The work group was established in 2010 with an aim to imrpove the court system and to improve protection of investment in Latvia. Issues discussed in the work group include:
The work group was started in 2011 and since has developed two position papers on improvement of the insolvency procedures in Latvia.
Currently the work group is carrying out a study on the impacts of insolvency system abuse on the economy of Latvia
In 2014 the work group produced a position paper on intellectual property protection and promotion. This season the group focuses on implementing the suggestions in this paper and providing input for government working groups now active in various areas.
Topics covered in the group:
Labour Issues Group began its work in 1999 when FICIL was established. The issues the group has been working on during these years are: the quality of Latvia's professional and tertiary education, its compliance with the labour market needs, quality of skilled labour, labour re qualification system, immigration policy and the dual system vocational education and training, and possibilities to introduce this system in Latvia.
Public procurement: new EU directive and implementation:
The reforms are intended to modernise and simplify the rules. Some of the most important changes introduced in public procurement regulation by the new legislative package can be summarised as follows:
- Abolition of the distinction between "part A" and "part B" services;
- “Lowest price” as award criterion has been abolished;
- Preliminary market consultations, prior to launching a procurement procedure, are now expressly permitted;
- Contracting authorities will be permitted to use a competitive procedure with negotiation on a wider range of grounds;
- The grounds for excluding bidders are expanded to include poor performance under previous public contracts;
- In order to facilitate participation of SME, authorities may not set a minimum turnover requirement at more than double the contract value;
- The minimum time-limits which authorities must allow for bidders to submit their tender proposals have been shortened, so as to speed up award procedures;
- When comparing tenders for services contracts, the authority will be expressly permitted to take into account the qualifications and experience of the individual staff assigned to performing the contract;
- A new, potentially groundbreaking procedure of innovation partnership has been introduced;
- Mandatory use of electronic communication;
- Introduction of new rules governing award of concessions etc.
Preconditions for increasing competitiveness of the country and sustainable economic development (Macroeconomics position)
Topics to be discussed and covered by the work group:
- What drives competitiveness of the country?;
- Advice on long-term policy (economic, education etc.);
- Views on current economic agenda topics (impact of sanctions);
- Measuring the sentiment of FICIL members for increasing/decreasing their investments in Latvia.
Tax Issues Group was established in 1999. It is closely following the developments in Latvia's tax system and tax administration, and coming up with proposals on how to improve the business environment and investment climate through changes and improvements in tax system and/or administration.
To apply for participation in any of the workgroups, please press the link below
Latvia keeps facing shrinking labour supply (via skills loss, ageing, poor health status, low birth rates, and emigration), which in combination with fragmented and financially small territorial units will undermine country’s ability to attract investment and create sustainable and well-paid jobs. We have entered a vicious circle of financially-ever-weaker regions with persistent emigration, which is also weakening currently stronger centres.
Recent survey of member organisations of the Foreign Investors’ Council in Latvia (FICIL) reveals a widening gap between supply and demand of labour force – for most the shortage of needed labour force will increase within next 3 to 5 years and will have negative impact on business performance. There are also concerns regarding the quality of the labour force, including underdeveloped social competences.
To mitigate the situation, we propose to concentrate on Education reform and promotion of innovation as well as develop smart immigration policy. We have also formulated a list of proposals relating to legal framework of labour related issues (Annex I).
Sound capital markets and effective regulation are critical in encouraging capital formation in Latvia. Actions taken to pursue these objectives must also ensure that investors and consumers are adequately protected. Improvements in capital markets and their regulation will help restore confidence in the financial system and promote economic recovery.
The state is a shareholder in numerous companies. These state-owned enterprises (SOE) play an important role in Latvia’s economy: SOEs generated 18.2 percent of GDP in 2009. Typically SOEs have both social and commercial goals. This often presents a problem.
Understanding the relevance of the quality of education for the future of Latvia and its business community, we have undertaken a review of a certain number of key aspects to be considered. This document provides a relevant framework for decision makers in order to proceed decisively towards the modernisation of the educational system in Latvia.
While we support and appreciate the efforts of the Ministry of Education and Science on key issues such as the new funding model, salary level of teachers and consolidation of schools’ network; we encourage considering the educational reform also from other perspectives: internationalisation, inter-cooperation and individualisation.
Reforms in the health sector have not transformed into meaningful improvements in health indicators within the Latvian population – in potential or current employees. Any success will depend on high levels of political will and material commitments sustained over time, albeit decisive action, which is difficult to achieve, is essential.
The Foreign Investors Council in Latvia (FICIL) position is that the dual-system vocational education and training would solve the problems with the quality of professional education in Latvia thus eliminating certain labour market faults as pointed out in the FICIL labour market study 2008, it would increase the prestige of the professional education thus increasing the number of students who would chose to go for it. At the same time labour market in general and employers in particular would gain access to highly qualified and motivated professionals who have acquired most up to date practical skills as demanded by industries.
Energy sector is one of the key components of the business environment; therefore FICIL closely monitors energy policy developments and supports recent Government initiative on the development of two new power generation units. In addition FICIL sees this as an attractive initiative since foreign investors are in particular interested in large scale investment projects and energy sector provides such opportunities. In order to get competitive bids from potential investors and further ensure stable and sustainable energy prices for foreign investors and other consumers FICIL suggests to consider several additional aspects when moving forward process on the implementation of new power generation units.
Foreign Investors’ Council in Latvia (FICIL), representing both energy users and producers and supporting improvements in the business environment and investment climate in Latvia, is closely following recent developments in the energy sector.
Economic recession in Latvia has resulted in an extremely high unemployment rate. Today, large companies are not able to generate new jobs and many people are leaving the country in quest for job abroad. We believe that workforce emigration prevention and creating new jobs should be one of the primary concerns of the government. Therefore FICIL members individually and FICIL as organisation is supporting and would encourage government to support implementation of the “Jobs & Society” concept in Latvia.
An effective and transparent insolvency procedure is one of the key components that ensures solid economic growth and stability. According to the World Bank1 an effective legal framework should provide for timely, efficient, and impartial resolution of insolvencies and prevent the improper use of the insolvency system. If the insolvency proceedings are misused, such abuse may result in significant negative impact on the economy and result in losses for the key stakeholders of the economy: businesses, investors, employees, and the public sector.
The Foreign Investors Council In Latvia (FICIL) has recognised that one of the causes for the current growth imbalances as well as several undesirable long-term trends in the Latvian economy are the distorted economic incentives caused by deficiencies in the tax system. The system has fallen behind the economic development process and even hinders it through failing to provide appropriate environment for balanced long-term growth.
FICIL believes that the higher education system is in need of serious reforms if it is to become internationally competitive, prevent brain drain (‘human capital flight’), and turn into a key driver of Latvia’s economic development. The reforms should focus on changing the financing model of higher education and promote consolidation of the higher education system.
The Foreign Investors Council in Latvia (FICIL) position is that the Government should improve the territorial planning and construction approval processes to increase predictability and clarity for investors about the procedures and timelines to be followed when developing green-field industrial investment projects.
Effective and transparent insolvency procedure is one of the key components that ensure solid economic growth and stability. According to the World Bank principles for effective insolvency, legal framework should provide for timely, efficient, and impartial resolution of insolvencies and prevent the improper use of the insolvency system. If the insolvency proceedings are misused, such abuse may result in significant negative influence on the economy and result in losses for key stakeholders of the economy: businesses, investors, employees and public sector.
Once the economic crisis was overcome, Latvia initiated a number of structural reforms in several industries, including healthcare and education, as well as state government. The Foreign Investors Council in Latvia (hereinafter referred to as FICIL) would like to draw attention to the need for maintaining the structural reform policy in order to achieve a sustainable increase in investment indicators for Latvia, shaping a favourable environment for business development.
FICIL Investment Protection Work Group has developed conclusions and recommendations regarding necessary and preferable changes in legislation as well as its enforcement, in order to better ensure the security and protection of investments as well as improve the business environment in Latvia in general.
One of the dangers for the long-term economic development of Latvia inter alia is the issue of labour force quality. It is only logical that foreign investors engaged in Latvian business and thinking about security and viability of their investments are interested in solutions in this particular area. The kind of solutions, which would produce results already in the nearest future.
The Foreign Investors Council in Latvia (FICIL) maintains it’s position that the Government should give the investors a clear vision of what are the priority areas for the economic development. FICIL has always recommended that within these priority areas, as well as in the energy and transportation sector the Government should strive to develop a few very large scale investment projects on a transparent basis to attract blue chip investors.
The successful development of the Latvian economy continued in 2013, and, despite a slowing down in the rate of growth, Latvia has maintained its place among the fastest growing economies in the European Union. The Latvian government’s determination to observe a policy of strict fiscal discipline has earned it and Latvian lawmakers a significant level of credibility in the eyes of its European peers and is well acknowledged, as reflected by a steady improvement of international credit ratings[i]. In addition, in a significant step towards further integration into Europe and further improving credibility and predictability, the Latvian government successfully managed the conversion from the Lats to the Euro in January 2014. This important step will certainly provide additional stimulus for the development of Latvia’s economy in the years to come.
[i] The Treasury reports a steady increase of Latvia’s credit ratings, from the lowest BB (BB+) in years 2009 and 2001 to BBB (BBB+) in 2013. Information retrieved from: http://www.kase.gov.lv/uploaded_files/Kreditreitings/Rating-Comparison_16.12.2013.pdf
The Foreign Investors Council in Latvia (FICIL) would like to note that macroeconomic conditions in Latvia have changed very significantly since the previous High Council meeting in June 2007. Although inflation is high and has even increased during the year, Government has used tools at its disposal to lead the economy towards comprehensive stabilisation — reduction of both internal (inflation) and external imbalances.
The previous FICIL position paper on macroeconomic policy was more pessimistic than the consensus view on economic prospects at that time, but it was clearly not pessimistic enough. Global financial crisis since the last Meeting has accelerated the unwinding of Latvia’s economic imbalances and negatively affected exports as well as access to external financing. As a result, we are looking at GDP contraction by perhaps close to 20% in 2009.
The good news — most of the correction has already happened, as indicated by preliminary GDP data for Q1 and the fact that current account was in surplus in early 2009. However, even as quarter-on-quarter contraction slows down sharply during the rest of the year, the downturn that has already taken place is deep enough to impose extraordinary fiscal policy challenges on the Government. While there is no easy way out, there are ways how to: (i) alleviate short-term pain, and (ii) reduce damage and leverage the benefit of the crisis for long-term development prospects of the country.
The recession in Latvia is formally over following a two-year contraction. But the end of the recession does not automatically imply stable economic growth from now on – the economy will grow, but it will be fragile in the beginning. Growth in one quarter may be followed by a contraction in another. Exports have been recovering while domestic demand is weak and is expected to remain so for some time. Albeit unemployment seems to have peaked and is gradually decreasing, international evidence shows that it will remain elevated for years. Job creation is weak and given the current institutional framework and business environment quality there is no reason to expect that it will improve sharply. The future growth will also be weighed down by grey economy, which is widening.
The Latvian economy is back on the road of growth – over the past year recovery has become stronger. Unless the global economy nosedives again, the Latvian economy will most likely continue to report positive growth rates, but without quality and swiftly implemented structural reforms such growth will be too slow to support coherent and across all social groups enjoyed rise in living standards. Job creation is weak, grey economy has grown to unacceptable levels. Tax increases to balance the budget have become increasingly counterproductive. Negative demographic trends are about to kick in putting under pressure sustainability of the social security system, pension system, country-wide regional cohesion and development.
In 2011 Latvian GDP growth was strong at 5.5%. The growth was broad-based, yet major underlying drivers still remain exports and EU funds. Unemployment continues to retreat and incomes have started to grow. The government’s fiscal stance continues to improve. The economy has become more competitive, more resilient to shocks. Financial and fiscal stability has been attained; State Treasury has accumulated good liquidity reserves. Yet, not all is done and over. The global environment remains fragile and one must remain cautious. Part of the current recovery in the Latvian economy is due to a post-recession rebound, which conceals structural weaknesses that will obstruct growth in the mid to long-term. It is encouraging that many of the earlier policy taboos have been lifted by the new government as we see more open and genuine discussions on the fundamentals of future growth, but results are still to be seen. The Euro 2014 target is within reach, but decisive actions are necessary to ensure it. The current momentum must be used and policymakers must make a clear shift from managing the crisis to creating growth. Growth that is sustainable, rapid, and inclusive.
The Foreign Investors Council In Latvia FICIL) working group has looked at the macroeconomic situation of Latvia and found that the internal and external imbalances need to be addressed immediately to maintain investor confidence and prevent lasting damage to the country’s long term growth prospects.
The Foreign Investors’ Council in Latvia (FICIL) supports “sustainable mobility” to enable economic growth and promote integration, sustainability, territorial cohesion and openness within the transportation network of the Republic of Latvia. To achieve development that is sustainable, FICIL sees four key issues that should define all future development activities:
2) competition - elimination of protectionism for a well functioning market;
3) predictability - stability in the investment climate; and
4) continuity – stability of the regulatory and policy environment to foster more forceful attraction of foreign direct investment.
The Foreign Investors Council in Latvia (FICIL) position is that the Government should improve coordination and concentrate available resources for economic research and in a medium term facilitate establishment of an independent economic research institution - National Economy Competitiveness Institution (NECI). The institution should work in sphere of macroeconomic analysis including long term economic planning, labour market research and assessment of tax policies. NECI would be a central coordinator of all economic related research in the country, and would ensure quality control, more efficient use of existing resources and undertake the task of making results publicly available and communicating them via seminars and discussions.
The FICIL believes that the Stockholm School of Economics in Riga (SSE Riga) is a valuable asset to the Latvian higher education system and contributes to the creation of a sustainable knowledge based economy in Latvia.
In Latvia, intellectual property (IP) rights- intensive industries contribute 21% of employment and 32% of GDP, thus placing the country near the bottom in the rank of European Union countries on both measures.[i]
The Latvian government has repeatedly emphasised its goal of supporting the development of high value added products, strengthening and facilitating cooperation between businesses and research institutions, and fostering applied research, as input for new products. This will lead to an increase in the value of intellectual property assets originating in Latvia.
Company disputes in Latvia are primarily resolved under the procedure laid down by the Civil Procedure Act (CPA) in a court of general jurisdiction or a court of arbitration. At the same time, the FICIL has already expressed its support for creation of either commercial courts or specialised departments of courts of general jurisdiction to facilitate the speed and quality of reviewing company disputes.
An efficient court system plays a crucial role in ensuring economic growth. Reliable, timely and enforceable court rulings are an essential component of an attractive business environment.[i]
A court system that guarantees security of investments and efficient protection and enforcement of rights is one of the fundamental criteria to a decision on investing in a specific country.
[i] The EU Justice Scoreboard, retrieved from: http://ec.europa.eu/justice/effective-justice/files/justice_scoreboard_communication_en.pdf
Considering that the proportion of actual expenditure in 2009 arising from public procurement contracts accounted for 9.8% of the GDP, public procurement provides for an important part of the Latvian economy. The public procurement contracts in 2007 even accounted for 17% of the GDP.
 Summary of Statistical Reports Regarding Public Procurement in the Republic of Latvia in 2009, http://www.iub.gov.lv/files/upload/2010_statistisko_parskatu_apkopojums.pdf
The FICIL has found that the improvement of the Insolvency Act per se does not ensure legal and transparent progress of insolvency processes. The quality of the insolvency process system is determined not only by the provisions of law, but also the practice of application of those provisions, while the practice thereof is in the hands of courts, insolvency process administrators (hereinafter referred to as the insolvency administrators) and the Insolvency Administration. The role of insolvency administrators is especially important because the law grants extensive authority to administrators and the administrators’ conduct considerably affects the interests of both debtors and the process-related creditors.
Real Estate Development Issues for the High Council
Purpose: to serve as an agenda for a meeting with the Riga City Council on June 21, 2006 at 16:00 to 18:00, Riga City Council, Ratslaukums 1
Search for Excellence - Growth Strategies
Latvia is doing well, we are all happy about it. Does that make us feel secure about the future? Doubtful.
It concerns us that, for example, the current Government future strategy planning does not seem to be taking much notice of realities outside of the Latvian borders. We believe that the most important question is how Latvia competes on a global scale, in the economy of which Latvia is part - the global economy. Therefore, a very sober look at Latvia’s present and future competitors is a critical success factor, which currently seems to be missing.
During the past years, the need to attract foreign investments and to improve the investment environment has been defined, in various policy planning documents, strategic development plans and government declarations, as one of the goals that Latvia has to achieve. The progress in accomplishing these goals, however, has not proved to be as clear as it could have been. Thus, in such positions as comprehensibility and predictability of the implemented policy, according to the Global Competitiveness Reports of the World Economic Forum both for 2012-2013 and for 2013-2014, Latvia still falls behind its neighbour states Lithuania and Estonia. Additionally, in the Doing Business 2014 research, published by the World Bank at the end of the last year, the overall indexes of Latvia also fall slightly behind its neighbouring states Lithuania and Estonia (Latvia ranks as the 24th, while Estonia — as the 22nd, whereas Lithuania — as the 17th).
The Foreign Investors Council in Latvia (FICIL) position is that the Government should improve regulatory enactments related to spatial planning and construction in order to establish effective, uniform and predictable spatial planning and construction processes.
Public procurement is an essential component of every European Union member-state’s economy. The European Commission has calculated that European Union member-states, including Latvia, spend approximately 19% of GDP on public procurement.
Latvia’s economy continued to develop and grow in the first six months of 2015 despite problems in external markets, although this growth lagged behind the predictions on which the 2015 budget was based. It is expected that Latvia’s GDP growth this year could be a little above 2%. Bearing in mind the importance of export and the continuing high uncertainty in external markets at the same time, the capacity of Latvia’s exporting companies to re-orient themselves and to continue increasing export volumes is to be commended. At the same time it must be conceded that Latvia continues to remain in a situation where it needs an economic “breakthrough”, to reach a level like that of the most developed EU nations. The pace of economic growth up till now, which is within the region of two to three percent, will not let it attain that level in the foreseeable future.
The Foreign Investors Council in Latvia (FICIL) position is that the Government should actively develop a national plan for “sustainable mobility” to enable economic growth and promote integration, sustainability, territorial cohesion and openness within the transportation network of the Republic of Latvia.
In 2012 Latvia was successful in keeping up a high rate of growth, reducing unemployment and maintaining low inflation. The austerity measures undertaken showed their effect. FICIL acknowledges that the main challenge for the future is to work to make such growth sustainable in the longer perspective.
The tax Committee of FICIL considered tax policies that might make it easier for companies to invest in production. The thinking behind this approach is that too many workers are being attracted out of the country to better-paid work, leaving loss of revenue, shortages of qualified workforce and broken families behind in Latvia.
The Foreign Investors Council in Latvia (FICIL) position is that the Government should improve the tax system in order to encourage the business activities during the economic slowdown. The FICIL recommends ensuring an effective tax system, which supports and encourages the business activities in Latvia and ensures consistent tax revenues to the state budget.
In Latvia, tax matters are often discussed without paying due regard to both the systemic role of individual taxes and a broader social context of the tax system. Changes in taxation are usually regarded as tools for raising more revenue. In the context of the current fiscal situation the revenue issue cannot be dismissed – indeed, there are tax measures that are preferable to many expenditure side measures available to close the deficit. However, FICIL would like to pay attention to possible synergies between improvements in the tax burden structure, governance, and a constructive dialogue between government and society. Gains are clearly available as tax evasion, poor quality of some public services, and low opinion regarding public administration are interlinked.
Tax and Tax Administration Issues for the High Council (draft)
Purpose: to serve as an agenda for a meeting with the Ministry of Finance and the State Revenue Service on June 21, 2006 at 15:00 to 17:00, the Ministry of Finance, Smilšu iela 1
The Public Sector – an Instrument for Competitiveness
The aim of this presentation is to give you an insight into what it feels like at times to be on the receiving end of services from Latvia’s Public Sector today and how it makes a foreign investor react.
The FICIL Transport and Logistics working group would like to recommend that the Government should be committed to developing an integrated transport strategy which will provide the framework for the country’s transport policy for the following years. A key objective is to produce more sustainable transport patterns, to serve the growing needs of private individuals and have a positive impact on business within the supply and logistics industries. Particularly looking to reduce dependence on the car by providing genuine alternatives, and promoting greater use of more attractive public transport, supported by complementary transport measures.
Waste management in Latvia is an industry with a significant potential for development and investment. The sectoral policy has a direct effect on the competitiveness of companies.
The situation in the waste management sector allows us to identify a number of structural issues in the business environment. It is insecure and unfavourable to investment: