On Thursday 11 March, Prime Minister Krišjānis Kariņš presented the Prime Minister’s report to the members of the Saeima, informing on the state of progress and actions the government intends to take, and stressed that despite the challenges caused by the Covid-19 pandemic to the Latvian society, we should think together about the future. The main task is to boost the well-being of the state and people. This can be achieved through smart re-industrialisation.
At the beginning of his address, the Prime Minister noted that Friday 12 March marks one year since the government had been forced to determine the first emergency situation in the context of the Covid-19 pandemic. “This pandemic has affected the countries all over the world, Europe, as well as our country. It was by making a joint effort in the spring that we were able to take decisive decisions within a very short time period, which restricted the first morbidity wave, and we could spend the summer without significant constraints,” said K.Kariņš.
The Prime Minister acknowledged that the situation was different in the autumn, because neither experts nor the government and general public were prepared to take such radical steps as in the spring. It resulted in a moderate but persistent increase in morbidity that culminated on the New Year's Eve.
“Since then, we've been able to gradually push down this second wave, which was moderately increasing, by the safety measures introduced, including the adoption of tougher measures shortly before Christmas. Compared to other European countries, including our neighbours in the Baltic, we have been able to avoid the third wave,” said K.Kariņš, adding that Estonia is experiencing a very sharp increase in morbidity at the moment, and Latvia has offered its assistance, wherever necessary.
The Prime Minister stressed that the decline in the second morbidity wave was fuelled by society as a whole. He expressed gratitude to medical practitioners who are fighting the pandemic on the front-line and the society.
“Safety measures are in place and all necessary steps are being taken to save people's lives and health, as hospitals remain critically loaded and are unable to provide the full range of health care services. Unfortunately, the crisis caused by the pandemic is not over, morbidity rates are still high. There is a solution to this crisis, and it is vaccination,” said K.Kariņš.
The Prime Minister acknowledged that although the vaccination process has been launched, it has begun slowly since the officials of the Ministry of Health refused the largest proportion of doses of the Pfizer/BioNTech vaccine within the framework of proportional distribution by the European Union. The government did everything in its power to resolve this situation and ordered additional doses of the Pfizer/BioNTech and Moderna vaccines. It is expected that Latvia will receive approximately 2 million doses of vaccines in the second quarter, which will start in April, with which it will be possible to provide immunity to Covid-19 for more than half of Latvia's population; consequently, it is possible that we will return to a much more normal rhythm of life in the beginning of July.
“The large vaccination centres are the key to this. Starting from April, at each sitting, the government will hear a report from the Vaccination Bureau on the state of preparedness of these vaccination centres. Vaccination is our solution to the crisis. The vaccines have been ordered, however the most important and major challenge will be to ensure their speedy availability to the public,” said K.Kariņš.
Further in his speech, the Prime Minister emphasized that, despite the pandemic, the government has continued its work to implement the changes laid down in the government's declaration. Work is continuing on changes in the financial sector supervision, implementation of administrative and higher education reforms, as well as significant improvements in the health system. Timely adoption of the 2021 budget significantly increased remuneration for medical practitioners and educators and introduced changes to the tax system, by reducing labour taxes, introducing a single tax account for businesses, as well as increasing the minimum wage.
“However, we have to look forward also to the future. How will we become a wealthy nation, a wealthy country? How will we achieve the desired level of prosperity that will bring us closer to the Nordic countries? I believe that we can do and achieve this through the so-called smart re-industrialisation,” said K.Kariņš.
In order to explain the concept of smart re-industrialisation, the Prime Minister stressed that historically, before World War I, Latvia developed an industry that was the foundation of the then prosperity. After the war and fight for independence, the industry was developed anew in the newly founded state of Latvia. The first re-industrialisation took place, and the companies such as VEF and Vairogs were established, as well as an export-oriented industry.
The Soviet occupation in Latvia, following World War II, carried out centralised industrialisation, partly on the foundations created during the period of the free state of Latvia; however, it was developed within a closed planned economy environment. After the collapse of the Soviet Union and the restoration of Latvia's independence, part of the industry in Latvia also collapsed – it was not competitive on an international scale, and was unable to adapt to the rules of the market economy. However, a part of the industry was able to refocus and adapt to the new conditions, became competitive on the global market and continues to develop successfully.
“Currently, there is industry in Latvia, an export-capable industry that is holding the country up during the crisis, while trade and bars, restaurants, cafes are closed, our exports continue to work and earn,” said K.Kariņš, acknowledging that it is not sufficient in order to boost economy at the required level of prosperity – if we compare Latvia with other countries in Europe, Latvia ranks the 30th among 40 European countries in terms of the share of production volume of GDP.
“How to change it? In mid-February, the government approved the National Industrialization Policy, which had been developed for a long time. It aims to achieve structural changes in the economy based on productivity growth for the benefit of export of knowledge-intensive goods and services. I call it smart re-industrialisation,” said the Prime Minister.
According to K.Kariņš, the modern industry is largely based on exports - not only traditional industry, but also the service sector, education, medicine, tourism. Unfortunately, the industry in Latvia has low productivity, which needs to be strengthened.
This can be achieved through targeted investment, and the main sources mentioned by K.Kariņš were the European Union's funding from the multiannual budget and the European Recovery and Stability Mechanism set up to mitigate the effects of the pandemic in the economy.
“The government together with the coalition, social and cooperation partners have developed this vision of the European Recovery and Stability Mechanism and presented it to the European Union. I believe that this project can be improved. We currently have a government-approved National Industrialisation Policy and, accordingly, we should clarify the European Recovery and Resilience Mechanism that we have developed, by assessing whether the outcome of this particular position will be beneficial for re-industrialisation. “This is the task that we still have to accomplish together to serve our great goals,” said K. Kariņš.
The Prime Minister pointed out that the world history demonstrates an interesting trend: the countries, which do not have a developing industry and, consequently, have irrelevant export volumes, face poverty, while in countries with developing industry, technologies and exports, the well-being is increasing.
“Let us not look at the example of poor countries, let us look at the example of rich countries – we can manage this together,” said the Prime Minister at the end of his speech.