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Foreign investors give Latvia an average score when it comes to investment attractiveness, according to FICIL Sentiment Index 2021 organized by the Foreign Investors’ Council in Latvia (FICIL) and Stockholm School of Economics in Riga on June 13.
In preparation for the upcoming Saeima elections, this year’s study focused on accomplishments of the last four years. Investors gave Latvia a score of 2.9 points out of 5 when it comes to the country’s attractiveness for investments and policy-makers’ efforts to improve its investment climate.
Investors were the most positive about capital reforms of the financial sector, reforms in higher education system, the administrative territorial reform, as well as politicians’ accomplishments in reorganizing the country’s tax policy, especially when it comes to zero interest rate for reinvested profits. Investors were negative in regards to failure to resolve problematic issues related to labor force, lack of efficiency of in the public sector, uncertainty when it comes to policy-makers’ decisions and a lack of strategy when it comes to accomplishing goals listed in EU Green Course.
«One of the main goals of FICIL Sentiment Index 2021 is evaluating the investment climate development progress in Latvia. Every year it serves as a temperature measurement of sorts to determine topical problems and solutions. Since it is election year, our latest index is a road map for the next policy makers. It offers suggestions to help improve the business environment to help increase investment volumes in Latvia. The latest index shows that investors welcome the finance sector's reform and the initiated higher education reform, which will, hopefully, bring about positive improvements in the long run. Entrepreneurs carefully follow the situation and how politicians deal with complicated problems related to shortage of labor force, energy price rise, implementation of EU Green Course and other issues, resolving which will require close cooperation with the public sector. Will politicians continue working in a state of crisis, looking for short-term solutions to different problems, or will they be able to implement a sustainable policy?» comments FICIL board chairperson Zlata Elksniņa-Zaščirinska.
Considering Russia’s invasion of Ukraine, entrepreneurs participating in the index were asked additional questions to see how the situation has changed their plans and vision for the future.
Foreign investors gave Latvia’s government a score of 2.2 out of 5 for its efforts in implementing Europe’s Green Course strategy. To improve the situation, it is necessary to adopt clearer plans and management style, more involvement from experts and society in general, as well as educate the public and private sector, set clear directions and made data-based decisions.
According to the index, 65% of respondents have plans to increase investments in the coming years, which is 3% less when compared to the year prior and 10% more when compared to 2018. 20% of respondents said they have no plans to increase investments and 15% said they have yet to decide on this, adding that it depends on multiple factors. When asked the same question after the start of Russia’s invasion of Ukraine, 83% of respondents said they have no plans to change their investment plans and 17% said their investment plans have been put on hold or reduced in scale.
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