In the last 20 years Latvia has not shown a clear focus on attraction of investment, said EY partner, Head of Strategy and Transaction Consulting in the Baltic States Guntars Krols in an interview to LETA.
He said Investment and Development Agency of Latvia (LIAA) is a great example of this, as the institution is weakened by its allocated financing and capacity, meaning that attraction of investments is no longer clearly defined as its main purpose.
“This is but one of many LIAA objectives. At times if feels like it has become a side objective to everything else they do. In other countries the general practice is to have one capable agency that works only to attract investment projects,” said Krols.
He asked that if the Minister of Economics says there is a shortage of EUR 2-3 billion in investments in the country, then why isn’t LIAA being reinforced to work with investment attraction five to ten times more actively than before.
When asked what signal is given by the fact that the government, after reviewing the report of the Ministry of Finance on the partial listing of shares of state and municipal enterprises on the stock exchange, did not make any decision on specific companies,
Krols admitted that it is not very positive.
“Unfortunately, we can see that many companies whose shares could be listed on the stock exchange, either have no need for capital or have no growth potential for their management to use and develop. This is a rather large problem because investors want to “buy” growth stories and projects that show companies can operate both in Latvia and in foreign countries. This is also one of the reasons why the government has yet to compose a list of companies to list on stock markets,” said EY partner.
He added that often the problem is the unclear goal the state as a shareholder gives companies in regards to development,
because there has always been a question whether Latvian state-owned companies should expand into foreign markets and invest aggressively elsewhere geographically.
“Often it is the correct answer for us to talk about successful investment projects. However, in many cases it has historically been slowed down and there has been a position that state-owned companies work only in Latvia.” said Krols.
According to him, the decisions that were made regarding the banking sector have also made a not very positive impression on investors, since any unplanned changes in regulation and taxes have their own negative effect, especially when the state intervenes in some business sector, including banking, with decisions that are outside of everyday commercial practices. This creates a general sense of instability and insecurity, which is more proof that the state can interfere with the private sector.
“There were, are and will be shocks for the economy and some changes, that are sometimes predictable, are often unpredictable. Yes, interest rates went up rapidly, but on the other hand, they were not outside the level at which interest rates could be and historically have been, if we look at 10, 20 or 30 years ago. Does the state need to intervene in this situation with compensation? Come on… That’s a good question. There are already other risks, and should the state compensate for them?” Krols asked.