The global economic crisis had deeply impacted Latvia’s national economy. At the same time, however, businessmen and the government were forced to change their actions and instead search for ways to make business activities more efficient and competitive.
For businessmen it meant reviewing their business plans, optimizing activities and finding new export markets. For politicians and legislators it means making decisions, which ended up delayed for years, especially in such sensitive areas like education, healthcare and regional development. Looking at it from a modern perspective, one has to conclude that the government has only partially realized some of the more important reforms ever since the crisis ended, believes CEO of the Foreign Investors Council in Latvia Girts Greiskalns.
According to him, this has impacted the country’s competitiveness and attractiveness in the eyes of investors.
«Latvia’s government institutions and legislators continue to work in their usual rhythm – prepare and discuss different plans, strategies, concepts and guidelines. Unfortunately, they rarely end up realized. While we continue to develop new or improving existing plans, other countries act and take the lead away from us in terms of economic growth. In a time when the fight for investments only increases elsewhere in the world, such a situation only serves to reduce Latvia’s attractiveness in the eyes of investors. This is demonstrated by statistical data – the volume of new investments in capitals of Latvian companies and general turnover continues to decline. Investors carefully assess Latvia’s business and investment environment. Seeing that many problems remain unsolved for years, they choose in favour of other countries,» – notes Greiskalns.
According to him, Latvia’s economic growth is negatively impacted by different geopolitical risks, lack of qualified labour force and weakened judicial power. This is demonstrated by ineffective insolvency processes and cases of abuse of this measure. Businessmen’s and investors’ lack of trust in state institutions and court justice system, the heavy bureaucratic burden, lack of clarity in regards to the responsibility of involved sides no only scares away businessmen and investors, but also makes them consider moving production to other countries. In addition, businessmen, taking into consideration possible risks, take precautionary measures: introduce advance payment system for services and apply higher prices, which only serves to make business deals more complicated and negatively impacts economic development in a long-term perspective.
«Latvia’s business environment remains unpredictable. It is rare to find people willing to take risks and invest in Latvian companies and establish production here. Although it is possible to found a company in Latvia within a couple of hours, an average of 18 months is necessary to close it. […] Worst case scenario, investors and creditors face lasting litigations, which are more often than not involve fictive, frozen accounts and general lack of information about anything, including any additional violations or even the outcome of court processes,» – Greiskalns describes the current situation.
In order to make Latvia’s investment attraction more competitive in comparison with neighbouring countries, the country has to carry out multiple improvements to its business and investment environment: make sure interpretation of the law is clear and compliant with legislation, introduce a comprehensive insolvency procedure and develop a functional investment attraction policy. Greiskalns reminds that the simplest way to attract new investments is to work with current investors: «Lithuania is a good example we can learn from – the country actively works with investors that are already active in the country. This allows investors to continue putting money into businesses in the country, showing potential investors that the business environment of this country is well-organized, safe and backed by proper legislation and safe investment climate.»