Who stole the time?

Two and a half years since I last wrote. Officially, and if you read the international news, Latvia is back on its feet, unofficially it is not. There is still lots of poverty below the surface. After a couple of years of relative quiet, the beggars are back in the old town. They never really went away but the police seem to have relaxed their hold again. There will be many views on why this has happened. But the shops are definitely getting busier and the traffic is visibly back well beyond the amount of the 2008 crisis. Apparently agriculture is beginning to work at last.

But the real damage has been out in the countryside. There are many ruined and empty farm houses and villages are losing population steadily. The flat prices are coming down and in some places they are now ridiculously low. There would be more on the market but many families who have emigrated have just shut up shop and left. The large numbers of black windows on winter evenings bear witness to this.

Something is still wrong in the way Government does business. The reductions in 2008 did not bring reform. The education system remains archaic from 10 years and upwards. there is simply no modernisation. It seems as if there is a death wish to retain culture and labguage as the driving forces ignoring the reality of the surrounding world. The children are being punished. The Russian speakers grow up better and more widely educated and far more business and internationally aware. Latvians are condemned to public service as many do not speak Russian and therefore cannot service half the population. But to argue this is heresy - culture rules OK!

Now I am back writing I suppose I must continue.I need to open my eyes again. There are many remarkable things happening in this lovely country - but there are many dumb things as well. It will be a close race to see who wins.

Tomorrow I am going to talk to the Justice Minister Bordans. he has struck a blow for honesty and his party want remove him. Now that is really dumb because it just points the corruption finger firmly at them.. There are many investors looking to see who wins, especially the banks who have lost miliions here

Glen.

THE CORNER IS TURNED!

Well time to write again.

I have found myself in recent weeks saying that the corner of this crisis has turned. What makes me say that? First were the fireworks at New Year. They were everywhere and continued filling the sky with colour and sparkle for an hour or more. The amount was really staggering. No country in crisis could waste so much money. It shows that some spare money is coming back. The traffic is also back up to prosperity levels and the driving is almost as bad as it was before - not much petrol saving here! And in the main streets now virtually all shops are being used. There are still some blank stares but the numbers are few. Rents are clearly becoming realistic. The shops are generally more active. But a word of caution.

Not everyone shares in this change. There are still many beggars and destitute walking the streets. Property experts try to say that flat prices are going up but the truth is that the average price is, but this is because there are now many of the expensive flats for open sale and hire that for two years were simply not offered. And the banks are apparently more willing to loan for house purchase again. But I suspect that the bargains have mainly gone - for now that is. I am sure that there will be reductions for another 6 months as there are still people with bank loans hanging over them.

But a radical and possibly unpopular thought. I feel that for the long term, this crisis has possibly not been deep enough for the country to understand how to do business in the world. Today I went into a shop to browse for some trousers. I did not have time to buy today. As I started to leave the two surly looking shop attendants talking to themselves at the back of the shop scowled even deeper and one of them muttered something and glared at me directly- without any self consciousness about their rudeness. I think I will not be going back. I spent a few days in Dusseldorf recently and the level of service was just so much higher than Riga everywhere we went. Shop assistants were positively wonderful. If things become better here quickly then I fear a return to the awful pre-crisis service. And the shops in Riga are still asking stupid prices for things with the winter and spring stock. Clothes prices here are more in Lats than they were in Dusseldorf in Euros (for exactly the same items)

But like it or not, we have what we have. Let us hope that this government holds long enough to continue the stability. The refusal by the Prime Minister of the hamfisted and blatantly political structural and work changes wanted by the Head of the Anti Corruption Bureau is at least a good start. But reform still has to be started. Education and Health need some hard thinking and new systems. They simply do not work. If visiting a doctor and getting the medicine can cost 50 Euros or more for a visit, that is a system failing everyone except itself.

The big activity this year will be the selection of a new President or the reselection of President Zattlers. After an awful start he has settled down to not doing a bad job at all. He is showing more astuteness and confidence each outing and his surgeons intelligence that he hid for so long is now being used to the full. He will be a hard person to better this time around.

Stockmans sale - hope or dispair?

The huge numbers shopping in the "madness days" sale in Stockmans this last few days tell a tale. What that tale is though is unclear. On one hand it may be a sign that the recent election has brought hope of a recovery. Certainly the idea that a Dombrovskis-led coalition of virtually the whole Parliament, including the minority speakers is unusual, outside of Finland that is - where it is normal (and very successful) business. But apart from this step into the political unknown, it is hard to find evidence of solid improvement. More on this later.

Of course the sale may just have been a welcome relief from the rather bleak couple of years that many have suffered. Sadly another hard winter looks to be on the cards for many with heating bills likely to just as bad again. Coming back regularly from Bulgaria that is in much the same state, I see many similarities with excessively large cars living side by side with beggars. But there I have seen many horses and carts on the roads, they seem to have disappeared here!

But has Riga started to show signs of improvement? The signs here are mixed. But I do feel that there has been no more general downward movement over the summer. Flat prices for rent and sale continue to fall steadily despite the bizarre "talking up" of the real estate companies trying to get investors onto the hook. The number of beggars and visible alcoholics is growing slowly but steadily - sadly too many of them are dying young and unnamed as the monthly newspaper reports show. Shops are still closing regularly but Latvia is showing amazing robustness in this regard as new shops, bars, clubs and cafes seem to open immediately. Only a few places seem to stay stubbornly closed, and I suspect that the owners are simply asking too much rent.

Sadly "service" still sucks in Riga and is a common comment from tourists. Typically, museums close when people want to visit - as I found to my cost when my mother and sister came recently. It is also noticeable that shop prices have started to creep up again. This is foolishness as those who charge too much will be penalised by the public. One clothes shop I frequent was expensive two years ago but has managed to gather a great collection of clothes at modest prices and kept the look and feel of an expensive store. Their service is great too. It can be done. But I went to the chemists at Riga airport last week and the girl was seriously rude and offhand. It is so simple to be polite and helpful - it brings customers back. She clearly thought I was a tourist so it doesn't matter! Her mistake. Now she is immortalised as being rude in print.

But there has to be some change if we are going to make headway. Last year along with my business colleague Bill from UK we worked with the Ministry of Economy at Under Secretary level to help them understand how to use the European funds to create transformation using LEAN business processes. We wrote presented and ran seminars. We helped them produce a plan and helped them with the bill for Parliament. But at every stage they watered down the proposals so that responsibility would be transferred to LIAA and the associations and no one in the Ministry would have to do any work. We told them directly in print that their plan was wrong and would fail. Simply, LIAA and the Associations did not have the experience or capacity to do this work The measures were accepted by cabinet and two weeks ago the head of the Investment Agency LIAA Andris Ozols told me directly that the plan had failed and the money (a huge amount) had been lost with no effect. Last week I saw that the Associations had written to the PM for him to do something. They have short memories. I offered to help them for nothing and they refused. They deserve to fail. Reality has to be accepted sooner or later. The level of manufacturing and organisational knowledge here is low and will only be improved by purchasing skilled foreign help.

This week I am running a business forum in Riga (details on my website

www.latvia-business.com). What has amazed me is the number of my contacts who have changed jobs or their companies no longer exist. At least 60% of my business cards are now out of date and few of them are more than 2 years old. Many of the people are now abroad. It reflects a huge national change. We shall see in the coming months if this is change for the better.

Suddenly - nothing happened!

A month or more has passed since my last post. I have not written for several reasons. Firstly I have been working in Bulgaria fairly solidly, secondly not much has changed and thirdly I have seen few cameos worth recounting in print. Now I do not think that we are seeing a plateau in the crisis, more I suspect that much of the continuing movement is under the surface. There is no serious evidence of visible improvement although the international experts choose to say there is some.

So what do I see today. There are still plenty of people avoiding paying on the trams. The number of visible drunks is increasing in town as is the length of the food queue outside of the Russian Orthodox Church on K Barona. Some of those waiting are clearly more middle class than the usual crowd of last winter. I have seen a gradual reduction in cars parked outside our flats and a steady offering of parking places for rent. But these are small things. There are of course many winners in this game. Those who kept their jobs and the same wage are now much better off as clothes and food have dropped in price. The supermarkets are getting their act together and competing. That is good for all of us.

But through all this there has been a remarkable good humour. There has been no tension between the communities despite the crass language based acts of some of the politicians. I suspect the Russian speakers value the freedom in Latvia and the EU and realise that whilst there is much to be unhappy about here, there is also much to celebrate. We just have to hope that the Government finds the courage to reform badly run ministries rather than raise taxes to pay for them. But I am not sure they have the courage or the skill.

LATVIA - UPTURN OR FALSE DAWN

Last week I saw my first Porche driving through Riga for at least a year. It was as remarkable for being alone as was the tens of them that drove the roads 3 years ago.

I haven't written anything for months but quite simply, there has been so little change to report that it has simply not been worthwhile. But the signs of change are here now. The deep winter snow has disappeared leaving masses of litter, dog pooh and cigarette ends and spring has brought out the first short skirts. Riga transport is trying hard to repair the trams lines distorted by the winter snow and ice. People are eating ice creams already.

The real change is that new shops are opening up all over Riga. The price of renting property has dropped dramatically and it is now worth the gamble. The banks are also more willing to lend. The tourists and businessmen are still here and VAT is being cut for the tourist industry. The Nasty Party has left Government in a gamble to win popularity. We shall see in the October elections if they succeeded.

But not everything is going well. There are still nearly 30% unemployed, people are leaving the country in droves (or trying to), there are more beggars than ever - back to 2000 levels, and there are more flats than ever for sale and rent - at increasing cheap prices. But we have more severe cuts to come in national finances. Add to this the fact that the money from the EU and IMF has to be paid back sooner or later so we have to get more tax back to do this. But where will this money come from? Many companies I know are hurting because serious money for expansion and change is not forthcoming. Several commentators recently have highlighted the fact that there is no stimulus thinking at all in the government policies to get business moving. That is not to say they want lots of free money but just some sensible reforms to make life easier. I have been trying to open another company doing Health Tourism (www.baltichealthtourism.co.uk )and it still took 8 weeks to manage. The bureaucracy is mind numbing. Process still takes precedence over result.

The really good news is that prices have finally reached realistic levels and most of the stupid shops have gone bankrupt. But the national money is still at the wrong value, perhaps as much by 40%. I realise this completely after trips to Bulgaria and Ukraine in recent weeks. Their currency value is much more realistic than here.

We now have a long summer before the elections. I suspect a summer of nonsense. But there is no assurance that the Latvian public will vote for an honest future. Corruption is still endemic here and many people simply don't care. We shall just have to wait and see what sort of future the silent majority wants - but I will not hold my breath for a better future.

LATVIA METEORITE REPORT 2009

In general, Latvia has survived better this year than many pundits, including me, would have thought possible. But the trends have not been good and some of these may come back later with a vengeance

Politically the Dombrovskis government has held firm against all critics with leather-suited finance minister Repse as the backbone. The other parties in the coalition have acted like spoilt children, refusing to sign papers for the IMF they agreed upon previously, and even bringing back the hated Skele to "save the country". Thankfully President Zatlers has improved dramatically over the year and shows new found confidence. Time will tell if he has the personal and political strength to face up to the election challenges created by Skele, Lembergs and Slessers next year. His predecessor VVF had a 5 minute rush into politics again as a possible EU Council President and then promptly disappeared. Former PM Kalvitis went to Russia and raised Latvian national hackles by having longer at dinner with Putin than Zatlers had with Medvedev

The working half of the government managed to deliver the 2010 Budget on time but still tried to cheat by not creating the cuts that were asked for by the EU and IMF. Instead they intend to raise dodgy taxes that most independent financiers think will never create money. The Constitutional Court has already ruled the pensioners cuts illegal so the budget is 100m Ls short before the year has even started. And the tax receipts continue to fall making the budget figures even more suspect. Conspiracy theories abound about the IMF and EU, and about anyone else who can be blamed for the crisis.

Business has steadily declined although there would appear to have been a welcome levelling out from September onwards. Christmas sales were apparently 25% down in the shops from last year. The shops are dropping prices daily and new "cheap shops" are springing up, and doing good business. Some observers see signs of business and export improvement. It is probably too soon to call.

The real weakness this year has been public service. The ministries have simply failed every test thrown at them. The grand plan of employing highly educated professionals and promoting only those with the right political allegiance has become a burst balloon. The appalling results show that the current civil service leadership structure needs a total rethink.

The real estate market has bombed. Flat prices for rent and sale are gradually dropping all over the country. There are still some companies with deep pockets holding out for a rich Russian to save them. Some bizarre prices are still apparently being paid. But there are few signs yet of real international investors. The prices have further to drop before anyone with common sense is tempted. The risk of failing to find paying tenants for all the empty flats and offices is just too great.

Socially the country has entered a strange time warp. Everything looks OK on the surface but people are going about their business in a robotic fashion with little joy to be seen. Understandably, many people are now fleeing the country, for UK, or anywhere that will either employ them or marry them. But these are mainly low paid workers. The wandering, coffee drinking executives are becoming unemployed in growing numbers as companies either fail, or thin out the management. There are too few tax incentives and too little investment funding to coerce them back into business again yet. Judging by the joke jobs on offer on CV online, if they are waiting for paid employment, they could be standing in line for a long time.

One good thing is that the crisis has put nationality and language onto a back burner, except that is, for the few language bigots who still see anyone not speaking fluent Latvian as evil. Thankfully the Russian speaking Riga Mayor Ushakovs has turned out to be a likable and normal human being with both good and bad sides who just wants to get the job done properly. Businesses of course don't care at all about language, they just want the cheapest worker for the job (I wrote "best" and then realised that this was not true at all - talent still has no meaning here!). Lets hope that a 3 language state is a true bonus from the crisis.

But Russia deserves a mention. As a country it seems unable to behave sensibly when dealing with the Balts. The queues of lorries delayed at the Russian border crossing is a Russian national disgrace. Sending a spy plane to overfly Latvia was also stupid and frankly childish. Lets hope that 2010 sees some common sense and graciousness from the big neighbour. But I won't hold my breath.

And Latvian servicemen and women continue to serve abroad with great distinction and praise. We all owe them a great deal.

The highlight of the year was of course the spoof Mazsalaca meteorite. It brought fame - and a large muddy hole to Northern Latvia. On TV, Interior Minister Linda Murniece tried hard and failed to defend the overserious actions of the police and customs. Everyone enjoyed the very good and funny joke perpetrated by Tele 2 except her. It nearly cost her her job. Tele 2 now totally dominate the airways with outstanding adverts showing that the best of Latvian business is as good as anywhere. If more companies could deliver this vitality, Latvia would soon leave recession.

But what about trends. The black market is back with a vengeance, partially forced there by sheer determination of people and companies to survive and partly because of the incompetence of the government tax structure penalising work and effort. It will be hard to recover honesty. The loss of people from the country will also further reduce tax income and may stunt growth later as firms fight for good workers. Morale is also low but the nation seems set on enduring rather than protesting. If it continues calm as the 2010 budget bites it really will be a miracle. And there are still a few people hell bent on screwing the country for every penny they can get. Corruption is becoming less acceptable but there are still large numbers who either do not care or don't recognise it as wrong at all. But at least shops seem to have stopped closing.

What marks the year for me - I think the friendships gained in common adversity. As I try to make my business work, I am surrounded by friends and colleagues working to reduce the effects of the crisis. Many are unemployed or are trying as hard as me to survive in business. Latvia is full of good people and I am meeting more every day. Lets hope 2010 works for those who deserve it.

THE BUDGET

The Latvian Government 2010 budget has been passed by Parliament. It contains many unpleasant tax rises. As you would expect, most of these are being blamed by politicians on the unreasonable demands of the IMF. The IMF team are in town for talks and they are clearly unhappy Bunnies. The key reason is that the budget is a fudge. The Government was supposed to cut 500m off their huge running costs but have wimped and only cut about 350m. This means that the other 150 has to come in tax rises, and this from a national tax base that is shrinking rapidly. Even with this extra blood money, there will still be a 600m shortfall (about 8% GDP I think that is) and of course the money for this has to come from somewhere too. In comes the IMF and EU with their duffel bags of dosh.

On the daily news, the budget sounds as though it balances and quite likely on the surface citizens will think that if the IMF accepts it this it is OK. And if you accept that it is right to run a huge deficit each year then it does appear on paper to balance. The figures technically look as though they work. But that deficit will not go away after the budget and nor will the public suddenly find more money to spend.

The IMF team is between a rock and a hard place. The Government knows this and is playing on it. If the IMF accept this weak and rotten budget they will be blamed when it fails (and it probably will unless God has told Finance Minister Repse something he has not told the rest of us). If they reject it ( and of course they actually have no legal power to do that), it would have to go back to Government and the Parliament again and the Government will fall - In that case a new budget from, for example the Peoples Party, would just give away pre election money in a wave of corrupt populism to win the elections next year. So bad though this budget is, it may be the best of the worst.

And if the IMF withhold their loan (not free gift remember), they will be seen as evil Americans (of which most of them are not of course) and the country could implode socially for lack of ability to pay pensions and unemployment money. And unpaid and hungry Russians suddenly becomes a security issue not to be played with at any cost. And of course there will be no magic money in the next 12 months from a sudden improvement in business, so the overlarge government structure, and the debts from this year will carry over to next and still have to be paid somehow. How this is to be done is of course never discussed.

In recent weeks I have been amazed by the stoicism of the Latvian nation. I knew that they had endured much before under the Soviets but now I can see this character trait in its full glory. But this Government (and those of Kalvitis and Godmanis) has also destroyed any basis for national honesty and decency by unfair tax policies, refusal to accept responsibility for their actions, and by the self seeking way most Parliament members behave and vote. Avoiding paying, and living outside of the rules is growing as a national sport(typically not paying for public transport), and this is very very sad.

What is clear to me is that like Italy in the 70s the country is beginning to work and exist totally independent of authority. Many people I talk to just want to leave, and leave quickly because they simply have no appetite for the fight. I am glad that I joined the SCP. They have stuck to their principles throughout all this, and I have been proud of the way many of the younger members have grown into fine politicians. Our day is probably not yet, but it will come.

What to do now though?