Op-ed for Delfi Versijas
John Tully, AmCham President
Liga Smildzina-Bertulsone, AmCham Executive Director

For businesses large and small 2024 will be a year full of potential and promise. Trends that will shape the next year are closely linked to implementing sustainable solutions in business practices, advancing digitalization, and accelerating the development of knowledge intensive industries and high value manufacturing. All these areas offer tremendous opportunities; however, success will depend on key pillars – coordination and effective governance, and access to talent and investment. 

In terms of the business environment, Latvia ranks 19th globally according to the Ease of Doing Business rankings among 190 countries. While it is a remarkable achievement on its own, more can be done to raise the country’s competitiveness even further and become more open to private investment. While the investment activity by the public sector remains high, the level of private sector investment has decreased by about 6% over the course of the last 10 years. The reasons for weaker private investment activity lie in both the supply and the demand factors, including limited availability of bank financing, underdeveloped capital market, negative shareholder equity and low liquidity. 

It is important to recognize and appreciate the value private investment is bringing to a country. That is why AmCham has continuously called policymakers to direct their efforts on investment attraction and retention. If we look at the impact of foreign direct investment, it does bring financial capital and jobs, but along with them – knowledge, innovations, efficiency, and good governance. 

Targeted investment in key sectors such as digital, technology, life science and R&D hold promise not only of high immediate returns, but of driving further progress and bringing value to our economy and people. Latvian companies have excellent opportunities to attract high-tech investment, and many have already done so. While we cannot predict with certainty that massive investment projects will happen in these sectors next year, we are sure we can achieve more if we put our limited resources into specific activities in the education and R&D sector. By doing so, Latvia’s economy will only grow and prosper. 

Due to the challenging demographics, the availability of human capital has become very critical. According to many potential and existing investors, talent availability is a major challenge and next year doesn’t promise any immediate improvements in this regard. We are hopeful that with the revamp of the new Human Capital Development Council the work to develop Latvia’s talents will be more targeted and better coordinated, but with multifaceted factors in play, it will not be easy. The new Education Accelerator, implemented by the World Economic Forum in cooperation with the government and private sector, is a commendable practical example bringing positive change to education and skills development in Latvia.

Digitalization is key to ensuring transparency and productivity both in public and private sectors. Without digitized data we cannot rely on decision making to be done in the best possible manner, adequately responding to the current challenges, and assessing societal impact. Looking into the next year, we envision the implementation of digital transformation and new technological solutions will take place. Some of the long-awaited strategies, such as the recently adopted Digital Health Strategy urgently need to be implemented. Digital transformation should be more actively pursued and led by a determined change manager. A big chunk of responsibility is on the business side as well. Companies should digitize their business processes, taking advantage of innovation and technology more actively. 

In the current geopolitical environment, which is likely to remain difficult throughout the next year, we need to strengthen our economic security – not only by investing in the defense sector, but by convincing our key strategic partners such as the U.S. to keep investing in Latvia and greater Europe. 

Economic security and National security go hand in hand. Focusing on good partners for economic development can also bring National security through consistent partnering based on common values including human dignity, rule of law and respect for human rights.

We welcome new prospective investment to Latvia, especially in biotechnology, precision medicine and digital technology. These are some of the areas Latvia already has a tremendous potential and can be among global leaders.

References:
AmCham_Recommendations_2023
https://archive.doingbusiness.org/en/rankings
Finanšu Pieejamības Pārskats 2023 (latvijasbanka.lv)