MoA Kaspars Gerhards: State forests will not be privatized as long as I am Minister!

Neatkarīgā invited Minister of Agriculture Kaspars Gerhards (NA) to talk about what the government has achieved in three years and what remains to be done.

Three years have passed since the government of Krišjānis Kariņš, in which you hold the post of Minister of Agriculture, was formed. In your opinion, has this government managed to deliver its most important promises to society?

I think that we have managed to do the things that previous governments failed to do when they could not reach an agreement, including the completion of the administrative-territorial reform, which started in 2009. The financial system has been put in order, including the money laundering problems. This was very important because money laundering cases not only had a negative impact on the reputation of the country, but also posed a threat to the Latvian economy as a whole. We have also managed to sort out education issues, including vocational education, and to develop a vision for the future of the Latvia University of Life Sciences and Technologies, the Bulduri Horticultural Secondary School and the Malnava College. In Latvia, agriculture and forestry account for around 40% of the country's exports, so we have important principles and a vision for how the training of young specialists in such important sectors of the economy will be organized and implemented in the future. We all know that Covid-19 overshadowed more than half of this government's time in office, practically two years have passed in a pandemic. This situation demanded completely different priorities and working arrangements, and in these two years, I have gained confidence that we have a professional public administration, a civil service capable of managing current processes in difficult circumstances.

I can therefore say that the government has delivered the promises it made to the public. Of course, there have been problems - particularly in the context of Covid-19, I have to admit that there may have been mistakes - but this is now being assessed by the Parliamentary Committee of Inquiry and the Office of the Prosecutor General.

From what you have said, the government has done its job well overall. Why do you think the public has such a low opinion of this government?

The most immediate impact on the assessment of the government's performance is the uncertainty that prevails throughout the world in connection with the Covid-19 pandemic. It is undeniable that restrictions have an impact on everyone - on their work, on their families, on their daily habits. All of us have experienced it, and all of us are looking for what we could do differently and better. I think that it is the great uncertainty that leads to very different assessments of what is going on - there will always be things that could have been done better or differently. In addition to the pandemic, everyone is now faced with rising prices for energy, food and other goods. We are seeing signs of inflation, and this is causing concern about the future in all Latvian households - it is also causing a negative assessment of the government's performance, even though the government has few tools to change the processes that are taking place globally. But we are not alone - we are a member of the EU and we need to discuss the best solutions together. There are many different views, but we have to stand up for the things that matter most to us - stability and economic development - so we have to find ways to mitigate the impact of prices. At the moment, the government has earmarked €450 million - €250 million last year and another €200 million this year - to reduce the impact of electricity price rises. We are following global developments and seeing solutions that could stabilize energy prices globally. For example, increasing gas production, which would allow us to reduce the high price pressure already in the coming months.

We also know that there is support for alternative energies, which is also in line with the European Green Deal. Where do you see potential?

On the one hand, Latvia is already very green, because we have hydroelectric power plants that make a good contribution to the overall green energy system, but we also see good potential in wind and solar energy. In the case of solar energy, there is support from the EU Structural Funds for both legal entities and private individuals. The support mechanisms promoted by the Ministry of Agriculture through the Rural Support Service also support solar energy for farmers. The first investment rounds for solar support are already open. Unfortunately, at the EU level, only the part produced for self-consumption is currently supported, but we would like to see support also for the part that goes beyond self-consumption and into the common grid. We have submitted this proposal to the European Commission for consideration, which would allow us to be more flexible on this issue. Regarding wind energy, the synergy is very important: firstly, it must be part of the overall energy system and it must have sufficient capacity. The Estonian-Latvian offshore wind farm project in the Baltic Sea, on the border between the two countries, is already quite concrete. There are a number of projects planned for onshore development. There have been legal discussions with municipalities, but these are nearing completion. In my opinion, wind energy projects could very well be developed in cooperation with Latvian State Forests (LVM). I would like to remind that forests cover about half of the country's territory, and LVM manages half of the total forest area. Building wind farms in forests and at sea would reduce public opposition to wind farms, as they would not directly affect people's livelihoods and economic activities in such places. Last week, the Ministry of Environmental Protection and Regional Development presented proposals for changes in legislation to facilitate the approval of wind farms. Let's see how this turns out.

There are indications that if all the directives and recommendations for the implementation of the European Green Deal are implemented, our entrepreneurs will not be competitive enough. What are the preliminary figures?

According to the decisions taken in December 2020, the European Green Deal aims to reduce greenhouse gas (GHG) emissions by 55% by 2030 compared to 1990. Already in 2015, Latvia had reduced GHG emissions by 57% compared to 1990. So, it is possible. It was done through a complete overhaul of the energy system, including the construction of new CHP plants and the replacement of equipment in centralized heating networks in virtually all cities. This has not been easy for Latvia, and it is clear that for the EU as a whole it will also require huge investments, a major change in the structure of the economy and in habits. I wish to remind that in 2015, the EU decided to reduce GHG emissions by 40% - at that time, indicative commitments were set for each country, which required Latvia to reduce emissions by a further 6%. The debate on how much more Latvia should cut is still to come. This is not impossible, as it can be done both by installing new technologies in heating systems and by renewing the vehicle fleet. When we drew up Latvia's strategic plan for the Common Agricultural Policy (CAP) for the coming years, we expected a 4% reduction in emissions from the agricultural sector. We plan to achieve this by introducing modern technologies and developing organic farming. I would add that the Latvian strategic plan for the CAP allocates 47.8% to measures in the agricultural sector with a positive impact on the climate and the environment.

Latvia is one of the few EU countries to have been allocated more funding in the new CAP programming period than in the previous one. Moreover, we are bound by the previous rules until 2023, but funding is already available in the amount of the new programming period. This is good news. I would like to remind that the Ministry of Agriculture and the Ministry of Foreign Affairs, in cooperation with the Prime Minister, have made a huge effort to achieve a 25% increase in total aid, including a 44% increase in direct payments. So, there is sufficient funding for the support mechanisms.

Organic and conventional farming are often confronted. Do you see a way to balance the coexistence of one and the other?

The farmer is the person who sees what is happening in nature best - he is the first to see climate change, heatwaves, droughts and rains. I think all farmers understand very well that they have to manage sustainably, without damaging the environment, biodiversity and the climate. In my opinion, there is no contradiction between organic and conventional farming, because no farmer is against nature. Of course, if it is possible, organic farming is the way to go, but it has to be a well-thought-out process. Our calculations also show, for example, that the climate footprint of organic dairy farming is smaller than that of conventional farming. It is clear that significant resources will be devoted to the development of organic farming. Currently, around 14% of agricultural land in Latvia is organic, the sixth-best in the EU, but our target is to have 25% of all agricultural land used for organic farming.

To maintain the balance, conventional farming must also be given a chance. Perhaps financial mechanisms should be created to help and motivate conventional farmers to change direction, to develop their activities in the direction of organic farming.

Farmers are considered to be the least affected by the Covid-19 crisis, as grain prices are high and milk prices are as well. Do you see a threat to the agricultural sector in the near future?

Grain prices are very high due to Covid-19, and prices of other types of agricultural products are also rising. You have already mentioned that world exchange prices are very high for grain and milk prices also reached a record in November last year, the demand and price of beef is also increasing. This might make farmers feel secure, but it is not. The situation is very different in different areas of agriculture. In Europe as a whole, there is an oversupply of pork, to some extent as a result of the closed Chinese market. Poultry farming is also under pressure, with rising feed prices out of balance with the price of production and demand. We therefore welcome the opportunity to support the sectors at risk, above all pig farming. I have also spoken to the EC Commissioner for Agriculture about the critical situation in pig farming and drawn his attention to the situation. In previous years, a relatively large amount of aid has already been allocated to pig farming in Latvia. This year, however, we have almost doubled the state subsidies to pig farmers, especially for breeding, from the national budget. It is very important to maintain the competitiveness of our pig farmers so that pork producers from other EU countries do not force us out of the common market, because competition in this market is very strong and cases of dumping have also been noted.

Recently, the reforms of the State Forest Service have been the subject of much debate. What are their aim and purpose?

The State Forest Service (VMD) oversees all of Latvia's forests, which represent almost half of our country's territory. Half of the forests are managed by the SJSC Latvian State Forests (LVM) and the other half by private forest owners. A review of the structure of funding for the VMD shows that the principle of solidarity is not respected - LVM profits are transferred to the state budget, and then part of this is diverted to ensure the VMD's activities, while private forest owners pay very little for the VMD's services. When I took up this position and met with the management of the VMD at that time, one of the main issues I had was about appropriate remuneration for staff, including not only those people who work in the VMD on a regular basis, but also those who do seasonal work, such as fire protection specialists. The question of the structure of the revenue of the VMD, which should be in balance with the revenue, was, in turn, a consequence of the remuneration review. When we look at the revenue structure, we see that it has not changed for decades: the fees for issuing felling certificates, for hunting season permits and for other services provided by the VMD are very low. The new management of the VMD comes with new initiatives, including fee increases and structural changes, as well as the digitization of processes and services, for which significant funding is already planned. This means that fees for services provided by the VMD will increase in the near future, while at the same time the quality of VMD services will also increase. Alongside these changes in the revenue structure, the issue of the remuneration of the VMD will also be addressed.

The digitization issues often do not make use of existing resources, but try to reinvent the wheel. For example, LVM has developed very high-level digital maps with numerous layers that can be added to. Do you see that the digitization of the Forest Service will use an existing resource?

LVM has indeed developed high-quality digital maps, which are extensively used not only for LVM operations. Foreign countries such as the USA and Japan have also shown interest in LVM products. Also, the information of the VMD on the status of the forest, its habitats, protected trees, timber stock, etc. should be easily accessible. Moreover, the information should be easily accessible to any forest owner, even those who own half a hectare of forest.

There is public concern that LVM could be privatized, and there are rumors of the sale of state forests. Indicators for this process include the replacement of the Chairman of the Board, listing on the stock exchange and so on. How justified are these concerns?

The law clearly states that LVM cannot be privatized. It is also my deepest conviction that this company should not be privatized, because it is a strategically important state enterprise and the forests are the property of the entire nation. The state forests represent a quarter of the country's territory, which is an enormous asset and wealth. Sustainably managed forests are an important factor for the national economy, for example, over the last three years, Latvia's exports of forest products have increased by €1 billion. This is a huge leap. Although a significant amount has been harvested and exported, the data shows that the area and stock of forests has not decreased, but increased. For example, forest area in 2021 has increased by four thousand hectares compared with 2020, while stockpiles have increased by one million cubic meters overall. The data show that private forests have seen a decrease in stocking, while the increase has come from state forests managed by LVM.

Regarding the change of the Chairman of the Board, it should be noted that Mr Strīpnieks has become the Chairman of the Board of Latraps. He will be replaced on the Board of LVM by Arnis Melnis, who has extensive experience in state forest management.

As regards the listing of LVM on the stock exchange, it should be noted that the final decision has not yet been taken and extensive political discussions are ahead. I believe that strategic national companies such as LVM and Latvenergo should not be listed on the stock exchange.

We are grateful that the public reacts to processes and expresses concern when things are not going as they should. But I would stress that LVM has built one of the most successful business models over the last 20 years, with clearly transparent and strictly followed processes.