How do you assess current foreign direct investments in Latvia?
I would like to see higher levels of investment. Foreign direct investments in Latvia increased sharply after Latvia’s accession to the EU in 2004. After the crisis, the investment slowed. However, we saw this in the entire EU. The fight for investments is obviously increasing. Latvia needs to think about incentives to attract additional foreign direct investment. Latvia needs to send a very clear message. Latvia is open for business. Latvia is open for investment.
How is the confidence of foreign investors evolving?
The foreign investor’s council measures the sentiment of foreign investors in Latvia once a year. The sentiment index published last year showed that half of the investors surveyed are planning to increase their investments in Latvia. Overall, this is very good news.
For many big companies, Riga is the obvious choice to establish and expand from. There is a very good infrastructure for international business. The airport is modern, and the railroads and ports connect us efficiently. IT infrastructure is excellent. Latvians will often complain about the speed of internet outside Latvia as we are used to really good internet connections. The nation has a young and brilliant talent pool available. Latvia has a skilled and flexible workforce. In addition, the population speaks several languages. Within FICIL’s sentiment index, usually, the highest value given by investors is due to Latvia’s overall excellent quality of life.
What Latvian sectors can grow the most with additional foreign direct investment?
There are many opportunities within Latvia. The massive Rail Baltica project has intrigued many potential investors to inquire about the region. They see Rail Baltica as a catalyst which increases the prospects about the potential of niche areas in Latvia.
The food processing sector has outstanding traditions and large growth opportunities. The chemical and pharmaceutical sectors have a historical importance to Latvian society. Related niche segments such as the development of Latvia’s cosmetics industry have potential to expand. There is also everything related to ICT and innovation which we continuously see is on a fast track.
In 2017, Latvia had a very wise initiative. It introduced the legislation of start-ups which is assisting new start-ups establishing in Latvia. According to the ministry of economics, 160 new jobs have already been created in 30 new companies. It can sound small, but it is the first step to finding a new innovative Latvian success story.
What is a key challenge foreign investors find in Latvia?
Investment likes predictability. Current tax reform is an opportunity, but continuous changes increase the risks for companies planning long-term investments. A more immediate challenge for Latvia is it’s declining demographics. Especially its impact on figures of labor availability. Latvia was previously competing with other countries because of the cost of labor. Latvia is growing and changing. It is a very positive change. Our standards are higher. However, availability of labor and highly qualified labor is becoming challenging for companies based in Latvia.
How does FICIL lobby government?
FICIL has a very close and constructive relationship with the government. Each year FICIL holds its high council meeting with the government. It usually takes place towards May. FICIL coordinates for foreign investors to meet for a half day with the entire government administration. We constructively discuss at a very high government level where foreign investors see Latvia. In addition, we converse on what should be done to increase a sectors economic growth. It is a very constructive way of dealing with issues in improving the business environment. It is a pretty unique format.