified by SWOT is the importance of Latvian business exploiting the competitive potential of innovative technologies. Initiatives to increase competitiveness will integrate well-targeted investments in top level human resource development and infrastructure. The combined impact of these initiatives will contribute to the generation of new employment opportunities in high value added sectors. Creation and strengthening the network of leading research centres and universities as well as ensuring link of these with private sector will allow absorbing available global knowledge, as well as ensuring transfer of technologies. It will facilitate alignment of Latvian business environment to the future conditions of the knowledge based economy.
661. Building on previous experience gained in the process of implementation of economic development initiatives the support will be provided in a demand- driven approach in order to minimise the market distortion as well to ensure market-orientated utilisation of funds.
662. The Latvian business community is not fulfilling its potential. Number of new business start-ups is very low. Majority of Latvian companies are SMEs or micro-businesses with very low productivity rates and limited opportunities to expand. At the same time the competitiveness of existing enterprises within EU Single Market can be undermined by inability to cope with regulatory requirements (environmental protection, safety at work, consumer protection) and the competitive pressure. Therefore initiatives should be taken to promote competitiveness of SMEs and support new innovation driven businesses start-
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ups. It can be achieved by helping to address the business to solve deficiencies like limited access to finance for start-ups and insufficient business skills. Those will also serve as tools to address the employment fall-out as a result of rationalisation of the agriculture sector and help reduce regional disparities by developing improved conditions for more diversified and new economic activities.
663. Supporting entrepreneurial activity will supply instruments to introduce greater product diversification, generation of higher value added and new product development in traditional (e.g. agriculture) and key lead economic sectors such as timber processing and transport logistics. These sectors will also benefit from support to increasing competitiveness of enterprises by investing in the business infrastructure to address market requirements of environmental protection, safety at work, and consumer protection.
664. Greater diversification will be encouraged in the sectors like food processing to reduce dependency on low value added exports and increase access to new more competitive markets. Quality assurance support measures will raise the productivity of the workforce in these sectors. The provision of access to market information and marketing training will increase business start-ups and encourage existing SMEs to expand.
665. Two primary branches of economy – agriculture and fisheries will deserve particular attention within a framework of SPD. Structural changes of agriculture and fisheries sectors will be addressed through the EAGGF and FIFG instruments. While investing in these two areas both the needs for modernisation and also socioeconomic importance of these branches in rural territories and coastal zone should be taken into account. The modernisation of the sectors of agriculture and fisheries is motivated by the need to comply with market regulations (e.g. food safety, hygiene) and also increasing efficiency, value added and diversification of production. At the same time local initiative and diversification of economy in rural and coastal territories should be stipulated.
666. One of the aspects identified by SWOT is the importance of Latvian business exploiting the competitive potential of innovative technologies in the future growth sectors. Following the national innovation strategy support will be targeted at applied research, new product development, and fostering linkages between research and business communities.
Development of Human Resources
667. The importance of addressing the mismatch between labour supply and demand, the overall decline in the active labour market and the need for specific instruments to address social exclusion have been constant themes in the SWOT.
668. Training provisions have to be enhanced at all levels based on the short term and future demands of the Latvian economy. New ways to deliver training and encourage the take up of training must be developed (e.g. advertising, grants). The private sector in partnership with universities has to be encouraged to promote and support employee life long learning. Tailored training instruments must be designed to address particular needs of marginalized sections of the community (e.g. disabled, non-Latvian speakers, long-term unemployed, peripheral communities).
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669. The supply of new training and education instruments, training of trainers, graduate conversion and school-to-work courses, training delivery mechanisms will be complemented by physical investments in training institutions and ICT. Training provision, life long learning and access to training for all will be positioned within the on-going reform and modernisation of the Latvian education and training system.
670. Latvia’s traditional economic sectors are already facing increased competition. Upon the EU accession the competition will increase. To exploit new opportunities in sectors like agriculture and maximise the economic potential of Latvia’s lead and new growth sectors, the linkages between the business community and Latvia’s education institutions have to be expanded. Long-term objective of moving towards knowledge based economy also requires development of well-educated and skilled workforce to create, share and utilise the knowledge. Investments will be mainly concentrated in the spheres of technology and engineering sciences. Ready supply of well-trained labour that can work in high value, export-oriented sectors are a major attraction for FDI.
671. New instruments, measures and incentives will be introduced to encourage reciprocal business and education links. Mainstream vocational and university teaching will be supported to supply more technology-based training and education directed towards the economy’s lead sectors. Increased educational infrastructure investments, ICT provision and incentives will encourage students to take up science based, engineering and ICT related education courses. These measures will also encourage the niche R&D strengths that Latvian universities possess in such areas as electro-magnetic physics and material sciences.
Development of Infrastructure
672. Latvia’s national transport system requires up-grading. Opportunities for increased efficiencies via inter-modal linkages are limited. Major gaps exist in social and environmental infrastructure. As a service based economy, poor infrastructure reduces competitiveness, discourages FDI and widens socio- economic disparities. The lack of sufficient access to telecommunications and Internet undermines Latvia’s potential to develop a knowledge-based economy.
673. In this SPD infrastructure provision will be integrated with business support services and human resource development. To reduce territorial disparities infrastructure measures will address infrastructure problems that limit accessibility, evolvement of new businesses, and employment across territory of the country. The assistance to address infrastructure will be targeted territorially addressing both objectives: • promoting growth of the country by concentrating assistance in main urban centres with economic growth potential; • narrowing internal territorial disparities through targeted interventions in territories outside major urban centres and rural territories.
674. Five main urban centres and economic growth poles or the country are connected by TEN-T transport network, however reconstruction of the first class roads to ensure that other economic development centres not located directly on TEN-T are connected to this transport network is still required (See Chapter 3.4. Single Strategy for Transport and Environment).
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675. In certain territories of the country mainly outside major urban centres investments are needed to address deficits in environmental infrastructure (strategy for drinking and waste water management, waste management see in the Chapter 3.4. Single Strategy for Transport and Environment) and district heating infrastructure. Lack of adequate infrastructure in theses areas considerably undermine economic activity and quality of life.
676. Investment in the infrastructure that supports preparation and use of highly educated human potential like equipping leading research centres and universities are crucial to that creates preconditions for transition towards knowledge based economy. However to ensure effectiveness and impact these investments will be concentrated in the territories where capacity is already exists and growth potential is clearly identified.
677. Investments in full-scale information infrastructure in order to facilitate the effective communication, dissemination and processing of information is necessary to ensure accessibility to knowledge and information resources across the territory of the country. Stimulating the increased use of ICT and improving accessibility to telecommunication networks will also reduce the negative effects of peripherality (See Chapter 3.2.4.1. Information Society).
678. Uneven development of social infrastructure and limited access to public services makes certain territories of the country, especially rural areas and small towns, less attractive to live and develop new business opportunities. Therefore infrastructure measures aimed at promoting employment, entrepreneurial activity and development of social infrastructure should be targeted in the manner to better address specific problems in underdeveloped areas also outside of the main urban centres. Intervention in the infrastructure and equipment of health, social care, labour market and vocational education systems should address equally the issues of accessibility of these services as well as quality. These investments will be strongly linked to policies of employment promotion and reducing social exclusion. It should also counterbalance out-migration and de-ruralisation tendencies in majority of territory of the country.
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3.2.3. Long Term Objective
679. These SPD interventions will complement the long-term objectives of the national development planning process. The long-term objectives of Latvia’s national development are: • To achieve convergence with EU per capita average; • To ensure balanced territorial development; • To transform Latvia into knowledge based economy.
680. This strategy will contribute to the welfare of Latvia within the EU by implementing the vision of a competitive, knowledge based economy.
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3.2.4. Horizontal Objectives – Coherence with the Policies of the European Communities
Information Society
681. The Lisbon European Council defined the goals and means to exploit opportunities presented by new information technologies. The e-Europe initiative of the European Commission provides a road map with concrete all- inclusive actions to achieve these goals. Development of the information society in Latvia is necessary in order to ensure smooth transition to the knowledge economy increasing efficiency of the national economy and raising competitiveness on the global scale, thus contributing to raising welfare and ensuring sustainability of Latvian economy.
682. In Latvia due to the low level of skills and unevenly developed ICT infrastructure, the use of the information and communication technologies in both households and enterprises is relatively low. Reflecting the objectives of e- Europe the second generation 48 information society programme Socio-Economic Programme e-Latvia aims at supporting ICT enabling infrastructure and skills in order to increase the competitiveness and sustainable growth of Latvia’s economy in the global market, accelerating the improvement of Latvian society as a whole. Within the framework of the e-Latvia Programme an array of nation wide projects was launched and being implemented now (Municipal Information System, Latvian Education Information System, Latvian Library Information System etc).
683. The main objective for this programming period is to focus around the provision of skills necessary for use of ICT in all layers of society as well as provide the necessary infrastructure and equipment to ensure access to the ICT as well as digitalised public services in the whole territory of Latvia. This means the development of information networks and infrastructure to lay the basis for a future information society and to begin addressing the digital divide in Latvia.
684. Development of rural telecommunication provisions will be encouraged through co-financing investments in the ICT by the national or local authorities in accordance with the Guidelines on Criteria and Modalities of Implementation of Structural Funds in Support of Electronic Communications ensuring open access for companies in using these communications at non-discriminatory conditions, technological neutrality in choosing solutions, allowing coverage of costs and a fair return on investments.
Sustainable Development and Environmental Protection
685. Decisions of the European Council in Gothenburg clearly defined interactive approach putting together social, economic and environment dimensions to ensure sustainable development. Due to Latvia’s rich and diverse natural
• 48 The National Programme ‘Informatics’ was elaborated in 1999 to cover development of the information society in the period of 1999-2005. Projects under the Programme are currently under way.
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resources, sustainable development is at the forefront when promoting competitiveness and socio-economic growth policies. Latvia has agreed a series of well-targeted environmental transitional arrangements namely: • Urban Wastewater Treatment – until 31 December 2015; • Quality of Water Intended for Human Consumption – until 31 December 2015; • Recycling and Recovery Packaging and Packaging Waste Targets – until 31 December 2007; • IPPC Compliance for 15 Installations – by 31 December 2010; • Safe Disposal of Asbestos Containing Hazardous Waste – 31 December 2004; • Health Protection of Individuals against Ionising Radiation in Relation to Medical Exposure – 31 December 2005; • Emissions of Volatile Organic Compounds from the Storage and Distribution of Petrol – until 31 December 2008.
686. In line with the priorities agreed in Gothenburg and commitments made the horizontal objective for implementation during this programming period will improve environmental management, decrease pollution and support the sustainable use of natural resources.
687. The National Environmental Policy Plan has been prepared in 2003. The main principles and goals of the environmental protection are formulated in the Plan and the measures to be taken for the achievement of the stated goals are defined. Particular emphasis is put on the integration of the environmental policy in other sectors of the economy (e.g. industry, agriculture, transport, forestry, fisheries and others) as well as at the level of national, regional and local planning. In accordance with the Plan the goals of environmental protection will also be taken into account throughout the implementation of SPD. Investments into environmental, energy and transport infrastructure are serving as important preconditions for improvement of environmental situation around territory of the country. Also support to the entrepreneurship is addressed in a manner to promote environmentally friendly practices in the businesses.
688. Sustainable development and environmental policy related documents in Latvia are prepared taking into account the main analogous documents of the EU (6 th Environmental Action Plan, the EU Sustainable Development Strategy etc) UN (Declarations and fundamental political documents of the UN Conferences on Environment and Development; UN Millennium Declaration) and regional documents (Visions and Strategies around Baltic Sea; Agenda Baltic 21 etc). The Strategy for Sustainable Development of Latvia has been developed and approved by the Cabinet of Ministers in August 2002. The principles of global sustainable development policy are defined in Rio de Janeiro Declaration. The objectives of the sustainable development of Latvia are based on those principles as well as its geopolitical place in the global perspective, nature particularities, the experience of social and economic development and the present situation.
Equal Opportunities and Gender Equality
689. The Government of Latvia has committed readiness to implement EU relevant gender equality and antidiscrimination principles. The major part of the acquis
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in the field of gender equality and anti-discrimination has been transposed with the entry into force in 2002 of the Labour Law and the Law on Labour protection. In order to complete transposition of the acquis in this area, notably the directives adopted from 2000 onwards, the necessary legislative amendments are under preparation and will be adopted by 1 May 2004 at the latest (except directives that will be transposed later according to the timeframe indicated in the directive). The Gender Equality Concept was elaborated and accepted by the Cabinet of Ministers in 2001 in order to address the issue. By accepting the Concept the Government of Latvia has decided to use the gender mainstreaming approach in gender equality policy development. One of the instruments to achieve goals set out in the Concept is the elaborated Programme for Gender Equality implementation. The Programme is a mid-term policy planning document and has six main objectives – education in all levels, work and family life reconciliation, prevention and rehabilitation of violence, sexual exploitation and human trafficking, awareness raising and capacity building about gender equality issues in governmental institutions, promotion of sustainable gender equality policy mechanism, education and information about gender equality issues of social partners, non-governmental institutions and mass media.
Territorial Cohesion
690. There are serious socio-economic imbalances between the various territories of Latvia. If these current tendencies are not addressed further migration will occur from less developed areas and increased de-ruralisation. Therefore the objective is to implement economic development measures supported by the EU Structural Funds in a manner that will begin diminishing the larger discrepancies of economic and social development between the territories of the country. SPD interventions in the development of transport network will focus on interconnection between economic development centres and important transport networks hence facilitating better accessibility and higher economic activity across whole territory of the country. Support to the development of environmental and energy infrastructure has been designed in a manner to address infrastructure deficits in the areas (small agglomerations) lacking critical mass of resources necessary for restructuring their public services. Measures of promotion of employment and development of human resources comprising both investments into human potential and supporting infrastructure should bring benefit equally to all parts of the territory. Therefore issue of accessibility and quality of labour market, education, social care and health care services in all parts of the territory is one of the key challenges for the SPD. Also integrated approach to the development of inclusive information society should foster territorial cohesion by minimising the negative effect of geographical distances and low density of population on the development of economy. The SPD measures aimed at development of rural territories and coastal zone will focus on the promotion of balanced development and providing specific economic development opportunities for rural and peripheral territories.
691. Acknowledging the fact that whole territory of the country is lagging behind considerably in its development compared to the rest of the EU and also economy of country in general requires considerable restructuring in order to move towards strategic goal of knowledge based economy for this short programming period of Structural Funds the nation wide approach has been
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chosen. In addition the scope of eligibility was not restricted territorially as well as specific targets for diminishing territorial disparities were not set. At the same time the problems of territorial disparities have to be taken in due account and monitored at the level of each measure during the implementation of the Programme.
Common Agricultural Policy
692. The Common Agricultural Policy (CAP) is comprised of a set of rules and mechanisms, which regulate the production, trade and processing of agricultural products in the European Union, with attention being focused increasingly on rural development.
693. The objectives of the CAP, as set out in Article 33 of the EC Treaty, are: • To increase agricultural productivity by promoting technical progress and by ensuring the rational development of agricultural production and the optimum utilization of the factors of production, in particular labour; • To ensure a fair standard of living for the agricultural community, in particular by increasing the individual earnings of persons engaged in agriculture; • To stabilize markets; • To assure the availability of supplies; • To ensure that supplies reach consumers at reasonable prices.
694. EC Guidelines for Programmes in the Period 2000-2006, Part 3: Urban and Rural Development and Their Contribution to Balanced Territorial Development have set the following priorities: • Stronger agriculture sector; • Improving the competitiveness of rural areas; • Maintenance of the environment and the Europe’s rural heritage.
695. The Latvian Rural Development Plan has been worked out for the receipt of the support co-financing from EAGGF Guarantee Section, for the programming period 2004 through 2006. The elaboration, implementation of the Plan, and the mechanisms of the implementation are in line with the requirements defined by EC Regulations 1257/99 and 445/2002 as well as agreements reached during accession negotiations.
696. The elaboration of the Latvian Rural Development Plan is aimed at ensuring, having regard to the requirements set forth by the EU and national legislation, the purposeful use of the national financial support and that co-financed by the EU for the development of the rural areas during the period from 2004 through 2006 based on the existing conditions in Latvia.
697. Under Rural Development Plan the following rural development measures shall be supported: • Agri-environment; • Less-favoured areas and areas with environmental restrictions; • Early retirement; • Support for producer groups; • Support for semi-subsistence agricultural holdings.
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698. The implementation of the Latvian Rural Development Plan is aimed at increasing the income level of farmsteads, developing and increasing the efficiency of production at farmsteads, having regard to the environmental requirements and diversifying the rural economic activities and the income, and maintaining the rural population.
699. The Latvian Rural Development Plan is closely coordinated with the SPD and both documents are complementary to each other. It is also ensured that there is no overlap between the interventions proposed in both programming documents.
Common Fisheries Policy
700. The Common Fisheries Policy (CFP) covers conservation, management and exploitation of living aquatic resources, aquaculture, and the processing and marketing of fishery and aquaculture products, where such activities are practised on the territory of member states or in Community waters or by Community fishing vessels.
701. The main objective of the Common Fisheries Policy is to focus on the sustainable exploitation of living aquatic resources based on sound scientific advice and on the precautionary approach to fisheries management. The long- term objective is to integrate the CFP within the Community’s established policies on sustainable development, taking into account environmental, economic and social aspects in a balanced manner.
702. Council Regulation (EC) No 2371/2002 of 20 December 2002 on the conservation and sustainable exploitation of fisheries resources under the Common Fishery Policy gives the general outlines and objectives of the CFP and is the basic policy implementing regulation. Structural interventions in the framework of this SPD concerning the fisheries sector must be in conformity with the objectives of the Common Fisheries Policy. These interventions are particularly subject to specific requirements and provisions fixed in Council Regulation (EC) No 1263/1999 and 2792/1999, lastly amended by Council Regulation (EC) No 2369/2002 of 20 December 2002. These provisions have to be respected even in the exceptional case of a fisheries action being financed by another fund. The interventions concerning the protection of aquatic resources, aquaculture, processing and marketing, and inland fisheries should have sustainable economic effect. The envisaged structural actions should give a sufficient guarantee of technical and economic viability and should particularly avoid the risk of creating any production over-capacity.
703. In order to determine the priorities of the fisheries sector two sub-programmes of “The National Development Program for the Fisheries Sector (1995–2010)” are elaborated: • Fishing Fleet Development Programme (2001-2003); • Fish Manufacturing Development Programme (2001-2006).
704. The main objective of the national fisheries policy is to balance fishing fleet capacity with fish resources available, to utilise these resources for production of competitive fish products for domestic and international markets, facilitating at the same time the integration of Latvian fisheries sector into the EU Common Fisheries Policy.
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705. The main objective of development of the fishing fleet is efficient and profitable use of fish resources accessible to Latvia in domestic and international markets in order to rise competitiveness of fish products, to balance the capacity of fishing enterprises according to fish resources and market opportunities, and to ensure the integration of the branch into the European Community according to the overall objective, as well as to develop the fishing fleet. It is necessary to ensure achievement of the objectives that are specific to this sector.
706. The objective of the development of the fish manufacturing is the implementation of structural transformations by developing technologically modern, effective and competitive fish-processing enterprises, which would create jobs, use comprehensively the intellectual potential and the infrastructure of coastal regions, as well as promote the further integration of Latvia into the Common Fisheries Policy of the European Union.
707. The SPD priority Promotion of Development of Rural Areas and Fisheries Development is based on the structural policy of the CFP and is closely related to other CFP areas. Both the CFP and the national policy objectives and priorities stress the importance of sustainable development of fish resources.
708. The SPD foresees FIFG financial support for the adjustment of fishing effort, which means scrapping of vessels in order to decrease the fishing effort. The measure on development of fishing port facilities should increase the quality of landed fish by increasing availability of ice and cold storage facilities. Improvement of processing and marketing of fishery and aquaculture products will help to adjust Latvian manufacturing to the EU sanitary rules this priority. The manufacturing has a great social importance, especially in coastal regions.
Community Initiatives Interreg
709. The complementarity with Interreg programmes both in programming phase as well as in the implementation phase have been taken into account in drafting the SPD. In principle the overlaps in the content of the programmes have been avoided and mechanism for ensuring double financing of activities has been prepared.
710. Latvia will participate in 2 Interreg programmes in the current programming period: • North Zone Interreg IIIC programme; • Baltic Sea Region Interreg IIIB programme (incl. IIIA priorities for Latvian- Estonian-Russian cross-border co-operation and for Latvian-Lithuanian- Belarus).
711. In general terms Interreg programmes will complement the Objective 1 SPD in certain extent by the following manner. North Zone Interreg IIIC programme will provide support for enhancing inter-regional co-operation across EU in the fields of activities supported under Objective 1 SPD. Thus the Interreg programme contributes for developing best policy approaches. BSR Interreg IIIB programme will provide a trans-national framework in which Objective 1 measures can be implemented. On the other hand joint trans-national projects supported under Interreg programme can lead to more concrete and financially
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bigger follow-up projects (especially regarding infrastructure) to be financed through Objective 1 SPD or Cohesion Fund support.
712. Latvia-Estonia-Russia and Latvia-Lithuania-Belarus cross-border priorities within BSR Interreg IIIB programme will complement Objective 1 SPD to a certain extent. The aim of the priorities are to contribute to the achievements of the SPD objectives by utilising the added value of cross-border co-operation in the border regions. The division of work between these two programmes is assured by the basic project eligibility criteria in Interreg priorities. Under these priorities projects bordering countries must benefit in terms of impact; and the projects must avoid double financing by any other EU grant. Equal
713. Both the SPD and Equal programmes are strategically related to the European employment and the inclusion priorities, which ensures the overall coherence between the two programmes. Due to the specificity of Equal, the measures foreseen are more targeted and the groups addressed are smaller, but the overall strategic framework is the same for the SPD and the Equal Community Initiative Programme.
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3.3. Policy Frame of Reference for Human Resources Development
714. In the Treaty of Europe signed in Luxemburg in 1995 Latvia has made the commitment to respect the requirements in the area of employment. Taking into account the strategic objectives set out in Lisbon and Stockholm in the summits of the EU Member States (to reach 67% total employment rate; female employment – 57% by 2005, and long term objectives – to reach 70% employment rate, female employment – 60% and persons of age 55-64 – 50% by 2010) and assessment of the progress made in adapting the employment system to be able to implement the European Employment Strategy, Joint Assessment of Employment Policy Priorities in Latvia (JAP) has been prepared and signed by the Government of Latvia and the European Commission, National Employment Plan (NEP) 2003 has been elaborated, and Joint Inclusion Memorandum will be signed in December, 2003. The main objectives of the Structural Funds intervention in the human resources development are to enhance the competitiveness and quality of the workforce through life long learning, regional and local development, information society, equal opportunities between women and men and to contribute to social cohesion and the economic growth, employability and employment promotion.
3.3.1. Joint Assessment Paper
715. The Government of Latvia and the European Commission, has on 6 February 2003 signed a Joint Assessment Paper of Latvia's employment and labour market policy priorities. The JAP presents an agreed set of employment and labour market objectives necessary to advance the country’s labour market transformation, to make progress in adapting the employment system so as to be able to implement the Employment Strategy and to prepare it for accession to the European Union. The main focus is made on the need to promote and manage structural change to establish flexible and adaptable labour markets appropriate for a dynamic market economy as part of a Single Market, to get the incentives right for taking up and creating jobs, to invest in human resources and promote activation and prevention.
716. The Joint Assessment Paper has identified a number of priority policy areas where progress is still needed in the Latvian labour market and where ongoing monitoring should be carried out in the context of the Employment Policy Review: • Sustained efforts (in terms of research, analysis, information systems and identification of appropriate policy measures) for a better understanding of structural disparities in the labour market; • Committed implementation of education reform, with particular emphasis on reducing drop-out in basic and initial vocational education, and on aligning vocational education and preparation with the needs of the labour market; • Expansion of continuing education and re-training in the context of a clear strategy and legislative framework for lifelong learning; • Maintenance, through social-partner consensus, of "employment-friendly" wage developments in line with growing labour productivity;
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• Reducing the "tax wedge", particularly at below-average earnings levels; • Development of the current structure of unemployment benefit payments, while at the same time improving social assistance provision for those unemployed who are not entitled to benefit; • Implementing an active strategy of supporting and encouraging job search and employability through systematic engagement of the professional education system with the unemployed throughout the unemployment spell. This will require efforts to increase the level of registration of the unemployed with the State Employment Service (SES) to guarantee the openness, accessibility of services and transparency of information concerning job offers; • Expansion of active labour market programmes as part of this activation strategy should be targeted to disadvantaged groups on the labour market by giving preference to training and human resources measures over those providing only temporary public works; • Implementation of the Concept Paper on Gender Equality; • Increased focusing of development supports, and of labour market interventions, on those regions hardest hit by unemployment, particularly Latgale; • Completion and reinforcement of the institutions required for implementing the European Social Fund.
3.3.2. European Employment Strategy and Employment Guidelines
717. Latvia has been following the European Employment Strategy and Employment Guidelines since 1999 through the Government commitment expressed in the Concept of the Cabinet of Ministers “On promotion of Employment” (adopted in 1999) and development of the annual National Employment Plan (NEP). NEP states SES tasks, priorities and measures in a field of promotion of employment and improvement of employability for unemployed and job-seekers as well as further development of active employment measures. It also determines tasks for SES with an aim to improve the quality and quantity of feasibility studies for demand in the labour market and to develop information flow on labour force demand and supply.
718. The employment promotion measures of NEP 2003 are closely linked with implementation of the JAP priorities and EU employment guidelines for policies of the Member States. Selection of employment measures in the NEP 2003 is based on current economic and social situation in Latvia and taking into account the experience of EU Member States. According to the established procedure, nearly all ministries, representatives of social partners and local governments were actively involved in development of NEP 2003 and defining, assessment and selection of priorities. Around 22.5 million LVL are allocated for implementation of about 57 activities set out in the NEP 2003.
719. As main activities set out in the NEP 2003 are:
720. In the area of active and preventative measures for unemployed and inactive (G1): • vocational training, retraining and qualification upgrading of the unemployed;
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• measures to improve competitiveness of the unemployed; • subsidised jobs for youngsters without job experience; • subsidised jobs for long-term unemployed and less competitive unemployed; • subsidised jobs for disabled unemployed; • further dissemination of professional guidance and counselling ensuring wider accessibility of services to adults, youngsters, unemployed; • analysis on the regional (local) needs and channelling funds for active labour market measures to the regions hardest hit by unemployment; • investments into IT systems of employment services for better data processing, information exchange and services to be provided to unemployed and co-operation partners; • improvement of co-operation of employment services with local actors on development of local employment plans.
721. In the area of job creation and entrepreneurship (G2): • measures to improve the business environment; • research on administrative procedures in Latvia and improvement of business environment; • implementation of the SME crediting programme (second phase); • improvement of the work and efficiency of the Guarantee Agency in line with the requirements of the labour market; • promotion of consulting to starting businesses; • development of a database of business support measures and initiatives (within the scope of the EU Multi-Annual Enterprise and Business Activity Programme 2001-2005); • implementation of the non-agricultural business development programmes.
722. In the area of promotion adaptability and mobility in the labour market (G3): • strengthening of social partners capacity to develop bipartite social dialogue (PHARE project) towards better balance between for improvement of working conditions, organisation of work at the enterprise, access to training etc.; • evaluation of possibility to introduce more flexible forms of labour contracts; • information dissemination to employees and employers on their rights (possibilities) towards work organisation in industrial relations.
723. In the area of promotion development of human capital and lifelong learning (G4): • elaboration and introducing of new standards of professions accordingly the needs of labour market and trends in national economy, involving social partners in this process; • strengthening of educational establishments in delivery of demanded study programmes and upgrading of skills of teaching staff; • support to studies and research on supply-demand in labour market and facilitation of implementation of results and findings; • optimising the number of study vacancies in the state funded programmes (by increasing the number of professional study programmes, the share the first-level professional study programmes, the number of study vacancies in the area of engineering and technologies, IT and decreasing the number of
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study vacancies in social sciences and teachers’ training, increase the number of doctorate study vacancies in all study areas); • dissemination of information on vocational guidance and counselling; • qualification upgrade measures for farmers and rural entrepreneurs.
724. In the area of increase labour supply and promote active ageing (G5): • giving focus on support of active labour market measures for unemployed at the pre-retirement age; • ensuring availability of jobs for certain groups of unemployed through subsidised work places for long-term unemployed, disabled unemployed, less competitive unemployed at the pre-retirement age; • channelling the professional guidance to unemployed promoting active involvement into labour market.
725. In the area of gender equality (G6): • strengthening of involvement of unemployed women in active labour market measures like training and retraining, subsidised work places etc.; • promotion of job opportunities for parents after child-care leave; • delivering vocational guidance and counselling services to women; • information dissemination activities on gender equality issues and its aspects in labour market.
726. In the area of promotion the integration of and combat the discrimination against people at a disadvantage in the labour market (G7): • active employment promotion measures for certain groups of persons: persons aged 15-25; persons with disabilities, persons after the maternity leave, pre-pension age persons not younger than 5 years below the officially established age of eligibility to the state old-age pension; persons who have been filed in the State Employment Service for longer than one year, persons after serving their sentence in correctional institutions and other target groups; • increase of supply of vocational education programmes for risk groups of people– persons with incomplete basic education, persons with special needs, inmates in correctional institutions. • promotion of activities targeted at special groups of persons (men, women, unemployed after the child-care leave, etc.) to help them raise employability and competitiveness.
727. In the area of address regional employment disparities (G10): • setting up a territorial councils of vocational education; • continuation of the started projects and develop the new ones within the scope of the Assisted Areas Development Programme; • development of employment promotion action plans for cities and rural areas.
3.3.3. Joint Inclusion Memorandum
728. Joint Inclusion Memorandum is policy document defining key political challenges and setting priorities and required medium and long-term action for promoting social inclusion and will serve as basis for National Action Plan. European Community and the Government of Latvia will mutually sign Joint Inclusion Memorandum in December, 2003.
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729. Key political challenges admitted as essential to reduce poverty and social exclusion in Latvia is as follows: • Overcome educational disadvantage. This will involve working closely with businesses (employers) and representatives of employees to create a favourable environment for the job market; create new jobs; ensure workforce mobility; increase resources for measures to enhance the employability of socially excluded groups; and to develop co-operation networks and partnerships among state and municipal institutions and NGOs and social partners at a local level. Special attention should be paid to efforts aimed at such social exclusion risk groups as the long term unemployed, pre- retirement age people, young unemployed persons, persons with disabilities, large and single parent families, women, ethnic minorities etc. • Formation of an inclusive labour market and promotion of employment. This will involve creating a favourable environment for the job market, creating new jobs, ensuring workforce mobility, increasing resources for employment promotion measures for socially excluded groups, developing co-operation networks among state and municipal institutions or partnerships at a local level. Special attention will be paid to efforts aimed at such social exclusion risk groups such as long term unemployed, pre-retirement age people, young unemployed persons, persons with disabilities, women, single parents, large families etc. There is also a need to explore the connection between unemployment, ethnic origin, language skills and regional disparities so as to increase the employment level of ethnic minorities in the most appropriate way. • Provision of adequate housing. In this case specific attention will be paid, at first, to support measures to assist people who are unable to obtain housing from the housing market, especially to such vulnerable groups as families with children, orphans coming of age, ex-prisoners. Second group of measures should be support to those groups of residents who do not possess enough income to pay for the housing area the family uses and for public utilities, especially to families with children and lonely elderly people in the cities, especially those who live in the denationalised housing facilities. At third, special support measures will be provided to people with disabilities. At fourth , special measures are important to support people (e.g. victims of violence, victims of trafficking, ex- prisoners etc.) to overcome short-term difficulties providing them with temporary housing opportunities and rehabilitation while the crisis situation hindering the social inclusion is overcome. • Ensuring an adequate income for all. With the help of wages, tax policy and social protection system to ensure opportunity for maintaining human dignity, paying specific attention to the people subject to several risks for social exclusion like unemployed persons with disabilities, single unemployed parents, homeless persons etc. • Developing social services. This means providing an opportunity for people to receive social services according to their needs and as close to their place of residence as possible. Educating professional specialists and raising their qualifications, developing the network of services, simultaneously improving the infrastructure required for the implementation of those services could achieve this.
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• Ensuring inhabitants to receive state guaranteed health care minimum and the access to the required medication. Simultaneously preventive measures will be taken to improve access to health care and to decrease the morbidity with social diseases (tuberculosis, HIV/AIDS, sexually transmitted infections, etc.). • Strengthen family solidarity and protection of children’s rights. The aim of such efforts is to build a healthy and favourable social and economic environment for family development. Special attention will be paid to the new families and families with children to eliminate possible crisis situations as well to provide support in crises. • Building institutional co-operation and increasing organisational capacity. This means building networks of institutional cooperation and fostering co-operation between national, municipal, non-governmental and private organisations in order to enhance the implementation and enforcement of policies. This will also involve increasing their organisational capacity . The human resources development is equally important with enforcement of political support systems and efficient, co- operation based partnership building.
3.3.4. ESF Links with Other Structural Funds
730. Considering the intervention objectives of the ESF as the main EU financial instrument for human resources development and improving of the labour market functioning, the ESF funding is intended to finance the priority ‘Development of Human Resources and Promotion of Employability’. The measures that are to be implemented in the framework of this priority are in line with the EU European Employment Strategy and above-mentioned national employment strategy documents. Investments necessary to ensure human resources development are defined within the priority “Development of Human Resources and Promotion of Employment” of the Single Programming Document. Close co-ordination will be ensured in order to ensure maximum complementary effect: • With the priority for Promotion of Territorial Cohesion – measure for Development of Education, Health Care and Social Infrastructure, financed by the European Regional Development Fund; • With the priority for Promotion of Enterprise and Innovation – measures for Support to Development of New Products and Technologies and Promotion of Innovation and for Development of Business Related Infrastructure, financed by the European Regional Development Fund; • With the priority for Promotion of Development of Rural Areas and Fisheries – measure for Training, financed by the European Agriculture Guidance and Guarantee Fund and Financial Instrument for Fisheries Guidance.
731. Coordination mechanism among involved institutions, programming approach and training will ensure synergy effect and avoid overlapping of measures.
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3.3.5. Policy Fields of European Social Fund
732. Further analysis of the human resources development and employment issues will be done according to the five policy fields of the ESF. Developing and Promoting Active Labour Market Policies (ESF Policy Field 1)
733. Positive tendencies in the socio-economic development of the state and economic growth in recent years was achieved mainly due to growth of productivity with minimal changes in the number of employed. The employment rate in Latvia is lagging behind the European Union average and the unemployment rate in Latvia is still high – 12.1% in 2002, especially in rural areas and it differs significantly in the regions due to high degree of regional imbalances. Restructuring of Latvian economy and globalisation processes created situation where skills of a large part of the population became irrelevant or outdated, indicated by high level of unemployment and low level of economic activity. Insufficient access of the people to the information on the labour market developments and professional training possibilities creates additional problems for integration into the labour market.
734. State Employment Service (SES) in co-operation with other institutions (e.g. educational institutions, social partners) is implementing the employment promotion activities: active labour market measures (training and retraining, temporary public works, measures for raising competitiveness). The special emphasis is laid on involvement in activities the young-aged, long-term, pre- pension aged, disabled unemployed and other risk groups of social exclusion.
735. The number of registered unemployed is approximately 1.3 times lower than the unemployment rate estimated according to the methodology of the ILO (LFS). There are several reasons for this difference: not all people can get unemployment benefit, many unemployed are not interested or are not able to master retraining programs (especially in pre-retirement age); often it is not easy to implement all the requirements to get the status of a registered unemployed, etc. Active employment measures offered by the employment services are an important tool for raising competitiveness and employability of unemployed. This is indicated by the fact that in 2002 more than 79% of the registered unemployed participating in professional training found the regular job. In year 2002 training has been performed mostly in regional centres, courses were organised as close as possible to living places of unemployed and the choice of courses depends on demand for professions, employers’ forecasts on business development and unemployed background education. The strategic approach to tackle the differences between the registered unemployment and LFS data is involvement of social partners in all stages to improve the situation in labour market in local as well as national level. The collaboration between employment services, local municipalities and social partners has considerably improved and local employment promotion plans have been worked out almost for all municipalities. Still further adjustment of all services according to the needs in labour market will be made. In this context the administrative capacity of employment services will be improved by enhancing the personnel skills and knowledge, improving service quality, developing work methods and working
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environment to be able to cope with local partnerships. At the same time supportive actions will be planned to raise the capacity of local actors to act within local partnership and promote local initiatives on specific employment issues presented in their municipalities and regions. Research and studies on disparities in labour market and particular groups in it will be applied, deeper analysis of the processes in labour market will be promoted and corrective actions taken. The improvement of information systems and accessibility to information on labour market issues, expending of usage of ICT and e-learning methods in employment services will be promoted as well.
736. The lack of Latvian language skills may be a risk factor for integrating into the labour market non-Latvian speakers. To address this problem the language training for this group of unemployed has been introduced in SES. Latvian language training has also been supported by international donors namely EU Phare programme, UNDP and others. Within Phare assistance Latvian language training component is included in society integration projects and is carried out by the Latvian Language Programme Unit under the Ministry of Education and Science. Phare allocation for this purpose as of 1998 up to 2003 is 4,2 MEUR; 1,7 MUER of the total amount is not contracted yet. Within Phare assistance Latvian language training is provided to several target groups including the unemployed. It is planned to train around 700 unemployed in 2003. The activities supported under Phare projects are in direct support for the National Programme for Latvian Language Training (NPLLT), a ten-year national initiative (1996 to 2006) implemented by the Latvian Language Programme Unit. Around 640 000 EUR is allocated yearly from the state budget for NPLLT, around 1 MEUR from the United Nations Development Programme and around 400 000 USD from bilateral assistance. Latvian language training to schoolteachers has been provided in 2003 within NPLLT. NPLLT significantly contributes also to the adult continuing training. In 2003 Latvian language training is provided for employees from interior affairs, medicine, kindergartens, army recruits and handicapped, altogether around 2700 adults. Naturalisation Board is another important Latvian language training provider for inhabitants of Latvia willing to obtain Latvian citizenship through naturalisation. Around 48 000 EUR were allocated for this purpose from the state budget in 2002 and around 76 000 in 2003. United Nations Development Programme supports the Naturalisation Board with yearly allocations amounting to 50 000 USD. In 2003 Society Integration Foundation has launched a tender “Latvian language training for adults” with amount of 45 000 EUR allocated from the state budget. State and municipal institutions, educational institutions applied and 56 project applications were received. This programme will be continued in 2004 as well.
737. Maintenance, through social partners consensus, of “employment-friendly” wage developments in line with growing labour productivity, reducing the “tax wedge”, particularly at below-average earnings levels, development of the current structure of unemployment benefit payment, implementing an active strategy of supporting and encouraging job search and employability, expansion of active labour market programs are important issues for promotion of employment and activity as well.
738. In order to ensure relevance of the qualification of the workforce with the development tendencies of the labour market and development of the national economy and to promote the competitiveness of the workforce the measure
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Promotion of Employment is set out under the priority Development of Human Resources and Promotion of Employment. This measure contains a number of preventive initiatives (raising the level of skills of employed persons) and active employment initiatives for unemployed. The measure focuses on the information and communication skills and others important in the modern world, as well as Latvian language skills. The measure will provide support to capacity building of the institutions responsible for implementing labour market policies (including local level authorities): systematic in-service training of staff, information initiatives on accessibility of employment services and on situation in the labour market, as well as research of the labour market issues. Promoting Equal Opportunities for All in Accessing the Labour Market (ESF Policy Field 2)
739. The important issue to ensure equal opportunities for all to participate in social life and labour market is provision of the special measures to facilitate the integration into the labour market for the people having specific problems integrating into the labour market. Several risk groups of social exclusion can be identified in Latvia – disabled, youngsters with low level of basic skills, persons in the post-penitentiary institutions, drug addicts, pre-pension unemployed, long-term unemployed, females after maternity leave. Since the youth unemployment in Latvia is comparatively high, special support has to be given to graduates to integrate them into the labour market. Another serious issue in Latvia that also needs special attention is the high drop-out rate from educational institutions. Great number of the long-term unemployed indicates the need to improve quality and accessibility of the employment services, in order to reduce the duration of unemployment.
740. The pilot projects: “Practice of young aged unemployed with the employer”, “Social enterprises to employ less competitive unemployed”, “Subsided jobs for pre-pension aged and disabled unemployed” implemented by SES in order to facilitate the integration process into the labour market for above mentioned risk groups.
741. The Concept Paper “Equal Opportunities for All” was accepted by the Cabinet of Ministers in 1998. The overall objective of the Concept is to provide equal opportunities for all members of society and to set out necessary measures to prevent obstacles for social inclusion of disabled persons.
742. Trying to find long-term solution for poverty elimination (considering the increasing polarisation of material well-being of people and the very low level of disposable income in the part of households), the government of Latvia in 2000 approved the Strategy for Poverty Eradication, setting the tasks to improve quality of life of poor by special measures in the areas of economy, employment, regional development and social welfare.
743. New pathways to the labour market have to be found. In the fight against poverty and social exclusion the potential of the knowledge-based society and the new ICT has to be fully exploited.
744. Lack of the Latvian language skills is an important factor that hinders the formation of multiethnic workforce and job opportunities for part of the population. In order to fully explore and promptly address the complex issue of
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ethnic origin, command of Latvian language, regional disparities and employment situation strategic approach of launching special studies and detailed analysis will be applied in 2004 to evaluate the impact of listed factors. Accordingly to the findings and conclusions of studies, strategic supportive actions will be formulated and the adaptation of the content of activities in the measures shall be carried out in years 2005-2006. The impact of actions and progress under the programme on the employment and labour situation of ethnic minorities will be monitored within the framework of the Monitoring Committee and the Annual Review meetings as well as in the Annual Implementation Reports. An appropriate knowledge base 49 covering the various dimensions of ethnicity will be set up for this purpose.
745. Under the priority Development of Human Resources and Promotion of Employment the measure Combating Social Exclusion is set out for integration of the socially excluded persons into the labour market. The measure includes – provision of training (especially focusing on basic skills and basic labour skills), distance learning, subsidised employment, development of entrepreneurship and self-employment; as well as widening the area of social rehabilitation programmes, development of pedagogical correction programmes, and integration of youngsters with special needs into general education system. Promoting and Improving Training, Education and Counselling as a Part of Life Long Learning (ESF Policy Field 3)
746. Considering the great amount of people lacking basic knowledge and skills essential for the development of modern knowledge-based society, the special measures are necessary to ensure the quality, relevance and accessibility of education and continuing training. Higher, professional and lifelong education fails to adequately react to the rapid changes of requirements of the labour market and economy; content of education as well as teaching and training equipment are outdated. In order to provide educated, flexible and competitive workforce able to contribute to economic development the improvement of education and training system is crucial. This shall lead to the increase the education quality, effectiveness and accessibility, including adult continuing training, on the whole of the territory of the country, thus balancing the regional employability disparities of the workforce (taking into account the essential regional disparities in the provision of education and training) and promoting socio-economic development of all regions.
747. In order to contribute to formation of information society, opportunities to acquire knowledge and training in ICT, including e-learning are of special importance.
748. To ensure the transition to the knowledge economy, the promotion within science and technology intensive sectors and preparation of specialists for
49 This will consist of the studies foreseen in the SPD and other information enabling to assess the scope and needs of potential beneficiaries as well as the relevance of the activities concerning the ethnic minorities in the programme. The information will relate to terms of reference of ESF, which covers issues linked directly or indirectly with the labour market.
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sectors, vitally important for the economic development of the country is essential.
749. The involvement of social partners in the improvement of relevance of educational programs (especially in VET), financing and providing vocational education and training for employees is important to stimulate the competitiveness of enterprises and employability of employees. 50 750. “The Concept of Development of Education for 2003 – 2005” defines the main policy priorities, objectives and measures to be implemented in education sector. Improvement of the quality of education of all types and on all levels is essential in order to promote competitiveness of labour force. Ensuring an access to education, continuing training and lifelong learning to all residents of Latvia is important and must interwove further policy development in education.
751. “The Program of Development of the Vocational Education and Training for 2003 – 2005” 51 ensures a continuity of reform in VET. Ministry of Education and Science will continue to support a development of professional standards, programmes and competence based examination in VET, teacher training and development of information and guidance networks.
752. The further implementation of principles of Bologna Declaration and Life Long Learning Memorandum in the system of higher education is essential. “Guidelines for Development of the Higher Education, Science and Technology in 2002-2010” 52 and “The Program for Renewal of the Academic and Scientific Personnel” 53 contribute to setting goals for development of more labour market oriented study programmes and support to innovations.
753. In order to stimulate the competitiveness of enterprises and employability of individuals through the development and implementation of relevant education in the areas crucial for the economic growth, the measure Development of Education and Continuing Training is set out under the priority Development of Human Resources and Promotion of Employment. Within the measure support will be provided to public education and training institutions to manage the improvement study programmes in the science and technology intensive branches; expand training for adults by promoting development of networks for continuing training and life long learning needs, development and implementation of continuing training courses and modules. Special attention will be devoted for the efforts of developing the national strategy for adult training and life-long learning, supporting respective research and analyses, and building the mechanisms, facilitating the launch and implementation of such strategy. Support will be given also to education institutions and agencies involved in the improvement of quality of education and training; to the
• 50 Approved in the Parliament on October 17, 2002 • 51 Approved in the Cabinet of Ministers by regulation of September 4, 2003. The document presents development priorities and directions for action in vocational education and training. • 52 Approved with the regulation nr. 125 of the Ministry of Education and Science, March 12, 2002 • 53 Prepared in conformity with “ The Concept of Development of Education 2002 – 2005”. Both documents present directions for development of the higher education.
200 Single Programming Document for Latvia Objective 1 Programme 2004-2006 partnerships involving social partners in education and training; to the projects improving the career education and guidance counselling in the educational institutions; and to higher education establishments and individuals co-funding Master and Doctoral level studies.
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Promoting Skilled, Trained and Adaptable Workforce and Developing Entrepreneurship (ESF Policy Field 4)
754. As a consequence of Latvia’s strategy of changing the labour-based economy to a knowledge-based economy, it is necessary to promote innovations, the development of knowledge-based, engineering and technological industries, strengthen the links between education, science and entrepreneurship. Under these conditions it is important to offer possibilities of retraining and supplementary training, skills promotion to the workforce affected by structural changes to ensure a well-trained and adaptable workforce. It is planed to continue tripartite and bipartite co-operation between social partners in order to promote adaptation capacities for enterprises and employees. Confederation of Employers of Latvia and Latvian Free Trade Union carry out activities to harmonise industrial relation with the new Labour Law to optimise individual work contracts and collective agreements, to motivate employers to invest in retraining of employees and increase of labour quality.
755. Favourable business environment is important factor for creation of more and better jobs. The low number of entrepreneurs and self-employed in Latvia is the reason to facilitate the start-ups of new enterprises and self-employment. Taking into account that enterprises have to operate in the conditions of globalisation, they have to use modern ICT and management methods, as well as foreign languages, etc., development of existing small and medium-sized enterprises in order to increase competitiveness is important as well. In this situation the accessibility of training and counselling is important.
756. To eliminate the obstacles for start-ups of enterprises, further perfection of services to taxpayers is planned alongside with enforcement of unified tax legislation, using electronic communication means. National Program for the Development of SME in Latvia 1997 – 2001 was adopted in 1997. In 2003 the Ministry of Economics is planning to submit to the Cabinet of Ministers the updated programme for the period of 2003-2006. Programme activities are being developed in co-operation with SME representatives and experts.
757. On September 13, 2002 the Latvian party signed the Memorandum on joining the EU multi-annual Program for Enterprises and Business, Especially for SME 2001 –2005.
758. Upgrading the skills and competencies level of public sector employees by improving the availability of training is essential as well. The modernisation of public administration and the development of delivery structures for human resources development, the reinforcement of the professional skills of the public administration is the pre-requisite for the successful development of the country.
759. In measure Promotion of Employment under the priority Development of Human Resources and Promotion of Employment activities are planed for promotion a skilled, trained and adaptable workforce and developing entrepreneurship. There will also be synergies with consultation activities to SMEs of measure Enhancing business support measures for SME under priority Promotion of Enterprise and Innovations that are targeted to improve the competitiveness of SMEs.
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Improving Women’s Access to and Participation in the Labour Market (ESF Policy Field 5)
760. Even though the female employment rate is higher than the EU average and the number of women having obtained higher education is bigger (1.6 times) than that of men, the salary for women in almost all the sectors of national economy is smaller, and the number of women in business and leading positions is relatively low. Female employment is more concentrated in the fields like education; healthcare and social care where average wages are relatively low. The reason is that social guarantees and family-friendly employment practises are more widely available within the public sector. The gender-gap in wages has been relatively stable, with female wages being approximately 80% of the male level over the period since 1994. The participation of women in politics and senior public administration is low as well. Therefore, in Latvia vertical and horizontal gender segregation can be observed.
761. The Concept Paper of Gender Equality was accepted by the Cabinet of Ministers in 2001. The overall objective of the Concept Paper is to enable an effective, integrated and co-ordinated approach to gender equality on all levels. To ensure this, Programme for Gender Equality implementation has been elaborated.
762. Considering that women are mostly responsible for most of the house-works, the reconciliation of work and family life, opportunity to work part-time and reducing the risk of women to become unemployed after the child-nursing period, the provision of good quality care services for children is crucial in Latvia.
763. Provision of special active labour market initiatives are planed under the measure Combating Social Exclusion of the priority Development of Human Resources and Promotion of Employment to promote inclusion of the unemployed women after maternity leave into the labour market.
764. The gender equality aspect as horizontal objective is included throughout the SPD, primarily within the priority Development of Human Resources and Promotion of Employment, e.g.: output indicators and baseline data are broken down by gender to monitor gender gaps and to measure progress in gender equality, gender experts have been involved in programming, training on gender mainstreaming has been provided to the staff involved in programming, additional points in the selection criteria will be assigned to those projects which contribute to gender equality, gender balance in Monitoring and Steering Committees will be encouraged etc. Specially targeted initiatives will promote employability and entrepreneurship of women, especially of those returning to the labour market after the child- care leave. Capacity of the institutions responsible for development and implementation of gender equality policy will be strengthened.
765. Additional activities to improve women participation in the labour market and to reduce poverty feminisation will be promoted via EQUAL Initiative.
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24. Table. Interrelationship between the Joint Assessment of Employment Priorities in Latvia, Joint Inclusion Memoranda (to be signed by December, 2003), National Employment Plan, Latvia’s Draft Single Programming Document, 4.3. Priority “Development of Human Resources and Promotion of Employment” and the Community Initiative EQUAL draft Programme
EU Policy Fields of Priorities set in the Joint Measures of the National Priorities set in Measures identified in Themes set in a Employment European Assessment Paper Employment Plan the Joint the Single Community Guidelines Social Fund Inclusion Programming Initiative EQUAL Memoranda Document draft Programme
Active and Developing and Expansion of active labour -vocational training, retraining Strengthening Promotion of active 770. Facilitation preventative promoting active market programmes targeted to and qualification upgrading of accessibility to employment measures. of measures for labour market disadvantaged groups. the unemployed; lifelong learning Promotion of re-training the policies (ESF opportunities. integration Establishment of appropriate -measures to improve and continuing training unemployed policy field 1) and re- institutional framework; competitiveness of the Promotion of for raising the and inactive integration unemployed; employment of qualification of both (G1) Implementing an active the most employed and the groups strategy of supporting and -subsidised jobs for youngsters disadvantaged unemployed. under the encouraging job search and without job experience; people. risk of employability through -subsidised jobs for long-term 766. Provision of systematic engagement of the Access to social unemployed and less training professional education system qualitative social exclusion competitive unemployed; targeted to with the unemployed service. into the throughout the unemployment -subsidised jobs for disabled disadvantaged Providing of labour spell. unemployed; groups. appropriate market Development of the current -further dissemination of income. 767. Provision of Integration of structure of unemployment professional guidance and subsidised asylum seekers and benefit payments, while at the counselling ensuring wider employment. migrants into the same time improving social accessibility of services to labour market. assistance provision for those adults, youngsters, 768. Widening of unemployed who are not
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entitled to benefit unemployed; area of social analysis on the regional (local) rehabilitation needs and channelling funds programmes. for active labour market measures to the regions hardest 769. Development hit by unemployment; of pedagogical -investments into IT systems of correction employment services for better programmes. data processing, information Integration of youngsters exchange and services to be with special needs into provided to unemployed and general education co-operation partners; system. -improvement of co-operation Provision of support to of employment services with capacity building of the local actors on development of institutions responsible local employment plans. for implementing labour market policies.
Job creation Developing and Sustained efforts (in terms of -measures to improve the Promotion of research on and promoting active research, analysis, information business environment; the labour market issues. entrepreneurs labour market systems and identification of -research on administrative hip (G2) policies (ESF appropriate policy measures) procedures in Latvia and policy field 1) for a better understanding of Provision of training in improvement of business structural disparities in the entrepreneurial and environment; labour market. management skills. Promoting equal -implementation of the SME opportunities for crediting programme (second all in accessing phase); the labour -improvement of the work and market efficiency of the Guarantee (ESF policy field Agency in line with the 2) requirements of the labour market;
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-promotion of consulting to starting businesses; Promoting skilled, trained -development of a database of and adaptable business support measures and workforce and initiatives (within the scope of developing the EU Multi-Annual entrepreneurship Enterprise and Business (ESF policy field Activity Programme 2001- 4) 2005); -implementation of the non- agricultural business development programmes.
Address Promoting equal Sustained efforts (in terms of -strengthening of social partners Promotion of research on change and opportunities for research, analysis, information capacity to develop bipartite the labour market issues. promote all in accessing systems and identification of social dialogue (PHARE adaptability the labour appropriate policy measures) project) towards better balance and mobility market for a better understanding of between for improvement of in the labour (ESF policy field structural disparities in the working conditions, market (G3) 2) labour market. organisation of work at the enterprise, access to training Promoting etc.; skilled, trained and adaptable -evaluation of possibility to workforce and introduce more flexible forms developing of labour contracts; entrepreneurship -information dissemination to (ESF policy field employees and employers on 4) their rights (possibilities) towards work organisation in industrial relations.
Promote Promoting and Sustained efforts (in terms of -elaboration and introducing of Strengthening Promotion of research on development improving research, analysis, information new standards of professions accessibility to the labour market issues.
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of human training, systems and identification of accordingly the needs of labour lifelong learning 771. Improvement capital and education and appropriate policy measures) market and trends in national opportunities. of study lifelong counseling as for a better understanding of economy, involving social learning (G4) part of lifelong structural disparities in the partners in this process; programmes in learning (ESF labour market. the science and -strengthening of educational policy field 3) technology Committed implementation of establishments in delivery of Promoting education reform, with demanded study programmes intensive skilled, trained particular emphasis on and upgrading of skills of branches. and adaptable reducing drop-out in basic and teaching staff; workforce and initial vocational education, 772. Provision of -support to studies and developing and on aligning vocational support to research on supply-demand in entrepreneurship education and preparation with education labour market and facilitation (ESF policy field the needs of the labour market. of implementation of results institutions and 4) Expansion of continuing and findings; agencies education and re-training in involved in the -optimising the number of the context of a clear strategy study vacancies in the state improvement and legislative framework for funded programmes (by of quality of lifelong learning. increasing the number of education and professional study training. programmes, the share the first-level professional study 773. Provision of programmes, the number of support to the study vacancies in the area of partnerships engineering and technologies, IT and decreasing the number involving of study vacancies in social social partners sciences and teachers’ training, in education increase the number of and training. doctorate study vacancies in all study areas); Provision of support to higher education -dissemination of information establishments and on vocational guidance and individuals co-funding counselling; Master and Doctoral
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-qualification upgrade studies. measures for farmers and rural Expansion of training for entrepreneurs. adults by the development and implementation of continuing training courses and modules. Provision of support to the projects improving the career education and guidance counselling in the educational institutions. Promotion of re-training and continuing training for raising the qualification of both employed and unemployed.
Increase Promoting and Expansion of active labour -giving focus on support of Promotion of 774. Promotion of 775. Facilitation labour supply improving market programmes targeted active labour market measures employment of active of and promote training, to disadvantaged groups. for unemployed at the pre- the most active ageing education and retirement age; disadvantaged employment integration
(G5) counseling as people. measures. and re- -ensuring availability of jobs part of lifelong integration for certain groups of learning (ESF unemployed through the groups policy field 3) Providing of subsidised work places for under the appropriate long-term unemployed, risk of income. disabled unemployed, less social competitive unemployed at the exclusion pre-retirement age; into the -channelling the professional labour
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guidance to unemployed market promoting active involvement into labour market. 776. Integration of asylum seekers and migrants into the labour market. Gender Promoting equal Implementation of the -strengthening of involvement The gender equality Reconciling family equality (G6) opportunities for Concept Paper on Gender of unemployed women in active aspect as horizontal and professional all in accessing Equality. labour market measures like objective is included life, re-integration
the labour training and retraining, throughout the SPD into the labour market subsidised work places etc.; document, especially market by (ESF policy field within the priority development of -promotion of job opportunities 2) “Human Resources flexible forms of for women after maternity Development and work, and necessary Improving leave; Promotion of services. Reducing women’s access -delivering vocational guidance Employment” gender gaps and to and and counselling services to considering the pay gaps segregation in the participation in women; and the high segregation labour market. the labour level in the Latvia’s market (ESF -information dissemination labour market. policy field 5) activities on gender equality issues and its aspects in labour market. Promoting Promotion of Promote the Expansion of active labour -active employment promotion 777. Provision of 781. Facilitation equal employment of integration of market programmes targeted measures for groups at risk of training of and combat opportunities to disadvantaged groups. social exclusion; the most the for all in disadvantaged targeted to integration -increase of supply of discriminatio accessing the people. disadvantaged and re- vocational education n against labour market groups. integration
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people at a (ESF policy programmes for risk groups of Providing of the groups disadvantage field 2) people – persons with appropriate 778. Provision of subsidised under the in the labour incomplete basic education, income. risk of market (G7) persons with special needs, employment. inmates in correctional social
institutions. 779. Widening of exclusion area of social -promotion of activities into the targeted at special groups of rehabilitation labour persons to help them raise programmes. market employability and competitiveness. 780. Development Integration of of pedagogical asylum seekers and correction migrants into the labour market. programmes. Integration of youngsters with special needs into general education system.
Address Developing and Promoting of regional -setting up a territorial councils Promotion of active regional promoting active cohesion by increased of vocational education; employment measures. employment labour market focusing of development -continuation of the started disparities policies (ESF supports, and of labour projects and develop the new (G10) policy field 1) market interventions, on ones within the scope of the those regions hardest hit by Assisted Areas Development unemployment, particularly Programme; Latgale. -development of employment promotion action plans for cities and rural areas.
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3.4. Single Strategy for Transport and Environment
3.4.1. Transport
782. Transport development in Latvia is based on “The National Transport Development Programme” for the period of 1996-2010 approved in November 14, 1995 by the Cabinet of Ministers of the Republic of Latvia and specified average term programme for the period 2000-2006. Its goal is to establish an efficient, safe, multi-modal, integrated and competitive transport system, which will also contribute to the environmental and safety objectives. Environmental protection is made an integral part of transport policy by special subprogram “Development of Environmentally Friendly Transport System” in “The National Transport Development Programme”. National Transport Development Strategy is based on long-term principle envisaging closer integration into European transport system. The National Transport Development Programme is an integrated programme, which determines the general goals and the sub-aims of transport development, the main strategic and financial means and measures. National Transport Development Program consists of 9 sub-programs which include maintenance and development of transport infrastructure, transport corridors’ development and integration into the European transport system, transit development, traffic safety improvement, development of environment- friendly transport service system, development of freight and passenger transport services in both – inland and international traffic.
783. The development of transport in Latvia is based on a principle of sustainable development. In the line of White Paper on Transport environmental protection measures are made an integral part of transport policy by special subprogram “Development of Environmentally Friendly Transport System” in “The National Transport Development Programme”. The goal of this subprogram is to establish a well planned, environmentally friendly transport system (in order to decrease harm inflicted on environment and health of population) by means of: • Development of environmental friendly transport infrastructure, • Optimization and control of vehicles and transport flow, • Decrease of emission and noise from the transport vehicles, • Establishment of system of chemical substances used in exploitation and final processing of transport vehicles and spare parts, • Improvement of surrounding environment for environmentally friendly and sustainable transport development, • Ensuring public safety of dangerous cargo transportation.
784. In order to reduce the number of accidents, especially with serious casualties, the National Road Safety Programme 2000-2006 was approved in 1999. The tasks of the programme include: • Increased control over road traffic participants; • Safety of the less protected participants of road traffic, especially pedestrians and cyclists; • Education, training and formation of understanding of road traffic participants; • Improvement of the road traffic safety after dark;
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• Rescue agencies and emergency services; • Engineering technical measures; • Control of technical condition of the vehicles.
785. It is envisaged to use the co-financing by Cohesion Fund to develop the transport corridors of international importance – TEN-T network, hence all projects related to TEN-T (road and rail) are eligible for assistance under the Cohesion Fund, including: • Development of Via Baltica and East-West road corridor by improving the quality of infrastructure and traffic safety, by increasing the bearing capacity of bridges and roads, as well as in separate routes by envisaging construction of new sections (Riga-Koknese and other); • The construction of access roads to Ventspils and Liepaja ports, as well as improving of traffic situation in Riga, including the construction of a new Daugava river crossing; • The modernisation of East-West railway corridor, envisaging the increase of safety level and throughput capacity, including the construction of a double track on the route Riga-Krustpils; • The development of infrastructure of the international airport Riga including the access road to airport and further modernisation of air traffic control system; • Further development and increase of competitiveness of the infrastructure of Latvia large ports, as well as the development of ferry traffic (the possibility to finance this aim depends on the decisions of EC in near future); • In the next programming period (by year 2010) – the project Rail Baltica that will ensure efficient fast speed railway traffic between the Baltic States and West Europe.
786. Taking into account the new EU transport policy that orientates on development of environmentally friendly transport means and the large share of transit freight in the total transport services, it is envisaged to divert 45% of EU funding to railway projects in the programming period for the years 2000-2006. It is envisaged to promote the short sea shipping and maritime transport (development of port infrastructure and access routes) using Cohesion Fund support. The Structural funds support will be diverted to regional port development (not included in the TEN-T). The measures supporting the public transport and transport organisation in urban areas also will be addressed within Structural fund support.
787. Based on the potentially available financing and the requirement to provide clear distinction between the activities financed by each financial instrument, the priorities for ERDF co-financing for the time period 2004–2006 in the transport sector will mainly address the transport infrastructure projects that will ensure the connections to TEN-T network, elements thus promoting economic growth and the accessibility of regions
788. The Ministry of Transport is selecting the sections of the 1st class roads network to be reconstructed in accordance with the principles set in the State Road Network Maintenance and Development programme (2000-2015).
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54 789. Two types of criteria are applied to select the priority set of the 1st class road sections to be upgraded with the help of assistance from European Regional Development Fund – technical criteria and economic feasibility criteria.
790. The two main technical criteria are traffic intensity and the technical condition of the road. Latvian Road Administration is responsible for elaborating a list of 1st class road sections which need upgrading in accordance with technical criteria. The list is submitted to the Ministry of Transport for further analysis. To decide on exact set of road projects to be co-financed from ERDF the Ministry of Transport is selecting sections of the 1 st class roads which ensure necessary interconnections between district and regional centres (which are economic driving force in different parts of Latvian territory) and TEN-T network. The final decision is made after partnership consultations with Regional Development Agencies of five planning regions to ensure that selection is addressing properly the current needs of economic development of the territory.
791. The main groups of projects co-financed by ERDF: • Improvement of the 1st class roads of regional importance; • Optimisation of the city transport system organization and traffic safety improvements in Riga and other urban areas; • Improvement of seaport’s infrastructure and sea - side accessibility; • Modernisation of passenger railway rolling stock.
• 54 First class roads interconnect district and regional centres between themselves and provide connections to the state main roads (TEN-T network).
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3.4.2. Environment
792. The overall objective of the investments in the environmental infrastructure is the improvement of the quality of environment, improvement of the services quality and facilitation of the economic development of the country.
793. The basis for the investments in the environmental infrastructure is defined in the national strategic planning documents, namely: State Programme 800+ “Development of Water Services in Small and Medium Size Towns”, State Programme 500- “Strategy for the Solid Waste Management in Latvia”. The Directive Specific Implementation and Financing Plans (DSIFP) for the implementation of the requirements of the Council Directive 91/271/EEC concerning urban waste water treatment, Council Directive 98/83/EC on the quality of water intended for human consumption, Council Directive 1999/31/EC on the landfill of waste and the European Parliament and Council Directive 94/62/EC of 20 December 1994 on packaging and packaging waste have been developed on the basis of the strategic documents during 2001 and are approved by the European Commission as the Annex to the Negotiation Position for Chapter 22 Environment. In the DSFIPs the commitments for implementation of the Directives requirements by the specified dates are formulated.
794. For implementation of the requirements of the heavy investment directives (91/271/EEC; 98/83/EC; 1999/31/EC) 1the financial assistance from the EU ISPA financial instrument has been used in the pre-accession period. With the assistance of the ISPA fund, six large scale investment projects in the water sector and five solid waste management projects have been started or initiated, thus providing considerable assistance in reaching the objectives in the environmental sector. For similar type of new large scale investment projects in the environmental sector assistance will be requested from the EU Cohesion Fund.
795. The main priorities for the request of the financing from the Cohesion Fund for the time period 2004 – 2006 are defined as follows: • Implementation of the requirements of the Council Directives 91/271/EEC and 98/83/EC in the agglomerations with population equivalent above 2,000, by development of the integrated investment projects for the water services development (there are 88 municipalities, to which this threshold would apply). • Implementation of the requirements of the Council Directive 1999/31/EC, by development of regional solid waste management systems, including construction of the solid waste landfills and re-cultivation of the existing non-compliant dumpsites in each project area; construction of the hazardous waste landfill and supporting infrastructure.
• 551 Transition periods are described in the Latvian Cohesion Fund Strategy – Environmental Sector 2004-2006 Table 2.2 Transition Periods Agreed in the Negotiations for Compliance with the EC Directives.
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• The rehabilitation of the largest historically polluted sites in Latvia is a major issue to be addressed through the Cohesion Fund. Pollution from military and industrial activities accumulated prior to independence. Contaminants in the soil of these historically polluted sites are being leached into groundwater and surface waters where they present a risk to human health. This uncontrolled pollution is hindering the fulfilment of commitments set in international agreements and the implementation of the investment intensive EU Directives.
796. Based on the potentially available financing and the requirement to provide clear distinction between the activities financed by each financial instrument, the priorities for requesting of the ERDF co-financing for the time period 2004–2006 in the environmental sector are defined as follows: • Development of the water services in small municipalities (with a population equivalent below 2,000) in order to facilitate the economic development of the regions. • Development of a separate waste collection system by the installation of the separate waste collection points. • Re-cultivation of those non-compliant dumpsites that are not included in the ongoing ISPA projects and that will not be part of the potential Cohesion Fund projects (there are 75 dumpsites identified). • Upgrading of district heating system run by the municipal companies in order to decrease air pollution. • Promotion of environmentally compatible tourism activities and infrastructure development projects.
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3.5. Interconnection between the Strategy and Priorities
797. The Priorities outlined in the SPD are based on the mid-term objectives and reflect the mono-fund approach adopted during the elaboration of the SPD. In the first programming period, a mono-fund approach will make the implementation and monitoring of the Structural Funds more effective and transparent. The Strategy elaborates an integrated approach to the socio- economic development and most of the Priorities are of a horizontal nature, whilst others address individual mid-term objectives.
25. Table. Allocation of Priorities in Intervention Areas
Enterprise Human Infrastructure Priority / Measure Competitiveness Resources
1. Priority: Promotion of Territorial Cohesion
1.1. Measure: Improvement of Environmental X Infrastructure and Tourism 1.2. Measure: Development of Accessibility and X Transport System 1.3. Measure: Development of Information and X X Communication Technologies 1.4. Measure: Development of Education, Health Care X X and Social Infrastructure
2. Priority: Promotion of Enterprise and Innovation
2.1. Measure: Support to Development of Innovation X X X 2.2. Measure: Business Infrastructure Development X X 2.3. Measure: Enhancing Business Support Measures X X for Small and Medium Size Enterprises 2.4. Measure: Access to Finance for Small and X Medium Size Enterprises 2.5. Measure: Development of Public Research X X
3. Priority: Development of Human Resources and Promotion of Employment
3.1. Measure: Promotion of Employment X X 3.2. Measure: Development of Education and X X Continuing Training 3.3. Measure: Combating Social Exclusion X X
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Enterprise Human Infrastructure Priority / Measure Competitiveness Resources
4. Priority: Promotion of Development of Rural Areas and Fisheries
4.1. Measure: Investments in Agricultural Holdings X X 4.2 Measure: Setting Up of Young Farmers X X 4..3 Measure: Improvement of Processing and X X Marketing of Agricultural Products 4.4 Measure: Promotion of Adaptation and X X Development of Rural Areas 4.5 Measure: Forestry Development X X 4.6. Measure: Measure: Development of Local Action X X (LEADER+ type measure) 4.7. Measure: Training X X X 4.8. Measure: Adjustment of Fishing Effort X 4.9. Measure: Fleet Renewal and Modernisation of X Fishing Vessels 4.10. Measure: Development of Processing and X X X Marketing of Fishery and Aquaculture Products, Fishing Port Facilities and Aquaculture 4.11. Measure: Development of Coastal Fishery, X X X Socio-economic Measures, Aid for Temporary Cessation of Fishing Activities and Other Financial Compensation, Promotion of New Market Outlets and Support to Producer Organisations
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3.6. Programme Indicators and Targets
798. To monitor the impact of the implementation of the Strategy and the Priorities the following indicators will be used (the improvement foreseen is accounted for the three-year period of 2004-2006, to be assessed during the ex-post evaluation taking place not later than three years after the end of the programming period).
3.6.1. Programme Indicators
Context Indicators
GDP per capita calculated in accordance to the purchasing power parity standard as a share of the EU average Current value (2002) – 35% Source of information: Central Statistical Bureau and the Eurostat Employment rate (% of population aged 15-64) broken down by gender and age Current value (2002) – 60, 5% Source of information: Central Statistical Bureau Unemployment rate (% labour force 15+) broken down by gender, age groups (age 25 years
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Exports of goods and services Current value (2002) – 3 303 mln EUR Source of information: Central Statistical Bureau Value of foreign direct investments per capita Current value (at end of 2002) – 1 145 EUR per capita Source of information: Central Statistical Bureau Labour productivity – GDP in PPS per person employed relative to EU-15 (EU-15=100) Current value (2002) – 37 EUR Source of information: Eurostat
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Programme Level Impact Indicators
10 000 net new jobs will be created Source of information: Central Statistical Bureau and project monitoring reports The proportion of active economic enterprises will grow up to 20 enterprises per 1000 residents Current value (2000) – 18.3 economically active enterprises per 1000 residents Source of information: Central Statistical Bureau) The disposable income per one household member in rural areas will grow by 7% Current value (2002) – 1316.04 EUR Source of information: Central Statistical Bureau
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Horizontal Policy Programme Level Impact Indicators
Equal Opportunities Average salary of women as a percentage of the average salary of men Current value (2001) – 78.5% Source of information: Central Statistical Bureau Environment Supply of qualitative drinking water (with regard to chemical composition and with regard to biological indicators) Current value (2001) – 50.5% for chemical composition and 94.7% for biological indicators; Source of information: Latvian Environment Agency Share of collected and recycled solid waste Current value (2001) – 50% Source of information: Ministry of Environment Information Society Growth of number of Internet users per 100 residents Current value (2000) – 6.1 Internet users in Latvia per 100 residents Source of information: Latvian Internet Association
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3.6.2. Indicators at the Priority and Measure Level
1. Priority: Promotion of Territorial Cohesion [ERDF]
Impact Indicator Traffic flow of vehicles on the 1st class roads will increase up to 797 cars a day Current value (2002) – 731 cars a day Source of information: State Road Directorate Stabilisation of population outflow from regions to the capital Current value – in 2002 4475 persons migrated to Riga city and Riga district from other territories of Latvia Source of information: Central Statistical Bureau
Result Indicators
Decrease of 1st class roads’ sections in critical condition down to 26% in 2002 30% of the 1st class roads were in critical condition Source of information: State Roads Directorate Growth by 1 % of amount of residents provided with access to qualitative drinking water and sewage services currently 9% of Latvian residents are provided with the access to qualitative drinking water and sewage services Source of information: Ministry of Environment
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Growth of number of Internet users up to 6.8 Internet users per 100 residents in 2000 there were 6.1 Internet users in Latvia per 100 residents; Source of information: Latvian Internet Association 1.3. Measure: 1.2. Measure: Improvement of 1.4. Measure: Development of Development of 1.5. Measure: Development of Education, Health Environment and Tourism Information and Communication Accessibility and Care and Social Infrastructure Infrastructure Technologies Transport System
Output Indicators
1. Number of public internet 1. Kilometres of 1. Number of emergency aid dispatch centres 1. Number of water services access points created (break- renovated and assisted (break-down by newly-established and infrastructure projects (20) down by geographical asphalted roads (250) modernized) (6) distribution) (500) 2. Number of projects on tourism infrastructure and 2. Number of institutions (educational, labour products development (break- market, social care) assisted (50) down by types of projects) (10)
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2. Priority: Promotion of Enterprise and Innovation [ERDF]
Impact indicators
5000 net jobs created Source of information: Central Statistical Bureau and project monitoring reports Value of total (public and private) spending for science, research and development will grow up to 0.7 percent of GDP Current value (2000) – 0.48% Source of information: Central Statistical Bureau
Result Indicators
200 new businesses launched (break down by ownership gender structure) Source of information: project monitoring reports 2.1. Measure: Support to 2.5. Measure: Support to 2.3. Measure: Support for Development of New 2.2. Measure: 2.4. Measure: Access of Development of Increasing the Products and Technologies Development of Business Finance for Small and Competitive Research and Competitiveness of and Promotion of Related Infrastructure Medium Enterprises Development and Science Enterprises Innovation Potential
Output Indicators
1. Number of feasibility 1. Number of enterprises 1. Number of enterprises 1. Number of enterprises 1. Number of research studies supported (50) assisted (50) assisted (2000) assisted (600) projects supported (20)
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3. Priority: Development of Human Resources and Promotion of Employment
Impact Indicators Percentage of people staying in job at least 6 months after completion of the project (break-down by gender, age groups 56 ) – 60% Source of information: Project monitoring information Increase of share of students in engineering science and technology programmes (break-down by gender, age groups) by 2% during the programme period Current value (2001.-2002. academic year) – 10.2% Source of information: Ministry of Education and Science Long-term unemployment rate as a percentage of total number of unemployed) (break-down by gender, educational level 57 , age groups) will decrease down to 45% Current value (2002) – 46,1 % Source of information: Central Statistical Bureau
Result Indicators
Number of persons entering the labour market after training or re-qualification received (break-down by gender, age groups) – 24 400 Source of information: Project monitoring information
• 56 age groups: under 25, 25-55, above 55 • 57 educational level: basic, secondary, higher
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3.2. Measure: Development of Education and 3.1.Measure: Promotion of Employment 3.3. Measure: Combating Social Exclusion Continuing Training
Output Indicators
Number of people receiving support (break-down by gender, age groups, status in the labour market) – 93 780 Number of institutions receiving support – 250 Number of projects – 2 730 1. Number of persons receiving support 1. Number of persons receiving support 1. Number of persons receiving support (break-down by gender, educational level, age (break-down by gender, status in the labour (break-down by gender, educational level, groups), i.e.: i. unemployed and job seekers, ii. market, educational level, age groups, types of age groups), i.a.: i. unemployed and job employees, iii. Entrepreneurs (27 000) projects) (58 900) seekers, ii. Employees (6 520) 2. Number of teachers and academic staff 2. Number of institutions supported by trained (break-down by gender, educational 2. Number of specialists of social work capacity building measures (100) level, age groups and types of projects) trained (break-down by gender) (1 360) (14 500) 3. Number of partnership and development projects (break-down by sectors and branches, 3. Number of projects supported (1 100) 3. Number of projects supported (730) types of projects, types of Project owners) (650) 4. Number of curricula development projects (break-down by sectors and branches, types of projects, types of Project owners) (250)
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5. Number of educational institutions and networks supported (break-down by sectors and branches, and regions) (150)
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4. Priority: Promotion of Development of Rural Areas and Fisheries
Impact Indicators The difference in disposable income per one household member between urban and rural population will remain stable at 37% 58 Current value (2002) – 37% Source of information: Central Statistical Bureau
Result Indicators
Annual value added in the agriculture, hunting and forestry will grow up to 509 mln EUR Current value (2002) – 336.7 mln EUR Source of information: Central Statistical Bureau Total annual value of production in food industry will grow up to 1050 mln EUR Current value (2001) - 687.2 mln EUR Source of information: Central Statistical Bureau The gross monthly wage of employees in agriculture, hunting and forestry will grow up to 300 EUR Current value (2002) – 229 EUR Source of information: Central Statistical Bureau
• 58 The indicator is also used as a Programme level indicator assuming the same target; however the impact will be generated in synergy between a number of Measures and Priorities of the Programme.
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Measure 4.3.: Measure 4.4.: Measure 4.6.: Measure 4.1.: Improvement of Measure 4.2.: Promotion of Measure 4.5.: Development of Investments in Processing and Measure 4.7.: Setting Up of Adaptation and Forestry Local Action Agricultural Marketing of Training Young Farmers Development of Development (LEADER+ Type Holdings Agricultural Rural Areas Measure) Products
Output Indicators
1. Area covered by land improvement 1. Number of 1. Number of 1. Number of new 1. Number of activities (2004- 1. Number of 1. Number of person hours of supported agricultural supported 2006 – 19 000 ha) associations of Local Action training agricultural holdings supported processing and length of forest owners Groups supported services holdings (1000) (230) enterprises (150) drainage systems established (150) (3) (500 000) improved (1 700 km) 2. Number of 2. Area of newly implemented established forests business plans and (2004-2006 – 3000 projects elaborated ha) and improved (1 300) forests (5 000 ha) 3. Number of supported holdings
with diversified activities (400)
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4. Area cleared from scrubs and weeds (15 000 ha)
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4. Priority: Promotion of Development of Rural Areas and Fisheries
Impact Indicators Average catch volumes per vessel will increase up to 375 t Current value (2003) – 320 t per vessel Source of information – Latvian Vessel Register, National Board of Fisheries Value of volumes of fish products export will increase up to 94.3 million EUR Current value (2003) – 85.7 million EUR, Source of information – Central Statistical Bureau
Result Indicators
Fishing fleet capacity in terms of fishing vessel number and gross tonnage will decrease down to 190 and 15 827 respectively Current value (2002) – 217 and 17 827 Source of information – Latvian Vessel Register, National Board of Fisheries Number of fish processing companies corresponding to the EU hygiene requirements will increase up to 38 Current value (2002) – 10 Source of information – Food Company Register of the Food and Veterinary Service Number of companies involved in fish farming activities will increase up to 63 Current value (2002) – 48 Source of information – Food and Veterinary Service
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Fisheries export will increase up to 88.3 million EUR Current value (2002) – 86.3 million EUR Source of information – Central Statistical Bureau Fish product external trade balance will improve up to 57.8 million EUR Current value (2002) – 57.7 million EUR Source of information – Central Statistical Bureau 4.11. Measure: Development of Coastal Fishery, Socio-economic Measures, Aid for 4.9. Measure: Fleet Renewal 4.10. Measure: Development of 4.8. Measure: Adjustment of Temporary Cessation of Fishing Activities and Modernisation of Processing and Marketing of Fishing Effort and Other Financial Compensation Fishing Vessels Fishery and Aquaculture Products, Fishing Port Facilities and Promotion of New Market Outlets and Aquaculture Support to Producer Organisations
Output Indicators
1. Number of fishing vessels assigned for scrapping or 1. Number of fishing vessels 1. Number of fish processing 1. Number of coastal fishing vessels (boats) used for purposes other than supported (97). companies modernised (25). modernised (60). fishing (7). 2. Number of fishermen supported with the 2. Number of fishing vessels 2. Number of ports adjusted to the compensation due to permanent cessation of
built (3). fisheries needs (3). fishing vessels’ activities/temporary cessation of activities (110 / 240). 3. Number of aquaculture 3. Number of marketing initiatives carried
companies supported (15). out (10).
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4. Number of producer organisations
supported (2).
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4. Priorities
4.1. Priority: Promotion of Territorial Cohesion Priority Objective
799. The objective of the priority is to raise the quality of life, improve the attractiveness of regions and promote balanced development of the whole territory of Latvia. The objective will be achieved by developing infrastructure related to the quality of life (environmental, healthcare and education, employment and social care) and accessibility (transport, information and communication) throughout Latvia. Priority Measures
800. Improvement of Environmental Infrastructure and facilitation of tourism.
801. Development of Accessibility and Transport System.
802. Development of Information and Communication Technologies.
803. Development of Education, Healthcare and Social Infrastructure. Synergy
804. Measures included in the priority will be co-financed by the European Regional Development Fund. To ensure maximum complementarity during the implementation process, the measures of this priority will be coordinated with those taken under the auspices of the European Agriculture Guidance and Guarantee Fund in the area of development of rural territories, European Social Fund in the human resource development issues and with the Financial Instrument for Fisheries Guidance in the area of sea-ports development. This measure will also complement environmental and transport projects of the Cohesion Fund. To ensure proper coordination of activities related to the development of an information society and promotion of the use of information and communication technologies under different measures of this priority the Information Society Bureau will carry out supervision function and will report to the Managing Authority.
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4.1.1. Measure: Improvement of Environmental Infrastructure and Tourism Measure Rationale
805. This measure contains a group of activities aimed at improvement of the environmental quality: water services in the agglomerations with p.e. < 2000, waste treatment and waste separation and collection points, promotion of energy efficiency within district heating systems and public final consumer side. The measure also supports economic revitalisation of natural, cultural and historical heritage by developing the public tourism infrastructure and developing tourism products. Activities related to eco-tourism are also included. Environment
806. These initiatives in the environment sector will complement investments under the Cohesion Fund. Currently only a part of the residents of the country are provided with qualitative water supply, wastewater collection and treatment services, and waste management services. This problem has a negative effect on both public health and the quality of environment in general. The basis for the investments in the environmental infrastructure is defined in the national strategic planning documents, namely: State Programme 800+ “Development of Water Services in Small and Medium Size Towns”, State Programme 500- “Multi-year Waste Management Plan for Latvia 2003-2012” in which the focus is given to fulfilment of relevant legal requirements.
807. Within this measure, water infrastructure in settlements with a population equivalent below 2,000 will be developed. In accordance with the Cohesion Fund Reference Framework Document, these settlements are not addressed through the Cohesion Fund assistance.
808. To support waste management , ERDF will provide support for the establishment of separate waste collection points in municipalities, re-cultivation of small and medium scale non-compliant dumpsites based on the relevant national programme.
809. The district heating networks will be modernised in order to ensure compliance with the environmental requirements and improvement of energy efficiency of the district heating system.
810. At the moment a significant amount of public heating enterprises use fuel with high sulphur content, however the usage of this type of fuel is not permitted in accordance with environment protection requirements that are stated in Directive 1999/32/EC 59 . Assistance will be provided to transition from liquid fuels with high sulphur content to fuels with low sulphur content as well as to renewable fuel where appropriate. Implementation of these investment projects will allow reaching compliance with requirements of the directive 99/32/EC
• 59 Currently there are approximately 100 combustion plants that use heavy oil with sulphur content above 1% as a fuel. In 40 out of these 100 combustion plants heavy fuel oil is the only fuel used. Almost all of these combustion plants are municipalities owned enterprises that supply energy to district heating systems.
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relating to the sulphur content in certain liquid fuels and respective national legislation. As a result, reduction of emissions of sulphur dioxide as well as greenhouse gases in national scale is expected that will ensure achievement of the goals set by the directive on the national emission ceilings.
811. Public investments will be made to foster the Step 2 of energy sector restructuring plan – “Increase energy efficiency and rehabilitation of district heating network systems by public support” in order to ensure faster emergence of break even point of district heating systems that would latter result in an opportunity to fulfil the Step 3 – allow the sector operate on commercial basis.
812. For each district heating system a restructuring plan in accordance with Municipality Development Plans will be established including identification of necessary investments for efficiency of production, conversion into combined heat and power (CHP), upgrading of distribution system and public owned buildings. Public investments will target decrease of heat transmission and distribution losses, increase of energy efficiency at boiler plants including cogeneration possibilities and promotion of wider usage of renewable energy resources. Attention will also be paid to avoidance of parallel investments in two supply systems for gas and district heating. As a result of promotion of energy efficiency efforts the reduction of fuel consumption and green house gas (GHG) emissions will be achieved.
813. Support for substantial increase in energy efficiency on the public final consumer side will be provided facilitating reduction of the negative influence of the energy sector on the environment. There are many energy users’ facilities with high potential to increase energy efficiency. To realize this potential assistance will be offered for energy audit 60 performed at public consumer side, for preparation and implementation of energy efficiency projects, including reconstruction of internal energy usage systems, heat insulation of buildings, and installation of automatic regulation systems. As a result of promotion of energy efficiency efforts the reduction of fuel consumption and GHG emissions will be achieved. However, private housing will not be financed through above mentioned activities.
814. The energy related activities which are financed by ERDF will be a continuation of the existing national projects under the Public Investment Programme. Tourism and Natural and Cultural Heritage
815. Promoting tourism provides new and alternative opportunities for the development across the territory of the country. Although tourism has developed rapidly in Latvia, several problems still exist, hindering further realisation of the potential of the sector, like insufficiently developed public tourism infrastructure and tourism products based on natural, historic and cultural heritage (cultural and nature tourism) to attract visitors. Tourism policy in Latvia is guided by the National Tourism Development Programme for Latvia 2001 –2010 and its
• 60 The energy audit will be carried out in accordance with Energy Efficiency Strategy 2000 and Conception for implementation of Directive on Energy Performance of Buildings 2002/91/EC by specially trained energy auditors. The current energy audit capacity is approximately 10 energy auditing companies (with 50 auditors). Further training and qualification raising for energy auditors will be provided in order to ensure implementation of Directive on Energy Performance of Buildings 2002/91/EC.
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Action Plan, therefore theses documents will serve as policy reference for implementation of tourism related activity under this measure. Development of tourism infrastructure will also allow more rational use of natural and cultural resources and will encourage sustainable development of the different parts of the territory of the country.
816. Support will be provided for investment in public tourism infrastructure (e.g. network of tourism offices, installation and improvement of tourism signs, specialised facilities designated for cyclists and pedestrians etc.). In addition, tourism products will be developed to attract more visitors and to reduce the impact of seasonality by improving provided services. The aim is to grant assistance for adapting indoor infrastructure including equipment for exposition and restoration and adaptation of the heritage entities for needs of public. . Support is also intended at promotion of nature tourism activities including development of eco-tourism facilities in the NATURA 2000 territories.
817. Measure is not covered by state aid legislation. All support to the promotion of tourism products and tourism infrastructure is aimed at public sector and therefore the results of the interventions will be accessible on equal terms to all potential users and operators in the market.
818. If the investments under this measure generate revenue a co-financing rate of less than 75% will be applied. Target Groups
819. The target groups addressed by activities will be municipalities, inter-municipal waste management organisations, municipalities owned water services and municipally owned energy enterprises as well as public bodies managing tourism services and natural, cultural and historical sites. Measure Objective
820. The objective of the measure is to improve the quality of environmental infrastructure and to support economic development by improving the necessary water supply, waste water and waste treatment infrastructure, to promote energy efficiency and public district heating enterprises, to create public tourism infrastructure through effective use of natural and culture heritage potential. Indicative Activities
821. Development of water services in the agglomerations with p.e. < 2000.
822. Establishing waste separation and collection points.
823. Closure and re-cultivation of small and medium size non-compliant waste disposal sites.
824. Upgrading district heating networks to comply with the environmental requirements and increasing energy efficiency at both the production and distribution system of district heating and public final consumer side.
825. Creation and development of tourism products based on natural, historic and cultural heritage (cultural and nature tourism) as well as constructing or up- grading needed public tourism infrastructure at the same time preserving and increasing the economic potential of the cultural heritage.
826. Development of eco-tourism in Natura 2000 areas.
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Indicative Final Beneficiary
827. State institutions, municipalities, state or municipal enterprises, trade unions and non-governmental organisations, non-profit legal persons.
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4.1.2. Measure: Development of Accessibility and Transport System Measure Rationale
828. To encourage economic growth and job creation, it is necessary to promote balanced and sustainable development of the country. In order to reach this aim, opportunities for cargo transportation and mobility of inhabitants need to be improved, and at the same time to maintain and improve the environmental quality. According to the National Transport Development Programme, Cohesion Fund strategy for transport sector aims at solving problems in the Trans-European Network (TEN-T). However, these investments do not solve the problems on the TEN-T access routes and in local economic development centres where e.g. small ports can have an important role in local economic development. Moreover, the urban areas in Latvia face specific problems because of constantly increasing traffic volume. 61 829. The support of the ERDF will be aimed at modernisation of the first class road network in order to ensure that main economic development centres are well interconnected and connected to TEN-T. Investments are necessary due to poor condition of the asphalt pavement of the first class roads in many sections (unable to bear 11.5 ton axle load required according to the EU directives on traffic weight and dimensions), certain important sections do not have asphalt surface and considerable amount of bridges have exceeded their life span and are unsafe. The selection criteria for the road sections to be reconstructed within this measure are the current and forecast traffic volume and economic impact of the investment.
830. With the aim of establishing effective modes for public transport and improving transport planning and management as well as raising the compliance with environmental standards, initiatives will be undertaken to make the urban transport system (including public transportation) more efficient. Traffic safety problems will also be addressed in Riga as well as in other urban areas.
831. Taking into account that the main impact of the transport to the environment is related to the air pollution mainly from increasing number of vehicles, which results in the increased emissions of nitrogen dioxide and greenhouse gases. This measure will improve environmental situation through upgrading the quality of roads and urban transport, accordingly improving efficiency of traffic flow resulting in reduction of the emissions. Environmental Impact Assessment is carried out for construction and reconstruction of roads infrastructure and specific provisions aimed at protecting environment are introduced.
832. As the economic development of the seashore regions is heavily dependent on the development of the seaports, upgrading of public hydro-technical structures and sea-side access is needed.
• 61 First class roads interconnect main economic development centres which are not located on TEN-T and provide connections to the state main roads (TEN-T network).
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62 833. Modernisation of passenger railway rolling stock will be implemented in order to serve Riga commuting traffic and ensure compliance with the EC Directives on sustainable and environmentally friendly transport system. The purchase of rolling stock for commuting trains will be carried out in line with the EC Regulation 1191/69 (amended with the Regulation 1893/91) as regards compensation rules and provision of public service contract. Target Groups
834. The measure is aimed at development of public transport infrastructure therefore main target groups addressed are municipal and state agencies and companies involved in administration of transport networks, municipalities, port authorities. Measure Objective
835. To improve the quality and efficiency of transport infrastructure in order to ensure sufficient capacity for the continuously increasing cargo and passenger traffic and mitigate negative effect on the environment. Indicative Activities 63 836. Reconstruction of infrastructure of the first class roads, interconnecting the main economic development centres and connecting those to TEN-T network: • construction of asphalt pavement on gravel roads; • increasing of bearing capacity on roads with asphalt surface up to 11.5 ton axle load and improvement of traffic safety on sections of state roads and city transit streets; • bridge reconstruction and increasing of bridge bearing capacity according to EU standards.
837. Improvement of transport system efficiency in urban areas (e.g. improvement of traffic management and traffic safety in Riga transport node, increasing attractiveness of the public transport, improvement of urban transport system connections to TEN-T).
838. Improvement of seaports` infrastructure and sea-side accessibility. Reconstruction and development of the seaports` common hydro-technical constructions 64 and reconstruction and modernisation of navigation equipment.
839. Modernisation of passenger railway rolling stock for commuting traffic to Riga.
840. Studies related to the activities of the measure will be financed within the above- mentioned activities. Indicative Final Beneficiaries
841. Municipalities, state institutions, municipal and state enterprises.
• 62 The state owned company “Pasazieru vilciens” is the only passenger train operator in Latvia and in 2004 will become the only passenger trains owner (currently trains are owned by the state company Latvian Railways). • 63 The selection criteria for choosing the sections of the first class roads to be supported are defined in the chapter 3.5. Single Strategy for Transport and Environment. • 64 Common hydro-technical constructions are defined in legislation as part of hydro-technical constructions for public use, e.g. moles, breakwaters.
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4.1.3. Measure: Development of Information and Communication Technologies Measure Rationale
842. Latvia lags behind the EU member states in its use of information and communication technologies (ICT). Access to ICT differs across the territory of the country, undermining the competitiveness of SMEs and increasing the Digital Divide. Basing on national objectives developed under the National Programme for Informatics (1999-2005) and the e-Latvia initiative, this measure will support social and economic cohesion by stimulating the development of ICT related public services and infrastructure. This will be done by focusing on e-government initiative providing public access points and supporting extension of the high quality broadband network.
843. In accordance with the „Law on Telecommunications”, in force since the 1st of November 2001, the elaboration of a secondary legislation is in progress and it will be submitted until 30th of November 2003. Hereby the implementation of the European Union’s regulatory package on telecommunications (1998) will be accomplished. The Law on Electronic Communication is in preparation and it should be drafted until the 1st of May 2004. New legislation will be in line with corresponding EU directives and will be focused on regulatory independence from technologies and the regulation of dominating enterprises at the e-market.
844. As identified in The Concept for Increasing Quality of Information Services Provided by Public Bodies, the development of public activities to create the base for the development of information society will be supported. Through improving general electronic access to public sector information, the efficiency of services and availability of information can be improved by further development of information systems of public use (e.g. municipal, education, library, archive and museum). In order to raise the quality of the public services, support for digitalisation of telecommunication lines will be supported in peripheral areas currently not covered by ICT networks.
845. According to the National Programme for Informatics, it is essential to guarantee equal access to the internet across Latvia. Therefore setting up public internet access points in the public institutions (e.g. in libraries) will be also financed to become the major suppliers of all types of information (scientific, financial, business, educational etc).
846. According to the Guidelines on Criteria and Modalities of Implementation of Structural Funds in Support of Electronic Communications, it is planned to connect the development of infrastructure to the objectives of regional economic development, based on analyses of regional needs and opportunities, technological neutrality and open access obligations after implementation. Pilot projects in rural and remote areas, that are not accessible for modern ICT technologies and broadband, should determine the best model for the infrastructure development and give solution for the questions of infrastructure ownership, fair return on investment, minimal market distortions and providing services at affordable prices. The best practices of pilots will be used for elaboration of documentation for open calls for tender. In accordance with the update of the Information Society Strategy (due to be approved by the Cabinet
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of Ministers by the end of 2003) provision of ICT services in peripheral territories of the country will take place under this measure. Target Groups
847. The measure is aiming at following target groups: public at large, as well as public institutions, nongovernmental sector will benefit from improvement of access to ICT.
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Measure Objective
848. To develop the conditions for competitive and socially inclusive use of information and communication technologies over the territory of Latvia, setting the basis for development of the information society. Indicative Activities
849. Support the development of nation-wide information systems for public use (e.g. municipal, education, library, archive and museum information), including digitalisation in order to improve the quality of provided services.
850. Support the development of public internet access points (e.g. in public libraries, municipalities, education institutions).
851. Support the development of information and communication in peripheral areas by extending high quality broadband network. Final Beneficiary
852. Municipalities, public institutions, state and municipal enterprises.
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4.1.4. Development of Education, Health Care and Social Infrastructure Measure Rationale
853. Access to high quality public health, social services and education infrastructure is required to improve the general well being of population and to support economic development. Currently provision of health care infrastructure is inadequate, and residents in rural areas of the country have insufficient access to primary health care and emergency medical aid. These conditions affect quality of life and economic development potential in these territories.
854. Within the Health Care Reform Project (started in 1998) supported by the World Bank, Latvia has set out the priorities for national health care development. The objective is setting up qualitative and accessible health care in the country throughout rationalization of existing health care infrastructure and services. The measure will support development and restructuring of the health care services in accordance with the Structure Plan of National Outpatient and Inpatient Health Care Service Providers (Structure Plan) and Consolidated Health Investment Program (CHIP). Investments into primary health care will be directed towards improvement of existing primary health care centres and establishment of new ones. It is planned to improve and renovate eight primary health care centres in the whole territory of Latvia, according to the Structural Plan 65 . Support to emergency medical aid (EMA) will contribute to rationalization of EMA system by creating integrated EMA territorial system in 5 regions. It will include establishment of EMA management and dispatch centres in each of the regions and a Key Management Centre in Riga, establish and equip emergency rooms in the network of 11 multi-profile EMA hospitals serving all five regions (Overall development of hospital infrastructure is supported through the investments of the Consolidated Health Investment Program and municipalities and the support will be continued in the future). In addition the mobile infrastructure 66 will be provided for EMA pre-hospital teams to address gaps 67 identified in the EMA service accessibility assessment in each of 5 regions. However, the number of ambulances to be purchased is limited to 20. Modalities of selection of ambulances by medical centres will be addressed in the Programme Complement. Development of the Unified Blood Donation Information System will network 20 hospitals into a unified data base and thus will ensure safe blood transfusion.
855. To support interventions of ESF, create synergy, and to enhance the socio- economic goals of education system improvement, upgrading of the vocational
• 65 These centres will be properties of municipalities and according to the state aid legislation this activity is not a state aid. • 68 A written commitment by the Final Beneficiary to respect the provisions for purchase of mobile infrastructure will be provided and controlled by the Managing Authority. • 69 Priority will be given to equipment of EMA pre-hospital teams in the territories where highest risk have been identified based on – waiting time, population density, rate of emergency calls, and location of high risk sites (high intensity roads etc.)
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education infrastructure and modernisation of teaching and training equipment in higher education establishments is required. Upgrading equipment in vocational education and training (VET) and higher education establishments is a crucial factor for facilitating local economic development around whole territory of the country. While the Education System Development Project (1999), supported by the World Bank has included upgrading of number of schools, only four VET schools were renovated within the framework of this loan, therefore further support is required. This initiative is in line with the Education Development Concept for 2002 – 2005, that addresses improvement of curricula and delivery, as well as relevance of courses to the labour market. Measure will support re-planning and renovation of the learning premises in conformity with the needs of subject standards and study programs, as well as provision of up-to-date machinery and equipment, and development of mainframe computer networks necessary for implementation of study programs will ensure provision and implementation of qualitative and high level study programs. Equipping research training facilities in higher education establishments will ensure the necessary provisions for implementation of high quality study programs in natural science and technology. Reconstruction of premises of the VET and higher education establishments will be carried out in order to adjust premises for the needs of students with physical disabilities as well as ensure compliance with general safety and hygiene norms.
856. Public social care institutions will be modernized and adjusted to allow development and delivery of new types of social care and rehabilitation services within or outside present institutions in order to foster way back to the labour market for disabled persons and their family members. ICT support will be provided for social care administrations to establish a unified database on disabled persons providing precise statistics and compatibility of the existing databases for efficient use of data and multi-sector cooperation. However support will be conditional to existence of clear evidence that intervention leads to positive impact to labour market. Investments from ERDF and ESF will be coordinated in a way to reach the maximum synergy effect.
857. Active employment measures provided by the State Employment Service (SES) play a key role of integration of unemployed and job seekers into the labour market. Strengthening the SES administrative capacity and development of the SES infrastructure are put forward as policy goals, Joint Employment Review and National Employment Plan. The measure first of all will focus the support to raising the quality and accessibility of SES services ensuring provision of services based on principle of “one stop agency” and ensuring accessibility of SES premises for people with disabilities. Carrying out necessary reconstruction works and providing equipment in the SES board, 17 affiliates and 18 local offices will improve working conditions and quality of services given by SES. Modernization of ICT and information system will ensure effective work with job placement system database as well as EURES database making the relevant information on the main situation in the labour market accessible to the unemployed, job seekers and employers in local areas.
858. Measure is not covered by state aid legislation. In case of support to primary health system, the primary health centres receiving assistance will be properties of municipalities and accordingly is not considered as state aid.
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859. The EU grant rate of 80% can be applied to the investments into health care infrastructure (excluding mobile infrastructure), vocational training institutions (particularly adoption of these to the needs of the disable persons); improvement of premises in the higher educational establishments and improvement of social care services. The 80% grant rate is justified by the lack of investment for over a decade into health care infrastructure and infrastructure of VTE institutions, especially to adopt these to the need of the disable persons, as well as urgent need for improvement of premises and equipment of the higher educational establishments and the necessity for investments into social care system to provide non-institutional social services in order to provide for people facing the risk of the social exclusion and their family members possibility to enter the labour market. Support to development of social care infrastructure is linked with the Priority "Human Resources Development and Promotion of Employment" complementing the measure "Combating Social Exclusion" financed by European Social Fund. Improvement of social infrastructure together with the development of human resources will foster efficiency of social inclusion of most vulnerable groups of society, especially in the remote areas. Target Groups
860. The main target group that will be addressed by the measure is public at large. Specific target groups addressed are: • Healthcare providers and potential patients; • Education establishments and students; • Social care administration and providers of social care and rehabilitation services; • Labour market services providers. Measure Objective
861. To ensure access to quality healthcare, social care, rehabilitation, labour market and education services throughout Latvia in order to diminish social exclusion, promote health care, and improve quality of education. Indicative Activities
862. Improvement of primary health care system infrastructure, premises, and equipment (e.g. medical equipment, buildings, ICT infrastructure);
863. Improvement of EMA system infrastructure, premises and equipment (e.g. premises and ICT infrastructure for EMA management and dispatch centres, EMA rooms in hospitals, mobile infrastructure for EMA pre-hospital teams);
864. Development of unified blood donation safety and information system;
865. Renovation of buildings (including adjustment to the needs of persons with physical disabilities) and provision of up-to-date practical training equipment and machinery in the initial vocational training establishments;
866. Provision of up-to-date training equipment, machinery and mainframe computer networks and renovation of premises (including adjustment to the needs of persons with physical disabilities) in higher education establishments;
867. Improvement of social infrastructure and development of alternative social services;
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868. ICT support for social care administrations to establish a unified database on disabled persons
869. Improvement of labour market institutions (e.g. ICT, infrastructure, equipment); Indicative Final Beneficiaries
870. State owned education and health care institutions, state and municipal institutions, labour market institutions, non-governmental organisations, state and municipal enterprises and agencies.
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4.2. Priority: Promotion of Enterprise and Innovations Priority Objectives
871. The main objective is to promote the creation of new enterprises and raise the competitiveness of existing enterprises by providing the conditions for transition towards knowledge intensive production. The objectives will be achieved by supporting integrated, partnership projects that incorporate access to finance, business-related infrastructure, support to raising competitiveness and innovation (business support services and/or access to technology).
872. The projects must be well designed and managed to guarantee sustainability. Priority Measures
873. Support to Development of Innovation
874. Business Infrastructure Development
875. Enhancing Business Support Measures for Small and Medium Enterprises
876. Access to Finance for Small and Medium Enterprises
877. Support to Development of Public Research Synergy
878. The measures will be co-financed by the European Regional Development fund. To maximize crossover opportunities during implementation these measures will be closely coordinated with the European Social Fund (training, education) measure 3.1 Promotion of Employment through benefiting from raising qualifications of employed as well as entrepreneurs. Efficiency of investments in business infrastructure development will be enhanced by activities of human resource development from ESF by training of employed persons and employers. Enhancement of business support measures for SME will be supported from ESF by supplying training for consultant and so improving quality of consultation services.
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4.2.1. Measure: Support to Development of Innovation Measure Rationale
879. This measure is in line with National Innovation Program adopted by Government on March 1, 2003. The primary objective of the National Programme on Innovation is to facilitate an increase in national innovation capacity. At the same time the National Programme on Innovation sets-up the following secondary objectives: • Formation of a harmonized and coordinated environment favourable to innovation; • Creation of a basis for sustainable development and the growth of innovative enterprises; • Foster the setting up of a unique and competitive structure for the national economy.
880. The development of innovation system is one of the pre-conditions for raising the competitiveness of Latvian enterprises and the future growth of the economy. At present the export share of the knowledge-intensive sectors of the economy in Latvia are on average five times lower than that of the EU countries.
881. The initiative will support commercially focused, industry (including manufacturing and services) led projects in product and process development. Activities of the measure are aimed at the investments in the stage of commercialisation of new technologies to create new products or processes and prepare them for funding (both private risk capital and public). As a result new and spin-off companies will be established, thus achieving the overall objective of increasing number of companies.
882. The aim is to provide funding for introduction of new products or technologies in production by supporting technical and economic feasibility studies, as well as development of prototypes and pilot models.
883. Measure provides support to start-ups and existing enterprises to benefit from external competence for innovation activities as well as financing for proof-of- concept, market research, or initial product development in order to assess the feasibility of prototypes and pilot models. As result it will encourage linkages between companies and research institutes hence promoting the national innovation system. Compliance with State Aid Regime
884. Aid to enterprises will be delivered under the aid schemes Support to development of new products and technologies and Support to the consultancy services and the participation of the commercial companies in international exhibitions and trade missions (sub-measure of the aid scheme 'consultancy services') which is being notified to the DG for Competition. Target Group
885. The target groups of the measure are enterprises and start-ups operating in the knowledge intensive sectors. Measure Objective
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886. To support technology transfer and the development of a national innovation system for industry, including promotion of private sector spending for innovative product and processes development and introduction in manufacturing. Indicative Activities
887. This measure is complementing the other measures of the priority by supporting new and existing enterprises in development of new products for market and introducing new business processes by: • Support to assessment of technical and economic feasibility; • Assisting the development of prototypes and pilot models. Indicative Final Beneficiary
888. Latvian Development Agency.
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4.2.2. Measure: Business Infrastructure Development Measure Rationale
889. The Single Market imposes specific requirement in the spheres of work safety, environment protection and consumer protection to the Latvian companies to operate and be competitive in the EU. These requirements force companies to make additional investments in business infrastructure to comply with. Overall, companies often have insufficient financial resources to allow the additional investments, those loosing competitiveness and posing a risk of reduction of jobs available. Measure aims at providing support for increasing competitiveness of enterprises by investing in the business infrastructure to address abovementioned problems. Investments can cover introduction new technologies and upgrading existing ones, as well as reconstruction of existing or building new premises if required for installation of new technologies.
890. Regarding the environment protection only small fraction of manufacturing enterprises in all 3 pollution potential categories – A, B, C 68 have upgraded their infrastructure according to the environmental standards and obtained the licence. Therefore, assistance under this measure would be targeted for enterprises in all 3 categories, with emphasis on category A and B, to comply with the standards and obtain the licence.
891. Assistance under this measure will also be provided to companies for investments in work-safety infrastructure to improve the current situation in which approximately half of all companies inspected confront violations regarding work safety environment every year.
892. Consumer protection in EU market is ensured by introduction of conformity criteria and requirements for products and production methods. The main problem in for Latvian enterprises to comply with market standards and requirements is insufficient access to information on mandatory and optional quality requirements and the ways to introduce them into the production process.
893. Verification of products is one of prerequisites to comply with conformity requirements in force (e.g. Good Manufacturing Practice, Environmental Management Assessment System etc.). Major investments to ensure verification process have to be made in laboratories. Investments made into institutions and equipment necessary for conformity testing often turn out to give only limited income, therefore the companies are not interested in making the investments. The lack of necessary quality assurance infrastructures and quality testing facilities often hinders the entrepreneurs’ access to markets. To support development of private conformity assessment infrastructure investments in
• 70 According to the Law “On Pollution” manufacturing companies are classified in three categories A, B, C according to their harm of pollution potential and should obtain respective licence conforming compliance to environmental standards. “A category” includes companies that mandatory must introduce “Best Available Technical Solutions”, “B category” are companies that have to introduce cleaner manufacturing principles and “C category” are companies that should operate in compliance with general environmental regulations.
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development and upgrade of testing and calibration facilities (equipment for laboratories) will be supported.
894. As a result of restructuring of industry to new markets there have been significant changes in geographical location of industrial activities. Consequently there is lack of links to public infrastructure for industry needs, relative costs of development of business infrastructure, especially, concerning access to roads and public utility connections (e.g., water, waste water) are hindrance. Compliance with State Aid Regime
895. Aid to enterprises will be delivered under the aid scheme Support to modernization of the business infrastructure which is being notified to the DG for Competition. Target Group
896. The target group includes enterprises. Measure Objective
897. To support development of necessary business related infrastructure to strengthen competitiveness of existing companies and promote start-ups. Indicative Activities
898. Support to private infrastructure investment in modernizing production processes and products in line with market standards and requirements in the sphere of environment protection, work safety and consumer protection (including purchase of equipment and construction and reconstruction of buildings).
899. Support to private infrastructure investments in shared equipment (laboratories for testing, certification and similar activities).
900. Support to investment in private infrastructure in access to public networks (road, electricity, water etc). Indicative Final Beneficiary
901. Latvian Development Agency.
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4.2.3. Measure: Enhancing Business Support Measures for Small and Medium Size Enterprises Measure Rationale
902. There are several limitations to raise competitiveness of Latvian businesses. SMEs lack in-house skills and in the same time are reluctant to seek outside assistance or hire a consultant and pay the full market rate for these services. Enterprise managers are resistant to change, due in part to time pressures and lack of funds. Action needs to be taken to improve the competitiveness and growth of SMEs by provision of financial support to attracting external high quality expertise to companies.
903. These shortcomings have been recognised by the Government, which has set up several instruments (Latvian Export Marketing Support Programme, SME Consultation Programme, etc.) for increasing accessibility of consultation services. These support schemes have been limited to small number of companies and demand for the support has been many times higher than available funding. To increase efficiency from economy of scale and reduction of fragmentation of support measures existing schemes will be replaced by single support measure for consultancy and access to new markets.
904. To guaranty high quality of consultation services and increase efficiency of investments in infrastructure training of employees of the companies will be supported under ESF employment promotion measure. Compliance with State Aid Regime
905. Aid to enterprises will be delivered according to de minimis rule, SME’s block excempt regulation and under the aid scheme Support to the consultancy services and the participation of the commercial companies in international exhibitions and trade missions which is being notified to the DG for Competition. Target Group
906. The target group of this measure is professional associations, SMEs. Measure Objective
907. The objective of the measure is to support access to professional advice and consultations to professional associations and small and medium size enterprises and support to broadening access to potential markets for companies. Indicative Activities
908. Provision of financial support for professional associations and SME’s to use external consultancy services and transfer of know-how in areas such as but not limited to: • market research, • marketing, • elaboration of business plans • financial management, • quality requirements.
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909. Support to participation of professional associations and enterprises in international fairs and events. Indicative Final Beneficiary
910. Latvian Development Agency.
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4.2.4. Measure: Access to Finance for Small and Medium Size Enterprises Measure Rationale
911. In Latvia the proportion of economically active enterprises per 1000 residents is three times lower than that of the EU member states. Access to working and capital finance is a major barrier for individual entrepreneurs, existing SMEs and new start-ups. High interest rates in Latvia combined with the lack of credit history and collateral stifles entrepreneurial activity. This situation is most pronounced in areas outside of the larger urban centres. Measure for ‘Enhancing business support measures’ for SME will contribute to growth of quality of applicants but there are market failures in access to finance.
912. Presently SME loans are available usually based on the business plan analysis, if sufficient collateral presented. Main reasons for credit refusals are lack of collateral (usually the loan is available as 80% of collateral value), lack of credit history and lack of sound business experience (profitability, growth rate etc.). Lending to start-ups, micro-companies and SMEs in development stage (with insufficient collateral) covers small part (estimated around 25%) of total SME need for relevant capital. The guarantee instruments and venture capital is still underdeveloped and undercapitalised regarding SME development.
913. In order to promote SME access to capital 4 instruments will be used – loan scheme for start-ups, guaranty scheme for SME projects with insufficient collateral, venture capital fund and interest rate subsidies. Access to capital (combined with proper consultancy and advice from measure “Enhancing business support measures”) is crucial considering need to increase competitive strength of SMEs. It is planned to support development of diversified risk sharing schemes, where risks are undertaken by the SMEs, banks, public actors to allow for special lending product development and implementation; in addition support will be provided by guarantee and equity funds. Compliance with State Aid Regime
914. Aid to enterprises will be delivered under the following aid schemes: Aid scheme of loan guarantees of Latvian Guarantee Agency, Aid to venture capital of small and medium sized enterprises, and Development of commercial activity in specially assisted regions, each of which is being notified to the DG for Competition and loan programme for Development of SMEs which will be applied starting with the date of accession to the EU according to the rules of the Commission Regulation No 70/2001. Target Group
915. The support will be made available mostly for SMEs including start-ups with rapid growth potential (but usually undercapitalized and with insufficient collateral not able to receive standard banking financing). Measure Objective
916. To provide greater access to business finance for Latvian SMEs including start- ups and micro-businesses.
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Indicative Activities
917. Loans (including micro-credits) to support business start-ups.
918. Development of loans guarantees systems.
919. Venture capital fund.
920. Interest rate subsidies.
921. The above mentioned Funds (venture capital, loan and guarantee) will operate in full compliance with rules 8 and 9 of Commission Regulation No. 1685/2000 (amended with the Regulation No. 1145/2003). Indicative Final Beneficiaries
922. Latvian Development Agency, Latvian Guaranty Agency, financial institutions, Public Limited Liability Company ‘Regional Development’.
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4.2.5. Measure: Development of Public Research Measure Rationale
923. Development of scientific potential and applied research capacity is one of the pre-conditions for raising the competitiveness and ensuring the future growth of the economy. It has been recognised that Latvia has globally competitive science potential that can give an important impact in restructuring its economy towards knowledge economy.
924. At present the scale and scope of state investment in Latvian research is limited (less than 20 mln EUR in 500 projects annually). As a result the applied research activities in public research institutions and R&D capabilities in terms of human resources, infrastructure and equipment are weak.
925. The first activity aims at promoting targeted applied research projects in state research institutions in order to initiate development of new products and technologies. The results of the research activities performed will be available on equal basis for all economic operators.
926. The support for projects is tailored to applied research activities performed in accordance with the research priorities adopted by the Decree No. 548 of the Cabinet of Ministers for the period 2002 to 2005: • information technologies (new technologies of systems and software engineering, telematics, multimedia systems and telecommunications); • biotechnology, bio-medicine and organic synthesis for pharmacy (new technologies for synthesis of biologically active compounds, gene (therapy) technologies); • material technologies (nanomaterials, new materials in microelectronics, photonics and optoelectronics, biomaterials and other composite materials) and engineering; • forestry and wood technologies (forestry development, rational usage of wood biomass, wood processing technologies).
927. The research infrastructure of Latvia has been established 20 to 30 years ago and has not been sufficiently renovated since the 1990ies. This is a result of limited investments in this sector that has led to depreciation of infrastructure up to 2/3 in certain research fields.
928. The second activity supports provision of modern equipment and infrastructure to the state research institutions, which perform strategic and applied research. Improvement of the infrastructure and introduction of modern equipment aims at raising the quality of research. Investments in public R&D infrastructure will be focused on interventions where there is solid research potential for potential co-operation with the private sector, which could lead to benefits in terms of innovation. Compliance with State Aid Regime
929. There is no state aid provided under this measure. Target Group
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930. The target group of this measure is state research institutions – the universities and state research institutes, which perform research activities in certain research field. Measure Objective
931. Development of globally competitive science potential through support applied research and modernising R&D infrastructure and equipment.
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Indicative Activities
932. Support to the implementation of targeted applied research projects in the following fields: • information technologies; • biotechnology, bio-medicine and organic synthesis for pharmacy; • material technologies and engineering; • forestry and wood technologies.
933. Provision of modern research equipment and infrastructure to the state research institutions. The criteria for infrastructure projects will be the international level of research (assessed on the European level) performed in conformity with the priorities of economical development as well as the research capacity of the institution. Indicative Final Beneficiaries
934. State research institutions.
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4.3. Priority: Development of Human Resources and Promotion of Employment Priority Objective
935. The objective of the priority is to enhance the competitiveness and quality of the workforce through life long learning, regional and local development, information society, equal opportunities between women and men and contribute to social cohesion and the economic growth, employability and employment promotion.
936. The objective will be achieved by improving education and training system, developing active employment policy and promoting integration into the labour market for those at risk of social exclusion. In order to facilitate the implementation of the priority it is necessary to develop means of identifying needs on the labour market, to ensure building of training capacity and to promote strong partnership between ministries, local authorities, social partners and non-governmental organisations. Priority Measures
937. Promotion of employment.
938. Development of education and continuing training.
939. Combating social exclusion. Synergy
940. The measures of this priority will be co-financed by the European Social Fund, which is the financial instrument implementing European Employment Policy. Therefore the content of the priority is in line with the European Employment Strategy and the Latvian National Employment Plan, as well as Regulation (EC) 1260/1999 laying down general provisions on the Structural Funds and Regulation (EC) 1784/1999 on the European Social Fund. In order to ensure the linkage between structural interventions and reach maximum benefit from investments into human resources, the measures will be coordinated with other Structural Funds. European Regional Development Fund supports development of education, social services and healthcare infrastructure, while the European Agriculture Guidance and Guarantee Fund (EAGGF) includes sector-specific training initiatives (EAGGF may support only agriculture and forestry related training); and Financial Instrument for Fisheries Guidance provides training in relation to the measure “Adjustment of Fishing Effort”.
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4.3.1. Measure: Promotion of Employment Measure Rationale
941. Maintenance of competitiveness of the workforce requires constant improvement of skills and ability to adapt to rapid changes of demand of the labour market. Restructuring of Latvian economy and globalisation processes created situation where skills of a large part of the population became irrelevant or outdated, indicated by high level of unemployment and low level of economic activity. Insufficient access of the public to the information on the labour market developments and insufficient professional training possibilities creates additional problems for integration into the labour market as well as for development of entrepreneurship and business start-ups. Lack of institutional capacity, insufficient quality and accessibility of services, lack of studies on employability risks caused by structural changes of economy, hampers labour market institutions from promoting active labour market balancing. National Employment Plan is the main policy document stating tasks, priorities and measures in the field of promotion of employment and improvement of employability for unemployed and job-seekers as well as further development of active employment measures.
942. The ESF support will contribute to promotion of active employment measures, training, re-training, and raising qualification of the employed, unemployed, job- seekers, and inactive as well as financial support and other measures for entrepreneurship and self-employment initiation. It will also support capacity building of the institutions responsible for development and implementation of labour market and gender equality policies. Research on the labour market issues will be carried out in 2004. The obstacles for labour force participation of any group at a disadvantage, e.g. legal immigrants and ethnic minorities etc., identified by labour market studies will be addressed by additional active employment measures supported in years 2005-2006. Equal treatment of genders and encouraging female labour participation, where applicable, will be ensured. Compliance with State Aid Regime
943. Aid to enterprises will be delivered under the aid scheme Support to training, re- training and raising of qualification of employed. Under financial support measures for start-ups, state aid will be delivered in consistency with de minimis regulation (No 69/2001). If any research project on the labour market development could be classified as state aid, rules of de minimis regulation (No 69/2001) will be applied. Target Groups
944. Unemployed and job seekers, employed persons, entrepreneurs, staff of labour market and gender equality institutions, public institutions and NGOs. Measure Objective
945. The objective of the measure is raising competitiveness and quality of workforce through provision of active labour market initiatives, training, retraining, and information dissemination. Indicative Activities
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946. Promotion of re-training and raising qualification of the employed.
947. Promotion of active employment measures for unemployed.
948. Provision of training and financial support for entrepreneurship and self- employment initiation.
949. Capacity building of the institutions responsible for development and implementation of labour market and gender equality policies, as well as capacity building of other relevant institutions, organizations and project promoters including NGOs.
950. Promotion of research on the labour market issues, including studies on ethnic minorities and both genders situation in the labour market.
Indicative Final Beneficiaries
951. State and municipality institutions, education institutions, non-governmental organisations, social partners, enterprises, professional associations, financial institutions.
4.3.2. Measure: Development of Education and Continuing Training Measure Rationale
952. Tendency of increasing knowledge gap and lack of basic knowledge and skills essential for the development of modern knowledge-based society has been observed among inhabitants of Latvia. Higher, professional and lifelong education fails to react adequately to the rapid changes in requirements of the labour market and economy. Content of education at the qualified worker and technician levels, especially in the technology and science intensive areas, is outdated. In addition, teaching and training equipment and school premises 69 don’t reach modern standards.
953. In order to provide educated, flexible and competitive workforce that is able to contribute to economic development, improvement of education and continuing training system, as well as enhancement of the involvement of social partners in the development of relevant and qualitative education and training system is crucial. Therefore, it is necessary to enhance the capacity of education and training system in economically relevant, and science and technology intensive sectors. Modernisation of education and training system and promotion of the lifelong learning capacity building, including e-learning, as well as development of the life-long learning strategy and its implementation mechanisms, will lead to the increase in the quality and accessibility of education, and reinforcement of lifelong learning around territory of Latvia, thus balancing regional disparities in the employability of the workforce, and promoting socio-economic development.
• 71 Support to upgrading buildings, infrastructure and equipment of educational establishments is envisaged under the Measure 5 of the Priority 1.
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954. Activities under this Measure will not be classified as State Aid. Target groups
955. Target structures and groups are defined as follows: • initial vocational education and training institutions; • higher professional education institutions and universities; • students on secondary, higher and doctoral studies level; • youngsters; • academic staff, teachers and trainers; • social partners’ and professional organisations. Measure Objectives
956. The objective of the measure is to enhance modernisation of vocational and higher education and training system, providing the basis for acquisition of modern, up-to-date knowledge, qualifications and skills relevant to the needs of growing labour market. Indicative Activities
957. Improvement of study programmes in the initial vocational education and training in economically relevant branches.
958. Improvement of subject teaching quality in natural science, technology and mathematics in secondary education.
959. Improvement of study programmes in the higher education in the science and technology intensive branches.
960. Enhancement of lifelong learning network and capacity building, course development and implementation for the continuing training needs of greater society (e.g. public service professionals and adults) and development of the adult training and life-long learning strategy and its implementation mechanisms.
961. Support to the competence building of academic staff and teachers, involved in education and training.
962. Enhancement of partnership between social partners and education institutions in raising the quality of education and training.
963. Development of carrier education, vocational guidance and counselling in the education system. Indicative Final Beneficiaries
964. State and municipality institutions, education institutions, non-governmental organisations, social partners’ organisations and professional associations.
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4.3.3. Measure: Combating Social Exclusion Measure Rationale
965. Social integration of all groups of population, by creating equal opportunities for all people to participate in social life and development of the potential of national economy, plays an essential role in the sustainable development of national economy. Some groups of society due to low income, shortage of working places, inadequate education, lack of work experience, stereotypes, inaccessible environment and insufficient access to ICT, or family situation are endangered by risk of social exclusion much more than others and therefore need special approach for removing barriers for their integration into the labour market. Scope of social exclusion is considerable in Latvia. Growing competition in the labour market posed severe obstacles for the part of population having problems with integration into the labour market. Therefore specially targeted initiatives are necessary to promote inclusion of the persons at risk of social exclusion such as disabled persons, youngsters with low level of basic skills, persons released from imprisonment, pre-pension unemployed, long-term unemployed, parents after child-care leave, single parents, large families, representatives of ethnic minorities if facing risk of social exclusion etc. ICT need to be brought closer to disabled persons providing the environment for e-work, distance learning and skill development. Specific ICT items should be provided or adapted for persons with particular disability, e.g. for blind or weak-eyed, retarded persons etc. Equal treatment of genders and encouraging female labour participation, where necessary, will be applied.
966. Activities under this Measure will not be classified as State Aid.
967. The EU grant rate of 80% for the measure is justified by the nature of this measure addressing urgent social inclusion needs for marginalized groups of society. Indicative final beneficiaries are public institutions, NGOs and social partners dealing with social involvement and equal opportunities issues. Target Groups
968. Persons at the risk of social exclusion like disabled, long-term unemployed, pre- pensioners, youngsters with low level of basic skills, persons released from imprisonment, parents after child-care leave, single parents, large families, ethnic minorities if facing risk of social exclusion etc., specialists of social work, staff of social rehabilitation institutions, service providers. Additional targeted social inclusion measures for special groups will be channelled via EQUAL initiative. Measure Objectives
969. The objective of the measure is to integrate socially excluded persons into the labour market. Indicative Activities
970. Provision of training, including ICT support for disabled persons.
971. Provision of subsidised employment.
972. Development entrepreneurship and self-employment, including ICT support for disabled persons.
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973. Training of specialists of social work.
974. Widening of area of social rehabilitation programmes including ICT support for disabled persons.
975. Development and implementation of pedagogical correction programmes or remedial programmes and courses.
976. Integration of youngsters with special needs into mainstream education system. Indicative Final Beneficiaries
977. State and municipal institutions, non-governmental organisations, education institutions, enterprises.
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4.4. Priority: Promotion of Development of Rural Areas and Fisheries Priority Rationale
978. In order to overcome structural problems in agriculture and processing of its products, low level of entrepreneurship in rural areas, insufficient initiative of rural inhabitants and to ensure sustainable rural, agricultural and forestry development it is necessary to have a complex approach towards solving rural problems: modernisation of agricultural production, improvement of soil, competitive processing of agricultural products, establishment of new work places, effective use of natural resources, activation of rural inhabitants and inclusion of young persons in agricultural production. Another part of priority is focused on sustainable utilisation of fish resources available to Latvia allowing the catch of sea and inland fish resources to produce high value added fish products which would be competitive on the local and international market as well as create opportunities for the acquisition of new market outlets. This will facilitate the economic growth of coastal regions dependant on fisheries, as well as ensure the development of fish farming as an alternative activity in rural areas.
979. Objective of Priority is to promote and to ensure balanced and sustainable rural development, by reducing socio-economic differences between rural areas and towns, maintaining diverse rural environment and promoting the efficiency and competitiveness of agricultural production, as well as to balance the fishing fleet capacity with the available fish resources, to develop production of high quality products with higher value added, to develop and raise the competitiveness of the fish processing sector in the European Union and international markets, to develop infrastructure at ports, particularly improving catch landing and storage conditions, to develop the aquaculture sector and to improve the socio-economic conditions for the fisheries sector.
980. In respect to the Common Agricultural Policy and the EU Forestry Policy the following Priority Measures has been elaborated: • Investments in Agricultural Holdings (this measure shall be allocated 19.74% of the financing available to the priority). • Setting Up of Young Farmers (3.95%). • Improvement of Processing and Marketing of Agricultural Products (16.58%). • Promotion of Adaptation and Development of Rural Areas (29.21%). • Forestry Development (5.92%). • Development of Local Action (LEDAER+ Type Measure) (1.97%). • Training (1.58%).
981. In respect to the Common Fisheries Policy the following Priority Measures has been elaborated: • Adjustment of Fishing Effort (6.42%). • Fleet Renewal and Modernisation of Fishing Vessels (2.78%). • Development of Processing and Marketing of Fishery and Aquaculture Products, Fishing Port Facilities and Aquaculture (7.87%).
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• Development of Coastal Fisheries, Socio-economic Measures, Promotion of New Market Outlets and Support to Producer Organisations (3.98%).
982. A part of measures will be co-financed from the European Agriculture Guidance and Guarantee Fund, another part - from Financial Instrument for Fisheries Guidance. With a view to ensuring maximum synergy of the measures in the process of their implementation, the measures of this Priority shall be closely coordinated with the European Regional Development Fund in the spheres of capacity building, environmental and infrastructure improvement, and business development, as well as seaport public facilities, and with the European Social Fund in the spheres of the development of human resources.
Transitional Measure
983. This priority shall also cover projects approved under Regulation (EC) No 1268/2000 in accordance with provisions provided by the Article 33(5) of the Treaty of Accession. Elements Common to More than One Measure
984. For the Measures, Investments in Agricultural Holdings and Improvement of Processing and Marketing of Agricultural Products the following Annex 1 (EC Treaty) products will be supported: • milk, • fruits (incl. berries), • cereals and legumes, • sheep and goats, • pork, • vegetables, • energy crops, • fibre crops, • beef, • apiculture, • poultry and eggs, • oil seeds.
985. The market situation for each of these products can be characterized by the level of self-sufficiency of these products in Latvia in year 2002, which is as follows: Export to the EU Export to the EU MS Export to the third MS and candidate Domestic Self- and candidate Product countries countries from the production sufficiency countries description total exports t EUR t EUR % Thousand t % Beef (slaughter 21.6 63200 4.5 19286 77 16.04 68.9 weight) Pork (slaughter 19.9 53100 9.9 44526 54 35.89 58.9 weight) Poultry and sub products 162.9 174183 5.1 13229 93 10.64 31.8 (slaughter weight) Sheep and goat 0 0 0.3 1644 0 350
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meet Milk and dairy 10300.5 18320611 960.6 926441 95 813.65 99.7 products Eggs (mln 1041.5 611154 127.5 47285 93 508.61 103.7 pieces) Apiculture 7.3 21385 4.7 10513 67 0.76 - products Cereals and 84734.6 10255633 23440.1 2388526 81 1032.7 111.8 legume Oil seeds 115 56207 0.2 335 99 32.7 Vegetables and 2184.8 913342 271.4 372142 71 148.2 79.7 root-crops Fruits 3515.1 3020597 864.5 148282 95 64.1 39.2 Fibre crops (flax) - - - - - 1.36
986. For the production sectors mentioned above normal market outlets exist. In all production sectors supported under this priority Latvia has developed export markets to the EU as well as has opportunity to expand in the local market. When evaluating applications the availability of market outlets will be assessed.
Minimum Standards
987. For the Measures Investments in Agricultural Holdings, Setting Up of Young Farmers and Improvement of Processing and Marketing of Agricultural Products, the detailed requirements for final beneficiaries concerning the minimum standards for the environment, hygiene and animal welfare will be provided in the Programme Complement. Economic Viability
988. For the measures Investments in Agricultural Holdings, Setting Up of Young Farmers and Improvement of Processing and Marketing of Agricultural Products, the detailed requirements for final beneficiaries concerning the assessment and achievement of economic viability will be provided in the Programme Complement. Exceptions to Measures Falling within the CMOs (Art. 37 of Regulation 1257/1999)
989. No support under any of the measures in this priority will fall within the scope of the common market organization. Common Monitoring Indicators
990. For the measures in this priority the Common Indicators for Monitoring Rural Development Programming 2000-2006 as provided for in the Commission Working Document approved in the STAR Committee on 26 February 2002 (VI/43512//02: FINAL) will be used as appropriate and annexed to the annual and final reports.
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State Aid
991. Support for Annex 1 (EC Treaty) products will be provided in compliance with the relevant measures of this SPD or will be notified for approval in accordance with the terms of Regulation (EC) 659/1999. In the latter case, no support will be provided to the recipient prior to approval by the Commission.
992. Other support (i.e. not related to Annex 1 products) from rural development measures will be granted in conformity with Articles 87 and 88 of the Treaty either as ‘de minimis’ aid (Regulation (EC) 69/2001) or as aid to SMEs (Regulation (EC) 70/2001) or as training aid (Regulation (EC) 68/2001). All other support must have been approved already or should be notified to the Commission for approval prior to implementation. Indicative Final Beneficiary
993. Final beneficiaries are the bodies and public or private firms responsible for commissioning operation as according to Regulation (EC) 1260/1999 Art.9(l) first sentence.
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4.4.1. Measure : Investments in Agricultural Holdings
994. The legal basis for the measure is Chapter I (Articles 4 to 7 of Regulation (EC) 1257/1999; Articles 1 to 3 and Point 9 in Annex II of Regulation (EC) 445/2002 as amended by Regulation (EC) 963/2003). Measure Rationale
995. The restructuring of agriculture has created large number of ineffective agricultural holdings. Majority of buildings, equipment and machinery is outdated and the infrastructure related to the holdings (especially drainage systems) is obsolete. They are dangerous to the environment and users, and they do not satisfy the requirements for working conditions. The purpose of this measure is to improve competitiveness of agriculture products for the internal and external markets by raising quality, hygiene, food safety and other standards for agricultural holdings. Measure Objective
996. The objective of the measure is to increase the income level from agricultural production by increasing its competitiveness; to decrease the cost of agricultural production by using modern technology; to raise the quality of agricultural products; to improve the conditions of workers; and to raise the compliance with veterinary, hygiene, animal welfare, and environmental standards beyond the required minimum. Complementarity with Other Measures
997. This measure is related to the following measures of the Priority 4 Promotion of Development of Rural Areas and Fisheries: measure 4.4.2. Setting Up of Young Farmers – where investments are undertaken by young farmers (under 40 years of age), public support is increased by 5%; measure 4.4.3. Improvement of Processing and Marketing of Agricultural Products – both measures are providing support for the two sectors of rural economy production primary products and processing; measures 4.4.7. Training and activities related to farm advisory and extension services within measure 4.4.4. Promotion of Adaptation and Development of Rural Areas provide the necessary human resources development and advisory support complementing introduction of new technologies, standards, and methods for production; activities for land improvement within measure 4.4.4. complements support to establishment and reconstruction of drainage systems within a single agricultural holding with provision of state and public drainage systems; activity for diversification of agricultural activities and activities close to agriculture within measure 4.4.4. provides support to production and processing of those agricultural products that are not covered under this measure and the measure 4.4.3. Improvement of Processing and Marketing of Agricultural Products.
998. There is a complementarity with other priorities of the SPD: measure 4.1.1. Improvement of Environmental Infrastructure and Tourism under the Priority 4.1. Promotion of Territorial Cohesion complements support to establishment and reconstruction of environmental systems within private agricultural holdings with provision of state and public waste and water management systems; measures 4.2.1. Support to Development of Innovation, 4.2.2. Business
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Infrastructure Development and 4.2.3. Enhancing Business Support Measures for SMEs address innovation, business infrastructure and quality issues in production and processing of those products that are not covered under the Priority 4.
999. Complementarity with EAGGF Guarantee section, Rural Development Plan: Agricultural holdings situated in less-favoured area according to Measure 9.2. Less-Favoured Areas and Areas with Environmental Restrictions shall receive 10% more of public support.
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Indicative Activities
1000. Investment in new machinery and equipment, information technologies and software intended for production of agricultural products, including perennial energy crops (incl. packaging, utilisation of the production waste and by- products, holding level land drainage systems).
1001. Construction, reconstruction and renovation of buildings and purchase of construction materials for buildings necessary for production (incl. packaging, utilisation of the production waste and by-products, holding level land drainage systems).
1002. Investment in animal husbandry by acquisition of animals in order to raise their genetic quality where the new animals replace existing stock.
1003. Acquisition and establishment of new plants in order to establish perennial plantings (e.g. fruit trees). Production Sectors
1004. The support under this measure shall apply to the production sectors listed in the Chapter Elements Common to More than One Measure. Indicative Final Beneficiaries
1005. Farmers, tenant farmers or other physical or legal persons responsible for the commissioning of operations. Aid Intensity
1006. The maximum aid provided under this measure will respect the terms of Article 7 of Regulation 1257/1999 (modified by Article 33(l) of the Accession Treaty), the details will be provided in the Programme Complement. EU Contribution
1007. The EU contribution to public support under this measure will respect the terms of Article 29(4)b(i) of Regulation 1260/1999, which limits the EU contribution to 35% of total eligible cost in the case of investments in firms. State Aid
1008. No state aid is provided under this measure.
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4.4.2. Measure: Setting Up of Young Farmers
1009. The legal basis for the measure is Chapter II (Article 8 of Regulation (EC) 1257/1999; Articles 4 to 5 and Point 9 in Annex II of Regulation (EC) 445/2002 as amended by Regulation (EC) 963/2003). Measure Rationale
1010. There is a general tendency that young persons leave the rural areas and move to the cities, thus the deterioration of age structure of owners of agricultural holdings is taking place. Measure Objective
1011. The objective of the measure is to promote the engagement of young people into agricultural activities on regular basis. This in turn would promote establishment of the economic viable agricultural holdings and ensure renewal of the workforce employed in agricultural sector and maintenance of the rural population. Complementarity with Other Measures
1012. This measure is related to the following measures of the Priority 4. Promotion of Development of Rural Areas and Fisheries: Measure 4.4.1. Investments in Agricultural Holdings – where investments are undertaken by public support to young farmers under measure 4.4.1. is increased by 5%; Measures 4.4.7. Training and activities related to farm advisory and extension services within measure 4.4.4. Promotion of Adaptation and Development of Rural Areas provide the necessary human resources development and advisory support complementing setting up of agricultural holding. Indicative Activities
1013. Support is provided to facilitate the establishment of young farmers setting up an agricultural holding for the first time. Such support will be in the form of a single premium and/or an interest subsidy on loans to cover the cost of setting up. Indicative Final Beneficiaries
1014. Farmers under 40 years of age. Aid Intensity
1015. The maximum aid provided under this measure will respect the terms of Article 8 of Regulation 1257/1999, the details will be provided in the Programme Complement. EU Contribution
1016. The EU contribution to the public support under this measure will be 75% of total eligible expenditure in respect of the terms of Article 29 of Regulation 1260/1999. State Aid
1017. No state aid is provided under this measure.
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4.4.3. Measure: Improvement of Processing and Marketing of Agricultural Products
1018. The legal basis for the measure is Chapter VII (Articles 25 to 28 of Regulation (EC) 1257/1999; Articles 22 to 24 and Point 9 in Annex II of Regulation (EC) 445/2002 as amended by Regulation (EC) 963/2003). Measure Rationale
1019. The processing sector of agriculture in Latvia is non-competitive due to insufficient provision of new technologies and equipment. The incomes of agriculture sector depend on the whole processing sector in view of the EU standards of processing, the management system and the competitive final product in local and external markets. Measure Objective
1020. The objective of the measure is improvement of competitiveness of processing and marketing of agricultural products by implementation of new technologies and equipment, to minimize harmful environmental impacts agricultural processing enterprises, and to increase the application of new means of production and technologies at agricultural processing enterprises (i.e. ISO and HACCP standards, improvement of treatment, supply and packaging systems). Complementarity with Other Measures
1021. This measure is related to the following measures of the Priority 4.. Promotion of Development of Rural Areas and Fisheries: measure 4.4.1. Investments in Agricultural Holdings – both measures are providing support for the two sectors of rural economy production primary products and processing; activity for diversification of agricultural activities and activities close to agriculture within measure 4.4.4. provide support to production and processing of those agricultural products that are not covered under this measure and the measure 4.4.1. Investments in Agricultural Holdings; measures 4.4.7. Training and activities related to farm advisory and extension services within measure 4.4.4. Promotion of Adaptation and Development of Rural Areas provide the necessary human resources development and advisory support complementing introduction of new technologies, standards, and methods for processing. Indicative Activities
1022. Investment in new machinery and equipment, information technologies and software intended for processing of agricultural products.
1023. Construction, reconstruction and renovation of buildings and purchase of construction materials necessary for processing of agricultural products.
1024. Related to the activities above general costs (such as architects’, engineers’ and consultants’ fees, acquisition of patents and licences) with a value not exceeding 12% of total cost of the investment may be supported. Production Sectors
1025. The support under this measure shall apply to the production sectors listed in the chapter Elements Common to More than One Measure.
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Indicative Final Beneficiaries
1026. Processing enterprises (existing and newly established enterprises that process agricultural products).
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Aid Intensity
1027. The maximum aid provided under this measure will respect the terms of Article 28 of Regulation 1257/1999, the details will be provided in the Programme Complement. EU Contribution
1028. The EU contribution to public support under this measure will respect the terms of Article 29(4)b(i) of Regulation 1260/1999, which limits the EU contribution to 35% of total eligible cost in the case of investments in firms. State Aid
1029. No state aid is provided under this measure.
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4.4.4. Measure: Promotion of Adaptation and Development of Rural Areas
1030. The legal basis for the measure is under indents 1, 3, 5, 7, 10 and 11 of Chapter IX (Article 33 of Regulation (EC) 1257/1999 and new article 33a as modified by Article 33l of the Treaty of Accession; Point 9 in Annex II of Regulation (EC) 445/2002 as amended by Regulation (EC) 963/2003). Measure Rationale
1031. The agricultural production in vast areas is dependent on effectiveness of drainage systems and polders. The effective operation of these systems is the base for operation of drainage systems owned by agricultural holdings and agriculture as such. In addition initial liming of acid soils is necessary in order to ensure sustainable agriculture.
1032. The recent dependency of rural economy from agricultural production has created large portion of rural inhabitants who have limited possibilities to be engaged in commercially viable agriculture. At the same time modernisation of agriculture will release workforce.
1033. The area of abandoned agricultural land is increasing; it is overtaken by bushes and invasive species.
1034. In order to solve problems created by restructuring process this measure is intended to provide high quality consultation services with a view to promote restructuring and development of agricultural sector. Measure Objective
1035. Activities related to land improvement are intended to reduce negative impact by natural and climatic conditions on the development of farmsteads, to enable sustainable capacity and productivity of agricultural land, and to ensure conditions for production of competitive products.
1036. Activities related to diversification of agricultural activities and activities close to agriculture as well as activities related to development of craftsmanship and rural tourism are intended to promote sustainable employment opportunities in rural areas by strengthening existing, creating new and diverse employment opportunities.
1037. Activities related to preservation of rural landscape are intended to encourage the conservation of the traditional open rural landscape and to prevent the degradation of ecosystems characteristic to Latvia.
1038. Activities related to farm advisory and extension services are intended to enhance the ability of farmers and forest holders to use high quality consultancy services that increase the competitiveness of farms. Complementarity with Other Measures
1039. This measure is related to the following measures of the Priority 4. Promotion of Development of Rural Areas and Fisheries: measure 4.4.1. Investments in Agricultural Holdings complements support to establishment and reconstruction of drainage systems within a single agricultural holding; measure 4.4.7. Training provides the necessary human resources development and advisory support complementing introduction of new technologies, standards, and methods; the
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activities under measure 4.4.1. Investments in Agricultural Holdings and measure 4.4.3. Improvement of Processing and Marketing of Agricultural Products is limited to the listed sectors of agricultural products, while under activity for diversification of agricultural activities and activities close to agriculture under this measure the support can be provided to any other kind of agricultural and non-agricultural entrepreneurial activity in the rural areas; activities related to farm advisory and extension services under this measure are complementary to all the other measures within the Priority 4. Promotion of Development of Rural Areas and Fisheries and to all the measures within the Rural Development Plan.
1040. There is complementarity with measures under other priorities of the SPD: measure 4.4.10. Development of Processing and Marketing of Fishery and Aquaculture Products, Fishing Port Facilities and Aquaculture will support existing aquaculture companies; at the same time the activity for diversification of agricultural activities and activities close to agriculture under this measure will allow diversification of economic activities in rural areas for the rural entrepreneurs that previously have not performed aquaculture activities; measure 4.1.1. Improvement of Environmental Infrastructure and Tourism comprises activities related to preservation of natural, historical and cultural heritage and related infrastructure facilitating attraction of tourists. Indicative Activities
1041. Design, construction, reconstruction and renovation of state and public drainage systems.
1042. Initial liming of acid soils to improve land once after long neglect where pH levels have become critically low (i.e. not the regular liming activity under normal farming condition).
1043. Agrochemical analysis of soil related to the initial liming of acid soils.
1044. Diversification of agricultural activities and activities close to agriculture (production and processing of those agricultural products that are not covered under Measure 4.4.1. Investments in Agricultural Holdings and Measure 4.1.3. Improvement of Processing and Marketing of Agricultural Products and aquaculture; the conversion of agricultural or associated rural buildings, land, or other facilities to new non-agricultural uses).
1045. Provision of basic services for the rural economy and population.
1046. Development of craftsmanship.
1047. Development of rural tourism.
1048. Cleaning of overgrown abandoned agricultural land from scrubs and invasive weeds (i.e. Giant Hogweed).
1049. Establishment and development of farm advisory and extension services.
1050. Provision of farm advisory and extension services to farmers involved in agriculture and forestry activities. Indicative Final Beneficiaries
1051. For the construction and reconstruction of drainage systems – a physical or legal entity responsible for operation or maintenance of drainage systems.
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1052. For the liming and agrochemical analysis of soil areas – owner, leaseholder or legal possessor of the land.
1053. For the activities related to diversification of agricultural activities and activities close to agriculture and for activities related to development of craftsmanship and rural tourism - private legal entities and physical persons (projects carried out by physical persons with objective to establish new enterprise) responsible for the performance of works.
1054. For activities related to provision of basic services for the rural economy and population – agriculture services cooperatives and other physical and legal persons.
1055. For the activities related to preservation of rural landscape - owners and possessors of agricultural land.
1056. For the support for establishment, development and provision of the farm advisory and extension services – the Ministry of Agriculture.
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Aid Intensity
1057. The details will be provided in the Programme Complement. EU Contribution
1058. The EU contribution to the public support under this measure will be 75% of total eligible expenditure in accordance of the terms of Article 29(1) of Regulation 1260/1999 or in the case of an investment in a firm 35% in accordance with Article 29(4)b(i). State Aid
1059. No state aid is provided under this measure.
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4.4.5. Measure: Forestry Development
1060. The legal basis for the measure is Chapter VIII (Article 29 and 30 of Regulation (EC) 1257/1999; Articles 25 to 28 and Point 9 in Annex II of Regulation (EC) 445/2002 as amended by Regulation (EC) 963/2003). Measure Rationale
1061. In conformity with the Council Resolution of 15 December 1998 on a forestry strategy for the EU, forestry policy is the responsibility of the member states. Provision of the introduction of international commitments, principles and guidance is the responsibility of a country.
1062. Ministerial Conference on Protection of Forests in Europe (MCPFE) contributes to sustainable forestry in Europe. MCPFE has a co-operation among European countries on the highest political level. Latvia participates in the work of MCPFE and takes part in the expert level meetings that take place in the period of time between the conferences. This measure is elaborated in line with the policies outlined above.
1063. Forests are an important element of the Latvian environment. Taking into account the significance of forests in environmental protection, the satisfaction of people's social needs, and the economy, the goals of the National Forest Policy of Latvia are: • to prevent reduction of forest cover, by setting limits on the transformation of forest lands; • to ensure protection and improvement of the productivity and value of forest lands; and • to facilitate afforestation of marginal agricultural and other lands, through the use of existing state mechanisms.
1064. Latvian forests are fulfilling ecological, social and economic functions important for the society, as well as in preservation of biological diversity and maintenance of environmental quality. A sustainable management of private forests and woodlands will be jeopardised unless investment is made for increasing the economic, ecological and social value of forests; the economic potential of forests would decrease, and the sustainable availability of forest resources, productivity and quality of forest plantations, as well as forest sector and the development of the national economy would be put at risk in the future.
1065. As a result of agriculture production narrowing the area of unutilized agriculture lands has increased to 21.2 % of the total area of agriculture lands (AL) in Latvia, but respectively 7.5 % and 1.8 % from AL areas are weedy and brushwood overgrown. As one of the rational solutions for slowing down the process is afforestation of these lands as well as maintenance of the naturally afforested areas. Measure Objective
1066. The objective of the measure is to increase the economic, ecological or social value of private forests, to promote the increase in quality of forest resources and promote absorption of CO 2, to encourage the improvement and maintenance of forest resources, to preserve and maintain the forest tree species diversity
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characteristic to local conditions, and to support the collaboration and cooperation among forest owners.
1067. The objective of the measure is to support afforestation of unfarmed land and brushwood overgrown land, thus promoting rational land use and sequestration and storage of CO 2, to create resource basis for increase of the volume of timber industry production in future, to increase the quality of the naturally established forest stands, and to promote maintenance and improvement of rural landscape.
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Complementarity with Other Measures
1068. This measure is related to the following measures of the Priority 4.. Promotion of Development of Rural Areas and Fisheries: activity related to land improvement within measure 4.4.4. Promotion of Adaptation and Development of Rural Areas complements support to establishment and reconstruction of drainage systems within forest holding with provision of state and public drainage systems. This activity improves forest growing conditions. Measures 4.4.7. Training and activities related to farm advisory and extension services within measure 4.4.4. provide forest owners and other persons involved in forestry activities and wood-working practices the necessary knowledge of sustainable forest management and the market economy. Indicative Activities
1069. Afforestation (including elaboration of individual afforestation plans) of unfarmed land (i.e. land that would not be eligible under Article 31 of Regulation 1257/1999).
1070. Investments in forests aimed at improving their economic, ecological or social value (support will be provided for investments to improve the infrastructure of private forest holdings, i.e. access roads within the forest, recreation and hunting facilities, promoting development of undergrowth and biological diversity of low value and lean forest stands; no support will be provided for normal forestry operations).
1071. Establishment of and organisational support to forest owner associations (support will be provided to establish forestry associations, in order to help their members to improve the sustainable and efficient management of their forests).
1072. Support to replacement of low value forest stands only where the replanting will contribute to the biological diversity and environmental value of low quality and lean forest stands beyond normal silviculture practice.
1073. Investments to improve and rationalise the harvesting, processing and marketing of forestry products.
1074. Restoring forestry production potential damaged by natural disasters and fire and introducing appropriate prevention instruments. Indicative Final Beneficiaries
1075. Forest owners (physical persons, municipalities and legal entities) and landowners. Aid Intensity
1076. The maximum aid provided under this measure will respect the terms of Article 32(2) of Regulation 1257/1999, the details will be provided in the Programme Complement. EU Contribution
1077. The EU contribution to the public support under this measure will be 75% of total eligible expenditure in accordance of the terms of Article 29(1) of Regulation 1260/1999 or in the case of an investment in a firm 35% in accordance with Article 29(4)b(i).
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State Aid
1078. No state aid is provided under this measure.
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4.4.6. Measure: Development of Local Action (LEADER+ Type Measure)
1079. The legal basis for the measure is Chapter IX (a) (new Article 33) of Regulation (EC) 1257/1999; Commission Notice of 14 April 2000 (2000/C139/05). Overall Goal
1080. The overall goal of measure is to promote sustainable local development in rural areas by building capacity (skills and experience) of local people and institutions in order to develop LEADER+ approach, to find new and better ways to solve resistant and deep rooted problems and to take advantage of opportunities, to draw out policy lessons for future direction of rural development and to gain better understanding of bottom-up approach. Measure Rationale
1081. The period of economical transition together with process of accession to the European Union have caused deep and lasting changes in rural life in Latvia. Underemployment is an issue as many of the smaller mainly subsistence farms contribute to under-productivity in the sector. Co-operation among rural actors in addressing the common problems is underdeveloped and therefore it is impeding the elaboration of development tools for their territories. When communities are “in poor health” and apathy, despair, mistrust and insecurity prevail, sustainable development cannot take place, innovation and initiative will be frustrated. The measure ensures a focus on building local capacity approach and seeks to promote local and community development as well as social inclusion in rural areas. At present there are some successfully operating Local Action Groups in Latgale region that succeeded in both promoting local and community development and in implementing an effective administration. This experience is forming the basis for the other Local Action Groups to implement the LEADER+ type strategy.
1082. This measure basically will grant support for activities related to acquisition of skills for Local Action Groups and implementation of local rural development strategies by projects of Local Initiative groups, i.e. groups at lower than Local Action group level, which will apply for financing for the implementation of their local projects compliant to the local development strategy of the relevant Local Action Group. Measure Objective
1083. The specific objectives of the measure are as follows: • To develop the capacity and effective administration skills at the local level to enable development of the LEADER+ type approach among local and community development. • To enable Local Action Groups to develop and implement local rural development strategies. • To enable Local Initiative groups to implement projects in accordance with local rural development strategies developed by respective Local Action Groups.
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Complementarity with Other Measures
1084. This measure is linked with most of other measures of the SPD, because it shall enhance initiatives on the basis of which local actors will more actively apply for any other measure of the SPD where appropriate Indicative Activities
1085. Given the pilot character of the implementation of local rural development strategies, the implementation of this LEADER+ type measure during the current programme will focus on the implementation of the first paragraph of Article 33f (“Acquisition of Skills”) and the second paragraph of Article 33f (“Adopting Integrated Territorial Rural Development Strategies”).
1086. The acquisition of skills is intended to prepare Local Action Groups and Local Initiative Groups to develop and implement local rural development strategies. Some areas have different levels of capacity and experience for developing the LEADER+ type approach. Ministry of Agriculture as final beneficiary of the Acquisition of skills shall draw the Terms of Reference for call for proposals to select outsourced contractors to carry out the activity.
1087. Support under Acquisition of skills will be provided for the following sub- activities (presented in a logical development sequence): • Information and training of the population to encourage an active participation in the development process; • Building capacity of Local Action Groups and Local Initiative Groups; • Drawing up of integrated development strategies; • Technical support for studies of local area, territory diagnosis taking into account the wishes expressed by the population concerned; • Preparation and dissemination of methodological material including other administrative preparation for LEADER+ type measure and exchange of experience nationally; • Participation in inter-territorial and trans-national co-operation actions in accordance with the principles laid down in items 15 to 18 of the Commission Notice; i.e. activities related to co-operation between Local Action Groups and monitoring of implementation of strategies. Simple exchanges of experience will not be supported; • Appraisal of integrated development strategies and arrangements for monitoring and evaluation.
1088. Under Adopting Integrated Territorial Rural Development Strategies support shall be provided for the Implementation of integrated territorial rural development strategies, of a pilot nature, by way of projects prepared by Local Initiative Groups in accordance with the principles laid down in Articles 12 and 14 of the above mentioned Commission Notice (see in particular criteria related to areas concerned (14.1) and the development strategy (14.2)).
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Selection of Local Action Groups
1089. For the programming period 2004 – 2006, indicatively at least 5 Local Action Groups will be selected for implementation of integrated rural development strategies.
1090. All Local Action Groups shall be assessed in accordance with Articles 12 and 14 of the Commission Notice of April 14, 2000 (2000/C139/05). More details and the procedure for selection of Local action groups, local rural development strategies and selection of projects will be included in the Programme Complement. Development Themes
1091. The integrated strategy must be prepared relating to one or more (under the condition that the strategy remains coherent) of the following themes.
1092. The use of know-how and new technologies to make the products and services of rural areas more competitive.
1093. Improving the quality of life in rural areas.
1094. Value adding to local products, in particular by facilitating access to markets for small production units via collective actions.
1095. Making the best use natural cultural resources, including enhancing the value of sites of Community interest selected under Natura 2000. Indicative Final Beneficiaries
1096. Legally established Local Initiative Groups, Local Action Groups and the Ministry of Agriculture.
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Specific Conditions
1097. The value of the administrative costs of the Local Action Group will not exceed 15% of the resources to be allocated to the respective development plan. The details of the financial resources to be allocated and the percentage for administrative costs for the Local Action Groups implementing the pilot integrated rural development strategies will be provided in the Programme Complement. Aid Intensity
1098. The maximum aid provided under this measure may be up to 100 % of eligible expenditure, the details will be provided in the Programme Complement. EU Contribution
1099. The EU contribution to the public support under this measure will be 75% of total eligible expenditure in accordance of the terms of Article 29(1) of Regulation 1260/1999.
1100. Projects under the pilot strategy have to respect aid intensity rates for investments, according to regulations 1260/1999, or State aid rules. State Aid
1101. No state aid is provided under this measure.
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4.4.7. Measure: Training
1102. The legal basis for the measure is Chapter III (Article 9 of Regulation (EC) 1257/1999; Article 6 and Point 9 in Annex II of Regulation (EC) 445/2002 as amended by Regulation (EC) 963/2003). Measure Rationale
1103. Support for vocational training shall contribute to the improvement of the occupational skills and competence of farmers, forest owners and other persons involved in agricultural activities and forestry activities, and their conversion. Measure Objective
1104. The objective of the measure is to raise skills and knowledge of farmers and persons engaged in agricultural activities, thus ensuring compliance with the EU memorandum on lifelong education, and to prepare forest owners and other persons engaged in forestry activities for the application of forest management practices with a view to enhancing the economic, ecological and social functions of forests. Complementarity with Other Measures
1105. This measure is complementary to all the other measures within the Priority 4. Promotion of Development of Rural Areas and Fisheries as far as they directly concern agricultural and forestry activities.
1106. Under Priority 4.3. Development of Human Resources and Promotion of Employment subsequent measures exclude activities that are directly related to agriculture and forestry and therefore they are covered under Priority 4. Indicative Activities
1107. Support shall be provided to vocational training for farmers and foresters and other persons involved in these two sectors (no support will be provided for the general running cost of the providers).
1108. Support for vocational training for farmers and foresters and other persons involved in these two sectors shall not include courses of instruction or training, which form part of general programmes or systems of agricultural and forestry education at secondary or higher levels. Indicative Final Beneficiaries
1109. Ministry of Agriculture shall be responsible for commissioning training operations in accordance to Directive 92/50. Aid Intensity
1110. The details will be provided in the Programme Complement. EU Contribution
1111. The EU contribution to the public support under this measure will be 75% of total eligible expenditure in accordance of the terms of Article 29(1) of Regulation 1260/1999. State Aid
1112. No state aid is provided under this measure.
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4.4.8. Measure: Adjustment of Fishing Effort Measure Rationale
1113. The problem of sustainability of fish resources results in constant decrease of quotas from year to year in the Baltic Sea, especially for cod, herring and sprat. Taking into account that the objective of the EU Common Fisheries Policy is to ensure sustainable development of fisheries sector, through the balancing of fishing fleet capacity with the available fish resources, Latvia also should balance number of fishing vessels with the available fish resources. Measure Objective
1114. One of the main aims of the priority is the balancing of fishing effort in the Baltic Sea and the Gulf of Riga. Indicative Activities
1115. Measures on the reduction of fishing effort – mainly scrapping of fishing vessels and permanent reassignment of few fishing vessels for non-profitable purposes other than fishing (e.g. educational or research purposes etc.). Indicative Final Beneficiaries
1116. Fishing vessel owners, whose vessels fish in the Baltic Sea and the Gulf of Riga and are registered in the Latvian Vessel Register and included in the fishing vessel list of the National Board of Fisheries. State Aid
1117. State aid schemes concerning actions financed under FIFG within this programme are governed by the provisions of Art. 19(2) of Council Regulation (EC) No 2792/1999 as amended by Council Regulation (EC) No 2369/2002 of 20 December 2002. EU Contribution
1118. Sustainable balance between the fishing capacity and the available resources is a key element of the Common Fisheries Policy and its reform. An increase of the FIFG contribution to 80% for this measure would be an incentive to accelerate adjustment of the Latvian fishing fleet and would therefore contribute to sustainable utilization of the fishery resources.
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4.4.9. Measure: Fleet Renewal and Modernisation of Fishing Vessels Measure Rationale
1119. Insufficient investment funding in previous years has affected the ageing of the fishing fleet and reduction of its operating efficiency. Latvian fishing fleet is by far more low-powered than fishing fleets in the EU Member States. Therefore a serious concern exists that the Latvian fishing fleet will not be able to compete with fishing fleets of other EU Member States, which operate in the same waters and obtain the same fish species as the Latvian fishermen. Measure Objective
1120. Improvement of health and safety on board of fishing vessels and the conditions under which fish is handled/ processed and ensuring sustainable and responsible exploitation of resources by using more selective fishing techniques. Indicative Activities
1121. Measures which allow fishing enterprises to modernise their fishing vessels, paying particular attention to the measures that will not create an increase of the total fleet capacity (power and gross tonnage) and will not cause any changes in the structure of the vessel. Hence the measures that provide for the development of safety, working and hygiene conditions and the improvement of catch quality will be supported. Public aid for the renewal of the fleet, i.e. the construction of new fishing vessels may be granted until 31 December 2004. Indicative Final Beneficiaries
1122. Fishing vessel owners, whose vessels are registered in the Latvian Vessel Register and included in the fishing vessel list of the National Board of Fisheries. State Aid
1123. State aid schemes concerning actions financed under FIFG within this programme are governed by the provisions of Art. 19(2) of Council Regulation (EC) No 2792/1999 as amended by Council Regulation (EC) No 2369/2002 of 20 December 2002.
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4.4.10. Measure: Development of Processing and Marketing of Fishery and Aquaculture Products, Fishing Port Facilities and Aquaculture Measure Rationale
1124. Due to the lack of financial resources many fish processing companies operate in technically outdated premises, which do not correspond to the EU hygiene and environment requirements. Besides, production of fish products with higher value added is restricted by limited amount of available fish resources and unfavourable composition of fish species being caught and used for production purposes.
1125. Fish landings take place at sea-ports, where internal infrastructure is outdated. Thus, it is necessary to adjust it to the fishermen needs, through improvement of fish landing and storage conditions.
1126. Lack of financial resources for the introduction of perspective fish species breeding technologies is one of the main factors, which hinder the development of the aquaculture sector in Latvia. Although historically in Latvia the emphasis was laid on fish restocking, the activities of the market fish breeding have increased much during the last years.
1127. Hence the development of aquaculture sector will be a good source for the acquisition of additional resources both diversify the range of fish products produced in fish processing enterprises and to satisfy consumer demands. It will also create alternative employment activities in rural areas. Measure Objective
1128. Promotion of fish processing sector competitiveness and production of high quality products by implementation of hygiene and environment requirements, as well as improvement of fish landing, storage and marketing conditions at ports, which will guarantee the freshness and quality of the products supplied to the final consumer. This measure also includes the development of aquaculture sector in order to promote alternative employment opportunities in rural areas and to obtain additional fish resources. Indicative Activities
1129. The support to fish processing companies will be provided for measures that have already been supported under the EU Special Pre-accession Programme for Agriculture and Rural Development (SAPARD). These measures include improvement of hygiene conditions, introduction of the HACCP system and new technologies including environment-friendly technologies. A particular emphasis will be put for the high value added production in order to ensure the maximum positive effect on both the economic efficiency of the sector and the employment.
1130. Activities establishing safe, modern and well-maintained sea-port infrastructure to be used by fishermen will be sustained under this measure. It will ensure arrangement and development of necessary services and infrastructure elements for fishing fleet activities in the sea-ports (e.g. ice-making equipment, cold storages, fish chilling rooms and other facilities).
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1131. Measures promoting modernisation of technologies for aquaculture companies and their adjustment to environmental requirements will also be supported. Indicative Final Beneficiaries
1132. Fish processing companies registered in the Food Companies’ Register of the Food and Veterinary Service, owners of the land at sea-ports, hydro-technical constructions and quaysides, as well as aquaculture companies registered by the Food and Veterinary Service.
State Aid
1133. State aid schemes concerning actions financed under FIFG within this programme are governed by the provisions of Art. 19(2) of Council Regulation (EC) No 2792/1999 as amended by Council Regulation (EC) No 2369/2002 of 20 December 2002.
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4.4.11. Measure: Development of Coastal Fishery, Socio-economic Measures, Aid for Temporary Cessation of Fishing Activities and Other Financial Compensation, Promotion of New Market Outlets and Support to Producer Organisations Measure Rationale
1134. Coastal fishery is economically and socially important for coastal regions, because it is the main employment form for people living in small fishermen villages. However, technical conditions of fishing boats engaged in coastal fishery frequently do not correspond to the general safety and hygiene requirements.
1135. The support for the owners of scrapped or reassigned fishing vessels is foreseen under measure 4.4.8. Adjustment of Fishing Effort. This measure provides support for crew members to compensate the possible earning losses due to the decommissioning of vessels.
1136. Commission or national administration designated protection measures for purposes of conservation of fishing resources are more often established, which result temporary cessation of fishing activities. Besides the Community legislation imposes technical restrictions on use of certain gear or fishing methods, as a result, the owners of fishing vessels should perform technical adjustment measures. Wherewith compensation schemes for covering losses should be introduced both for fishermen and owners of fishing vessels.
1137. Taking into account that significant part in the common market organisation of fishery products belongs to producer organisations (e.g. fishermen, fish and crayfish farmers), it is necessary to establish such organisations in Latvia as well to introduce fish market intervention mechanisms.
1138. A remarkable part of fish production in Latvia is made-up of canned fish, what is determined by the structure of caught fish as more than 90% of the Latvian quota consists of sprat and Baltic herring. Since the opportunities of using this kind of production are limited, it is essential to carry out promotional activities, especially with Latvia’s forthcoming accession to the European Union when the competition with other EU Member states will rise. Measure Objective
1139. The objective is to improve the conditions of coastal fishery in the Baltic Sea and the Gulf of Riga, to support fishermen suffering from fishing vessel scrapping and ceased (including temporary) fishing activities, to facilitate the production of market oriented fish products, as well as to increase fish consumption by entering new markets and finding new market outlets, to promote the common market organisation for fishery and aquaculture products. Indicative Activities
1140. The measure provides support to the groups of fishing vessel owners and fishermen (at least 3), fishing in the coastal waters. This support will ensure improvement of safety equipment, hygiene and working conditions and introduction of more selective fishing methods, promotion of fresh fish market and increase of value added of the fish production.
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1141. This measure includes a support scheme for fishermen involuntary leaving fisheries as the result of the decommissioning of fishing vessels (e.g. scrapping or reassignment of fishing vessels for other purposes – training, research activities, etc.) related to the activities of measure 4.8. Adjustment of Fishing Effort.
1142. Compensation schemes for fishermen and owners of fishing vessels are foreseen within the framework of this measure to reduce losses caused by the temporary cessation of fishing activities (in cases where a recovery or management plan is adopted by the European Council or where the European Commission or national authorities introduce emergency measures) or by the technical adjustment in cases where Community legislation imposes the technical restrictions on the use of certain gear or fishing methods.
1143. Latvia’s accession to the European Union will create many opportunities for the development of the market of fish products. This measure provides support to projects promoting production of market-oriented fish products to raise Latvia’s competitiveness on the world market (e.g. organisation of promotional campaigns and fairs, and participation therein).
1144. The measure will also provide support for the establishment of producer organisations and promotion of their activities by ensuring the introduction of key intervention mechanisms of the Common Fisheries Policy in Latvia.
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Indicative Final Beneficiaries
1145. Groups of coastal fishermen and/or fishing vessel owners; crew members of decommissioned vessels; fishermen and owners of fishing vessels suspended from fishing activity temporary; companies and organisations ensuring fish product promotion activities; producer organisations (e.g. fishermen, fish and crayfish farmers). State Aid
1146. State aid schemes concerning actions financed under FIFG within this programme are governed by the provisions of Art. 19(2) of Council Regulation (EC) No 2792/1999 as amended by Council Regulation (EC) No 2369/2002 of 20 December 2002. EU Contribution
1147. The development of coastal communities, as well as maintaining social and regional equilibrium by mitigating the consequences derived from the adjustment of fishing capacity form an essential part of the CFP. Furthermore, promotion of new market outlets and support to producer organizations will enhance competitiveness of the sector and benefit the consumer by providing products in demand and in compliance with hygiene and food safety requirements. Having in mind limited national financial possibilities and aiming at maximum effect of the above actions, FIFG contribution of 80% would benefit the whole sector and the implementation of the CFP.
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4.5. Priority: Technical Assistance Priority Rationale
1148. Technical Assistance is a valuable instrument necessary for effective management of the Programme. In order to ensure programme management functions, it is necessary to have appropriate administrative capacity. In addition, it is required to implement publicity measures, informing the wider public about the Programme and its content to promote the activity and interest from the potential project applicants. Financing for the different type of studies will ensure better quality of project proposals. The priority will include measures for co-financing of the direct programme management costs and also other technical assistance costs.
1149. The EU co-financing for direct management costs should not exceed 11.75 mln EUR, and should not exceed 75% of total eligible costs. Priority Objectives
1150. The objective of the technical assistance priority is to support effective and sound management, monitoring, control and evaluation of the Programme.
1151. The following specific objectives are defined: • Ensure effective management of the Programme, promoting quality of the implementation; • Support for the Monitoring Committee; • Ensure publicity and availability of the information about the Programme; • Improve quality of the data and quantification of the results.
4.5.1. Measure: Support for Programme Management ERDF
1152. It is envisaged that the measure will finance activities in accordance with the Rule 11.2 of the Regulation 1685/2000 as amended by the Regulation No 1145/2003 of 27 June 2003. The measure will cover costs related to Programme management, implementation, monitoring and financial control. Eligible activities include project preparation, selection, appraisal and monitoring. The measure will also cover costs related to the organisation of the monitoring activities, including costs for the experts, and expenditure for audit and on the spot checks.
4.5.2. Measure: Other Technical Assistance Costs ERDF
1153. The measure will co-finance expenditure related to the costs that are not eligible under direct management costs. The expenditure will include studies, seminars, publicity and information campaigns, and evaluations that are not directly linked to the management of the Programme. The measure will also include expenditure related to the acquisition and installation of the computerised data information system (including both hardware and software) necessary for programme management, monitoring, evaluation and control.
4.5.3. Measure: Support for Programme Management ESF
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1154. It is envisaged that the measure will finance activities in accordance with the Rule 11.2 of the Regulation 1685/2000 as amended by the Regulation No 1145/2003 of 27 June 2003 related to the management of the ESF. The measure will cover costs related to programme management, implementation, monitoring and financial control. Eligible activities include project preparation, selection, appraisal and monitoring. The measure will also cover costs related to the organisation of the monitoring process.
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4.5.4. Measure: Other Technical Assistance Costs ESF
1155. The measure will co-finance expenditure related to the costs that are not eligible under direct management costs. The expenditure will include studies, seminars, publicity and information campaigns, and evaluations that are not directly linked to the management of the programme.
4.5.5. Measure: Support for Programme Management EAGGF
1156. It is envisaged that the measure will finance activities in accordance with the Rule 11.2 of the Regulation 1685/2000 as amended by the Regulation No 1145/2003 of 27 June 2003 related to the management of the EAGGF and FIFG. The measure will cover costs related to programme management, implementation, monitoring and financial control. Eligible activities include project preparation, selection, appraisal and monitoring. The measure will also cover costs related to the organisation of the monitoring process, including costs for the experts, and expenditure for audit and on the spot checks.
4.5.6. Measure: Other Technical Assistance Costs EAGGF
1157. The measure will co-finance expenditure related to the costs that are not eligible under direct management costs. The expenditure will include studies, seminars, publicity and information campaigns, and evaluations that are not directly linked to the management of the programme.
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5. Overall Management Framework of SPD
5.1. Legal Framework
1158. In order to ensure management of the EU Structural Funds according to the Council Regulation 1260/1999 of 21 June 1999 following national legislative acts have been adopted. There are two legal documents elaborated by the Cabinet of Ministers to define the management structure of the EU Structural Funds.
1159. Regulations of the Cabinet of Ministers No.500 of September 2, 2003 “Regulations on the Institutional Framework of the Management, Monitoring, Evaluation and Control of the EU Structural Funds”: • Designates the Managing Authority, Paying Authority, Intermediate Bodies, Monitoring Committee, Steering Committee and defines role of Final Beneficiary (Aid Scheme Manager) for Structural Funds; • Defines the functions of the Managing Authority, Paying Authority, Line ministries, Intermediate Bodies, Monitoring Committee, Steering Committee and Final Beneficiary (Aid schemes manager); • Defines three types of projects to be implemented – national projects, aid schemes and open calls for projects.
1160. Decree of the Cabinet of Ministers No.573 of September 10, 2003 “On Tasks to be Accomplished to Ensure the Implementation of the Management, Monitoring, Evaluation and Control System of the EU Structural Funds” defines the main tasks and deadlines of Managing Authority, Paying Authority, Intermediate Bodies, Final Beneficiaries (Aid schemes managers) and Public Procurement Bureau to ensure the implementation of EU SF management system.
1161. Respectively the Regulations of the Cabinet of Ministers “On the Management, Monitoring, Evaluation and Control System of the EU Structural Funds” will be elaborated based on the above mentioned regulations and decree of the Cabinet of Ministers.
1162. In order to ensure the compatibility of operations financed from the Structural funds with Community policies and legislation the legislative framework of the European Union Structural Funds management and implementation has been developed.
5.1.1. Public Procurement
1163. In July 2001, the Law on Procurement for Government and Municipal Needs was adopted. It entered into force on January 2002. Thereby the harmonization of the public procurement norms in so-called classic procurement sector was started. The new Law has replaced the Law “On Public Procurement”, initially adopted in 1996 and then subsequently amended to adjust its norms to EC Directives 93/36/EEC, 93/37/EEC, 93/38/EEC, 98/4/EEC, 89/665/EEC, 97/52/EEC and 92/13/EEC. Procurement in utilities sector is regulated by the
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Law “On Works, Supplies, Lease and Services Procured by Entities Operating in the Public Services Sector” came in force on July 1, 2000.
1164. In order to achieve full alignment with acquis, amendments to the “Law on Procurement for Government and Municipal Needs” were adopted on 24 October 2002, 27 December 2002 and 5 June 2003.
1165. According to the Law on Procurement for Government and Municipal Needs the State Procurement Monitoring Bureau was established in January 2002 with a view to further enhance the supervisory capacity and transparency in the field of public procurement as well as to ensure successful implementation of the legislation. The Bureau’s decisions are binding for procuring entities; it is entitled to consider complaints on compliance of the procurement procedure with the legal basis and has rights to suspend awarding of a contract.
1166. The Procurement Monitoring Bureau is supervising how procuring entities and other involved parties comply with legal acts in public procurement sphere (on its own initiative and when considering complaints).
1167. The Procurement Monitoring Bureau will give the guidance for those involved in the procurement process of Structural Funds projects.
1168. The Procurement Monitoring Bureau is acting under the supervision of the Ministry of Finance and its statutes have been approved on 27 November 2002.
5.1.2. Planning of Co-financing and Multi-annual Budgeting
1169. The process of the budget planning, its approval and implementation in the Republic of Latvia is regulated by: • The Law “On Budget and Financial Management” (adopted by Saeima on 24 March 1994); • The Law “On Local Governments Budgets” (adopted by Saeima on 24 March 1994). • Annual State Budget Law what could stipulate special rights or principles of executing budget.
1170. Since 1997 in Latvia the annual state budget law has been developed according to the program principle. The Law “On Budget and Financial Management” states that the budget program is set of measures and services that are oriented towards a common objective.
1171. The law “On Budget and Financial Management” foresees the mid-term planning of the state budget. The mid-term planning of the state budget is the process where available resources are identified for a period of five years and the use of the resources is assured according to the government defined priorities. At the same time the resources of the EU funds and state budget co- financing are planned for the complete implementation of the program (project) including the total required financial amount. The implementation follows this procedure: in case where planned projects for the state budget program are implemented for a period longer than the current budget year, the required resources from the EU funds and state budget co-financing are stated as long- term public commitments (in an annex to the annual state budget law). The long-term public commitments include public investment projects, payments for loans and credits, payments within the international programs, projects, leasing etc.
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1172. The state budget law contains long-term public commitments showing all the necessary financial resources required for the next year, the year after the next year and the total amount for the completion of a project. Thus the Parliament approves the commitments of a program for the total period of its implementation. Long-term programs (projects) approved by the government are included as long-term state commitments, and the respective financial resources are planned according to the stated time of program (project) implementation, for example if the program (project) implementation period is stated for 6 years the financing of the program (project) is included as a long-term commitment for the total implementation period. The financial amounts of a program (project), split up into several years, can be updated taking into account the state of progress of the program (project) implementation.
1173. The resources of the EU Structural Funds and related state budget co-financing will be planned as long-term public commitments (included as an annex to the annual state budget law), specifying the total required amount of financial resources for the next year, the year after the next year and amount up to the end of the programme implementation. The commitment will be made to cover the total program period of the SPD.
1174. The appropriate funding of the EU Structural Funds will also be planned within the state budget program of each related Intermediate body. The information will be provided on planned EU Structural Funds resources for all levels of SPD – from the projects up to the priorities of the SPD. It will be ensured that the appropriate national co-financing has will made available at all the levels. In case of transferring funds from one SPD measure to another there is no need to amend the state budget law – transfers can be made at the management level (related Intermediate body level).
1175. The legislative documents of the Republic of Latvia – the law “On Budget and Financial Management” and the annual state budget law allow transfers of financial resources between measures and priorities, which are included in the state budget programs. In case of transferring funds within the framework of one budget program there is no need to amend the state budget law – transfers can be made at management level (related ministry level).
5.1.3. Environmental Protection
1176. Procedures for project assessment and quality evaluation are regulated by the legislation on environmental protection, which are in line with the acquis: • The “Master Plan of Policy of Environmental Protection” (accepted on April 25, 1995) is the first document, accepted by the Cabinet of Ministers, in which the issue of integrity that forms the basis for strategic environmental assessment has been mentioned as one of the objectives of environmental protection policy. • “Environmental Protection Law” (in force since 6 August 1991) provides basic requirements that apply to strategic environmental assessment, as well as determinates the cooperation among society, government institutions and local government in field of environmental protection. • “Environmental Impact Assessment Law” (in force since 13 November 1998) provides legal basis for detailed assessment of important projects, and requires providing information on environmental impact of project of
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strategic document. The law corresponds to the Directives – 85/337/EEC and 97/11/EC.
1177. The Environmental Impact Assessment State Bureau has been established in 1999 under the supervision of Ministry of Environment with a purpose to implement the state policy in the environmental impact assessment field. The main function of Environmental Impact Assessment State Bureau is to prevent or to reduce adverse impact on the environment caused by the activities of physical persons and legal entities. In order to ensure the Structural Fund’s project compliance with the Environmental Policy of the Community: • the representatives of Environmental Impact Assessment State Bureau will participate in the Steering Committees as observers; • the environmental impact assessment of the Structural Funds projects will be carried out in accordance with national legislation; • environment specific indicators will be defined in the Programme Complement and monitored consequently.
5.1.4. State Aid
1178. Necessary legislative framework corresponding to EU policy on the state aid control in Latvia was set up in 28 December 2002. The “Law on Control of Aid to Commercial Activity” contains main principles of the EU State aid control rules.
1179. National state aid controlling body is the State Aid Surveillance Commission. The functions of Secretariat of above-mentioned Commission are provided by the Ministry of Finance.
1180. The established national state aid control system covers public financing to entrepreneurial activities from state, municipalities as well as from the EU funds.
1181. Application of the state aid control rules before Latvia’s accession to the EU – according to the national legislation all planned state aid schemes should be notified by the State Aid Surveillance Commission. Implementation of any aid measure is allowed only after positive State Aid Surveillance Commission’s decision. All state aid schemes which are included in the Single Programming Document are being certified in the European Commission according to interim procedure.
1182. Application of the state aid control rules after Latvia’s accession to the EU - All planed state aid schemes will be notified to the European Commission according to the Article 88(3) of the EC Treaty. Only after European Commission’s approval the state aid scheme will be put into effect.
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5.2. Administrative Framework
1183. In order to ensure the compatibility with the Article 19.3 (d) of Council Regulation 1260/1999 of 21 June 1999, the information on the institutional framework of the management of the EU Structural Funds is set out in this chapter.
5.2.1. Managing Authority
1184. The Managing Authority in accordance with Article 34 of Council Regulation 1260/1999 of 21 June 1999 is responsible for the efficiency and correctness of the management and implementation of the EU Structural Funds.
1185. According to the Regulations of the Cabinet of Ministers No.500 of 2 September 2003 “Regulations on the Institutional Framework of the Management, Monitoring, Evaluation and Control of the EU Structural Funds” the Ministry of Finance has been designated as the Managing Authority for the Single Programming Document.
1186. According to the Decree of the Minister of Finance the European Union Funds Department of the Ministry of Finance is nominated as responsible for fulfilling the tasks of the Managing Authority for the EU Structural Funds in Latvia. Deputy State Secretary of the Ministry of Finance acts as a Head of the Managing Authority. The European Union Funds Department has a following structure 70 : • ERDF Division, • ESF Division, • EAGGF and FIFG Division, • Monitoring and Evaluation Division, • Information and Publicity Division, • EU Cohesion Policy Division.
1187. The Managing Authority will perform the following functions in the management of the EU Structural Funds: • organisation and management of the Monitoring Committee, • organisation and management of the Steering Committees, • ensures coordination between different measures under the SPD as well as necessary coordination between institutions involved in the implementation of the SPD, • preparation and submission to the European Commission of annual and final implementation reports, • ensuring the information and publicity measures, • development, maintaining and upgrading of the Management Information System (MIS), • organisation of ex-ante and ongoing evaluation of the SPD, as well as cooperates with EC in organisation of ex-post evaluation,
70 It is foreseen that starting from January 2004 the 25 additional staff members will be hired (total staff number becomes 45) in order to strengthen the capacity of the Managing Authority.
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• verifies expenditure declarations before submission to the Paying Authority, • carries out verification of expenditure declarations before submission to the Paying Authority, • ensures establishment and operation of proper management and control systems, as well as existence of adequate audit trail at all administrative levels involved in the management of the Structural Funds.
5.2.2. Paying Authority
1188. The Paying Authority in accordance with Article 9 (o) of Council Regulation 1260/1999 of 21 June 1999 is responsible for drawing up and submitting payment applications and receiving payments from the Commission, as well as certifying expenditures.
1189. According to the Regulations of the Cabinet of Ministers No.500 of 2 September 2003 “Regulations on the Institutional Framework of the Management, Monitoring, Evaluation and Control of the EU Structural Funds”, the State Treasury has been designated as the Paying Authority for the SPD. The State Treasury in fulfilment of the tasks of the Paying Authority is fully independent from the Managing Authority (Ministry of Finance).
1190. The Decree of State Treasury on fulfilling Paying Authority functions indicates the following division of tasks in carrying out supporting functions in management of the Structural Funds 71 : • Forecasting and Financial Planning Department is responsible for preparing forecasts of applications for payment for the current year and for the following year and submitting them to the European Commission (EC) by 30 April of each year as well as for preparing cash flow forecasts to ensure the financial management; • Reports Department is responsible for elaborating principles and methodology for accounting of received, disbursed, unspent and recovered funds for the institutions and bodies involved in management of the EU Structural Funds; • Operations Department is responsible for reimbursement of expenditures to Final Beneficiary, accounting of received, disbursed, unspent and recovered EU Structural funds as well as for transferring unspent or recovered funds to the EC as well ensures necessary data in Management Information System; • Department of European Affairs is responsible for certification of expenditures reimbursed to the Final Beneficiary and submission to the EC of the following reports: declaration of expenditures at least three times per year; certified statements of expenditures actually paid within six months of the deadline for payment laid down in the EC decision granting a contribution from the Structural Funds; • Internal Audit Department is responsible for the internal audits of the State Treasury’s established management and control system and assessment of its performance;
71 It is foreseen that starting from January 2004 the 12 additional staff members will be hired (total staff number becomes 54) in order to strengthen the capacity of the Paying Authority.
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• Treasury Settlement Centres will execute payments to the final beneficiaries; • Other Departments of the Treasury will fulfil supporting functions to the Paying Authority.
5.2.3. Intermediate Bodies
1191. With reference to the Article 2 of Commission Regulation 438/2001 of 2 March 2001 several public bodies acting under the responsibility of Managing Authority and performing tasks on behalf in relation to Final Beneficiaries or the bodies or firms carrying out the operations have been appointed. There are 2 levels of Intermediate Bodies envisaged:
1192. According to the Regulations of the Cabinet of Ministers No.500 of 2 September 2003 “Regulations on the Institutional Framework of the Management, Monitoring, Evaluation and Control of the EU Structural Funds” the following Line Ministries have been appointed as first level Intermediate Bodies: • Ministry of Regional Development and Local Governments; • Ministry of Economy; • Ministry of Welfare; • Ministry of Education and Science; • Ministry of Agriculture; • Ministry of Transport; • Ministry of Environment; • Ministry of Health; • Ministry of Culture. st 1193. The 1 level Intermediate Body/Line Ministry on behalf of the Managing Authority ensures that activities implemented under Structural Funds will comply with the policy of respective sector and provisions of the Single Programming Document. st 1194. In the cases when the 1 level Intermediate Body/Line Ministry will act as Intermediate Body and Final Beneficiary, it will be ensured that these functions will be performed by separate departments. st 1195. The 1 level Intermediate Body/Line Ministry operates under the supervision of the Managing Authority and performs following tasks delegated by the Managing Authority: • preparation of the priorities of the respective fund for the SPD; • co-ordination and monitoring of the respective priorities to assure that measures are implemented in conformity with the SPD; • organising information and publicity measures on the assistance; • in consultation with Managing Authority, Paying Authority and 2 nd level Intermediate Body developing project application forms; • developing project selection criteria for projects financed under the respective measure; • evaluation of project applications and approval of projects (in case of Aid- Schemes establish and chair Evaluation Committees); • access to financial and physical information for monitoring of implementation of measures to assure that objectives of the priorities are met;
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• reporting to the Managing Authority on progress of implementation of measures and priorities.
1196. According to the Regulations of the Cabinet of Ministers No.500 of 2 September 2003 “Regulations on the Institutional Framework of the Management, Monitoring, Evaluation and Control of the EU Structural Funds” the following second level Intermediate Bodies have been appointed: • Central Finance and Contracting Unit – for the European Regional Development Fund (ERDF); • State Employment Service – for the European Social Fund (ESF); • Agency for Vocational Education Development Programmes – for the European Social Fund (ESF); • Rural Support Service – for the European Agricultural Guidance and Guarantee Fund (EAGGF) and the Financial Instrument for Fisheries Guidance (FIFG). nd 1197. The 2 level Intermediate Bodies are responsible for supervision of the implementation of projects funded by the respective fund. The Managing Authority delegates the following tasks to the 2 nd level Intermediate Bodies: • developing project application form in case of EAGGF and FIFG; • call for applications, receiving project applications, ensuring technical and administrative evaluation of project applications and submitting them for evaluation to the 1 st level Intermediate Body/Line Ministry. For EAGGF and FIFG the 2 nd level Intermediate Body ensures evaluation and approval of projects and submits to the Steering Committee; • entering into agreements with the Final Beneficiaries on project implementation and aid scheme implementation; • supervising and controlling the implementation of projects in accordance with the concluded agreement with the Final Beneficiaries, carrying out controls in accordance with Article 4 of Commission Regulation 438/2001 of 2 March 2001 (in case of Aid scheme – the Final Beneficiary). This is done by units other than the Internal Audit Units carrying out the Article 10 of Commission Regulation 438/2001 of 2 March 2001 checks, and the separation of function will be ensured; • Internal Audit Units of the 2 nd level Intermediate Bodies is carrying out controls in accordance with Article 10 of Commission Regulation 438/2001 of 2 March 2001; • gathering financial and physical information for monitoring of project implementation (analytical data accounting at the level of projects); • checking request for reimbursement, verifying that share of national co-financing has been effectively paid out, authorising payments and submitting them to the Paying Authority; • preparing expenditure declarations and submitting them to the Managing Authority; • reporting to the 1 st level Intermediate Bodies/Line Ministries and Managing Authority on progress of implementation of projects.
5.2.4. Final Beneficiary
1198. The Final Beneficiaries in accordance with Article 9 of the Council Regulation 1260/1999 of 21 June 1999 are the bodies and the public or private firms that are responsible for commissioning operations or bodies designated by the government to act as body granting the aid to final recipient. In the description of Measures of the SPD (Chapter 4) the corresponding types of Final
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Beneficiaries are identified – and these are state institutions, municipalities, state or municipal enterprises and agencies, individuals (in case of priority 4 – EAGGF, FIFG) etc.
5.2.5. Body or Firm carrying out the operation
1199. In case when according to Article 9 of the Council Regulation 1260/1999 of 21 June Final Beneficiaries are responsible for commissioning operations or bodies designated by the government to act as body granting the aid, there are bodies or firms carrying out the operations identified to indicate the target group benefiting from structural intervention directly. The following bodies or firms carrying out the operations are identified in the text of the Single Programming Document - enterprises and individuals (in case of priority 2 – ERDF and 3 – ESF) etc.
5.2.6. Monitoring Committee
1200. According to the Article 35 of the Council Regulation 1260/1999 of 21 June 1999 the Monitoring Committee monitors the elaboration and implementation of the SPD. The Monitoring Committee is established upon the agreement with the Managing Authority not later than 3 months after the SPD has been approved.
1201. According to the Regulations of the Cabinet of Ministers No.500 of 2 September 2003 “Regulations on the Institutional Framework of the Management, Monitoring, Evaluation and Control of the EU Structural Funds” the membership of the Monitoring Committee will include the representatives of the following Institutions: • Managing Authority; • Paying Authority; • 1st level Intermediate Bodies/Line Ministries and 2 nd level Intermediate Bodies; • Latvian Free Trade Union, Latvian Employers Confederation; • NGO’s (active in such areas as environment, equal opportunities, information society and other); • Regional Development Councils; • Union of Local and Regional Governments of Latvia; • European Commission (as advisory capacity); • Various International Financial Institutions (as observers).
5.2.7. Steering Committee
1202. In order to ensure the coordinated implementation of the programme in accordance with the specific objectives of the SPD four Steering Committees will be established – one for the ERDF, one for the ESF, one for the EAGGF and one for the FIFG.
1203. Considering the specific of sectors and measures funded under the assistance and institutions involved in the management and implementation of the measures the Steering Committees coordinate implementation of the relevant measures, by taking the decisions on project selection and ensure regular operational monitoring and evaluation at the level of the respective fund. The
309 Single Programming Document for Latvia Objective 1 Programme 2004-2006
Steering Committees also ensure horizontal links among SPD priorities and measures
1204. A representative of the Managing Authority will chair the Steering Committees and the membership of the Steering Committees will include the representatives of the following institutions: • Managing Authority; • Paying Authority; • 1st level Intermediate Body/Line Ministry and 2 nd level Intermediate Body; • Regional representatives (of 5 planning regions); • Final Beneficiary 72 .
1205. The respective Division of European Union Funds Department of the Ministry of Finance in charge of relevant fund will ensure coordination and secretariat functions for each of the Steering Committees. st 1206. 1 level Intermediate Bodies/Line Ministries within the framework of ESF Steering Committee will ensure ESF policy coordination according to EU Employment Policy Guidelines and will contribute to effective planning and implementation of ESF support. Following functions will be ensured: - to secure co-ordination of the activities of involved institutions in relation to the ESF implementation, in particular setting up priority actions within the ESF measures, developing projects pipeline, etc; - to coordinate the expected results of the ESF supported actions, discuss and evaluate the outputs and results of the measures; - to monitor the process of the implementation of ESF supported measures and discuss problems arising, to provide agreed proposals for the Managing Authority and Monitoring Committee concerning changes to the SPD and Programme Complement, allocation or reallocation of financial resources, improvement of administrative system, project selection and evaluation criteria, etc.
72 In case when according to Article 9 of the Council Regulation 1260/1999 of 21 June 1999 Final Beneficiaries are responsible for commissioning operations or they are bodies designated by the government to act as body granting the aid.
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5.3. Implementation
1207. In accordance with the requirements of the Article 19.3 (d) of Council Regulation 1260/1999 of 21 June 1999, this chapter sets out provisions for implementing SPD. The structure of the section is based on the implementation of three project types: • (1) open call for applications in case of ERDF, ESF, EAGGF and FIFG; • (2) national projects; and • (3) aid schemes in the case of ERDF and ESF.
5.3.1. ERDF and ESF
1208. According to the requirements defined in the Regulations of the Cabinet of Ministers No.500 of 2 September 2003 “Regulations on the Institutional Framework of the Management, Monitoring, Evaluation and Control of the EU Structural Funds” the ERDF and ESF projects will be selected as follows: Open Call for Applications Project Selection st 1209. The 1 level Intermediate Body/Line Ministry in consultation with Managing Authority, Paying Authority and 2 nd level Intermediate Bodies develops project application form and submits for approval to the Steering Committee. The 1 st level Intermediate Body/Line Ministry develops project selection criteria for projects and submits the criteria for consideration to the Steering Committee. The selection criteria after positive opinion in Steering Committee are approved by the Monitoring Committee. After approval of project selection criteria in the Monitoring Committee the 2 nd level Intermediate Body makes call for applications.
1210. The Final Beneficiary completes the project application form selecting priority/measure according to the SPD and submits the project application to the 2nd level Intermediate Body. nd 1211. The 2 level Intermediate Body ensures administrative and technical evaluation of the project application and then submits the project application for evaluation to the respective 1 st level Intermediate Body/Line Ministry. The 1 st level Intermediate Body/Line Ministry evaluates project application. Evaluated project application forms are submitted to the Steering Committee. The Steering Committee makes a positive opinion on project selection. On the basis of the positive opinion of the Steering Committee the 1st level Intermediate Body takes a decision on project.
311 Single Programming Document for Latvia Objective 1 Programme 2004-2006
Project selection ERDF&ESF open
1st Level 2nd Level Final Intermediate Managing Steering Monitoring Paying European Contractor Intermediate 1 Beneficiary Body/ Line Authority Committee Committee Authority Commission Body Ministry
Develop project Approve application form appl.form
Positive opinion Develop project Approve on selection selection criteria criteria criteria
Call for applications
Prepare project application
Receive project application/ Positive opinion Evaluate project technical on project application administrative selection evaluation
Take a decision on project
Project Implementation nd 1212. To start implementation of project, the 2 level Intermediate Body concludes the agreement with the Final Beneficiary on project implementation and ensures operational monitoring of the implementation of project.
1213. The Final Beneficiary according to national legislation carries out procurement procedures and ensures procurement process. The Procurement Monitoring Bureau is responsible for investigation of complaints.
1214. The Final Beneficiary concludes the contract with the Contractor on works, supplies and services and ensures operational monitoring of the implementation of projects in accordance with contracts. nd 1215. The 2 level Intermediate Body ensures that the projects are implemented in accordance with the agreement and ensures on-the-spot checks as per Article 4 of Regulation 438/2001.
312 Single Programming Document for Latvia Objective 1 Programme 2004-2006
Project implementation - National and Open
1st Level 2nd Level Final Intermediate Managing S teering Monitoring Paying European Contractor Intermediate Beneficiary Body/ Line Authority Committee Committee Authority Commission Body Ministry
Agreement with beneficiary on project implementation
Ensure procurement Procurem ent Monitoring process Bureau - investigate com plains
Enter into contract with contractor
W orks, Monitoring in Ensure supplies, accordance with on-the-spot services contracts checks
Payment Flow
1216. In the payment process of Structural funds (according to Article 31 and 32 of the Council Regulation 1260/1999 of 21 June 1999) the two basic stages are distinguished: • flow of funds from the Paying Authority to the Final Beneficiary; • flow of funds from the European Commission to the Paying Authority. st 1217. During the 1 stage the Final Beneficiary verifies and validates deliveries and invoices and checks supporting documents as well as ensures appropriate bookkeeping and reports to the 2 nd level Intermediate Body on project implementation progress.
1218. The Final Beneficiary makes payments to the Contractor account and prepares and submits request for reimbursement of funds to the 2 nd level Intermediate Body. Rules for submission of reimbursement claims will be stipulated in agreement between the Final Beneficiary and the 2 nd level Intermediate Body. nd 1219. The 2 level Intermediate Body checks the request for reimbursement, authorises the payment and submits it to the Operations Department of the Paying Authority.
1220. The Operations Department of the Paying Authority checks the request for reimbursement and pays to the Final Beneficiary. nd nd 1221. During the 2 stage the 2 level Intermediate Body prepares expenditure declarations and submits to Managing Authority for verification.
1222. The Managing Authority when submitting expenditure declarations to Paying Authority gives assurance based on information in Management Information System and audit reports on system operation, controls and audits performed and submits those to the Paying Authority.
313 Single Programming Document for Latvia Objective 1 Programme 2004-2006
1223. Department of European Affairs of the Paying Authority checks expenditure declarations against supporting documents, information in the Management Information System as well as information in the Paying Authority accounting system (entered by Operations Department), certifies expenditure and prepares payment claims for submission to the EC.
Payment flow - National and Open
1st Level 2nd Level Final Intermediate Managing S teering Monitoring Paying European Contractor Intermediate Beneficiary Body/ Line Authority Committee Committee Authority Commission Body Ministry
M ake advance Receive payments p ay ment and from EC payments based on payment claims
Invoices and Check invoices sup p orting and supporting documentation documentation
M oney on Pay to the contractor's contractor account
Check request for Check request for Prepare request reimbursement/ reimbursement for reimbursement authorise and pay to the payment beneficiary
M oney on beneficiarie's account
Prepare payment Give assurance on claim, check Prep are system operation, exp enditure exp enditure controls and declarations and declarations audits p erformed certify exp enditure
Reporting and Monitoring
1224. In order to ensure the operational monitoring of the implementation of projects, the Managing Authority gives an assurance on the system operations, controls and audits performed according to Article 4 of Commission Regulations 438/2001 of 2 March 2001. nd 1225. The Final Beneficiary reports to the 2 level Intermediate Body on project implementation progress. nd 1226. The 2 level Intermediate Body ensures checking of the deliveries, validity and existence of expenditure, existence of supporting documents and reports to the 1st level Intermediate Body/Line Ministry and Managing Authority. The 2 nd level Intermediate Body ensures data on financial and physical progress collection and transfers into Monitoring Information System. st 1227. The 1 level Intermediate Body/Line Ministry ensures the reporting to the Managing Authority on progress of implementation of measures and priorities and their compliance with the SPD.
1228. The Managing Authority prepares annual and final reports and submits for information to the Steering Committee.
314 Single Programming Document for Latvia Objective 1 Programme 2004-2006
1229. The Steering Committee review reports and submits for approval to Monitoring Committee.
1230. The Managing Authority and the Monitoring Committee chaired by the representative of the Managing Authority ensures the monitoring of the progress made towards achieving specific objectives of the SPD and submits annual and final reports to the European Commission.
Reporting and monitoring - National and Open
1st Level 2nd Level Final Intermediate Managing S teering Monitoring Paying European Contractor Intermediate Beneficiary Body/ Line Authority Committee Committee Authority Commission Body Ministry
Financial and Financial and Access to Financial and p hy sical data phy sical data financial and Financial data on p hy sical data on on on phy sical data on implementation imp lementation imp lementation imp lementation imp lementation of the SPD of the SPD of p rojects of p rojects of the SPD
Report to 1st level Intermediste Report to 2nd Rep ort to Body /Line level Intermediate M anaging M inistry and Body Authority M anaging Authority
Information on Rep ort on p rogress of SPD financial data imp lementation
Review reports Approve reports prepared by the prepared by the Report to the EC Receive rep orts M anaging M anaging Authority Authority
315 Single Programming Document for Latvia Objective 1 Programme 2004-2006
National Projects Projects Selection st 1231. As regards the National Projects the 1 level Intermediate Body/Line Ministry, is responsible for development of the National Programme and submission for consideration to the Steering Committee. st 1232. In case of positive opinion of the Steering Committee, the 1 level Intermediate Body/Line Ministry approves the projects of the National Programme.
Project selection - National Programme
1st Level 2nd Level Final Intermediate Managing Steering Monitoring Paying European Contractor Intermediate Beneficiary Body/ Line Authority Committee Committee Authority Commission Body Ministry
Pos itive Develop opinion national on national programme programme
Approve projects of national programme 1233.
Project Implementation nd 1234. To start project implementation the 2 level Intermediate Body concludes the agreement with the Final Beneficiary on project implementation and ensures operational monitoring of the implementation.
1235. The Final Beneficiary according to national legislation carries out procurement procedures and ensures procurement process. The Procurement Monitoring Bureau is responsible for investigation of complaints.
1236. The Final Beneficiary enters into contract with the Contractor on works, supplies, services, and ensures operational monitoring of the implementation of project in accordance with the contracts. nd 1237. The 2 level Intermediate Body ensures that the projects are implemented in accordance with agreement and ensures on-the-spot checks as per Article 4 of Commission Regulation 438/2001 of 2 March 2001. st 1238. In case when Final Beneficiary acts under supervision of 1 level Intermediate Body/Line Ministry, the 1 st level Intermediate Body has rights to delegate the following functions to the Final Beneficiary: • payments to contractor; • project accounting; • monitoring of project implementation.
316 Single Programming Document for Latvia Objective 1 Programme 2004-2006
Project implementation - National and Open
1st Level 2nd Level Final Intermediate Managing S teering Monitoring Paying European Contractor Intermediate Beneficiary Body/ Line Authority Committee Committee Authority Commission Body Ministry
Agreement with beneficiary on project implementation
Ensure procurement Procurem ent Monitoring process Bureau - investigate com plains
Enter into contract with contractor
W orks, Monitoring in Ensure supplies, accordance with on-the-spot services contracts checks
Payment Flow
1239. In the payment process of Structural funds (according to Article 31 and 32 of the Council Regulation 1260/1999) the two basic stages are distinguished: • flow of funds from the Paying Authority to the Final Beneficiary 73 ; • flow of funds from the European Commission to the Paying Authority. st 1240. During the 1 stage the Final Beneficiary verifies and validates deliveries and invoices and checks supporting documents as well as ensures appropriate bookkeeping and reports to the 2 nd level Intermediate Body on project implementation progress.
1241. The Final Beneficiary makes payments to the Contractor account and prepares and submits request for reimbursement of funds to the 2 nd level Intermediate Body. Rules for submission of reimbursement claims will be stipulated in agreement between the Final Beneficiary and the 2 nd level Intermediate Body. nd 1242. The 2 level Intermediate Body checks the request for reimbursement, authorises the payment and submits it to the Operations Department of the Paying Authority.
1243. The Operations Department of the Paying Authority checks the request for reimbursement and pays to the Final Beneficiary. nd nd 1244. During the 2 stage the 2 level Intermediate Body prepares expenditure declarations and submits to Managing Authority for verification.
73 In cases when the Final Beneficiary acts under supervision of 1 st level Intermediate Body/Line Ministry ensures implementation in above stages mentioned functions.
317 Single Programming Document for Latvia Objective 1 Programme 2004-2006
1245. The Managing Authority when submitting expenditure declarations to Paying Authority gives assurance based on information in Management Information System and audit reports on system operation, controls and audits performed and submits those to the Paying Authority.
1246. The Department of European Affairs of the Paying Authority checks expenditure declarations against supporting documents, information in the Management Information System as well as information in the Paying Authority accounting system (entered by Operations Department), certifies expenditure and prepares payment claims for submission to the EC.
Payment flow - National and Open
1st Level 2nd Level Final Intermediate Managing Steering Monitoring Paying European Contractor Intermediate Beneficiary Body/ Line Authority Committee Committee Authority Commission Body Ministry
M ake advance Receive payments p ay ment and from EC payments based on payment claims
Invoices and Check invoices sup p orting and supporting documentation documentation
M oney on Pay to the contractor's contractor account
Check request for Check request for Prepare request reimbursement/ reimbursement for reimbursement authorise and pay to the payment beneficiary
M oney on beneficiarie's account
Prepare payment Give assurance on claim, check Prep are system operation, exp enditure exp enditure controls and declarations and declarations audits p erformed certify exp enditure
Reporting and Monitoring nd 1247. The Final Beneficiary reports to the 2 level Intermediate Body on project implementation progress. nd 1248. The 2 level Intermediate Body ensures checking of the deliveries, validity and existence of expenditure, existence of supporting documents and reports to the 1st level Intermediate Body/Line Ministry and Managing Authority. The 2 nd level Intermediate Body ensures data on financial and physical progress collection and transfers into Monitoring Information System. st 1249. The 1 level Intermediate Body/Line Ministry ensures the reporting to the Managing Authority on progress of implementation of measures and priorities and their compliance with the SPD.
1250. The Managing Authority prepares annual and final reports and submits for information to the Steering Committee.
1251. The Steering Committee reviews reports and submits for approval to Monitoring Committee.
318 Single Programming Document for Latvia Objective 1 Programme 2004-2006
1252. The Managing Authority and the Monitoring Committee chaired by the representative of the Managing Authority ensures the monitoring of the progress made towards achieving specific objectives of the SPD and submits annual and final reports to European Commission.
Reporting and monitoring - National and Open
1st Level 2nd Level Final Intermediate Managing S teering Monitoring Paying European Contractor Intermediate Beneficiary Body/ Line Authority Committee Committee Authority Commission Body Ministry
Financial and Financial and Access to Financial and p hy sical data phy sical data financial and Financial data on p hy sical data on on on phy sical data on implementation imp lementation imp lementation imp lementation imp lementation of the SPD of the SPD of p rojects of p rojects of the SPD
Report to 1st level Intermediste Report to 2nd Rep ort to Body /Line level Intermediate M anaging M inistry and Body Authority M anaging Authority
Information on Rep ort on p rogress of SPD financial data imp lementation
Review reports Approve reports prepared by the prepared by the Report to the EC Receive rep orts M anaging M anaging Authority Authority
319 Single Programming Document for Latvia Objective 1 Programme 2004-2006
Aid Schemes Implementation Scheme –Phase I
1253. In case of aid schemes for ERDF and ESF project selection will be organised into 2 phases. The 1 st Phase describes the organisation of approval of Final Beneficiary and aid scheme management project.
1254. In case when in accordance with Article 9 of the Council Regulation 1260/1999 of 21 June Final Beneficiary is responsible for commissioning operations or bodies designated by the government to act as body granting the aid, there are Body or Firm carrying out the operations identified to indicate the target group benefiting from intervention directly.
1255. During the Phase I the Cabinet of Ministers will take a decision on approval of Aid Scheme manager. Implementation Scheme –Phase 2 nd 1256. During the 2 Phase of project selection, projects within the aid scheme will be assessed and approved or rejected. The process will be organised as follows: • The 2 nd level Intermediate Body concludes the agreement with the Final Beneficiary on aid scheme implementation. • As part of the project application process, the Final Beneficiary will already have developed the aid scheme project selection criteria and project application form. After approval of the project application form the Final Beneficiary will call for applications. • The Body or Firm carrying out the operations prepares project application and submits it to the Final Beneficiary for technical and administrative evaluation. • The Final Beneficiary after positive opinion by evaluation committee (established under 1 st level Intermediate Body/Line Ministry) takes a decision on project.
320 Single Programming Document for Latvia Objective 1 Programme 2004-2006
Project selection - Aid Schemes Phase II - approval of projects within the aid scheme
1st Level Body or Firm 2nd Level Final Intermediate Managing S teering Monitoring Paying European Contractor Carrying out Intermediate Beneficiary Body/ Line Authority Committee Committee Authority Commission O peration Body Ministry
Agreement with final beneficiary on aid scheme implement.
Develop aid scheme p roject selection criteria
Develop aid scheme p roject ap p lication form
Call for ap p lications
Receive and Positive Prep are evaluate op inion by p roject p roject evaluation ap p lication ap p lication committee
App rove p roject
Project Implementation
1257. After the positive decision on project the Final Beneficiary concludes the agreement with the body or firm carrying out operation on project implementation and ensures operational monitoring of the implementation.
1258. Body or Firm carrying out the operation according to national legislation carries out procurement procedures and ensures procurement process. The Procurement Monitoring Bureau is responsible for investigation of complaints. The Final Beneficiary checks procurement process based on risk analysis.
1259. The Body or Firm carrying out the operation enters into contract with the Contractor on works, supplies and services, and ensures operational monitoring of the implementation of project in accordance with the contracts.
1260. The Final Beneficiary ensures controls in accordance with Article 4 of Commission Regulation 438/2001 of 2 March 2001 at the level of individual operations. nd 1261. The 2 level Intermediate Body provides on-the-spot checks for common aid scheme.
321 Single Programming Document for Latvia Objective 1 Programme 2004-2006
Project implementation - Aid Scheme
1st Level Body or Firm 2nd Level Final Intermediate Managing S teering Monitoring Paying European Contractor Carrying out Intermediate Beneficiary Body/ Line Authority Committee Committee Authority Commission O peration Body Ministry
Agreement with beneficiary on p roject implement.
Ensure procurement p rocess Procurement Monitoring Bureau - investigate com plains
Enter into contract with contractor
Ensure Works, M onitoring in Ensure on-the-spot supplies, accordance on-the-spot checks services with contracts checks (common aid scheme)
Payment Flow
1262. In the payment process of Structural Funds (according to Article 31 and 32 of the Council Regulation 1260/1999 of 21 June 1999) the two basic stages are distinguished: • flow of funds from the Paying Authority to the Final Beneficiary; • flow of funds from the European Commission to the Paying Authority. st 1263. During the 1 stage the Body or firm carrying out operation verifies and validates deliveries and invoices and checks supporting documents as well as ensures appropriate bookkeeping and reports to the Final Beneficiary on project implementation progress.
1264. The Body or firm carrying out operation makes payments to the Contractor account and prepares and submits payment request to the Final Beneficiary.
1265. The Final Beneficiary checks the payment request and pays to the Body or Firm carrying out the operation and prepares request for reimbursement to the 2 nd level Intermediate Body. nd 1266. The 2 level Intermediate Body checks the request for reimbursement, and authorises the payment and submits it to the Operations Department of the Paying Authority.
1267. The Operations Department of the Paying Authority checks the request for reimbursement and pays to the Final Beneficiary. nd nd 1268. During the 2 stage the 2 level Intermediate Body prepares expenditure declarations and submits to Managing Authority for verification.
1269. The Managing Authority when submitting expenditure declarations to Paying Authority gives assurance based on information in Management Information System and audit reports on system operation, controls and audits performed and submits those to the Paying Authority.
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1270. The Department of European Affairs of the Paying Authority checks expenditure declarations against supporting documents, information in the Management Information System as well as information in the Paying Authority accounting system (entered by Operations Department), certifies expenditure and prepares payment claims for submission to the EC.
Payment flow - Aid Scheme
1st Level Body or Firm 2nd Level Final Intermediate Managing S teering Monitoring Paying European Contractor Carrying out Intermediate Beneficiary Body/ Line Authority Committee Committee Authority O peration Body Commission Ministry
M ake advance Receive payment and payments payments based from EC on payment claims Check invoices Invoices and and sup porting sup porting documentation documentation
M oney on Pay to the contractor's contractor account
Check Prep are payment payment request and request pay to the beneficiary
M oney on beneficiary 's account Check request for P repare Check request request for reimbursement for /authorise reimbursement reimbursement payment
Money on final beneficiary's account Prepare payment Give assurance claims, check P repare on system expenditure expenditure operation, declarations and declarations controls and certify audits performed expenditure
Reporting and Monitoring
1271. The Body or Firm carrying out the operation reports to the Final Beneficiary on project implementation progress.
1272. The Final Beneficiary ensures checking of the deliveries, validity and existence of expenditure, existence of supporting documents and reports to the 2 nd level Intermediate Body on aid scheme implementation progress. The 2 nd level Intermediate Body ensures data on financial and physical progress collection and transfers into Monitoring Information System and reports to the 1 st level Intermediate Body/Line Ministry and Managing Authority. st 1273. The 1 level Intermediate Body/Line Ministry ensures the reporting to the Managing Authority on progress of implementation of measures and priorities and their compliance with the SPD.
1274. The Managing Authority prepares annual and final reports and submits for information to the Steering Committee.
1275. The Steering Committee reviews reports and submits for approval to Monitoring Committee.
323 Single Programming Document for Latvia Objective 1 Programme 2004-2006
1276. The Managing Authority and the Monitoring Committee chaired by the representative of the Managing Authority ensures the monitoring of the progress made towards achieving specific objectives of the SPD and submits annual and final reports to European Commission.
Reporting and monitoring - Aid Scheme
1st Level Body or Firm 2nd Level Final Intermediate Managing S teering Monitoring Paying European Contractor Carrying out Intermediate Beneficiary Body/ Line Authority Committee Committee Authority Commission O peration Body Ministry
Financial Access t o Financial Financial Financial and physical financial and Financial and physical and physical and physical dat a on physical data dat a on data on data on dat a on implement. on implement. implement. implement. implement. of aid implement. of t he SP D of projects of projects of t he SP D schem e of t he SP D
Report to 1st level Report to 2nd Intermediate Report to Report to final level Body/Line M anaging beneficiary Intermediate Ministry and Authority Body M anaging Authority
Information on progress of Report on SP D financial data implementatio n
Approve Review reports reports prepared by Receive Report to EC prepared by the Managing reports the Managing Authority Authority
324 Single Programming Document for Latvia Objective 1 Programme 2004-2006
5.3.2. EAGGF and FIFG
1277. According to the requirements defined in the Regulations of the Cabinet of Ministers No.500 of 2 September 2003 “Regulations on the Institutional Framework of the Management, Monitoring, Evaluation and Control of the EU Structural Funds” open call for applications will be organised in case of EAGGF and FIFIG projects. Project Selection
1278. The Managing Authority leads on development of project application forms in consultation with the 1 st level Intermediate Body/Line Ministry, the 2 nd level Intermediate Body and Paying Authority. nd 1279. The 2 level Intermediate Body develops project selection criteria and submits them for consideration to the Steering Committee. The selection criteria after positive opinion in Steering Committee are approved by the Monitoring Committee. After approval of the project selection criteria in the Monitoring Committee the 2 nd level Intermediate Body makes call for applications.
1280. The Final Beneficiary completes the project application form selecting priority/measure according to the SPD and submits the project application to the 2nd level Intermediate Body or its regional offices. For Measure 4.6 the Final Beneficiary submits the project application to the relevant Local Action Group nd 1281. The 2 Level Intermediate Body evaluates project applications. Evaluated project application forms are submitted to the Steering Committee. The Steering Committee makes a positive opinion on project selection. On the basis of the positive opinion of the Steering Committee the 2 nd level Intermediate Body takes a decision on project and starts implementation. For the Measure 4.6 the relevant Local Action Group assesses the project application compliance to the relevant integrated rural development strategy according to the project evaluation criteria. After assessment Local Action Group gives statement for each project and then submits projects together with corresponding statements to the 2nd level Intermediate Body for project evaluation according to the specific, administrative and general criteria. Evaluated project application forms are submitted to the Steering Committee. The Steering Committee makes a positive opinion on project selection. On the basis of the positive opinion of the Steering Committee the 2st level Intermediate Body takes a decision on project. More detailed information will be included in the Programme Complement.
325 Single Programming Document for Latvia Objective 1 Programme 2004-2006
Project selection EAGGF&FIFG open
1st Level 2nd Level Final Intermediate Managing Steering Monitoring Paying European Contractor Intermediate Beneficiary Body/ Line Authority Committee Committee Authority Commission Body Ministry
Develop project application form
Positive opinion Develop project Approve on selection s election criteria criteria criteria
Call for applications
Prepare project application
Receive and Positive opinion evaluate project on project application selection
Decision on project
1282. Project implementation, financing and reporting for this type of project will be organised in the same way as per ERDF and ESF open call for applications.
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5.4. Monitoring
1283. The objective of the monitoring is to keep up the ongoing process of the Structural funds intervention according to the priorities and targets set in the SPD. The monitoring will ensure the quality and effectiveness of implementation of the SPD through assessment of progress towards achievement of the financial and physical indicators defined in the SPD.
1284. In order to ensure an effective use of the Structural funds assistance, the Managing Authority is establishing the framework of the regular monitoring of the SPD.
1285. The monitoring of the SPD begins at the lowest level – at the level of the project: the project is the basic unit of analysis at which monitoring information will be collected; individual project information will be aggregated upwards to show progress at the measure, priority and, finally, SPD level.
Monitoring Committee SPD Managing Authority
priorities Steering Committees
1st level Intermediate Bodies/Line Ministries
measures
nd 2 level Intermediate Bodies projects
5.4.1. Monitoring Committee
1286. According to the Article 35 of the Council Regulation 1260/1999 the Monitoring Committee monitors the elaboration and implementation of the SPD. The Monitoring Committee is established upon the agreement with the Managing Authority not later than 3 months after the SPD has been approved.
327 Single Programming Document for Latvia Objective 1 Programme 2004-2006
1287. The Monitoring Committee shall satisfy itself as to the effectiveness and the quality of the implementation of the SPD. To this end Monitoring Committee carries out the following tasks: • confirms or corrects the Programme Complement, including physical and financial indicators to be used to monitor the assistance; • approves the criteria for selection of projects financed under each measure, developed by 1 st level Intermediate Bodies/Line ministries; • periodically reviews progress made towards achieving specific objective of the SPD; • reviews reached aims in relation to each financed measure; • considers and approves the annual and final implementation reports before they are sent to the European Commission; • considers and approves any proposals to amend the content of the approved SPD; • proposes adjustments of the SPD and Programme Complement to the Managing Authority in order to provide for achievement of the SPD objectives, or to improve the management system, including financial management.
5.4.2. Data Collection and Reporting
1288. According to Article 36 of the Regulation 1260/1999, the Managing Authority and the Monitoring Committee will carry out the monitoring by reference to the physical and financial indicators specified in the SPD and the Programme Complement. These are developed taking into account the indicative methodology and the list of examples of indicators published by the Commission in its Working Paper 3 "Indicators for Monitoring and Evaluation: an Indicative Methodology".
1289. The monitoring indicators have been included in the SPD on three levels: • The impact indicators are defined at programme level; • The result indicators are defined at the level of priorities; • The output indicators are defined at the measure level.
1290. The indicators relate to the specific character of the SPD, its objectives and the socio-economic, structural and environmental situation. In order to ensure the Structural Funds’ project compliance with the Environmental Policy and Equal Opportunities of the Community specific indicators will be defined in the Programme Complement and monitored consequently.
1291. The indicators will show the specific targets, quantified where they lend themselves to quantification, for the measures and priorities and their mutual consistency as well the indicators will show the stage reached in the SPD in terms of physical implementation, results and, as soon as practicable, its impact at the appropriate level (priority or measure), and the progress of the Financial Plan.
1292. To ensure requirements stated in Council Regulation 1260/1999 Article 34 on setting up a system to gather reliable financial and statistical information on implementation computerised monitoring information exchange system is under preparation. It is foreseen that all financial and physical data on implementation of SPD will be held in MIS (Management Information System). The
328 Single Programming Document for Latvia Objective 1 Programme 2004-2006
specification for MIS has been developed and the development of system has been started.
1293. The agreement between the Ministry of Finance and the firm on system development has been concluded. The Managing Authority makes a commitment that the MIS will be tested and wholly operational starting from 1May 2004. It is envisaged that during the transition period (starting from 1 January to 1 May 2004) the Managing Authority will ensure the collection and management of all data concerning the projects approved. st 1294. This system will be operational at four levels (1 level Intermediate Body/Line ministry, 2 nd level Intermediate Body, Managing Authority and Paying Authority). Managing Authority will be responsible for management and control of the system. All financial and physical data on project implementation will be delivered from 2 nd level Intermediate Bodies, Paying Authority. The 1 st level Intermediate Body/Line Ministry will have an access to MIS. nd 1295. The 2 level Intermediate Body is responsible for data on physical and financial progress collection and transfer into MIS.
1296. The Managing Authority will produce guidance for data entrance at various levels. The roles on data entrance at Managing Authority, Paying Authority and 2nd level Intermediate Bodies will be ensured by procedure on data entrance.
1297. According to Article 7 Council Regulation 1784/1999 in the case of ESF both 2nd level Intermediate Bodies (State Employment Service, Agency for Vocational Education Development Programme) will ensure data on physical and financial progress entrance into MIS.
1298. Final Beneficiaries: • Submit progress reports to the 2 nd level Intermediate Body; • Submit information on the progress of the set physical indicators during completion of the project. nd 1299. The 2 level Intermediate Bodies: • Check progress reports submitted by the Final Beneficiaries and enters information/data on physical and financial progress into MIS; • On the regular basis provide information to the Managing Authority on the progress of the implementation of the Structural Funds co-financed activities; • Twice a year prepare information on the implementation progress of the measures under responsibility of respective 2 nd level Intermediate Body and submit to the 1 st level Intermediate Body/Line ministry for the Monitoring Committee. st 1300. The 1 level Intermediate Bodies/Line Ministries: • Twice a year before the meeting of Monitoring Committee submit the report on the progress of implementation of the activities financed under each fund, including the analysis of the existing problems, difficulties and proposals for improvement; the report is to be submitted to the Managing Authority; • On the regular basis provide information to the Managing Authority on the progress of the implementation of the Structural Funds co-financed activities.
1301. Paying Authority (Operations Department):
329 Single Programming Document for Latvia Objective 1 Programme 2004-2006
• Ensures entry of the financial information of accounts of the Structural Funds into the monitoring information system and reports on the progress to the Managing Authority; • It is foreseen that the systems in the State Treasury and in the Managing Authority will be linked.
1302. Managing Authority: • Ensures functioning of the joint monitoring information system; • Collects and transmits financial and statistical data on the implementation of measures; • Organises and chairs the Monitoring Committee; • Prepares the annual implementation report for approval in the Monitoring Committee prior to the submission of it to the European Commission.
1303. Managing Authority will be responsible for preparation of annual and final reports. In accordance to the Article 37.1 of the Council Regulation 1260/1999, Managing Authority will submit the annual implementation report to the Commission within six months of the end of each calendar year. Steering Committees will review reports prepared by Managing Authority before submission to Monitoring Committee. The Monitoring Committee will approve the reports before they are sent to the Commission.
1304. The report will include the following information: • change in general conditions which is of relevance to the implementation of the SPD, in particular the main socio-economic trends, regional or sector policies or in legislation and their impact to the integrity of the Structural funds system; • the progress in implementation of priorities and measures for each of the funds in relation to their specific targets; • the financial implementation of the SPD summarising for each measure the total expenditure actually paid out by the Paying Authority and a record of the total payments received from the Commission; • overview of actions taken by the Managing Authority and the Monitoring Committee for ensuring quality and effectiveness of implementation, in particular monitoring, financial control and evaluation measures, a summary of any significant problems encountered in managing the SPD, use made of Technical Assistance, measures taken to ensure publicity, steps taken to ensure compatibility with Community policies.
1305. In accordance with Article 34.2 of the Council Regulation 1260/1999, every year when the annual implementation report is submitted, the Managing Authority in co-operation with the Commission will review the main outcomes of the previous year.
1306. After this review the Commission may make comments to the Latvian Government and the Managing Authority. The Managing Authority will inform the Commission of actions taken to these comments. Where the Commission considers that measures taken are inadequate, the Commission may make recommendations to the Government and the Managing Authority for adjustments aimed at improving the effectiveness of the monitoring or management arrangements of the SPD. If the Commission has made such recommendations the Managing Authority shall demonstrate the steps taken to
330 Single Programming Document for Latvia Objective 1 Programme 2004-2006
improve the monitoring or management arrangements, or it shall explain why such steps have not been taken.
1307. According to the Article 32.3 of the Council Regulation 1260/1999, one of the conditions, subject to which interim payments shall be made by the Commission, is acting upon the Commission recommendations within the specified time period. This applies where those recommendations are intended to remedy serious shortcomings in the monitoring or management system, which undermine proper financial management of the SPD.
1308. A final report will be submitted to the Commission within six months after the end of programming period.
1309. The same content and procedure for annual reports apply to the final report.
1310. In case of a final report, the Commission will indicate if the report is considered acceptable within a period of five months from receipt of the report.
331 Single Programming Document for Latvia Objective 1 Programme 2004-2006
5.5. Financial Management and Control
1311. Council Regulation 1260/1999 of 21 June 1999 and Commission Regulations 438/2001 of 2 March 2001 form the basis for determining the activities necessary for performing financial management and control.
1312. The Managing Authority and the Paying Authority are responsible for ensuring the conformity with the conditions defined in provisions of Structural Funds.
1313. Financial management and control involves a series of certification and verification operations as well as using separate accounting systems or separate accounting code. According to the Latvian legislation – Final Beneficiary is responsible for accountancy of full project. Respective 2 nd level Intermediate Body will ensure accounting of Structural Funds and State budget co-financing (if it is foreseen in the project) paid out to Final Beneficiary. According to the Decree of the Minister of Finance separate economic classifications codes (separate accounting code in accordance with Article 34 (e) of the Council Regulation 1260/1999 of 21 June 1999) will be used by the Paying Authority, 2nd level Intermediate Bodies in the management of the Structural Funds. The obligation of Final Beneficiary to ensure separate accounting of expenditures executed under the project co-financed by the Structural Funds will be stipulated in the agreement on the implementation of the project between 2 nd level Intermediate Body and Final Beneficiary. Paying Authority (Operations Department) will ensure accountancy of funds received, disbursed, interest earned on the fund level.
1314. According to Council Regulation 1260/1999 Article 38.6. for a period of three years following the payment by the Commission of the final balance in respect of the Single Programme, the responsible authorities (1 st and 2 nd level Intermediate Bodies, Paying Authority and Managing Authority) shall keep available and ensure availability at the level of the contractors, body or Firm carrying out the operations and final beneficiaries all the supporting documents regarding expenditure and checks on the assistance concerned. This will ensure the audit trail in accordance with Annex 1 of Commission Regulation 438/2001.
5.5.1. Financial Management
1315. To receive payments from the Commission the separate bank accounts are opened within the Bank of Latvia on behalf of the Paying Authority. There are separate accounts opened for each of the Structural Funds. nd 1316. The 2 level Intermediate Bodies are in charge of elaborating and submitting to the Paying Authority expenditure forecasts on regular basis. It allows the Paying Authority submit to the Commission annual forecast of application for payments in accordance with the Article 32 (7) of the Council Regulation 1260/99 to the Commission and also to place on deposit free financial resources.
1317. Paying Authority also converts payments received from the Commission in Euros into Latvian national currency – Lats when payments to the accounts of Final Beneficiaries are executed. Exchange rate applicable to convert LVL transactions to euro is applied in accordance with Article2 (2) of the Commission regulation 643/2000 of 28 March 2000.
332 Single Programming Document for Latvia Objective 1 Programme 2004-2006
nd 1318. At least three times in the year the 2 level Intermediate Body submits declarations of expenditure to the Managing Authority which carry out necessary verification and submits it further to the Paying Authority. To provide adequate assurance according to the Article 9 of Commission Regulation 438/2001 of 2 March 2001 the Managing Authority sets requirements for effective management and control system to be implemented in each institution involved to ensure sound financial management of the assistance. The Managing Authority ensures that the requirements in each institution involved are met and decides where the additional control should be provided to assure sufficient control system.
1319. According to the Article 9 of Commission Regulation 438/2001 of 2 March 2001 expenditure declarations are prepared by the 2nd level Intermediate Body, verified by the Managing Authority, and submitted to the Paying Authority for verification, certification and preparation of payment claims (European Affairs Department). The purpose of the certification process is to make sure that the independent control at the relevant level has been carried out in the sense that every problem is identified and solved. For implementation of proper verification and certification process the specific procedures will be set within the internal regulations of the Paying Authority as well as within agreements concluded between parties involved in the management of the Structural Funds (Paying Authority, Managing Authority, 2 nd level Intermediate Bodies). These procedures will include provision for introducing specific checklists verifying the existence of proper management and control systems, as well as possibilities for carrying out necessary controls by the officials of Paying Authority etc. hence ensuring implementation of requirements laid down in Article 9 of Commission Regulation 438/2001 of 2 March 2001.
1320. The Paying Authority certifies that given statements of expenditure are accurate and resulting from accounting systems bases on verifiable supporting documentation. In case of inaccuracy in declaration of expenditures the Paying Authority has the right to control all the expenditures included thereof. Clear segregation of duties between the unit carrying out certification functions and those responsible for audit and execution of payments are ensured. Before declaration of expenditure is certified by the Paying Authority the MA (Ministry of Finance the EU Funds Department) will give assurance on management system and controls performed.
5.5.2. Financial Control
1321. According to Articles 4, 10 and 15 of Commission Regulation 438/2001 three key elements of the financial control – verification of management and control systems, sample checks on operations, and declaration at winding-up of the assistance – will be dealt with through formal reporting mechanisms to be designated by the Managing Authority and the Paying Authority. The Internal Audit Department of the Ministry of Finance will be responsible for verification of the EU Structural Funds’ management and control system. With a decree of the Ministry of Finance of 15 September 2003 procedure to ensure delivery of the products and services co-financed and the reality of expenditure claimed; sample checks and operations have been accepted. Verification of Individual Operations on the Spot
333 Single Programming Document for Latvia Objective 1 Programme 2004-2006
1322. According to requirements set in Article 4 Commission Regulation 438/2001 of 2 March 2001 and Decree of the Ministry of Finance of 15 September 2003, the 2nd level Intermediate Body verifies the delivery of services and products co- financed and reality of expenditure claimed. In case of Aid scheme the Final Beneficiary ensures controls in accordance with Article 4 of Commission Regulation 438/2001 of 2 March 2001 at the level of individual operations. nd 1323. The Managing Authority has issued the methodology for the 2 level Intermediate Bodies in order to assure the implementation of the requirements under the Article 4 of the Commission Regulation 438/2001 of 2 March 2001. nd 1324. The 2 level Intermediate Body (in case of Aid scheme – the Final Beneficiary) ensures on the spot checks providing project implementation, monitoring and payment control functions. nd 1325. Within the 2 level Intermediate Bodies (in case of Aid scheme – the Final Beneficiary) following segregation of functions between different units is ensured: • management of operations (selection of projects, agreements with final beneficiaries etc.); • checking request for reimbursement; • verification of reality of expenditure claimed; • The Internal Audit Units are not involved in any of these tasks in order to ensure separation of functions from the Article 10 of Commission Regulation 438/2001 of 2 March 2001 checks. Sample Checks on Operations
1326. According to Article 10 of Commission Regulation 438/2001 of 2 March 2001 the Internal Audit divisions within Managing Authority and 2 nd level Intermediate Bodies will perform following control functions: • verification of the effectiveness of the management and control systems; • selective verification of expenditure to be carried out on a sample of the operations. The verifications shall cover at least 5% of the total eligible expenditure and be based on a representative sample of the operations approved. nd 1327. The Internal Audit Department / Units of the Ministry of Finance (and the 2 level Intermediate Bodies) will be functionally independent from other divisions involved in the project selection, implementation and payment procedures.
1328. The Internal Audit Department of the Ministry of Finance issues the methodology for the Intermediate Bodies in order to assure the implementation of the requirements under the Article 10 of the Regulation 438/2001.
1329. In order to ensure institutional capacity and implementation of the necessary management and control procedures the Ministry of Finance has elaborated requirements for the management and control system for the 2 nd level Intermediate Bodies. Before the start of the implementation of the SPD the Internal Audit Department of the Ministry of Finance will get assurance on the management and control system of the 2 nd level Intermediate Bodies.
1330. The Internal Audit Department of the Ministry of Finance is responsible for preparation of report according to Commission Regulation 438/2001 Article 13.
334 Single Programming Document for Latvia Objective 1 Programme 2004-2006
The Internal Audit Units of 2 nd level Intermediate Bodies will provide all necessary information for preparation of above mentioned report.
The Structure of Financial Controls According to the Articles 4, 10 of Commission Regulation 438/2001 of 2 March 2001
PAYING AUTHORITY
PEER REVIEW OF IA UN ITS
AUDIT METHODOLOGY
MANAGING AUTHORITY EVALUATION OF AUDIT EV A LUA TION OF REPORTS REPORTS INT ERNAL AUDIT ARTIC LE 10 SYSTEM AUDITS
REPORTS
Article 10 INTERMEDIATE BODY 5% SAM PLE CHECKS VERIFICATION AUDITS CONT ROL IMPLEMENTATION INT ERNAL AUDIT UNIT UNIT
ART.No4 ON THE SPOT CHECKS
FINAL FINAL FINAL BENEFICIARIES BENEFICIARIES BENEFICIARIES
Declaration at Winding-up of Assistance
1331. Winding-up declarations in According to Article 15 of the Commission regulation 438/2001 are issued by Financial Control Department of the Ministry of Finance. The Department of Financial Control is a functionally separated administrative unit from the Managing Authority (European Union Funds Department) as well as from the Paying Authority. st nd 1332. The Managing Authority, the Paying Authority and the 1 and 2 level Intermediate Bodies will supply all necessary documentation and information to Financial Control Department of the Ministry of Finance to ensure issue of declarations of winding-up of the assistance.
335 Single Programming Document for Latvia Objective 1 Programme 2004-2006
5.5.3. Irregularity Reporting
1333. According to Decree of the Ministry of Finance of 15 September 2003 main principles and requirements for development of Irregularity reporting procedure has been developed by the Managing Authority. In carrying out this function the Managing Authority will require regular reporting of any such irregularities by the 2 nd level Intermediate Bodies, 1 st level Intermediate Bodies/Line Ministries and Final Beneficiaries in case of grant schemes for investigating irregularities and implementing necessary measures. The Managing Authority will report on any irregularity to the Paying Authority for ensuring expenditure certification. The Managing Authority will report on this to the European Commission.
336 Single Programming Document for Latvia Objective 1 Programme 2004-2006
5.6. Evaluation
1334. In accordance with the requirements of Articles 41 and 43 of Council Regulation 1260/1999 of 21 June 1999 SPD will be subject to ex-ante and ex- post evaluation. Mid-term evaluation will not be required by the European Commission due to the shortened programming period in Latvia. The Managing Authority has developed procedure for carrying out ex-ante evaluation. According to structure of the Managing Authority, the Monitoring and Evaluation Unit is responsible for organisation of evaluations according to Article 41 of Council Regulation 1260/1999 of 21 June 1999. The Managing Authority can organise a number of thematic evaluations, which will also allow building necessary evaluation capacity within institutions involved in the management of the Structural Funds. Monitoring Committee will be informed on the results of evaluations carried out. Ex-ante Evaluation
1335. The objective of the ex-ante evaluation is to provide the basis for the preparation of the SPD and the Programme Complement. The ex-ante evaluation is an interactive process, within which the experts directly not involved in the preparation of the SPD provide the assessment and recommendations for the preparation of the SPD in order to contribute to the overall quality of that and ensure their compliance with economic and social needs.
1336. Ex-ante evaluation has been carried out by an independent assessor and the evaluation provided the basis for adjustment of the SPD. Ex-post Evaluation
1337. In accordance with Article 43 of the Council Regulation No 1260/1999 the ex- post evaluation will be the responsibility of the European Commission in collaboration with the Managing Authority.
1338. It will cover the utilization of the resources and the effectiveness and efficiency of the SPD and it will draw conclusions regarding policy on economic and social cohesion. It will cover the factors contributing to the success or failure of implementation and the achievements and results.
1339. The ex-post evaluation will be carried out by independent assessors and be completed not later than three years after the end of the programming period.
337 Single Programming Document for Latvia Objective 1 Programme 2004-2006
5.7. Information and Publicity
1340. Information and publicity measures about assistance from the EU Structural Funds to increase public awareness and transparency regarding the activities of the European Union are stated under the Publicity Chapter of the SPD.
338 Single Programming Document for Latvia Objective 1 Programme 2004-2006
6. Financial Plan
26. Table. Financial plan (euro) 74 .
Public Other EU Cohesion Total cost Community participation Latvian public participation Private (Interreg EIB 75 Fund Total Equal) Priority/ Year Total ERDF ESF EAGGF FIFG Total State Local Other
Priority 1. Promotion of
Territorial Cohesion 278 447 713 278 447 713 210 746 500 210 746 500 67 701 213
2004 69 345 073 69 345 073 52 501 000 52 501 000 16 844 073
2005 97 342 775 97 342 775 73 698 000 73 698 000 23 644 775
2006 111 759 865 111 759 865 84 547 500 84 547 500 27 212 365
Priority 2. Promotion of 208 522 670 208 522 670 156 392 000 156 392 000 52 130 670 Enterprise and Innovation
• 74 The contribution of the Funds is indicated as a share of total public expenditure with an exception of FIFG which is calculated as a share of the total eligible cost. • 75 Under the Single Programming Document and Cohesion Fund strategies for programming period of 2004-2006, the European Investment Bank's could contribute the amount of EUR 150 million, of which approx. 60% can be earmarked for projects implemented under the SPD. This amount is indicative and does not prejudge in any way the use of the loan by the Latvian authorities.
339 Single Programming Document for Latvia Objective 1 Programme 2004-2006
Public Other EU Cohesion Total cost Community participation Latvian public participation Private (Interreg EIB 75 Fund Total Equal) Priority/ Year Total ERDF ESF EAGGF FIFG Total State Local Other
2004 53 716 000 53 716 000 40 287 000 40 287 000 13 429 000
2005 75 401 335 75 401 335 56 551 000 56 551 000 18 850 335
2006 79 405 335 79 405 335 59 554 000 59 554 000 19 851 335
Priority 3. Development of Human
Resources and Promotion of Employment 165 642 875 165 642 875 125 808 500 125 808 500 39 834 375
2004 45 051 914 45 051 914 34 195 000 34 195 000 10 856 914
2005 63 241 319 63 241 319 48 001 000 48 001 000 15 240 319
2006 57 349 642 57 349 642 43 612 500 43 612 500 13 737 142
Priority 4. Promotion of Development 182 018 540 171.311 137 115 668 000 91 333 000 24 335 000 55 643 137 10 707 403 of Rural Areas and Fisheries
2004 46 587 214 43 828 852 29 796 000 23 527 000 6 269 000 14 032 852 2 758 362
2005 65 427 711 61 857 819 41 825 000 33 026 000 8 799 000 20 032 819 3 569 892
2006 70 003 615 65 624 466 44 047 000 34 780 000 9 267 000 21 577 466 4 379 149
340 Single Programming Document for Latvia Objective 1 Programme 2004-2006
Public Other EU Cohesion Total cost Community participation Latvian public participation Private (Interreg EIB 75 Fund Total Equal) Priority/ Year Total ERDF ESF EAGGF FIFG Total State Local Other
Priority 5. Technical Assistance 22 605 109 22 605 109 16 953 826 14 905 177 1 533 460 515 189 5 651 283
2004 5 741 855 5 741 855 4 306 389 2 257 740 1533460 515189 1 435 466
2005 8 228 042 8 228 042 6 171 030 6 171 030 2 057 012
2006 8 635 212 8 635 212 6 476 407 6 476 407 2 158 805
ERDF related 19 873 575 19 873 575 14 905 177 14 905 177 4 968 398
2004 3 010 321 3 010 321 225 7740 2 257 740 752 581
2005 8 228 042 8 228 042 6 171 030 6 171 030 2 057 012
2006 8 635 212 8 635 212 6 476 407 6 476 407 2 158 805
ESF related 2 044 614 2 044 614 1 533 460 1 533 460 511 154
2004 2 044 614 2 044 614 1 533 460 1 533 460 511 154
2005
2006
EAGGF
related 686 920 686 920 515 189 515 189 171 731
2004 686 920 686 920 515 189 515 189 171 731
2005
341 Single Programming Document for Latvia Objective 1 Programme 2004-2006
Public Other EU Cohesion Total cost Community participation Latvian public participation Private (Interreg EIB 75 Fund Total Equal) Priority/ Year Total ERDF ESF EAGGF FIFG Total State Local Other
2006
TOTAL 857 236 907 846 529 504 625 568 826 382 043 677 127 341 960 91 848 189 24 335 000 220 960 678 10 707 403
2004 220 442 056 217 683 694 161 085 389 95 045 740 35 728 460 24 042 189 6 269 000 56 598 305 2 758 362
2005 309 641 182 306 071 290 226 246 030 136 420 030 48 001 000 33 026 000 8 799 000 79 825 260 3 569 892
2006 327 153 669 322 774 520 238 237 407 150 577 907 43 612 500 34 780 000 9 267 000 84 537 113 4 379 149
Total ERDF
related 506 843 958 506 843 958 382 043 677 382 043 677 124 800 281
2004 126 071 394 126 071 394 95 045 740 95 045 740 31 025 654
2005 180 972 152 180 972 152 136 420 030 136 420 030 44 552 122
2006 199 800 412 199 800 412 150 577 907 150 577 907 49 222 505
Total ESF
related 167 687 489 167 687 489 127 341 960 127 341 960 40 345 529
2004 47 096 528 47 096 528 35 728 460 35 728 460 11 368 068
2005 63 241 319 63 241 319 48 001 000 48 001 000 15 240 319
2006 57 349 642 57 349 642 43 612 500 43 612 500 13 737 142
Total EAGGF
related 138 643 255 138 643 255 91 848 189 91 848 189 46 795 066
2004 36 223 897 36 223 897 24 042 189 24 042 189 12 181 708
342 Single Programming Document for Latvia Objective 1 Programme 2004-2006
Public Other EU Cohesion Total cost Community participation Latvian public participation Private (Interreg EIB 75 Fund Total Equal) Priority/ Year Total ERDF ESF EAGGF FIFG Total State Local Other
2005 49 884 991 49 884 991 33 026 000 33 026 000 16 858 991
2006 52 534 367 52 534 367 34 780 000 34 780 000 17 754 367
Total FIFG 44 062 205 33 354 802 24 335 000 24 335 000 9 019 802 10 707 403 related
2004 11 050 237 8 291 875 6 269 000 6 269 000 2 022 875 2 758 362
2005 15 542 720 11 972 828 8 799 000 8 799 000 3 173 828 3 569 892
2006 17 469 248 13 090 099 9 267 000 9 267 000 3 823 099 4 379 149
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7. Standard Section on Additionality for Objective 1
1341. The verification of additionality is to take place at two points in time for the programming period 2004-2006: ex ante and at the end of the period. Ex ante verification
1342. As indicated in Table 7 on the basis of information provided by the Latvia’s authorities, the Commission services and the Latvia’s authorities have determined the annual average of national public eligible expenditure to be maintained in the period 2004-2006 in the sum of all Objective 1 regions at 258.2 million € (at 1999 prices). This is an increase of 2,8 % compared to the average expenditure of the reference period . The reference period is defined as the average of the two most recent years for which final spending figures are available. In the case of Latvia these are 2001 and 2002.
1343. The Latvia’s authorities will provide the Commission with appropriate information and inform the Commission at any point during the programming period of developments likely to call into question its ability to maintain this level of expenditure. Verification at the end of the period
1344. Verification shall take place before 31 December 2007. Additionality is regarded as verified if the annual average of national public eligible expenditure in the years 2004 to 2006 has at least reached the level of expenditure agreed on ex ante. The submission of no or methodologically insufficient information shall be regarded as non-compliance. Therefore, the Latvia’s authorities will present information according to the following calendar: • by 31 July 2007: presentation of aggregate and annual tables with final data on the years 2004 and 2005 as well as provisional data for the year 2006; • by 31 October 2007: if necessary, methodological improvements on the basis of the Commission’s comments; • by 31 December 2007: deadline for the submission of any additional information.
1345. The Latvian authorities will inform the Monitoring Committee of the results of the verification which will be taken into account in the preparations of the subsequent programming period.
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Table 7: Public or other equivalent structural expenditure in the Latvia’s Objective 1 regions (in million € at 1999 prices)
Annual average reference period Annual average 2004-2006 Total (1) of SPD Not EU- Total Total of SPD Not EU- Total which: co- which: co- public financed public financed enter- enter-
prises 76 prises (2) Nat. Nat. EU Nat. Nat. Nat. Nat. + Nat. + EU Nat. Nat. Nat. EU EU 1 2 3 4 5 6 7 8 9 10 11 12 13 =2 =11+12 =8-10 1. Basic infrastructure 57,91 N N 57,91 57,91 86,29 27,38 9,11 49,80 58,91 - Transport 33,79 O O 33,79 33,79 47,63 13,84 4,61 29,18 33,79 - Telecommunication and ICT 0 T T 0 0 4,01 3,01 1,00 0 1,00 - Energy 2,34 2,34 2,34 5,35 3,01 1,00 1,34 2,34 - Environment & water 5,28 A A 5,28 5,28 8,29 3,01 1,00 4,28 5,28 P P - Health, education, social 16,51 16,51 16,51 21,02 4,51 1,50 15,01 16,51 P P 2. Human resources 137,76 L L 137,76 137,76 157,36 19,60 6,53 131,27 137,76 I I - Promotion of employment 8,30 8,30 8,30 16,73 8,43 2,81 5,49 8,30
• 76 Central government grants to non privatised local government service providers are included in Column 2.
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C C - Education and lifelong A A learning 121,32 B B 121,32 121,32 128,77 7,45 2,48 118,84 121,32 - Social exclusion L L 8,14 E E 8,14 8,14 11,86 3,72 1,24 6,90 8,14 3. Productive environment 55,58 55,58 55,58 103,57 42,88 14,28 46,41 60,69 - Agriculture/rural
development/fisheries 41,21 41,21 41,21 58,29 17,08 5,69 35,52 41,21 - Industry and services 2,18 2,18 2,18 27,09 20,32 6,77 0 6,77 - RTD 11,81 11,81 11,81 14,58 2,77 0,92 10,89 11,81 - Tourism 0,38 0,38 0,38 3,61 2,71 0,90 0 0,90 4. Other 0 0 0 3,34 2,5 0,84 0 0,84 Total 251,25 0 0 251,25 251,25 350,56 92,36 30,76 227,44 258,20
(1) Including national co-financing of Pre-Accession Instruments.
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8. State Aid The State aid granted under all measures will be: - either compatible with the de minimis rule, or - it will be applied under an exemption Regulation in accordance with Council Regulation No. 994/98 of 07.05.1998 (OJ EC L 142 of 15.04.1998), or - it will operate in conjunction with the notified and approved State aid schemes as set out below, or - it will operate in conformity with Community rules on state aid to agriculture, fisheries and aquaculture.
Cumulation of aid under different aid schemes and from different sources will be respected. The aid intensity ceilings laid dawn in respective EC legal acts apply to total aid: - where assistance is granted concurrently under several aid schemes; - whether the aid comes from local, regional, national or community sources.
The above mentioned applies also to cases when aid is granted as de minimis aid.
Measure Title of aid measure (aid scheme) State Aid Number Approval Letter Duration of aid number Reference measure (aid scheme) 4.1.1. Measure: Improvement of Environmental Infrastructure and Tourism No state aid falling under 2004-2006 Article 87 (1) of the EC Treaty shall be granted under this measure. If there is a case that could be classified as state aid, it will be
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Measure Title of aid measure (aid scheme) State Aid Number Approval Letter Duration of aid number Reference measure (aid scheme) granted as individual state aid. 4.1.2. Measure: Development of Accessibility and Transport System No state aid falling under 2004-2006 Article 87 (1) of the EC Treaty shall be granted under this measure 4.1.3. Measure: Development of Information and Communication No state aid falling under 2004-2006 Technologies Article 87 (1) of the EC Treaty shall be granted under this measure 4.1.4. Measure: Development of Education, Health Care and Social No state aid falling under 2004-2006 Infrastructure Article 87 (1) of the EC Treaty shall be granted under this measure 4.2.1. Measure: Support to Development of Innovation
Aid scheme: Support to development of new products and technologies LV/12/2003 08.03.2004 2004-2006
C(2003) 816/4 Aid scheme: Support to the consultancy services and the participation of LV/15/2003 2004-2006 the commercial companies in international exhibitions and trade missions 08.03.2004 C(2003) 816/4
4.2.2. Measure: Business Infrastructure Development
Aid scheme: Support to modernisation of the business infrastructure LV/14/2003 08.03.2004 2004-2006
C(2003) 816/4
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Measure Title of aid measure (aid scheme) State Aid Number Approval Letter Duration of aid number Reference measure (aid scheme)
4.2.3. Measure: Enhancing Business Support Measures for SME
Aid scheme: Support to the consultancy services and the participation of LV/15/2003 the commercial companies in international exhibitions and trade 08.03.2004 2004-2006 missions Aid to enterprises will also be C(2003) 816/4 delivered in compliance with de minimis regulation (No
69/2001) and SME aid regulation (70/2001)
4.2.4. Measure: Access to Finance for SME
Aid scheme: Loan programme for development of SMEs Application of the rules of the 2004-2006 Commission regulation No 70/2001 (applicable from 01.05.2004)
Aid scheme: Aid scheme of loan guarantees of Latvian Guarantee 23.12.2003 2004-2006 LV 7/2003 Agency C (2003) 5354/5
Aid scheme: Aid to venture capital of small and medium sized N-360/2004 23.12.2004 2004-2006 enterprises C (2004) 5653
Aid scheme: Development of commercial activity in specially assisted 2004-2006 regions LV 8/2003 23.12.2003
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Measure Title of aid measure (aid scheme) State Aid Number Approval Letter Duration of aid number Reference measure (aid scheme) C (2003) 5354/5
4.2.5. Measure: Development of Public Research No state aid falling under 2004-2006 Article 87 (1) of the EC Treaty shall be granted under this measure 4.3.1. Measure: Promotion of Employment
Aid scheme: Support to training, re-training and raising of qualification LV/13/2003 08.03.2004 2004-2006 of employed C(2003) 816/4
Scheme: Research projects on the labour market development No state aid falling under Article 87 (1) of the EC Treaty 2004-2006 shall be granted under this measure If there is a case that could be classified as state aid, rules of de minimis regulation (No 69/2001) will be applied Application of the rules of the de minimis regulation (No 69/2001) 4.3.2. Measure: Development of Education and Continuing Training No state aid falling under 2004-2006 Article 87 (1) of the EC Treaty shall be granted under this measure 4.3.3. Measure: Combating Social Exclusion No state aid falling under 2004-2006 Article 87 (1) of the EC Treaty
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Measure Title of aid measure (aid scheme) State Aid Number Approval Letter Duration of aid number Reference measure (aid scheme) shall be granted under this measure 4.4.1. Measure: Investments in Agricultural Holdings
Complies with the Council Regulation (EC) No 1257/1999 Article 4 This measure will be 2004-2006 implemented in compliance with Council regulation (CE) No. 1257/1999 of 17.5.1999 4.4.2. Measure: Setting up of Young Farmers This measure will be Complies with the Council Regulation (EC) No 1257/1999 Article 8 implemented in compliance 2004-2006 with Council regulation (CE) No. 1257/1999 of 17.5.1999 4.4.3. Measure: Improvement of Processing and Marketing of Agricultural Products This measure will be implemented in compliance Complies with the Council Regulation (EC) No 1257/1999 Article 25 with Council regulation (CE) 2004-2006 No. 1257/1999 of 17.5.1999 4.4.4. Measure: Promotion of Adaptation and Development of Rural Areas 2004-2006 - Land Improvement This measure will be Complies with the Council Regulation (EC) No 1257/1999 Article 33 implemented in compliance with Council regulation (CE) No. 1257/1999 of 17.5.1999
- Diversification of Agricultural Activities and Activities Close to This measure will be Agriculture implemented in compliance with Council regulation (CE)
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Measure Title of aid measure (aid scheme) State Aid Number Approval Letter Duration of aid number Reference measure (aid scheme) No. 1257/1999 of 17.5.1999 If there is a case that could be classified as state aid outside Annex I products, rules of Commission’s regulation No
69/2001 [on de minimis aid] and from 01.05.2004 also rules of Commission’s regulation No 70/2001 have been applied
- Encouragement of Tourism and Craft This measure will be Complies with the Council Regulation (EC) No 1257/1999 Article 33 implemented in compliance with Council regulation (CE) No. 1257/1999 of 17.5.1999
If there is a case that could be
classified as state aid outside Annex 1 products, rules of de minimis regulation (No 69/2001) and from the date of accession into the EU also rules of support for Small and medium enterprises (No 70/2001) will be applied
- Basic services for the rural economy and population This measure will be Complies with the Council Regulation (EC) No 1257/1999 Article 33 implemented in compliance with Council regulation (CE)
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Measure Title of aid measure (aid scheme) State Aid Number Approval Letter Duration of aid number Reference measure (aid scheme) No. 1257/1999 of 17.5.1999 If there is a case that could be classified as state aid outside Annex I products, rules of Commission’s regulation No
69/2001 [on de minimis aid] and from 01.05.2004 also rules of Commission’s regulation No 70/2001 have been applied
- Preservation of Rural Landscape This measure will be Complies with the Council Regulation (EC) No 1257/1999 Article 33 implemented in compliance with Council regulation (CE) No. 1257/1999 of 17.5.1999
This measure will be - Farm Advisory and extension Services implemented in compliance Complies with the Council Regulation (EC) No 1257/1999 Article 33 with Council regulation (CE) No. 1257/1999 of 17.5.1999 4.4.5. Measure: Forestry Development
Complies with the Council Regulation (EC) No 1257/1999 Article 30 This measure will be 2004-2006 implemented in compliance with Council regulation (CE) No. 1257/1999 of 17.5.1999 If there is a case that could be classified as state aid outside Annex I products, rules of
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Measure Title of aid measure (aid scheme) State Aid Number Approval Letter Duration of aid number Reference measure (aid scheme)
Commission’s regulation No 69/2001 [on de minimis aid] and from 01.05.2004 also rules of Commission’s regulation No 70/2001 have been applied
4.4.6. Measure: Development of Local Action (LEADER+ type measure) This measure will be 2004-2006 implemented in compliance with Council regulation (CE) No. 1257/1999 of 17.5.1999 4.4.7. Measure: Training
Complies with the Council Regulation (EC) No 1257/1999 Article 9 This measure will be 2004-2006 implemented in compliance with Council regulation (CE) No. 1257/1999 of 17.5.1999 4.4.8.. Measure: Adjustment of Fishing Effort State aid schemes concerning 2004-2006
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Measure Title of aid measure (aid scheme) State Aid Number Approval Letter Duration of aid number Reference measure (aid scheme)
Fully eligible under the Council Regulation (EC) No 2792/1999 actions financed under FIFG Article 7, 10, ANNEX III Article 1.1 and within this programme are governed by the provisions of Council Regulation (EC) No 2369/2002 Article 1.7, 1.10 Art.19 (2) of Council Regulation (EC) No 2792/1999 as amended by Council Regulation No 2369/2002 of 20 December 2002
4.4.9.. Measure: Fleet Renewal and Modernisation of Fishing Vessels State aid schemes concerning actions financed under FIFG within this programme are Fully eligible under the Council Regulation (EC) No 2792/1999 Article 9, 2004 governed by the provisions of 10, ANNEX III Article 1.3, 1.4, and Council Regulation (EC) No Art.19 (2) of Council 2369/2002 Article 1.9, 1.10, ANNEX III Article 3 and Council Regulation Regulation (EC) No 2792/1999 (EC) No 1421/2004 Article 1.1, 1.8 as amended by Council Regulation No 2369/2002 of 20 December 2002 and Council Regulation No 1421/2004 of 19 July 2004 4.4.10. Measure: Development of Processing and Marketing of Fishery and Aquaculture Products, Fishing Port Facilities and Aquaculture State aid schemes concerning 2004-2006 actions financed under FIFG Fully eligible under the Council Regulation (EC) No 2792/1999 within this programme are Article 13, ANNEX III Article 2.4; governed by the provisions of Art.19 (2) of Council Article 13, ANNEX III Article 2.3; Regulation (EC) No 2792/1999 Article 13, ANNEX III Article 2.2. as amended by Council
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Measure Title of aid measure (aid scheme) State Aid Number Approval Letter Duration of aid number Reference measure (aid scheme) Regulation No 2369/2002 of 20 December 2002
4.4.11. Measure: Development of Coastal Fishery, Socio-economic Measures, Aid for Temporary Cessation of Fishing Activities and Other Financial 2004-2006 Compensation, Promotion of New Market Outlets and Support to Producer State aid schemes concerning Organisations actions financed under FIFG within this programme are Fully eligible under the Council Regulation (EC) No 2792/1999 governed by the provisions of Article 11 and Art.19 (2) of Council Council Regulation (EC) No 2369/2002 Article 1. 11; Regulation (EC) No 2792/1999 as amended by Council
Regulation No 2369/2002 of Council Regulation (EC) No 2792/1999 Article 12, 16 and 20 December 2002 Council Regulation (EC) No 2369/2002 Article 1. 12, 1.13;
Council Regulation (EC) No 2792/1999 Article 14, ANNEX III Article 3;
Council Regulation (EC) No 2792/1999 Article 15.
Note: In conformity with its duties under Article 34(1)(g) of Council Regulation No 1260/1999, the Managing Authority will keep the above State aid table up-to- date and will inform the Commission of any modification of the table. The introduction of a new aid scheme or ad hoc aid requires a modification of the assistance by a formal Commission decision.
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Article 4 of the Commission decision approving the present programme (suspensive clause concerning State aid) applies to measures which contain State aid that is subject to appropriate measures or has not yet been authorised by the Commission. At the present stage, this Article applies to measures 4.2.1 (Support to development of innovation), 4.2.2 (Business infrastructure development), 4.2.3 (Enhancing business support measures for SMEs), 4.2.4 (Access to finance for SMEs) and 4.3.1 (Promotion of employment). The suspensive clause will be lifted when DG for Competition formally signals its agreements to the Latvian authorities that the scheme(s) in question fulfil the requirements of State Aid rules.
Taking into account activities foreseen in the programme responsibility for updating state aid table is shared between following structures: - State Aid Control Department of the Ministry of Finance is responsible for preparing and updating the state aid table for priorities: Promotion of Territorial Cohesion (except measure Development of Accessibility and Transport System); Promotion of Enterprise and Innovations; Development of Human Resources and Promotion of Employment; - Ministry of Transport is responsible for preparing and updating the state aid table for measure Development of Accessibility and Transport System under priority Promotion of Territorial Cohesion; - Ministry of Agriculture is responsible for preparing and updating the state aid table for priority Promotion of Development of Rural Areas and Fisheries.
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9. Partnership
1346. The envisaged institutional scheme for preparation of the SPD provides involvement of all line ministries, other national administration institutions, planning regions, as well as social and economic partners in the programming process, hence implementing the principle of partnership.
1347. The key point of the principle of partnership is to involve all the interested parties in planning and implementation of development initiatives. Participation of the social and economic partners in the planning process allows the planners directly receive the necessary information – namely, from the people that daily deal with problem.
9.1. Stages of Partnership
1348. Partnership and co-ordination of work in the preparation process of the SPD is organized in the following three stages of partnership: • The first stage of partnership includes representatives of line ministries and planning regions, that day-to-day work together on elaboration of the SPD, giving an input in the preparation of the documents within the frame of their competence. Thereby preparation of separate parts of SPD in small and flexible working groups is being provided. No more than three institutions are usually represented in the first round of partnership. • The second stage of partnership includes institutions and organizations that are competent in respective areas, but those areas are not within their primary competence. These are line ministries, boards of planning regions and development agencies, non-governmental organizations and other interested organizations. This stage of partnership provides wide-range of discussions, involving no more than ten organizations. • The third stage of partnership is society. Any institution, organization or enterprise that feels competent in the relevant sphere can participate in discussion, hence getting involved in the functioning of the principle of partnership.
9.2. Working Groups
1349. Management Group of the Development Plan (MGDP) is the highest structure of administrative level that participates in the elaboration of the SPD. It consists of representatives from the ministries, planning regions, Union of Local and Regional Governments of Latvia, State Auditing Office, Bank of Latvia, Central Statistical Bureau and State Chancellery, Association of Latvian Towns and Prime-Minister Office.
1350. Eight working groups are established in order to elaborate SPD, three of them deal with the elaboration of the following chapters of the SPD: • Working group for methodology issues is responsible for development of methodology for several chapters of the SPD and for approval of the content of SPD chapters before submitting to MGDP for reviewing and approval.
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• Working group for socio-economic issues is responsible for preparation of socio-economic situation analysis. • Working group for financial issues is responsible for preparation of financial plan.
1351. Leaders of the enlisted working groups are representatives of the Ministry of Finance.
1352. Additionally to the above-mentioned working groups five priority working groups were established. Each of those is managed by public administration institution responsible for respective policy area: • Representative from the Ministry of Welfare manages working group for elaboration of the European Social Fund priority. • Representative from the Ministry for Regional Development and Local Governments manages working group that prepares Priority for Promotion of Enterprise and Innovation of the European Regional Development Fund. • Representative from the Ministry for Regional Development and Local Governments manages working group that prepares Priority for Promotion of Territorial Cohesion of the European Regional Development Fund. • In the elaboration process of Financial Instrument for Fisheries Guidance Priority interested associations are involved, and issues related with the Priority of this financial instrument are co-ordinated and reviewed in Fisheries Advisory Council, which is managed by the Minister of Agriculture. • Preparation of the European Agriculture Guidance and Guarantee Fund Priority is under the competence of the Rural Development Department of the Ministry of Agriculture, in collaboration with the partner institutions. Further work with Chapters of SPD that relates to Ministry of Agriculture (MoA) is carried out in the Rural Development Activities Management Group that is chaired by the representative of the MoA, also in cooperation with the partner institutions.
1353. Planning regions are represented in all working groups.
1354. The non-governmental organisations participated in the relevant working groups as well as in the series of public debates on the SPD. Especially active were representatives of such NGOs as the Environment Protection Club and the Latvian Confederation of the Employers.
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9.3. Seminars
1355. In order to promote partnership and information exchange, the former Regional Policy and Planning Directorate (now, after the reform, the Ministry for Regional Development and Local Governments) organized several partnership seminars.
1356. On 15 March 2002 seminar for representatives from non-governmental organizations and planning regions was organized.
1357. Similarly, in each planning region of Latvia informative seminar was carried out, where representatives from regional municipalities, non-governmental organizations and entrepreneurship participated. Seminars were organized: • Vidzeme on 29th of May; • Planning Region of the Baltic Sea Coast on 5th of June; • Latgale on 12th of June; • Zemgale on 14th of June; • Riga region on 19th of June.
1358. Apart from seminars, which were organized by themselves, representatives of the Ministry of Finance and the former Regional Policy and Planning Directorate involved in the preparation of SPD, participated in several seminars, organized by other institutions and organizations. The most important were regional seminars organized by the Chamber of Trade and Commerce, and a meeting with the National Economy Board. The general subject of the seminars was related with assistance from the EU Structural Funds in Latvia and preparation of the SPD, as well as opportunities for regional entrepreneurs to benefit from Structural Funds by improvement of general entrepreneurship environment, and direct assistance to business projects.
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9.4. Feedback Evaluation
1359. Draft SPD and its draft Programme Complement were put for the public discussion from 9 September to 1 October, 2002. It was sent out to more than 70 non-governmental organizations, published on the Internet – in the web site of the former Regional Policy and Planning Directorate.
1360. At the opening of the public discussions press conference was organized, where mass media received information about preparation, content and significance of the SPD.
1361. Four seminars for interested parties were organized during the period of public discussion, where information concerning SPD as a whole was disseminated, as well as debates on different priorities and activities took place.
1362. Comments on the SPD were received from 15 non-governmental organizations and universities. Comparing to the public discussion on the National Development Plan, that took place at the end of 2001, activity of the public has not increased; however, quality of the comments has improved.
1363. In the most cases comments on the SPD were substantial and considerable. At the end, the public discussion seminar for those that provided comments was organized.
1364. Comments received during the public discussion pointed out several imperfections, the most important of them being: • Co-operation between ministries and non-governmental organizations is still unsatisfactory, part of comments were so important to discuss them during the preparation of the SPD, not during the public discussion; • There is a lack of information in society concerning the EU Structural Funds and the role of the SPD in the system of development planning documents. Part of submitted proposals was not in compliance with acceptable activities in the framework of the EU Structural Funds. SPD was perceived as a document that determines development of the whole State and not as programming document of Structural Funds.
1365. In co-operation with National Economy Board polling of entrepreneurs was accomplished from 24 September to 10 October, 2002. Questionnaires were disseminated also to the members of the Cooperation Council of Agriculture Organizations. Out of 70 disseminated questionnaires 49 were received back.
1366. 35% of respondents were large enterprises, 31% medium size and 17% small and micro enterprises. 76% of respondent enterprises are operational for more than 7 years. Average annual turnover of the respondents: 44% enterprises – LVL 1 million. 12% of respondents are planning to invest LVL 500 thousand into enterprise development, 32% - LVL 10 to 50 thousand, but 32% till LVL 10 thousand per annum.
1367. Regarding the use of potential EU Structural Funds, majority of respondents demonstrated willingness to use Structural Funds for purchase of technological equipment, means of production and technology, as well as for training and re- qualification of staff.
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1368. As the main factors that could negatively affect preparation of tender, the entrepreneurs mentioned: - Complicate and unclear administrative process (75% from respondents); - Lack of information (71%).
1369. Results of polling indicate a lack of information about the EU Structural Funds and SPD – only 7.7% of respondents have pointed out that they are informed about the EU Structural Funds and their utilization opportunities, but 50% have limited information. 21% of respondents were unaware about elaboration of the SPD.
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10. Publicity
1370. Information and publicity about assistance from the EU Structural Funds is intended to increase public awareness and transparency regarding the activities of the European Union and to create a coherent picture of the assistance concerned across all Member States.
1371. In order to ensure an effective operation of Structural Funds in Latvia, awareness of public concerning the EU and its Regional Policy shall be improved, as well as transparent implementation of Single programming document (SPD) shall be ensured.
1372. Article 46 of Regulation No 1260/1999 that stipulates general provision for Structural Funds, states that Managing Authority is responsible for ensuring SPD publicity. Managing Authority is responsible for informing potential final beneficiaries, local governments and other state institutions, as well as trade and professional bodies, economic and social partners, non-governmental organizations, particularly bodies promoting equality between men and women. It is responsible for informing the general public about the role played by the Community in the assistance concerned and its results.
1373. In charge of implementing SPD it is necessary to receive project applications that meet requirements of Structural Funds. Accessible, exhaustive and comprehensible information to various groups of public about the opportunities offered by Structural Funds will increase the number of potential project applicants, as well as their opportunities to develop a successful project. Managing Authority in cooperation with partners, has elaborated an Information and Communication Action Plan on arrangements for the development and delivery of information and communication for the implementation of the EU Structural Funds.
10.1. General Objective
1374. To inform society on the EU Regional Policy, Structural Funds and implementation of SPD.
10.2. Specific Objectives
1375. To promote knowledge of Structural Funds, encourage project identification and accelerate project start up.
1376. To ensure the transparency, accountability and efficiency of EU Structural Funds activities.
1377. To ensure cooperation and partnership among the parties involved.
1378. To promote general knowledge on EU Regional Policy and enhance its public profile.
10.3. Target Groups
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1379. Media – a well-targeted network of journalists regularly provided with up-to- date information.
1380. Potential Final Beneficiaries – particularly those organisations and private firms, notably SME’s, defined in the SPD and Programme Complement.
1381. Partners – Line Ministries and Intermediate Bodies as well as Regional Development Agencies.
1382. Education Sector – including students at different levels, Educators and others in Latvian Educational Institutions.
1383. Non Governmental Organizations – particularly those working towards equal opportunities and environmental sustainability.
1384. General Public.
10.4. Publicity and Information Measures
1385. Information and Communication Action Plan defines the particular measures for achievement of each of the objectives. The measures are grouped according to the three stages of implementation of the SPD – start up of programme, programme implementation, conclusion of programme.
10.5. Indicative Budget
1386. From January 1, 2004 the implementation of Information and Communication Action Plan is financed under the Technical Assistance priority of the Single Programming Document. Till January 1, 2004 Information and communication Action Plan is financed from the state budget resources.
10.6. Responsible Authorities
1387. Monitoring Committee is the highest authority supervising the implementation of the Information and Communication Action Plan. In order to ensure effective implementation of the Information and Communication Action Plan, the Managing Authority will delegate the implementation of information and communication measures to the appropriate Intermediate Body or Line Ministry.
10.7. Monitoring and Subordination
1388. The Structural Funds Monitoring Committee will be in charge of implementation of the Plan and approve annual Communication Reports produced by the Managing Authority based on the information submitted by the Line Ministries and the Intermediate Bodies. However the primary management of the information and communication will be ensured at the level of the Steering Committees, which will review the reports prepared by the Managing Authority.
10.8. Evaluation Criteria
1389. The evaluation criteria of the information and publicity measures are defined in the Information and Communication Action Plan.
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11. Ex-Ante Evaluation
1390. The ex-ante evaluation was carried out by an independent team of experts contracted via Phare framework contract procedure.
1391. The team worked with the Latvian officials responsible for elaboration of the Single Programming Document actively participating in common drafting sessions, which were extremely useful.
1392. The Final Ex-ante Evaluation Report based on the draft Single Programming Document as approved by the Cabinet of Ministers on 18 March 2003 (officially submitted to the European Commission for negotiations on 19 March 2003) was submitted on the 30 th of June 2003 and approved by the Beneficiary. The Report is attached to the Single Programming Document as an Annex 1.
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