As reported last week, Latvia’s investment climate has reached its lowest rating in 2023. This is the conclusion of the “Sentiment Index 2023” research by the Foreign Investors’ Council in Latvia (FICIL) and Dr. Arnis Sauka from the Stockholm School of Economics in Riga (SSE Riga). Investors cite geopolitical situation, the quality of legislation, and the workforce costs and availability as reasons for the low assesment. The full report of the “Sentiment Index 2023” can be found here:

The 2023 study asked the investors to assess progress in five key policy areas – reduction of the shadow economy, investment protection, promotion of green economy, human capital development and public sector efficiency. On a five-point scale, investors observed the lowest progress in public sector modernisation (1.9), improving labour availability (1.9), improving labour requalification (2.0) and managing a coherent human capital policy (2.0). Average progress was observed in the shadow economy reduction (2.5) and in the improvements in the work of the SRS (2.5), the digitisation of the public sector (2.5) and the promotion of climate and energy policies (2.5). In the eyes of the investors, high progress has not been observed in any of the policy areas. FICIL has a long-lasting/on-going cooperation with public sector institutions, as FICIL has been offering recommendations in key policy areas in order to improve Latvia’s overall investment climate and increase economic growth. The investors have cofirmed this by aknowledging that they are being heard by policy-makers but that there is a lack of real action following the initiatial dialogue.

Investors welcome the commitment of public sector officials to strengthen Latvia’s investment climate, both by supporting new investments and by keeping existing investors in Latvia. Traditionally, as part of the “Sentiment Index” study, investors are asked to send a message to the Prime Minister. Investors wish Evika Silina to become bolder, more ambitious and to develop a long-term vision, focusing on improving Latvia’s competitiveness, by increasing productivity, investments in innovation and infrastructure, without only thinking of the four-year election cycle. According to investors, Ms. Silina should involve the private sector more extensively in the policy-making process, focus on reducing bureaucracy, and increase fair competition by reducing public sector favouritism towards state-owned companies. Similarly, investors are asking the Prime Minister to find a solution to the problems of demography, by saying – no people, no economy!

At the end of this week, on April 26, foreign investors, together with the public sector representatives, will discuss solutions to improve Latvia’s investment climate and reduce administrative burden. In order to reduce the bureaucratic burden, investors offer to continue digitalisation and reforms of the public administration by introducing more data-based and result-based decision-making. On the other hand, in order to improve the investment climate, investors recommend developing a long-term human capital strategy that promotes availability of skilled labour, eradicating the shadow economy by reducing the sense of impunity for tax avoiders while strenghtening benefits for honest taxpayers, as well as demanding a clear action on access to public capital markets for state-owned and municipal-owned companies.