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Baltic Report: May 2, 2000

2 May 2000, Volume 1, Number 15
Estonian Government Adopts EDI
Four cabinet ministers -- Interior Minister Tarmo Loodus, Agriculture Minister Ivari Padar, Transport Minister Toivo Jurgenson and Finance Minister Siim Kallas -- signed on 24 April an agreement on the implementation of an electronic data interchange system, ETA reported. The agreement establishes the infrastructure of electronic data transmission, which the government hopes will reduce paperwork, fraud, corruption and would make Estonia more competitive. The program will begin when the law on digital signatures, passed earlier this year, come into effect in December. The system should be fully functional by the end of 2001 at a cost of 15 million kroons ($900,000), Jurgenson told BNS.

Estonian Central Bank Chief Quits Before Appointment
Newly-elected head of the Bank of Estonia, Vello Vensel, resigned on 25 April, BNS reported. Vensel, elected by the central bank's governing board on 30 March (see "RFE/RL Newsline," 14 April 2000) and due to take up the post this week, cited health reasons for his resignation. The central bank's deputy governor Peter Lohmus will take over on the interim. Vensel is reported to be in the hospital with high blood pressure, according to "Eesti Paevaleht."

Reactions To Estonian Central Banker Quitting
Politicians and officials reacted with surprise to the decision by central bank governor-elect Vello Vensel on 26 April to not take the post just days before he was due to take over.. Bank spokeswoman Kaja Kell called the news "amazing and sudden," saying that the bank has received inquiries from foreign investors concerned about possible problems, ETA reported. Members of the bank's governing board said that acting governor Peter Lohmus could be elected to the post, and outgoing governor Vahur Kraft has also expressed his interest to stay, "Eesti Paevaleht" reported. Finance Minister Siim Kallas blamed the governing board for selecting an unfit candidate, "Postimees" added. BNS reported on charges by "Eesti Paevaleht" that Vensel had cooperated with the KGB during the Soviet era.
* On 26 April, the 14th anniversary of the Chernobyl nuclear power plant explosion, Andres Illak, the chairman of the Estonian Fund of Assistance to Victims of Radiation said that 93 percent of the more than 4,000 Estonians who had taken part in the clean-up, are in need of medical treatment..
* Estonia's Moderate Party has announced that it, along with its coalition partner Pro Patria Union, supports tying the rate of income tax to the number of children. The tax break could be adopted as part of next years budget negotiations.
* Estonia has begun year-long celebrations marking the printing of the first Estonian language book in 1525.
* Small rural hospitals are being closed in conjuction with a Swedish-government sponsored report on health care restructuring. The report calls for the current 78 hospitals nation-wide to be cut to 13.
* The government has adopted a plan to close dozens of rural schools at the end of this school year.
* Breweries are worried that Finland will change its laws on beer imports from travellers, reducing the 15-litre limit to 6 litre. A case of Estonian beer currently is over 6 litres.
* The government plans to sue Estline for the costs of the Estonia ferry disaster, claiming about 5 million kroons.
* Estonia's cross-country ski maker Viisnurk should become the biggest company in the world soon, overtaking Fischer. Rossignol and other big firms buy their skis from Viisnurk's Pernu factory. They make about 25% of all cross-country skis in the world now, about 280,000 of 1.1-1.2 million.

President Nominates Riga Mayor As Premier
Latvian President Vaira Vike-Freiberga on 25 April proposed for premier Riga Mayor Andris Berzins. She expressed the hope that a new government headed by him will last until the end of this parliamentary cycle in 2002. Berzins has the support of Latvia's Way, the People's Party, For Fatherland and Freedom, and the New Party, which hold a total of 69 seats in the 100-seat parliament. Berzins said that he wants to "eliminate the split between state power and society" and to "restore" the "confidence" people have in the state, BNS reported.

Latvian Premier-Designate Proposes...
Andris Berzins told the press on 27 April that a new government model may be ready as soon as 28 April, though its confirmation would unlikely be completed by 4 May -- the tenth anniversary of the declaration of restoration of independence. Berzins added that negotiations are still continuing among the four parties in the proposed coalition and no assignments of cabinet posts have been made, LETA reported. However, Berzins has said he does not want former prime ministers to serve in his cabinet. Berzins also stressed the need to divorce business interests and politics, citing the public feud between outgoing Premier Andris Skele and Ventspils Mayor Aivars Lembergs.

...But Coalition Partners Disagree
Outgoing Prime Minister Andris Skele voiced displeasure at Berzins's plan to keep former premiers out of the cabinet, calling it an "unacceptable political principle," BNS reported. Skele's People's Party has said it wants either the foreign affairs or transportation portfolio, though Latvia's Way -- which currently holds both -- has insisted on retaining them.

Latvian War Criminal Released On Appeal
During an appeals hearing on 25 April, the Latvian Supreme Court released convicted war criminal Vasilii Kononov from custody on his own recognisance. The court found that Kononov is in need of medical care and expressed its confidence that Kononov will not attempt to flee the country, BNS reported. Prosecutor Ausma Rubene called the decision a "compromise" and expressed his concern that Kononov will flee to Russia. Russian Ambassador Aleksandr Udaltsov confirmed that Kononov had received his Russian passport and Kononov hinted that he will give up his Latvian passport, LETA reported quoting Itar-Tass. Meanwhile, BNS reported that Latvia and Australia are close to agreement on an extradition treaty that might lead to the extradition to Riga of suspected Nazi war criminal Konrads Kalejs.
* Xinhua, the Chinese news agency, opened a bureau in RÓga to cover all three Baltic countries.
* The New Party has called for lowering of corporate income taxes to 12.5% and came out in favor of a referendum on the privatization of the state-owned utility Latvenergo.
* On 26 April there was a commemoration for the victims of Chernobyl. Of the 6000 Latvians who took part in the clean-up, 300 have died and 2700 are disabled.
* The Russian Embassy has issued over 2000 visas for the Ice Hockey Championships in St Petersburg. Latvia's team is expected to do well, having beaten France just before the tourney's start.
* Firenze (Florence, Italy) is now a sister city of RÓga. The friendship agreement signed in Florence by officials from both cities on 26 April makes Florence Riga's 22nd sister city.

Lithuanian Government Rejects Defence Cuts
The government on 26 April decided not to support an amendment on redistributing defence funding to education, which was initiated by public petition, ELTA reported. The bill, championed by head of the New Alliance (Social Liberals) Arturas Paulauskas, called for the diverting of about 148 million litas ($37 million) from defence spending in this year's budget to education. Paulauskas collected 87,000 signatures in a public petition drive confirmed in early April (see "RFE/RL Baltic States Report," 3 April 2000). The government explained the rejection due to its negative impact on long-term security, adding that the education sector receives over 6 percent of GDP compared to defense, which gets 1.7 percent. The bill will go to the parliament for debate in May.

Trial Of Priest's Murderers Finally Begins
The trial of men accused of murdering Reverend Ricardas Mikutavicius for his prized art collection in also began in a Vilnius district court on 25 April. Three of the defendants have confessed to killing Mikutavicius,though they blame co-defendant Vladas Beleckas of masterminding the murder and theft of the collection appraised at 5.1 million litas ($1.28 million), ELTA reported. Mikutavicius was murdered in the summer of 1998, though the body of the slain priest was not identified until nearly a year later in the highly publicized and embarrassing case for both Kaunas city and national authorities, involving the exhumation of the previously unidentified body.
* Chicago-raised, Vilnius restauranteur Rita Dapkus' recent election to the Vilnius City Council is being challenged by the local press citing her failure to officially disclose her KGB and FBI contacts on her election registration forms, as required by law. She said those contacts were public knowledge and extensively covered by the press a few years ago.
* Coca-Cola buys about 23% of the remaining shares in the beverage bottling plant in the town of Alytus for 3.5 million litas -- in exchange for an amount of duty-free refined sugar.
* Foreign Minister Algirdas Saudargas was in the US this past week to attend the UN nuclear non-proliferation conference. While in Washington, DC he met with NSC Advisor Sandy Berger, Deputy Secretary of State Strobe Talbott, and non-Administration foreign policy experts.
* The Chernobyl anniversary was marked by a conference on its effects in Lithuania, where 7000 persons were involved in the clean-up.
* Foreigners working in Lithuania must now receive a work permit from the national government. The earlier procedure required employers to be licenced to employ foreigners. The fee for a 12-month work permit is 110 litas ($27.3). The number of permits is capped at 1,300 for the current year.
* On 26 April, President Valdas Adamkus amnestied about 1,000 of Lithuania's 15,000 convicted criminals. Every senior citizen (over 65), women, handicapped and young people with less than 5 years left to serve on a sentence will be set free. About 3,000 inmates will have their sentences shortened as well by the president's action.

An Economic Year To Forget

By Mel Huang

The impact of the 1998 Russian economic meltdown on Estonia, Latvia and Lithuania was obvious when the Baltic countries released key 1999 figures indicating economic performance and trade. The figures also show the different pace of recovery among the three countries, partly indicative of the reaction of the governments to the crisis.

None of the three countries had a good economic year, reversing an established trend of sizeable growth in both economic activity and trade volume in the years preceeding the Russian crisis. Though the effects of the crisis could be seen in the fourth quarter of 1998, strong year-end GDP growth figures -- 4.7%, 3.9%, 5.1% respectively -- hid the problematic fourth quarter (-0.7%,-1.9%, -0.9% respectively).

With the reputation of being the most economically dependent on Russia, Latvia came out of the messy year in better statistical shape than the others by registering a minor but symbolic 0.1 percent GDP growth in 1999. The result was a bit of a surprise, since there were gloomy forecasts from analysts when the third quarter results were announced. The quarterly results of 1999 -- -2.3%, -1.8%, 0.2%, 2.8% -- showed that the economic decline was under control despite the government crisis during the summer months.

Latviaís dependency is based on the Russian oil transit through its ports. That sector did not falter much on the economic front because transit figures dropped only modestly in 1999. Also, regular transit volume fell only 1.1% in road haulage and 6.2 percent in port handling. Latvian exports made significant gains in the EU market, with exports to the EU growing from 56 percent to 62.9 percent in the first 11 months of 1999. At the same time exports to the CIS dropped markedly to 12 percent (from 20.1%) in the same 11-month period.

The middle performer of the group was Estonia, which registered a provisional 1999 GDP drop of 1.5 percent. Analysts were clearly disappointed with each quarterly result -- -5.6%, -2.3%, 0%, 1.9% -- despite signs of a general recovery. The large drop in the first quarter showed the impact on the country assumed to be the least affected by Russian economic turmoil. The loss of the eastern market turns out to have seriously damaged sectors such as food processing -- especially the fishing industry.

Overall Estonian trade dropped significantly in 1999, as exports dropped by 5 percent to 43.2 billion kroons ($2.64 billion) and imports by 10 percent to 60.5 billion kroons ($3.69 billion). Exports to Russia dropped by 35 percent and to Ukraine by 47 percent. However, export volume to EU countries grew steadily to 63 percent of all exports (up from 55% in 1998).

Lithuania was hardest hit and slowest to react among the three countries, with 1999 GDP dropping by a staggering 4.1 percent. However, more troubling is a look at the quarterly results, where there was little sign of recovery and even indications of a secondary setback: -2.8%, -1.4%, -6.7%, -5%. Other indicators such as an increase in the unemployment rate to 11.4 percent in March 2000 also show an economy in trouble.

One major factor in the drop was the decline in production at Mazeikiu Nafta due to a lack of oil supply from Russia. As the oil processing sector accounts for nearly 20 percent of Lithuania's annual GDP, extended periods of slow or no activity at the refinery clearly played a large part in the negative GDP numbers.

The government failed to make significant cuts early in public spending, exacerbating many problems throughout the economy. The lack of funds by the state left many bills unpaid and planned developmental projects halted. The government, as well as the social insurance fund, are heavily burdened by debt, having fallen into a nearly insurmountable whirlpool of continuous borrowing. The Finance Ministry announced that as of the end of February, the total state debt was 13.16 billion litas ($3.29 billion), or 29.5 percent of this year's expected GDP.

Lithuania's trade also took a heavy blow in 1999 with the loss of the large eastern market. Total exports reached 12 billion litas ($3 billion), down 19 percent, and total imports totalled 19.3 billion litas ($4.82 billion), down 16.6 percent. There was a mild increase in exports to the EU, though it could not cover the 58.7 percent drop in exports to the CIS.