FDI into Latvia has recovered in recent years as the Baltic state has implemented stricter anti-money laundering procedures. Latvian minister of economics Ralfs Nemiro highlights the progress that has been made.
Q: Latvia has encountered significant problems with non-resident deposits in recent years. What steps have been taken to improve investor confidence, anti-money laundering [AML] procedures and the combating of terrorism and proliferation funding [CTF/CPF]?
A: Money laundering and the financing of terrorism has been very high on the political agenda of Latvia in recent years. The government is aware of the continuous need to further strengthen national efforts in the area of AML, CTF and CPF. We have made very good progress and achieved substantial and irreversible changes in the fight against financial and economic crimes. Now we have effective de-risking of the financial sector, better access to information on beneficial owners, more effective investigation and prosecution procedures, a strengthened framework for targeted financial sanctions and more.
We are discussing with the Chamber of Commerce in Latvia all issues connected with the business environment. The government has [also] developed an investment attraction strategy called the Polaris Process to improve the quality of services offered to investors. It ensures the coordinated activity of ministries, local governments, and state institutions for the successful implementation of strategically important domestic and foreign investment projects. The private sector, universities and research institutions are also involved in this process.
Q: What are your major goals as minister of economics and how does foreign investment fit within them?
A: There are three main goals based around innovation, exports and productivity. As a small and open economy, we see exports as the main source to increase the prosperity of Latvian society. To change the current economic development pattern and to gain competitiveness in the global market, we need to focus on increasing our participation in global value chains.
To be competitive and participate in the global market and global value chains, we need to invest in research and innovation activities. To tackle the innovation challenge together with the Ministry of Education and Science, we are elaborating and evaluating the current support mechanisms and developing new support activities for the future. Attracting high-quality FDI brings us closer to achieving these goals, as it brings knowledge and technology spillovers.
In terms of productivity, our focus is on helping businesses create more value-added products and create a better environment for integration in the global markets. Latvia has a great environment for creating, testing, implementing and exporting innovative solutions.
FDI from technological companies would help us to achieve our goals in terms of productivity, as it would increase the investments in the specific ecosystems, thus making us even more competitive. Currently in some sectors we lack global expertise, which investors could bring us.
Q: Which sectors have the most exciting opportunities for foreign investors, and why?
A: Latvia-based biomedical companies and organisations have demonstrated dynamic growth in recent years. Their success is defined by a strong scientific basis historically and R&D capabilities today, including some of the best experts and researchers. R&D capabilities and modern laboratories, existing production infrastructure and an educated workforce are important components that encourage investment in the industry.
There is enormous potential for the science and industry of smart materials in Latvia. This interdisciplinary area of science opens up new innovative opportunities and creates a variety of value-added products, such as nanotechnologies, smart materials and coatings.
About 50 global business centres [GBCs] contribute significantly to Latvia’s economy; in 2018, total GBCs turnover reached €300m. The government of Latvia proactively promotes GBCs as one of its priority sectors and positions the country as the next great investment destination.
We see the EU’s Green Deal as an opportunity. Investments in renewable energy are pretty attractive in Latvia. We have locations near to the sea, which are already tested and proven to have powerful enough wind to generate power. There are Swedish and Finnish companies looking at this market to go in as operators, [but] we also see future opportunities to set up factories producing wind turbines.
This interview was conducted before the global impact of the coronavirus was fully known.
This article first appeared in the April-June edition of fDi Magazine. The full digital version of the magazine is available here.