Thorough disputes between the Ministry of Transport and Liepāja Municipality. A draft law on the reform of Latvia’s largest ports is being submitted to the Saeima for rapid steps. Liepāja residents promise to prevent the transfer of the port and 65% of the city territory to state control. The Association of Port Tenants has appealed to the Competition and Foreign Investors Council, stating that the draft law is illegal.
The intention to change the management model of Latvian ports by transforming them into capital companies has arisen several times during the last 20 years. In 2002, Einārs Repše’s “New Time” tried to implement it, while in 12 the idea of reform was promoted by the Zatlers Reform Party in the name of overcoming corruption. In both cases, municipal resistance prevailed.
The issue came up again after Ventspils Mayor Aivars Lembergs and Ventspils Freeport were added to the US sanctions list at the end of last year. The big plan, along with the changes in Ventspils, envisages the transformation of the Freeport of Riga and the Liepāja Special Economic Zone into state capital companies. In the opinion of the Ministry of Transport, in the case of Liepāja, the model established 23 years ago is outdated, port management is inefficient and the infrastructure is outdated. The municipality rejects such insults.
“This offer, sorry, is a thawed soup from the 2012 World Bank study, in which Liepāja is mentioned only in passing. Liepāja has not been studied, Riga and Ventspils have been studied. We are offered to take a step, but it is not clear in which direction we are told we have to jump in the canal, but we do not know what awaits us down there, ”says Jānis Vilnītis (LRA), Chairman of Liepāja City Council.
Liepāja SEZ currently consists of 43 capital companies, which last year invested 31 million euros in the port infrastructure. The head of Terrabalt, one of the first companies in the Special Economic Zone, also expresses confusion about the planned port reform.
“I have been working here since 1992. We came almost to the bare place, invested ourselves, looked for partners. In 1994, the first ferry arrived in the port of Liepaja, even at that time the Russian army was still going out. We started from scratch, we created it all ourselves and do not want to lose it, ”says Jurijs Solovjovs, director of the Liepāja SEZ stevedoring company Terrabalt.
As ports become state capital companies, the new draft law also envisages changing the management model. They would become commercial companies with the aim of making a profit. The municipality is alarmed that this will have a negative impact on the business environment. Although the Minister of Transport indicates to TV3 Uudised that the tax policy in Liepāja SEZ will not change, entrepreneurs indicate that the draft law does not contain a specific plan. Therefore, the planned investments in Liepāja have already been slowed down.
“What will happen now? So far, all the texts that have come from the business side of the Ministry of Transport have simply passed them by ear. Entrepreneurs are currently waiting and have put all their plans, if not in the far corner, then at least in the corner of the table, ”says Jānis Ēlerts, Chairman of the Liepāja Port Tenants’ Association.
The new draft law provides port authorities with the right to provide stevedoring and other services and to profit from commercial activities in ports after their transformation into capital companies.
“And here the competition council should also say that this offer was mixed in business,” Vilnītis believes.
The municipality promises not to allow it. The port’s tenants have addressed the Competition and Foreign Investors’ Council in a single letter – emphasizing that the new draft law is in conflict with competition norms. This will lead to a situation where, on the one hand, the port authority will lease port land to private operators, set rents and, on the other hand, take over the infrastructure set up by existing stevedores to offer its services on the same basis.
“According to this new idea here, even without the administration, it will be possible to provide stevedoring services – this is not our little thing we care about. We take care of the infrastructure, attract entrepreneurs who further invest in the development of the port, attract cargo. If we went inside, they would become a competitor, which many of us ask. Yes, entrepreneurs are excited, ”says Uldis Hmiļevskis, Deputy Manager of Liepāja SEZ.
Minister of Transport Tālis Linkaits (JKP) connects the resistance of Liepāja municipality with the efforts of the local authorities to maintain influence over the ports.
Linkaits also emphasizes that ports are a strategic asset of the Latvian state and not a place of pleasure for mayors: have hard times. There has always been resistance from local and local authorities to any change that could reduce the influence of local politicians on port management. ”
The mayor of Liepaja hopes for a discussion and an opportunity to find a solution to the tense situation – but if the only offer will be a capital company, it will be difficult to agree. The municipality also expects an analysis of the financial report, which would substantiate the statements about the inefficient operation of the port.
“I very much hope that we will be able to discuss with the minister at the level of senior officials and I would very much not want us to go down the path of insult, that is not right. We expect what the added value will be, we have not heard it, we have heard that there will be a capital company, it will be better, but what will be better? ” asks Vilnitis.
Liepāja Special Economic Zone is not just a port, it includes the territory of Karosta Airport in the total area of 4000 hectares. The municipality was concerned that after the port reform, 65% of the city’s territory would come under public administration.
Linkaitis does not currently have a majority support in the coalition in the reform of the Liepāja SEZ. “Jaunā Vienotība”, the national association and “KPV LV” – do not support the transformation of Liepāja port into a state capital company. The Prime Minister has also pointed out that there are no signs of poor governance in Liepaja as in Riga and Ventspils. Meanwhile, the Minister of Transport has decided to submit amendments to the Seimas in the autumn and to transform the ports into capital companies next year.