FDI Track Record

After Latvia’s accession to the EU, the inflow of foreign direct investment (FDI) increased rapidly and reached its highest point in 2008 (LVL 5.7 billion). The main factors fostering FDI inflow were new market opportunities for foreign investors, stable monetary policy, Latvia’s advantageous geographic location between the EU and CIS countries and its well-developed infrastructure. After being severely affected by the global financial crisis, Latvia is steadily regaining the confidence of foreign investors and FDI inflows are on the rise again.

Historically, most of Latvia’s FDI inflow has come from neighbouring countries in the Baltic Sea region and other EU Member States. The largest amounts of investment are from Estonia, Sweden, Denmark and Germany. A large proportion of the Estonian FDI results from ’transit investment‘ by Scandinavian and other investors through regional head offices established in Estonia. The FDI stock of these four countries comprised 44% of the total FDI stock in the Latvian economy at the end of 2009. Each of the four countries show markedly dominant sectors: Swedish FDI is focused in the financial service (37%) and real estate (34%) sectors, almost 65% of Estonian FDI and 37% of Danish FDI is also in financial services. German entrepreneurs have mainly invested in financial intermediation (21% of German FDI in the Latvian economy) and real estate (19%). In 2009, investment from within the EU comprised around 70% of total FDI inflow.

Overall though, Latvia’s FDI inflows cover a wide range of economic sectors. The largest share of FDI stock is attributable to services: FDI split by sectors shows that most investment is attracted by financial intermediation (29%), wholesale and retail trade (13%) and real estate operations (13%). FDI in manufacturing only makes up 11% of total FDI stock.

The table below presents a list of some of the most interesting foreign investment projects successfully implemented in innovative and high added value sectors including IT, environmental technology and manufacturing.

Table 1. Some of the foreign investment projects established in Latvia

Additional information:
www.bank.lv 
www.liaa.gov.lv