- The Washington Times - Thursday, March 2, 2006

Latvia looks ahead

The economics minister of Latvia took a break yesterday from hosting a major investment seminar in Washington to ponder the future of his robust Baltic nation.

Arturs Karins looked over the vast lobby of the Mandarin Oriental Hotel and waved his hand, as if the future were on the other side of the room.

“We see where we want to go,” he told Embassy Row, discussing plans to increase growth and personal income for the 2.3 million Latvians through conservative, low-tax economic policies. “In 10 years, we will be nipping at the heels of Germany.”

Latvia’s per capita income was $12,800 last year, while the average German earns $29,700. Latvia’s inflation rate was higher at 5.9 percent, compared with Germany’s 2 percent. But in other ways Latvia is already far ahead, according to the CIA World Factbook.

Germany’s growth rate last year was 0.8 percent, while Latvia’s roared along at an estimated 10 percent. Latvia’s unemployment rate was 8.8 percent — down from 18 percent five years ago — while in Germany it was 11.6 percent. Government debt was 12 percent of the gross domestic product in Latvia, while it soared to 68 percent in Germany.

“We don’t like to borrow money,” Mr. Karins said.

The State Department noted that Latvia’s “economic performance for the past several years has been among the best of the European Union.”

Latvia’s economic success story is all the more startling because only 15 years ago the economy collapsed with the demise of the Soviet Union. Latvia regained its freedom in 1991 but suffered economic chaos. The revival, however, was not long in coming.

“We went from ‘91, standing on the barricades and facing down Soviet tanks, to ‘92, when people started to ask, ‘What’s happening to my job?’ to ‘93, when we started to recover,” Mr. Karins said.

“When you lose everything, you have to be brave. The biggest gain was the opportunity to forge our own future.”

Latvia today is booming because of a low corporate tax rate of 15 percent and a friendly business climate in which foreign firms can open within two days of filing corporate papers. Latvians call the approval process “plug and play” because of the limited bureaucratic review.

Latvia also has a flat tax rate on personal income of 25 percent, and the government proposes to reduce it to 15 percent over the next three years.

“The discussion in the Cabinet was not whether to reduce the rate but how fast,” Mr. Karins said.

He noted that Latvia has a high social welfare burden because about half of the population is living on pensions. However, Latvians can invest a portion of their retirement savings in a manner similar to the Social Security plan proposed by President Bush, Mr. Karins said.

“We have a profound conviction in classical liberal economic policies,” he said, referring to the U.S. conservative model of low taxes and limited government. “We also are blessed by having the best people.”

Mr. Karins was born and raised in the United States of Latvian immigrant parents. He developed a firm belief in the supply-side economics policies of President Reagan and British Prime Minister Margaret Thatcher before migrating to Latvia, where he opened an investment firm in 1999 and won a seat in parliament three years later.

Japan resolute

Japanese Ambassador Ryozo Kato refused this week to back down under congressional pressure on Tokyo to lift its latest ban on U.S. beef imports.

Mr. Kato met with Rep. Jerry Moran, Kansas Republican, who wanted a timetable for the reopening of the market, which was closed Jan. 20 after a shipment of U.S. veal was found to contain banned products.

“I’m not in a position to give a timeline,” he told Japan’s Kyodo news service after his meeting Wednesday.

Last year, Mr. Moran called for economic sanctions on Japan over its decision to impose sanctions in 2004 after a case of mad cow disease was found in an American cattle herd.

Call Embassy Row at 202/636-3297, fax 202/832-7278 or e-mail [email protected]washingtontimes.com.

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