It is exactly the Latvian tax system that troubles investments attraction, thus also slowing down business development, Artis Davidnieks, representative of the Dutch investment company BGF.BV told the business news portal BNN. BGF.BV launched its activities in Latvia in August, 2011, with an aim to invest up to 50 million lats in prospective Latvian and Baltic businesses.

Artis Davidnieks

To what extent can foreign investors influence the Latvian economic development?

Foreign capital influx boosts economic development by ensuring additional funds to businesses so that they can carry out new projects. Business expansion and new companies ensure jobs, greater tax revenue and better export as well as other performance. Entrance of strategical investors sometimes means switch of technologies and knowledge from one country to another. Foreign investments do, of course, ensure some kind of credit from the part of foreign partners, while positive experience gives room to new investments.

What are the most crucial factors to attract invetsments? What is that stands out in Latvia, compared to Estonia and Lithuania?

Western investors are very particular in examining the investments environment, including the credit rating, in that specific country. Moody’s upgraded Latvia’s outlook from stable to positive in 2011. It did attract their attention for sure. Traditionally, foreign investors see the Baltics as a single region, so Latvia, Lithuania and Estonia are not just neigbours. They are also rivals. It is important that Latvia boasts about its advantages, for example, sectors rich in traditions.

Politic stability and reasonable tax policy also play a major role in one’s decision to place money in Latvia. However, these are problems here.

What is the sore point of Latvia from the perspective of investors?

It is the tax system for sure. It is not promoting business development. First and foremost, moratorim to the recent tax changes should be introduced for a period not less than three years, so that investors and local businessmen can plan their future activities.

Did the crisis encourage or scare away potential investors?

During periods of instability investors look for safe assets, so stable companies of leading sectors can be considered as a good alternative for invetsments.

Do investors still care for the same sectors as before the crisis?

Strategical investors favour their particular sectors regardless economic cycles, whereas financial investors want to see potential. Previously it was in fashion to operate with real estate. Now investors pay great attention to innovative products and solutions. Nevertheless, traditional sectors are always topical as well.

How many jobs and what contribution BGF.BV investments could bring to Latvia?

Investments will definitely bring additional funds to business development. Moreover, if companies we place money in turn out to be especially prospective we are also ready to attract strategical investors and help not only financially but also practically by lending a helping hand in production boost and export markets acquisition. Emergence of new jobs depends on the specific plans of the company.

What amendments would you like to see in the legislation of Latvia?

Ever-lasting law amendments is one of the key issues in Latvia. Also investors worry about that, as they want certain stability. Upon deciding to invest, each and every investor analyses the current legislation and hopes it will not be changed that fast. The tax system’s stability is the most topical thing investors hope for.

Has the government done enough to boost the economic situation?

Latvia needs a long-term development strategy for at least five years. An action plan tied to that is crucial as well. Only then it will be possible to assess influence of decisions on long-term development.