The Latvian government recently signed an accession agreement with the OECD to become the organisation’s newest member state. This comes after nearly three years of talks that began in late 2013. The agreement, signed on June 2 in Paris, will see Latvia become the OECD’s 35th member, pending ratification.

Latvia is the organisation’s second ex-Soviet state member, after Estonia. It is the latest attempt by the small Baltic country to become more closely integrated with the Western world. Latvia joined NATO and the EU in 2004 and adopted the euro in 2014.

“It’s an impressive achievement for a country that 26 years ago, when it signed its independence declaration, was a small, underdeveloped post-Soviet country,” Latvian minister for economics Arvils Ašeradens told fDi Magazine.

In its endeavours to join the organisation, Latvia had to comply with the standards set by the OECD’s 21 different committees. The OECD accession roadmap put particular emphasis on improving the transparency of Latvian banks, which have been used by residents of Commonwealth of Independent States (CIS) countries for money-laundering and other illegal activities. Non-resident deposits, mostly originating in CIS countries, amounted to two-thirds of total deposits in 2015, according to Mr Ašeradens.

“We took two steps there: we changed the Financial and Capital Market Commission’s management and introduced new auditing procedures and amendments to the existing regulations to significantly increase sanctions for banks breaching the rules. On top of that, right now we are drafting a specific banking strategy and debating whether or not those deposits are toxic,” he said.  

At the same time, the government pushed through a reform of the governance of state-owned enterprises, which still account for 18% of the country’s GDP, and is now aiming to raising their average return on investment  to about 5% in the next couple of years, from the current level of close to zero.

As the long-awaited OECD accession comes through, the government – led by prime minister Māris Kučinskis – has made the promotion of foreign investment a key priority of its fresh mandate inaugurated in February. Mr Ašeradens highlighted two main factors the government is working on to improve foreign investment prospects. “The first factor is to invest in the education system to make quality labour available. Second, we have to improve the business environment, for example, by tackling the shadow economy, which makes up around 21% of GDP,” he said.

Latvia has announced its goal of reaching 20th position in the World Bank’s Ease of Doing Business report by 2018. It is currently at 22nd. This would follow a number of economic improvements the country has already made en route to becoming an OECD member state.