According to the viewpoints of investors, Latvia's investment climate in 2019 was still seen as average, reaching 2.6 points out of five, which is an improvement by only 0.1 point in comparison with 2018, as concluded in the FICIL Sentiment Index 2019 research by the Foreign Investors' Council in Latvia (FICIL) and Stockholm School of Economics in Riga (SSE Riga).

The main conclusions of the study were presented by professor Arnis Sauka, Head of Centre for Sustainable Business at the SSE Riga and author of the study.  The 2019 study focussed on four topics that, according to investors, are currently crucial for Latvia's ability to compete for foreign investment, namely, the stability and development of the financial sector, tax system, the quality of higher education and productivity of workforce.

Index for the productivity of workforce, compared to the previous four years, has reached its highest point so far - 3.4 out of 5. However, investors point out that productivity remains a challenge both in the private sector and in public administration. Investors believe that public administration has many opportunities to reduce bureaucracy, streamline processes and develop e-services. In many cases, investors also expressed the view that the municipal reform could have a positive impact on the efficiency of the public sector.

Foreign investors also assessed the 2018 tax reform with 3.1 points out of five, which is slightly above average. Investors emphasised the need to simplify the tax system. Most investors mentioned the introduction of the zero-tax rate for reinvested profits as a very positive improvement, and in some cases, investors also commended the introduction of the progressive income tax rate. However, before launching a discussion on the content of upcoming tax reform in 2021, majority of the investors indicate that a comprehensive analysis of the results of the previous reform should be carried out.

The quality of education and science in Latvia was evaluated with 2.7 points which is a relatively significant decrease compared to the situation a year before -3 points out of 5. As a country with a declining population, it is particularly important for Latvia to ensure competitive higher education. Otherwise, it will be impossible to sustain long-term economic growth. Investors urge to continue the ongoing changes to modernise the governance model in higher education institutions, as well as to address the insufficient level of funding.

Index for the productivity of workforce, compared to the previous four years, has reached its highest point so far - 3.4 out of 5. However, investors point out that productivity remains a challenge both in the private sector and in public administration. Investors believe that public administration has many opportunities to reduce bureaucracy, streamline processes and develop e-services. In many cases, investors also expressed the view that the municipal reform could have a positive impact on the efficiency of the public sector.

Presentation was followed by a discussion between policy makers and foreign investors, moderated by journalist Jānis Domburs. The report is available both in English and Latvian. 

About FICIL Sentiment Index:

FICIL Sentiment Index is an annual report which follows development of the investment climate in Latvia from the perspective of foreign investors, identifying the most significant challenges in the business environment. It is a qualitative study, based on in-depth interviews with investors, carried out by FICIL in cooperation with SSE Riga.

FICIL aims to create evidence-based policy through realistic and forward-looking recommendations. The goal is to improve the overall business environment and investment climate in Latvia. The FICIL Sentiment Index addresses topical issues, such as demographic decline, digitalisation, economic competitiveness, quality of the higher education system, rule of law, as well as economic and financial crime issues.

The preparation of the FICIL Sentiment Index 2019 is supported by the U.S. Embassy in Latvia and the Norwegian Embassy in Riga.