Source: U.S. Department of Commerce, Survey of Current Business August 1991, Vol. 71, No. 8, Table 11.3 LATVIA 1. General Policy Framework The Latvian government says that its overriding goal is "to manage a smooth transition to a market economy, at the same time recreating the integrity of the Latvian economy as a separate unit." To this end, the government has passed a flurry of new legislation establishing the framework for a market economy. Ultimately, Latvia would like to serve as a gateway economy between Europe and Russia. But for the moment, the economic situation remains unsettled. Changes to the Latvian constitution reintroduced guarantees of individual property rights. New types of businesses are now permitted: individually and family-owned enterprises, cooperatives, and privately and publicly held companies. Privatization of state properties will proceed in stages. The first step is the division of current ownership between Soviet-owned, republic-owned, and locally-owned properties. Enterprises nationalized in 1940 will be returned to their original owners, and the government hopes to stimulate new investment both from Latvian and foreign investors. Other items for reform include: implementing a customs service, creating its own national currency, creating a strong central bank, reforming the taxation system, and stimulating foreign investment in Latvia. Latvia's Department of Foreign Trade is optimistic that the new currency, called the lat, will be put into circulation by the second half of 1992. The Latvian government expects the lat to be backed by an IMF loan and gold reserves of $120 million. Currently the Soviet ruble remains in use as currency. In the meantime, any person or legal entity licensed by the Bank of Latvia may buy or sell hard currency at free market rates. There are 28 currency exchange points in Latvia, and market exchange rates fluctuate daily. 3. Structural Policies Patterns of Industrial Ownership: As of September 1991, heavy industry was still primarily subordinate to Moscow. Many enterprises are no longer jointly controlled by Moscow and Latvia, but are controlled by Latvia alone. A privatization program will take place in 1991-2, during which industrial facilities will be available for purchase by both Latvians and foreigners. A non-state sector began to emerge in 1989, after enabling Soviet legislation passed in 1988. The number of people employed in the cooperative sector jumped from 8,800 in 1988 to 198,700 in 1990, giving Latvia the largest cooperative sector of any Baltic country. LATVIA Price Reform: Latvia plans to free prices beginning January 1, 1992, but certain goods may remain at current levels. Energy prices were reportedly freed in late October 1991. However, the price of gasoline remained controlled. Tax Policies: Joint ventures are subject to property taxes, land taxes and excise taxes. A property tax of 1.5 percent on assessed property values, excluding land, is levied. Agricultural properties are taxed at a lower rate, and buildings financed with currency receive a three-year tax holiday. A land tax, which ranges from 15 kopeks to 1 ruble per square meter depending on such factors as location, population density and how the land is used, is also imposed. Excise taxes, ranging from 10 to 95 percent of the sales price for producers of hard alcohol, liqueur, wine, beer, tobacco products and furs, may also apply. Foreign Investment: Latvia passed a foreign investment law on November 5, 1991. It permits foreign investors to acquire existing businesses or create new ones under the same laws that apply to local investors. If a business is both foreign-controlled and has assets over $1 million, the Council of Ministers must approve the investment. If the business does not fall into either of these categories, the investor must simply register the business with the government. Businesses which are at least 30 percent foreign-owned do not pay tax for the first two years, and the second two years are taxed at 50 percent. There are no other restrictions on repatriation of profits; however, it remains difficult to convert local currency into dollars. Only Latvian citizens are permitted to own land. However, other property rights are guaranteed to foreign nationals. 4. Debt Management Policies As a former republic of the Soviet Union, it is still unclear exactly how much debt Latvia will be responsible for repaying. Negotiations on this matter are in progress. The biggest problem for U.S. exports is not the existence of Latvian subsidies or other trade barriers, but the lack of an infrastructure for trade. Over 80 percent of Latvia's trade has been conducted with the Soviet Union, and foreign trade was handled through centralized state agencies. As a result, control of the economy is not completely in Latvian hands. The former Soviet Union still controls part of the customs service, for example. 6. Export Subsidies Policies Concerned about scarcities of goods, the Government of Latvia has begun to control exports. LATVIA 7. Protection of U.S. Intellectual Property Under the Soviet Union, Latvia was a member of the World Intellectual Property Organization, the Universal Copyright Convention, the Paris Convention for the Protection of Industrial Property, the Madrid Agreement Concerning the International Registration of Marks, the Patent Cooperation Treaty, and the Budapest Treaty on the International Recognition of the Deposit of Micro-organisms for the Purpose of Patent Procedure. No further laws on intellectual property have been passed. 8. Worker Rights a. The Right of Association Soviet labor law and practice were generally enforced in Latvia. New Latvian legislation on trade unions and collective bargaining has been passed. Unions have the right to strike with some limitations. b. Right to Organize and Bargain Collectively Under Soviet law, workers in Latvia did not have the right to organize outside the official single trade union system, and free collective bargaining, as that term is understood, did not exist. Under new legislation passed after consultations with labor organizations, trade unions can now function independently of the managers of state-owned enterprises. However, collective bargaining is still in its formative stages. C. Prohibition of Forced or Compulsory Labor Prior to the Soviet coup attempt in August 1991, forced labor in prison camps was permitted; it has since been banned. 16. d. Minimum Age for Employment of Children The statutory minimum age for employment of children is Minimum age and compulsory education laws are, by all accounts, enforced by state authorities through inspections. e. Acceptable conditions of Work The Labor Code provides for a mandatory 40-hour maximum workweek, 4 weeks of annual vaction, and a program of asistance to working mothers with small children. Labor conditions in Latvia were somewhat better than in the U.S.S.R. Soviet and Latvian laws establish minimum occupational health and safety standards for the workplace. These standards seem to be frequently ignored. Extent of U.S. Investment in Goods Producing Sectors There is no sector by sector data available on U.S. investment in Latvia. LITHUANIA 1. General Policy Framework Since declaring independence last year the Lithuanians have been largely preoccupied with the political climate in their emerging nation. It is only recently that attention has started to shift to economic issues facing the country. Lithuania intends to develop a market economy and eliminate vestiges of the centrally planned Soviet system as quickly as possible. The government is eager to encourage foreign investments and open new trade ties, particularily with the west. This is hampered by the need to extricate itself from the Soviet economy. Lithuania has embarked on a series of price liberalizations in certain areas but has been reluctant to completely abolish price controls. The government has established a central bank which it envisions playing the same role as that of the U.S. Federal Reserve. Lithuania still uses the Soviet ruble as its unit of currency and thus is tied to its problems. Lithuania has privatized some small businesses and is allowing private citizens to own land for the first time. Lithuania is seeking to liberalize its foreign investment laws. The Lithuanian government is following a cautious, but optimistic program of economic reform in banking and monetary policies, price structure, tax laws, land ownership laws, fiscal reform and foreign trade reform. 2. Exchange Rate Policies At present Lithuania's currency is still the Soviet ruble. The government periodically adjusts the official exchange rate. There are plans to introduce a national currency, which may be tied to a foreign currency. Meanwhile any licensed person may buy or sell hard currency at free market prices. Both the official and free market exchange rates have been falling rapidly. Patterns of Industrial Ownership: Lithuania recently embarked on a program of privatization, currently limited to small scale enterprises like shops and restaurants. Lithuania's privatization program includes a voucher program which will involve all citizens. Private ownership of land is permitted, but only for Lithuanian citizens. All large manufacturing enterprises are still state owned. The government has published a limited list of companies which are open to foreign investment. Price Reform: The Lithuanian government has begun a cautious dismantling of the centralized price control mechanism formerly imposed by Moscow. Prices on most foodstuffs and manufactured goods have already been liberalized. However, prices on energy, housing, transportation and communications will remain fixed. This is |