The Independent Expert has indicated that the objectives of his visit to Latvia are to assess the impact of foreign debt on Latvia’s capacity to design and implement policies and programmes in order to enjoy all human rights, in particular, economic, social and cultural rights, and the right for development. Thus, the expert intends to evaluate the effect of the European Union and the International Monetary Fund programmes (2008-2011) on the ability of our country to protect and realise human rights.

To this end, the UN Independent Expert has arranged to meet with representatives from the government institutions and international organisations resident in Latvia, the Ombudsman and non-governmental organisations.

The UN Human Rights Council appointed Dr. Cefas Lumina as Independent Expert in 2008. Dr. Lumina has over 24 years’ legal practice, research and teaching experience in several countries.

Country visits are part of the Independent Expert’s mandate. Over the last two years, Dr. Lumina has visited Australia, the Solomon Islands, Vietnam, Norway and Ecuador.

Compared to the fourth quarter of 2011, manufacturing turnover in the first quarter of 2012, according to seasonally adjusted data, increased by 4.3%, of which in the domestic market rose by 0.2% and in export by 8.4%.

Compared to March 2011, manufacturing turnover in March 2012, according to calendar adjusted data, increased by 14.8%, including by 9.5% in the domestic market, and by 19.5% in export.

The growth in manufacturing turnover was mainly influenced by such sectors as manufacture of other transport equipment (building of ships and boats, manufacture of railway locomotives and rolling stock) (5.5 times), repair and installation of machinery and equipment (2.4 times), and manufacture of electrical equipment (56.5%).

Compared to February 2012, in March the seasonally adjusted turnover of the Latvian manufacturing industry rose 5.6% in current prices. The industry’s turnover grew 2.4% in the domestic market and 8.6% in export markets.

The steepest rise was in the manufacture of other transport equipment (building of ships and boats, manufacture of railway locomotives and rolling stock) (2.5 times), manufacture of vehicles, trailers and semi-trailers (21.7%), and manufacture of basic pharmaceutical products and pharmaceutical preparations (13.9%).

Latvian Defence Minister Artis Pabriks said that in the new National Defence Concept the emphasis was made on radical change of the paradigm, turning Latvia from a security consumer into a security provider. By developing its own national armed forces, Latvia will also make a contribution to the NATO collective security and thus could win greater political support from the members of the alliance, he said.

Developing ground operations-oriented combat capacity and regional integration with armed forces of other Baltic States are listed as priorities in the draft Latvian National Defence Concept. The document for the first time has defined also Latvia’s priorities in strengthening collective defence, including strengthening of NATO rapid response and military capacities as well as the alliance’s potential of deterrence and the NATO presence in the Baltic States.

He said that it had been agreed in principle that during further discussions about increasing the minimum non-taxable income or tax allowance per dependent the focus should be on increasing the latter.

“We will continue discussions about these matters and probably will do it also in the context of the 2013 budget. The minimum non-taxable income per dependent is established by the Cabinet of Ministers and [changing this] is easier to do. Changes in the tax rates need to be approved by the parliament therefore the Finance Ministry will prepare the proposal for the said tax changes for the [Cabinet] meeting on Tuesday [May 15],” Dombrovskis said.

Speaking about the need to lower VAT, he said that both the Finance Ministry and the Bank of Latvia had reviewed the proposal and their conclusion had been that reduction of the VAT rate by one percentage point would bring down inflation by 0.5 percentage points. Negotiations will be held with retailers to make sure that end consumers would indeed feel the benefits of the planned tax reduction.

The prime minister said that for now the government did not have any plans for further VAT reduction and intended to focus on lowering of labour taxes in future.

Finance Minister Andris Vilks praised business people for eagerness to see Latvia in the Eurozone and retailers for willingness to cooperate to let people enjoy benefits from the VAT reduction. Price monitoring will also be important in this respect, he said.

The Finance Ministry has proposed to reduce the standard VAT rate, which currently is 22%, to 21% from July 1, 2012, and to lower the personal income tax rate from 25% to 24%, starting from the next year, as well as to increase the monthly minimum non-taxable income to 60 lats (EUR 85,37) from 45 lats (EUR 64,03) in 2013.

Dombrovskis gave Chan the Lacplesis hat. Lacplesis (Bear-slayer) is a Latvian mythical hero, who has ears of a bear which is the source of his superhuman strength.

“I passed to Jackie Chan greetings from legendary Lacplesis and invited him to return here to make a sequel to his movie,” the Latvian prime minister wrote on his Twitter blog. He had also enclosed a picture of Chan wearing his new hat.

The wind tunnel in Jelgava has become a filming location for some scenes for Chan’s latest movie, China Hero.

Previously there were press reports that Chan had visited the Latvian pavilion during the Expo 2010 in Shanghai featuring a wind tunnel by the Latvian company Aerodium, and it had been suggested that he might include some wind tunnel acrobatic stunts in his future movies.

SEB Banka macroeconomic expert Dainis Gaspuitis told BNS that in March 2012 industrial output has been holding against the leading winds and had managed to uphold good growth, showing that Latvia is able to take chances.

He said that industrial output has risen by 8.5 percent from March 2011, including by 15.4 percent in manufacturing, while electricity and natural gas supply saw a 10.2 percent reduction.

The biggest growth was in ship and boat building, and production of metal. “The high performance in ship building is based on the orders of the Scandinavian fishing sector. In the future, there will be orders from the Ukrainian oil platform tender to be fulfilled,” said Gaspuitis.

“Industrial output growth is in contrast to the uncertainty and recession in the eurozone countries. Nevertheless, there are also different trends recorded. Despite large growth in different sectors, food and clothing sectors show a reduction in output. The first-quarter data allows us to positively assess further perspectives and forecast further development, giving hopes for more successful employment. These data, however, should be assessed in close context with further development of export… The situation in the Latvian market keeps fluctuating and still remains quite uncertain, making us draw moderate development scenarios,” he said.

Swedbank senior economist Lija Strasuna told BNS that in March 2012 industrial output demonstrated strong results. “In March the industrial output exceeded the pre-crisis record — February 2008,” she said.

At the same time Strasune underscored that the strong results in March were driven by just some sectors.

“Industrial output keeps promoting export and economic growth. The second quarter of this year might be slightly weaker, including under the influence of the uncertainty ruling in Europe,” she said.

DNB Banka’s macroeconomic expert Peteris Strautins told BNS that news on industrial output growth in March just strengthens the confidence that Latvia’s economy keeps growing.

He said that industrial output growth has been formed of contrasts. “Manufacturing in March has risen more than industrial output in general, due to the reduction in the energy sector because of the warm winter,” he said.

He also said that food industry, unfortunately, has been developing very slowly. “Data suggest that the food industry is good in exports, but they are losing their market share in Latvia,” he said, adding that food producers are attempting to describe the picture as bad as possible in hope for the decision on reduced value added tax (VAT) rate, but they forget that they have to create new products.

He said that lower VAT rate is hardly believable, and producers would not gain anything from that. “They have to take chances and create new products that consumers need. The agricultural and food processing sectors could learn from the forestry sector how to work as a chain, form optimistic strategy and positive image,” said Strautins.

In the first quarter of 2012, industrial output in Latvia grew 8.3 percent from the same period last year in constant prices, according to the calendar-adjusted data, the national statistics office reported. The manufacturing industry increased output by 14.8 percent year-on-year, in mining and quarrying output grew by 21 percent and in electric power and gas supply output dropped 5.8 percent.

In the first quarter of 2012 overall, the manufacturing output volumes have increased quarter-on-quarter, in the production of  wearing apparel (+4.6%), wood pulp and its products (+2.0%), pharmaceuticals (+2.5%), metals (+27.5%), fabricated metal products (+10.8%), computers and electronic equipment  (+9.1%) as well as other transport vehicles (+27.5%). Production volumes have meanwhile dropped in the manufacturing of food products (-0.9%), textiles (-1.9%), chemicals, and electrical equipment (-12.4%).  It is interesting to compare the dynamic of the real manufactured production with that of its sales (in actual prices). The manufacturing production sales data currently cover only the first two months. These data, just as those on the manufactured production volumes point to contrasting trends in the first two months of the year – the manufacturing sales volumes in January grew 8.7%  month-on-month, seasonal factors excluded, whereas in February they dropped 5.7%. These fluctuations were the result of the export sales of manufacturing production – a 14.2% growth in January and an 8.4% drop in February. Yet, looking at sub-branches, the situation has varied over time: thus the sales data, if compared to the average month in 2010, exceed substantially the data on production volumes, which point to a rise in the sales prices. In many other sub-branches (wood-processing, chemical production, construction materials production) the situation is similar: the production volumes have grown slower than sales, primarily determined by an increase in export sales volumes. In some of the branches, however, (production of wearing apparel, fabricated metal products, pharmaceuticals) the situation is opposite – in these branches, the growth in the production volumes is more rapid than that in sales, which points to a possible utilization of competition in pricing.

The ministry representative noted that the rating on free operating cash flow has been upped to A- from BBB+.

Jarockis pointed out that with this decision S&P has restored its rating on Latvia at the investment grade, which is a significant appreciation of Latvia’s economic potential in general.

“Latvia is indeed in a unique situation now, because at a time when economic activity in the EU is on decline and ratings are being cut for several member states, our country has received an upgrade. The ratings agency has appreciated Latvia’s future growth potential thanks to the job done by the government and entrepreneurs, as well as public support for balancing the economy. Latvia is currently standing out against the overall EU backdrop, because our economic growth this year is expected to be faster than in other countries, so Latvia is set to become increasingly attractive to investors and international entrepreneurs,” said Latvian Finance Minister Andris Vilks.

Representatives of the Finance Ministry said that S&P had explained the ratings upgrade with Latvia’s improved political environment and fiscal discipline as Latvia continues to move towards its fiscal goals, cutting the budget deficit from 8.2 percent of GDP in 2010 to 3.5 percent in 2011.

The ratings agency also indicated that Latvia’s recent political reforms and commitments would reinforce political responsibility and ensure fiscal discipline in the medium-term, as well as significant economic resilience and a growth of exports in the GDP structure.

Recent election reforms that made the parliamentary election procedure more transparent, restricting political advertising and ensuring government funding for political parties, will further strengthen political responsibility and enhance the general political environment in Latvia, the ministry representatives said, adding that S&P has also appreciated the fiscal discipline bill drawn up by the government, which calls for a balanced budget in the economic cycle and a ceiling for nominal expenditure. The bill is expected to take effect in mid-2012 and curb spending growth. S&P expects the Latvian government to meet its budget deficit target for 2012, which has been set below 3 percent of GDP, and will keep reducing the budget deficit in the medium term.

Jarockis said that the stable outlook on Latvia’s rating asserts the agency’s opinion about developments in the private sector, as well as the improved fiscal and inflation figures, which have reduced the risks that Latvia’s commitment to fiscal consolidation might weaken or that parent banks might scale down their operations in Latvia.

The Finance Ministry hopes that in the future S&P might upgrade its rating on Latvia even further provided that positive changes continue in the private sector and fiscal and inflation figures meet the eurozone’s requirements. Latvia’s planned membership in the eurozone and the European Central Bank, as well as other crediting instruments would reduce external financing risks and improve its monetary flexibility.

International ratings agencies Fitch Ratings and Moody’s have also assigned investment-grade ratings to Latvia.

Latvian Foreign Minister Edgars Rinkevics said that Latvia had been an active part of the international community and was willing to continue its presence in Afghanistan as long as necessary.

He said that NDN was not only useful for delivering supplies to the allied troops in Afghanistan but also helped to maintain good relations with Central Asia and Russia. Rinkevics voiced hope that in future NDN will become a trade route linking Europe with Central Asia and the Far East. Latvia is willing to cooperate with those countries towards development of NDN and Afghanistan, he said.

Latvian Transport Minister Aivis Ronis said that NDN had become an international transit route which was safe and effective. NDN has helped the governments of the countries involved to cooperate more effectively, he said, mentioning Latvian-Russian cooperation in particular. There have always been trade ties between the two countries, but „now we are cooperating under the umbrella of NATO and the UN, and this is a proof that the world has changed and we can work together,” the Latvian transport minister said.

Latvian Defense Minister Artis Pabriks also underlined the role of the Central Asian countries in development of Afghanistan and cooperation with NATO, saying that it was very hard to imagine development of Afghanistan without cooperation with the Central Asia countries and Uzbekistan.

He said that security and development of the region was in Russia’s interests and the transit route had showed that „our cooperation works very well”.

Since 2009, NDN has been used for transportation of non-lethal cargos of the US and other allies to   Afghanistan. The workshop in Riga has brought together experts from Latvia, Russia, the US, NATO member states, Central Asia and other countries to discuss the possibilities for transforming NDN from a network for transportation of non-lethal military supplies into a commercial transportation route as one of the elements for supporting economic growth and cooperation in   Afghanistan   and other countries of the region.

Spokeswoman Inese Grumolte told BNS that the society will be involved in working out Latvia’s working program for the EU presidency under a contract worth 39,900 lats (EUR 56,800).

The experts will first draw up analytical research material on current trends in the EU and the world and their possible impact on the bloc’s agenda in 2015.

“The experts will study EU programming documents influencing the EU’s policies in various areas and identify issues concerning these documents. Data will also be summed up on the regular conferences held by the European Council, as well as priorities of EU presidencies since 2004,” said Grumolte.

After that, a report will be drawn up on how the potential priorities of the Latvian EU presidency might be compatible with Latvia’s existing priorities.

The report’s summary will be used at public debates planned this summer on the forthcoming presidency and its priorities. Ten thematic debates are scheduled from May to September in Rîga.

The debates will focus on the EU’s foreign and security policy, competitiveness, economy and finances, law and law enforcement, environmental and energy issues, regional development, transport and electronic communications, agriculture and fisheries, employment, social policy, health and consumer rights, as well as education, science and culture.

These debates will be followed by three conclusive debates – a comprehensive public debate; a discussion with the participation of the officials and specialists directly involved in preparing Latvia for the EU presidency, as well as a debate of young researchers and scientists.

Finally, the experts involved in the initiative will formulate specific proposals, including an analysis of risks and various factors.

Based on the experts’ assessment and the conclusions drawn during the debates, proposals will be worked out for Latvia’s priorities during its EU presidency and risks that might prevent their attaining. Later, this information will be used as an authoritative source when defining priorities of Latvia’s EU presidency at the national level, explained Grumolte.

The Latvian Society of Political Scientists will be implementing the above plans in association with Ernst&Young Baltic financial consultancy and the Latvian Foreign Ministry.