President of the Republic of Latvia Vaira Vīķe-Freiberga:

Latvia in the Process of Regional and European Integration

Address at the Norwegian School of Economics and Business Administration in Bergen, Norway, September 21, 2000

Your Majesties,

Mr. Prime Minister,

Mr. Mayor,

Excellencies,

Ladies and gentlemen,

It is a great pleasure for me to be here in Bergen, one of Norway’s most beautiful and hospitable cities.

It is also a pleasure for me to congratulate the people of Norway and, especially, the people of Bergen, for the honour that has been bestowed on this city by designating it as a European City of Culture.

Both Bergen and Riga have evolved over the centuries in a similar fashion. Back in the times of the Hanseatic League, both Bergen and Riga rose to become important port cities and trading centres. They still remain so to this day. The city emblem of Riga still hangs on a wall in Bryggen, the old Hanseatic pier in Bergen, as a tangible witness to the close ties that used to bind these cities.

My visit here is the first official visit by a Latvian Head of State to your country, and it follows a visit by King Harald and Queen Sonja to Latvia two years ago. These visits underscore the growing quality and dynamism of relations between our countries, and confirm that the old spirit of Latvian and Norwegian friendship has not only endured, but has strengthened significantly since Latvia regained its independence from the Soviet Union.

During the past decade, the Latvian and Norwegian economies have become closely interlinked, and Norway is now among Latvia’s top 10 investors. Statoil, Rimi, Narvesen, and Cubus are household names in Latvia. Any Norwegian visiting Riga will likely feel very much at home. Norwegian companies have formed more then 100 joint ventures in Latvia, and their presence in Latvia can be felt at every step.

Latvia and Norway have also established close links in the educational sphere. I am particularly happy to announce that thanks to a scholarship provided by the Wilhelmsen Foundation, Latvian students will now have a new opportunity to study at the Norwegian School of Economics and Business Administration. Currently three Latvian students are enrolled at this institution, and more can be expected here in the future, since about 5000 Latvians have already acquired a working knowledge of the Norwegian language. This impressive figure attests to the high degree of interest and affinity that people in my country feel for Norway.

In the current Age of Information, a well-educated population is crucial for any country’s future development and business success. And it is in part thanks to Norway’s excellent educational system that your country has built a strong economy with international links that others can only envy. This is an achievement that we admire and would like to emulate.

Latvia’s Economic Development

Latvia takes pride in the remarkable achievements it has managed to accomplish since recovering its independence a decade ago. In ten short years, Latvia has re-established and consolidated a democratic political system, as well as a fully functioning market economy. These are no small feats for a country that ten years ago was still a part of the Soviet Empire with its totalitarian system of governance and a bankrupt economy.

Latvia has also received widespread international praise for its observance of human rights, its respect and protection of national minorities, and its abidance by the principles of the rule of law, as one would expect from a country that is aspiring to join the European Union and NATO.

We are pleased that a number of large Norwegian companies are already taking advantage of Latvia’s favourable environment for foreign investors, and are operating in Latvia with great success. These companies were not discouraged by the temporary downturn that Latvia experienced following the Russian financial crisis of 1998, and from which Latvia has now largely recovered. Latvia and her Baltic neighbours are once again experiencing among the fastest GDP growth rates in Europe. Latvia also has one of the lowest annual rates of inflation in Central and Eastern Europe, at only 2.4 %, along with a low national debt, and a national currency that has been stable for six years running, thanks the Bank of Latvia’s tight monetary policies, which link the lat at a fixed rate to the SDR currency basket.

These economic achievements, along with the Latvian government’s sound and far-sighted economic policies, have created a climate of increasing confidence on the part of foreign investors. For several years, the rate of foreign direct investment in Latvia, at 777 USD per capita, has been among the highest in Central and Eastern Europe, and international credit rating agencies have accorded Latvia favourable ratings that are among the highest in the region.

Latvia’s already favourable investment climate is continually improving, thanks in part to the productive dialogue between the Latvian Government and the country’s Foreign Investors’ Council, in which Norwegian investors are playing an especially active role. Since taking office as the President of Latvia, I have been arguing forcefully for rapid action on the part of the Executive branch in removing legal and bureaucratic impediments to foreign entrepreneurial activity in the country.

Integration and Co-operation in Europe

Ladies and gentlemen,

Latvia and its Baltic neighbours would like to further strengthen and diversify their cooperation with Norway, as well as with Norway’s partner EEA countries and with the European Union’s member states. All of our countries share common goals and common values. We all wish to partake in the consolidation of a stable, secure, prosperous and unified continent, based on the four cornerstones of free-market economic principles, democratically-run institutions, respect for human rights and the rule of law.

From the Latvian perspective, European co-operation and stability can be strengthened by:

· promoting regional economic co-operation, particularly between the Nordic and Baltic countries;

· increasing the involvement of the European Union in Northern Europe;

· and promoting the enlargement of both the European Union and NATO.

While Norway is not a member of the EU, it has very close links with several EU member-states, and is an active member of the NATO alliance.

In Latvia’s opinion, EU and NATO enlargement, together with Baltic Sea co-operation, are mutually reinforcing processes that will serve to ensure long-term welfare and stability in Europe.

Latvia is seeking to join both the EU and NATO, and has been continuing its internal reforms at a rapid pace since the EU invited Latvia to begin accession negotiations in Helsinki last December. We hope to conclude these negotiations with the European Commission by the end of the year 2002, and to become a full member-state of the European Union shortly thereafter. But this will also depend on the ability and on the political will of the EU itself to absorb new members.

The Russian Federation is also involved in the process of European and regional co-operation, and Latvia hopes to see the strengthening of European values in that country. We are committed to the continued development of pragmatic and constructive relations with our eastern neighbour. Latvia could serve as a useful bridge to help Russia integrate more closely with the Western economies and stands ready to play a role in that regard. Since we are a future member of the European Union, our continuing dialogue with Russia will also affect the Kremlin’s relations with this international organization.

Regional Development and Interdependence

Ladies and gentlemen,

In the modern international system, regional co-operation facilitates each country’s ability to integrate into the global economy. In this respect, the development of the Baltic Sea region will play a key role in the future of Europe.

There is evidence that with increased integration, Northern Europe and the Baltic Sea Region have the potential to become one of the most dynamic areas of growth on the continent. Already in the medium-term, the average real growth rates in the Baltic States and in Poland are estimated at 4 to 5 per cent per annum.

About two-thirds of Latvia’s foreign trade is now being conducted with Western Europe, mainly Germany, Great Britain, and the Nordic countries. The Baltic banking sector is also developing healthily, thanks to a large infusion of Scandinavian and German capital into our banks.

Regional co-operation has always been an essential element of Latvia’s foreign policy, and we wholeheartedly endorse the 8-country model of co-operation and integration between the Nordic and the Baltic countries. Far from fragmenting the continent, regional development can be seen as a construction building block in the larger process of European integration.

Furthermore, our common heritage of values, as well as our common goals and aspirations, will ensure that this cooperation proceeds in a smooth and natural manner.

The Council of Baltic Sea States is an organization with untapped potential, of which Germany, with Europe’s largest economy, and Russia, with its great development potential, are members. Latvia has already contributed to the development of regional co-operation by offering concrete projects and ideas within the framework of the EU’s Northern Dimension initiative.

In the Baltic Sea region, there are a number of sectors that can benefit greatly from regional co-operation, and from increased Norwegian investments. These include energy, transport, information technologies, telecommunications, natural resources, environment and nuclear safety, financial services and cross-border trade and investment.

The energy industry is a particularly good example of how regional co-operation is expanding. Latvia’s ports and transport networks are linked to the East by oil and gas pipelines, underground gas-storage facilities, and an energy supply grid. Latvia is thus participating in projects to develop gas and oil transit corridors and to consolidate the Northwest, Central, and Eastern European electricity systems.

Latvia and Norway are already co-operating within the framework of the Nordic Gas Grid project, and analysing the possibilities of integrating Baltic gas grids into common North European gas grid systems.

Latvia is ideally located in this regard, and can offer a number of unique gas storage facilities for international use. Once these facilities are fully developed and integrated, Latvia could serve as a seasonal regulator of the natural gas supply to the western part of Russia and to several countries on the Baltic Sea coast. All the countries in the region would benefit from the integration of Latvia’s gas storage facilities into a common Russian-European gas transportation system.

Roads and railroads will assume ever-greater importance in Europe’s transportation grid. Therefore, the continuing development of the Baltic region’s infrastructure is essential. A region-wide vision is required to avoid unnecessary competition and overlap among neighbouring countries. The VIA BALTICA road network project, which will stretch from Warsaw to Helsinki, is an existing example of successful international co-operation.

In short, the assurance of a constant supply of energy, an optimum transport infrastructure, and adequate environmental protection will require common action and close co-ordination in the political, economic and legal spheres among all the countries in the Baltic region.

Ladies and gentlemen,

It is no secret that globalisation has led to increasing interdependence among the world’s countries, and that this has resulted in both positive and negative trends.

On the positive side, globalisation is leading to the expansion of common values and common understandings about the role of the state and the rights and duties of the individual. The spread of such a common understanding has an overall stabilizing effect.

Globalisation has also created exciting new opportunities and has led to the realization of major international projects, such as the recently opened bridge between Denmark and Sweden. Such projects benefit all of the parties involved and bring the people of different countries closer together.

Perhaps the most exciting and sweeping changes are occurring in the field of information technology. Globalization is opening new world markets in the IT sphere, providing worldwide access to skilled IT professionals, and clearing the way for new investment possibilities.

Latvia would like to attract foreign investments - and would very much welcome Norwegian investments - to its own IT service industry, which is growing very rapidly. The Latvian government is implementing special measures, which include substantial tax breaks for investors, to turn Latvia into a powerful exporter of software services, and to promote Latvia as a regional high-tech industry leader. Latvia is already a net exporter of IT services and is ready to expand further. And I am very pleased that a representative of one of Latvia’s most successful computer software companies, DATI, is accompanying me during this trip.

The porousness of international borders as a result of globalization does have its negative aspects. Practically every country on this planet is experiencing the challenges of organised crime and terrorism, where old methods are being combined with modern technology in such a manner that they cannot be brought under control by a single state within its national borders.

Environmental degradation is another cross-border problem that will require concerted international co-operation in order to be properly addressed. However, with increased regional co-operation, I am confident that at least the environmental ‘hot spots’ around the Baltic Sea will be cleaned up in the medium term. I am also convinced that we will achieve a common approach to cross-border pollution and nuclear security.

The increased level of such "soft" security threats is demanding a new degree of awareness and better co-ordination across national boundaries. New tasks are emerging along with growing global interdependence, and these are merely some of the challenges brought forth by the third millennium.

I would like to conclude by reiterating that there are numerous opportunities to expand co-operation in various fields between our countries, cities, and entrepreneurs.

Both of our countries have a long history of co-operation – and as small, coastal nations – a similar history of resilience and survival under foreign occupation.

Latvia, like Norway, would like to make the maximum use of its strengths and assets. Latvia’s strategic geographic position at an important crossroads between West and East, together with its modern, ice-free ports, and its well-developed infrastructure, have already helped it to become one of the most important transit countries in the Baltic Sea Region. And Riga has become an important centre of financial and commercial activity for Northern Europe.

In the year of 2001, Riga will celebrate its 800th anniversary. As one of the designated European Cities of Culture, Riga will be hosting numerous special events. I invite you all to come and visit Latvia. I am sure that relationships between our people and institutions can continue to evolve in a new quality that will be enjoyable, stimulating, enriching, and mutually beneficial.