As the Saeima elections approach, the Foreign Investors Council in Latvia (FICIL) calls on the new government to place Latvia’s economic growth at the centre of its agenda. From investors’ perspective, growth is not a matter of a single policy area. It is a system in which human capital, good governance, innovation and business support, predictable regulation, and well-considered tax and energy policies complement one another. There is no simple solution; what is needed is well-coordinated and considered policymaking.
Innovation Ecosystems – The Key to Latvia’s Development
With limited resources, Latvia must be highly targeted in how they are used. Latvia’s competitiveness can be strengthened by making better use of and connecting the knowledge, capital, talent and infrastructure already available, thereby building innovation ecosystems. Closer cooperation between the private sector, universities, research institutions and the public sector can help turn ideas into products and services, research into commercially viable solutions, and companies into internationally competitive businesses, increasing productivity and attracting new investment. Only a shared pursuit of common goals, rather than isolated projects, can overcome fragmentation and create a productive environment for cooperation that drives economic development and improves people’s well-being.
It must be recognised that it is not possible to develop all sectors with equal intensity. However, continuing to avoid making choices about priority areas and sectors would be the wrong path. Latvia therefore needs to select a limited number of priority areas of specialisation, based on its competencies, business and research capacity, global demand trends and future growth opportunities. This is politically challenging, but difficult times require courage. Such choices would also help Latvia finally define a long-term vision and build a clearer national profile, showing the world where Latvia’s competitive strengths lie and why it is worth investing in Latvia.
Human Capital – The Foundation of Innovation and Productivity
Strong innovation ecosystems are not possible without people equipped with the knowledge, skills and ideas needed for the future. This requires closer links between education and the labour market, targeted upskilling and reskilling, and greater employer involvement in education. Particular attention should be paid to STEM, digital skills and the use of artificial intelligence in learning and skills development.
At the same time, Latvia needs a targeted policy for attracting and retaining talent. This includes the ability to attract international students, researchers and specialists, as well as creating the conditions for foreign nationals who have studied and worked in Latvia to choose to build their professional lives here.
Good Governance – A Prerequisite for Cooperation and Investment
Businesses and investors need a state they can trust. This means predictable and high-quality regulation, timely and well-informed decisions, fair competition, an effective judicial system, a lower administrative burden and high-quality public services. Priorities must be linked to specific objectives, clear responsibility, funding and measurable results.
Effective action against the shadow economy is also essential. A level playing field is a prerequisite for law-abiding businesses to grow and invest, as well as for strengthening solidarity within society. Reducing the shadow economy, in turn, helps increase public revenues and reduce unfair competitive advantages.
Investors also expect a predictable and effective tax policy. Significant tax changes should be planned over the long term, based on data and impact assessments, with timely involvement of businesses and social partners.
Energy – A Prerequisite for Competitiveness and Resilience
The availability and cost of energy have a significant impact on Latvia’s industrial development and ability to attract investment. Latvia therefore needs a developed, competitive and well-functioning energy market that provides businesses with affordable and predictable energy costs. This is particularly important for energy-intensive industries and companies considering establishing new production facilities or investing in Latvia.
Energy policy is also a matter of economic and national security. Investment in energy infrastructure, the development of domestic energy generation capacity, market competition and stronger regional integration can help ensure uninterrupted energy supply, reduce cost pressures on businesses and create the conditions for attracting new investment.
Investors Expect a Coherent Growth System
From FICIL’s perspective, the new government’s task is to build an interconnected growth system: developing people with the skills needed for the future, creating an environment that supports innovation and cooperation, ensuring high-quality and predictable governance, and concentrating limited resources in areas where Latvia has the potential to generate greater added value.
“Latvia’s advantage cannot be the scale of its resources. It must be our ability to quickly connect people, knowledge, capital and ideas, turning them into greater productivity, innovation and export growth. This requires bold, consistent and cooperation-oriented action from the government,” emphasises Reinhold Schneider, Chair of the Board of FICIL and CEO of SCHWENK Northern Europe.