The great influence of the EU funding instruments on the Latvian economy

Table of Contents

List of Tables, Figures, Graphs and Plates

Preface

Executive summary

Chapter 1. Introduction
1.1. The background of the problem
1.2. The background of the author's study

Chapter 2. Objectives of the study
2.1. Problem Statement
2.2. Objectives of the Study
2.3. Hypothesis Statement
2.4. Limitations to the Study

Chapter 3. Literature review
3.1. Chapter introduction
3.2. A brief history of the available EU funding instruments in Latvia
3.2.1. EU pre-accession funds (ISPA fund, SAPARD programmes, Phare programme)
3.3. Available funding instruments
3.3.1. European Regional Development Fund
3.4. Future without the support of EU funds: possibilities and alternatives
3.5. Introduction to the Author’s Discussion

Chapter 4. Collection of Primary Data
4.1. Methodology
4.2. Research Design
4.2.a. Type of Research
4.2.b. Design of the Research Instrument
4.2.c. Sample Selection
4.3. Research Execution
4.4. Analysis of Data
4.4.a. Profile of Respondents
4.4.b. Analysis of Responses

Chapter 5. Intermediate Analysis and Conclusion
5.1. Hypothesis Testing
5.2. Intermediate Conclusions

Chapter 6. Overall Conclusion and Recommendation
6.1. Summary of Findings
6.2. Overall Conclusion
6.3. Recommendations on further study
6.4. Lessons Learned / Learning Aspects
6.5. Ethical implications

Bibliography

Appendices
Appendix 1. Thesis Approval Form
Appendix 2. Blank Questionnaire

List of Tables, Figures, Graphs and Plates

No Name

3.1. Rate of changes in Latvia’s real GDP (%)

3.2. EU funds implementation status till 30.09.2016., M EUR, % of EU funding

3.3. EU funds implementation status (project level) till 30.09.2016., M EUR, % EU funding

3.4. Progress report 2007-2015 of the structural assistance through ERDF, CF, and ESF

3.5. Contraction ratio breakdown according to EU fund (at the end of 2015)

3.6. SMEs Competitiveness (3rd prioty) status till 30.09.2016., M EUR, % EU funding

3.7. EU funds as % of GDP in Latvia, 2004-2015

3.8. ERDF and Cohesion fund resources and national co- financing for the 2007-2013 period in Latvia, intitial (2007) and last (April 2016)

3.9. Main macroeconomic indicators as for March 2017

3.10. Consolidated General budget balance: 2016 - 2017

3.11. Total Budget by Fund: Latvia, EUR in the 2014-2020 planning period

3.12. EU Budget by Fund: Latvia, EUR in the 2014-2020 planning period

3.13. National Budget by Fund: Latvia, EUR in the 2014-2020 planning period

3.14. ERDF Budget by Theme, EUR Billion in the 2014-2020 plan- ning period

3.15. % of the general public that have heard about Latvia’s eligibility to the means of EU funding

3.16. Awareness of the existence of seperate EU funds among the gen- eral public 2013-2016

3.17. Awareness of seperate EU funds among the general public 2013-

3.18. The general public’s self-assessment of possessing knowledge of EU funds

3.19. The general public’s opinion on whether the information available is insufficient

3.20. Information sources through which information on EU funds and supported activities has been acquired

5.1. Demographic information

5.2. Respondents’ understanding of the concept of EU funding instruments and their function

5.3. Respondents awareness of EU funding instruments

5.4. Channels through which respondents have acquired information on EU funding

5.5. Respondents’ observations on improvements needed to enhance the public recognition of support areas and the possibilities provided by EU funding instruments

Preface

This Thesis was written by a Finance/ BBA International Management 4th year student, and concludes a 4 year cycle of acquiring the necessary knowledge to prepare and defend this research. It presents the results of a study towards evaluating the level of awareness of growth options provided by European Union (EU) funding instruments, a short history of the early stages of EU funds’ absorption, an insight of the existing financing mechanisms, a closer description of the most common source of financial aid to small and medium sized enterprises (SMEs) - European Regional Development Fund (ERDF)-, and an evaluation of future prospects of EU funding.

The author of the work finds the submission of this Thesis bittersweet - these 4 years have proved to change and widen their perceptions much more than ever imagined. And, in the author’s opinion, it is exactly what higher education should be about - expanding perspective, not only imparting knowledge in a specific area.

The author would foremost like to thank those, who have contributed the most in the making of this work practically and academically: firstly, my head supervisor Kārlis Ketners and, secondly, programme director Tatjana Mavrenko for valuable advice on various topics regarding the preparation.

On top of that, the author would like to thank all the academic staff that have contributed in acquiring this diploma troughout the period of the last 4 years - the input in terms of knowledge and added value through provoking thoughts on the widest range of real world issues is invaluable and greatly appreciated.

Finally, the author would like to show the biggest possible gratitude to their mother for the endless support and, most importantly, providing them education.

Executive summary

Nowadays, a noteworthy portion of Latvian citizens, both natural persons and owners of SMEs, have or at some point have had promising business ideas, but lack funding and knowledge of ways to acquire it. Moreover, the current EU funds planning period will come to an end in 2020 without a clear vision of future EU stimulus towards building competitive and inclusive economy and their budgetary distribution.

This report describes the great influence of EU funding on a variety of economic sectors and functions of funds, displays some of the macroeconomic statistics in relation to their contribution to economic development agenda, evaluates the level of awareness of EU funding opportunities, and provides informed assumptions of future without knowing the EU budget allocation strategy and its distribution between the target sectors.

Secondary research was conducted to describe the background of the issue and make comparisons between results on the subject matter of primary research already carried out and the one conducted by the author. Later, statistical tools were applied in analysis of the results, complemented with graphical representations, and, finally, conclusions were made in relation to the author's findings.

This Bachelor Thesis consists of 6 main chapters and 22 subchapters. Chapter 1. Introduction sets out the background of the problem and the background of the study, complemented by the author’s brief assessments, concerns and substantiations, that are justified in greater detail in Chapter 2. Objectives of the Study. Chapter 2 provides an insight in the development of Problem Statement, Objectives of the Study, Hypothesis0 and Hypothesisa, and Limitations to the Study, with sufficiently descriptive emphasis on each of the subchapters to assert the logical link and sequence in the process of defining these cruical components. Chapter 3. Literature Review accounts for all the theoretical background needed in preparation of this Thesis: the author provides an insight in the history, as well as the present and the future of EU funding prospects in Latvia. Chapter 4. Collection of Primary Data reports on research methodology, research design, research execution, and analysis of the data obtained. Chapter 5. Intermediate Analysis and Conclusion provides for testing the Hypothesis and drawing inferences on the results of the analysis carried out in Chapter 4. In Chapter 6. Overall Conclusion and Recommendation the author of the work summarizes the findings, draws an overall conclusion, makes recommendations on further study, depicts learning aspects and comments on ethical implications. Glossary was not incorporated in the structure of the work because of the lack of necessity. All abbreviations are explained in the brackets after the first appearance in text. The two mandatory Appendices are added at the end of this paper.

As the author reveals 2 questions of interest in Chapter 1.1. The background of the problem – “is society really aware of the broad opportunities provided?” and “what will happen to Latvian economy after the end of the last planning period - is the implementation of these funds well-considered and utilized to the best ability?” – they have come to 2 important conclusions.

One of the findings arose as a result from conducting secondary research – currently a considerable portion of development projects in Latvia are fully dependent on the EU funding, rather than being financed by the national budget, which asserts the topicality of the author’s proposed discussion. After assessing the political and economic environment in an European context, the author of the work concluded that most likely the priority directions will not change remarkably, with the most funds being granted to projects with the greatest socioeconomic impact, although the funding instruments could be changed by the structure and adjusted to a lending-and-blending approach.

The major conclusion that arised from conducting the primary research was that Hypothesis0 could not be rejected – young people, even with academic and professional backgrounds related to the subject area, lack basic knowledge of the nature and purpose of EU funding instruments. Therefore, Hypothesisa could not be accepted and did not prove to be true.

Chapter 1. Introduction

In this chapter, the author of the work reports on the subject matter: the background of the research problem and, consequently, the author's study.

1.1. The background of the problem

The first reform of the Structural Funds was undertaken in 1989, and it established priority development objectives and the basis of a system of partnership. 4 years later, in 1993, as a result of The Treaty of the European Union entering into force, Cohesion policy became a priority objective of the Union. The year of 1999 came with redefinition of the priority objectives and the strategy of targeting the financial provisions available to favor the most disadvataged members – the second reform of the Structural Funds was adopted.

After the collapse of the Soviet Union, the strategy Latvia undertook was to integrate in the Western society to maintain independence as a member of network of international bodies. However, the end of the Soviet era came with its challenges – the institutional environment and poor economic conditions required serious efforts to meet the Copenhagen criteria. (Grigas A., 2013) Together with Poland, Hungary, the Czech Republic, Slovakia, Slovenia, Cyprus and Malta, Latvia and the rest of the Baltic States successfully concluded the EU accession negotiations in 2002. Latvia became an EU member in 2004. (Karnīte R., & Bormanis U.,2003)

Within the EU Cohesion policy framework, Latvia, as an EU member state, throughout the last decade has and will keep receiving significant resources, aimed at increasing production potential and competitiveness of SMEs, reducing social inequality, and promoting energy efficiency. The funding received is invested in various economic sectors, such as health, education, transport infrastructure, new technologies development, and promotion of employment.

In 2007-2013 planning period, EU funds (European Social Fund, European Regional Development Fund, and Cohesion Fund) accounted for more than EUR 4.5 billion, which is the greatest budgetary support for Latvia and adds up to 70% of the total public financing. In the 2014-2020 planning period, EU funding will account for EUR 4.4 billion. (Ministry of Finance, 2017)

The budget for the next planning period will be allocated only over the following years, but the main priorities are bound to remain as set previously, although mechanisms through which the funds would be granted could be reviewed. In a recent interview, Latvian Minister of Finance stated that “the country will try to convince the European Commission (EC) that the less developed regions of Latvia will still need support after the current EU funds programming period concludes in 2020”. Further future, however, remains unclear, although the fact that EU funding will not be infinite has to be kept in mind.

The major financial instruments under which Latvia receives financial assistance through Cohesion policy, are EU Structural funds: ERDF, European Social Fund (ESF), and Cohesion Fund (CF), which in Latvia are managed by the Ministry of Finance of Republic of Latvia. (Birziņš A. Et al., 2003)

Depending on compliance with developed, transition or less developed region categories, funds can provide from 50 to 85% of the total financing of the project. The rest of the financing can be obtained from public (national or regional) or private sources. The main objective of EU funds is to improve competitiveness by promoting growth and creating jobs.

Latvia is funded also by European Agricultural Fund for Rural Development and European Maritime and Fisheries Fund, but these funds are administered by the Ministry of Agriculture and the Rural Support Service. (ES fondi, 2016)

In this paper, the author chose to report on only the funds managed by the Ministry of Finance to narrow down the research and ensure quality and sufficiently descriptive analysis of the subject area. Noteworthy, a greater emphasis was set on ERDF and its influence on development of SMEs.

The author's logical conclusion is that EU funding is an invaluable opportunity to attribute the means that would otherwise prove insufficient for rapid growth and idea implementation. Nevertheless, this conclusion reveals two questions: first, is society really aware of the broad opportunities provided, and, second, what will happen to Latvian economy after the end of the last planning period - is the implementation of these funds well-considered and utilized to the best ability? In this Thesis, the author aims at answering the questions regarding the awareness of opportunities provided by these funding mechanisms and makes informed assumptions of the future of national economy after the EU aid will come to and end. As a Finance student, the author herself is largely interested in the opportunities aimed at supporting businesses, and, for that instance, describes the areas and environment of funding available for business development.

The choice of the subject was not one of a circumstancial nature, but instead came as a natural interest, evoken by the author's current position: for the last 10 months, the author of the work has worked as a financial analyst for a financial and management consultations company, FIDEA LLC, whose business operations at the time are largely connected to EU funding attraction and administrative assitance in project implementation. The author's day-to- day responsibilities are based on continuous work with clients who are willing to obtain or have already obtained financing for their businesses by providing consultations on ducumentation preparation, and issues that deal with financial audit. In author's consideration, this stimulus is cruical for some, and an added benefit to others, but it is clear that options for attracting EU funding are known among the existing industry players, e.g. Tenapors LLC and Grindeks JSC which are one of the biggest FIDEA clients. What concerns the author is whether the information on these largely specific issues is enough compehensible to people from other types of environments, especially youths with promising ideas, but no capital available for implementation? An answer to this question is sought throughout the Chapter 4 – analysis of the results of primary research.

1.2. The background of the author's study

This Thesis focuses on 2 key Research Objectives: first, the considerable contribution of EU financial support mechanisms to the development of various Latvian economic setors and the overall state of wellbeing, with greater descriptive emphasis on ERDF and funding opportunities provided to SMEs, complemented by an insight in the potential future funding prospects, and, second, assessing and making conclusions on the awareness of these options among Latvian citizens who have direct or indirect interest in attraction of these resources. The contribution is observed through macroeconomic indicators and sectoral statistics, and the awareness – through analyzing the survey conducted in primary research.

The paper explores the changes of functions in EU funds' utilization, their vital role in national economic integration in the EU, and displays the central tendencies in funds’ acquisition.

After completing the decision making process on the theme of the paper set out above, the author drew up a work plan and a timetable, as well as, most importantly, started to gather information for a strong and extensive review of the issues inspected in the main chapters of this Thesis paper.

The first step in conducting the actual study, was secondary research - a thorough analysis of the sources available on the topic. Most of the printed sources found in library date back to early 2000s when the first funds available to the Baltics were allocated, which asserts today's shortage of printed information sources and assenctuates the growing digitalization. This step at the beginning stage of preparation of this Thesis served to help in formulating Research Objectives, Questions, and Limitations to the Study, along with Hypothesis, leading to a more relevant and specific definition of the subject area.

The information gathering process called for choosing appropriate methods for keeping track of the sources already used, and recording and citing the remaining. A structural approach helped in determining problems, solutions, and developing author's own stance in questions dealing with the research subject. A closer examination of past surveys on the topic chosen for primary research was the next step in the process – assessing these findings benefited the prognosis of the forthcoming results and outlined the overall public attitude against the subject.

As evaluating the information gathered and reporting on the theoretical background, the author gradually covered key issues that lead to drawing up main conclusions and findings. This step was concluded by making suggestions on further study and providing solutions that have not been considered in the sources examined.

The final step was reviewing and editing the draft to complete and cover each chapter in a logical, comprehensible manner. The author concluded the work in accordance with methodological requirements.

Chapter 2. Objectives of the study

In this chapter, the author aims at offering a synopsis of how the Hypothesis was drawn up: the core subject matter, Objectives of the Study, and Limitations are described in the corresponding subchapters.

The purpose of the chapter is to justify the topicality and need to assess the subject matter through a brief, systematic preview.

The Problem Statement was described as concise as possible to serve as the grounds of setting focus on the core issues that needed to be adressed. Consequently, arose the general aims and Objectives of Primary Research, compatible within the given time frame and with the resources available to the author. The Hypothesis0 was set on the basis of author’s observations – limited evidence that served as subject to further research to accept or reject the contrary Hypothesisa. Limitations to the Study were defined for primary research conducting purposes to avoid inaccurate context in interpretation of the findings.

2.1. Problem Statement

The central Research Problem set was the assessment of awareness of EU funding opportunities among youths. However, in the Thesis subject area defining process, an additional Research Problem arose: in order to address the primary Research Problem, theoretical grounds had to be set to fully comprehend all the aspects of the funds’ structure, historical background, current implications in the national economy, future prospects, and the true contribution to the development of SMEs.

To address the main Research Problem, for the purpose of narrowing the sampling unit and sample size to draw more precise conclusions, the author chose to report on the results of questionnaires filed by young people in the age group from 20-30. In the author’s observations, a relatively high proportion of those youths that possess a university diploma and/ or background knowledge of the business environment, has considered launching a business or at some point has had at least an a idea regarding potential entrepreneurial directions. However, although the state has introduced various iniatives to promote creation of new businesses and growth of existing ones, there is room for improvement in terms of intelligibility.

This observation partly arises from the author’s professional background: during the past year while working as a financial analyst for a financial and management consulting company that deals with EU project implementation through the prism of administrative assistance and provision of other support functions, it has become clear that even with knowledge as to where acquire the necessary funding, the comprehension of how it is actually done is limited - this is exactly why quite a number of companies increasingly decide on hiring a consultant to get through all the phases of project implementation and deal with numerous bureaucratic matters. In the author’s opinion, this tendency displays the growing awareness of funding options as a whole among already established businesses, but also is a sign of the stagnating level of understanding the nuances. This applies to different size enterprises, including big domestic companies, e.g. Dobeles Dzirnavnieks JSC, Olainfarm JSC, Tenax LLC etc., despite the remarkable competencies of their management teams, their positions in the market and extensive experiences in business operations.

The observation enhances the author’s skepticism towards the ability to grasp the true essence of the procedure and set the right focus for SMEs, let alone choosing a funding instrument that is the most suitable for a successful project implementation.

The additional issue the author chose to address came as a logical complement to the primary Research Problem: an eximanation of the scope and nature of EU financing mechanisms was needed to present the background of the research subject and assert the topicality of the matter, whilst at the same time setting emphasis on potential future outcomes.

The Research Problem was defined as follows:

Nowadays in Latvia, a considerable portion of people have promising business ideas, but lack funding and knowledge of ways to acquire it. The problem should be addressed in order to encourage entrepreneurial development.

It could be defined as The Primary Research Problem. The Secondary Research Problem, consequent to the Primary, is defined below:

The EU funding environment in Latvia has changed significantly since the introduction of the first financial aid mechanisms in EU pre-accession process. After joining EU, the scope and contribution of EU support to the national economy has expanded vastly, whilst the question about the future prospects remains unanswered.

Throughout this paper, the author of the work tried to deliberately investigate and depict both of the Research Problems to come to clear conclusions and provide a compehensive overview.

2.2. Objectives of the Study

The primary Objectives of this study were to assess the awareness of opportunities provided by EU financing mechanisms among the chosen target respondents, a short history of EU funding in Latvia, currently available EU funding instruments with a descriptive emphasis on the biggest available fund - ERDF-, ways for SMEs to acquire financing in desired areas, and potential future policies.

A short history of EU funding in Latvia was targeted at being able to compare the investment opportunities and environment before and after Latvia joined the EU in May 1, 2004, and reporting on the background of the issue chosen as the topic for this paper.

Further, the author reports on the available funding instruments to demonstrate knowledge of the different functions and support areas. ERDF was chosen as the instrument that has been the most beneficial to the economic development of Latvia: in the 2004-2006 planning period, ERDF accounted for EUR 382 043 677 or more than a half of the available funding, whereas in the 2007- 2013 planning period - EUR 2.4 billion or 53.86% of the total funding. (European Commission, 2016) Next, the author of the work presents a summary of the stimulus provided for the growth of SMEs, rather than other strategic directions, like social inclusion.

Then the author analyzed the information available on potential scenarios of policy changes after the current 2014–2020 programming period will come to an end to gain understanding of how it could alter the funds’ contribution to the country’s further development.

Finally, the primary research was conducted to analyze the knowledge and attitudes of

Latvian youths and draw conclusions about the matter.

The Primary Research Objectives that were taken into account in the preparation of Chapter 4, are based on these general aims and listed below:

- To estimate the level of awareness of EU funding prospects for entrepreneurial development;
- To determine the most well-known EU funding instruments;
- To identify the main channels through which information about EU funding instruments is acquired;
- To indicate the potential of attracting more people to making use of funding available from EU funding mechanisms.

The Secondary Research Objectives, taken into account in the formation of Chapter 3, were the following:

- To report on the historical background of EU financial aid in the pre-accession process;
- To describe the funding environment after EU accession, as well as the scope, nature and use of the available instruments;
- To analyze the possible policy changes in the future.

With this part of the Research Proposal determined, the author or the work avoided collection of data that were not necessary in solving the Research Problem, and remained focused on interpretation and utilization of information obtained along the lines of the set Research Objectives.

In order to reach the Objectives, an extensive literature review was carried out and a survey was conducted to fulfil primary and intermediate analysis.

2.3. Hypothesis Statement

As stated by Sarantakos (1993: 1991), “A hypothesis can be defined as a tentative explanation of the research problem, a possible outcome of the research, or an educated guess about the research outcome”. Therefore, on the basis of the suggested Research Problem, the author drew up two contradictory Hypothesis which were later verified through analyzing the survey conducted.

The title of the survey was “Awareness of the options for entrepreneurial development provided by EU funding instruments”. This by itself explains the concern the author adreses - whether information on the topic is perceived as sufficiently available, comprehensible, and useful. Out of this concern supervenes the Hypothesis:

Hypothesis0: Young people lack knowledge of EU funding instruments for entrepreneurial development;

Hypothesisa: Young people have a sufficient amount of information on EU funding instruments for entrepreneurial development.

The Hypothesis were set as the basis for conducting the primary research and cosequently accepting or rejecting the author’s assumption.

2.4. Limitations to the Study

The author views Limitations to the Study as constraints on generalizing the results obtained – the methodology chosen clearly impacts the interpretation of findings.

In the preparation of this paper, the author was fully aware that, when being of interest about ways to attract financial support, EU funds, distinctly, are not the only option available. On top of that, the results of the survey were influenced by the limited amount of respondents and inability to distinguish whether the answers provided by the respondents were entirely true. This can be explained by the bias contained by self-reported data: in this case, selective memory (remembering or not remembering experiences or events that occured at some point in the past).

The compilation of information needed for the theoretical background reported on in Chapter 3, made it clear that for a broader and more comprehensive assessment, the author would need access to a wider range of resources.

This leads to defining the Limitations of the Study:

- Sample size (it is not possible to survey an unlimited amount of people);
- Self-reported data (data provided by respondents has to be taken at face value);
- There are additional options to acquire funding through various other funding mechanisms (public funding platforms, risk capital companies etc., so the findings may not show a fully objective picture of the awareness of attracting investment in general);
- Limited availability of resources.

However, the author of the work deemed the sample size sufficient to analyze tendencies and relationships from the data for a representative distribution. There were no study design limitations, except for the sample frame (sample size of 50 with at least 40 valid responses).

Chapter 3. Literature review

3.1. Chapter introduction

Any country's economic structure consists of many correlating elements, and is formed on the basis of several objective factors and the needs of society, which determine both the overall demand and production volume, and, therefore, also the effectiveness of economic function and growth pace.

In this chapter, the author of the work provides an insight in the history of the research topic to compare the funding opportunities and environment before and after joining the EU in 2004 and report on the background of the issue, describes the available funding instruments, with emphasis on the biggest available fund – ERDF –, and summarizes the stimulus provided to SMEs as the bottleneck of the various beneficiaries of EU finacial aid. Lastly, the author describes the main future prospects of EU funding in Latvia: possibilities and alternatives.

3.2. A brief history of the available EU funding instruments in Latvia

The history of the general EU budget emphasizes the union' s nature as a joint economic institution. At the very beginning, the EU budget was relatively small and financed via national contributions. Throughout the development of the European Union, numerous policies have been introduced that in turn have worked as a catalyst to an overall expenditure growth. (Zīle R. et al., 2000)

EU structural funds were reformed in 1988, when the provisions of new operational tasks of Structural funds were adopted. Ever since reformation, EU structural policy has covered 3 sectors:

1. Infrastructure development;
2. Support for manufacturing sector;
3. Human resources development.

In the period from 1994–1999, six main Structural fund targets were excreted that dealt with development and structural adjustment of the less developed member states, support for regions that were severely affected by industrial decline, battle against permanent unemployment and integration of the unemployed in the labor market, labor adaptation to industrial changes, support for changes in agricultural and fishery structures, rural areas development, and development of those regions with low population density.

In 1999, the targets of Structural funds were redefined again, excreting only 3 general aims, connected to contributing 2/3 of the overall funds budget to development and structural adjustment of the less developed member states, 11% to regions affected by industrial decline, and 12% - for battle against permanent unemployment and expenditures for inclusion of unemployed youths in the labor market. (Karnīte R., & Bormanis U., 2003)

The Latvian economic structure and proportions between separate elements of the national economy for manufacturers, fields and regions have significantly changed between 1990 and 2017.

After the restoration of independence in 1990, the main objectives of economic policy became building a liberal, open, on the principles of competition and private property based economy with unlimited goods, services and capital movement, and achieving successful integration in the EU. Retrieving independence prefaced numerous interrelated reforms in microeconomics, macroeconomics, and financial and capital markets development, and, in the implementation, the specific economic conditions and existing political restrictions had to be taken into account.

While analyzing the country’s economic development and reforms carried out since 1990, when Latvia regained independence, till early 2000s, several directions could be secreted:

1. The institutional reform, which included legislative and governmental reform to construct an infrastructure suitable for the market economy;
2. Prices and market reform, which began with the liberalization of prices and foreign trade and concluded with the renewal and convertibility provision of the national currency;
3. Formation and development of the private sector through privatization and attraction of foreign capital;
4. Financial sector reform;
5. Stabilization of economics and structural reforms.

(Karnīte R., & Bormanis U. , 2003)

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