Too many hurdles for investors to jump

  • 1999-02-04
  • Anastasia Styopina
RIGA - Doing business in Latvia would be much easier if the country would introduce clear-cut regulations, speed up the processing of documents and get the authorities to quit harassing investors.

That was the verdict of a group of foreign investors who took the time to participate in a survey called "Latvia: Administrative Barriers to Investment" and conducted by the Foreign Investment Advisory Service.

Jacqueline Coolidge of the advisory service said most investors' assessment of Latvia is positive but pointed out that there are certain criticisms that keep coming up.

The most common complaint is discrimination against certain types of investors and widespread corruption, the advisory agency found.

"The report was very accurate," said J.C. Cole, president of the American Chamber of Commerce. "Individual people interpret the law differently. If a clerk changes, so does the implementation of the law and the results of your application."

Cole said there is no discrimination between foreign and local investors as such, but he admitted that some laws do create advantages for either foreign or local companies.

"If [a foreigner] had a problem, he would be heard much faster than a local, but locals can maneuver through the system much faster," he said.

Rolands Blezurs, president of the British Chamber of Commerce, said he sees disparity between people who know the system and have connections and those who do not. This, he says, makes it harder to start up a business in Latvia.

Foreign investors will not tolerate obstacles and costs that a competing company avoids. The report shows that sometimes tax authorities treat one company more harshly than another. Sometimes one company's imports are cleared faster than another's.

"Inconsistency cannot be dismissed as a minor problem," the report reads.

The Foreign Investment Advisory Service found that the basic start up process is relatively clear-cut while the problem of inconsistency tends to be worse after the business is registered.

Coolidge said investors are often disturbed by numerous visits of a variety of inspectors: tax, fire, sanitation, labor, language inspectors and immigration police.

There were some complaints that large businesses were visited by one government inspector or another at least once a day.

"Inspectors would show up from various government inspectorates, claiming that you are not conforming with the law, and you have to defend yourself," Cole said. "Instead of building the Latvian economy, you are focused on dealing with inspection."

Cole said there are a lot of cases when foreigners are fined because an inspectorate often has limited funding.

"Their survival depends on the amount of fines they collect," he said, noting that sometimes an inspector earns a percentage of the fines he collects, so naturally he goes after the company that has more money.

Blezurs agreed. "It is a misinterpretation that there is benefit in a fine. Really, there is no benefit, it's a short-term economic policy."

He also said it's a common attitude in inspectorates and other governmental organizations to look for mistakes.

All too often, Blezurs said, Latvian inspectors are thinking "Let's have a look to see where we can fine you, where you are wrong.

"Bullying [that is practiced] by local institutions should be put aside."

The Foreign Investment Advisory Service suggested that investors should have access to all inspectors' reports in order to defend themselves and also see why they are being fined.

Foreign investors also said the application process for different institutions should be speedier and more efficient. Mark Shiman, of the advisory service, said that in Singapore, processing documents takes up minutes or hours, while in Latvia it takes days and weeks. Latvia should aim at processing certain documents in one day by 2000, he said.

Most foreigners agree that there is a substantial potential for improvement that will benefit all parties and create more tax revenues.