RIGA, April 17 (LETA) - The Foreign Investors Council in Latvia's (FICIL) assessment of the investment attractiveness of Latvia in 2023 is the lowest to date, evaluated by foreign investors with a mark of 1.9 on a five-point scale, according to the FICIL Sentiment Index 2023 survey carried out by FICIL in cooperation with the Stockholm School of Economics in Riga.

Compared to the 2022 survey, foreign investors' assessment of Latvia's investment attractiveness has decreased 0.4 points.

FICIL board chairwoman Zlata Elksnina-Zascirinska says that foreign investors in Latvia are more cautious now, and the share of investors planning to invest in Latvia in the future has decreased from 79 percent in 2022 to 67 percent in 2023.

Investors point to long-standing, persistent problems that hinder both Latvia's competitiveness and attraction of new investment, such as unavailability of labor, low education quality, high levels of bureaucracy and lack of investment attraction mechanisms.

"In addition, the high bureaucratic burden on businesses leads to a high volume of work and higher costs, with the end-consumers suffering as a result. Latvia's challenge is to define a long-term vision that outlines a clear strategy for change. Such a vision is essential for investors to feel safe and welcome in Latvia," said Elksnina-Zascirinska.

When asked about the reasons for the low score, most investors emphasize the geopolitical situation, also citing the unavailability of skilled labor, high labor costs, and a regulatory framework that is not well thought out.

Investors' assessment of policymakers' performance in attracting investment has also decreased significantly, to 2.4 on a five-point scale. This is the lowest score since 2017. While communication with policymakers has improved and they are now more willing to listen to businesses, investors believe that there has been no real action. Investors also point out that the lack of a clear vision hinders Latvia's ability to compete for new foreign investment, as there is no clear definition of Latvia's strengths.

Last year's study in particular focuses on the administrative burden, highlighting it as a major factor hampering Latvia's competitiveness and attracting investment.

Foreign investors point out that the administrative burden in Latvia is caused by a high level of bureaucracy, a lack of coordination between public sector institutions, absence of measurable objectives for those working in state and municipal institutions, and a complex regulatory framework. Administrative burden is evident in all areas - construction, employment, the legal system, tax administration, and others. Investors point out that the administrative burden means additional work for businesses, increases costs, and creates a sense of uncertainty, discouraging further investment in Latvia.

Investors' critical assessment highlights the challenges that need to be addressed by the public administration, such as the availability of labor and the development of human capital, modernizing the public sector, ensuring transparency and predictability, and promoting fair competition. These challenges also identify areas where investors see the least progress over the past year, calling for immediate action from policymakers.

Overall, 67 percent of investors confirmed that they plan to continue investing in Latvia, one of the lowest rates in the history of the survey. Several investors acknowledged that it has become easier to invest in the other Baltic countries, both because of the size of their internal market and lower bureaucracy. Investors who are still undecided are expecting a clear vision of the country's development.

On April 26, FICIL in cooperation with the Riga School of Economics and the German-Baltic Chamber of Commerce will organize a discussion on the investment environment in Latvia and solutions to attract investment, during which the results of the study will be presented. The discussion will be broadcast live on FICIL's Youtube channel and on the Latvian public media portal lsm.lv in Latvian and eng.lsm.lv in English.

The FICIL Sentiment Index was established in 2015 by FICIL in cooperation with the Stockholm School of Economics. The key aim of the Index is to foster evidence-based policy decisions and promote a favorable investment climate in Latvia. This is the ninth consecutive FICIL Sentiment Index report. FICIL Sentiment Index draws on mini case studies of foreign investors in Latvia.

In February and March 2023, 55 senior executives representing companies that are key investors in Latvia were interviewed for the survey. Altogether, these companies contribute 21 percent of Latvia's total tax revenue, 33 percent of total profit and employ 26 percent of the total workforce of companies with 50 percent foreign capital.