On Wednesday, August 25, the Coordination Council for Large and Strategically Important Investment Projects chaired by Prime Minister Valdis Dombrovskis assembled for its first meeting. During the first meeting, the participants obtained a comprehensive and reasoned information from the representatives of the Latvian Investment and Development Agency on the current situation in the area of investment attraction in Latvia and, comparatively, in the Baltic countries, as well as on the problems which hinder the inflow of large investments in Latvia, as well as agreed on the future course of action and activities of the Council to significantly activate the attraction of large investment projects to Latvia.
”In its struggle for investment attraction Latvia is not in the field of equal opportunities and fair competition. The regions and countries are competing rather than the commercial enterprises, emphasized Māris Ēlerts informing about the present situation in investment attraction in the world.
The Prime Minister stressed that the main incentive for growth of the Latvian economy, unlike in previous years, should be export, as well as the ability to replace some imported products with domestic products. Therefore, Latvia needs export-oriented investments, which would provide currency earnings, enhance trade and improve the balance of payments. The import substitution is essential as it would reduce the currency expenditures, thus improving trade and the balance of payments. Latvia also requires new technologies, which would enhance the competitiveness of Latvian entrepreneurs, increase the added value and employees’ incomes, as well as the promotion of competition, to ensure the lowest possible prices.
The most important factors for investors are available skilled labour force in sufficient numbers, where Latvia has problems in some sectors, a sufficient market size, which can be positively evaluated for Latvia because our country is in the single market of the EU, the macroeconomic stability and equal conditions for all, positive attitude of the authorities, local governments and the public, simple procedures, low level of corruption, infrastructure, stable tax system and investment incentives and the support for entrepreneurship.
Having identified the existing problems in attraction of large foreign investors, the Council members also agreed on the necessary action to solve them. In relation to infrastructure availability, it was found that there is a lack of the land with industrial zoning with adequate infrastructure in Latvia. Such zoning is only available in Ventspils and Liepāja. There is also a lack of high- power electric energy connections.
In order to address this issue, there is a need to find a faster rezoning opportunity with approval of the Cabinet of Ministers and strategic planning of the industrial sites in regional centres, considering Latvenergo power. It is also necessary to consider changes in the structure of the local government budget, dividing the PIT between the local government of the place of residence and local government of the place of work or similarly dividing the EIT. There should be a possibility to invest the funding of the structural funds in improvement of industrial territories and construction of elementary infrastructure, as well as a support program for infrastructure development should be developed.
The participants of the meeting were informed that the investors who are already working in Latvia acknowledge that it is difficult to find qualified employees. To address this problem it is necessary to develop the education system (higher and vocational education, in particular) by training the experts for those sectors which are priority sectors for investment attraction, as well as to increase the opportunities for placement in vocational education ensuring the state support for those enterprises which provide the placement. In order to attract the investments in sectors which have no high capital intensity, but which provide large number of qualified work places (information technology, business process service centres), the state support is desirable to support the creation of jobs. At the same time, the investments that meet certain criteria would require more favourable conditions for labour taxes (PIT, Soc.tax). For example, defining salary ceilings, above which the payroll taxes are not payable.
An important condition is also to continue the activity ”High Value-Added Investments” on smaller-scale by realizing 5-7 projects each year, as well as support for machinery and equipment acquisition.
V.Dombrovskis welcomed the proposal on tax relief or restoration of a tax allowance for the investments which comply with definite criteria. ”Such incentives would certainly encourage faster economic recovery and attract investments in Latvia", believes the Prime Minister.
The Coordination Council for Large and Strategically Important Investment Projects was established with the aim to coordinate the cooperation among the public institutions, local governments, educational establishments, infrastructure enterprises, administrations of the special economic zones and free ports, ensuring that the challenging issues are solved to promote successful implementation of the investment projects which are significant for Latvia.
The Council is asked to make a decision on the investment attraction strategy, create a single investment project portfolio, analyze the project's effectiveness and impact on the Latvian economy, as well as within the scope of its competence to decide on the necessary measures to promote specific investment projects.
The Council is chaired by the Prime Minister, the Deputy Chairman - Minister for Economics. Also the Minister for Finance, the Minister for Regional Development and Local Government, the Minister for Transport, the Minister for Environment, the Minister for Education and Science, the Minister for Agriculture and the Minister for Foreign Affairs are engaged in the Council. The secretariat functions of the Council will be performed by the Latvian Investment and Development Agency.
The photos of the first meeting of the Coordination Council for Large and Strategically Important Investment Projects are available in the photo album of the State Chancellery: Flickr: http://www.flickr.com/photos/valstskanceleja/sets/72157624678862457/
The latest foreign direct investment projects implemented in Latvia:
CEMEX – one of the leading construction material producers in the world. In 2009 finished reconstruction, the most up-to–date cement production in Europe. Investments – EUR 270 million, the largest in production in Latvia.
• Bau How: announced about investments in Latvia in the heat of the crisis in June 2009. The first house modules produced in the plant in Ventspils were supplied to customers. In September, the construction of the second plant will start in Ventspils, 250 employees more. Bau-How Baltic Ltd has contracts on the supply of the modules of multi-story dwelling houses and hotels to Norway and Denmark. The turnover after opening of the 4th plant will amount at LVL 420 million per year.
• Brabantia – On June 10, immured a capsule in the foundations of the second plant in Talsi region. The investments amount at EUR 2.13 million. A new 3000m2 large production plant is being built next to existing plant.
• AGA – a producer of industrial and medicinal gas will establish a new gas production station in Ropaži region. Investments – EUR 8.3 million. 30 experts will be employed.
• Coca-Cola HBC – in 2009, investments – EUR 6.2 million (up to EUR 80 million at full implementation of the project), up to 150 workplaces. In 2009, purchased the land and obtained all permits, the implementation is postponed due to economic situation.
• The U.S. company of the chemistry sector has chosen Rīga for the development of a shared services centre, provides financial, personnel management, IT and procurement (administrative) services for the parent company group in the USA and Europe. 38 employees are employed, it is planned to recruit 40 employees in September, increasing the number up to 125 by June 2011.
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