Good afternoon, dear friends,
Dear delegates of the World Latvian Economics and Innovation Forum,
I am deeply honoured to have the opportunity to address you as the president of one of the fastest growing economy in the European Union.
Latvia has become one of the three fastest growing economies of the European Union and it is evident everywhere. We see it here in Latvia, and it has also been noticed in Europe. Why is it important? Because we need to build on what we have here, in Latvia, and also exploit the opportunities presented by the European Union (EU).
It is estimated that 80–90% of EU member state legal infrastructure in the field of economy is derived from EU legislation. This is not something you think about every day, but only 10-20% of your legal infrastructure is based on national legislation. In other words, 80–90% of Latvia’s legislation is the same as in other member states like Portugal and Sweden, for example. Therefore, investment and production location decisions now depend on these marginal differences between countries.
Better national regulation can make a big difference on those margins. In other words, national legislation has some room for manoeuvre in the larger framework where it can create those differences. This is the ‘level playing field’ on which countries compete in terms of better business environment. And, I should say that ‘on paper’ our legislation looks good. For instance, tax legislation gives us the third best ranking among OECD countries. On paper, that is. Subjectively, we always think there is too much tax and tax inspectors impose too much. I do not think you will ever hear anyone or any business owner saying, ‘Oh, he taxed so little, I am so happy.’ So, compared to other countries, we are in quite a good shape.
Then comes the local level because decisions made by local governments have strong impact on the local business environment. I am happy to be in Valmiera, a city which fully uses its local government autonomy to support businesses and attract investments.
Valmiera is one of the fastest growing municipalities outside Riga. Demographic trends are also good. While the rest of Latvia, including Riga, suffers from population decline, Valmiera is doing well. That makes Valmiera one of the national champions. All thanks to smart local entrepreneurship promotion policies. I will not dwell on what smart local policies represent in the European or our national or local context, I just want to underline the evident fact that Valmiera has smart policies. It is the very reason why the World Federation of Free Latvians and Valmiera City Council decided that this is the right venue for this forum. Why this forum? Well, because Latvian business owners, who operate in different European countries and beyond, have preserved and built deeper ties with Latvia. Not only through culture, language or emotionally, but also through their knowledge of Latvia and its economic advantages compared to other countries.
Let me also draw your attention to some critical aspects. I would like to mention some challenging issues that need to be addressed by the state and local governments. I think it is critical to ensure that governance has the required capacity and professionalism, that it can enforce the rules the way they have been intended to work, with right and appropriate objectives in mind. This issue is already being addressed, however, there is still a lot to be done, especially on the civil service part. That is why civil service is on my radar and I will try to make sure it, or rather the capacity building in civil service, is not forgotten.
Many also complain about the judiciary. However, I should emphasise that the perception of the efficiency judicial system based on lengthy litigations is slightly skewed. The share of delayed proceedings is very small. Almost all cases are adjudicated quickly or reasonably fast, and there is evidence to support that. According to annual report of the European Commission on efficiency and quality of justice in member states, our courts rank slightly above the EU average. We rank 10-14 among the EU-28, soon to be EU-27. So, we are a bit above the average. Many here have not been in French, Spanish or Swedish courts. That is what you call a lengthy litigation. So, in terms of speed of proceedings, Latvia is doing rather fine. And, I always say that being here, as we try to solve these problems, we, of course, perceive these challenges as an obstacle. But, if we compare ourselves to rest of the EU, we can easily see that Latvia has quite good business environment. We should appreciate and considered that more. We should, of course, also give precise and constructive criticism where it is due and where improvements are needed.
Dear friends,
Thank you all for being here today and showing your concern for Latvia’s economy. I do not think I should convince you that businesses are the engine and driver of our economy, but it still is a notable fact. Without local businesses we would not have been able to ensure the fastest growth in the EU in recent years. Without you and other business owners and managers, who are right now busy directly or indirectly contributing to our economy, society and the state, we would not have been where we are right now. Thank you for doing this job!
