Foreign investors in Latvia see least progress within demography, uncertainty, and the tax system

RIGA - The results of the 2020 Foreign Investors Council in Latvia (FICIL) Sentiment Index study suggest that foreign investors in Latvia see the least progress within demography, uncertainty and the tax system.

Quality of business legislation and unethical or illegal behavior are two areas where a substantial number of foreign investors see no progress. On the other hand, foreign investors see some progress made when it comes to the support from the government and communication with the policy-makers, and progress in the financial sector stability in Latvia.

More than half of the investors surveyed see at least partial progress in the level of higher education and science in Latvia, as well as in access of labor.

The author of the study, Stockholm School of Economics in Riga Professor Arnis Sauka emphasizes that this is the first year when foreign investors see at least partial progress in the availability of labor.

"This must be a result of the impact of the Covid-19 pandemic - even though labor availability has improved, assessment of the efficiency of labor has declined from 2019," said Sauka. Improvements in the assessment of quality of education and science, healthcare and other areas are thanks to the ongoing reforms, however, there is still much to be done, he said.

The assessment of foreign investors with regard to the investment attractiveness of Latvia over the past year was evaluated by foreign investors with 2.7, which is slightly better than the assessment in the previous years.

On average, foreign investors evaluated policy-makers’ efforts to improve the investment climate over the past year with 3.1 out of 5 (where 5 is excellent) in 2020, which is on the same level as in 2019, yet a slightly better result than compared to previous years: 2.9 in 2018 and 2017 and 2.3 in 2016.

The FICIL Sentiment Index 2020 reveals that more than half of investors have managed to maintain, or even grow, turnover, and most investors plan to increase investment in 2021.

In the majority of cases, foreign investors call for the need to invest in the infrastructure and human capital, as well as make investments considering the long-term perspective.

68 percent of respondents said that they were planning to increase their investments in Latvia, 27 percent said they would not, and 5 percent said they had not yet decided.

From September to early November 2020, 44 senior executives representing companies that are key investors in Latvia were interviewed for the study. Altogether, these companies (including their subsidiaries) contribute to 16 percent of Latvia's total tax revenue, 13 percent of the total profit and employ 10 percent of the total workforce of companies with a turnover above EUR 145,000 and 50 percent foreign capital.