The Foreign Investors’ Council in Latvia (FICIL) is calling for a reform of the public procurement system to attract investment and foster Latvia’s economic growth, FICIL representatives told the LETA news agency.
FICIL acknowledges that progress has been made in recent years within the state procurement system. However, it stresses that in order for Latvia to become the most secure investment destination in the Baltics, in-depth reforms are needed to eliminate favouritism, corruption risks, and unfair practices.
The council notes that, according to its latest research, concerns over the fairness and transparency of public procurement processes in Latvia are significantly higher than in other Baltic countries. Moreover, Latvia scored 59 points in the 2024 Corruption Perceptions Index — well behind Estonia (74 points) and Lithuania (63 points).
According to FICIL, public procurement is a crucial government tool for providing essential services to the public — such as road and school construction, hospital equipment supply, and expert consulting — and it absorbs a significant portion of taxpayer funds. An effective system improves sector efficiency, service quality, trust, transparency, and fair competition. It can also drive innovation, attract foreign investment, and stimulate economic growth by boosting private sector demand.
FICIL points out that in 2023, the total value of public procurement contracts reached 5.4 billion euros (excluding VAT), or roughly 14% of the country’s GDP.
The council highlights several challenges in the public procurement system, such as complex and fragmented rules that increase administrative burden and costs.
Another issue is insufficient professional capacity — contracting authorities lack the skills to manage complex procurements, particularly in construction and IT. A lack of transparency and inconsistent practices fuel concerns over unfair competition, corruption, and favouritism. FICIL also identifies the “price over quality” principle as a major issue, noting that in 2021–2023, 73% of procurement winners were selected solely based on the lowest price.
These problems discourage companies from participating in public tenders, weaken competition, and lower project quality. In Latvia, the risks of favouritism are particularly high in sectors such as energy, telecommunications, transport, and other industries related to natural resources.
FICIL cites telecom operators “Bite Latvija” and Tele2, which report losing tenders to the state-owned “Latvijas Mobilais Telefons” (LMT) despite offering significantly lower prices — including zero-euro bids. The industry suggests introducing an e-catalogue for mobile communication and similar uniform services with standardized, fixed criteria. FICIL supports this initiative, emphasizing that it would increase transparency and reduce favouritism in public procurement.
The council notes that instances where municipalities directly award public procurement contracts without holding a tender often raise red flags for foreign investors. For example, the Ministry of Transport is currently planning to extend the universal postal service contract with the existing partner, “Latvijas Pasts”, without organizing a public tender. According to several foreign investors and the Latvian Postal Operators Association, such actions restrict competition and prevent other market players from offering potentially better services and delivery solutions.
Foreign investors have also voiced concerns about long-term partnerships between state institutions and specific companies or institutions, arguing that prolonged cooperation can reduce independence and objectivity — particularly when expert opinions are delivered as professional services.
FICIL cites a recent case where it asked the Ministry of Economics for clarification about its decision to sign a contract directly (without an open procurement) with the University of Latvia’s Productivity Research Institute “LV PEAK Think Tank”, with which the ministry has had long-term cooperation. FICIL questioned both the necessity of the project and the independence of the research, noting that some employees simultaneously work for the ministry and the think tank. To date, FICIL has not received a response.
The council also points out that shortcomings in the public procurement system have been acknowledged by the Competition Council, the State Audit Office, and the Corruption Prevention and Combating Bureau (KNAB).
FICIL’s expert on fair competition and public procurement, Māris Butāns, Senior Manager at PwC Legal, emphasizes that these institutions must be protected from political pressure to ensure neutrality and objective assessments. If contracting authorities have other reasons for consistently favouring certain service providers, such cases should be transparently investigated to ensure the efficient use of public funds and alignment with public needs.
FICIL calls on the government to complete reforms that will make public procurement more transparent, efficient, and competitive — attracting more foreign investment and strengthening Latvia’s long-term growth.