Roundup: Politicians, economists debate revival of Latvia's residence permit program

Latvia may have to take a second look at the revisions it made to its residence permit program in light of a looming economic slowdown, participants at a conference on residence permits and immigration policies warned.

A scheme allowing foreign investors to obtain temporary residence permits by purchasing real estate in Latvia has been injecting 350 million euro (403 million U.S. dollars) a year into the Latvian budget. The scheme has helped preserve quite a few jobs and generated tax revenue, but this source of income is now under threat as the amount investors must spend on properties to obtain residence permits has been significantly increased.

It is not yet clear how politicians will deal with this situation, but debates on the issue are going to be tough, as some politicians are warning of risks the scheme may be posing to Latvia's national security, while others are defending its economic benefits such as jobs and tax revenue, which are badly needed as the Latvian economy suffers from the sanctions war between the EU and Russia over the Ukraine crisis.

Janis Dombrava, an MP of Latvia's ruling right-wing National Alliance, admitted that his party shared responsibility for raising the investment threshold for foreigners seeking residence permits in Latvia, a move criticized by many as careless from a business standpoint. But the MP referred to the Latvian security police's findings that the trade in residence permits was causing significant security risks for Latvia, saying that such findings had to be taken seriously.

Vilnis Kirsis, an MP of Latvia's ruling center-right Unity party, disagreed and called for an easing of the requirements for obtaining residence permits "Last year, when the immigration law was amended, there was an entirely different economic growth perspective: the issue of Russia was not there. This circumstance has changed the rules of the game. It is forcing us to lower the threshold for obtaining the residence permits," Kirsis said.

However, Bank of Latvia economist Agnese Rutkovska argued that a better long-term solution had to be found. "Supporting the real estate and construction sectors by easing the rules of the temporary residence permit program is a short-term solution which can be used in a phase of economic slowdown, but it definitely cannot serve as a cornerstone of growth in the long run."

"Now that the Latvian economy is cooling down fast it would be the right time to use reserves accumulated in previous years to warm it up. But since there are no such reserves, easing the rules of residence permit program appears to be almost the only tool for warming the economy," she said.

Latvian Economics Ministry state secretary Martins Lazdovskis agreed, saying that a revival of the residence permit program would stimulate economic growth.

The Economics Ministry official indicated that the number of residence permit applications had dropped from 200 to 30 a month on average since Sept. 1, 2014, when amendments to the immigration law came into effect. Meanwhile, Latvia's economic growth rate has been slowing, and it would be necessary now to consider stimulation measures, Lazdovskis said.

"We are no longer talking about 5 percent growth, it is necessary to start considering economic stimulation measures, we must think about warming up the economy, and this program's revival would be a positive signal for the Latvian economy," Lazdovskis said.

On Sept. 1, 2014, the minimum price foreigners must pay for properties to obtain temporary residence permits was raised to 250,000 euros from 150,000 euros. Under the amended law, investors seeking residence permits in Latvia are also required to pay 5 percent of the value of the purchased property into the Latvian budget.

However, the Latvian Security Police have warned that, notwithstanding the economic benefits from the trade in residency permits, growing demand for the permits from Russian citizens might pose risks to Latvia's national security.

The Interior Ministry said in a report last year that the inflow of immigrants from former Soviet republics could potentially exacerbate problems like the "self-sufficiency of the Russian language in the public environment and emergence and establishment of a parallel Russian-speaking society" in Latvia.

The conference, titled "Temporary Residence Permit: Latvia's Lost Opportunity," was organized by Latvia's Dienas Bizness business newspaper and took place in Riga on Monday. Endite