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The Principles of Agrarian Policy in Latvia: Searching for Our Own Way

Inesis Feiferis report in Finnish-Baltic Joint Seminar, Saku, Estonia, published in 'Agricultural Development Problems and Possibilities in Baltic Countries in the Future' (1993) Agricultural Economics Research Institute, Finnland, ISBN 952-9538-35-9, ISSN 0788-5393, pages 14-17 Oriģinālajā salikumā lasāms PDF fails pielikumā

THE PRINCIPLES OF AGRARIAN POLICY IN LATVIA 
Searching for Our Own Way 
INESIS FEIFERIS 
Latvian State Institute of Agrarian Economics 
Riga, Latvia 
Latvia regained its political independence and international recognition on August 21, 
1991. The issue of determining independent policy in national economy, including 
agriculture, was topical already before this event, but then came into foreground. The main 
questions to be answered were: 
the place and role of agriculture in strategic development of Latvian national economy, 
the goals to be pursued in agriculture, 
the model to be chosen for development of agriculture, the political, economic and 
other tools to be used in order to attain these goals. 
At present agriculture and food industry are the major contributions to GDP. According 
to data of Ministry of Economic Reforrns, in 1992 their share in GDP was 33,4% or 5,459 
million LVR (in comparable prices to 1991). For the same period the share of industry 
(except for food industry) in GDP was 4255 million LVR, which is 22% less than 
agriculture and food industry. 
Agriculture and food industry are also major customers of products and services 
provided by other branches of national economy. It means that they provide incentives for 
development of these branches. 
Apart from that, agriculture, food industry and related services are a significant income 
source for state, local government and social budgets. Their development is essential for 
increasing payments to the budgets. 
It is a fact of no minor importance that about 16% labour force are employed in 
agriculture, the living standards of a considerable part of population in Latvia depend on 
the trends in agriculture: if production decrease, the number of working places will reduce 
dramatically an the number of unemployed will grow, if agriculture continues developing 
within the range of its possibilities, the rural inhabitants will have employment. Undoubtedly, 
number of people employed in agriculture will gradually decrease due to developments 
in science and technology, anyway, this will be a gradual process, and there will be extra 
time for creating new working places in the countryside. 
We cannot overlook the export capacities of agriculture and food industry and together 
will it a possible source of revenue in foreign currencies. 
There is an opinion being spread that due its geographical position, it would be 
profitable for Latvia to become a mediator-country (transit country) in the transactions 
between West and East. This conception would require shifting of the already very limited 
resources to those branches of economy and adequate transportation, communication and 
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banking system and other infrastructure that would promote Latvia' s playing the role of 
the mediator-country. It is definite that agriculture as a branch of national economy will 
be moved to the very bottom of the list, as there exists an opinion that we could easily buy 
agricultural products abroad, where they are in excess supply and cheaper than the costs 
in Latvia. According to this idea, money for this can be raised from transit transactions. 
The supporters of this idea mention Singapore and Taiwan as examples worthwhile to be 
copied. However, there is no sufficient economic basis for this conception. 
Speaking about Singapore and Taiwan, it should be pointed out that these are countries 
with high development level in agriculture, despite the fact that they are also typical transit 
countries. 
In Singapore the agricultural output for 1989 was 183 million US$.' In Taiwan the 
export of agricultural products constituted 4,5% of total export. In both countries the 
proportion of agricultural land to total acreage is very small. 
If Latvia is looking for exemplary countries, transit countries inclusive, it would be 
more logical to look towards EEC countries like Denmark and Netherlands which are 
much closer to Latvia than Singapore and Taiwan, as to their climatic conditions and 
European traditions. 
It should be admitted that both have well-developed agriculture which allows the 
countries to be self-sufficient regarding the primarY agricultural products. Still more, in 
Denmark the export of agricultural products in 1990 constituted 25% of total export, and 
18,5% in the Netherlands.2 Definitely, Latvia is still far from Denmark's and Netherland' s 
development level in agriculture, but these examples are worth copying in strategic sense. 
Ali this testifies to the fact that agriculture occupies a significant place in Latvian 
national economy together with industry is a perspective branch. 
The conception of agricultural development is based on the following assumptions: 
The conception of Latvian agricultural development is based on socially-oriented 
market model, which envisages a higher degree of govemment envolvement in building 
an efficient economy and in caring about the social needs, than it regularly is in the liberal 
market model. In the transition period from centrally planed to market economy we ought 
to give up the destructive idea that the state only sets the provisions for economy, but the 
market economy will automatically settle the relations between the subjects. Without 
active regulations from the state a quick exit from the all-comprising socio-economic 
crisis is impossible. This is why owing to economic crisis in Latvian national economy, 
including agriculture, we should move from entirely liberated economic processes to 
active state regulation both with economic and administrative methods. 
In Latvian agriculture is a priority branch in national economy, and its role in the 
survival of Latvian nation during the present crisis is growing. 
In future Latvian agriculture should rely on individual and family farms as the 
prevailing ownership and management form. At the same time it should be stated that ali 
ownership and management forms have equal rights to exist and be legally protected. 
Agriculture is a branch with export capabilities, therefore it should be oriented not 
only to meeting the demands in local market, but also export should be stimulated. 
' 2,7 million inhabitants, territory 625 km2. 
In Denmark in 1990 there were 5,1 million inhabitants, territory 43 thousand km2, 
the Netherlands - 15 million and 33,94 thousand km2and Latvia - 2,7 million and 64,6 
thousand respectively. 
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Goals for Development of Agriculture 
There are two types of goals that agriculture should pursue: strategical and tactical. 
Strategical goals are long-term, they give an orientation to agricultural development for 
the next 10 to 15 years. Tactical goals are necessary for the activities in the nearest 2 to 
3 years. Both types of goals are closely linked, because, when solving tactical problems, 
we must keep in mind strategical goals, so that tactical activities would promote the 
achievement of strategical goals. 
Strategical Goals 
Strategical goals for Latvian agriculture have very much in common with goals for 
agriculture in the countries of EEC. They are: 
Self-sufficiency in primary agricultural products. This means supplying the 
population of Latvia with food in accordance with nutrition standards and national 
traditions, and at reasonable price, supplying industry with raw materials from agriculture, 
setting up state resources; 
Protection of agricultural producers income level, a complex development of rural 
territories ensuring such living standards in the countryside which would make it possible 
to retain the rural lifestyle and cultural environment and employment; 
Developing export of agricultural products; 
Increasing efficiency of agricultural production by introducing the latest developments 
in science and technology, at the same time providing for a rational development of 
agriculture and optimal use of resources in order to make agriculture more competitive 
both in domestic and foreign markets; 
Protection of domestic market in order to restrict the competition from outside and 
prevent the Latvian agriculture from destruction; 
Regulation of agricultural output on state level, in order to prevent over-production 
above local demand and export possibilities; 
Stabilization of agricultural market. 
Tactical Goals 
For the next 2 to 3 years the main tactical goal is to stop the decline in agricultural production 
and to maintain stability. In order to achieve this, it is necessary 
To revive and consolidate the management of economic processes in agriculture and 
to activate the role of state regulation; 
To bring in order and supplement legislation as to property conversion in agriculture 
and related branches. Demonopolization and privatization of agricultural processing 
enterprises and services, so that they become property of producers.To supplement the law 
about land ownership, in order to be able, at last, determine to the order for selling and 
buying of land; 
To settle the delayed payments for products and claim back the outstanding debts 
to agricultural producers, to restore the working capital in production to a level at which 
production and marketing processes are stable; 
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To organize an efficient system for giving credits to agricultural producers, 
processors and food trade (this envolves also mutual credits), the main focus being on 
target credits. 
To establish Rural Bank; 
To promote cooperation of agricultural producers (farmers, shareholding companies 
etc.); 
To establish Latvian Agricultural Council (or Chamber) with representatives from 
agricultural producers, state institutions, as well as from consumers' rights protection 
organizations; 
To find incentives for establishment of small and medium businesses in rural 
territories in order to create employment for redundant people; 
To work out and implement special target programmes for individual agricultural 
products (grain, sugar-beet, flax, potatoes, oilseed, milk, meat etc.), which should 
comprise stabilization of production, processing and marketing; 
To promote a further development of advisory service for agriculture. The main 
task of this service should be targeted at bringing down the latest developments in science 
and technology to the producer. This would enable to reduce costs and to use the resources 
efficiently; 
To organize a systematic and active foreign market research, in order to collect 
information on marketing possibilities for Latvian agricultural products. To channel this 
information to agricultural producers with the help of advisory service for agriculture. 
Within the framework of foreign technological assistance, to envolve foreign consultants 
and specialists in this work.