We wished our best, you know the rest. This is how the actions of Latvia on the attraction of foreign investors can be characterized.
The position of the Foreign Investors’ Council in Latvia (FICIL), which now blatantly declares the lack of understandable rules of the game, can be considered as the indicator of the investors’ mood. Meanwhile, in aggregate the FICIL members have invested in the Latvian economics 2.2 billion euro — about 30% of the total volume of direct foreign investments in the country.
The fact that the undertakers, who represent mostly western countries, call the business climate unfavourable sets alarm bells ringing. What is specifically alarming is that Latvia visibly looses against the background of its direct regional competitors — Lithuania and Estonia.
So, Latvia is distinguished in the region by the longest in Europe period from construction permit application to commissioning. According to the Doing business study of the World Bank this easy for the EU process takes in Latvia up to 7 years (if neighbors challenge and disapprove the project). This period includes examination of claims at three court instances, because, as a rule, in the majority of such disputes the decisions of the first-instance courts are appealed against by either of the parties involved, thereafter follow cross appeals.
By the way, protraction of cases at courts and incompetence of judges are named by foreign investors as one of the key problems of doing business in Latvia.
Yet there is another headache – liquidation of enterprises in Latvia. It can take few hours to open business, but it would take on the average 18 months to shut it down.
At times scandals break out in the sphere of protection of foreign investments, which can become the target of the local and international raiders.
A separate matter is the bureaucracy and signs of corruption of the local officials. The adventures of a transnational company Western Union in Riga have passed into a proverb. The investor wanted to build headquarters and organize jobs closer to the centre of the capital, but he was sent to build to Ganibu dambis. Eventually Western Union made a U-turn and left Latvia.
Meanwhile, three practical things are priori significant to investors:
1) whether their business is desirable in the country;
2) whether the rules of competition and laws for their business and business of other undertakers are equal in the country, whether the conditions are equal;
3) whether they would be protected in risk events.
Alas, as they acknowledge at FICIL, in Latvia these principles are observed far from always — the business environment remains unpredictable. Few people are ready to risk and invest funds in Latvian companies or establishment of new industries.