Ministers: there are several objective reasons for the historically lowest assessment of the investment environment in Latvia by foreign investors

There are several objective reasons for the historically lowest assessment of the investment environment in Latvia by foreign investors, but the government still has a lot to do to improve the investment environment, Latvian government ministers admitted on Friday at the discussion held by the Foreign Investors Council in Latvia (FICIL).

Finance Minister Arvils Asheraden (JV) said that, taking into account all the circumstances, the assessment of foreign investors is still relatively good. Asheraden pointed to several circumstances affecting the economy – the ongoing fight against inflation by the European Central Bank (ECB), the very conservative lending policy of banks, as well as the security situation, which must be addressed urgently.

Asheraden emphasized that the economy cannot develop normally at such high interest rates. The minister also pointed out the weak crediting, because currently the Latvian economy lacks investments in the amount of approximately two to five billion euros. According to Asheraden, the lack of financing and investment could be solved with the development of the capital market.

Also, the Minister of Finance admitted that targeted progress towards the implementation of the strategies implemented in the country has been replaced by bureaucratic procedures.

Asheraden said that tax policy guidelines will be ready in June, which could be more welcoming to entrepreneurs. Similarly, the reform of the State Revenue Service (SRS) is moving forward, as well as the work with the introduction of general income declaration, which will promote the fight against the shadow economy, continues.

Economy Minister Viktors Valainis (ZZS) said that the assessment of foreign investors should be taken seriously.

Valainis pointed out that there is a lack of labor for business development in Latvia – entrepreneurs have orders, but they are unable to produce them due to a lack of employees.

Valainis also acknowledged the impact of the bureaucratic and long construction process on the evaluation. The minister pointed out that work is already underway to reduce bureaucracy in construction. The absolute minimum goal is to reduce the time of the construction process by 30%, and ideally by 70%, Valainis said.

The Minister of Economy also pointed to the underdeveloped capital market, which currently accounts for about 1% of the gross domestic product (GDP). “In order to be able to move the economy, the development of the capital market is necessary,” Valainis said.

Transport Minister Kaspars Briškens (P) admitted that the infrastructure received a bad rating from investors, agreeing that Latvia has invested too little in the development of railways, ports and especially roads, creating connections between industrial parks, ports and other objects necessary for entrepreneurs.

At the same time, Briškens pointed out that in the field of aviation, Latvia is the leader in the Baltics, while the communication infrastructure in all three countries is approximately at the same level.

The investment climate in Latvia in the assessment of foreign investors in 2023 was at the lowest level so far, amounting to 1.9 points out of five, concluded the study “Foreign Investment Environment Index 2023” conducted by Riga University of Economics and FICIL.

Compared to the measurements of 2022, the rating for the investment climate decreased by 0.4 points.