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1. Political and socio-economic background information

General information (Year is 1997))

Area thousands km2 64,2
population 2458,4
population increase, thousands -21,5
population density per km2 38,1
capital Riga
population Latvians, Russians, Belarussians, Ukrainians, Poles, Lithuanians, Jews, Estonians etc.
official language Latvian
Administrative division districts, cities, towns, villages, small rural districts
National Assembly – Parliament Saeima,
head of state president,
National currency Lats

During the 12th and 13th centuries the German crusaders conquered Latvia. In the 17th and 18th centuries parts of the countries underwent a period of Swedish and Polish rule, but the German gentry remained the ruling class even when Latvia was part of the Russian Empire, from the first half of the 18th century until 1918 when Latvia became an independent republic. Latvia lost its independence in 1940 and it was re-established in 1991.


Recent serious changes in living conditions are mirrored in the demographic situation. The worsening of the demographic situation in Latvia began at the end of the eighties and there were no particular positive changes either in 1997. The natural birth rate has been decreasing since 1987. In 1991 it turned negative with the death rate exceeded births by 116 persons and in 1996 the population was 188,000 less than in 1991.

In 1997, identically to 1996 (the year 1986 was included as the year with the largest natural increase in the population during the 1980s), in all the towns and regions the death rate exceeded the birth rate. The dynamics of births and deaths are shown in Figure 1.

Figure 1.Dynamics of births and deaths in Latvia

Tab.1. The natural increase rate (in thousands)































Natural increase










A natural decrease in the population is observed for all national groups as well as for urban and rural populations.

At the beginning of 1997 there were 2,479,870 inhabitants in Latvia, out of them 46.3% were male and 53.7% female.

Nationalities. During the same period Latvia’s population comprised of 55.3%Latvians, 32.5% Russians, 4.0% Belarussians, 2.9% Ukrainians, 2.2% Poles, 1.3% Lithuanians, and others 1.8%.

The process of population ageing continued to intensify in 1997 (see breakdown of population by age at the beginning of 1997 - Figure 2). The population at the beginning of 1997 was comprised of: 22.4% of pensionable age and 19.9% children and teenagers. The demographic burden (the population under and over working age per 1,000 population of working age) is practically the same as in the beginning of 90’s - 733 in 1990 and 732 at the beginning of 1997.

In Latvia, as well as in many other countries, the development of huge industrial enterprises in the cities attracted people from rural areas to cities.

The main city and the capital of Latvia is Riga. In 1997 about one third of the population (815,8 thousands of inhabitants) lived in Riga. About 18% of the population dwell in the 6 relatively large cities which have from 40,000 to 120,000 inhabitants.

Approximately the same share of the population (19%) lives in smaller towns that, according to the Latvian classification system, are regarded as urban areas. The size of these small towns varies widely but they all have fewer than 40,000 inhabitants. So the urban population in Latvia is about 69%.. The living conditions and styles, the education possibilities and quality are different not only in urban and rural districts, but also in cities and towns of various sizes.


Fig.2. Breakdown of population by age at the beginning of 1997


Fig.3. Number of inhabitants in urban and rural areas


Under the Socialist regime the system of social protection was highly centralised and strictly administrated. It functioned and guaranteed some basic social protection. In the new independent Latvia state legal changes have occurred

A reform of the social security system began in 1990-1991 in order to create a new model of social security that would guarantee social security and protection for all inhabitants. The new social security system was aimed to matching Latvia’s current conditions as well as social security standards in Western countries thereby facilitating the integration of Latvia into the European Union. Strategic tasks of this reform were to raise the economic activity of the working age population and to improve the economic basis in social policy.

The basic rights to social protection are defined in the constitutional law "Rights and liabilities of the inhabitants and citizens" which stipulates:

  • the rights to financial maintenance at pension age, in case of illness, complete or partial disability,
  • the rights to receive an unemployment benefit in the case of losing job.

Since the laws have the most important role in ensuring the functioning of the social security system, in 1995 legislative reform was carried out. The Saeima (Parliament) of the Republic of Latvia has adopted 7 new laws, which cover all aspects of the social protection:

  • "Law on Social Security",
  • "Law on the Social Tax",
  • "Law on Social Assistance", "Law on State Pensions",
  • "Law on mandatory Social insurance for unemployment",
  • "Law on mandatory insurance for work accidents and professional illnesses",
  • "Law on maternal and disablement allowances".

These laws guarantee social protection to the inhabitants of Latvia, simultaneously enlarging the responsibility of inhabitants and their involvement in ensuring social security. As well, these laws regulate the financial and structure of social insurance. Besides these laws other legislative documents have been developed which regulate the application of particular laws. Amount of social benefits and payment procedure is established by government.

The above mentioned laws can be summarised as follows:

  • The "Law of social security" is a framework law . It formulates the general principles for the creation and the functioning of the social security system, social rights and liabilities of the individual. It also protects the budget for social insurance, determining the role of the individual in the maintenance of social rights.
  • The "Law on the Social Tax" determines an equal social tax rate of 38% for all the employees which should be gradually decreased to 33% over 5 years, also changing the rate between the part of tax paid by the employers and the part paid by the employees. The tax rate which was 37% for employers and 1% for employees at the beginning of the reform should reach 18% for employers and 15% for employees in 2001.
  • The "Law on the Social Assistance" determines the range of persons eligible for social benefits and assistance, as well as the state and municipal institutions which have to provide assistance. The law stipulates that the state is responsible for the institutions dealing with people with sight, hearing and mental problems while the municipalities are responsible for old people’s homes and orphanages. Social assistance can be rendered as a financial support or as fringe benefits. The size of social benefit for families depends on the number of children.
  • The "Law on State Pensions" determines the size of the age pension for each person depending upon the amount of social tax paid and the length of service. A person is entitled to receive age pension if he or she is 60 years old and has paid social tax for a minimum of 10 years. Three kinds of pensions are foreseen by the Law: age pension, invalidity benefit and survivor’s benefit. The pension of a particular person is calculated, taking into account the amount of social tax paid, length of service and relative average lifespan of each gender.
  • The "Law on the Mandatory Social Insurance for Unemployment" stipulates that the amount of unemployment benefit depends on the length of insurance and the average earnings in the last 6 months. This law is believed to facilitate the declaration of real earnings by the population. To increase the interest of policyholders in insurance, it is foreseen that the payment should be made in equal parts by the employer and the employees. The "Law on the Mandatory Social Insurance for Unemployment" and the "Law on Employment" stipulate that the unemployed person has a right to unemployment benefit, vocational training and retraining as well as a right to take part in other activities of employment policy.
  • The "Law on Mandatory Insurance for Work Accidents and Professional Illnesses" guarantees a special social security foreseeing insurance indemnity in cases of work accidents and professional illness. Depending on the type of disablement insurance indemnity is paid as a single allowance, or, if necessary also expenses for additional food, prosthetic appliances, means for rehabilitation, medical and professional rehabilitation can be reimbursed. In the event of death of a person at work, the relatives receive a survivor’s benefit and a burial benefit. The Law stipulates that the payment is made only by the employers as an incentive to improve working conditions for employees, and to guarantee the safety of work as well as helping in avoiding accidents in the workplace and professional illnesses.
  • The "Law on maternal and disablement allowances" foresees and regulates the granting and payment of maternity, disability and burial benefits. Each person (including foreign citizens and non-citizens) working in Latvia who has regularly paid social tax is eligible to these benefits. Maternity benefit is paid for pregnancy and maternity leave (50+56 calendar days) if the woman is registered at a medical institution. Maternity benefit can be granted for the father or another person who actually cares for the child if mother is dead, seriously ill or refuses to care for the child. The amount of maternity benefit is 100% of average earnings. The law guarantees a disability benefit of 80% of the average earnings and foresees the receipt of this benefit in several work places if the person is working for several employers.

At present private institutions have a minor role in social protection. This is associated with the low level of purchasing capacity as well as with distrust in private financial structures. The social insurance system is financed from payments of social insurance. In 1997 payments were carried out as social taxes. The reform of the social security system foresees a switch to a system where social insurance payments are registered individually for each policyholder with a breakdown by type of social insurance. Social insurance payments are deposited in the State special budget and this budget is administered by the State social insurance foundation.

Social assistance and health care are financed over state and local governments' budgets. The state budget resources allocated to public care do not provide for an improvement of the situation, as they are hardly large enough to cover the most essential necessities.

One of the main goals of the reform of social security is to achieve a complete transition to the health insurance model. The general insurance for the entire population was initiated on 1 January 1996. The compulsory insurance system will be based upon Health Insurance Offices that have been established in all of Latvia’s districts and major cities, as well as within the system of the Ministry of Transport and the Ministry of the Interior.

One of the most serious problems in creating a new medical insurance system is the complete lack of appropriate specialists. The staff of the Insurance Offices need to be recruited and trained, the medical personnel should be instructed and prepared for work under the new conditions. However, the most important and the most difficult tasks are to create a positive attitude in the population to the new institutions, as well as to make society understand new relationships at work.


The restructuring of the economy has had a great effect upon Latvia’s employment situation. Macro-economic changes, including a decline in output, have been accompanied by rising unemployment. There has been a transition to a labour market based on more direct market relations.

The costs of carrying excess labour have become painfully real - many people lost their jobs as their professional skills were not wanted any more.

Results of labour force statistical survey

At the end of 1995 the State statistical bureau of Latvia carried out the first labour force statistical survey after the collapse of the socialism regime. It was aimed at obtaining detailed information on the situation in Latvia’s labour market and the economic activity of its inhabitants.

The results of the survey (Nov.1997) show that 1397.9 thousand or 70.3% out of 1987.5 thousand of the total labour force in Latvia (15 years of age or older) live in the urban areas and 589.6 thousand or 29.8%- in the rural areas. 48,2% of the labour force dwelling in cities live in Riga.

12.4% of the labour force have higher education, 54.0% secondary education (23.7%- general secondary, 19.9%- specialised secondary and 10.5% vocational secondary education), 21.2% have basic education only. The education level of women is slightly higher than that of men-13.5% of women have higher education compared with 11.0% of men, 25.2% of women have general secondary education compared with 21.8% of men, 20.4% of women have specialised secondary education compared with 19.3% of men, but only 7.6% of women have vocational education compared with 14.0% of men.

The education level of the rural population where only 6.0% have higher education is significantly lower than in the urban areas where this percentage is 15.0%. 28.2% of the rural population as compared to 18.3% of the urban population have basic education only.

Out of the total labour force (15 years of age and older) 59.7% were economically active - they had a job or were looking for it. Results of the survey show that 51.1% of the total labour force were employed (1014.9 thousands). 51.9% of these were men and 48.1%- women.

Fig.4. shows that the employment level gradually increases after the age of 25 years. It is rather low for the young people of school age (15 to 19 years). In the 40-44 group it reaches the maximum employment rate- 78.9%. For the population groups of retirement age (women over 55 and men after 60) employment decreases significantly.

There is remarkable difference in the employment of different genders, especially for younger population groups (below 35 years) where the rate of employment for men is much higher than for women. One of the possible reasons of this phenomenon could be that women of reproductive age are involved in baby and child care since legislation foresees a paid leave for child care up to 3 years. Another reason for the better employment situation of young men could be that younger men are actively recruited by the newly emerging businesses.


Fig. 4. Employed population by age groups and gender.
(Percentage of the total amount of appropriate age group)

The main part of the active population is employed in different kinds of manufacturing 21.3%, agriculture, hunting and forestry - 20.1% as well as in wholesale and retail trade - 13.9%.

Women are mainly employed in health care and social work, education, and hostelry. The percentage of men is the greatest in construction, electricity, gas and water supply, transport and communications as well as in fishing industries.

According to employment status, 81.0% of employed persons are employees, 3.4% employers, 9.6% are self-employed, and 5.9% are unpaid family members but the status remains unclear for 0.1% of employed persons due to the lack of information. The main part of employers are active in trade – 44.2%, agriculture, hunting and forestry – 24.1%. Only about 25% of employers were women.

The share of the self-employed is higher in the rural population where almost all of these are employed in agriculture, hunting and forestry. The self-employed urban population is mainly active in trade. The share of self- employed men is slightly higher than for women.

One of the main indicators of economic stability of a state is a low level of unemployment. In Latvia unemployment is quite a serious problem because after the reorganisation and privatisation of enterprises and the collapse of quite a high number of state enterprises many employees have lost their jobs. One of the objectives of the labour force statistical survey was to make clear the main reasons of unemployment, duration of unemployment, to classify the main types of unemployed persons and how job-seekers are trying to find a job.

The following definition of a job seeker was used:

job seekers are persons at the age of 15 or older that in the week of survey were not working and were not in temporary absence (vacation, illness, etc.), were actively seeking a job for the last 4 weeks and were ready to start working within 2 weeks . These persons could be registered or not registered in the State employment service.

Difference between rural and urban areas

Results of the survey show that there are 171.2 thousand job seekers or 14,4% out of the total amount of the economically active population (employed and job seekers). In urban areas it is 17,6% and in rural- 6,9%. A partial explanation for this result could be the fact that persons working on their own farms are considered as employed. Large numbers of rural inhabitants who have lost their jobs because of the collapse of collective farms are now employed in their own farms.

Difference between genders and age groups

The share of job seeking women in the total number of economically active women is a little bit higher (14,6%) than for that of men (14,3%)

Diagram 4 shows that the percentage of job-seekers is the highest in the age group 15-19 in which 41,5% of men and 33,3% of women are job seekers. In this age group only about 20,8% (24,2% of men of this age group and 17,4% of women) are economically active - the main part of population of this age group is still attending schools and therefore is not regarded as part of the labour force. Young people have difficulties in finding a job because they do not have experience or appropriate education (the majority of them have only basic education).

In the next age group (20-24) the percentage of the job-seekers is much lower (21,0% of economically active population).

Fig.5. Percentage of job seekers
(Percentage of economically active population of appropriate age group)

Fig. 6. Education level of employed persons and job seekers
(percentage out of total amount)


Difference between education level of employed persons and job seekers.

When comparing the education level of employed persons and job-seekers, it should be noted that the education level of job-seekers is lower. An especially low number of people with higher education are seeking work (8,3% compared with 17,3% of employed persons of this group in the total amount of employed). Only the rate of people with basic education or less is higher for job seekers (18,6%) than for the employed (15,3%). This shows that people with higher education have had a greater possibility to adapt to the situation in the labour market.

Ways of job seeking. Job seekers use different ways to find a job. More than 25% registered at State employment service, about 25% were regularly looking through advertisements, about 20% were seeking for a job by enquiring with relatives or friends and about 14% were going directly to employers. Only about 7% applied to the private employment services (possibly because of the high costs for services). 3% placed advertisements in newspapers, and 0.4% tried to organise their own business.


Data on unemployed persons

The State Employment Service (SES) takes care of all unemployed persons. This is the only institution where a person can acquire the status of unemployed which gives the right to unemployment benefit. Not all of the job-seekers have been registered as unemployed therefore rather a great difference exists between both numbers.

A registered unemployed person is a person who has the granted status of unemployed person. According to the Law on employment:

an unemployed person is a Latvian or a foreign citizen who is able to work; who is within the working age; who does not have other earnings that would represent at least the amount of state determined minimum salary and who does not have a business; who is seeking a job, is registered at the State employment service and is reporting to it at least once a month.


Fig.7. Breakdown of unemployed persons by age (01.04.98)

Information from the State employment service shows that up to 01.04.98 86.2 thousand people or 7.1% the of economically active population were recognised as unemployed persons, 01.04.97- 94.7 thousands (7.7%).

Breakdown of unemployed persons by age. More than a half 52% of unemployed persons were from age group 30-49 but every sixth (17%) is under 25 years.

Breakdown of unemployed persons by professions shows that the greatest part of the registered unemployed have simple professions. During the last two years the rate of qualified workers and craftsworkers as well as machine and device operators and fitters in the total number of unemployed has gradually decreased. Rate of these professions in the total unemployed was 37.3% in September 1995 and 31% in September 1997. That shows to a certain degree the increase of entrepreneurial activities in the state. Simultaneously the rate of clerks, employees of branches of services and trade in the total number of unemployed is growing.. This group of highly qualified professions is suffering the least from unemployment, making up only 2% of the total number of unemployed.

Breakdown of unemployed persons by education. Only 6% of the unemployed have higher education. The largest amount 30% have general secondary education but 26% have basic or unfinished basic education.

Fig. 8. Breakdown of unemployed persons by education



In 1991 the Law on employment was adopted in Latvia and in February 1992 the first unemployed person was registered. The Ministry of Welfare's State Employment Service carries out employment policy in Latvia.

Some financing is foreseen in the state budget for dealing with employment problems, which is used for passive (unemployment benefits) as well as active measures. All-in-all the funding for employment problems is in the range of 2-3% out of the total state budget. In previous years the share of financing for active measures has increased substantially from 3.1% in 1992 to 23,7% in 1997.

Active measures now include professional consulting, professional education and retraining, creating of temporary jobs, of job seekers clubs etc. The most important among the active measures is training and re-training of unemployed persons which began in 1992, when the regulations "On unemployed vocational training and retraining" were adopted. These regulations were adopted in 1994 by the cabinet of Ministers. About 2/3 of the expenditures for active measures are spent for this aim.

With the lack of correspondence between the increase of demand of the workforce and supply in a professional terms, the social need for unemployment training and retraining increases.

Rate of unemployed persons forwarded for training or re-qualification, out of total unemployment makes:














One of the main problems of Latvia's labour market currently is to increase territorial and professional mobility. The State Employment Service must ensure Professional mobility. Considering the future changes of the labour market structure the vocational education and training system should be improved introducing young people’s basic vocational training along profession families.

The laws of Latvia in particular the Law of Labour declares the rights of young people, disabled persons, women with small children, persons of before retirement age etc. For example, it is forbidden to employ in regular work persons younger than 15 years. Regular working hours for people younger than 18 and women who have children less than 3 years old are 35 hours a week.


1.5.1. Gross domestic product

Latvian national economy has undergone serious changes. Dynamics and structural changes of GDP also reflect these changes.

At the beginning of the reforms GDP sharply declined with the abandonment of a planned economy and the collapse of the Soviet Union. In 1993 the GDP decreased by 50% compared to 1990.

In the following years the situation in the national economy stabilised due to consistent economic reforms. A sharp fall in GDP in 1991 and 1992 was halted in the middle of 1993. In 1994 for the first time after the beginning of reforms GDP increased by 0.6%. This occurred because of both an increase in private consumption and an increase in investments. In 1995 the development of Latvia’s economy was seriously influenced by a crisis in commercial banks which worsened the monetary situation in Latvia and GDP again declined by 0.8%. Thus GDP in 1994 and 1995 was on the same level as in 1993. During this period a decrease in the level of production in agricultural and branches of processing industries was compensated by an increase in activities in trade and financial services.

The government and Bank of Latvia had realised a number of activities that strengthened the system of banks and financing and precipitated structural reform. This stabilised economic life and GDP increased by 2.8%. This happened mainly because of the accelerated development of the communications industry - for 13.5%- and the increase in industrial production- for 3%.

Further improvement of the economic situation is observed in 1997 with improvement being seen in all-basic economic branches. It was foreseen that in 1997 the GDP will double compared to the previous year. The increase in GDP in the first nine months of 1997 was 5.6%. The uneven rate of development of branches has caused changes in the structure of GDP. Compared with 1991, the rate of services has increased but the rates in agriculture and industry have decreased. Also in 1996 and 1997 structural changes continued to decrease levels of agriculture, industry and construction and increase levels of services, especially of transport and communications, in terms of GDP.

The structure of branches of manufacturing has stabilised. An increase is shown in the food industry, production of cellulose and paper, wood industry, textile industry and the production of construction materials.

An increase in economic activity is foreseen for the coming years. The pace of development of the national economy will depend upon how fast the entrepreneurial environment is put in place and the conditions to stimulate investment and to widen the export market are created.

Tab. 2. Breakdown of GDP by sectors




1997 (I-IX)


100 %



Agriculture, hunting, forestry and fishery




Manufacturing, mining and quarrying




Electricity, gas and water supply












Taxes on products




Fig.9. Dynamics of Latvia’s GDP (1990=100)


1.5.2. Inflation.

Latvia along with all the other Eastern European countries encountered many problems in making the transition to a market economy, including weak capital markets, inflation, and supply and demand crisis. Until the end of the 1980s, Latvia had been fully integrated into the Soviet economic system. However, old economic links and production patterns were disrupted as a consequence of the Soviet break-up due to economic and partly due to political reasons. Thus, economic activity declined sharply in the early 1990s. Industrial production declined as a result of the disappearance of export outlets in the former Soviet Union as well as access to cheap raw materials and energy.

In the former USSR there were a lot of goods with prices set due to purely political reasons without any economic reference point. This is one of the reasons why the liberalisation of prices in early 1991 and in 1992 created shock waves in the population. In 1991 inflation reached 262%, rising to as much as 958,6% in December of 1992. However tight monetary policies and the introduction of the convertible Latvian national currency, the Lat, in June 1993 marked the beginning of placing inflation under control. This dropped to 109% in 1993 and 36% in 1994.

The Latvian Government has declared that measures to diminish inflation will be continued in the following years with a target of 7% of inflation in 1998. A target of 1997- 9% inflation- was reached.

The existing inflation level in Latvia is influenced by the increase in economic activity and the inflow of foreign capital, as well as the continuing adaptation of prices to the world level. Although the prices of goods and most part of services were stabilised soon after the liberation of prices, administratively regulated prices will be still increasing for several years in order to reach the level that will completely cover expenses and which corresponds to a balance in supply and demand.

Fig.10. Dynamics of inflation (average per year)


There are 26 districts and 7 state importance cities in Latvia. Historically Latvia is divided in 4 regions – Kurzeme, Vidzeme, Zemgale and Latgale. At present these four regions have no administrative borders.

The Soviet period left Latvia with a distorted regional development – with an over concentration of both inhabitants and manufacturing in the Riga region, a collapsing of branches of industry artificially developed in Latvia with no economic motivation, along with great differences in living standards

The map below shows administrative districts and the four historical regions of Latvia.

The general objectives of regional policy are:

  • ensuring balanced development in the state and its regions;
  • balancing the level of the quality of life among all regions;
  • facilitation of regional development according to the potential local possibilities and resources of each region and the creation of work places in underdeveloped regions

Regional policy in Latvia is currently under the supervision of the Ministry of Environmental Protection and Regional Development (MEPRD).


Overview on the realised and planned activities by the MEPRD in regional and rural development


The Regulations of 1994 by the Cabinet of Ministers commission the development of a National Rural Development Programme for Latvia.


During 1995 conceptual issues of the National Regional Development Programme of Latvia are discussed. Intensive work was started on the preparation of a conceptual document "Guidelines for the Regional Development Policy of Latvia" accepted by the Cabinet of Ministers on 1995, thus acknowledging regional development policy as a part of the national policy.


In December 1996 the Cabinet of Ministers accepted "The Concept of the Regional Development Policy for Latvia" developed by the MEPRD. The aim of the document was to formulate the basic approaches for regional development policy in Latvia, its development and implementation background, in order to create the preconditions for a co-ordinated action in the field of regional development among entrepreneurs, non-governmental organisations, municipalities and government, as well as to state the main actions and directions along with main methods and tools for regional development.


In 1997 the Law "On Particularly Supported Regions" prepared by the Ministry of Economics and supported by the MEPRD, and jointly prepared by corresponding Cabinet of Ministers regulations, was passed.

  • On 8 October 1997 with the Cabinet of Ministers decree, a regular inter-ministerial co-ordination group for the further development of the Latvian Rural Development Plan was established and the preparation of the agreement with the World Bank was carried out. The head of the co-ordination group being Minister of MEPRD


The transition from the planned economic system to market economy brought forward the requirement to create a new development planning system and a new approach to development planning. In this regard 1998 the Law "On Territory Development Planning" was accepted.

"Concept on National Planning" was accepted in 1998 including an identification of the necessity for national planning, its aim and objectives, contents and constituents, basic principles of planning development and implementation, functions, tools, documentation and procedure, as well as determining its form and dissemination.

International assistance projects

International assistance projects and planning activities are successfully being run , for example,

  • international co-operation project "Vision and Strategies around the Baltic Sea",
  • international planning "Development Zone Tamper-Helsinki-Tallinn-R?ga",
  • during the first half of 1997 the implementation of the Phare Cross-Border Programme "Regional Development Policy" was started.

Project application for creating a development strategy and action plan for the production of linen starting with flax growing, processing, production of finished goods up to production in the Latgale region and implementation in the Ludza district. The main aim of the project is promoting rural development. Project prepared and submitted to the Phare National Indicative Programme of 1998-1999.

Secondary objectives were the following: adapting foreign experience to foster the increase of productiveness in flax growing, supporting farmers - flax producers, as well as supporting flax processing and finished production enterprises, thus creating new work places and decreasing the level of unemployment.

Planned activities. At the moment regional development is mainly focusing on planning. Therefore, as matter of urgency, the fostering of the development of this system as well as the provision of development plans should be foreseen. Local and regional (district) level plans are of special importance, which is why the MEPRD considers the development of local initiatives promoting local development planning and the realisation of development projects as main tasks.

These development plans should respond to the following questions:

  • what are the local resources (actual and potential) for promoting development,
  • what are the strengths, weaknesses, opportunities and existing threats for the development of a certain rural municipality or town,
  • what infrastructure objects are situated in the territory of a specific local municipality, what are their conditions, their location and their current usage,
  • how the interrelations function between inhabitants and certain locations (place of residence, work place, recreation sites, etc.),
  • to what extent people are ready to work on certain development projects, to start their business, to learn, etc. (i.e., the evaluation of human resources),
  • what are the characteristic traits of certain places which make them different from other places and possibly create potential development impulses.

However there is a lack either of knowledge and experience, or financial means in the local municipalities.

That is why the MEPRD is supporting local municipalities both financially and professionally. The Ministry also takes part and supervises working and management groups on the development of the Coastal Zone Integrated Management Plan.

One of the most important projects relevant to regional development is the creation of free economic zones. These facilitate investment attraction, export, development of small and medium business in the respective regions. Currently there are 4 free economic zones in Latvia- Riga Free Trade Port, Ventspils Free Trade Port and Liepaja and Rezekne Special Economic Zones. The decision has been made not to increase the number of free economic zones further because these zones result in a decrease in revenue to the state budget.

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