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Valdis Zatlers

Valdis Zatlers

Annual Report 2009

The economy

Over the course of 2009, President Zatlers helped to promote entrepreneurship in Latvia. On March 31, in his address on Latvia’s National Television and Latvia’s National Radio, the President said that after evaluating the extent to which the Saeima fulfilled the assignments given to it on January 14, he concluded that the government must help Latvian businesspeople by repealing the burden of advance taxes and fees, eliminate bureaucratic obstacles against the use of EU funding, and ensure the use of European funds for a more far-sighted and thorough development of the national economy. The President also called on the government on more than one occasion to introduce financial instruments in the area of loans, guarantees and risk capital – something that is of key importance at a time when banks have seriously limited their lending programmes.

 

The more effective use of monies from EU Structural Funds

 

President Zatlers has said on more than one occasion that EU money is the only available source of financing to promote entrepreneurship in Latvia at this time. Therefore it is of key importance to make effective use of the monies and to eliminate any obstacles which hinder that process. Focusing on EU Structural Funds in particular, the President took part in a meeting of the Saeima Public Expenditure and Audit Committee on June 3, 2009, to discuss issues related to EU funding, as well as the matter of how to make it simpler to access those funds.

 

 

After receiving reports from government ministries on progress in the use of EU funding, President Zatlers announced that the process is neither quick enough nor effective enough, and so the aforementioned committee decided to review the use of EU monies sector by sector. The Finance Ministry was instructed to take administrative steps to ensure the necessary pre-financing and to ensure that organisers of EU-related projects receive reimbursements as quickly as possible. Between the June 30 meeting and November 30 of 2009, certain progress was made in this process. In terms of the 2007-2013 planning period, the proportion of projects approved in relation to the total EU financing of LVL 3.2 billion increased from 30% to 46.1%, the number of concluded agreements increased from 20.9% to 40.4%, and the amount of money actually provided for recipients increased from 3.3% to 7.9%. Given that three of the seven years of the planning period have already passed, this is a ridiculously low percentage of spending. In 2010, President Zatlers will continue to push the relevant institutions toward working actively on ways of making the EU funding process more effective in terms of pursuing specific indicators in this regard.

 

Dialogue with and support for businesspeople

 

President Zatlers has activated dialogue with businesspeople to ensure that Parliament and the government take purposeful and effective steps to facilitate entrepreneurship and to remove obstacles in this process. After an open letter to the President which spoke about timely problems in business, the President invited representatives of a number of companies to his office at the Rīga Castle – Kolonna, Baltkom, airBaltic, Ventspils Nafta, Grindex, and Latvijas Balzams. Prime Minister Valdis Dombrovskis and Economics Minister Artis Kampars were also present.

 

 

President Zatlers listened to the views of the businesspeople and called on them to work together to find solutions aimed at developing a friendly environment for business and to overcome the consequences of the crisis. It was agreed that views would be exchanged on a regular basis in future, and the government was asked to inform businesses in a timely way about planned tax changes and structural reforms. The President emphasised the importance of tax policies which promote business and once again called on the Prime Minister to review the procedure related to advance corporate income tax payments and the payment of the value added tax.

 

On September 15, the President convened another special meeting of the Cabinet of Ministers, where conceptual support was given to an informational report on the review of tax policies so as to stimulate the economy. It was decided that after the document was made more precise, it would be submitted by September 29 to the Cabinet of Ministers, which would then review the advance corporate income tax system and the system for paying the value added tax. The Finance Ministry prepared amendments to the law on the corporate income tax which spoke to a review of the relevant procedure, and that became part of the package of laws related to the 2010 national budget. The ministry also prepared amendments to normative acts to clarify the system of reimbursement of overpaid added value taxes so as to eliminate unnecessary limitations. These, too, became part of the budget package. Parliament approved the new rules, which took effect on January 1, 2010. True, the requirement that the added value tax payment procedure which is based on the so-called “cash register principle” was not implemented for all companies, but as of the beginning of 2010, it was applied to micro-businesses.

 

Throughout 2009, President Zatlers continued his tradition of visiting major state-owned companies to talk about strategies and problems and to identify ways of making operations more effective. He has visited Latvenergo, the Rīga Freeport and Latvian Railways.

 

 

The President also paid working visits to various regions of Latvia to learn about businesses there and to visit companies in various sectors. During the course of the year, he visited 27 companies. Any Latvian city or region has successful examples of entrepreneurship at the regional, national, or even international level. During the course of the year, President Zatlers visited all kinds of companies – producers of bio-gas, metal processors, wood processors, apparel manufacturers, building material manufacturers, forest processors, and food producers. On these visits, the President always discussed problems, bringing local government leaders into the discussion and calling on them to work actively in pursuit of an improved environment for business.

 

 

Promoting employment and social assistance

 

Another area in which President Zatlers has been active is support for micro-enterprises. On October 13, the Cabinet of Ministers approved a conceptual document on support for such companies, and on October 30, it issued Regulation No. 748, “On a Conceptual Approach to Support for Micro-Enterprises.” The document set out specific tasks and specific deadlines for ministries which were to implement the processes addressed in the regulation. Several of these were to begin on January 1, 2010:

1) Amendments to the commercial law to state that the minimum equity capital of a limited liability company must be LVL 100;

2) Amendments to the law on the VAT, allowing micro-enterprises to file a VAT declaration once per quarter if their annual turnover is not higher than LVL 35,000;

3) Amendments to the law on the VAT, allowing micro-enterprises to pay the VAT on the basis of the cash register principle if their annual turnover is not higher than LVL 70,000.

 

On September 15, President Zatlers convened a meeting of the Cabinet of Ministers to declare that employment is a priority for the government. Unemployment increased to 16% at the end of 2009, and efforts to promote more widespread employment will be of key importance in 2010 in terms of economic recovery, the welfare of the people of Latvia, and a reduction in social tensions. Throughout 2010, the President will continue to encourage the government to be active in pursuing employment-related programmes. He will also demand specific results from the government.

 

On October 28, the third session of the Latvian Forum, which is organised by the President’s Strategic Analysis Commission, was held throughout Latvia. The event was a workshop for ideas about micro-businesses and self-employment, and the workshops were held in Valmiera, Cēsis, Jēkabpils and Rēzekne. More than 200 people took part to help people with specific ideas about a new business to use their experience and knowledge to prepare a proper business plan. There were mentors at each of the workshops, helping people to find new business ideas and launch businesses. Ten specific business ideas were prepared, while the main thing was that people were encouraged to establish and manage their own companies.

 

Participants in all of the cities said that one of the main conclusions from the event was that exchanges of practical views and experiences are of key importance when someone wants to begin a new business. They proposed that practical workshops and discussions centred on exchanges of experience be established as a local government project aimed at promoting entrepreneurship.

 

 

On March 12, the President called on the government to ensure social security guarantees for the least-protected groups in society, and in response to this, a differentiated level of guaranteed minimal income has been defined for different social groups as of October 1, 2009. The same is true with respect to local government housing support and/or other support received by families or individuals in response to their fundamental needs. On November 17, the government approved a new law on insolvency which allows individuals who become insolvent to keep at least one-quarter of their income.