The level of support for European integration in Latvia has increased from 27% to 30% over the past year.
Golden cockerels on the spires of medieval churches and serious cats hurrying along with people on errands known only to themselves greeted the new sunny spring morning of Riga - a city that has passed through numerous economic and political unions over its almost eight-century history, from the Hanseatic, through the Soviet, to the European. As the magazine "Europa" notes, each period has left its traces both in the city itself and in the whole country. Residents of modern Latvia evaluate differently the decisions being made now, which one way or another will affect their future.
There are still a lot of flags in Riga, so much so that it seems the city's residents have well remembered the poetic line "All flags will come to visit us." Moreover, along with the Latvian maroon-white-maroon banner and the blue EU flag with yellow stars, many buildings in the city are decorated with the flags of its neighbors - Estonia, Lithuania, Germany and Russia, and alongside the Latvian language, Russian, Finnish and German are heard everywhere. In the evening, Riga's streets are filled with surprisingly diverse music - near the Dome Cathedral in the old town, young people stage a medieval musical performance, on Theatre Street, songs of Viktor Tsoi, whose life ended not far from Riga, are played on the guitar, and at the Monument to the Fatherland and Freedom, an elderly veteran plays "Victory Day" on the accordion...
"Of course, over the past year, on the one hand, everyone has noticed the rise in prices, but on the other hand, the disappearance of border barriers has become obvious," says EU Information Agency Director Linda Jakobsone. "People have become used to the idea of the European Union, and while there were discussions at first, pragmatism now prevails and Latvian residents are finding out what benefits EU membership brings them." Data from surveys commissioned by the agency confirm these words. The level of support for European integration increased from 27% to 30% over the past year, while the number of Eurosceptics has decreased significantly - from 25% last year to 18% this year.
Who is the backbone of European integration?
"The Zemgale Plain is home to about 6,500 agricultural enterprises of various sizes and forms of ownership, which are mainly engaged in growing grain, sugar beet and rapeseed," says Viesturs Reinfelds, head of the Zemgale Regional Agricultural Administration. "There are also farms producing agricultural products for their own needs. There are also larger ones oriented to both domestic and international markets. Farmers in Latvia have felt more than others all the advantages that the country's accession to the EU can bring, so most of them voted in the referendum for entry into a united Europe."
The trust placed in European integration by farmers was primarily due to the opportunity to participate in agricultural support programs established to help new countries even before joining the Union, and to use funds from the EU structural funds. Under these programs, sale of combine harvesters, tractors and other agricultural machinery could be accompanied by compensation of a fairly significant share of the funds invested in a particular project.
Of course, at first farmers treated the new ideas with a certain degree of skepticism, but having seen that the programs really work, agricultural producers began to actively submit a wide variety of projects, financed with EU participation. As a result, as of the end of 2004, the vast majority of farms in the Zemgale district use, to one degree or another, money from agricultural support funds and EU structural funds.
It usually takes about six months from the submission of an application to the receipt of funds. During this time, the project is approved and very thoroughly checked. If minor discrepancies with the application are found, even on part of the areas, an inspection of the entire territory is ordered, and in the case of more serious problems, the farmer will not avoid strict sanctions.
How do Latvian farmers use the money received under various European programs? Most often, these funds are used to purchase new, sometimes very expensive machinery. At the same time, over a decade and a half, the resource of Soviet-era agricultural machines has not yet been exhausted, so Belarus tractors can often be seen in fields and hangars alongside ultra-modern systems from European manufacturers.
The Latvian farmer feels quite competitive at the European level. Thanks to the same financial assistance provided before accession to the EU, many of them have more modern machinery than in "old" Europe. Satellite navigation systems are in operation, computer processing of field quality is carried out, which helps to determine what fertilizers are needed for which plot.
"At the same time, this does not mean that the situation is cloudless," continues Reinfelds. "The countryside is aging, young people are moving either to cities or, with the opening of borders, abroad, where even low-skilled work pays significantly more than here. I do not know a European country where Latvians do not work. A significant reduction in the number of household farms is inevitable, whose products are intended for own consumption and often do not meet European quality standards. Such farmers will either have to sell (or lease) their land to a more successful neighbor, or reorient their farm, in which, admittedly, only slightly, but European programs can also help. In addition, in parallel, such a farmer can also apply for financing of projects from EU structural funds."
How likely is it that with the opening of borders and markets, Latvian land will pass into the ownership of foreigners? Reinfelds believes that such a probability is low. "There is competition within the country as well; historically, if a Latvian farmer faces a choice - to sell land to a compatriot or a foreigner, priority will be on the side of the compatriot, even if the foreigner offers somewhat more favorable terms. I know cases where a Latvian bought land from a foreigner who had once acquired it in Latvia. There are, of course, foreigners who own lands in our region, but there are few of them - 5-10%, mainly from Denmark, Austria, and Germany. Say, the interest of the Danes is dictated by the fact that this country has strict agricultural quotas, and they prefer to move their production to Latvia."
The growth in the efficiency of agricultural production required stronger interaction, a striking example of which was the rapeseed growing and marketing cooperative "Latraps". Today it is the largest specialized cooperative in the country. It was organized on the basis of a former grain storage facility, and thanks to European structural funds, it was possible to purchase new necessary equipment and set up a modern laboratory.
How confident do farmers united in this cooperative feel? "We are developing, opening branches in other regions of Latvia. Moreover, we are already ready to talk about equal cooperation with similar structures from other European countries. Soon 'Latraps' intends to launch a biodiesel fuel production plant," its representatives reply. "Come here in about two years, you will hardly recognize this place," the workers smile optimistically, and it is precisely in this optimism that the key to a successful future seems to lie.
Not by bread alone
Alongside the development of agriculture, another national priority is considered to be attracting foreign investment, which is called upon to play a key role in ensuring economic growth. What is the current investment climate in Latvia, and how has the country's accession to the EU affected it?
Andris Ozols, director of the Latvian Investment and Development Agency, kindly agreed to tell about this: "Of course, no investment boom occurred after May of last year. It was known with a reliable degree of probability in advance that the results of the referendum on EU accession would be positive, and entrepreneurs from different countries, mainly from Scandinavia and Germany, systematically invested funds in Latvia. One of the most important changes that have occurred in this area over the past year is the increased interest in Latvia from large enterprises that invest in a reliable economy and a reliable political situation.
Currently, a very positive investment climate is developing in the country. This is facilitated by the tax policy; we have a 15 percent corporate profit tax, and in addition, there are four large economic zones operating in Latvia with significant tax benefits. Their functioning is also coordinated with the European Union, and we will maintain these special economic zones until 2017.
In recent years, the culture of doing business has grown significantly, as has the competitiveness of Latvian export enterprises. In particular, there has been a trend toward the production of goods with added value. If earlier we exported round timber, then boards, now Latvia has created a complete technological cycle - from the primary resource (growing trees) to the final product (furniture production).
Our metalworking industry and machine building are export-oriented. Thus, we produce spare parts and components for cars, in particular seats and electrical appliances. Ninety percent of textile products manufactured in Latvia are also exported.
At the same time, our government is now focusing on an economy based on knowledge and education. We do not see a future for ourselves in an economy dominated by mass industrial production. Our niche is the sphere of industry and services where added value is relatively high. Therefore, biotechnology and information technology have been named our priorities. A full cycle has already been created - from development to production, including in medicine.
Among the changes, one should also note the significant reorientation of Latvian exports from East to West. Currently, more than 70% of export flows are directed to the EU, followed by the USA and Japan. Russia is currently not a very large importer of Latvian goods, and this is regrettable. Russia also does not take significant part in Latvian investment projects. Perhaps purely psychologically it seems that the ties between Russia and Latvia are so close that Russian investment should dominate, but according to data at the end of 2004, the absolute leaders in investment in Latvia were Germany (14%) and Sweden (about 12%). Russian investment was at approximately 7%, comparable to investments from Finland, Estonia, and the Netherlands. Among the main Russian investors are Gazprom and Severstal. There are also local firms that act as partners of Russian ones. One can also mention large Russian investments in real estate, but the number of investments does not mean their high financial volume."
Many remember such famous Latvian trademarks as VEF and RAF. What was the fate of these enterprises? According to Ozols, these factories can no longer be spoken of as flagships of industry. They have ceased to exist, and foreigners coming to Latvia are interested in the so-called greenfield investments, that is, they are interested only in land plots. Thus, in the immediate vicinity of the RAF factory, branches of several foreign companies have appeared, including the Russian ZIL. At the same time, in the streets of Old Riga, there are signs of the trademark “Dzintars,” known since Soviet times, and, of course, the famous “Riga Balsam.”
Overall, Ozols assesses the investment climate in modern Latvia as very positive: “We have fully opened our market. Now foreigners have property rights, they can be hundred percent owners of land and real estate, they can singly establish Latvian companies, there are practically no restrictions. Now we are in a real market situation, and besides, we now have to play by the rules of all Europe.”