WEBSITE EXCLUSIVE: Andris Laucins Q&A

Andris Laucins ischairman of the board of the Foreign Investors' Council in Latvia (FICIL) andboard member of Ernst & Young Baltic. Here he talks about why current corruption cases could be good news for investors, how FICIL can try to influence government policy and why predictability is the key to attracting fresh investment.

Let's start with the obvious question - how bad is corruption in Latvia?

Well, if we aretalking about recent cases that have been brought to the courts, this is verygood news for the investment community. This is a major difference from what wesaw a few years ago. Many people were speaking about corruption but we hadn'tseen particular cases being brought by special institutions charged withfighting and preventing corruption.

Right now we see that the system is up and running and we have fairly seriouscases being discovered. These people are now being named and involved in courtcases. It probably creates a bit of negative publicity around the country andaround the system but this shows that the system is working.

It was much, muchworse before when no-one was speaking about it. We have to use this 'matchingprinciple' that we should be worried when nothing is being discovered but be muchmore hopeful when we see that the system is working.

If anyone in theinvestment community in Latvia is concerned about corruption they should bestrong enough to report it instead of spreading rumors. If you just spreadrumors that everyone is corrupted you in a sense are just promoting it becauseboth sides 's those giving bribes and those taking them 's will think 'Íf it isso well known that everyone is doing that, then why aren't I doing that?'

So what are the current priorities of theForeign Investment Community?

We are involved indifferent special projects. For example we have a group working on suggestionsfor a public procurement law, which is very relevant for many of our members.

Other hot topics arecompetition law amendments, tax issues 's which are always near the top of ourpriority list 's transport issues and encouraging policies that have longer-termimpact than just changing some short-term administrative acts.

 Do you feel that your voice is listened to andacted upon in government?

It's definitelylistened to. We have direct access to cabinet ministers and we don't need anytricks or other mechanisms to make sure than people in government listed to us.If we need to speak with someone at the highest level there is no problembecause these people know that we aren't coming just to push some lobby-typeagenda.

But of course there isa time difference between when we come up with a suggestion and when it becomestomorrow's 'to do' item for the current government.

There are definitelyissues on which we would like a faster response time but on fundamental policyquestions it is good that the government listens to our position.

Is structural change needed to governmentdepartments dealing with investment?Some investors complain that they can fallbetween the cracks in the current system.

One of the particulardifficulties right now is that we would like to see some stability andpredictability in the system related to construction and green fielddevelopment projects.

There is a very clearposition from the foreign investors'council that foreign investors are comingto Latvia because it is an EU country and are ready toaccept the stongest social, environmental and other requirements that might beset up for any industrial development. They would be ready and willing to meetrequirements that are not even today's requirements but tomorrow's requirementsbecause in areas such as noise, pollution, and other things.

Since investors comingtoday are not opportunistic 's at least not the ones we are working with 's theywould be interested to have a clear picture of what to expect when consideringthis planning and industrial development.

Investors want to havepredictability in the way the system works. Here we see an obvious problemwhere, for example, a reputable investor member of ours has a site that hasindustrial zoning and they want to start the project but they are not evenallowed to start testing their project against environmental rules because thesystem as it is right now is created in such a way that any individual ororganization with motives can stop any activity.

If you have a littlemoney and the motivation to stop it, you can stop anything. There is nopredictability that would allow an investor to say: 'Here is a process and ifyou fulfil certain requirements then in a one year or two year cycle you willget to a predictable result.'

You're suggesting that Latvia cansell itself on much more than price 's that structural predictability is abenefit, not an obstacle. How do you react when people say that perhaps Estonia is abit more predictable?

The biggest foreigninvestor in Latvia is Estonia. Individuals and organizations today have a really wide choice ofservices to use, on a global, European or regional level.

We are competing withthe other Baltic countries, the Scandinavian region and the whole Europeanregion on what we can offer to the investment community in terms of particularservices and sometimes this competition is much closer than we feel.Particularly post-Schengen people can really move around.

In terms of Latvia compared to other destinations, sometimes aweakness can become a strength. The fact that half the population is living inone city here is a weakness in some ways, but as one of the biggest cities onthe Baltic Sea, I am certain that investors are looking to belocated in the big cities. We have a multilingual workforce available that canspeak Latvian, Russian, German, English and other languages, making it quite aunique setting for foreign investors in the area of service supply. Riga is a Hanseatic city that has always been atthe crossroads of trade. It's a part of where we stand and who we are, but ofcourse there are still things we can improve.