Sunday, October 26, 2008

Jungle laws of Latvian governance

Latvian Prime Minister prior adding the final touch and allowing the minister of finance to present the 2009 annual budget to the parliament announced that that Latvian public service would be utterly transformed, and that 10% budget cuts must take place in all ministries irrespective of their size. The size matters, Latvian politicians announce and population (1,37mlj vs 2.37mlj) and territory wise Latvia is bigger than Estonia indeed. But should it automatically increase also the number of state functions, because while in Estonia there are 11, relatively bigger Lithuania (population of 3,5mlj) 13 ministries, then why Latvian taxpayers have to keep up with 19?

Prior giving the next year´s annual budget project over to the parliament PM announced that 3 of the ``ministries`` or the secretariats of Social Integration, E-governance and Children´s ministry would be eliminated, and the E-business secretariat would be joined with the ministry of Regional affairs. Until today we have learned from politician´ s public announcements that it is almost impossible to liquidate ministries in Latvia, because it would leave those poor civil servants and their families without a work. Alright, so be it, and probably in Latvia we have humane governors, but what about the results of those ministries???

The Children's´ Ministry simply copies the Ministry of Welfare labours. E-business secretariat apart from using taxpayers monies to throw birthday parties also have not managed to introduce functional e-signature system in Latvia, and now finally Latvian administrators are visiting Estonia to learn from them how to accomplish such a complicated task... . The Integration secretariat has inflated from 2 to 47 administrators from 2004-2008 and they still contract private firms to do their job. When such news came out couple of month ago it created a scandal, similar to one when the Minister of the Secretariat Mr Oskars Kastens (a married man and a member of the Christian party) was happily flirting with the Diena correspondent. The scandal about contracting private firm made even the Prime Minister to announce that the secretariat would be closed, but probably he was too emotional when he announced such news.

These days it appears that the Secretariat will not be closed but transformed instead! You may wonder why? Because, if the Secretariat would be simply closed then Minister Kastens would have to return back to work as the MP in the parliament. But such a return would lose the benefits of his party mate and the head of the Saeima human rights commission Janis Smits. The latter person has created quite a stir with his intolerant announcements, and he is in the parliament with a weak mandate, for a period of time of Mr Kastens ministership...

So be it with finding jobs to party mates, but unfortunately it wont make the survival of the economic crisis easier. Also Minister of Finance does not help us here. At the time when next year´s budget is discussed in the parliament Minister Slakteris (TP) took a vacation... .Even his chief aid Miss Inguna Gulbe and her PhD degree cannot save Mr Slakteris from his questionable announcements, or sending his chief administrator Mr Bickovskis to participate in public TV shows does not hide the fact that the Minister of Finance is not up to his task. Now, even the new leader of the Peoples Party (TP) Mr Seglins wants to discuss whether it is the most appropriate time to take the vacation, and there are discussions ripe about his possible replacement. It would be reasonable indeed, because Mr Slakteris with his educational background is simply incapacitated to perform his duties.

Alright, and if the minister of finance would go, who would replace him then? Simply the list of candidates in the TP is rather short and I cannot imagine his replacement without general refurbishing of the government facade. The list of candidates is shortened by the weekend´s announcement about the former PM Kalvitis to be considered as the new Latvian ambassador in Moscow. If the government and parliament would even consider such an option how will it affect the behaviour of the Latvian president? Mr Zatlers made a very special precedent while not appointing the candidacy of Vaira Paegle for the ambassador´s post in the United Nations excusing his decision with the fact that Madam Paegle is not a career diplomat. How would he act now if his wife´s relative Kalvitis would be considered for the ambassadorship in Moscow, because the former PM is not a career diplomat either?

There are many questions out in the air in Latvia today. It seems that not only PM and president, but also heads of largest Saeima factions want to continue the status quo of Latvian governance. Instead of preparing balanced budget, or passing legislative amendments in election law (stipulating party financing principles), bringing about constitutional amendments (giving the president and certain quorum of electors to dissolve the parliament) and finally establishing mandatory tax and property declaration system MP´s must deal with crap. Last week former attorney of the Maire of Ventspils Mr Janis Grinbergs sent the stipulated amnesty bill to the Saeima commission heads. The bill is outright stupid, and immediately made even Mr Lembergs to deny anything to do with ``such a frivolous act of a private citizen Janis Grinbergs``. Fortunately the Latvian Council of Attorneys has to act now, because the former attorney of Mr Lembergs signed the stipulated bill as being proposed by the Council of Attorneys. Will Mr Grinbergs be able to say the same words today, when he will have to present amended amnesty bill to the president of the republic?

It is impossible to continue to manage the business as usual and earlier the political clique will understand it the better. Thus, is there upgrade of the Latvian government facade planned prior the June 2009 deadline?

Monday, October 20, 2008

Who´s in charge in Latvija?

One of deficiencies of the coalition rule is unstable government. Today´s Latvian society is tired of the transformation milieu and party political squabbles and it clearly reflects in Eurobarometer and other sociological polls. Legitimacy of the present democratic regime has declined to the record low levels. Society is also divided according to ethnic and socioeconomic lines. Yesterday the present Minister of Municipal Affairs (MNA) Edgars Zalans (TP) in the public TV emission outlined his realization about diversity of Latvian populace. While talking about the ongoing discussions what the MNA organizes all over Latvia about the new administrative territorial reform he said: ``that people in Kurzeme (Courland) want the consensus agreement and more self-government, while Latgale people crave for a strong leader who would show its subjects what to do.``

In Latvia such diverse political cultures clash when we discuss about the role of the central government. Unfortunately the discussion in Latvia always centres around personalities and seldom about the rule of law. Now it is almost a daily routine to hear that some civil servant from judicial, executive or legislative branch of the government is being charged by Corruption Prevention Bureau (KNAB) or Internal Revenue Service (VID). Corruption plague is endemic and there are no quick remedies unfortunately. Ineffective remuneration system in the public service does not help here because the public remuneration system has become a nasty playground for party political fiefdoms to reap the public funds according to gangsta rules - your relative strength in the hierarchy of the coalition government determines how many bites from the common chop one gets...

The PM with his relatively meagre salary is trying to bring an order to the warring fractions within the government and I am afraid that it is mission impossible. Government announcements conflict, and, for example, Ministers of Transport and Economics came out with conflicting news just last week about the future strategy of the Latvian economic development. The Minister of Foreign Affairs is traditionally diplomatic, but in his speech in the party congress he could not avoid critique upon government he is very much part of plus he must arrange Latvian president's forthcoming visit to Moscow. The Latvian government today seems as if working behind the scenes.

When there is a need after joint actions with our NATO and EU allies then PM helps the president and flies down to Tbilisi (August 2008). Together with the Minister of Economics PM supports the building of the coal powered electricity plant, and with the Minister of Foreign Affairs there is an open support for joint action in order to lobby for the EU energy action plan vis-a-vis the three Baltic States. In the meantime his own party member (the Minister of Transport Mr Slesers) openly declares that Latvia is now safely member of the NATO and EU, and thus its should concentrate fully on reaping benefits from its geographical position and look towards embedded cooperation with the Latvian Eastern neighbor.

Also PM very quietly wants to have the best candidate for the directors position of KNAB. If he wants to avoid the party political squabbles then his intentions are laudable. However, any secrecy in the present situation is only doing damage to his public image. If Ivars Godmanis does not care about his public image, and his workaholic habits clearly attest to that, then so be it. But if he cares, and his weekly DJ performance on the radio SWH Rock airwaves and drumming qualities at the Queen concert in Riga attest to that, then he better start coordinating the policy making process and start juggling among the present coalition members because otherwise the coalition members will simply juggle him out of his post prior the cold winter sets in.

Thursday, October 16, 2008

Orange balloon deflated

The coming weekend the leading Peoples (TP) conservative party will have their congress. In October 2006 the TP together with the Prime Minister´s & transport supremo´s First and Latvian Way Union (LPP/LC) parties stole elections. After this TP managed to get 177, 481 total votes that gave them majority of seats (23 and +3 increase in comparison with 2002 elections) in the 100 member Latvian parliament.

It was Aigars Kalvitis who became the Prime Minister on December 2, 2004 after inability to agree on the 2005 budget and consequent withdrawal of their support for the Indulis Emsis (ZZS) government even though it was the TP finance minister who prepared the budget. A. Kalvitis led the country until December 5, 2007, when after ominous Cappuchino revolution extremely unpopular A. Kalvitis had to resign. Gradual decline of his popularity was fostered with his own colourful expressions, and new year promises to provide ``seven fat years`` was probably the most ironic among them.
I voiced my disapproval about the working methods of the former PM for quite some time. In any economics textbook it is clearly written that you ain't able to cool the overheated economy by flooding more money (the EU funds) into it. Instead of regulating the overheated economy (it was galloping at the stunning 13,7% in early 2007) he simply listened to high school educated transport minister, who ´s only slogan was `to simply accelerate the economy!`. Thus, instead of reaching the promised mean level of EU living standard in ten years the former Pm failed to perform thus needed structured reforms, institutionalize the rule of law and as a consequence all Latvian inhabitants must experience the hard landing of Latvian economy.

Economic crisis does not help to gain momentum for the TP spin doctors. Questionably conservative party was founded in 1996 and it uses shiny colours to distinguish itself from other representatives in the conservative wing of the political spectrum. The coming party congress is staged, and it is known already that the incumbent Minister of Interior Mareks Seglins will become the new leader of the TP. It is also known finally that Aigars Kalvitis plans to leave the parliament and politics, and Mr Kalvitis just approved such news while talking on the Latvian public radio.

Former PM sounded not only smug but outright ridiculous in the Wednesday´s TV show as well on radio this morning. He still considers that he did everything (!) right and blamed liberal opposition for creating too many bad news in the Latvian public space. Alright, so be it with his understanding about the political process in democratic society, but he sounded utterly stupid when in the weekly Kas notiek Latvija TV show former PM blamed Icelandic banks and Lehman Brothers bankruptcy for the ills of the present Latvian economy. It is over for the former PM now and good luck with his ice-hockey endeavours! Actually his latter activities have made Latvian public suspicious about his too close ties with the energy tycoons behind the Latvian eastern border. Probably that explains why the former PM was so easily discarded by his former party mates?

Whatever the party mates think about the former PM, the TP hopes to rise from the existing slump where majority of the Latvian political elite has found itself. While orange coloured TP will try to pump up its rank and file members this weekend, it is the Latvian president who is acting again. It was very much due to the agreement between the coalition parties, and TP as the largest among them, why Valdis Zatlers became the president. Now, the president has acquired a new head of the chancellery and his press secretary already left the office. There are certain changes in the air. I am sceptical, however, about the prospects of replacing some politicians and/or civil servants to change the post-soviet inertia in the Latvian political culture. It seems as if the civil society is wearily waiting for effects on the rise of utility prices prior the winter sets in. In the meantime the parliament is discussing the budget with the already engineered 1,87% annual deficit, the PM Godmanis is trying to find a new head of the Corruption Prevention Bureau (KNAB), and the president with his family continues to enjoy his hobbies...

Photo: Aivars Liepinsh

Tuesday, October 14, 2008

The last earthly voyage and collaboration

Today famous Latvian actress Vija Artmane is laid to rest in eternal peace in Pokrov´s cemetery in Riga. She was a long standing star performer in the Latvian Daile theatre and she became famous due to her acting qualities not only in theatre, but particularly in movies making her famous all over the former USSR. She had to live her last days in the Riga outskirts Murjani summerhouse, which belonged to her deceased husband Arturs Dimiters. The summerhouse formerly belonged to the tragically killed composer Emils Darzinsh, and apparently the prewar house had no central heating system.

Photo: Aivars Liepinsh

Funeral of no other actor has created such a stir in post-independence Latvia. The Russian president sent his condolences, and the Russian media has added a spat in Latvian - Russian relations while accusing the Latvian state allowing``the former star performer to live in unbearable living conditions``. The fact is, however, that last years of her rich life were tarnished due to behavior of her own son Kaspars Dimiters. The latter person questionably managed his mother´s real estate and then started turning from membership of one Christian denomination to other. She followed her son in his path of Christian revelations and the last denomination they ended with was the Orthodox Christianity.

Her biggest fame was achieved in Russia, and several experts reckoned that Latvia was too small for her talent to flourish. The fact is that there were several artists from the Daile theatre who achieved the stardom due to their superb performance in the Soviet movie industry. Nevertheless, her stardom strained relations with other actors of the Daile theatre guild, be they Eduards Pavuls, Elza Radzina or Harijs Liepinsh. The reason for strained relations with other colleagues was the issue of collaboration with the occupation regime. Quasi-totalitarian and authoritarian regimes need artists to help to legitimize the ruling elites. The question of collaboration was particularly painful for the subjugated nations living under the Soviet yoke, and questions about peaceful resistance or collaboration unfortunately were never really discussed in the post independence Latvia.

The fact is that Vija Artmane was not only member of the CPSU but she was also the member of the occupied Latvian Supreme Council. She tried to promote interests of Latvian people during the times of occupation, but unfortunately such people like her were simple pawns in the bigger chess game of the CPSU elites.

Thus, the actress was sent to her last earthly voyage from the Riga Orthodox Cathedral. The magnanimous funeral procession with the traffic closed in Central Riga passed the Daile theatre on the way to Pokrov´s cemetery, and there is a remembrance corner devoted to her on the corner of the theatre building. There are several experts who question reasons for the poisonous Russian media reaction about the last years of the star artist´s life and the exceptional magnanimity of her funeral procession. After all, other star performers of Daile theatre guild were usually taken to the last earthly voyage from the theatre building. Why such an attention to the former nomenclature member commentators in and ask?

An answer is simple. While the issue of collaboration and resistance will continue to simmer in post-independence Latvia without being properly analysed and discussed, there will be ongoing antagonism promoted in the Latvian society. Vija Artmane rests in peace now, and there are fewer and fewer representatives of her generation left under this sun. Can Latvians really afford such internal antagonism to proceed?

Monday, October 13, 2008

Traditional authority still prevails

Diena reports that apparently the present Maire of Ventspils (he faces charges about money laundering and embezzlement) and Riga City Council bureaucrat Mr Kavacs were able to change their 2001-2007 annual tax declarations post factum! The authority who permitted them to do it was the Latvian Internal Revenue Service (VID), and the Latvian conflict of interest prevention law allows to do it to some members of the Latvian society.

Lately VID and Corruption Prevention Bureau (KNAB) have exchanged insulting news, and from outside it looked to me like a war of words between two bureaucratic institutions. While KNAB´s task is to oversee the politicians, it is the VID´s task to meticulously search for inconsistencies in tax declarations of VID members. Thus, the mutual search for `the bad and good cop` takes place right at this moment between two institutions.

Apparently, the Art. 29 of the Latvian conflict of interests prevention law is dubious to say the least. Subsection (2) of the law specifies the fact that any Latvian public servant must prove (without mentioning the time limit) the state that his revenues are legitimate (Valsts amatpersonai ir pienākums pamatot ar likumu pilnvarotajai institūcijai vai valsts amatpersonai faktu, ka tās izdevumi ir segti un mantiskais stāvoklis uzlabojies no tiesiskiem ienākumu avotiem). The subsection (3) of the same law states that the public servant must be able to prove legitimacy of his annual revenues, and if he fails to do so, then it is presumed that his revenues are illegal. (Ja valsts amatpersona nesniedz ar likumu pilnvarotās institūcijas vai valsts amatpersonas pieprasītās ziņas par mantas, tai skaitā finanšu līdzekļu, gūšanas avotiem vai nevar pamatot ienākumu vai mantisko labumu gūšanu no tiesiska avota, tiek prezumēts, ka valsts amatpersona ir guvusi ar šo likumu aizliegtu mantu, tai skaitā finanšu līdzekļus, un šo faktu slēpj no valsts.) .

It means that if you are politically influential enough then you are able to interpret the law even post factum about your annual income back in 2001, 2002 or 2007! To put it simply, the Conflict of interest prevention law was amended back in 2004, but it is still miserable! After all it is the task of 100 Latvian parliamentarians to upgrade laws, but it seems that they have no clue that serving their Godfathers does not immediately translate into serving the interests of the whole Latvian public.

Unfortunately it reminds me about the German sociologist Max Weber and his notion of traditional authority. A century ago Max Weber argued in his The Theory of Social and Economic Organization that rational legal authority or rules are basis for superior bureaucratic organization. Traditional authority or domination becomes apparent if one analyses works of Latvian minigarchs - be they Lembergs, Skele, Slesers or some of the most colourful from the multitude of the Riga City Council members. Traditional domination - is based on a belief in the legitimacy of an authority that 'has always existed'.

Such traditional belief still prevails in Latvia, unfortunately. I was reminded about such traditional authority by one of the first year students last month. When one of them failed to participate in seminar discussion he was asked to come after classes and prepare for it. Instead of preparing properly he came like a carte blanche and rather ironically was not able to answer the question about pros and cons of the plural electoral systems. Thus, I recommended him to prepare again, because the rules are, that every student must pass all the seminar discussions. Instead, he persistently asked whether ``we could somehow agree to pass this seminar any other way``? My answer was that rules apply equally to all the students, and that there cannot be any other agreement. I was able to answer so to the fist year student, and apparently it is the Latvian Internal Revenue service that is not able to answer to top notch politicians about the paramount role of the rules. And it is because Latvian governing politicians write rules that are very easy to be bent...

Tuesday, October 7, 2008

"Metalic birds" leave ahead of looming crisis

Today Latvian cabinet in government session and amidst peaceful trade union protests in front of the government building planned to pass the 2009 fiscal budget (Ls5,46 billion planned revenues and Ls5,79 billion planned expenses) with the -1.89% GDP deficit. Last week the Fitch credit rating agency already downgraded the Baltic States` long term credit rating to negative. Now, LETA officially announced the "bad news" about Latvian cabinet engineering not the best scenario for upcoming years. Thought decreasing still budget deficit is planned for the 2009, 2010 and 2011! Funny, but in the meantime the Minister of Finance propsed to create the emergency reserve fund last week and as if nothing has happened in questionably governed Latvian environment and everything would be calm in international markets Mr Slakteris plans 2% GDP growth, 7,6% annual inflation, and 8,1 % unemployment rate for 2009!

The governor of the Bank of Latvia (BoL) Ilmars Rimsevics voiced his concerns about the budget deficit in his interview to the Latvian Public Radio, particularly pointing to Estonia and rhetorically asking why Latvian Northern neighbors can follow rational policy making (passing balanced budget) and Latvian government cant?

Prime Minister Ivars Godmanis does not agree with the BoL governor concerns and rhetorically responded that he would let the chicken roost first and wait till the news come in next autumn!Thus lets wait and see the apples turn rotten I should ask??? Also the leader of the opposition Sabiedriba Citai Politikai party (SCP) Aigars Stokenbergs put down his firm conviction in his daily blog, that the trust in any rational policy of the present political elite is lost.

Perhaps the Prime Minister still has not gotten out from his ambiance of the early 1990`s, or probably he is still having a spell from the energetic and comercially active transport supremo? The fact is that transport supremo was too busy managing his buddies business, thus busy that he forgot to implement Ls 90 million from the EU structural funds in the next years budget in order to fix Latvian potholed roads, let the Latvian Post Plc go bancrupt and rescued it with the taxpayers monies, mismanaged public funds in his ministry etc. with liberal media foaming and continuing the business as usual due to having his party mate (Ivars Godmanis) blessing.

Transport supremo has grandiose long term plans in the RIX airport. I doubted the Minister of Transport plans already a year ago in the same blog entries. His grand plans to have 20 million passenger turnover in RIX airport by 2032 sounded too ludicrous, therefore also his grandiose plans to rebuild the RIX international airport. Simply to achieve such plans the RIX has to take the passengers away from already top notch and adjacent Scandinavian airports, or to expect that Chinese and Japanese tourists would choose RIX instead of Copenhagen, Helsinki or Stockholm. Also he could expect that suddenly Central Asian and Russian middle class tourists would become rich and would start flying using RIX as a transit depot. Again I assume that the transport supremo is wrong, because if he could count on some Central Asian sultan clan members becoming rich and continuing usage of RIX as their transit depot, then economically nationalist Russia would not give such a sweet chunk of aviation pie to the Latvian transport maverick, even if he has his personal buddies behind the Latvian eastern border.

In the meantime airport must live also in the short term. Already some time ago British Airways left the RIX, this summer also Easyjet, last week Austrian Airlines, and today also Germanwings plus Aer Lingus left the suit.

Photo: Aivars Liepinsh

This week bad news came from Vilnius where Lithuanian authorities accused the RIX international about continuing unfair competition and arrested plane. The Lithuanian airliner accused the Baltic Air Corp. in unhealthy competition in the Vilnius Airport where has about 35% of the market share. It is known, however, that also Latvian Competition Council already before have accused the Airbaltic over unfair competition in the RIX international airport. The public in Latvia is ready to receive news from Brussels any time soon about the end result of the transport supremo`s hard handedness and possible revoking of the unfair approach to "chosen airliners" in the Riga International airport and consequent fines from taxpayers pockets again...

Airliners leave the RIX due to the decreasing number of passengers, declining level of service in downtown Riga, and the looming global economic recession. Nevertheless, the transport supremo and his underlings still weave their megalomaniac plans. While more than 2/3 of Latvian domestic bus lines were closed in early September the government still subsidises (with about Ls4 million) the domestic aviation industry with super cheap air-fares from Riga to Liepaja and Ventspils. While number of tourists flying to Riga is drying up the lieutenant of the transport supremo and the head of the RIX international Mr Krisjanis Peters naively reiterates about the huge reconstruction plans in the RIX environs and building the Skyscrapercity!

While world economic crisis is raging and Icelandic government announced its "almost imminent insolvency" the works of Latvian government reminds me about a feast in the Plague time. Iceland was hit very much due to inability to weather the global financial storm during times where governments do not have clout over the free capital accounts. The bad forecast for Iceland was voiced already couple of years ago, but the years of cheap credit bonanza made probably Icelandic policy makers numb. Nevertheless, the Icelandic government had to beg Kremlin for emergency loans today with just 10% of the current account deficit.

The Latvian current account deficit has declined to the " relatively low" 15,6 %. Current account deficit is not the only determinant in the economy, and the governor of the BoL assured that Latvian government can weather the storm of open capital markets. If 500 000 population Iceland had it hard to contain the storm in the situation of extremely tight credit markets, then in gloomy Latvian situation it makes me reckon about the old truth that the real crisis never announces about its arrival... . The airliners are leaving the RIX international airport and I can just hope that airliners` actions would emulate behavior of migratory birds and I would see them back somtime next spring?