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latvia

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  LATVIA

REPUBLICAN REFERENCE

Area (sq.km)
64,589

Population
2,529,500

Principal
ethnic groups

Latvians 52.0%
Russians 34%
Belarusians 4.5%

Capital
Riga

Currency
Lats

President
Mrs Vaira Vike-Freiberga

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Background:
After a brief period of independence between the two World Wars, Latvia was annexed by the USSR in 1940. It reestablished its independence in 1991 following the breakup of the Soviet Union. Although the last Russian troops left in 1994, the status of the Russian minority (some 30% of the population) remains of concern to Moscow. Latvia continues to revamp its economy for eventual integration into various Western European political and economic institutions.

Update No: 253

The Latvian republic has been doing remarkably well of late. It is doing so from a very low base, its GDP per capita being €6,600 or 29% of the EU average. But that very fact is luring foreign investors, attracted by low wages for highly educated workers (the one solid achievement of communism was excellent education).
The stock of direct foreign investment (FDI) to date is US$4.2bn, a high figure for a nation of two and a half million. The investment has been across the board, taking advantage of Latvia's superb location as the natural Baltic gateway to and from Russia.
The local Russians comprise one third of the population and predominate in the main six towns, including the capital, Riga. Hence the main problem is inter - ethnic relations. Latvia has far more Russians than neighbouring Estonia or Lithuania, precisely because of its excellent location and ports for trade.
Putin has tried to stir up trouble here in an irresponsible address (cum question-and-answer session) given on TV on Christmas Eve. He clearly hopes to slow down Latvia's adhesion to NATO by making out that there is still discrimination against the Russians. The Latvians were indeed engaging in that in the late 1990s. But their Western friends have persuaded them subsequently to take a more accommodating life. It is, therefore, inappropriate for Putin to be making an issue of the matter now, especially given his own dicey record on human rights.
Growth of GDP is set for 4.5% in 2002, after 7.9% in 2001, according to the EU, but the IMF puts growth at 6% for both 2001 and 2002, which shows how the figures should be treated warily.
The IMF regards Latvia as a model performer among transition economies and it is now in a leading position among the EU candidate countries. Inflation is estimated at 2.5% for 2001 and 3% for 2002, well within acceptable limits. The prospects look excellent for this small, but strategically-placed Baltic republic.

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ENERGY

Russia's LUKoil to step up diesel fuel transit via Latvian port


Russia's LUKoil oil company president and the mayor of the western Latvian port city of Ventspils, have agreed on increased transportation of diesel fuel through Ventspils, Ventspils mayor, Aivars Lembergs, said he and LUKoil president, Vagit Alekperov, had agreed during Alekperov's visit to Latvia last December, on raising diesel fuel handling through Ventspils to 8-10m tonnes a year, BNS News Agency has reported.
Khaym Kogan, the board chairman of LUKoil subsidiary, LUKoil Baltija R, confirmed to BNS that Alekperov and Lembergs had indeed agreed on substantial increase of diesel fuel transit via Ventspils, saying that so far LUKoil had transported through Ventspils only some 5,000 tonnes of the product.
He explained that diesel fuel is to be transported to Ventspils by a pipeline from a refinery in Nizhniy Novgorod, Russia. Last year LUKoil Baltija R transported a little over 3m tonnes of crude oil through Ventspils port.
An agreement was also made about Ventspils handling 3m tonnes of crude oil this year, said Kogan, adding that the amount may vary during the year.
He said this January about 300,000 tonnes of crude oil are to be reloaded through Ventspils.

Latvian Gas company boosts natural gas sales by 17 per cent in 2001

Latvijas Gaze (Latvian Gas) company last year sold 1,539m cubic metres of natural gas, up 17.39 per cent from 2000, BNS News Agency has reported.
The amount of natural gas actually sold by the company last year was also 17 per cent or 224m cubic metres above the target figure set for 2001. Latvijas Gaze board chairman Adrians Davis told reporters that gas consumption had been comparatively high in 2001.
Last year the company expected to sell 1,315m cubic metres of gas as compared to the 1,311m cubic metres it sold in 2000. This year Latvian Gas plans to sell 1.4bn cubic metres of natural gas, a 13.9 per cent drop from 2001 sales.
Shares in Latvian Gas are quoted on the official list of Riga Stock Exchange. The company has Russia's Gazprom and Itera Latvija as its largest shareholders and natural gas suppliers. Other large shareholders in Latvian Gas include two German companies, Ruhrgas and E.ON Energie.
Latvian Gas has a registered capital of 39.9m lats (€70.37m).

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FOOD & DRINK

UK, Sweden launch fisheries twinning project in Latvia


British and Swedish governments have launched a joint bilateral assistance project to help strengthen the fisheries administration in Latvia, reported the British Embassy in Riga, the BNS News Agency reported.
The project is a part of the European Union (EU) Twinning programme, pairing administrators from EU member states with their counterparts in the candidate countries under specified project designed to assist and, when necessary, to improve institutional, administrative and reporting structures to comply with requirements set by Brussels.
The fisheries project based in Latvian capital Riga is led jointly by Tore Gustavsson from the Swedish fisheries administration and Normunds Riekstins, director of the Latvian National Board of Fisheries. The pre-accession adviser on the project is Mike Barners from the UK Department of Environment, Food and Rural Affairs.
The 18-month project has a budget of some €1.4m.
The Fishing industry , particularly in the Baltic Sea and the Gulf of Riga, is important to Baltic coastal communities and, at a time when fish stocks are under threat from over-exploitation, the project has set out to boost Latvia's ability to operate in a most competitive environment when it joins the EU, said the British embassy in Riga.
The Latvians will absorb expertise and gain practical experience through a range of methods, including at-the-desk training and study visits to the UK and Sweden, according to the embassy press release.
"I am delighted that Britain's twinning project in Latvia is in such an important economic area as fisheries. This demonstrates our commitment not only to twinning but to the wider enlargement process, and shows the ability and commitment of Member States to work together to achieve a common goal and enhance economic development in Central and Eastern Europe," said British Ambassador to Riga, Stephen Nash.

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SHIPPING

Latvian economics minister, privatisation head optimistic on shipping sale


Latvia's Economics Minister and the head of the Latvian Privatisation Agency (LPA) are sure of a successful outcome for the latest attempt at privatising the Latvian Shipping Company (LK), BNS News Agency has reported.
After the latest terms for the fourth attempt at privatising LK were passed at the LPA council, Latvia's Economics Minister Aigars Kalvitis told reporters that he was sure that by July this year LK will have become a public private joint-stock company.
Kalvitis also said that he was sure that international investment banks will be interested in the LK shares and that the company's shares will be successfully sold for cash.
The minister did not forecast how large a share of the 15m privatisation certificates currently in the possession of Latvian private and legal entities may be used in the public offering in exchange for privatisation certificates; however, he did express hope that interest will be as high as possible.
The CEO of the LPA, Arnis Ozolnieks, said that he was happy that the LK privatisation terms were passed by the LPA council, after already having been passed by the board and the Latvian government.
Amendments suggested to the terms by the LPA council were of specifying character, said Ozolnieks, and the almost unanimous vote in favour of the terms shows how professionally the terms were developed by the LPA board together with the Riga Stock Exchange.
Ozolnieks said that he hopes all the shares set to be sold for cash are sold off, but if this does not happen, the terms include further action for solving such a situation.
LPA council member Ojars Kehris from the coalition party Latvian Way said that the terms do have certain flaws, but doubted that anything better may be passed with the current parliament member line up in Latvia. Kehris said that the terms give a certain benefit to local investors and large privatisation certificate owners, and that the success of the LK privatisation process depends on how successful the Riga Stock Exchange is in attracting investment banks and selling shares for cash.
Kehris said that the amount of privatisation certificates that will be used for privatisation of LK "can only be predicted by a fortune teller, but this will set the price for the shares sold for cash."
LK president Andris Klavins said at the LPA council before they were passed that the terms are contradictory and hasty, but urged for them to be supported, "so that the privatisation of LK is finally started."
Klavins said that if no international investment banks are drawn to the share offer for cash, then the process will be a failure, as the state will be left with a large portion of the shares and local investors will not be able to afford the shares for their possible minimum price.
A month after the LPA council approval, a public offering will be launched to sell 32 per cent or 64m shares in the company against payment in privatisation vouchers, assuming the price per share at one lats (1.77 euro).
Sale of 6 per cent or 12m LK shares to the company's current and retired employees will also begin on the same date.
Approval of LK privatisation regulations will also be a go-ahead for Riga Stock Exchange to start making arrangements for sale of 51 per cent or 102m LK shares on the stock exchange against cash payment.
The bourse will also be required to carry out an in-depth survey of the company, including legal and financial analysis. The survey is required for the stock exchange to produce its assessment of LK to be used to determine maximum and minimum price of the company's shares to be sold on the bourse against cash.
When the price range is set, Riga Stock Exchange will organize road shows with participation of LK senior executives, representatives from the Economics Ministry, the LPA and the stock exchange. The road shows will be held to present the offer of LK shares to potential financial investors.
The regulations state that any LK shares remaining unsold at the auction against payment in cash will later be sold at another auction on the stock exchange, also against cash. The date of such auction and the share price will be set by a separate LPA board decision, and the LPA will hold unsold shares in trust until the next auction.
Within a week after confirmation of stock exchange sale results, the private company resulting from LK sell-off has to hold a shareholder meeting to elect board and council, and take other required measures towards registration of the company in the Latvian business register.
After the shareholder meeting the LPA will transfer to the National Social Insurance Agency 10 per cent or 20m LK shares meant for the special budget of state pensions.
The company emerging from the LK sell-off is required to keep the shipping company's current line of business and existing jobs, manning ships mostly with Latvian sailors.
The company must be registered in Latvia and retain the name of Latvian Shipping Co. It is also required to take over LK obligation to provide financial support to the Latvian Naval Academy and the company's union of retired sailors.
This is going to be the fourth attempt to sell LK off to private hands following three previous failed attempts, the latest of which went sour last spring.

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TELECOMMUNICATIONS

Latvia picks six firms for UMTS development


Six companies have been approved as applicants for developing auction regulations for licences of three new standard UMTS mobile telecommunications licences and one GSM 1800 standard licence, the Latvian Transport Ministry reported. Applicants for developing the licence auction regulations and staging the auction who have been approved are Andersen Management International, consortium Squire Sanders & Dempsely L.L.P., consortium National Economic Research Associates, Arthur Anderson Ltd., consortium OX Auction Experts and consortium Spectrum Strategy Consulting. 
In total 15 companies applied for the tender for the right to develop the auction regulations and hold the auction. Transport Ministry official, Inara Rudaka, said the other bidders either did not qualify for the tender requirements or failed to submit all required documents on due time. The six companies had to submit auction holding proposals and the possible auction cost estimates to the transport ministry by January 31st after which one company will be picked for developing the auction regulations and staging the auction.

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