The Baltic Course  


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Liepa Skopina Borenius

Local links from Latvia
The Baltic Course – Autumn 2007 ¹27


Editor's note  


New & Views  


 Towards common European energy market
On 1 July 2007, Lithuania and Latvia have announced a program for the full liberalization of their energy markets. Estonia has negotiated with the EU the conditions concerning its open energy market. The BC discussed this and other important issues in development of the Baltic energy markets with the heads of the national energy utilities in the three Baltic states: Sandor Liive, Board Chairman of the Eesti Energia; Karlis Mikelsons, Board Chairman of Latvenergo; and Rymantas Juozaitis, Director General of Lietuvos Energija. BC: What does the full liberalization of the energy market introduced on 1 July 2007, means for large and small end-users?  

SIA “ITERA Latvija” — Natural gas supplies and energy projects  

Environment-friendly fuel
At the working session of the Baltic Council of Ministers in October, the three heads of government concluded that the shut-down of the Ignalina Nuclear Power Plant in 2009 entails great risks for the Baltic energy industry. The BC discussed the future of the Baltic energy market with industry expert Adrians Davis, Board Chairman of Latvijas Gaze (Latvian Gas) company. BC: How we will cover the electricity shortage following the shutdown of the nuclear power plant in 2009?  


Ports' development projects
In conditions of tough competition the ports in the Baltic States are gaining momentum through using own and borrowed investment resources as well as the EU funds. The Baltic ports’ apparent advantage lies in their status as free economic zones. All ports see their perspectives linked to containers keeping in mind other freights and cargoes. Baltic ports’ representatives told the BC about their new development projects.  


Convenient environment for innovations
What is a common denominator for producers of such items as natural cosmetics, label’s glue, paper processing machines and those for old tires’ recycling? The answer is that they are all innovative endeavors choosing NP Properties industrial parks in Latvia as their business location.  


Gediminas Kirkilas: Income tax in Lithuania might be lowered to 20 per cent
Starting from 1 July 2006, personal income tax in Lithuania was reduced from 33 per cent to 27 per cent by the government decree as part of national fiscal policy implementation. It is the first serious step towards tax reduction in recent years. Lithuanian Prime Minister Gediminas Kirkilas reveals prospects of further reduction in personal income taxation.  


Time for professionals
Lately there were numerous articles published discussing a potential crisis situation in the Baltic Property market. Concerns about local banks ceasing to finance almost any kind of a construction project , downward pressure on residential sale prices and rising construction costs became central in any social discussion not only locally, but also among interested investors from the UK, Germany and other countries. In order to clarify the current situation the Baltic Real Estate Market, organizers of “the Baltic Real Estate Investment Forum” a real estate consultancy and brokerage company Ober-Haus gathered together a unique group of experts in Tallinn on September 11-12th to discuss the latest trends in the property market.  


The time is over for cheap money
In mid-September British citizens queued in order to withdraw their savings from the Northern Rock bank. The simple reason was that the bank made fortunes on cheap loans while facing problems returning debts on borrowed loans. For the fist time since 2005 real estate prices in the United Kingdom have dropped significantly. What is the situation with the bank loans in the Baltic States where mortgage lending has been growing for several years and housing prices have already started moving down?  

Private equity potential in Baltics
Currently the Baltic States are the rising star on the European private equity investment menu. Indicative investments have been made; some investors have already made good profits. These and similar affirmations were made at the Buyouts in the CEE & SEE Conference in Warsaw, Poland, this September, where the author of this article was also present. To assess the weight of the opinion, it is to be noted that influential players on the European investment market, such as Société Générale, Gartmore, 3i, Gutmann, Enterprise Investors, Nordic Mezzanine, Mid Europa Partners, Mezzanine Management, were represented at the Conference. It means that this is not merely a theoretical opinion but rather a forecast for the trends of development of the Baltic and Eastern European investment market.  


High Education Export: problems and perspectives
The theme of the regular round table organised by the BC and the Baltic International Academy (BIA) was that of high education export facilities for the Baltic States’ neighbouring countries, e.g. Russia, Ukraine, Belarus, etc.  

Looking for possibilities rather than causes
The focal point of the high education export rotates around such notions as to what exactly is to be exported, what kind of demand is for such a “product”, what are the competitive advantages and consequential threats of such “export”.  


Russians are willing to get European education
The potentials of the Russian educational market (valued in terms of students’ credits) amount to about USD 50 bln per year and this trend is positively assessed by experts. The MBA degrees are becoming ever more popular and important acquired both in national business schools and/or abroad. Presently about 30 business schools operate in the Russian market producing over 1 thousand graduates per year.  

Global higher education challenges: what does it bring to Latvia?
“When the world was flat the last time, St. Augustine observed that to try to become educated without travel was like trying to read a book without ever turning a page. Our vision at the Institute is that one day, international will be a part we define what it means to be educated” (Allan Goodman, Institute of International Education)  

Why are the new EU member states afraid of educational export?
A quick review of the high education development after the collapse of the Soviet system in 1990s can assist us in our understanding of the problems and peculiarities of educational export. Suffice it to say that most countries, Latvia included have been quite liberal in issues concerning high education institutional development.  

European Union. Common Market in education: coordination or unification
About 15 years ago 12 European Communities’ member states (MS) agreed to include educational sphere into the general common market regulatory issues. Thus, Maastricht Treaty of 1992, which entered unto force on 1st November 1993, has become a window of opportunity representing the initial steps on the bumpy road towards creating educational foundation for the economic and cultural aspects of the European Union’s integration process.  


Eastern "Davos" in Poland
Each year, already for the 17th year in a row, during the first week in September a small resort city in Southern Poland, Krynica-Zdroj hosts politicians, businessmen and experts from around the world on an economic forum. However, most participants are, of course, from central and eastern Europe. The participants are called “forum’s guests” as they do not adopt any decisions neither they impose their opinion on other participants, i.e. they gather for discussions, to get familiar with new trends in politics and economics. Another forum’s significant feature — it has become a renowned tender between the countries of western Europe and those in its central-eastern parts, alongside with other regions of the former socialist-block countries. Forum allows for direct contacts among people of different political and cultural clout.  


Market in Financial Instruments Directive: general and specific issues
Our magazine has been constantly reviewing the most urgent problems concerning the Baltic region’s general economy integration within the EU’s common market and that of the financial sector, in particular. The latter, it seems, reflects the specifics of the Baltic’s financial sector in the EU market. During 2005-2006 the BC has published four extensive reviews of the EU financial markets’ development. The two new reviews are prepared in view of entering into force this November the EU directive on the market in financial instruments, so-called MiFID.  


Belarus acknowledged by international ratings agencies
On the eve of the Third Belarus-Latvian Investment Forum this fall in Riga, the BC's correspondent met Belarus Ambassador in Riga, Alexander Gerasimenko; his answers to the BC's questions follow below. BC: Your Excellency, Mr. Ambassador, how would you define the present state-of-art in Belarus economic development?  


Belarus: familiar though unknown country
During Latvian journalists’ reconnaissance tour across the Belarus Republic the country’s cities seemed clean, green and tidy, the countryside was properly managed and special economic zones (SEZ) dully developed.