Territorial reform to have little effect on reducing economic differences, experts say

The territorial reform proposed by the Environment Ministry is not directed towards developing regional economies. It instead aims to provide access to services of equal quality, a number of economics experts told Latvian Radio.

Economist Andris Miglavs of EDO Consult said that the outcome of the territorial reform would be municipalities with a greater number of residents. But it is clear to him that the reform will do little to reduce economic differences between Latvian regions.

"Differences in regional development won't disappear by redrawing the borders. That's why these goals will not, in effect, be reached. But a number of factors [could contribute] to economic development, such as tax changes – as today municipalities are dependent on the income tax but not the income they've generated. One should also discuss changing the model of managing road infrastructure, giving a great part and the involved resources to the control of the municipality.

"One should also discuss implementing economic and business development programs. But the current reform doesn't discuss any of these," said Miglavs.

Vents Armands Krauklis, the head of the Valka Municipality, said that there are currently fewer than 10,000 residents in the municipality, but it would like to become bigger. The question is whether the neighbors would agree.

"The Rūjiena, Naukšēni and Strenči [municipalities] aren't exactly pleased about this idea. At any rate, I see we share the same problem, namely, depopulation. [..] If it's not just redrawing the map, the reform can have a positive effect if it also includes other important decisions, first of all money for roads, as well as public transportation; if state services are adapted to the new municipalities; and if there's support over state investments and reasonably arranged availability of EU funds," said Krauklis.

He did admit that there's a "self-preservation instinct of a sort" at municipalities. 

Estonia had a "social pillow" for municipal employees out of work. "We should have something similar in place, and in that case I think the emotions wouldn't be as pronounced," he said.

Meanwhile Mārtiņš Āboliņš, an economist at Citadele Bank, said that the reform doesn't aim to develop regional economies but instead seeks to ensure access to equally good services. 

"Rīga dominates Latvia's economy to a large degree, and it's part of a global trend. Across the globe, the economy is mostly concentrated around the big cities.

"But if the municipalities were larger, they would have more resources to attract investors. We see that the small municipalities aren't able to work towards achieving this. And the other thing is that it would increase managerial competition. The larger the municipality, the greater the competition for ruling it," said Āboliņš.

Meanwhile Miglavs remained skeptical on that the reform would substantially cut administrative costs, but remains confident that Environment Minister Juris Pūce (Development/For!) has finally resurrected the matter and that there'll be solutions that take a number of interested parties into consideration.

The administrative-territorial reform project envisages the creation of 35 local government regions centered on towns and cities rather than the more dispersed model currently in operation.

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