Latvian President Guntis Ulmanis and his country's worries about Russia

What do you see as Latvia's major achievements since independence from the Soviet Union in 1991?

In terms of domestic policy - the establishment of an independent state which has already seen two free and democratic parliamentary elections. We have also created a civil and harmonious society by restoring Latvian citizenship and passing the Citizenship Law in accordance with European standards. Finally, we have begun economic re-integration into free markets and into the European Union by becoming an Associate Member in 1995.

In terms of foreign policy - after 50 years of separation from the processes of international policy, we have endeavoured to restore Latvia's legitimate place in the world. This process is absolutely reasonable and necessary. Latvia has become a member of many important international institutions, among them the UN, the Council of Europe and the OSCE.

Latvia's transition to democracy and the free market has been relatively smooth compared with that in other post-Soviet states. How do you explain this?

Latvia's price liberalisation and economic reforms have been quicker and smoother than those in other post-Soviet states - it took us three years. However, reform of the pension, health and education systems has been slower because it seemed initially that the old system, with some cosmetic adjustments, would suffice. We therefore lost time and created social tensions. Latvia's new government is paying particular attention to creating order in the economic system. I believe that this year we shall see the first positive results of these efforts, enabling Latvia to meet all the requirements for becoming a fully-fledged member of the European Union in the near future.

The socio-economic effects of free-market reforms have increased support for left-wing parties. Do you see this support posing a threat to the reform process?

There are few left-wing parties in the classical sense in Latvia. Rather, we have several populist parties and lobbies, which could indeed have a negative impact on the reform process. However, this is not a substantial threat: in the run-up to parliamentary elections in autumn 1995, none of these parties openly declared a return to socialism or communism. I believe that the Latvian political system is undergoing changes that will eventually lead to the creation of the classical divisions between rightist, centrist and leftist parties.

Relations with Russia have been problematic in the past. Do you believe that, with the nationalist surge in Russia, relations can improve in the near future?

We are keen to expand trade and economic co-operation on a mutually advantageous basis. Certainly, recent Russian rhetoric does not make it easier to develop dialogue. The creation of a legal basis for bilateral co-operation, embracing all spheres of co-operation, is the foundation for Latvia's foreign policy. It should be remembered that Latvian/Russian relations are being developed in accordance with international law and are aimed at preserving stable, neighbourly relations and developing them in accordance with the European spirit and the status of Latvia as an associate member of the EU.

What effect will the outcome of Russia's presidential elections have on bilateral relations?

I would like to confirm Latvia's interest in the consolidation of democracy and the further implementation of economic reform in Russia. A democratic, stable and predictable Russia is a decisive prerogative, not only for the development of normal Latvia-Russian relations but also for the stability of the continent.

Latvia is attempting to strengthen ties with the West. How successful have these efforts been? What remains to be done?

Relations with the West are stable and close, and we are confident that they will deepen. Bilateral trade has grown and Latvia is increasingly serving as a bridge between the East and the West.

Our goal is to make this process irrevocable. We view Latvia's integration into the European and transatlantic economic and security structures as the way to achieve this. Latvia participates actively in the Partnership for Peace programme and views itself as an integral part of future models of European security; within the next few years our foreign policy will take these issues as priorities. This will require a permanent political and diplomatic dialogue with all the involved parties.

What makes Latvia attractive to foreign investors?

We are advantageously located to act as a bridge between the Commonwealth of Independent States and the rest of the world, western Europe in particular. Our infrastructure is developing, though we need further modernisation so that it can become a strategic asset. We have a qualified labour force, with a variety of the skills needed for a market economy (languages, management experience, accounting and marketing). Latvia also has a stable currency exchange regime, which is a prerequisite for the development of the export market, and low taxes.

The banking sector has seen particular growth in recent years. Why?

Indeed. This is because Latvia has had a fully liberal exchange rate mechanism and finance regime since 1991. There are no restrictions, either for the import or export of currency. These factors, together with our location and cultural environment, provide favourable conditions; we are in the process of further developing the banking sector with efforts to consolidate the security of the industry.

What are the main obstacles to foreign business in Latvia?

The following issues need to be addressed in order to overcome the barriers and problems facing foreign investors. We must improve our customs performance. More concretely, we must avoid involving other organisations, apart from the State Revenue Service, in customs matters. We must simplify the procedure and provide a unified system for cases where exemption from VAT or customs tax are envisaged. Also, we must simplify and accelerate the development of our real estate market, particularly in terms of registration procedures.

Where do you see Latvia at the end of the century?

I see Latvia as a free, sovereign state with a stable legislative basis which conforms with the needs of the Latvian people and the EU.

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©Kensington Publications 1996