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German businesses see inflexible labor legislation as a key problem in Lithuania's business environment and think that it is necessary for the country to amend its Labor Code. In Estonia, German companies consider the business environment to be generally good and 93% of them would choose Estonia as the destination of their investment also now.

At the moment, there are 1,097companies with German capital registered in Latvia, and German investments in Latvia mostly go into such industries as mechanical engineering, wood processing, and metalworking, AHK Executive Director Florian Schroder told LETA. Some of the companies with German capital include AKG Thermotechnik Lettland, Valmieras Stikla Skiedra, Zieglera Masinbuve, Rettenmeier Baltic Timber, Kurzemes Atslega1 and others.

The survey finds that German investors in Latvia are overall more positive this year than in 2015. A year ago, the biggest concerns were about the geopolitical developments in the world, especially in Russia, but this year most German investors expect positive business development in Latvia.

"Of course, Russia's embargo and the falling value of the ruble affected all kinds of business, but Germans are pragmatic and never focus on doing business in just one country. Besides, new markets have been found in place of Russia," said Schroder.

65% German businessmen anticipate positive business development this year, while two-thirds believe that their companies' turnover will increase, which is 22%age points more than in 2015. The number of companies that believe their exports will increase this year has doubled.

"This is a better result than in Lithuania or Estonia, where 44% and 30%, respectively, believe that their exports will increase," said Schroder, adding that labor costs were also expected to increase by 8% on the average this year.

German businessmen in Latvia are also increasingly pleased with Latvia as a target for investment when compared to other Central and Eastern European countries. In German businessmen's opinion, Latvia is second most attractive country for investment among all twenty countries. Estonia is in first place, while Lithuania is third.

At the same time, there are several investment climate factors that have not improved in Latvia from 2015, for instance, transparency of government procurement and employee qualifications. The majority consider Latvia's vocational education partly satisfactory, but one-third are not satisfied with the vocational education system.

German businesses see inflexible labor legislation as a key problem in Lithuania's business environment and think that it is necessary for the country to amend its Labor Code, increase transparency and improve vocational training, according to the latest survey of German companies operating in the Baltic countries.

"We hope for swift reforms because only international investors are capable of creating jobs and increasing wage levels in the long run. The labor law must not become an obstacle for economic growth," Florian Schroeder, head of the German-Baltic Chamber of Commerce, told BNS.

Schroeder said that labor legislation in Lithuania had to become more flexible to make the country more competitive.

"I don't know any country that can thrive with rigid labor law," he said.

According to the survey, Lithuania's labor law flexibility was rated 3.42 on a scale of 1 to 5, where 1 is "very good " and 5 is "unsatisfactory", compared with 3.06 for Latvia and 2.53 for Estonia.

Lithuania scored 3.24 for the transparency of public procurement, 3.09 for the tax system and administration, and 3.24 for the fight against corruption and crime, compared with 3.64, 3.25 and 3.42 for Latvia and 2.52, 2.6 and 2.33 for Estonia, resistively.

94% of the German companies said that the economic situation in Lithuania was good, compared with 88% for Latvia and 90% for Estonia.

German companies active in Estonia consider the Estonian business environment to be generally good and 93% of them would choose Estonia as the destination of their investment also now. 97% of the respondents estimated the shape that their business is in to be good or satisfactory, it appears from a 2016 survey conducted by the German-Baltic Chamber of Commerce.

Businesses are also confident about their future. Only very few business owners believe that the economic condition of their business will become worse in 2016 and 41% hope the situation to improve. One in two German owned businesses here expect their revenue to grow and 43% of businesses are planning to invest a three times bigger amount of money than they did last spring.

One in three businesses are planning to create new jobs. At the same time, businesses reckon with a 4.6% faster rise in labor costs here compared with other costs.

Estonia received the highest marks for business environment from German investors among 20 countries of eastern and central Europe. Next after Estonia came Latvia, with Lithuania in third place.

"Estonia deserves first place, but it shouldn't be resting on its laurels," Peer Salstrom-Leyh, president of the Baltic-German Chamber of Commerce for Estonia, said. "Red tape, taxes and vocational education in particular are topics that still need to be worked on. We hope that politicians will actively tackle them."

The points given to Estonia were higher in all categories without exception than last year, Salstrom-Leyh said.

"It's rather that businesses are taking a better view of all criteria than in spring 2015. This is an indicator that the reforms here are moving forward and have been accepted by the public," he added.

Although very high marks were given to the work environment, German companies active in Estonia are awaiting further economic policy changes from the Estonian government. The things that Estonia was criticized for include access to public sector support and legislation related to labor.

The German-Baltic Chamber of Commerce conducts a poll among its members every year. The AHK interviewed a total of 114 German businessmen for the survey – 30 in Estonia, 34 in Latvia and 50 in Lithuania. The AHK unites more than 430 companies in Germany and the Baltic countries.