President notes problems for foreign investors

  • 2000-04-27
  • Valters Medenis
RIGA - The Latvian president, Vaira Vike-Freiberga, spoke to the Committee of Intellectuals about Latvia's path to the European Union on April 15.

Vike-Freiberga said Latvia needs to develop economically so it can reach its potential in an EU open market. She said the government needs to start seriously planning to develop all industry sectors and implement strategies.

One has to understand that a small country as Latvia cannot achieve a true open market when different industries develop more quickly than others, she said.

Danish Ambassador to Latvia Ole Lisbord shares her views.

"Latvia is on the right track to attract investors, and slowly the climate is becoming friendlier for foreign investors, but planning is needed to further develop Latvia to EU standards" said Lisbord. "Gradually Latvia's legislation is nearing EU standards and this means that Danish businesses will have the same standards here as they do back home.

"Reaching EU standards means that production levels in Latvia will improve with the labor unit costs being lower here. This will attract businesses to Latvia, if the business climate is hospitable," he said.

Latvia has clarified its industry, business and investor development, said Vike-Freiberga. Businesses are complaining that there are not clear and stable rules "in the game."

The president said the rules need to be even for everyone, so friends don't look after friends, and economic groups don't look after other economic groups.

Laris Grava, attorney with the Latvian Development Agency, said the laws regarding investment are pretty good, but improvements are needed.

"The problem is getting laws implemented as they are passed from Parliament to regulating institutions, he said.

Lisbord agrees that legislation needs to become more understandable for foreign investors with stronger enforcement of laws.

"Danish investors find there is too much red tape and bureaucracy,"he said.

"There are hindrances, it's difficult to get permits and the administration from city councils and rural councils is hard to understand," said Lisbord.

"Transparency between government officials and institutions needs to be seen to and fixed for investors to feel secure," said Grava. "The laws for investors and institutions need to be interpreted equally."

Vike-Freiberga said there should be no secret support through corruption, and Latvia needs to take further steps to have the same mechanisms in place as already implemented by the EU to fight corruption.

Jens Bruno, from the Swedish Trade Council, said Swedish businessmen are faced with many problems in Latvia regarding legislation, the main one being tax legislation.

"Another major problem is that foreign investors have to confront corruption all too often. Corruption is in all parts of society here in Latvia," said Bruno. "Swedish investors find it very frustrating that in Latvia corruption occurs at a very high level.

"The main problem is the paying of people under the table to get, lets say, licenses," he said.

Contradictory to Bruno's view, Lisbord commented that corruption in Latvia is at a much lower level of transactions.

"I don't want to point a big fat finger, but generally low level business is where Danish companies experience the element of corruption," said Lisbord.

James Holmes, U.S. ambassador to Latvia, told the magazine Baltic Outlook that corruption in Latvia is much lower than some would have one think. He said it would be a good idea to set up a special bureau that would work to convince society that corruption is under control.

His opinion is not shared by the director of enterprises for the Riga City Council, Nils Students.

Students is stern in his view that corruption is rampant in Latvia.

"In my opinion, based on my 10 years' working in Latvia in both the public and private sector, at present Latvia is second only to Russia in widespread corruption in Eastern Europe," said Students. "It exists on all levels and is the main reason Latvia is becoming less attractive to foreign investment year upon year."

Figures from a poll of 200 businesses conducted by the Latvian Development Agency shows what they perceive is most lacking in Latvia's economic development.

"Capitalism amongst friends," is the phrase coined by former Prime Minister Guntars Krasts, on the economic situation in Latvia.