Latvia is approximately five years behind Estonia and Lithuania, when it comes to capital market development, “INVL Asset Management” board chairman Andrejs Martinovs has said.
Data from the Bank of Latvia indicated the pension capital accumulated on the second level pension plans went up by 24.4% last year, reaching EUR 7.06 billion. However, only 8.5% of money in pension funds were invested into Latvian assets.
Martinovs noted this was largely linked to the size of Latvia’s capital market in comparison to GDP, which was one of the smallest in Europe and OECD member states. Although there are some improvements, compared to the situation five or ten years ago, the problem remains unresolved.
“Yes, there was growth observed on capital markets, but, if we compared it to more than EUR 7 billion, which was currently accumulated on the second level pension fund, it was not enough. This is why, answering the question as to whether or not 8.5% is enough in Latvia – it is not, and as a local pension manager, I would like to see more than that. But if we maintain the same proportion or achieve a slight increase, it would be a good result because money is multiplying in the pension system and this pace is much higher than the increase in investment opportunities in Latvia because money is multiplying in the pension system and this pace is much higher than the increase in investment opportunities in Latvia,” Martinovs describes the situation.
Commenting on how no specific decisions came after the report from the Ministry of Finance on the inclusion of state and municipal companies on the capital market, the head of INVL Asset Management said from the point of view of the progress in this process, criticism could certainly be made, because it should finally move forward.
At the same time, he said that, on the other hand, politicians were not unreasonable, as residents were still ruled by myths and stereotypes that stemmed from the privatisation process of the 1990s. This means it is difficult for politicians to be decisive, and their unwillingness to speak about that is understandable.
“However, as I’ve said, we are at least five years behind our neighbours, when it comes to capital market development. In order to catch up to them and be on the same Baltic development level, we need to resolve these issues as quickly as possible,” said Martinovs.
As for management of state companies, he was critical of the ruling coalition’s proposal – that officials would be able to combine their posts only with one other post in a board or council of a capital association.
Martinovs said it was unclear who could end up in councils and boards of state companies – would they be business professionals or simply some office officials who had lower qualification than their colleagues who worked in multiple management institutions.
“My opinion that officials have nothing to do in councils of businesses. Everyone should do their jobs, work in their respective field. People whose professional qualifications are linked to entrepreneurship should work in councils of businesses,” says Martinovs.
INVL Asset Management is an alternative asset manager in the Baltic States and is part of the Invalda INVL Group. (BNN)