Foreign investment climate improving in Latvia, though challenges remain

FICIL released its annual overview of its members' views on the economy and business environment, the "Foreign Investment Environment Index" at the Stockholm School of Economics in Riga which shows that the mood of foreign investors improved overall in 2017 compared with 2016 data, based on interviews with 42 different members.

Last year, the volume of foreign direct investment increased substantially - 710 million euros were invested, which is five times more than direct investments in the same period in 2016.

Speaking at the launch of the report which he compiled, Dr. Arnis Sauka said that as foreign-owned businesses contribute nearly half of total taxes and employ more than a quarter of the total workforce, it is very important to listen to their views.

"These companies seem to be much more productive than companies on average in Latvia," the data suggested, Sauka said, revealing that investors gave Latvia a score of 2.5 out of 5 points in 2017, up from 2.0 in 2016.

There was praise for improvements in how the government communicates with investors, with the Economics and Finance ministries both seen to have upped their games.

However, "Demography has not a very positive trend in this country... what we see from this 2017 study is that there is a negative trend, which is concerning. When it comes to access to labor, this is another issue which is one of the most problematic... all countries these days fight for talent."

Yet foreign investors were concerned about hiring "simple, old-type workers" in addition to the highly-skilled workers being fought for on the international labor markets.

Investors also remained rather skeptical about promised reforms to the healthcare system and whether recent tax reforms will improve the way companies file their taxes and the returns they see.

"With the court system 26% say there has been some progress. Yet as with previous years foreign investors criticise courts for being slow and not that efficient. But it's not completely bad, it's still a bit of a gray issue."

"We don't see uncertainty with regard to the threat from Russia as we saw 2 years ago... but foreign investors are skeptical or at least reserved when it comes to the effect of the tax system. Some would argue that the tax system and the way it has been implemented might actually increase uncertainty," Sauka said.

Investors would also "like to see more analytics" when it comes to changes in business legislation, he added.

The full report can be read HERE or via the link below.