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For the fourth year in a row, the Foreign Investors' Council in Latvia (FICIL) carried out an assessment of the foreign investors' sentiment regarding the developments of the business environment in Latvia. Professor Arnis Sauka presented the key conclusions of the research. According to the research, 40 companies were interviewed - these companies (including their subsidiaries) contribute to 9% of Latvia's total tax revenue, 18% of total profit and employ 4% of the total workforce out of all companies above a 145000 EUR turnover and 50% foreign capital (data from Firmas.lv). Altogether, the number of companies in which foreign capital accounts for at least 50% and whose turnover exceeds EUR 145 000 represents one fifth of all Latvian companies, paying 48% of all taxes in the country, as well as employing 27% of workers.
The main problems in the business environment as identified in the research:
- Acute problems: corruption in the public sector, availability and quality of labour, efficiency of the public sector.
- Chronic problems: uncertainty, shadow economy, education system.
- Partly treated problems: demographic situation, healthcare system, tax reform, unethical or illegal behaviour of entrepreneurs, unfair competition.
- New negative trends: the situation in the financial sector, the consequences and the problems of the reputation of Latvia, the role of Riga in the development of Latvia - insufficient capacity to compete with other cities in the region.
Julia Sundberg, FICIL Chairperson of the Board: "Although at the moment investors still feel relatively good in Latvia because of the economic upturn, years of unresolved issues like the demographic downturn, availability and quality of workforce, corruption, shadow economy and others not only pose a risk that no new investment will enter Latvia, but also that existing investment might leave. This is why FICIL hopes this report can be used as a constructive tool for Latvian policy makers to improve the overall competitiveness of Latvia's business environment."
Arnis Sauka, professor at SSE Riga: "By analysing responses of the investors over the past four years and seeing the dynamic data, it can be concluded that some problems have been partly treated and are not as painful anymore; some problems have become chronic and everyone has learned to live with them; while some have just become acute and no actions can cost a lot not only to investors but to the general economy of the country."
The discussion was moderated by journalist Jānis Domburs. The full text of the report "FICIL Sentiment Index 2018" is available here: https://www.ficil.lv/research/
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 tackles 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.
About the FICIL Sentiment Index
The FICIL Sentiment Index is commissioned by FICIL and prepared by Dr. Arnis Sauka, Director of the Centre for Sustainable Business at SSE Riga.
Latvia's economic competitiveness is examined from a foreign investors' perception about the quality of labour, education and science, health and social security, business legislation, as well as demand for products and services, attitude towards foreign investors, hard infrastructure, soft infrastructure, demography and efficiency of labour. Additionally, the research also looks into the standard of living in Latvia, as a supportive measure to evaluate the attraction and retention of a talented workforce.
The production of the FICIL Sentiment Index 2018 is generously supported by the British Embassy Riga and the U.S. Embassy in Latvia. Furthermore, we are grateful for cooperation and support from Firmas.lv.
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Agrita Kiopa, Vice Rector for Science, Riga Stradins University