Attracting investors requires a qualified labor force and corrections in the migration policy - LIAA

RIGA - In order to attract investors, a qualified workforce is needed, while in order to obtain a workforce, it is necessary to correct the migration policy, Vilis Zinkevics, deputy head of the Investment Promotion Division of the Latvian Investment and Development Agency (LIAA), said at the session of the Saeima's Submissions Committee, speaking about challenges in regards to foreign investments in Latvia.

He said that the LIAA's clients have faced problems related to quality and educated workforce.

"We are trying to position ourselves as an information technology (IT) country, but we lack employees in this field. We cannot provide employees with local resources, and this is closely related to the migration problem - there are a lot of issues regarding the procedure for granting residence permits, which are especially relevant to 3rd country citizens, such as problems opening bank accounts," Zinkevics said.

MP Hosams Abu Meri (New Unity) said at the meeting that there are reports from the embassies of different countries that it is difficult for foreign investors to start their activities in Latvia, and banks' requirements are strict.

Commenting on the situation in the last four years, the representative of the Foreign Investors' Council in Latvia, Dace Cirule, said that the Investors' Council unites investors from Scandinavia, the United States and other countries, however, there are no representatives of 3rd countries in the Council, so the Council's comment cannot be considered as describing the entire problem of investors.

"In the last four years, both Covid-19 and the war started by Russia in Ukraine have hindered in increasing the investment flow, however, the investment flow has remained fairly stable," said Cirule.

Foreign investors see problems for various other reasons, not because Latvia has a border with Russia. Cirule said that investors are worried about the extreme instability, including in the planning of various matters, as well as in the implementation of policies. Also, investors are opposed to the fact that legislation in the country changes frequently.

At the same time, in surveys, investors indicate "shock and confusion'' over the fact that the state may not comply with constitutional rulings that have entered into force. ''If the state may not comply with the judgment, then investors look at the country as a high-risk area," Cirule said, citing various examples social issues.

"Investors are also looking at these matters closely," Cirule said.

Representatives of the Bank of Latvia pointed out that investments in Latvia are low, and the growth of investments has been slow and flat for many years - the growth in Lithuania and Estonia is higher than in Latvia.

Speaking about investors' problems related to the possibility of opening bank accounts in Latvia, representatives of the Ministry of Finance said at the committee meeting that the legislation has been introduced according to standards, and that it is important to introduce a risk-based assessment approach. On the other hand, for a bank to be able to take on risk, it must be able to manage risk and be willing to take it.

MPs pointed out that there are the same banks in Latvia, Lithuania and Estonia, however, in Latvia, various bank processes take longer, because the settings are different in different countries. Also, trust in banks varies from country to country.

MP Janis Reirs (New Unity) stated that it is probably necessary to create a state bank in order to create competition, because "laws and regulations cannot force a private company to perform some actions".

At the end of the session, Abu Meri said that the issue of attracting foreign investors should be discussed in other committees as well. It is also necessary to improve the country's image, as well as to come up with clear migration policies to attract the workforce.

At the same time, the MPs pointed out that due to the time limit, there was no discussions about taxes and tax relief for investors starting investments. The representative of the Foreign Investors' Council, on the other hand, said that when it comes to attracting investors, problems related to the shadow economy must first be solved.