Analytics, EU – Baltic States, Investments, Labour-market, Latvia, Legislation, Markets and Companies, Technology

According to FICIL conclusions, labor shortages in Latvia are getting worse at all levels. Furthermore, there are flaws in the legal framework, as a result of which there are problems with starting a business in the regions where unemployment is high.

At the same time, FICIL believes that it is important for Latvia to support employment in the regions through supporting regions' economic development and making it easier for companies in cities, including in Riga, to hire from the regions. High tax burden makes it more difficult for companies in the cities to attract workers from the regions, which especially concerns low-income earners who cannot afford renting apartment in a city, says the report.

FICIL suggests that the government alter tax regulations by not taxing employers' payments for employees' accommodation in cities and covering the cost of transporting them from home to work and back to the regions. FICIL also proposes that the government develop a support program for businessmen that operate in the regions or have built a system to hire employees from the regions.

Taking into consideration that companies in Latvia are short of qualified employees on different levels, Latvia should consider hiring from third countries. To that end, various bureaucratic obstacles have to be removed, FICIL points out.

Remigration has the best potential, albeit not in the short term, believes FICIL. At the same time, FICIL emphasizes that attracting investment and employees requires infrastructural upgrades, including construction of modern office buildings.

Latvia has one of the fastest internets in the world, while digital skills of residents are not satisfactory, said Ingrida Karina-Berzina, board member of the Foreign Investors Council in Latvia (FICIL).

She said, that in line with the data of the EU Digital Economy and Society Index (DESI), Denmark, Sweden, Finland and the Netherlands have the highest scored in the index. Latvia ranked 19th in the overall index, but was in the 27th position in the digital technologies integration business environment.

"Even though we are proud of the fastest internets in the world, residents’ digital skills and the country’s state administration and business integration in the digital environment is not satisfactory. The digital services in the public sector, such as Latvija.lv and eParaksts is a good start, but these services are not compatible with business processes in companies. We will be able to achieve efficient digitalization only of the public and private sector cooperate," said Karina-Berzina.

FICIL in its analysis has identified four problematic areas.

First, there is a shortage of high-level officials who are authorized to implement strategic plans that would coordinate the country’s digital development. Then, small and medium companies that employ 79 percent of employees do not have the necessary access to e-services or choose not to use them because of low IT user skills and shortage of qualified workforce. Also, e-services make business processes complicated, and administration of systems costs more than necessary.

FICIL underscores that development of user-friendly systems that promote functionality of the systems would improve the situation.

The mission of the FICIL is to improve the business environment in Latvia through active dialogue with the government. The FICIL represents the 30 largest companies from various countries and sectors that have made significant investments in Latvia as well as twelve international chambers of commerce.