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Country Commercial Guides
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CHAPTER VII. Investment Climate
Openness to foreign investment
The Latvian government actively encourages foreign direct investment, and has taken significant steps to improve the country's business climate. One of Latvia's strategic national goals is to accelerate integration into Euro-Atlantic organizations, and more broadly, into the global economy. To this end, the government has been striving to bring Latvian economic institutions, laws and regulations into conformity with EU directives. In particular, Latvia made broad changes to its legislation prior to its accession to the world trade organization in February 1999.
Under the 1991 Foreign Investment Law, the laws of the republic of Latvia apply equally to domestic and foreign investors. Amendments to the investment law passed in 1996 removed virtually all restrictions on foreign investment. However, there are several exceptions: foreign investors are prohibited from controlling companies that harvest timber (the Law on the Management and the Use of Forest, 3/24/94), organize lotteries and gambling (the Law on Lotteries and Gambling, 6/16/94) and operate radio or television stations (the Law on Radio and Television, 8/24/95). In addition, the Law on Insurance restricts representative offices or branches of foreign insurance companies to reinsurance their operations. However, a foreign insurance company is eligible to set up a 100% foreign owned insurance company in Latvia. According to the 1995 Laws on Credit Institutions and on the Bank of Latvia, a foreign bank opening a representative office, bank branch, or merging with a local bank must receive approval from the Bank of Latvia. In January 1995 the United States and Latvia signed an agreement on mutual protection of investments, which went into effect on December 26, 1996.
Companies that are owned by foreigners can purchase land freely if the majority of investors represent countries with which Latvia has entered into international agreements on mutual protection of foreign investments. Land can also be purchased by companies in which Latvian citizens own a controlling share. In addition, foreign investors can lease land for up to 99 years.
The Law on Privatization of State and Municipal Property governs the privatization process in Latvia. The Latvian Privatization Agency (LPA), established in 1994 to carry out the privatization program, has adopted a case-by-case approach in determining the method of privatization for each enterprise under privatization. There are a number of methods that the LPA uses to privatize a state enterprise. The three major methods are public auction, auction for selected bidders, and tender. For some of the largest companies, a certain percentage of shares can be sold publicly at the Riga Stock Exchange. In state stock companies, employees and pensioners can acquire up to 20% of the company shares using privatization certificates, and 5% are reserved for the pension fund. For some companies, management can acquire up to 25% of the shares using privatization certificates, but only if certain conditions are met (e.g. the company has no debts). The government can decide to maintain a certain number of shares in companies that are deemed important to the state's strategic interests.
Privatization of small and medium enterprises is almost complete, while several large companies still remain partly or wholly state-owned. The government intends to complete privatization of nearly all state-owned enterprises in 2000. The only exceptions will be the postal service, the state-owned railway company, the Riga international airport and approximately 40 small and medium-sized companies in the health care sector, social services, road maintenance, and companies providing support for the agricultural sector.
Foreign investors appear to have fair access to most enterprises that are eligible for privatization. Even though blocks of shares can be reserved for employees and management, there have been no reports of a serious foreign investor having been excluded from a privatization due to this practice.
In keeping with European Union and World Trade Organization requirements, there is no screening of foreign investment. On special occasions, when the government is prepared to offer considerable tax exemptions, grants or other concessions, strategic investors for greenfield projects are selected through international tenders. So far, there has been one such tender for the right to develop and operate a cellular phone network; in addition, preliminary negotiations with potential investors in a large pulp mill project are underway. The investor selection process for these projects appears to be non-discriminatory. Tender regulations for greenfield projects are prepared on a case-by-case basis.
The process of completing privatization of some of the biggest, and potentially most lucrative, state enterprises is politically sensitive. Relatively large, politically well-connected domestic business groups are lobbying for broader participation in the privatization of attractive state firms such as the energy monopoly - Latvenergo; Latvia's largest oil terminal - Ventspils Nafta; the Latvian shipping company and several others. Political stalemate delayed privatization of these enterprises in 1998. However, the government has committed to complete privatization by the end of 2000.
Conversion and Transfer Policies
Latvia's foreign investment law provides for unrestricted repatriation of profits associated with an investment. Investors can freely convert local currency into foreign exchange at market rates, and have no difficulty obtaining foreign exchange from Latvian commercial banks for investment remittances.
Expropriation and Compensation
There have been no cases of arbitrary expropriation of private property by the government of Latvia. Expropriation of foreign investment is possible in a very limited number of cases specified in the Law on Expropriation of Real Property. Compensation must be paid in full within three months of the date of expropriation. If the owner of the property claimed by the government deems the compensation inadequate, the owner has the right to appeal to a Latvian court.
Since independence, the Latvian government has been de-nationalizing private property seized by the Soviet authorities during the occupation. In cases when the government cannot return property to former owners or their rightful heirs, compensation certificates or monetary compensation are issued in lieu of ownership rights. However, the property restitution process is sometimes slow due to red tape and shortage of funds. There are even a small number of restitution cases involving American citizens that are still pending final resolution.
Dispute Settlement
Currently, the embassy is aware of several commercial disputes involving U.S. companies in Latvia. The disputes range from the telecom sector to the energy sector, from equipment supply to advertising, and mainly concern different interpretations of a contract.
The 1993 Law on Judicial Power introduced a three-tier court system. Currently, judicial power is exercised by town, city and rural districts, regional courts, and the Supreme Court. In addition, the constitutional court reviews the compatibility of decrees and acts of President of Latvia, the government and local authorities with the constitution and the law. Unless otherwise stipulated by law, district courts are the courts of first instance in all civil, criminal and administrative cases. Regional courts are vested with the authority of appellate review for district court verdicts. In addition, regional courts are courts of first instance for cases specified in the civil code. Such cases include claims exceeding Ls 15,000 (approximately USD 25,000), adoption cases, cases related to immovable property and serious criminal offenses. The Supreme Court consists of the Senate and Houses of Court. The law provides for civil, criminal and economic houses of court. However, the economic court has not yet been established.
Judges are appointed by the Minister of Justice and their appointments are confirmed by the Parliament after two years' professional practice. From then on, they have absolute security of office, which can only be called into question if they have committed a crime. The judges at the Supreme Court are appointed by the president of that body.
City and regional courts are administered by the Ministry of Justice and therefore may be subject to indirect pressure from the government. The Supreme Court and Constitutional Court are independent. However, improvements in the judicial system are needed to accelerate the adjudication of cases and to strengthen the enforcement of court decisions.
There are three arbitration institutions in Latvia: Riga international arbitration; arbitration under the auspices of the privatization agency; and arbitration conducted by the Latvian Chamber of Commerce. Today the parties opt to refer their disputes in most commercial agreements to arbitration rather than to the Latvian courts.
The Civil Procedure Law, which came into force on March 1, 1999, contains a section on arbitration courts. This section was drafted on the basis of the Uncitral Model Law, thus providing full compliance with international standards. The law also governs the enforcement of rulings of foreign non-arbitral courts and foreign arbitration.
Latvia has joined the 1958 New York Convention on the recognition and enforcement of foreign arbitral awards, and thus judgments of foreign arbitral courts that are made in accordance with the convention can be enforced in Latvia. In addition, the Civil Procedure Law stipulates that the judgements of foreign non-arbitral courts can be enforced in Latvia.
A draft Commercial Code is currently being reviewed by the parliament (Saeima.) The law is expected to correct contradictions in current business legislation and to modernize terminology. The parliament has adopted the new Collateral Law and thus has significantly strengthened the process and security of registering pledges on moveable assets. A modern bankruptcy law was adopted in 1996. The Law on Credit Institutions was passed in October 1995 and this law also regulates bank bankruptcy and liquidation. Business activities are regulated by the Law on Entrepreneurial Activities and Business Operations, which serves as the legal framework for establishing, registering, operating and closing a business in Latvia.
There are two laws governing bankruptcy procedure: the 1996 Law on Insolvency of Enterprises and Companies, and the Law on Credit Institutions, which regulates bankruptcy procedures for banks and other financial sector companies. The Law on Insolvency provides reorganization proceedings whereby a majority of creditors can reach a binding settlement with the debtor. Secured claims enjoy privilege rights and are satisfied separately before the liquidation of the debtor's assets. The next priority group includes the administrative expenses of the liquidation process, employee salaries and social tax payments, payments to farmers, social tax debt, credits guaranteed by the state and other payments to the state budget. After the claims of the first group are satisfied in full, debts to other creditors are settled, and when the principals of all the above-mentioned debts are repaid, creditors are entitled to interest payments. Creditors that submit claims after a certain deadline have the lowest priority in the debt settlement process. The Law on Credit Institutions and the Law on Deposit Insurance regulate bank's bankruptcy procedures and establish a similar order of priority for claims. The law requires monetary judgments of the local courts to be made in local currency. Judgments of local arbitral courts can be made in either the investor's or local currency.
Performance Requirements/Incentives
Foreign investors are entitled to exemptions from VAT and customs duties on fixed assets that are imported as long-term investments, and there is also an exemption from VAT and import duties if goods are imported for processing on a temporary basis. Companies with foreign capital that was registered in Latvia before April 1,1995, are exempt from corporate income tax payments for 4-8 years after the company first made taxable profits. There appear to be no other incentives that apply exclusively to foreign investors. However, the Latvian government has prepared a series of incentive schemes for investment, both foreign and domestic, in several free ports, special economic zones, and in special support regions.
Except in certain specific cases described below, there are no performance requirements for a foreign investor to establish, maintain or expand an investment in Latvia.
In the privatization process, certain performance requirements for investors, both foreign and domestic, are determined on case-by-case basis. Typically, those include requirements to maintain a certain employment level and to invest a certain amount of money into the company. The privatization requirements are subject to negotiation.
The privatization control department at the Latvian Privatization Agency reviews the progress of each privatized company over three years following the privatization. If an investor does not meet the requirements specified in the privatization regulations, the LPA breaks the agreement with the investor. So far, this has happened in about 30 cases, most of them relatively small. As the requirements are easily measurable, the LPA decisions in such situations are reasonably transparent and fair.
In addition, there are several requirements for companies applying for a license to operate under a free port or a special economic zone regime. Since separate laws were adopted to regulate business activities in each of the free trade zones, the requirements also vary from one to the other. Only the Liepaja special economic zone has a requirement for the share of exports in the total output. In order to qualify for tax relief in the Liepaja special economic zone, more than 80% of the goods manufactured there must be exported.
Under Latvian law, it is quite easy for foreign citizens to enter Latvia for temporary business activities (up to three months in a six-month period). Businessmen who wish to reside and work in Latvia for longer periods need to obtain a residence and work permit. Both embassy contacts in the American business community and a FIAS (Foreign Investment Advisory Service) study on administrative barriers to investment have noted that obtaining the permits is a complex and lengthy process. However, the Latvian government - acting on the recommendations of the FIAS study - is making an effort to simplify the issuance of both work and residence permits.
Right to Private Ownership and EstablishmentUnder the Latvian law, foreigners may conduct business activity under one of the following three forms of business representation: -- limited liability company ("Sabiedriba ar Ierobezotu Atbildibu" or SIA);
-- joint stock company ("Akciju Sabiedriba" or AS); and
-- representative (branch) office of a foreign company.Limited liability and joint stock companies are established upon registration with the Latvian Enterprise Register and have the rights of a legal person. Other full liability forms of business representation are closed to foreigners, including sole proprietorships (individualie uznemumi), partnerships (ligumu sabiedribas), enterprises of social and religious organizations (sabiedrisko/religisko organizaciju uznemumi), companies with supplemental liability (sabiedribas ar papildinatu atbildibu), non-profit companies and cooperative societies. However, foreign companies registered in Latvia can freely participate in other forms of business representation.
Private enterprises have competitive equality with public enterprises with respect to access to markets and business operations.
Protection of Property Rights
Legal rights to property have been restored in Latvia. The World Bank has assisted the government of Latvia to institute a land title registration system, although the progress has been hindered by a slow cadaster process. A new mortgage law strengthening the recognition and enforcement of secured interests in property was put into effect in 1998.
The government of Latvia is committed to attaining a level of protection for intellectual property rights (IPR) comparable to that provided under international conventions. Pursuant to that commitment, the Latvian parliament passed legislation in 1993 to protect copyrights, trademarks and patents. Foreign owners may seek redress for violation of their intellectual property rights through the appellation council at the Latvian Patent Office. Even court action can be sought in such cases.
In the effort to harmonize the legislation with the EU and WTO requirements, Latvia has established an adequate legal framework for the protection of intellectual property. However, the enforcement of the IPR laws remains weak, largely due to insufficient resources of enforcement agencies. At the same time, Latvian authorities are taking more proactive steps to confiscate pirated films, video and software.
In July 1994, President Clinton signed a trade and intellectual property rights agreement with Latvia. Latvia has been a member of the World Intellectual Property Organization (WIPO) since January 1993, a member of the Paris Convention since September 1993, a member of the Bern Convention since August 1995, and Geneva Convention for the protection of producers of phonograms against unauthorized duplication since august 1997. In addition, the Latvian government has amended all relevant laws and regulations in order to comply with the requirements of the WTO trips agreement (Agreement on Trade-Related Aspects of Intellectual Property Rights), to which Latvia acceded by joining the WTO.
Latvia has also acceded to the following international treaties and agreements:
-- Patent Cooperation Treaty (September 1993);
-- Budapest Treaty on the international recognition of the deposit of micro-organisms for the purposes of patent procedure (December 1994);
-- Madrid Agreement on international registration of trade marks (January 1995);
-- Nice Agreement on international classification of goods and services for the purpose of trade mark registration (January 1995);
-- Rome Convention for the protection of the rights of performers, producers of phonograms and broadcasting organizations (with a note to not apply the article 12 of the convention concerning phonograms of producers that are not nationals of contracting states).Transparency of the Regulatory System
The Latvian government has repeatedly amended its laws and regulatory procedures in an effort to spur Latvia's integration into the European Union, the WTO and the global economy. However, the frequent changes have resulted in regulatory confusion and conflicting interpretations of laws that undermine the transparency of the regulatory system. In particular, conflicting interpretations in the area of taxation, and the weak capacity of the judicial branch to provide transparent and timely tax dispute resolution, are hindrances to investment.
Efficient Capital Markets and Portfolio Investment
Government policies do not interfere in the free flow of financial resources or the allocation of credit. Local bank loans are available to foreign investors. However, average interest rates for both local currency and USD loans are still higher than the U.S. bank rates, thus making local borrowing less attractive. At the end of the first quarter of 1999, the average weighted interest rate for long-term LVL loans stood at 15.2% and the average interest rate for loans in OECD currencies at 12.5%.
The Latvian banking system successfully recovered from the 1995 banking crisis that wiped out a substantial portion of Latvia's GDP. However, the system was shaken again in the fall of 1998, when the Russian government defaulted on its debt payments. A number of Latvia's largest banks held considerable amounts of Russian bonds and consequently suffered substantial losses. In addition, Latvian banks lost Russian customers who, in some cases, had made up a significant part of their customer base. By July 1999, the banking system had somewhat recovered, and banking experts forecast that most surviving banks will end the year with a modest profit. Although the Russian crisis failed to induce the expected wave of mergers and acquisitions in the Latvian banking sector, most analysts expect that in the next few years the consolidation and restructuring process will reduce the number of banks from current 24 to about 10-15.
The Central Bank acts as a supervisory institution for the banking system. The banking supervision system, created with the assistance of the U.S. Agency for International Development, is often called one of the most successful in Central and Eastern Europe. The regulatory framework for commercial banking incorporates all principal requirements of European Union directives. Existing banking legislation includes provisions on accounting and financial statements (strict adherence to the international accounting standard is required), minimal initial capital requirements, capital adequacy requirements, large exposures, restrictions on insider lending, open foreign exchange positions and loan-loss provisions. An anti-money laundering law and deposit insurance law were adopted this year, and an independent anti-money laundering unit is now operating in close cooperation with the general prosecutor's office. Some of the banking regulations, such as capital adequacy and loan-loss provisions, are even tighter than EU requirements. The Central Bank strictly enforces all banking regulations.
Markets for debt instruments are dominated by trade in treasury bills with increasingly longer maturities, the longest currently two years. Foreign banks are allowed to participate in the primary market for treasury bills -- weekly auctions organized by the Ministry of Finance, and the Bank of Latvia provide repurchase and reverse repurchase facilities.
Securities markets are regulated by the 1996 law on securities, the law on the securities market commission, the law on joint stock companies and several other laws and regulations. Even though Latvia has made considerable progress in developing securities markets and the respective legal framework, legislation is still developing. In 1996, the Ministry of Finance transferred security market supervisory functions to an independent institution -- The Securities Market Commission. Protection of investor interests is ensured by strict control over participants in the securities market. Transparency of the market is achieved by issuing Riga Stock Exchange (RSE) bulletins after each trading session and by offering securities market information on the internet.
The Riga Stock Exchange started operating in 1995. France assisted Latvia in setting up the securities market based on a continental European model. In 1997, the RSE was admitted to the international federation of stock exchanges as a corresponding emerging market. The RSE was the first exchange in Eastern Europe to create an index in cooperation with Dow Jones. On the first day of trading in 1995, only four stocks were listed on the RSE; by the end of 1998, 68 securities were listed. At the last trading session of 1998, market capitalization stood at LVL 391.4 million (USD 687.9 million).
During 1998 and the first half of 1999, however, activity in the Riga bourse has fallen considerably, with daily trading volumes occasionally dipping below LVL 10,000. The Dow Jones RSE index has dropped from about 350 in the beginning of 1998 to 81 at the end of august 1999. The RSE was mainly affected by the overall economic slowdown in the region and the stalemate in privatizing Latvia's largest state enterprises. Moreover, many investors have indicated that an additional disincentive to buy shares of Latvian companies on the Riga Stock Exchange is the lack of adequate legal protection for minority shareholders. Currently, the Latvian government is reviewing several amendments designed to bring the protection of minority shareholders rights in line with the international standards.
Political Violence
There have been no reports on political violence or politically motivated damage to foreign investors' projects or installations since Latvia re-achieved independence in 1991. The likelihood of widespread civil disturbances is extremely low.
Corruption
Foreign business representatives and non-governmental organizations such as Transparency International, have identified corruption as a persistent problem in Latvia. It is often alleged that bribe-taking - ranging from low-level bureaucrats in a position to delay or speed up bureaucratic procedures, to high-level officials involved in awarding government contracts - is not uncommon. For U.S. companies, the lack of transparency in government procurement has created difficulties. Other key problem areas include customs, dispute settlement (including tax collection)and conflicting interpretations of the regulatory system, which can foster corruption.
The Latvian government has responded by making a serious commitment to fight corruption. The legislature has enacted the corruption prevention law and amendments to the criminal code, which introduce an equivalent of the U.S. false statement statute, and the law on money laundering was adopted in 1998. Nevertheless, enforcement of these and other anti-corruption statutes remains weak, mainly because of deficiencies in the management of law enforcement structures.
International organizations and foreign governments are providing considerable assistance to Latvia in an effort to eradicate corrupt practices. The World Bank's initiatives focus on promoting ethics in public administration, while the EU is concentrating on improving public administration and customs. The U.S. government is providing direct assistance to help Latvia modernize its Criminal Procedures Code and strengthen the enforcement of anti-corruption laws, including an effective anti-money laundering system.
Latvia has signed the criminal convention on corruption of the Council of Europe and has expressed interest in joining the OECD Convention on combating bribery. According to the Latvian law, accepting a bribe is a crime, while offering one is not. It is not a criminal act to bribe a foreign official, but the bribe cannot be deducted from taxes. The penalty for government officials accepting a bribe is heavy, but senior officials are rarely brought to justice for this crime.
The primary institution responsible for combating crime is formally the Ministry of Justice. In fact, the judicial branch's Prosecutor General's office plays the main role.
Bilateral Investment Protection Agreements
As of July 15, 1999, Latvia has concluded bilateral investment agreements with Austria, Belarus, Canada, the Czech Republic, Denmark, Egypt, Estonia, Finland, France, Germany, Greece, Hungary, Iceland, Israel, Korea, Lithuania, The Netherlands, Norway, Poland, Portugal, The Slovak Republic, Spain, Sweden, Switzerland, Taiwan, Ukraine, The United Kingdom, The United States, Uzbekistan and Vietnam. The agreement with the U.S. came into force in December 1996. Agreements with Belgium, Luxembourg, Italy, Singapore and Turkey have been signed but have not yet taken effect.
Latvia ratified the treaty on avoidance of double taxation with the U.S. in the spring of 1998, and it is currently awaiting ratification by the U.S. Senate.
OPIC and Other Investment Insurance Programs
Overseas Private Investment Corporation (OPIC) political risk insurance coverage is available for U.S. investments in Latvia.
Starting in February 1993, the Bank of Latvia's policy was to stabilize the Lat at a value of 79.97 Santims (one Santim equals 1/100 of a Lat) to one SDR. Since then, the Lat exchange rate has remained constant against SDR, and there is little likelihood of devaluation in the foreseeable future. Over the past three years, the value of the Dollar against the Lat has remained at about $1.7 per Lat. The embassy purchases local currency at the market rate. The Bank of Latvia has sufficient foreign reserves to guarantee full convertibility of the Lat.
Labor
The official rate of registered unemployment in October was 9.5%, but according to estimates by unofficial sources, the real rate may exceed 15 percent. Unemployment is significantly higher in rural areas, especially in the southeastern Latgale region. Both skilled and unskilled labor is available. A high percentage of the workforce has completed at least secondary or vocational education. Foreign managers agree that Latvians are generally hard working, reliable and quick to learn. However, there is still a shortage of mid- and senior-level managers with western-style management skills. Companies have reported difficulties in finding knowledgeable lawyers and auditors. Even though service sector employees now seem to have better skills than several years ago, it can still be hard for service-oriented companies to find experienced staff, and often at least some training will be necessary.
Companies must keep wages above a legally specified minimum, which currently is Ls 50 (approximately $83) per month. Union influence on the wage setting process is modest. In June,1999 the average gross monthly wage in the public sector amounted to $281 and the minimum wage represented 30% of the average gross wage. There is no official information on wages in the private sector, but, in general, they are considerably higher. Employers are required to pay a social security tax that is currently the equivalent of 28% of their employees' salaries. An additional 9% is paid by the employees. By the year 2002, the total social security tax rate is expected to drop to 33%, and the tax will be payable in equal parts by the employer and the employee.
Employment issues are covered by the Latvian Labor Code. An employer is prohibited from entering into an employment contract with an individual who does not possess a work permit. Under the labor code, there are three types of employment contracts: fixed term contracts, indefinite term contracts, and contracts covering the length of time required to complete the contracted work. The first three months of employment are considered probationary, and during this time employees may freely resign or be dismissed without notice (many foreign managers use this to weed out anyone who does not fit the job). If neither the employer nor employee terminates a fixed term contract at its conclusion and the employee continues in employment, the contract is deemed to be extended for an indefinite term.
An employment contract can be terminated without notice by mutual consent. Irrespective of the terms of a contract, an employee can terminate the contract before it expires by giving one month's written notice. Employers can dismiss employees with at least one month's notice for reasons such as liquidation of a company, staff cutbacks, refusal to move to a new location or reinstatement of an employee who had been on maternity leave or other temporary absence. In certain circumstances, when an employment contract has been terminated early, the employer is obliged to pay compensation equal to one month's average salary. In a few cases, termination of an employment contract requires prior consent of a trade union. According to the Labor Code, standard working hours are 40 hours per week. Normally, there are five working days per week, but employers may also demand six working days per week. Employees are entitled to annual paid vacations of four calendar weeks per year.
The Latvian government is committed to adhere to the ILO Convention protecting worker rights.
Foreign Free Trade Zones/Free Ports
There are four free trade areas in Latvia: free ports are established in the Riga and Ventspils ports, and special economic zones (SEZ) are created in Liepaja, a port city in western Latvia, and Rezekne, the center of an eastern Latvian region which borders on Russia. The IMF objects to free trade zones on the grounds that they distort competition and create tax collection problems. Therefore, Latvia's stand-by agreement with the IMF sets forth a commitment not to create any new free trade zones in Latvia.
Each of the four zones applies slightly different rules. In general, the two free ports provide for exemptions from indirect taxes, including exemptions from customs duties, VAT and excise tax. The SEZ offer additional incentives, such as 80-100 percent reduction of corporate income taxes and real estate taxes. In order to qualify for the tax reliefs and other benefits, companies must obtain permits and sign agreements with the appropriate authorities. These authorities are the state joint stock company "Rigas Tirdzniecibas Osta" (Riga Commercial Port) for the free port of Riga; the Ventspils Port Authority, for the Ventspils free port; or the Liepaja SEZ administration or Rezekne SEZ administration.
Foreign Direct Investment Statistics
Source: Latvian Central Statistics Department The data reflects investment in equity capital registered with the Latvian enterprise register.
Foreign Investment Stock by Country of Origin, End-of-Year Data (Millions of Dollars)
Country 1996 1997 1998 1998 ------------------------------------------------------ Percent of total Denmark 178.8 168.3 176.1 15.5% US 73.8 97.8 121.6 10.7% Russia 91.3 87.5 99.0 8.7% Germany 32.0 76.5 95.1 8.4% UK 49.6 48.7 85.7 7.5% Sweden 33.2 40.4 78.1 6.9% Ireland 21.6 40.5 61.1 5.4% Finland 18.7 26.3 49.6 4.4% Norway 2.7 1.9 43.7 3.8% Estonia 9.6 34.4 38.1 3.4% Singapore 0.5 75.9 33.0 2.9% The I of M 1.7 0.9 30.2 2.7% Netherl. 10.1 18.6 29.1 2.6% Switzerland 26.9 29.0 25.9 2.3% Liberia 17.4 21.0 22.3 2.0% ---------------------------------------------------- Subtotal 568.0 767.8 988.7 87.1% Others 115.6 147.0 146.9 12.9% ---------------------------------------------------- Total 679.2 901.4 1135.6 100.0% Foreign Investment Flow by Country of Origin (Millions of Dollars) Country 1996 1997 1998 1998 ---------------------------------------------------------- percent of total Norway 2.6 -0.8 41.7 17.8% Sweden 19.1 7.2 37.7 16.1% UK 24.5 -0.9 37.0 15.8% Isle o Man 1.7 -0.8 29.2 12.5% US 12.7 24.0 23.8 10.2% Finland 4.2 7.7 23.3 10.0% Ireland 1.4 18.9 20.6 8.8% Germany 1.5 44.5 18.6 7.9% Russia -4.2 -3.8 11.5 4.9% Netherlands -9.7 8.5 10.5 4.5% Denmark 45.9 -10.5 7.8 3.3% Estonia 8.2 24.7 3.7 1.6% Liberia 17.4 3.6 1.3 0.6% Switzerland 26.9 2.1 -3.0 -1.3% Singapore 0.5 75.3 -42.9 -18.3% ------------------------------------------------------------ Subtotal 152.7 199.7 220.9 94.3% Others 16.0 22.5 13.3 5.7% ------------------------------------------------------------ Total 168.7 222.2 234.2 100.0% Foreign Investment Stock by Sector of Economy (Millions of Dollars) Sector 1996 1997 1998 1998 ---------------------------------------------------------------- Transport, storage, communications 306.5 309.5 346.8 30.5% Fin intermediation 114.5 179.3 264.9 23.3% Manufacturing 116.2 235.3 199.1 17.5% Wholesale,retail trade, maintenance and repairs 62.5 74.0 185.2 16.3% Real estate, leasing, and other commercial activities 16.3 18.4 50.4 4.4% Electricity, gas and water 0.0 15.3 20.8 1.8% Hotels,restaurants 13.9 13.2 14.7 1.3% Agriculture, hunting, forestry,fishing 1.0 1.1 8.9 0.8% Health, social work 7.7 7.6 7.0 0.6% Construction 4.9 5.1 3.6 0.3% Mining and quarrying 2.1 1.2 2.8 0.2% Other social and individual services 2.5 1.6 2.5 0.2% Education 1.0 0.9 0.9 0.1% Other investment 30.3 38.9 28.2 2.5% ----------------------------------------------------------------- Total 679.2 901.4 1,135.6 100.0% Foreign Investment Flow by Sector of Economy (millions of dollars) Sector 1996 1997 1998 1998 ---------------------------------------------------------------- Wholesale and retail trade, maintenance and repairs 39.5 11.5 111.1 47.4% Fin intermediation 1.1 64.9 85.6 36.5% Transport, storage, communications 89.3 3.0 37.3 15.9% Real estate, leasing, other commercial activities 13.3 2.1 32.0 13.7% Agriculture, hunting, forestry, fishing 0.4 0.2 7.7 3.3% Electricity, gas and water 0.0 15.3 5.5 2.4% Mining and quarrying 1.7 -1.0 1.6 0.7% Hotels, restaurants 2.1 -0.7 1.5 0.6% Other social and individual services 0.5 -0.9 0.9 0.4% Education 0.8 -0.1 0.0 0.0% Health, social work -4.6 -0.1 -0.6 -0.2% Construction -0.1 0.2 -1.5 -0.6% Manufacturing 23.6 119.1 -36. -15.5% Other investment 0.9 8.7 -10.8 -4.6% ---------------------------------------------------------------- Total 168.7 222.2 234.2 100.0% Foreign Investment, Percent of GDP stock inflow ---------------------------------- 1996 13.3% 3.3% 1997 16.2% 4.0% 1998 17.1% 3.5% Largest Foreign Investments in Latvia Source: Latvian Development Agency Investor Country Latvian Industry (USD mil) Company Sonera Finland Lattelekom telecom 305 Transnefte- produkt Russia Latrostrans transit 61.8 in oil products New century USA shareowner of 60 Holdings of various companies Metromedia/ USA Baltkom GSM telecom 50 Western wireless Polarbek USA Radisson SAS hotel 42 Daugava Den Norske Norway Latvija trade in oil 40 Stats Statoil products Oljeselskap SEB Sweden Unibanka finance >30 (Skandinaviska Enskilda Banken) Bank of USA Unibanka finance >20 New York Varner Norway Varner retail, Gruppen Baltija estate 30 Shell UK Shell Latvia trade in oil 27 Overseas products Holdings ltd. Tolaram Singapore Tolaram textile 30 Group Fibers industry Vereinsbank Germany Vereinsbank finance 24 und Westbank Riga Neste OY Finland Neste Oil trade in 20 Terminal oil products Riga Neste Oil Latvia Hebeda TRA Sweden Vika Wood wood 20 AB & Ltd. processing Thomesto Sverige AB Gazprom Russia Latvijas energy >15 Gaze Preussen Germany Latvijas energy >25 Electra & Gaze Ruhrgas Coca Cola Austria Coca Cola distribution 16 Getranke Dzerieni Holding GmbH Hydro Denmark Hydro trade in oil 16 Texaco Latvija products Orchard Ireland Rietumu finance 15.7 Finance ltd. Banka GEBR Knauf Germany Sauriesu production of 15.5 Verwaltung Buvmaterialu building GmbH Kombinats/ materials Knauf Marketing Corpora Chile Proexpo food 15 Tres Montes processing Ernesto Italy PK Latvia real estate >15 PreatoniOther significant U.S. investors in Latvia include Intersource Inc., Jeld-Wen, Lathaag, McDonalds, Colgate Palmolive, and Procter and Gamble. The American Chamber of Commerce in Latvia currently has more than a hundred members.
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[end of document] Note* International Copyright, United States Government, 1998 (or other year of first publication). All rights under foreign copyright laws are reserved. All portions of this publication are protected against any type or form of reproduction, communications to the public and the preparation of adaptations, arrangement and alterations outside the United States. U. S. copyright is not asserted under the U.S. Copyright Law, Title 17, United States Code.
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