April was the month of the Sentiment Index! We presented the research results and engaged in a hot discussion with the public sector officials. Besides that, FICIL met with various government officials, participated in panel discussions, and continued to shape the agenda of policymakers through the work groups.
Sentiment Index 2023
On April 26th, FICIL organised the event to present and discuss results of the Sentiment Index 2023. They painted an alarming picture, as the foreign investors assessed the Latvia’s investment climate with the lowest score in the history of the research. Thus, the share of investors, planning to continue investing in Latvia has also decreased. Among the reasons behind the above were mentioned the geopolitics, lack of skilled labour and high labour costs, quality of legislature and a high level of bureaucracy.
In the focus of this year’s research was the administrative burden, which significantly increases staff workload and higher business costs, thereby hindering future investment in Latvia. As per investors assessment, high administrative burden is prevalent in areas of construction and site development; employment and labour market; judicial system; tax administration, and others.
The results of the Sentiment Index and potential solutions were discussed on 26th April, together with the public sector officials, including the Minister of Economics, Minister of Finance, Minister of Transport, Auditor General, and the Mayor of Riga. The discussion was moderated by Jānis Domburs. The event has been livestreamed and recorded in English and Latvian.
This year, the Sentiment Index event was launched in cooperation with the German – Baltic Chamber of Commerce, as they presented the results of the survey on the business climate in Eastern and Central Europe.
FICIL met with the Prime Minister, Ms. Evika Siliņa
On April 12th, the FICIL Board met with the Prime Minister of the Republic of Latvia, Ms. Evika Siliņa, to discuss reduction of the administrative burden, human capital, and measures to stimulate a fair market competition. During the meeting, FICIL underlined the importance of implementing a comprehensive human capital strategy to enhance the quality and availability of skilled workforce, as well as, to spur economic growth and investment. The Prime Minister outlined the government’s newly adopted plan aimed at reducing the administrative burden in the real estate sector, designed to support the real estate projects, ensuring a faster and more convenient development process. FICIL thanked the Prime Minister for taking the first steps to reducing the administrative burden in the areas of construction and real estate development. FICIL remains committed to supporting the government in improving the investment and business environment in Latvia.
Meeting with the Minister of Justice, Ms. Inese Lībiņa-Egnere
FICIL met with the Minister of Justice on 24th April to discuss matters related to reducing the shadow economy, improving the quality of the legislation, the new Law on interest representation and court efficiency. FICIL stressed that the justice system should be pro-active, anticipating and suggesting effective regulatory solutions. FICIL has expressed support of the Law on interest representation, as it further promotes transparency in the public sector and policy co-creation. The significant work done on regulations related to arbitration courts in Latvia, the progress on implementing the Shadow Economy Plan and measures to curb corruption were also discussed.
FICIL was represented by its Board Member, Māris Vainovskis, and several work group leaders – Dace Cīrule, Evita Goša, Daiga Zivtiņa, and by the FICIL’s Executive Director, Tatjana Guzņajeva, and Policy Expert, Roberts Alhimionoks. FICIL would like to thank the Ministry of Justice for a productive meeting and remains committed to cooperation with the ministry in the future!
FICIL participates in the OECD “Economic Survey of Latvia 2024” panel discussion
On April 26th, FICIL Vice-Chairperson of the Board, Reinhold Schneider, participated in an OECD-organised panel discussion about the report “Economic Survey of Latvia 2024”. During the panel discussion, Mr. Schneider noted that the OECD recommendations are very similar to the FICIL position papers presented to the Government in November last year.Reinhold Schneider emphasized the importance of reducing a shadow economy and adopting a cautious approach towards tax reforms, as raising taxes in an environment with a high level of a shadow economy could be detrimental for the economy.
During the discussion, the overall investment attractiveness of Latvia was debated. The panelists concluded that both Lithuania and Estonia are leading in some areas, while Latvia needs to evaluate its strengths and opportunities, building upon them to catch up with the neighbouring countries. The discussion ended with a conclusion that it is crucial to accelerate progress in the long-standing issues, such as a lack of coherent labour policy, etc. Listen to the full discussion here.
FICIL’s work group leader, Dace Cīrule participates in the Big Cleanup
On April 27th, the annual Big Cleanup (Lielā Talka) was held in Latvia. FICIL’s Energy & Green Economy work group leader, Dace Cīrule, was leading by example and participated in the cleanup of Zaķusala.
Prior to the Big Cleanup on April 27th, Dace Cīrule participated in a panel discussion dedicated to the movement of Big Cleanup. During the discussion, Dace Cīrule quoted FICIL’s slogan “tomorrow is the consequence of now” and emphasised that the principles of accountability and sustainability are imperative. Watch the full discussion (in Latvian).
FICIL signs the memorandum to implement the principles of good governance in state- and privately-owned companies
On April 29th, FICIL’s Chairperson of the Board, Zlata Elksniņa-Zaščirinska, together with the Government, Baltic Institute of Corporate Governance, Finance Latvia, and the Latvian Exporters Association “The Red Jackets” signed a memorandum to implement the principles of accountability and good governance in state-owned and privately-owned companies. FICIL has long advocated for a stronger accountability and implementation of principles of good governance in state-owned companies and is actively cooperating with the government to ensure fair competition between state-owned companies and private businesses. Read more by clicking here.
FICIL in media
This year, the Sentiment Index results drew significant attention of the media in Latvia and beyond. In total, 321 publications have mentioned the research in Latvia and the Sentiment Index was highlighted in different news channels for 2 weeks. The foreign media channels also expressed interest in the Sentiment Index. Below we present a few examples:
Science Bussiness: in an interview with Thomas Brent for Science Business, FICIL’s executive director, Tatjana Guzņajeva, and the public sector reform work group leader, Reinis Āzis, reflected on the Sentiment Index 2023 results. They delved into investors’ views on the administrative burden, noting that high bureaucracy affects future investment plans. Reinis Āzis highlighted progress made in the public sector digitalisation. Tatjana Guzņajeva explained that the investors’ assessment of the investment climate is worrying, but Latvia holds a huge potential – investments in innovation and higher education are needed to address the labour shortage challenges and to stimulate higher competitiveness.
Māris Vainovskis “Spried ar Delfi”: Maris Vainovskis, FICIL Board member and leader of the Investment Protection Work Group, alongside the Parliamentary Secretary of the Ministry of Economics, discussed the investment climate in Latvia on the talk show “Spried ar Delfi”. Vainovskis emphasised the need for a proactive government approach to tacking critical business-related challenges, predictability and stability of governments policies, especially of the tax policy, and the importance of a long-term vision for Latvia. The above would ensure that investors feel secure about their investments in Latvia.
Zlata Elksniņa-Zaščirinska “Rīta Panorāma”: Zlata Elksniņa-Zaščirinska, the Chairperson of the FICIL Board, commented at LTV1 Rīta Panorāma about the long-standing social and economic reforms that are urgently needed, requiring political will, consistent funding, new technologies, processes, and people that can implement them. To ensure successful implementation of these reforms, the public administration should lower its dependence on EU funding and stimulate digitalisation to become more efficient. Lastly, Zlata highlighted importance of the long-term economic development strategy. Thus, the government should clearly define what and how the country will achieve.
Arnis Sauka “900 sekundes”: Arnis Sauka, SSE Riga professor and FICIL member, while giving an interview to the TV3 morning news “900 sekundes” indicated that the Sentiment Index research findings are not designed to criticise the government, but to help the policymakers identify issues that are critical for the investors and entrepreneurs in Latvia. This year’s research results highlight that Latvia is falling behind on indicators that are related to development, such as innovation ecosystem, infrastructure, education, technologies and productivity. In addition, other Baltic States provide more measures to attract investment, have a more efficient public administration and more impactful policies. What is urgently needed is to invest in science and education, simultaneously fighting the shadow economy.
Jānis Grants “Latvijas Radio Labrīt”: Jānis Grants, FICIL Board Member, discussed the shadow economy, administrative and human capital challenges at Latvijas Radio programme “Labrīt”. He pointed to the duplication of efforts, poor communication between many public sector institutions, and a lack of result-oriented KPIs at these institutions. In view of the foreign investors, the bureaucratic apparatus in Latvia should be reduced. Despite existing challenges, Jānis stressed that the foreign investors have a good collaboration with the government and trust that progress will be achieved.
Invitation to a Joint Chamber Debate: The Future of Europe: Competitive, Sustainable and Thriving?
On May 22nd the American, German, Norwegian, Swedish Chambers of Commerce in Latvia will host a pre-election debate in the run-up to the European Parliament election scheduled for June 6-9, 2024. The event will take place on Wednesday, May 22nd, 15.00-17.00 at Riga Graduate School of Law, Strelnieku 4k-2.
In a time of significant political and geopolitical tensions, the new European Parliament will need to address a myriad of issues starting from post-pandemic economic recovery to climate change and environmental sustainability, from increased security threats to digital transformation. The debate will focus on the vision and priorities of the parties to ensure safe, competitive, sustainable and prosperous Europe and Latvia as part of it. Joining the debate will be the leading candidates from the most popular political parties according to the latest polls.
The FICIL members can join the event for 25EUR. To register, please contact ficil@ficil.lv or one of the organisers.
Work group update
The FICIL Shadow Economy Combatting work group: met three times in April. The meetings focused on the tax reform scenarios, including the real estate and environmental taxes (natural resource tax), the potential reforms of the SRS (State Revenue Service) and the progress on shadow economy combatting plan. In addition, a joint meeting with the FICIL’s Shadow Economy Combatting work group was held. The groups engaged in a discussion of the natural resource tax and potential recommendations for the government.
The FICIL Energy and Green Economy development work group: held three ad hoc meetings in April. The meetings focused on the following topics – environmental tax, issues regarding state accountability, and energy efficiency of buildings, energy policies and investment in achieving the Green Deal goals. On April 25th, the work group meeting was joined by the Member of Parliament and Chairman of Parliament’s Innovation ecosystem sub-committee, Andris Kulbergs.
The Construction work group: held an ad hoc group meeting on 24th April, discussing FICIL comments about the Construction sector strategy until 2030.
Besides the above, FICIL representatives met with the representatives from the Ministry of Finance to reflect on recommendations that aim to improve the public procurement process, and held a meeting with the Ministry of Economics about the Human capital strategy.