LATVIA. A. Socio-economic forces

Transcription

1 LATVIA A. Socio-economic forces Growth rates in the Latvian economy have been very rapid in recent years. In the period between GDP grew on average by 8% annually, but the growth rate in 2005 was 10.2%. These growth indicators are the highest in the European Union. The high growth rates in Latvia are based on the steady increase of domestic demand and export growth. Latvia's accession to the EU is a particularly stimulating factor for the country's economy. This strengthens confidence that growth in the coming years will also be sustainable. If there are no external shocks GDP can be expected to grow by 6-8% annually in the medium term. The Ministry of Economics forecasts the growth of GDP in 2006 at 8.5%. B. Global economic forces The economic growth potential is best characterised by the investment increase. In the period from 2000 to 2004 gross fixed capital formation rose 1.7 times. The investment growth rate and its share in GDP are among the highest in the EU. Investment continued to accelerate rapidly in 2005 promoting the modernisation of production and transition to new more productive technologies. EU is the main trading partner of Latvia. Trade with EU member states has been constantly expanding since restoration of Latvia s independence, and currently more than 70% of Latvian exports and imports are linked to the EU, including also the new EU member states. In the 11 months of 2005 most of Latvia s foreign trade turnover was made up by trade with Germany (13% of the total), Lithuania (13%), Estonia (9%), Russia (8%), Sweden (6%) and Poland (6%). EU accession provides Latvia with new opportunities for economic growth. By joining the single EU market Latvia can benefit from the advantages provided by a broad and stable market, free movement of goods and services, labour and capital, i.e., the most favourable terms on the EU market. Support from the EU funds mitigates, in turn, the effect of structural changes in the economy and helps to reduce the social and economic disproportion. C. Sociodemographic issues On the Latvia had 2 million 319 thousand inhabitants. The number of inhabitants between 1999 and 2004 has decreased by 80 thousand.

2 1. picture Changes in number of inhabitants tūkst gadi Source: Central Statistic Bureau EUROSTAT prognoze is that the number of inhabitants will still decrease: 1. table Prognoze for the rise of number of inhabitants Increase of number of Number of inhabitants on (thousands) inhabitants in comparison with , % ES ,3 2,9-1, ES ,1 4,2 0, New EU ,1-3,9-11,7 member states Latvia ,3-10,8-19,2 * actual data 2015., 2025., EUROSTAT prognosis Unfavourable demographical situation since 1991 is indicated by two main negative processes decrease of birth rate and ageing population, and migration of inhabitants: 2.table Population growth (on 1000 inhabitants) Birth rate Mortality rate Population growth ,3 8,6 9,0 14,0 13,9 13,9-5,7-5,3-4,9 Source: Central Statistic Bureau EUROSTAT gives prognosis that rapid ageing of population will be continued in the nearest future.

3 3.table Structure of number of inhabitants by age, %* Age 0-14 Age Age above ES-25 16,4 14,4 13,4 67,2 63,0 56,7 16,4 22,6 29,9 ES-15 16,3 14,4 13,5 66,7 62,8 56,5 17,0 22,8 30,0 New 16,7 14,4 13,2 69,7 64,5 57,7 13,6 21,1 29,1 memberstates Latvia 15,4 16,2 14,8 68,4 64,1 59,1 16,2 19,7 26,1 * 2004.gads actual data 2015., 2025., EUROSTAT prognosis As the influential factor it should be mentioned that emigration rate is higher than immigration. 4.table Migration saldo Source: Central Statistic Bureau In a period from 1999 till 2004 the density of inhabitants in urban and rural areas has changed. At the beginning of ,1% were living in urban areas, 31,9% - in rural areas. On the 1 st of January in ,8% in urban areas while 32,2% in urban areas. The change in density can identify the changes in economic circumstances and structure. Latvia also is characterized by relatively high concentration of inhabitants in the capital in ,7% of inhabitants were living in Riga. Togehther with diminishment of number of inhabitants in total there have been changes also in number of inhabitants with different ethnic backgrounds and their proportion but still very fundamental changes since 1999 have not taken place. In 2004 Latvians are 58,6%, Russians 28,6%. 1 The proportion of men and women has not changed fundamentally over several decades. In 2004 the proportion was 46% of men and 54% of women. D. National socio-economic policies Economic activity is improving in all main economic sectors. Domestic demand invigorates the development of services especially the development of trade and construction. High growth rates can also be observed in the transport and communications sectors. Manufacturing output in the period between rose on average by 9% per year. The competitiveness of Latvian manufacturers can be explained by the rapid rise in productivity spurred by the investments that were made in previous years. Centrālā statistikas pārvalde Demogrāfija, 2004

4 Economic growth in Latvia was achieved in a stable macroeconomic environment. The general government budget deficit in Latvia is low and does not exceed the level set by the Maastricht criteria. The Parliament has confirmed the general government budget deficit for 2006 at 1.5% of GDP. Although the current account deficit is comparatively large, it should not be considered today as critical as it is covered by foreign direct investment and long-term loans. Net foreign reserves of the Bank of Latvia fully cover the reserve money. Table 5 Latvia: Key Indicators of Economic Development f (growth against the preceding year, %) Gross domestic product f 8.5 Private consumption f 9.0 Public consumption f 2.5 Gross fixed capital formation f 15.0 Exports f 9.6 Imports f 7.8 Consumer prices (in % of GDP, unless indicated otherwise) Central government budget fiscal balance f -1.5 Central government debt f 10.5 Current account balance f -9.8 Foreign direct investments (flows) f 5.0 Unemployment rate (15-74 years) f 8.8 f forecast A relatively high level of inflation has been observed in recent two years. Its rise in 2004 was accounted for by a combination of several one-off effects (an increase in the administratively regulated prices, harmonisation of the indirect tax rates, inflation expectations due to EU accession and the high oil prices on the global scale). Inflation in 2005 remained on a high level owing mainly to the rises in the global oil prices and the second phase of inflation (spiral). According to forecasts, due to the diminishing influence of the aforementioned price-raising factors, inflation will decrease gradually. With the economic growth, income of the population is also growing. The real income of employees in the period from 2000 till 2004 has increased by 24%. It continued increasing in 2005 and in the first 3 quarters of this year went up by 9 10% against the respective quarters of the preceding year.

5 It should be noted that the growth of population s income is very uneven, the society is becoming increasingly polarised in terms of income, and the number of poor people in the country is relatively high. Growth of old age pensions is slower than growth of the income of employees. The Gini index measuring inequality in distribution of income within the country has gone up from 0.34 in 2000 to 0.36 in The employment and unemployment indicators are gradually improving. In recent years the number of employed has been rising every year while the unemployment rate has decreased from 14.4% in 2000 to 10.4% in 2004 and in the 4th quarter of 2005 it was 7.8%. E. Political system Latvia is democratic republic with a parliamentary system of government. After the constitution of Latvia (Satversme) the parliament (Saeima) is elected in general, equal, direct and secret elections, based on proportional representation. The Saeima has one hundred seats. The parliament elects the President of State and approves the cabinet of Ministers. President is the head of the state and serves largely representative functions. The elections of Saeima are held once in four years, the last were in October The results were following: New Era ( Jaunais laiks ) 26 seats, For Human Rights in a United Latvia (Apvienība Par cilvēka tiesībām vienotā Latvijā ) 25 seats, People s Party ( Tautas partija ) 20 seats, Union of Greens and Farmers (Zaļo un Zemnieku savienība ) 12 seats, Latvia s First party ( Latvijas Pirmā partija ) 10 seats, For Fatherland and Freedom/LNNK ( Tēvzemei un brīvībai/lnnk ) 7 seats. The Latvian party system is still not fully stable. The number of politically influential (with representation in parliament) parties changes with every new election. The ongoing popular disillusionment with regard to existing political forces gives permanent ground for new parties. This phenomenon is partly connected with unrealistic popular expectations that no political party can meet. Another reason is widespread political corruption that undermines the legitimacy of the existing political elite. Also people tend to associate their political preferences with particular personalities rather than political organisations may be of some importance. Besides Latvian political parties have generally small membership. This is a feature that limits the linkage between political parties and broader public. According to World Bank research the Latvian economy is highly concentrated, political parties are closely aligned with economic interests, and the country s position on east-west trade and energy transit routes exposes it to strong corruption pressures. The World bank has noted also that Latvia has a high level of the so-called state capture whereby illegal payments are made by companies and individuals in order to modify the adoption of the basic rules of the game, namely laws, government decrees etc. the UN Development Program in its Human Development Report has indicated that in Latvia important political issues are often decided within close circles rather than in democratic discussions.

6 F.New management ideas In 2000 the report on poverty reduction in Latvia concluded that there exist ineffective public administration institutions and weak governance that negatively influences fair development and growth in Latvia. Also the researches by state institutions and donors showed that ineffective institutions, not appropriate human resources, not guided use of resources, public intervene in fields where market failures have not been traced, lack of transparency in public spending, corruption, have restrained private investment, that is essential element for development, employment opportunities and reduction of poverty 2. Public management has been highly influenced by the process of joining European Union public administration has to ensure adoption of acquis and absorption of structural funds. Unless Copenhagen criteria and the Treaty of Amsterdam proclaim that public administration must be democratic and follow rule of law, no common requirements or indicators exist. As the main hindrances have been mentioned slow adjustment of legal basis, lack of appropriate financial and human resources. The development of Latvian executive towards the requirements of EU can be more traced in yearly Progress Reports and the achievement of them is indicated by the joining EU as a full member. Besides EU Phare support and monitoring of the progress, the process of development of the public administration has been influenced by international organisations SIGMA reports, UNDP report Latvia. Report on Human Development 2000/2001. Public Policy Process in Latvia and Latvia. Report on Human Development 2002/2003 that concludes that there exists high sense of insecurity in the country and especially stresses the role of state for the guaranteeing personal security economical, health, community and other. The main support for public administration by World Bank PSAL programs has been for the direct regulations for business and indirectly by promoting transparency and reporting. As the most influential report there should be mentioned the report by Ser Robin Mountefield to the President of Ministers on public management situation. The main conclusions were the need for strategic management, public management reform as a precondition to join EU, need for common agreement among political parties that public management reform is in interest of all parties, common civil service, New Chancellery institution subordinated to President of Ministers and having policy and strategic planning coordination and civil service reform functions, linkage of budget process with strategic planning, horizontal audits of functions, establishment of agencies, combating of corruption and proposals for regional development. Also the projects financed by international organisations, e.g., UNDP and SIGMA must be mentioned as highly influential for the development of the many aspects of public administration reform, e.g. impact assessment, policy planning capacity and other. 2 Report and Recommendation of the President International Bank for Reconstruction and Development to the Executive Directors on a Proposed Second Programmatic Structural Adjustment Loan in the Amount of US$20.21 Million to the Republic of Latvia, August 15, 2002

7 G. Pressure from citizens In Latvia there are no wide researches on interaction between state and its inhabitants but data available indicates following: Do not believe in processes - slowly decreases the number of inhabitants that believe that processes in Latvia on the whole are going towards the right direction 39,4% agree (e.g. in 2000 agree 47% of citizens and 32% of noncitizens), 53,2% disagree, 7,4% do not know or do not have answer 3. Support for strong leadership - similar to other new democracy states Estonia, Poland, Lithuania, 70% of citizens evaluate democratic political system as good or very good but 42% think that there is a need for a strong leader who should not take in account parliament and elections. In comparison in Sweden and Denmark those who agree on democratic system are not less than 90% and ones who agree on strong leader more than 20% 4 ; Do not support pubic spending since 1997 rather stable is the number of inhabitants that think that taxes are not spent in an adequate way amplitude 68,5%-75,3%. The number of those who agree on public spending raises only in ,9% decreasing he number of persons who disagree 6,2% 5. Low participation unless 19% of inhabitants believe that it is useful to turn to the ministry because of decisions only 1,8% have tried to influence he process and 2,3% have been written the letters. 6. The widest activities have been mainly performed by the professional groups or organisations e.g. teachers, medical staff in the questions of raising the wages. As it can be seen there does not exist any remarkable pressure by citizens in the questions of public administration on the whole except on any particular policies and their impact on the society, e.g. health, social issues. H.Party political ideas Only three parties out of six that have won the last elections in 2002 have had any platforms on public administration issues in their pre election programmes: - Opposition party For Human Rights in a United Latvia transparency and fairness in state institutions, combating corruption; - Newly established party New Era combating corruption; transparency; open sittings of Cabinet of Ministers; kind, helpful and responsible civil servants; dismiss of dishonest workers and promotion of the honest; more effective public administration by reduction of needless workplaces; - Newly established party Latvia s First party wide participation of society in decision making, reduction of doubled functions, combating of corruption by qualitative laws and political will. 3 SKDS , skatīts Ceļā uz pilsonisku sabiedrību. Latvija.Iedzīvotāju aptauja, BSZI, 2001, Naturalizācijas pārvaldes pasūtījums, 52.lpp. 5 SKDS , skatīts Iedzīvotāju aptauja par dažādiem integrācijas aspektiem, 2003.gada novembris, SKDS. ĪUMSILS pasūtījums.

8 Analysis of declarations of Cabinets of Ministers in a period from 2000 can serve as a clear evidence for the decrease of public administration reform questions in political agenda. Decleration of Cabinet of Ministers for besides support for public administration professionalism, rule of law, increase in trust to government, social dialogue, increase of administrative capacity, consultation centres for development of business and diminishment of administrative burdens, states very clear tasks in reform field - the development of Public administration reform policy, common wage system, reduction of doubling of functions, information of society, promotion of cooperation between state and society, more effective public spending. Period of shows the increase in centralization and politization of civil service the development of order how President of Ministers dismisses workers in executive structures that have lost loyalty of MP, without politization of civil service, ensuring of competitive wages in public sector, common civil service including all institutions subordinated to Cabinet of Ministers, territorial planning of public institution, rise of responsibility by public officials to individuals and society, support for professional growth in public administration and its capacity. This government has also stressed the role of interaction between state and society - transparency, accountability, cooperation and information. Starting from 2004 public administration questions are slightly touched in the declarations, mainly in the context of other policies - clear mechanisms for public participation, introduction of e-government, social dialogue, reduction of gender discrimination, promotion of effectiveness of research. Declaration of the present government does not include any special activities in the field of public administration and has mentioned only issues of transparency and combating corruption. I.Chance events Besides before mentioned external consultants and international organisations whose activities have influenced public administration development in Latvia, the main chance events are based in the process of development of public management system itself. As the reform policy mainly consists of the decentralized approaches it strengthens the ability of institutions to implement any initiatives themselves. s J.Elite decision-making Public administration reform become an important issue after regaining the independence. Systematic work on public administration reform started in 1993 when Law on order of Cabinet of Ministers was re-established, adopted Law on civil service and State Reform Ministry, Latvian School of Public Administration, Civil Service Board established. In 1995 Conception of Public Administration Reform in Latvia has been adopted and on the whole in a period of the 5 th Saeima reform had a priority status.

9 Since that there have been several changes in the institutions responsible for public administration reform - Public Administration Reform Bureau ( ), Minister for Special Assignments in Public Administration and Local Government Reform Issues ( ), Minister for Special Assignments in Public Administration Reform Issues ( ). Since 2003 the institution responsible for this function is State Chancellery. As it was mentioned before since 2002 as declarations of Cabinet of Ministers did not include any concrete activities towards public administration reform as Cabinet of Ministers did not include any minister responsible for public administration policy issues. Political responsibility in this area was assigned to the Prime Minister, thus, concentrating the development of public administration policies in the core of the government. A State Reforms Division was formed in the Policy Coordination Department of the State Chancellery. This Division is responsible for matters related to the development and coordination of public administration policies, but the development and coordination of local governments policies was assigned to the Minister for Regional Development and Local-governments. Since 2001 the main policy document is Public Administration Reform Strategy and its implementation plan. In this period also other important and reform process influencing legislative acts have been adopted - Law on Civil Service, Law on Public Agencies, Law on Administrative Process, Law on Structure of Public Administration. K.Administrative system Given the relatively large number of political parties represented in Saeima, government formation usually takes at least one month after elections. Even though in theory the President of State could choose any candidate for the President of Ministers according to his or her independent judgement, in practice the candidate is nominated after intense negotiations with potential governing coalition parties. Since 1993 till 2004 Latvia has had 10 Cabinets with an average duration of 12 month. Thus they have been only slightly more stable than the governments of the inter-war period when average durability was ten month. On the other hand, the fact that Latvia has during certain periods had minority governments is a sign of moderate political conflict. Moreover despite frequent cabinet changes, the political orientation of the government has been remarkably stable with dominating right-wing politics. In a way, it is again the parliament that approves major governmental policy goals. Before parliamentary approval, candidate for the post of President of Ministers presents composition of Cabinet of Ministers and draft declaration. Coalition parties usually negotiate these declarations based on their programs and tactical interests. In most cases government declarations are not based on comprehensive development plans but are based on bargaining results. In practice the distribution of ministerial positions among coalition parties is a major subject for debates among political forces. Article 58 of the Satversme (Constitution) of the Republic of Latvia stipulates that public administration institutions are

10 subordinated to the Cabinet of Ministers. According to the State Administration Structure Law, public administration is organised in a single hierarchical system. No institution or administrative official may remain out of the system. The hierarchy ensures subordination of public administration to people s will expressed in a democratic way, and the chain of legitimacy (voter Parliament Government administration) also includes the lowest administration level. Public administration institutions are divided into direct and indirect public administration institutions. Direct administration institutions are all institutions and officials of the Republic of Latvia as the initial public person. They are ministries and other administration institutions directly subordinated to the Cabinet of Ministers, Prime Minister or Minister, as well as institutions that are subordinated to the above-mentioned institutions. Ministries are top-level direct administration institutions that develop state policies and that are directly subordinated to a respective Member of the Cabinet of Ministers. In early 2004 there were the State Chancellery, 16 ministries, 2 secretariats of ministers for special assignments (in total, 19 top-level public administration institutions) in Latvia. The Corruption Prevention and Combating Bureau also has the status of a top-level institution; it is supervised by the Prime Minister and in charge of development and implementation of state policies for prevention and combating of corruption. 98 institutions are subordinated and 84 institutions supervised by members of the Government, incl. 30 state agencies. Information about direct administration institutions is publicly available. Database of direct administration institutions is available in the Internet homepage of the Cabinet of Ministers since March Indirect administration institutions are local governments and other derived public persons, their bodies and officials. With regard to indirect administration, the focus is laid on autonomy of these institutions, thus, their subordination to the Cabinet of Ministers implies supervision (control of legality and lawfulness), i.e., the Government has to guarantee that indirect administration performs its tasks in compliance with the laws and regulations. L.Contents of the reform package Public administration reform strategy and its implementation plan have been developed in inter-ministerial work group and approved in council for management of implementation and coordination of the Public administration reform strategy. This council consisted of representatives of state institutions ministries, State Chancellery, Latvian School of Public Administration and State Civil Service Board. Since 2003 Public Administration Reform Council, which is a consultative body consisting of representatives of non-governmental organizations, businessmen, universities, courts, local governments, the Saeima and public administration institutions. This council serves more like forum rather than monitoring tool for the concrete document strategy. Governmental ties with policy think tanks and business community have been rather weak because Policy coordination department in a way functions as a think tank itself

11 and at the same time there is not widely developed culture of think tanks on public management issues in Latvia. As to international consultants their impact has been mainly on certain aspects of public management reform, mainly on policy planning system and human resource development. Content The public administration reform policy covers the following areas: 1) Unified, purposeful and future-oriented public administration improvement of the policy-making process of public administration, institutional reform of public administration, introduction of strategic planning in institutions; 2) Stable and efficient financial and budget management introduction of mediumterm budget planning; 3) Increasing the trust of people in public administration and public involvement in the process of public administration ensuring public involvement in the making of public policy; 4) Improvement of the quality of public services reduction of administrative obstacles, development and implementation of quality management systems; 5) Personnel policy of public administration and development of human resources improvement of salary system, promotion of quality of education and professional development of people working in public administration, introduction of the competence model in personnel management. Organizational changes Main elements of the institutional system of public administration are public administration institutions determined in the legislation, their hierarchy, competence, regulations on their establishment and operation, procedures for preparation and adoption of decisions. During , due to coming into force of the Commercial Law, according to the procedure established by the Cabinet of Ministers, assessment of institutions, companies, including state non-profit organizations and state companies was performed and they were transformed into direct administration institutions, state agencies, or state commercial companies according to functions performed by them. Altogether there were evaluated 108 institutions with uncertain status, 3 institutions were liquidated, 2 institutions united. After the evaluation of experts, process has been successful in 50% cases when common view from institutions on their status was achieved. The aim of the institutional reform of public administration is to ensure that clear and transparent conditions for operation and funding are introduced and maintained in the operation of public administration, and to discontinue the legal status of non-profit organization state limited liability company and non-profit organization state jointstock company that were widely used in the 90s, because these did not allow sufficiently transparent regime of funding and supervision of institutions. Still there exist problems with order of financing institutions, not flexible planning of finances and the system must be improved. Performance measurement

12 In 2000 Latvia started the development and implementation of a uniform policy planning and coordination system. Policy Planning Guidelines, which prescribe the basic principles for the development of action policies, types of policy planning documents and their hierarchy, was a basis for adoption of Cabinet Regulations No.111 Rules of Procedure of the Cabinet of Ministers of 12 March All policy planning documents have distinct common requirements with regard to their contents analysis of the current situation, main existing and potential problems, solution alternatives and impact assessment, as well as assessment of decision s impact on the state budget, policy outcomes and outputs expected, correlation with other policy planning documents or legal acts, reporting and control procedures. Since restoration of Latvia s independence all policy planning documents adopted by the Cabinet have been collected in the Database of Policy Planning Documents. When forming the system, a special focus was put on development and implementation of policy impact assessment procedures. An integral part of the process was introduction of the annotation mechanism prescribing that an annotation has to be attached to every draft legal act in order to provide a summary on importance of the draft legal act, its impact on the current situation and on the state budget, compliance with regulatory document of the EU and opinion of the nongovernmental sector. Currently, the Policy Coordination Department of the State Chancellery, in association with other ministries, is working on scenarios for development of the policy planning and coordination system in view of the fact that in 2006 the term of the Policy Planning Guidelines is expiring. Late in 2005 an independent study was conducted on implementation of the Guidelines, and it is planned that the Guidelines for Development of the Policy Planning System will be submitted to the Cabinet of Ministers by autumn 2005 for their approval. Implementation of the strategic planning system was started in 2004, which is a substantial step towards linkage of the policy planning process and drafting of the state budget. According to the results obtained in a pilot project in the Ministry of Agriculture, Methodology Guidelines for Development of Institution Action Strategy. State and municipal agencies also develop their action strategies in line with the Law on Public Agencies. Critical importance in implementing the strategic planning system has transition to the medium-term planning system of the state budget which is drafted by the Ministry of Finance. Amendments to the Rules of Procedure of the Cabinet of Ministers adopted in 2005 stipulate that the state budget of 2007 should be drafted in accordance with the structure included in the programme part of their action strategies. This would ensure integration of industry policies used for annual budget application of the respective direct administration institution. Financial management reform

13 Linkage of state budget planning and action strategies was started by the Guidelines for Medium-term Budget Planning Methodology adopted by the Cabinet of Ministers in the aim of the reform was to implement results oriented policy and budget planning in medium term, to improve quality of budget decision making and transparency of procedures. In 2003 Cabinet of Ministers approved guidelines on results and their indicators, separating outputs and outcomes and determining the main kinds of results. In the preparation of budget for 2003 the mechanism of evaluation of government priorities was exercised and the report on the public spending was prepared. When developing the guidelines for action strategy planning, one the most important requirements was compliance with the feasibility principle by linking policy and budget planning. Primary elements of the linking process are: - Procedure for consideration and acceptance of new policy initiatives, - Institution strategic planning, - Medium-term budget planning. The procedure for consideration and acceptance of new policy initiatives (NPI) is prescribed by Cabinet Regulations No.111 Rules of Procedure of the Cabinet of Ministers of 12 March The main feature of the procedure NPIs is considered for a year s time but decisions on allocation of necessary funding are adopted only within budget planning by including the NPIs in the respective list. By the time when planning of the next budget is started, all ministries have to perform assessment of the approved NPI and present them to the Cabinet in a list (in priority sequence). Medium-term budget planning is a process which involves defining state development priorities, fiscal objectives and strategy, budget objectives, priority lines of development and medium-term state budget expenditure. The primary legal act regulating this process is Cabinet Instruction No.8 Procedure for Medium-term Budget Planning of 27 August On the whole the process of implementation of medium term budgeting and linkage of it with strategic planning is in the very first stage and many improvements must be implemented. More effective administrative management Quality management in public administration implies reporting and efficiency as a fundamental principle. Service quality involves availability (convenient working hours), adequate structure of facilities and attitude of employees, simple procedures or, by contrary, too complicated procedures and other factors. Introduction of quality systems in public administration was started 1999 a working group prepared a document which was approved by the Cabinet on 4 December 2001 as Regulations No.501 Regulations on Implementation of the Quality Management System in Public Administration Institutions. On 11 December 2001 the Cabinet adopted Recommendations No.1 On Implementation of the Quality Management

14 System in Public Administration Institutions. These acts are based on requirements under the standard ISO 9001:2000 or Latvia s national standard LVS EN ISO Introduction of quality management and ensuring the quality of services in Latvia implies decentralised quality management and provision of quality services; it is a voluntary process the decision to introduce quality management is taken by the head of an institution. According to the survey performed by the State Chancellery (link to the survey), 42.5% of direct public administration institutions are implementing quality management, and 65.9% are planning to implement the system. More than a half of respondents implement the quality management system in line with the abovementioned Cabinet Regulations, ISO standard (link to the Latvian Quality Association), or by aligning these requirements according to institution s needs. 11.8% use the TQM (Total Quality Management), 4.4% - CAF (Common Assessment Framework) or other quality management instruments. A frequently used instrument for quality assessment of public administration institution in EU countries is the Common Assessment Framework (CAF) (link to the CAF division). It includes the main features of the EFQM Excellence Model and Speyer Model adjusted according to the needs in public administration. The CAF is based on two principles compliance and suitability for the specific features of public administration, and connectivity with other most popular organisational models of public administration and private organisations in Europe. Latvia s Quality Award (link to the Latvian Quality Association) is an incentive aimed at motivating people to address quality issues and requirements of market economy. Public administration institutions are assessed separately according to the criteria set for big companies. Skills needed for quality management can be acquired in the Latvian School of Public Administration. In order to promote implementation of quality management in public administration institutions, it is planned to prepare recommendations on implementation of the quality management system in view of experience gained by Latvia s public administration institutions and EU countries. It is also planned to develop the training system in matters related to quality management Changes in human resource management Equity of public administration is its employees. Since the regaining of independence, human resources of public administration the people employed in public administration have been grouped in several categories according to labour relations, functions, institutions, salary systems, etc. However, at the same time there has never been a clearly developed and comprehensive conceptual solution that would apply to all persons employed in the public sector. In 2003 in direct state institutions civil servant was employed, out of that in specialized civil service.

15 Neither have been developed unified principles of personnel management how and what staff to select, how to assess their work and calculate salaries, how to stimulate them in other ways to maintain good quality of work. There are some personnel management principles (for instance, annual performance evaluations) concerning public servants, which are only a part of all persons employed in the public sector. As the main reasons should be mentioned the very often change of the institutions responsible for human resource development policy in the public sector. At the beginning of 2003, when the function of development of civil service policy and public administration personnel policy was assigned to the State Chancellery, an opportunity arose to plan the development policy of human resources of the whole public administration in a coordinated and unified manner. At the moment the State Chancellery is working in the following directions in the field of personnel policy and development of human resources: - Creation of a unified development policy of employees of the public sector, promotion of common values and organizational culture, improvement of the overall image of public administration; - Development of a competitive, fair, motivating, input- and qualification-related unified salary and social guarantees system in the pubic sector (in cooperation with the Ministry of Finance) close to labour market average (link to Cabinet Regulations No.995 of , study Motivation of public servants: impact of social guarantees, concept paper on social guarantees for public servants); - Promotion of the quality of education and professional development of people working in the public sector, by developing cooperation with universities, planning of coordinated training that corresponds to the needs of the state (link to the study for the School of Public Administration of Latvia); - Introduction of the system of competencies in the personnel management system of public administration, in order to select, train, motivate, reward and assess public administration staff on the basis of clear understanding of the basic competencies necessary for a particular position knowledge, skills, qualities, capabilities; possibility to compare labour conditions of employees in similar positions working with different institutions (link to Cabinet Regulation No.310 of ); - Introduction of the newest information technologies in the management of processes of public administration, by developing and implementing a unified IT system of management of public administration institutions, personnel and salaries. (link to materials related to the project of IT system for public sector institutions personnel and salary management: concept paper, functional requirements, guide for organisational arrangements, analysis of the survey on IT systems to be used in public sector personnel, finance and accounting management.) In 2004 the State Chancellery started developing a new model for performance evaluation in public administration and HR development. It is based on a system of competencies tasks performed in public administration are grouped in certain categories (families) of associated jobs (positions) (for instance, action policy planning or administrative management); each category is assigned specific competencies and knowledge, and qualification requirements for the position. This job classification system can be used as a methodology basis for further elaboration of the HR development policy by stipulating specific skills and knowledge needed for certain jobs and groups of associated jobs and including them within a performance

16 evaluation system, and designing plans for training needs (link to the Guide for Usage of Competence Approach in HR Management in Public Administration). In accordance with international practice and private sector practice with regard to performance evaluation methods, a Catalogue of Public Administration Jobs (link to Cabinet Regulations No.310 of ) was developed, including evaluation and classification of public sector jobs. This classification system is a basis for indicating salary groups and planning further development of a uniform salary system, which would ensure salaries amounting to 75-80% of private sector salaries for the respective jobs. In order to develop a legal basis for this uniform salary system, on 21 February 2005 the Cabinet of Ministers approve the Concept Paper on the Uniform Salary System of Public Sector Employees, but on 20 December 2005 Regulations on the Salaries, Benefits and Compensations for Employees of Direct Administration Institutions (link to Cabinet Regulations No.995 of and Concept Paper on the Uniform Salary System of Public Sector Employees). Gradual implementation of the salary reform is planned during next five years, starting from M.The implementation process The Public administration reform strategy and its implementation plan will be evaluated in 2005 in a following: 1. evaluation of the implementation plan activities implemented, tasks achieved and analysis of influential factors; 2. evaluation of impact indicators qualitative and quantitative evaluation of outputs and outcomes, development of public administration indicators based on international experience and public management reform content in Latvia; 3. effectiveness of implementation mechanisms evaluation of input of institutions involved, their cooperation and work of Public Administration Reform Council. The results of the evaluation will be available at the end of N.Reforms actually achieved Please see the explanation in point M. Sources: In English: 1. Report and Recommendation of the President International Bank for Reconstruction and Development to the Executive Directors on a Proposed Second Programmatic Structural Adjustment Loan in the Amount of US$20.21 Million to the Republic of Latvia, August 15, 2002 In Latvian: 2. SKDS , skatīts Ceļā uz pilsonisku sabiedrību. Latvija.Iedzīvotāju aptauja, BSZI, 2001, Naturalizācijas pārvaldes pasūtījums, 52.lpp. 4. Iedzīvotāju aptauja par dažādiem integrācijas aspektiem, 2003.gada novembris, SKDS. ĪUMSILS pasūtījums.

17 5. Centrālā statistikas pārvalde Demogrāfija, 2004 Web resources: 6. Public Policy Portal Information by Ministry of Welfare 9. Information by Ministry of Economics 10. Information by Central Statistic Bureau