LATVIA in REVIEW March 5 - 11, 2013 Issue 9

LATVIA IN REVIEW March 5 - 11, 2013 Issue 9

CONTENTS

Government Saeima Amends Law to Enable Accession to the Convention against Bribery Saeima Supports Latvian Presence in EU’s Military Mission to Train Malian Armed Forces

Economy GDP Growth in Latvia, at 5,6%, Fastest in Europe; Growth to Moderate This Year Second Estimates Confirm Latvia’s Biggest Q4 GDP Increase in EU – Eurostat Latvia Promised a June Answer on Its Euro Pledge Latvian Lats Celebrate 20 Year Anniversary

Foreign Affairs Rinkēvičs Urges Expansion Europe-U.S. Relations in Security Issues, Energy and Economy Rinkēvičs Urges Closer Integration of Baltic States into EU Energy and Transport Networks

Society Latvia Has EU’s Highest Ratio of Women Managers, Academics and Physicians

Articles of Interest Cherry-Picking Riga’s Museums in a Day Did You Know a Latvian Invented Jeans?

Government Saeima Amends Law to Enable Accession to the Convention against Bribery Saeima.lv The Parliament of Latvia (Saeima) adopted amendments to the Law on Enterprise Income Tax, thereby improving the legal framework for preventing bribery, in the second and final reading.

Latvia had to amend its Law on Enterprise Income Tax in order to join the OECD Convention on Combating Bribery of Foreign Public Officials in International Business Transactions.

In order to prevent misinterpretation of any regulation set forth by the Law, from now on the Law will clearly and unambiguously state that commercial bribes are to be regarded as expenditures that have to be taken into account while calculating corporate income tax. These expenditures will include tangible assets, property or other benefits which are used in committing a crime, including offering a bribe to a public official, staff member of a state or municipal institution who is not a public official, a person authorised by a public institution or a private individual.

The former wording of the Law already set forth that in calculating the corporate income tax, taxpayers had to take into account expenditures which are not directly related to their economic activity, but it was not explicitly stated that this provision also applied to tangible assets.

1 The summary of the relevant draft law presented by the Budget and Finance (Taxation) Committee of the Saeima states that the aim of these amendments is to prevent commercial companies from achieving their goals by means of bribery instead of fair competition in tenders.

Saeima Supports Latvian Presence in EU’s Military Mission to Train Malian Armed Forces Saeima.lv Saeima has supported the draft resolution on participation of the Latvian National Armed Forces in the European Union’s training mission in Mali (EUTM Mali) aimed at training the Malian Armed Forces.

The decision was adopted unanimously with 86 votes in favour and none against.

According to the Latvian National Armed Forces, as a part of EUTM Mali, two Latvian soldiers will be deployed in Mali as of late March or early April, to be substituted with the next team in six months. The shared costs of the operation are estimated at 8,64 million lats for the initial mandate of 15 months, and each participating member state will bear the costs of their soldiers.

16 EU member states, as well as Norway, have agreed to contribute to EUTM Mali. Approximately half of the 500-strong contingent will engage in training the Malian Armed Forces, while the rest will assume responsibility for security, administrative tasks and medical assistance. The headquarters of the mission will be in Bamako, and the training is to take place in Koulikoro.

The EU Foreign Affairs Council launched EUTM Mali on February 18, 2013, aimed at training and reorganising the Malian Armed Forces. EUTM Mali is intended to help improve the military capacity of the Malian Armed Forces in order to allow, under civilian authority, the restoration of the country's territorial integrity. The mission will not be involved in combat operations.

Economy GDP Growth in Latvia, at 5,6%, Fastest in Europe; Growth to Moderate This Year Agnese Bičevska (Economist at the Bank of Latvia), Macroeconomics.lv The indicator updated by the Central Statistical Bureau shows that gross domestic product (GDP) in the last quarter of 2012 grew 1,4% quarter-on-quarter (adjusted upwards by 0,1 percentage point). Year-on-year, GDP has grown by 5,1%. Since a broader perspective on GDP is currently available and previous data have also been adjusted slightly, we will look back at the year overall.

For a second consecutive year, the three fastest growing economies are in the Baltic countries, whereas in EU27 countries overall GDP even dropped – by 0,3% (these data are still going to be updated). The Latvian economy in 2012 continued to grow rapidly, at 5,6%, reaching the highest rate of growth in Europe. Only a year ago, we placed only third with this rate of growth.

Exports, investments and private consumption contributed equally to GDP growth in 2012, yet their particular dynamics changed over the year. At the beginning, investments played a crucial role, later yielding to private consumption, but in the last six months net exports had a very important positive impact on GDP growth, accounting for an average of 4.4 percentage point contribution in GDP changes. 2

The gross value added in the economy increased by 5,2% in 2012. The greatest contribution to value added growth, in a breakdown by branch, was made by the increased value added in trade, manufacturing and construction. Yet in contrast to the previous year, other, more rapidly growing smaller branches accounted for a notable contribution (e.g., information and communication services, agriculture and professional, technical and scientific services).

In 2013, we do not expect GDP growth on the level of the last two years, yet it will still be among the highest in Europe. The base scenario of predictions published by the Bank of Latvia in January envisions a 3,6% growth. The data published soon after developing the predictions gave rise to speculations that the predictions would come to pass according to the optimistic scenario, yet the latest data point to several negative tendencies.

First, a rather rapid drop in production output was observed in manufacturing in January. In all likelihood, that was a brief moment of weakness, yet there are serious risks that are related both to further economic growth in the most important Latvian export markets and possible appreciation of producer costs because of the mandatory procurement component of electrical energy.

Second, the consumer and retail trade confidence indicators deteriorated sharply in February. The deterioration in consumer confidence is probably related to the colder winter and the attendant larger expenditure for heat. That in turn has a negative impact on the purchasing power of the population and reduces the possibilities of expenditure in points of sale. Retail trade is thus not doing as well as could be expected. The good news this year is that inflation remains low, so, as the expenditure related to the heating season is over, salary raises will determine a like improvement in purchasing power.

Some problem spheres notwithstanding, we can have a rather optimistic future outlook; however, an important role in further economic growth will be played by investments as an important precondition for expanded production and improved productivity. And, even though euro introduction could be a positive stimulus here, responsible economic policies in Latvia will still have the determining role in terms of attracting investment and creating jobs.

Second Estimates Confirm Latvia’s Biggest Q4 GDP Increase in EU – Eurostat Latvian Institute Second estimates for the fourth quarter of 2012 confirm that Latvia has had the biggest growth of gross domestic product (GDP) among the 27 European Union (EU) states, Eurostat, the statistical office of the EU, reports.

The change, compared with the same quarter of the previous year, shows a 5,7% increase, based on seasonally adjusted data.

Concluding the TOP3, Latvia is closely followed by its Baltic neighbours Estonia and Lithuania that have registered a 3,4% and 3% growth respectively in October-December of last year.

Latvia has also registered the biggest increase of GDP, compared to the third quarter of 2012 – a 1,3% growth.

3 GDP fell by 0,6% in the euro area and increased by 0,5% in all 27 EU states during the last quarter of 2012, compared with the third one, according to second estimates.

Compared with the same quarter of the previous year, seasonally adjusted GDP fell by 0,9% in the euro area and by 0,6% in all 27 EU states in the fourth quarter of 2012.

As reported, Latvia also registered the biggest increase of GDP among EU members in the third quarter of 2012 with a 5,3% growth.

Latvia Promised a June Answer on Its Euro Pledge Latvian Institute In line with the Treaty requirements, the European Commission and the ECB will each make an objective and profound assessment of Latvia’s readiness to join the euro area.

The conclusions of the assessment will be presented by late May, early June, Vice- President of the European Commission and member of the Commission responsible for Economic and Monetary Affairs and the Euro Olli Rehn told the reporters after receiving the formal request for a convergence report in view of Latvia’s aim of adopting the euro on 1 January 2014.

„Without prejudging in any way the outcome of the assessment, let me say this. Latvia’s decision to request entry to the euro area shows how much progress the country has made in getting its economy back on track, following the very deep economic crisis of 2008-2009,” Rehn added.

He went on to say that determined implementation of the EU-IMF-led financial assistance programme, which was successfully concluded last year in January 2012, helped to steer Latvia out of the very deep recession it had in 2008 and 2009.

„Latvia now has the fastest rate of GDP growth in the EU. It has the second highest rate of export growth in the EU. And it has steadily falling, if still high, unemployment. Latvia is in fact an example of how macroeconomic imbalances, however severe, can be successfully addressed and how a country can emerge stronger once such an adjustment is completed,” Rehn emphasized, saying ”let me also stress that Latvia’s request is another sign of confidence in the euro”.

Latvian Lats Celebrate 20 Year Anniversary Latvian Institute It was 20 years ago, March 5, 1993, when Latvians first laid their eyes on the first 5-lats banknotes.

Not only was the note very beautiful with its characteristic Latvian symbols, but it also marked the end of the transition period after the regaining of independence from the Soviet occupation. It was the first ever lats currency introduced in the newly-independent Latvia.

The currency reform in Latvia has been fully completed as of July 20, 1998 when the 500- lats banknote was put into circulation.

There are currently more than 15,7 million 5-lats notes in circulation with the total worth of 78,68 million lats.

4 At present, banknotes with nominal values of 5, 10, 20, 50, 100 and 500 lats, as well as coins with nominal values of 1, 2, 5, 10, 20 and 50 santims and 1, 2 and 100 lats are in circulation.

The Latvian banknotes feature popular symbols characteristic of our nation and stages of our cultural history: an ancient oak (LVL 5); a view of the Daugava (LVL 10); a Latvian farmstead (LVL 20); a sailing vessel of Riga as member of the Hanseatic League (LVL 50); the collector of traditional folksongs, the dainas, Krišjānis Barons (LVL 100); a Latvian woman symbolizing the country (LVL 500) from Zariņš’s 5-lat coin’s reverse.

The 5-lats banknote was printed repeatedly in 1996, 2001, 2006, 2007 and in 2009, the 10-lats banknote - in 2000 and 2008, the 20-lats banknote - in 2004, 2007 and in 2009, 100-lats banknote in 2007, the 500-lats banknote in 2008.

The design for coins was developed by graphic designer Gunārs Lūsis. The reverse of "red" and "yellow" (1, 2, 5, 10, 20 santims) coins is decorated with ethnographic ornaments: five parallel curved darts with their ends supported by square signs. These geometric, visually concise forms, which conform to the ancient stylistics found in traditional ornaments, represent the sun, the course of the day, work.

While the 50-santims coin features pine seedlings (forests), the one lat coin depicts a salmon (water), and the two-lat coin a cow (earth).

Foreign Affairs Rinkēvičs and new French Ambassador Agree to Strengthen Bilateral Relations Ministry of Foreign Affairs Latvia’s Minister of Foreign Affairs Edgars Rinkēvičs met with the Ambassador Agréé of France to Latvia Stéphane Visconti on March 8.

The parties voiced satisfaction over active bilateral relations and cooperation in a number of areas, including economy, education, culture and La Francophonie, and expressed a wish to build even closer contacts. Ambassador Visconti outlined to the Foreign Minister the priorities for strengthening bilateral relations during his term in office.

While discussing the current situation in Mali, Minister Rinkēvičs informed the Ambassador about the Saeima’s decision regarding the participation of soldiers form the National Armed Forces of Latvia in the European Union mission to assist with the training of Mali’s armed forces. Ambassador Visconti thanked for Latvia’s support important not only for France but also contributing to the stability of the entire continent.

Minister Rinkēvičs commended support by France in the period of preparations for Latvia’s Presidency of the European Union, during which France shares its Presidency experience and ensures French language teaching to public administration staff.

The Minister thanked the Ambassador Agréé for support by France for a continued NATO’s Baltic airspace policing mission. At the same time, Minister Rinkēvičs called on France to support Latvia’s accession to the euro area and the OECD.

Stéphane Visconti is replacing the former French Ambassador Chantal Poiret. Mr Visconti’s accreditation visit with the President of Latvia has been scheduled for March 12.

5 Rinkēvičs Urges Closer Integration of Baltic States into EU Energy and Transport Networks Ministry of Foreign Affairs Latvia’s Minister of Foreign Affairs Edgars Rinkēvičs met with the ambassadors of Nordic, Baltic and Visegrad states accredited in Latvia on March 8. The event was a follow-up to the foreign ministers’ meeting held in a similar format in Gdansk, Poland, on February 20.

Foreign Minister Rinkēvičs commended the results of the Gdansk meeting and emphasised that „our countries are linked by shared values and a common perspective on a broad range of issues on the international agenda”.

Minister Rinkēvičs accentuated that the NB8 and V4 states should continue enhancing their cooperation in the following areas: promote measures that would allow the Baltic states to overcome their insufficient integration into the EU’s energy and transport networks; and facilitate a coordinated EU member states’ approach vis a vis the EU Eastern Partnership countries. The defence capabilities enhancement of the involved countries should also be ensured, among other things, through holding military exercises, of which, this year’s NATO Steadfast Jazz 2013 is of importance to those involved.

Society Latvia Has EU’s Highest Ratio of Women Managers, Academics and Physicians Latvian Institute Latvia has registered the highest ratio of women being managers, teachers at upper secondary education level, academic staff in tertiary education and physicians in the European Union, Eurostat reports.

A third of managers in the EU are women. The highest proportion of female managers was recorded in Latvia (45%). Hungary is second with 41% and France is third with 40%.

While there are also more female than male teachers at upper secondary education level in the EU, the pattern is less pronounced. The proportion of female teachers at upper secondary level was 59%, with the highest percentages in Latvia (80%), Lithuania (79%) and Bulgaria (78%).

On the other hand, at tertiary education level there are fewer female than male academic staff (which includes lecturers and researchers) in the EU. The proportion of female academic staff was 40% in the EU, with the highest percentages in Latvia (59%), Lithuania (55%) and Finland (50%).

About 45% of physicians in the EU are women. The highest proportions were found in Latvia and Estonia (both 74%), Lithuania (70%) and Romania (69%).

Articles of Interest Cherry-Picking Riga’s Museums in a Day “I’d heard plenty about Riga’s ultra-cool bars and superclubs before my recent trip to Latvia’s capital city, but a less anticipated pleasure was its astonishingly diverse range of museums,” Phileas French. http://www.gotsaga.com/review_saga_pics/5669

Did You Know a Latvian Invented Jeans? https://www.facebook.com/photo.php?fbid=621658347851677&set=a.296291000388415 .95356.295492690468246&type=1 6 THE LATVIAN INSTITUTE The Latvian Institute promotes knowledge about Latvia abroad. It produces informative materials and works closely with international media professionals in developing a wide variety of communications projects. Contacts: Pils iela 21,Rīga, LV – 1050, LATVIA Phone: (+371) 67503663 Fax: (+371) 67503669 E-mail: [email protected] www: www.latvia.lv Facebook: http://www.facebook.com/IfYouLikeLatviaLatviaLikesYou Twitter: www.twitter.com/LatvianInstitute Font: Robusta Pro, made in Latvia