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Acad. Raita Karnīte 6-7 October 2008 Sofia

Bulgaria, Latvia, Lithuania and Slovakia – Comparison of industrial transition models Economic transformation process in Latvia. Acad. Raita Karnīte 6-7 October 2008 Sofia. Economic transformation process in Latvia. The evolution of industrial policy

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Acad. Raita Karnīte 6-7 October 2008 Sofia

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  1. Bulgaria, Latvia, Lithuania and Slovakia – Comparison of industrial transition modelsEconomic transformation process in Latvia Acad. Raita Karnīte 6-7 October 2008 Sofia

  2. Economic transformation process in Latvia The evolution of industrial policy Example of one highly successful policy measure Example of one less successful policy measure Analysis of developments before and after EU accession, also in the light of Lisbon strategy Conclusions

  3. The evolution of industrial policy Responsible institution – Ministry of Economics of the Republic of Latvia(also National Economic Council) Large number of national level policy documents: several middle and long term national development strategies, two national development plans Sector policy documents – Conception on the development of industry Small and medium size companies’ promotion policiesand institutions (councils) Innovation policy, policy implementation plan EU Structural funds

  4. Main focus – export oriented knowledge intensive industry • Most effective measure – education • Supporting measures – export promotion (export promotion institutions, export guarantee system) • 5-7 priorities in research activities related to perspective industry sectors • Innovation promotion institutions – technological parks, excellence centres, cooperation with scientific institutions, including Latvian Academy of Sciences and universities • Financial support – EU Funds

  5. The evolution of industrial policy Special economic stimulus (tax regime, industrial subsidies) are not expected Supporting measures moderate: export promotion policies not implemented investment promotion policies are not clear innovation policy measures focused on information technologies sectorand priorities in science effective financial support institutions (funds, business angels) are not developed

  6. Highly successful policy measures Wood processing industry Local resources Good market Fast privatisation and modernisation, but slow move to higher value added sectors Sufficient funding, intensive FDI Sufficient supporting measures (the State Forest policy, activities of state owned company Latvijas Meži in securing timber resources) IKT industry Traditions and skills from former industrial structure Good education provide skilled personnel High technical level (starting from nothing) Concepts of information society and Knowledge society provide secure market (state procurement is very important)

  7. Results Wood processing industry in 2005 in % of total manufacturing

  8. Results

  9. Example of one lesssuccessful policy measure Sugar industry (three factories) destroyed: Privatisation, concentration (one factory closed) Before accession – supporting measures (Sugar Law, subsidies to farmers, market protection measures) - lot of discussions but industry and supporting agriculture grows In 2005 (after accession) – two remaining companies voluntary closed due to economic stimulus Sugar price ???

  10. Results 0

  11. Analysis of developments before and after EU accession, also in the light of Lisbon strategy

  12. GDP growth in selected countries, %

  13. GDP level (1990 = 100)

  14. FDI by sectors, mln LVL

  15. Latvia’s current account

  16. Value added in % of turnover in selected sectors Waste collection, treatment and N/A disposal activities; materials recovery 58 Water collection, treatment and supply Repair and installation of machinery and N/A equipment Manufacture of other transport 29 equipment Manufacture of motor vehicles, trailers 26 and semi-trailers Manufacture of machinery and 39 equipment n.e.c.; 33 Manufacture of electrical equipment Manufacture of computer, electronic 48 and optical products Manufacture of chemicals and chemical 47 products 46 Manufacture of wearing apparel 39 Manufacture of textiles 0 10 20 30 40 50 60 70 80 90 100

  17. Conclusions • Latvian industry is underdeveloped, but its potential is not exhausted • Industrial policies are elaborated, but implementation is not sufficient • Supporting financial and organisational measures are poor • Industry needs special attention, probably, also special responsible institution • Collateral indirect policies would be welcomed (ex. support to entrance in the local and global military markets)

  18. Thank you for your attention

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