The Latvian government is committed to changing public administration to reduce the administrative burden and costs. This should, in theory, divert additional resources towards human capital, energy and other important fields. Investors propose speeding up implementation of the goals that were outlined since the last high-level meeting to win the “contest” for investments.
On Friday, the 27th of September, during the high-level meeting of the Cabinet of Ministers and the Foreign Investors Council in Latvia (FICIL), investors and members of the government outlined the priorities to help compose Latvia’s long-term development strategy. Investors stressed that they value the government’s efforts to attract investments and ensure successful cooperation between investors and the government. Nevertheless, to preserve and boost investments into Latvia. However, to preserve and boost investments into Latvia, it is first necessary to create a beneficial business environment. For a long time, FICIL has asked the Latvian government to develop a clear development vision for the country that would contribute to economic growth and improve the investment environment. FICIL also proposes that Latvia becomes an internationally recognised centre for innovations with the most efficient government in Europe.
Representatives of the government and investors also discussed during the meeting how there are serious concerns as to whether or not the country even has a long-term vision. This means all existing decisions are made under short-term considerations, which could hurt the country’s long-term interests. Creating a clear vision of the development strategy will help not only the public sector to focus on essential areas (digitization, centralization, modernization), but will also allow private investors to build a business that understands the rules of the game. Investors stressed that without a long-term development strategy, policy documents are not sufficiently coherent, public administrations lack synergies and resources to successfully achieve a number of objectives.
A long-term strategy would help create a clear and attractive international image and give an idea to new and existing investors about business opportunities in the country.
Compared to our neighbouring countries, the Estonian government has invested in digitisation and the development of the IT sector and is currently recognised as one of the most digitally advanced companies in Europe. In addition, Lithuania has improved its business environment and is taking steps to become one of the leading FINTECH hubs in Europe. Investors were pleased to hear that the government is ready to take on ambition and become the most effective public administration in the European Union. In this context, investors urged the Prime Minister and ministers to take important and, perhaps for some, unpopular decisions.
“It is clear that this objective will bring a lot of reforms, and some of these reforms have already been launched. In this context, the most important issue is the implementation of implementation, so that reforms do not remain on paper alone,” notes Zlata Elksniņa-Zaščirinska, FICIL Board Chairperson and PricewaterhouseCoopers leading partner in Latvia. According to FICIL, the public administration should focus on results and not just on the execution of the process in order to serve the needs of Latvian citizens and companies. In view of this, it is critical to introduce a results-based state budgeting process, allocating funds only to those measures that create real performance and contribution to the development of the country. The meeting highlighted the role of reducing administrative burdens for better business promotion.
Among the most important factors that negatively influence the efficiency of public administration duplication of functions and lack of coordination between public authorities, rotation and lack of accountability of public administration staff, insufficient monitoring of policy measures, ill-considered and complex rules to interpret, as well as the lack of a centralized data management system. In the view of investors, the government should develop a pragmatic approach to the performance of its functions and outsource tasks that the private sector can do faster, better and at a lower cost.
Defence is an existential issue of our country, but it, according to the examples of other countries, can also be used as a stimulator of the economy, creating a defence fund and defining goals for spending funds. During the meeting, Prime Minister Evika Siliņa indicated that she would be ready to consider the creation of a defence fund to ensure the implementation of long-term projects at the state level, efficient and transparent management of financial resources, as well as to prevent the “sacrifice” of other economic development priorities.
FICIL has been talking for several years about the fact that human capital-related issues should be the next highest priority after defence, but the progress of these issues is very slow and unstructured.
This has been acknowledged by the Minister of Economy Viktors Valainis and promised to speed up progress on these issues – governance, labour supply, human capital development, re-skilling and up-skilling, as well as the integration of the unemployed into the labour market.
In particular, FICIL stressed the need to ensure the effective implementation of the “Human Capital Development Strategy 2024-2027” and to assign responsibility for its implementation to the Human Capital Development Council, as well as to make improvements in internal migration policy and education in order to ensure the sustainable development of these areas. According to FICIL, the development of human capital and its closely related economy is key to national security and the future.
The meeting also discussed the necessary investments in addressing climate issues, with an emphasis on a sustainable future. FICIL expressed its gratitude to the Ministry of Climate and Energy for its successful cooperation and pointed to the need to inform the public more widely about all the opportunities created by the Green Deal, as well as called for legislative changes to promote the green transformation, including through the adoption of the Climate Law. The Green Deal should be seen by businesses as an opportunity, not a threat. Latvia should clearly define its position in relation to the Green Deal and adopt relevant, conceptual documents that would ensure opportunities for sustainable development in the field of green and clean technologies. This is crucial if investment in this sector creates opportunities, not risks.
FICIL stressed the need to continue the work undertaken to improve the business environment and promote fair competition. It is important to continue targeted work in the field of public procurement, fighting favouritism towards state-owned companies. In addition, it is essential to focus on reducing the informal economy by introducing stricter controls and revising existing regulations. The achievements of the VID were noted, however, greater cooperation between state institutions is needed, which would also strengthen the activities of VID. In times of constant change, it is important to build trust. This can be achieved by creating a business environment that is fair, understandable and accessible for all.
The meeting also discussed solutions to strengthen the rule of law in Latvia. FICIL has long stressed the need to continue to put in place a transparent and reliable legal framework that protects both domestic and international investments in a more targeted manner. A step-by-step approach is needed to improve the legislative process, increase the efficiency of the courts and strengthen public procurement, making it more efficient, accessible and results-oriented.
FICIL has submitted six position reports to the Cabinet of Ministers with proposals related to the modernisation of public administration, human capital development, sustainable development, investment protection and combating the shadow economy.