Reflection on Attitude Towards Attraction of Foreign Investment in Latvia

1. Reflection on Attitude Towards Attraction of Foreign Investment in Latvia Kristaps Lešinskis Assistant Professor BA School of Business and Finance

2. Traditional Latvian attitude Let’s go for it! We need it! We have to attract it! Declarations of Cabinet of Ministers, different action plans, Business environment improvement plans Positive aspects have always been stressed By far not that much negative aspects have been accounted and considered Affection to attraction, competition for this investment has always been very high

3. Source: Ministry of Economics, Report on Economic Development in Latvia, December,2009

4. Have we observed and considered enough • Increase of gap between GDP and GNP before crisis started?

5. GDP-GNP: 0,33 billion lats in 2006, 0,49 billion lats in 2007, 0,26 billion lats in the 1st half of 2008

6. Have we observed and considered enough • Vulnerability aspects Those with serious CA deficits on BoP and foreign debt were more crisis affected Threats of outflow of FDI Foreign capital escapes the first and very fast

7. Have we observed and considered enough • May we economically and politically afford living under burden of external debt and dependence on FDI? 3rd quarter 2009 Source: Bank of Latvia Accumulated FDI at the end of September, 2009: 5,780 million lats Source: Bank of Latvia

8. Have we observed and considered enough • Should we as a nation cultivate idea of permanent necessity for foreign capital as the unavoidable source of investment? • Should we establish a status of “holy cow” for it?

9. Have we observed and considered enough • Does this obsession with foreign capital encourage aspirations of potential national entrepreneurs? • Have not we lived too long with an idea that there are other masters in our country and role of Latvians is more to serve them?

10. Cadbury taken over by Kraft Public reaction: “Cadbury is a British brand and should remain British.” “If it is taken over will it still have the same quality it now has? Will product names be changed or some products be discontinued?” “I feel that there are too many takeovers in everything. We are going to end up with only a few organisations owning everything, which could lead to them having the monopoly and controlling what we do, what we get and what we are allowed to do." "Kraft already has a track record of cutting production and moving production abroad. There's no guarantee that they'll keep production in the UK in the long run."

11. Finally • Anyway we need foreign investment • We need reasonable attitude towards it; perhaps, the mentality has to be changed • We have to change our thinking ang heavy reliance on foreign capital (too heavy)- both real and psychological • We have to think of foreign investment as only temporary solution to capital deficit we have if we want to become country with a sustainable development

12. Paldies par uzmanību! Thank You for Attention!