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Latvian Business Guide

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Latvian Business Guide Latvian Business Guide THE ENHANCED BUSINESS ENVIRONMENT IN LATVIA Latvia has experienced strong and continuous growth for a decade, with real GDP growth rates exceeding the average growth rate in the EU by far. Since 2004, Latvia’s GDP has increased by an average of 10.4% annually, and last year growth reached a record high of 11.9%. Swift but sustainable growth is helping us to quickly catch up with the most developed countries in Europe economically. Foreign direct investment has been a major driving force behind our economic development. The volume of foreign direct investment in Latvia has doubled every 4 to 5 years. About 85% of these investments have been from EU countries. Foreign investment has helped create the most dynamic financial sector in the Baltic Sea Region, a growing high-tech sector, and a promising logistics cluster. Latvia is gradually changing its profile from an exporter of raw materials, such as timber and base metals, to one that provides a diverse range of export products, including many with high added value. Important factors that draw investment to Latvia include our country’s strategic location and cost advantages in the knowledge-intensive and added value sectors. For Eastern investors, Latvia is a perfect springboard to the EU market in the West. For Western investors, Latvia provides the perfect platform for business in the rapidly growing Russian and CIS markets to the East. Latvia has an advanced transit infrastructure with three large, ice-free ports and a well-deve- loped railway network that is fully integrated with Russia’s and suitable for high-capacity cargo transfers. By using the railway corridors that go through Latvia, Western exporters can cut their delivery times to East Asia threefold, for instance – from 45 to just 15 days – with compara- tively small cost increases. Asian exporters can likewise optimize their deliveries to the Nordic countries through Latvia. In terms of air transport, Riga International Airport is the hub of the Baltic States. Nearly 2.5 million passengers utilised Riga International Airport in 2006. As of 2007, there are regular direct flights from Riga to 60 cities. Latvia has been rapidly developing competitive industrial parks, attractive technological business parks, modern logistics centres and special economic zones that offer vast advantages to foreign investors. By implementing the Action Plan for the Improvement of the Business Environment, Latvia steadily improves its global ratings every year. The World Bank survey “Doing Business in 2007: How to reform” showed that the Latvian business environment is continually improving and ranked 24th among 175 countries in 2006. One of the most appealing features of Latvia’s busi- ness climate is its 15% Corporate Income Tax, which is one of the lowest in the EU. 2 Riga, the capital of Latvia, has recently become a magnet for major international events. Last year we hosted the World Ice Hockey Championship and the NATO Summit of Heads of State and Government. The tourist industry has seen spectacular growth, especially in Riga. A UNESCO World Heritage Site, Riga is Northern Europe’s capital of Art Nouveau architecture and one of the most beautiful cities in the region. Latvia’s growing economy is attractive to anyone from the business community exploring our favourable business environment. We welcome foreign investment, especially in the knowledge-based and high added value sectors, as well as in transportation and logistics. I am certain that some of you will decide to do business here after studying what Latvia has to offer, and I hope that your activities in my country will meet with success. Valdis Zatlers President of the Republic of Latvia 3 DISCOVER OPPORTUNITIES FOR YOUR BUSSINESS IN LATVIA In the name of Investment and Development Agency of Latvia (LIAA), I would like to invite you to discover Latvia and many opportunities it offers to your business. The attraction of foreign investments has been one of the national priorities and is recognized as a key source of economic growth. LIAA is a state agency set up to promote Latvia as an attractive investment destination and trade partner. Our services include assistance and com- prehensive information on financial, legal, fiscal, and bureaucratic aspects of doing business in Latvia, establishing contacts with Latvian partners, identifying property options. They are tailor-made to suit our client’s individual needs and are provided during all stages of our clients’ investment projects. The key principle of Latvian economic legislation is equal treatment of foreign investors and domestic companies. Latvian government acknowledges the importance of establishing a struc- tured dialogue with foreign investors, which are represented officially by the Foreign Investors’ Council, by implementing 95% of their recommendations. There are numerous incentives offered to investors, ranging from support via the EU structural funds to favourable legislation on depreciation to special economic zones. These arrangements have proven successful. With LIAA’s direct involvement, in the last year ca. 48 million EUR was invested into Latvian economy and ca. 1110 new jobs were created. The number of LIAA’s employees promoting foreign trade and attracting investments quadrupled which has enhanced LIAA’s overall capacity and enlarged its areas of expertise. Joining the European Union gave the country numerous advantages, such as the broad and stable common market, free movement of goods and services, labour and capital. The LIAA objective is to assist both Latvian and foreign companies in becoming fully aware of these new openings. We support domestic businesses in raising their competitiveness and gaining recognition abroad, and we administer state aid from the EU structural funds. The Latvian Business Guide, which has been published for ten years, aims at helping foreign companies and organisations in developing business contacts with Latvia. I invite you to dis- cover this newly updated version of the guide, and explore Latvia as a business partner with great potential. Andris Ozols Director Investment and Development Agency of Latvia 4 CONTENTS Latvia in Facts . 6 FDI Track Record ....................................................8 Human Resources ...................................................12 Business Infrastructure . .16 Promising Business Sectors.............................................21 Incentives for Investors................................................25 Operating Environment . .29 Financial Environment ................................................41 Taxation...........................................................43 Trade and Customs . 57 Accounting and Auditing..............................................60 Quality of Life and Recreation ..........................................63 International and Regional Trade Fairs 2007/2008 . .65 Promotion of Entrepreneurship, Investment and Foreign Trade ..................70 5 LATVIA IN FACTS Location The Baltic country of Latvia is located at the crossroads of northern and eastern Europe, on the east coast of the Baltic Sea. The Republic of Latvia is bounded by Estonia to the north, Russia and Belarus to the east and Lithuania to the south, and has a maritime border with Sweden to the west. Other neighbouring coun- tries include Finland, Poland and Germany. The strategic location of Latvia has been the major influence on the country’s diverse historical and cultural experiences. Today, it is this location which forms the basis for Latvia’s economic success. 6 General Information Major Facts & Figures Political system Republic, parliamentary democracy Member of EU and NATO since 2004 International membership Member of WTO since 1998 Capital Riga Other major cities Ventspils, Liepaja, Daugavpils, Jelgava, Jurmala Population (2007) 2.281 million Area 64 589 km² Language Latvian (official); Russian, English and German are also widely spoken Legal system Based on civil law Currency 1 ‘Lats’ (LVL) = 100 ‘santims’ 1 LVL = 1.423 EUR Average exchange rate (2006) 1 LVL = 1.78 USD GDP (2006) EUR 16027 billion GDP growth (2006) 11.9% GDP growth rate, average over 5 years 9.0% GDP per capita (2006) EUR 7002 Inflation, annual average over 5 years 6.9% Accumulated FDI (2006) EUR 5744 billion Accumulated FDI per capita (2006) EUR 2503 Source: Central Statistical Bureau of Latvia, 2007 Additional information at: www.csb.lv www.bank.lv www.li.lv Investment Ratings (long term)* Agency Foreign Currency Local Currency Fitch Ratings BBB+(Outlook: Stable) A (Outlook: Negative) Moody’s A2 (Outlook: Stable) A2 (Outlook:Stable) Standard&Poor’s BBB+ (Outlook: Negative) A- (Outlook: Negative) *As at September 2007 Additional information at: www.fitchratings.com www.moodyseurope.com www.standardandpoors.com 7 FDI TRACK RECORD FDI Inflows FDI Stock by Country of origin, End of Year 2006 Ever since Latvia regained independence, foreign direct United Kingdom 3% Switzerland 2% investment has been a major driving force of the economy, Norway 5% Austria 1% showing steady growth with FDI stock doubling every 4-5 Russian Federation 7% Cyprus 4% years. Currently ranked 6th among the new EU states for FDI stock per capita, Latvia continues to enjoy high recognition Netherlands 5% Iceland 1% among both regional and global FDI contributors. United States 6% Other countries 15% Finland 6% FDI Stock at the End of the Period, LVL million Estonia 12% Germany 11% 4000 4037 Denmark 8% Sweden 14% 3500 Total FDI stock LVL4 037.2 million Source:
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