There are multiple reasons for the drop in direct foreign investments in Latvia in recent years – foreign investors are scared off by the still existing problems like grey economy, corruption, risks of abuse of insolvency procedures and Latvia’s unpredictable tax environment. There are also flaws in construction regulations, says foreign investments expert Girts Greiskalns.
He explains that lately the need to improve regulations associated with construction industry and investment industry has become one of Latvia’s priority goals. «It should be emphasized that construction industry should be viewed together with territorial planning and regulations to create effective, united and predictable territorial planning mechanism, as well as increase predictability and clarity in relation to procedures and terms for investors to follow in the development of projects,» – notes Greiskalns.
He emphasizes that the large administrative burden, different interpretations of the law and fractured division of responsibilities of state institutions have made the construction process nearly non-transparent, putting on hold the realization of already initiated projects and discouraging other investments from starting new projects. «Foreign investors that have no plans for direct investments into the construction of new projects but still intend to perform investments in businesses of other industries in Latvia understand that sooner or later they will have to deal with construction plans one way or another. This includes expansion of a company’s activities, building a new factory, office building or cattle shed. Looking at potential risks and that the period of time between submission of a construction project and its completion is unpredictable, it is likely investors will become cautious and decide to change their investment plans,» – Greiskalns said.
«Flaws in construction regulations also create problems for existing investors in Latvia. In spite of challenges associated with Latvia’s business environment and legislative requirements, they have expressed their readiness to continue work in Latvia,» – the expert said.
He says that investors often have to deal with forced cancellation of construction plans due to fake reasons, including lengthy court processes. This impedes the realization of planned projects, creation of jobs and attraction of investments.
Greiskalns emphasizes that such a situation will only encourage investors pick a different country to direct their investments. «The court justice system also plays a part, because it is in its power to establish temporary regulations to allow investors to assess risks and consider construction options or wait for the court to come up with a verdict.»
«Considering that Justice Ministry has not followed up with a detailed explanation for any new regulations, many investors now face new challenges in planning construction initiatives. As allow that the ministry’s intentions behind the introduction of an additional building rights institute were good. But instead of making the industry more ordered, this institute has created new problems,» – Greiskalns says.
The expert notes that the majority of businesses look at 2017 with hopes. They’re waiting for the launch of a number of new EU fund programmes in healthcare, culture, education and other field.