From 01 October 2010

Baltic Sea Region - Archipelago of Innovation?

The objective is to create a seamless working environment for fast growth innovative SME all over the Baltic Sea Region

Working language: russian


Innovative industrialization will rescue Latvia, says Professor Andris Deniņš.

The Strategic Research and Management Center created upon the initiative of Andris Deniņš in March 2012 offers a quality new model for Latvian development based on innovative industrialization and the use of venture funds.

The Strategic Research and Management Center created upon the initiative of Andris Deniņš in March 2012 offers a quality new model for Latvian development based on innovative industrialization and the use of venture funds.

The Amber Bridge interviewed Professor Andris Deniņš about the aims of planned reforms that can radically change the fate of Latvia like the Marshall plan revived Western Europe from the ruins of the war.




Mr. Deniņš, you are a genuine professional in your business and have been heading an auditing company for many years. Now you distract from your business and deal with a program for the whole of Latvia. Why?


It is true that I have never worked that much as in the past two years... But I can do nothing about it as time is running out.

As economist I am dissatisfied with the situation in Latvia and its development trend. The crisis in the country has not been overcome. We shall be able to speak about recovery after the Latvian economy gets back to the 2008 level and it is not going to happen soon.


But the Latvian government produces optimistic reports and we are posed as a success story for the whole of Europe.


The Latvian economy is currently at such a low level that any even the slightest activity improves its indicators. You cannot judge anything from the quarterly reports which they like to quote. They do not reflect the development trend. To affect performance indicators a slight puff is enough from the east or west.

As a professional I clearly realize how our country could look today had it not been for the errors committed in the past 20 years. I said long ago and continue to insist the capitalist economy is no synonym to chaos. To engage in liberal economic policy does not mean taking a hands-off approach and expect the market to streamline everything by itself. Instead of watching how everything collapsed they should have rescued what had a chance to survive. It means to transform and adjust for new needs everything positive which we inherited from the previous period.


Do you mean major enterprises — VEF, Radiotechnica — that went bankrupt and were closed?


Exactly. Political interests dominated in the '90s and opposed the flagships of industry which targeted the Russian market. The whole world fights for the market while we ceded it just like that! Russia is our natural partner and a close neighbor with which Latvia has a common border.

We jumped to a new social-economic formation in one leap and in a month. The legislative base for that should have been more sophisticated and elaborate to help economy progress along a smooth track instead of flying around and turning your head around in search of guidelines.

Latvia was called the financial capital and a bridge between East and West but the populist slogans remained empty words. All efforts were targeted to strengthen geopolitical positions of the country, to join the EU and NATO.


After that we had to live with our own mind.


Exactly. But nobody thought about it. It is no wonder that we are where we are...

It is not accidental that on the eve of the final concert of the Song and Dance Festival in Latvia world-famous maestro and our national treasure Raimonds Pauls sadly admitted: "We came together, sang and continue to lead a poor life... We become a small wasteland with addled water, a province. The main aim is to get a high position".




By all important social-economic indicators Latvia occupies one of the lowest places in the European Union. Bad infrastructure, problems in education, specifically higher education, and health care...


We should not deceive ourselves: not less than 500 thousand people emigrated from Latvia in the past years and its population currently is less than two million. A proof is the record low turnout at the recent self-government election specifically in distant areas from Riga. There is actually nobody to vote. It is a tragedy for the country. But on the other hand, had it not been for mass emigration Latvia would have become a European champion in unemployment which would have jumped to 20 percent like in Portugal. People will begin returning back home when the minimal monthly wage comprises 800 euro. So far we cannot afford it and all re-emigration programs are pure populism.


Aren't we late?


We aren't late until the last person has not left. The earlier you begin to cure a disease the better and you have more chances for a favorable outcome. In this country nobody dealt with economy and now we have only to envy Baltic neighbors who overtook us and convincingly progress. You feel it as soon as your cross the border: roads are much better in Lithuania! Estonia has a deficit-free budget for long while Latvia wants to achieve it for many years. The startup positions of the three Baltic countries were practically the same and not very bad.


Why does Latvia always fall behind neighbors? There is a trend in it, isn't it?


I believe there is more social cohesion and resolve in Estonia and therefore the country succeeded in all spheres better than we did. The subjective factor also played a role. We could have achieved more had we had more competent, honest and responsible people at the wheel. But alas! I can call only one prime minister an expert in all those years.


Who is he? Andris Šķēle?


I do not want to name him. I am talking in general. Definitely, Andris Šķēle is keen in economy. Initially we were like-minded people and I regret that he made a poor decision and focused his skills on private enterprise. Other prime ministers were average performers, including the current one. Success comes to those who have lustrous eyes, believe in themselves and spare no effort for common benefit.

Our government seems to have only one super task – saving money. They call it consolidation for some reason although consolidation means cohesion, unity rather than reductions and belt tightening. It is horrible when they change even the meaning of words because of the political context. The economic "squeezing" policy will definitely backfire and hit at competitiveness. We are already one of the last in the European Union by the indicator. The gap with developed European nations is growing.


Can the situation improve after euro is introduced on January 1, 2014?


Definitely, there is geopolitical sense in the transition to the single currency. It means rapprochement with developed countries. However there is not a single economic argument in favor of euro in Latvia. Sweden actively advises us to join the eurozone but is in no hurry to do it itself. Most European nations do not fulfill Maastricht agreements but demand Latvia to abide by them. Compliance with the criteria is positive in itself because it means economic stability and long-term basis for growth. But in our case the indicators are dragged by the head and ears with only one aim - to join the eurozone although it should be neither an aim nor priority.




Mr. Deniņš, how do you formulate the role of the state?


Naturally, it is increased wellbeing of the people. There is only one real rather than populist way to achieve it. It is industrialization on the basis of innovations which allows to radically increase production efficiency.

Today the technical level of Latvian production is extremely low. Only each fourth equipment unit meets modern requirements. The remaining 75 percent of machinery can only turn out low-quality and high-cost products with low labor productivity. In such conditions there can be no talk about increased wages, taxes and consequently wellbeing.


What do you suggest? Tell me about your Marshall plan. What do you think about such a comparison?


The essence and scope are similar. The large-scale international program designed by the research center which I am heading is called Alternative Energy and Gas Processing. Its authors are President of Alternative Technologies Group Sergei Bernatosyan and Board Chairman of the same company Georgy Tavlidi. The program aims at restoring economic growth and promoting independence and security of Latvia also in energy sphere. It enjoyed high acclaim in academic circles which promised support to transformations.

The model of creating innovative economy is an alternative to the current course of the government towards total reduction of expenditure. It provides an answer to the main question for any country: how to earn a decent living for the people?

270 enterprises are planned to be built in Latvia.


How many?!


270! We speak about several-fold increase in the GDP, not about doubling it. You do not believe me? Do you think Andris Deniņš only looks serious but suggest unrealizable? No, it is absolutely real.

Oil reserves are limited in the world and will last another 10-15 years. Therefore, there is an active search for alternative energy at present. First and foremost, it is gas. And you do not have to build pipelines to transport it because revolutionary technologies of gas freezing have already been patented and simplify gas transportation.

Today Latvia is dreaming about a liquefied gas terminal however it is likely to be built in Finland or Estonia. But that is not a problem. A terminal based on the latest technologies is likely to appear much earlier in Liepaja.

A large-scale program is offered to the eastern region of Latvia – Latgalia which is in a depressive state at present. The construction of a methanol plant is only one project based on patented technologies. There are close to 5000 patents waiting for implementation and so far they are top secret.




Innovative production demands huge investments. Where can Latvia get the money?


There are thousands venture and risk funds in the world which target innovative projects and enterprises. Latvia has not used them so far. Previous programs were based on budget appropriations, self-government money or European structural funds. Venture financing calls for a completely different approach - money is provided for product or idea.

The program has been operating in many countries of the world for 20 years and since this spring it has become available also for us. It is an eloquent figure: up to 2022, i.e. in eight years, we can get nearly 30 billion euro.


Who do you mean by "we"? Can you name you like-minded people?


The scientific and research center which was created in March last year upon my initiative united the brightest brains of Latvian science. It is a mighty force which can give Latvia a powerful impulse. So far there are 14 of us but many are scientists of world acclaim. Among them is Ivars Kalvinš (from Organic Synthesis Institute) who I call the most outstanding scientist of Latvia. The medicinal preparations he designed are annually sold in the whole world worth 2.5-3 billion euro. It is close to a third of the Latvian budget. We were supported by distinguished geneticist Elmārs Grēns, energy experts Juris Ekmanis and Leonid Ribitskis, as well as leading European economist Tatyana Volkova and others. They all welcomed my call to unite and work for Latvia. It is a proof that time for change has come.


Do you hope for support of politicians?


Acting politicians do not like energetic people getting engaged in public processes. Therefore, we should hardly expect a warm embrace. But we do not need anything from them. They only should not stay in our way. Only those who need budget money have to go and bow and ask to include their projects into state financing program. We have already acquainted the president, the prime minister, parliament chairman, the finance ministry with our program and will now open productions and create jobs.




Your program seems to contradict the one implemented in Latvia in the past 20 years. Thus, by 2018, the centenary of the Latvian Republic, it is planned to achieve the status of the greenest country in the world. And you offer industrialization...


They do not contradict each other. All innovative projects are environment-friendly.


Industrialization will require additional manpower and people were intimidated by the threat of migrants for many years...


It is a most complicated issue. Definitely we shall have to invite foreign experts. Politicians have to support the will of the people. If the people support us politicians will have to follow suit. As a Latvian, preservation of national identity is important for me but it should be promoted in parallel to economic development.


Will you launch a political party?


No. We are thinking much wider. A party represents only a part of society while we plan to act in the interests of the whole country. We hope for support of hundreds of thousands people.


Like the Popular Front enjoyed in Latvia years ago?


Maybe… Latvian independence began at the congress of writers. We also stake on intelligentsia, academic circles and wise and decent people who currently stay away from politics as they dislike the existing option. They will definitely join the process if they see changes. We have no doubt that we shall soon begin to determine public opinion in the country.


You are a staunch supporter of the presidential republic in Latvia, of a "strong hand". Is Putin's example attractive for you?


Each country looks for its own model of efficient governance. Russia has its own while France has a different model. But it is clear that during radical reforms the vertical of power must be sustainable. The people shall be given the right to elect the president. He will appoint the prime minister who without partisan interference will select a team of professionals and will be responsible for the result.


They say that before parliamentary election in 2011 the influential Reform Party considered you as a potential prime minister. You said quite a few times you were ready on certain conditions to become the president of Latvia. Have you already determined the startup date for the political career?


I do not see myself in the current political system. It will be another situation if the planned reforms succeed. I have to admit I am an ambitious man…




Andris Deniņš was born in 1957. He graduated from the Riga Polytechnic Institute and post-graduate courses of the Leningrad Institute of Textiles and Light Industry. He studied in the Harvard Business School (USA) and the Swedish State Academy. In 1992 he became PhD, Economy, and professor of the economy and management faculty of the Latvian University.

He is director of the BDO auditing company, founder and chairman of the Strategic Research and Management Center created in 2012 to promote innovative productions.


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