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I was nearly born in Moscow

By Olga Pavuk

They say the Mayor of Riga, Gundars Bojars, did what Latvia's ruling government parties couldn't do in eight years. An agreement signed last December on cooperation between the two capital cities of Latvia and Russia made other political forces jealous and sparked many accusations of Bojars smooching with the Russians

Caution will pass

Mr. Bojars, Tallinn and Vilnius signed similar agreements with Moscow long ago. What stopped Riga from doing this earlier and why do you think the Latvian government is unable to make such agreements with Russia?

Firstly, there was no wish to do so and, secondly, there was also fear that the move would be much criticized. I have had my fair share of various reproaches for the pro-Moscow policy. I see nothing wrong in kissing with the Russians [laughs]. Especially as we are also working hard in the West. We have very active cooperation with the capital cities of European Union member states and candidate countries, as well as other cities. So far things have been pretty smooth. As for Russia, it's not that previous efforts were inadequate, there were hardly any such efforts at all. And I chose it as one of my priorities to set up normal pragmatic relations with our eastern neighbors, including Russia and Moscow, within the limits of our municipal competence.

We have an agreement with St. Petersburg signed in 1997. Regretfully, there has not yet been any developments within the framework of this agreement. It has remained just a piece of paper. But Mayor Yakovlev of St. Petersburg has invited the Tallinn and Vilnius mayors and also myself for talks this March. The wariness of Moscow and St. Petersburg officials towards us seems to be passing as of lately.

A Moscow Duma, headed by chairman Platonov came to Riga in late February. As we already have an agreement with the Moscow city government, we would also like to make a similar arrangement on the city's legislative level.

They say that Bojars got his trip to Moscow as a present from the left-wing alliance For Human Rights in a United Latvia (FHRUL). How do other parties on the Riga City Council feel about cooperating with the "opposition"?

I think it was Gorbachov, who used to say "there's an opinion.," but nobody knew where it was. I myself have fairly good contacts in Moscow, St. Petersburg and Russia in general dating back to the times I was doing business and sat in parliament. I respect my partners on the Riga City Council but believe that I did this on my own. Of course, with the support of colleagues from FHRUL, who approved of it from the very start, but it was no gift.

I have hardly felt any opposition on the city council concerning the Russian issue, if only in rhetorical form. A representative of the Fatherland and Freedom (FF)/LNNK party, Valdis Kalnozols, joined meetings with Moscow officials more than once. Agnis Kalnkazins, the director of the municipal gardening company Darzi un Parki, is also working actively in this direction. For most the approach is pragmatic and normal.

As for other authorities, the Latvian Foreign Ministry run by the Latvia's Way party commended us for our contribution to developing ties with Russia. The press does happen to publish unflattering comments on activities by the Riga City Council, but on the embassy level in both Latvia and Russia we have always received the required assistance, whether in the organization of meetings or obtaining visas, anything. I have no accusations to make against the Foreign Ministry, and I must say the ministry officials are surprised that we take the pains to get their approval for every trip to Russia or be it anywhere else. Obviously, my predecessors did not work much with the Foreign Ministry.

Cozy in Russia

Your mother is a Russian, and you yourself are a Russian Orthodox believer. Could it be that your affection for the Russian capital stems from these factors?

It is not that I have any special affection for Moscow. I'd say I like St. Petersburg better - the city is calmer, maybe more human. Naturally, I admire Moscow - it is a true megatropolis of global scale. It has huge economic power, which is to a large extent to the credit of the city leaders. But I have very strong feelings for my homeland. Latvia is my home. Of course, there's something about Moscow that Latvians can relate to. We know the Russian soul well and I feel very comfortable in Russia. Probably because hospitality stands out amongst other Russian features. You won't find anything of the kind either in the West or the East.

Your father is a prominent Latvian politician, the leader of the Latvian Social Democratic Workers Party (LSDWP). What is your relationship with him now?

We have a two-tier relationship. Regretfully, with us a family gathering often turns into a political debate. Family ties probably suffer from this. We share the same approach to the Russian issue, of course. My father is not just a politician, he is an expert of international law, a scholar. I am on the LSDWP board, he is the party's chairman. Purely on party level, we may run into disagreements now and then. Naturally, I would like to see him more as a dad or grandfather to my sons.

The first issue agreed upon in the deal with Moscow was on education. What was this about?

The agreement was already drafted by the previous city council and fit in quite well with the framework agreement now signed with the Moscow city government. Just a small example, when it comes to Russian literature, we are indeed short of Russian-language textbooks and fiction for our schools. Cooperation towards developing education in various languages is also an issue. Moscow undertook the obligation of opening a Latvian school in Moscow. This is a very interesting project. Of course, we will help with teachers and textbooks.

What Latvian goods are Moscovites willing to receive from Riga and what obstacles have to be overcome for trade with Moscow to resume?

There's a lot of problems here that date back to the Russian meltdown in 1998. Nowadays it's quite difficult to elbow one's way into the Russian market. We didn't simply lose grip, many companies totally re-directed their business or cut their output of agricultural produce. Regaining a grip will not be easy. Moscovites expect the traditionally praised dairy products. Of course, services are in great demand, I mean services of the Riga port. After all, St. Petersburg cannot cope with all the shipments, thus consignees, consignors and producers all suffer. Two thousand train loads stand idle in St. Petersburg waiting to be reloaded. This is simply a tragedy.

Riga ready to give a hand

A Latvian journalist once said: "The Riga City Council got a bridge to Moscow instead of a ferry" [referring to continued problems and promises in resuming ferry traffic between Riga and Stockholm]. What is Gundars Bojars as the Riga free port council chairman doing to boost the port's business?

The Latvian Cabinet of Ministers has finally approved the new borders of the Riga free port. We have to install a number of mechanisms to create incentives for investing in the port. These projects do not deal exclusively with port operations. The law on Riga Free Port provides for development of industrial projects as well. This includes what must be some of the most attractive sites not only in Riga, but in all of Latvia. I find the oil product terminal project proposed by Dinaz Group quite interesting. I don't see it as any environmental threat. There are many such terminals in large cities around the world. Of course, the terminal must meet all standards and ensure environmental safety. I also agree with the project of a financial center of the Irish model. This would bring the port huge amounts of cheap funds and develop the Andrejosta area right by the city center, being a little outdated at the moment. This project is still being discussed by the Latvian parliament.

How do you use the experience you gained working as development manager for the Liepaja Special Economic Zone?

I worked at the Liepaja Special Economic Zone in the south-western Latvian port from the very start. We implemented a number of mechanisms aimed at bringing investments to the underdeveloped region. This is something to take pride in. So far Liepaja is the only area making good use of its free zone privileges. It's a shame but the free zone in Riga is not developed enough. I believe that here we must set in motion the same mechanisms currently operating in Liepaja. There's no need to invent anything anew. In this the Riga City Council must extend any assistance and support it can to the port's companies.

What has become of the Minsk city council's proposal on buying land in the Riga port?

A Minsk delegation is expected to visit Riga late April. We will be discussing in detail the plot of land they are interested in and the project the Belarus intend to carry out in port Riga.

Moscow premieres awaited by Rigans

Science is another of the directions slated for cooperation with Moscow. What is being done along this line?

The thing is we and the Moscow city government have varied competence. Moscow is a federal subject of the Russian Federation. It also owns a number of research institutes, educational establishments, etc. Latvia is legally a governed by the state. At the same time, Moscow has made a unilateral offer for further education in its universities - there are special scholarships granted by Moscow mayor Yuri Luzhkov for Rigans to study in Moscow. We also grant stipendiums to graduates of Riga schools, but no funds have been set aside specifically for studies in Russia.

What surprises await Rigans and Moscovites in culture life this year?

The Latvian Opera and Ballet Theatre will give guest performances in Moscow this summer with support from both Riga and Moscow municipalities. Riga City Council will help Baltic Pearl [a cinema/arts/theater festival group] organize a project titled Moscow Premieres in Riga, set to stage several outstanding plays staged by Viktyuk's Theatre, the MHAT theater and others. Some exhibitions are planned to be organized in Moscow, including the Textile Arts in Latvia exhibition. Libraries in the Latvian and Russian capitals are also set to exchange experience.

_{There's always luck in hunting}

Mr. Bojars, how often do you travel to the Russian capital?  When did you make the trip for the first time and what struck you most on this trip?

I visit Moscow once or twice a year. The first time, I was nearly born in Moscow - my parents were students then. Mother worked at the Botkin hospital and studied medicine but father was a student at the Moscow State Institute of International Relations. I don't remember this, of course, but father insisted that mother should go to Riga to have me. As an infant I was carried from Riga to Moscow and back a number of times. Then the travels stopped and when I was 12 I went to Moscow again. What struck me most was the terrible cold. And the Tretyakov Gallery - I liked it very much despite having to stand in queue for some two hours in that cold weather to get inside.

What was the greatest surprise during your last trip to Moscow?

High-speed growth, I believe. I had been to Moscow in 1994 - the city undergoing deep crisis and heavy unemployment. Now one finds it difficult to describe the opportunities opened in the city, the growing real-estate market, high prices of realty being an important indicator of economic growth. And, of course, the projects carried out by the Moscow city municipality such as Moscow-City business center, sports facilities, a whole series of grand investment projects. They have a very busy social program - additional pensions to retired Muscovites, benefits for war veterans, public transport, etc. An interesting Moscow project is the program for Internet access for every apartment and a great variety of services available through electronic communications. We are working in tandem with Muscovites on this as Riga is also carrying out a multi-stage project called Internet Riga.

You took your hunting gear to Moscow. Were you able to go hunting and was the game any good?

There's always luck in hunting - sometimes a hunter gets lucky, and sometimes the luck is with the game. I did go hunting in Zvidovo near Moscow. It was interesting. We hunted elk, and wild boar. But I don't think of hunting as an entertainment for lords - many issues can be solved in the informal atmosphere of a hunt. I noticed though, that in Latvia the hunting services are better and the game more abundant. I was not lucky this time, but my partner, Vladimir Malyshkov (a Moscow city government minister, and former Rigan) was - and a boar ran out of luck.

Bridgehead for Russia's westward offensive

By Olga Pavuk, Tatyana Kamorskaya, Tatyana Ìårkulova  (Delovoye Vedomosti)

Statistics find it hard to follow the growth of Russian investments in Estonia, Latvia, and Lithuania, too often still disguised in the form of foreign offshore companies. Russian businessmen are taking interest in the Baltic states as a bridgehead for pushing Russian capital onto the European market, while lack of certainty in regards to Russian railway policies prevents more cargo from flowing to Baltic ports

Latvian thaw sets in

The ice age in Latvian-Russian economic relations finally seems to be coming to a close. Last year was marked by a more than treble increase of Russian investments to the Latvian economy. According to figures supplied by the Latvian Company Register, Russia's contributions to the registered capital of Latvian companies totaled 108.2 mln US dollars after ten months of 2001 (for comparison, US investments were

203.1 mln USD, Estonian 94.4 mln USD). Offshore disguises also make it fairly problematic to identify the share of Russian money hidden under supposed American capital.

Ainars Bruvelis, president of Lursoft, a company running the Latvian Company Register and data base, confirmed this in an interview to Latvian business daily Dienas Bizness. He said Russian companies were investing much more money in Latvia than registered, as cases of non-direct investments registered from countries outside the initial origin of funds are quite frequent.

Bruvelis said that the corporate names and surnames of many foreign investors, notably from Cyprus, the U.S., Lithuania and Denmark, suggest ties to Russia. This leads him to believe that contributions by Russian investors in Latvia could actually be some 25 to 30 percent above official statistics.

It is also interesting that the majority of capital contributions to Latvian companies have been made by individuals, rather than corporations. The top ten largest Russian investors last year include only two corporate companies - Svitoil and SIBUR (the Siberian-Ural Oil and Gas Chemical Plant). The leading investor among individuals was a Mr. A, who contributed 2.96 million US dollars to a company by the name of Optimax L.   

For the economy it seems pleasing that Russians are investing their money in not only in the sale of oil, gas, metals and chemicals, but also in mechanical engineering, light industries and real estate.

In ten years since the restoration of Latvia's independence in 1991, over 3,000 companies with Russian capital have been registered, while half of these have already closed down. Nevertheless, Russia still leads by number of joint ventures. Latvian-registered Russian capital totals 108.2 million US dollars. The largest Russian investors are Transnefte-produkt and Gazprom, dealing with oil and gas transit.

Economic ties with Russia are growing through the use of labor. A shortage of qualified labor and its increasing cost is making Western and Latvian companies look for employees in Russia and other CIS states. The Latvian economy, already suffering from unemployment, is hardly likely to benefit from this.

A round-table discussion titled Foreign Diaspora - Russia's Economic Potential, organized by the Moscow mayor's office in mid-February, was one step towards the consolidation of business circles in the Russian neighborhood. Latvian participants of the event noted as a factor of key importance the Russian willingness to support the initiatives of their compatriots.

Yevgeny Tikhonov, who heads trade advisors at the Russian Embassy in Riga, pointed out that Russian businesses finds it convenient to use Latvia as a bridgehead for further movement of Russian capital onto the European market. "We are building joint businesses here, and it gives businessmen some leeway for maneuvering and livening-up the market."

Lithuania discovers Russia anew 

Lithuania has registered 1,100 companies with Russian capital. Of the aggregate registered capital of 670 million US dollars, the Russian share makes up only 21 million US dollars. The number of companies registered as Russian is 270, and 850 companies are joint ventures with Russian capital accounting for USD 14.5 million or 2.2 percent of the above total.

By number of joint ventures in Lithuania, Russia ranks second after Denmark but stands 15th by amount of investments while the Danes take 18.3 percent of the market, Swedes 17.3 percent and Germans 7.5 percent. The honor of leading Russian investor goes to LUKoil-Baltiya, having built 90 gas stations across Lithuania, investing around 90 million US dollars.

Let's list some other major Russian investors. There's KRIS, a company that paid some 3 million US dollars for a controlling stake in Kuro Aparatura, the former industrial giant in making fuel-oil pumps, now working under contract with Russian and Belarus clients. Nilma invested USD 1.3 million in wood processing. Stella Vitae, a gas supplier and Baltic Garantas (insurance and pension funds) each received half a million US dollars in investments from Russia. Tekhnonikol this February bought a controlling stake in Gargzdu Mida for 0.3 million US dollars, the seventh bitumen roofing producer acquired by the Moscow company.

At the same time, Igor Zotov in charge of the Russian trade representation in Lithuania believes that investment cooperation still doesn't live up to the amount of bilateral trade of USD 2.1 billion last year. Russia is the leading export destination for Lithuania and ranks 4th by imports. While there's an overall deficit in Lithuanian-Russian trade, Lithuanian exports to neighboring the Kaliningrad region are well above imports from this Russian enclave in the Baltics.

Kaliningrad has also become a major object for Lithuanian investments. As much as 424 companies with Lithuanian capital have been registered in the region. Their registered capital totals USD 4.4 million or 11.5 percent of all foreign investments in the Kalinigrad region. Lithuanians are investing in construction, production, food processing, light industry, furniture and services.

The president of the Lithuanian Constructors' Association, Àdakras Sestakauskas, is obviously pleased with the comeback to former markets in Russia. Panevåzio Statybos Trestas, a major Lithuanian construction company, now has three small contracts in Moscow and is also working on several projects in Kaliningrad.

Having become the leading crab stick producer in Europe, Lithuania's Viciunai company invested some USD 5 million in a production facility in Kaliningrad.  The company head Visvaldas Matiesaitis, added that in order to enter the Russian market, one must become a producer there because of Russian customs policies.

Siauliu Tauro Televizoriai plant has started making Samsung TV-sets. Cooperation with the South Korean company also envisages participation of Sovetsk-based Stela Plius, the Russian partners of the Lithuanian TV-set company.

The Kilimai carpet maker has also discovered the Russian market anew with exports due to begin in March. The company hopes to boost its exports by 60 percent this year as it has also signed a contract for deliveries to the United States. Kazlu Rudos Metalas, producing bio-fuel boilers, exports 35 percent of its output to Russia. 

In an attempt to protect the domestic market, Russia imposed a 12-percent duty on imports of caramel this February. This will limit the opportunities for Lithuanian confectioneries but Naujoji Ruta, extremely popular in Lithuania for its caramel products, was one step ahead, investing USD 2 million in a caramel production facility in the Kaliningrad region.

Seeking to help businesses, the Russian trade representation in Lithuania sent out news to 57 Russian regions late last year, urging to step up regional cooperation. Some 20 locations responded, confirming their interest in cooperation along specific lines, including investments. According to the Russian North-west customs board, there are as much as 646 articles on the list of Lithuanian products exported to Russia last year.

The aim of specific Lithuanian sectors towards Veliky Novgorod and the Leningrad regions in Russia also opens up great opportunities. The conditions for investment are better there. A businessman has to pay federal taxes but there are refunds from the municipal budget. Regional administrations welcome deliveries of pork to local markets. By the way, Lithuanians will have to reckon with Danish competition in this Russian region, as local-made products account for only 10 percent and the rest is imported from Denmark.

Lithuanian exports to Russia grew 84 percent last year, and exports to Belarus increased by 60 percent. But the lack of required laws slows down the investment climate and trade. Agreements on the promotion and mutual protection of capital investments and on the prevention of double taxation were signed between the two countries in June 1999.  The Lithuanian parliament soon ratified these agreements, the Russian State Duma, however, did not. Therefore businessmen have to resort to a number of tricks and loopholes for gaining access to the Russian market, incurring a minimum loss in the process. This also explains why they are turning more to Kalinigrad, which becomes a bridgehead on the way to Russia, main.

Estonia's not bragging

According to official statistics, Estonian exports to Russia and the CIS states fell 91 percent since 1991. In fact, economic ties between the two countries still remained quite strong but somehow the matter spoken of much.

Head of the Estonian Forecasting Institute, Erik Terk, believes that official Estonian statistics do not give a truthful reflection of the situation with Esto-nian-Russian relations. «Many companies prefer to stay in the shadows, not flaunting their ties with Russia. This way some of them try to avoid taxes, some to launder dirty money,» added Boris Batov, the director of the Narva Business Union.

According to official figures provided by the Estonian Agency for Foreign Investments, the only Estonian company receiving Russian investments, for example, is Nitofert, which is owned by Russia's Gazprom. There are some other companies, mostly related to the transit business, but their capital is filtered through offshores.

Five years ago every business union was duly informed and aware of Russian success form their members, and every major project was monitored and applauded, but now nosediving exports and countless failures have hardly left any enthusiasm in most of these unions. Regions are also unaware of the state of affairs for local businessmen. "Narva does have some joint ventures but we have no knowledge about their number or type of business. All the data is now pooled only at the statistics department and municipalities can get the information only once a year and even this is problematic," said Batov.

Russians are aware of the cold-shouldered attitude from Estonian politicians towards their capital. According to Batov, the word among Narva businesses is that Russian businessmen simply come over with a case full of cash and put it into companies. At the same time, Estonian branches and representations of Russian companies operating openly such as Oiltankin, representing Russia's Orenburgneft, as well as Estonian representatives of LUKoil and Peterburgskaya Neftyanaya Kompaniya (St.Petersburg Oil Company) seem to be developing quite successfully.

Last summer one of the largest fuel retailers in north-east Russia, St.Peters-burg Oil Company, even opened its first gas station in Tallinn. The company's future plans include construction of new stations or the acquisition of an existing network on the Estonian market.

Late last year LUKoil Eesti invested EEK 60 million in retail and wholesale, becoming the owner of the largest number of gas stations in Estonia. In a couple of years LUKoil Eesti may make it to top three in Estonia, provided that LUKoil, ranking among the world's five largest oil companies, takes serious interest in the Baltic region, said Neste Eesti head Rain Talmar.

This year the company plans to invest about 600-700 thousand US dollars and build at least two new gas stations. It also costs EEK 75,000 to re-equip stations bought earlier. A project for the construction of new LPG car-gas stations in Estonia has also been approved. LUKoil Eesti intends to expand the business considerably. The company's fuel retail sales last year nearly doubled over 2000, reaching EEK 335 million.

In the opinion of experts from the Estonian Forecasting Institute, the Moscow region and areas rich in raw materials located in the north-European part of Russia, and Western Siberia would be of interest for the general Estonian economic strategy. Separate Estonian regions also have spheres of economic interest. The rapid growth of Novgorod is important for development in south-eastern regions of Estonia.

It would be good if the city of Pskov began developing, right near the border with Estonia. It is important for north-east Estonia to develop logistics and distributorship services related to St.Petersburg and the Leningrad region, in order to sell electricity to Russia, to open a port by Sillamae near the Russian border, to work on the idea of production based on raw materials from Russia. Even the flow of goods from Kazakhstan or East Asia through Russia onto the West could be interesting.

Largest Russian investors by capital contribution to Latvian companies, mln USD

Source: Latvian Company Register

Estonian-bound Russian timber detours through Latvia

By Artur Tooman, (Deloviye Vedomosti)

A Russian Federal Customs Committee directive issued late last year, which in fact banned round timber exports to Estonia, brought a state of confusion upon the Estonian railway company and the country's sawmill industry, importing around one-sixth of its timber from Russia

The Estonian Forestry Union's (EFU) executive director Andres Talijarv said the union has sent a letter to the Estonian Foreign Ministry stating that Russia's unilateral decision to cease timber trade with Estonia puts timber companies under serious threat, not to mention investments that would later be made in Russia. "Estonian-Russian joint ventures operate under the arrangement that most of the logged timber is taken to Estonia," said Talijarv.

Russia's directive of October 19, 2001, lists border checkpoints through which round timber and many other timber-related goods may be exported by railway or trucks. The list names 107 such checkpoints on the Russian border from Finland to the Far East, but does not mention a single location on the Russian-Estonian border.

The directive, published officially on Dec. 29, 2001, was to take effect 30 days after publication, that is, as of January 28, 2002.

According to figures provided by the EFU board chairman Margus Kohav, the Estonian sawmill industry produces 1.2 to 1.4 million cubic meters of sawn timber annually, using up to 2.4-2.8 million cubic meters of round timber in the process. About 15 percent or over 300,000 cubic meters of timber is imported, mostly from Russia and a little from Latvia.

Kohav said that stopping Russian timber imports would further aggravate the already difficult situation on the domestic market for raw timber. But Estonian companies that were buying timber in Russia will not cease production, they will simply try to get their timber stocks in Estonia.

After a meeting between Russia's Pskov region governor Yevgeny Mikhailov and the custom's committee chairman Mikhail Vanin, directive No. 1,002 was amended to the extent that Russian customs now allowed timber exports to Estonia, but only by railway. The new provision will took effect on March 15, 2002. Out of 300,000 cubic meters of Russian timber brought to Estonia, 40 percent is imported by truck.

Commenting these amendments, Valery Kuzemin, the director of the Neoantiikva company, said that timber imports from Russia by railway are quite problematic. "We tried, but gave up on the idea due to sticky red tape related to ordering railway carriages," he said.

Apart from problems with carriages, businessmen are also disappointed with the time of delivery, which lasts 7-8 days while it only takes 24 hours for a timber-loaded truck to cover the same distance by road.

Polarprof company director Sergei Morzhakov added that many Russian lumber companies refused railway transportation themselves because 70 percent of the suppliers in Russia are inaccessible by railway due to the absence of railway tracks. Those, who carry timber by trucks, will continue to do so via Latvia, although it means driving an additional 300 kilometers. Nevertheless, Morzhakov said that the longer distance would not affect the price but will mean a lower profit.

EFU deputy director Mart Riistop does not see any logic in the restriction. He said there has not been any official response to the inquiry by Estonia's Foreign Ministry and probably won't be. "Out of 300,000 cubic meters of round timber imported from Russia, over 100,000 cubic meters are delivered by trucks. The Russian GTK decision will strike hard on those transporting timber in small batches," said Riistop. Moreover, because of inefficient Russian railways, timber carried via rail loses some of its quality, especially in the springtime and fall. "Speed is important when taking timber from a felling site to a sawmill," said Riistop.

TKE Grupp AO timber-processing company board chairman Alexander Karaulov said the company's normal business would suffer if the new rules take effect. "It takes much time and effort for a company to re-arrange it's system of logistics," stated Karaulov.

Two birds with one stone

International trucking is one of the few competitive services in the Baltic states that fully meets Western standards. The Baltic vehicle fleet is way ahead of Russian counterparts by technical standards and professional levels of management and drivers. A shortage of transit permits is only the tip of the iceberg preventing the branch from functioning normally in the maximum compliance to European Union (EU) requirements, as Russia and Belarus trim Baltic trucker competition under the pretext of fighting smuggling.

In January 2002, Russian customs officials introduced compulsory convoys for all cargo carried by Lithuanian truckers (convoys cost each trucker USD 500). These extraordinary measures by the Russian State Customs Committee (GTK) followed the exposure of a large-scale smuggling scheme involving 32 Lithuanian trucking companies. Representatives of the Lithuanian trucking association Linava said the claims filed by the International Road Union (IRU) to the Russian customs committee may reach up to USD 10 million. Under the pretext of fighting smuggling, the IRU tried to suspend the issuing of TIR carnets to Lithuanian truckers. It did not get that far, and the Russians limited their response to convoying all Lithuanian trucks.

Lithuanian truckers started losing business, while smuggling immediately shifted to neighboring Latvia. According to unofficial sources, non-delivery by TIR-carnets in Latvia reached USD 20 million this January alone. Open robberies on Lithuanian and Latvian roads have grown in number. What's more, it seems to have become profitable for truckers to even steal their own cargo, said a representative from a trucking company. The Latvian association of international truckers, Latvijas Auto, and its president Valdis Trezins said "it cannot be ruled out that Russia would introduce obligatory convoys also for Latvia. Latvijas Auto in close cooperation with the IRU and branch associations of other countries is working to improve the TIR system."

The question arises as to the reasons behind the high crime on Baltic roads. Latvijas Auto believes that the underlying reason leading to the corruption of customs and smuggling cargo lies in the disorder of Russia's customs and border guard services.

Nevertheless, in past two or three years Russia seems as if It has not spared its efforts for improving the situation on its borders. In some aspects the Russians have even left the Balts behind. Thus, alongside customs and borer guards, Russian checkpoints now also have a transportation inspector. Steps are being taken to upgrade information systems. At the same time, a lack of proper planning results in notorious queues on the borders of Russia. The reality is that the amount of shipments from Europe to Russia is growing with every year, while performance by customs and border guards is often hinged on the whims of local checkpoint chieftains, or other higher orders.

Tough competition on the international trucking market makes Russians look for new ways to fight for cargo. An announcement was made recently on the construction of new cargo terminals on the Russian borders with Estonia and Lithuania, set to take away part of the shipments from the Balts. "It could be that we fell asleep on our laurels, but the government failed to realize that talks about transit cannot be built only on private initiative," admitted Algimantas Kondrusiavicius, the president of Linava.

A stately basis

By Olga Pavuk

Continuing good neighborly relations with Belarus, the Baltic Course once again visited Minsk where we met the Mayor of this Eastern European capital city. Our discussion with Mikhail Pavlov, Chairman of the Minsk city executive committee, or major, mainly concerned the city's economy and it's relations with the Baltic States

Top customer - Russia

Mr Pavlov, please tell us your view of Minsk today from an economic point of view?

Minsk is a city populated by one-fifth of the entire Belarussian population of over 10 million, constituting almost one-forth of the country's economic potential. We have only just summed the results revealing economic performance last year, showing that development in branches like the real-estate remained positive This was accompanied with growth in the volume of industrial output and production of consumer goods, an increase in the export and import volumes, as well as a boost in services. Besides all this, around 80% of our companies have exceeded their production level of 2000.

With fairly good average indicators, still every fifth company in the city is loss-making, and the surplus of unsold goods stored in warehouses has seen a monthly increase from 65% to 73%. How would you comment this situation?

All of our enterprises operate on a self-supporting basis, and although not all of them are capable of reaching the necessary volume indicators, the situation is not really all that gloomy. For example, 17 companies pay salaries to their employees with the help of loans granted by the Belarussian Savings Bank, but, as you know, loans are extended for those who are capable of overcoming the crisis. What concerns the surplus of goods in warehouses -unsold stock - it is neither money thrown away, nor commodities needed for anybody. Today we work under conditions of highest level market competition, which is mainly determined by demand. The main consumer certainly being Russia, we also co-operate with volumes neighboring and more distant countries. The portfolio of orders is formed, as a rule, for one year, but if in case this is insufficient to meet the required volumes, a certain amount of production is sold on the free market. Of course, low solvency, decrease in profitability, as well as an increase in the number of unprofitable enterprises and organizations does leave a certain impact on the economy, but on the whole it is not a catastrophe.

Companies like Horizont, producing TV sets, have boosted production by 25%, while the company still stands second on the list of most unprofitable businesses. Is there so little demand for the Belarussian TV sets?

Sales of TV sets produced in Minsk are going well. In order to survive competition, the company purposefully operated at a loss in the fourth quarter of last year. Production costs went up at the expense of prices for the TV parts. Thereby, the company had to ñut prices in order to stay on the market - on a market always carrying a certain degree of risk.

There are cases when companies are brought to bankruptcy intentionally, then operate under a new name in order to avoid paying off of debts. Is such a situation also possible in Belarus?

Yes, it is. Today we filed for the bankruptcy of two companies - the Minsk Margarine Factory and the Alesya knitwear mill. We have initiated internal supervision and started the mechanism of bankruptcy in accordance to our legislation.

Joint stock companies welcome

How many companies operate in Minsk, and what is the ratio of state enterprises to private ones?

In total there are approximately 500 industrial enterprises operating in Minsk, 42% of these are engaged in the non-public sector. 15-16% of all enterprises, including joint-stock companies and companies established on the basis of rental agreements, operate in the municipal sector.

Which sectors have attracted the most private capital?

Private capital is present in all sectors of the economy. For example, 83% of companies involved in the trade sector are non-public, and the same goes for the construction and transport sectors, where all enterprises operate in the form of joint-stock companies.

Would you please comment on how ownership is changed for a joint stock company?

Belarus is experiencing a smooth process of economic reforms, which means a transition from one type of ownership to another. You see, we could not simply pull down everything that was created under the rule of the Soviet Union, so we did it our own way. Companies were taken under state control, and the process of changing company ownership could begin. When ownership of a joint stock company is changed, the particular enterprise obtains a collective ownership in the initial stage. Later the collective is given a free hand and these shares are sold, and joint ventures, as well as private companies can be established. Still, one should take into consideration that being a proprietor involves responsibility that not all people can cope with it. You have to ripe for it. Could any person carry on one's shoulders the load of responsibility in this city like I do? Can anybody become the head of a company? Everything takes time. Besides, our policy is to protect the social sphere.

Atlant refrigerators are well known in a number of countries, the company is making a profit, salaries and taxes are paid regularly.  All of a sudden, the Minsk-based refrigerator company dismissed its director, and the principle the golden share was put to use. What happened?

The term "golden share" stands for government rights to interfere with the entrepreneurial activity of joint-stock companies in cases when the policy conducted by company management may lead to unforeseen consequences. In the case of Atlant, the policy implemented by its director, who was elected by shareholders, led to economic damages for the company. The factory would have done better if its director had been sent on retirement three years ago.

Are there any examples of de-privatization in the city?  

Yes, there are, especially in the trade sector - people tried their luck, failed, and the particular company was returned to the state. There are such cases also among joint stock companies, as well as among companies established on the basis of rental agreements. For instance, as for the Alesya knitwear mill, it has about one and a half thousand shareholders, but the factory lacks in majority shareholding. The situation has even gone so far that they don't know what to do and are ready to return at starting positions.

_{Capital protection guaranteed}

What role does foreign capital play in the city economy?

Out of 24,000 legal entities registered at the City Executive Committee, more than 1,800 are foreign companies and joint ventures with participation of investors from 60 countries (the largest investors in 2000 were the USA - 26%, Germany - 23%, Poland - 15%, Lithuania - 12%, Latvia - 9%). These companies employ 30,000 people, or 5% of the city's working labor force.

Where can foreign partners look for information related to private business in the Belarus capital?

We have a homepage on the Internet (www.minsk.gov.by), but information can also be received at the City Executive Committee's department for foreign economic affairs.

What, in your opinion, attracts or stops foreign investors?

Of course, investors are influenced by the negative and subjective information about Belarus, spread through the mass media. This aspect is most unpleasant. The fact is that we are a peaceful and open country in all respects, no doubt towards all potential investors. Besides, we guarantee the protection of capital, and as in the Baltics we have an inexpensive labor force.

What might be the reasons for the Russian mass media not providing information on the Belarus economy?

As you may understand, this doesn't fall within Russian interests.

Arm in Riga needed

How would you assess cooperation with the Baltic states?

Of course, Latvia comes first, followed by Lithuania. As for Estonia, our relationship with this country has historically been under-developed, compared to Latvia and Lithuania, with whom we share a border, and today we have practically no economic relation with Estonia. Although Estonian fish is sold in our market, Belarus is more interested in raw materials than finished goods, as we have enough of our own processing companies. Still, the Estonian market is of special importance, and I can only recommend tht our diplomatic service work more actively in regard to establishing closer relationships with this Baltic country, as there is no Belarus embassy in Estonia and our ambassador to Latvia covers also Estonia.

At the same time I can give you examples of a very fruitful co-operation, for instance, 95% of the Latvian agricultural machinery market is composed of production made at the Minsk tractor plant. Trucks produced by Minsk Automotive Plant (MAZ) make up 30% of the market. In 2001 Belkommunmash supplied 10 trolleybuses to Riga. By opening a chain of catering enterprises called Krinitsa-Express, the Belarus capital has followed the example of Riga-based company Lido. Besides, Lithuania's Senukai is supplied with construction materials by the Minsk- based Keramin. Of course, the list goes on..

Please tell something about the co-operation project with the Riga Free Port. 

We are now working towards concluding a long-term rental agreement in order to acquire territory in the  Free Port for processing export and import cargo. We are really interested in this, and a non-binding agreement between the Minsk City Executive Committee and the Riga City Council was signed in October 2001. I tabled this proposal to the government, which formed a working group, so I can say that there is a progress on this matter.

What's more important for Minsk from the aspect of foreign economic relations with the Baltic States: to sell Belarussian goods in our markets, or take advantage of the Baltic ports for the transit of your goods?

Either. Of course, access to the Baltic Sea is of great importance for us, thus we are holding negotiations for acquiring our own territory in the Riga Free Port.

Mayor's position

I found some information on the Internet about your city newspapers. How are they financed?

Minskij kuryer [the Minsk Courier] - a municipal newspaper - has been published since April 1, 2001, and has a circulation of 14,000. Strange as it may seem, the newspaper has started paying off - it has gained popularity among the residents of Minsk, increased even more since the newspaper has been printed in color. Vecherny Minsk (Evening Minsk) is a privately-owned newspaper. All other newspapers are regional.

Which, if any, of the periodicals do you see as oppositional to authorities?

As a representative of the authority I don't feel any opposition from the mass media. Evidently I do not create any problems that might lead to opposition against me. The policies I implement as mayor of this city coincide with the opinions of the population's majority.

Another question related to opposition - what about the republican trade unions?

I don't answer for all trade unions. I am responsible for the municipal trade union, and it is not in opposition to municipal authority. I repeat, my position doesn't provoke opposition.

What is the role of trade unions in present-day conditions?

Our President deals with the needs and necessities of all working people living in our country. The question may arise as to what exactly should trade unions protect the workers from? The president has a clear and well-defined position: he stands for the nation, for its well-being. Everyone should have an opportunity to work and earn, as well as the opportunity to receive one's salary in due time. The state is a basis for everything.

I believed and still believe that trade unions are a kind of artificial structure. Today employer-employee relationships are strictly regulated by employment contracts, providing for obligations that both parties must meet. If I'm not satisfied with anything, I take the agreement and appeal to court. Why should I go and complain to the trade union?

What is the average income of a Minsk resident?

The average monthly salary in Minsk is 143 US dollars, pensions - 50 to 60 US dollars. It should be noted that all payments concerning municipal services, like rent and utilities for a three-room flat are usually within the limits of 10 dollars per month.

What is the salary of the city mayor?

The mayor's salary is 100 dollars, with a bonus of 300 dollars.

The mayor of the city gets a salary of 300 plus dollars; the same salary is received by a factory director, as well as a doctor at the highest level of professionalism. Is this the roof?

Salaries in Belarus are determined by real economic conditions. We have an especially pragmatic approach to this. Taking into consideration the price index, salaries and pensions are regularly revised. Of course, like anybody else I would like my salary to be bigger. But if it's not possible? We could portray the desirable amount of salary, but rules are dictated by real life. Even if a salary is not very high, it is earned and paid in due time. We don't have beggars here in Minsk and nobody faints from hunger in the streets.

What is the mayor of Minsk most concerned of?

The culture of modern man is the main matter of concern. In order to create a different man, it is necessary to develop proper conditions and change living environment.

What are the necessary things?

We must work.

The usual answer to such a question is money.

As I say, money can settle all problems. Try to solve the matter without it. My mission in the capacity of mayor is to create comfortable conditions to make people feel good and eliminate all the negative factors.

Basic indicators of socio-economic development in Minsk

* as of January-February, 2001
Source: Minsk City Executive Committee

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