Nearly all Latvian CEOs expect competition to grow in the future. In addition, this will happen in conditions of deficit of qualified workers, according to results of a study performed by PricewaterhouseCoopers.
In Latvia, businessmen are concerned the most about the increasing tax burden and influence of other regulations. PwC experts are confidence that businessmen can adapt to emerging challenges, search for innovative solutions and exchange resources and experience with one another.
The study shows that 93% of Latvian businessmen are certain that their industry will soon experience an increase of competition. Nevertheless, businessmen are committed to strengthening their competitiveness, exploring new markets and investing in capacity.
Latvian businessmen are rather cautious when it comes to planned activities for growth. 75% of respondents have no plans for any special activities, and would rather rely on natural growth. 41% of them plan to reduce costs. Only 3% of Latvian businessmen have plans to purchase another company or perform a merging. Neighbouring countries are the main markets for Latvian businessmen. Scandinavia and Western Europe, on the other hand, are used to a lesser degree than Lithuania and Estonia.
«Businesses find it necessary to reduce costs. The time for cutting corners has passed. This is why it is necessary to look for strategic solutions. Buying or merging businesses is one such solution. In addition, deals don’t have to be massive. Introducing new technologies is also a good solution. Sometimes businesses make short-term solutions and avoid attracting innovations, fearing the financial side of the process,» says PwC ITS manager Eriks Dobelis.
He says the third way is investing in human resources, which is widely considered one of the deciding growth factors. ‘This can be realized through employee motivation and in cooperation with partners,’ said Dobelis.
In Latvia, when compared with other countries, businessmen feel threatened the most by increasing tax burden. They believe a competitive tax system should be the government’s main priority. Only 4% of respondents view Latvia’s tax system as efficient and internationally competitive. For the most part, however, businessmen view is negatively.
In Estonia, 63% of respondents view the tax system as positive. PwC Tax Department director Ilze Rauza emphasizes that such a result is largely based on emotional opinions: «Businessmen’s position on this is a signal for the government. 85% of respondents say reduction of administrative burden is just as important as reduction of tax rates. 68% of respondents claim tax system’s stability is more important than reduction of tax rates.»
Rauza explains that businessmen do not expect the tax reform to create any additional difficulties or increased administrative burden. The goal of the reform is motivating taxpayers who have been avoiding taxes until now to start paying taxes honestly, which would improve competitiveness and increase optimism in the business environment.
Excessive regulation is a source of headache for nearly every large business – 80% of the world’s and Europe’s businesses mentioned that as the main threat to the growth of their business.
Pressure for existing resources and additional costs force businessmen to search for solutions to make their activities more efficient. PwC Audit Department director Lolita Capkevica mentions introduction of an internal quality system as a possible solution: «Evaluation of possible consequences of new regulations could create additional costs, but in a long-term perspective it can help reduce risks and secure stability. It is also important to keep in mind commitments one’s business has before the state, as well as create a sense of responsibility among employees. Often managers’ vision remains in their heads without reaching their employees. Every employee has to know the goals of the company they work for. They also have to know what their own role is in accomplishing those goals.»
The global study results of which were presented at this year’s economic forum in Davos included the participation of 1,379 CEOs from around the world, including 124 from Latvia, 93 from Estonia and 105 from Lithuania.