Boosting investment is important for GDP growth in Latvia. At the end of September 2017 the country reached the level of 14.4 billion Euro (54.8% of GDP) in accumulated Foreign Direct Investment (FDI) since 2000. However during the economic crisis, investment in Latvia has significantly contracted and has not yet reached its pre-crisis level. For instance, investment fell from its peak in 2007 at 36.4% of GDP to 18.3% of GDP in 2016. Other economic sectors such as tourism and exports have recovered and surpassed their pre-crisis levels.
In order to foster growth and development, Latvia needs to increase attraction of foreign capital. The main problems in the FDI attraction system pertain to the need to improve the business environment, the duplication of functions of main actors involved, insufficient aftercare services for investors and low capacity to proactively pursue foreign investment. There is not adequate coordination of activities and information exchange between public and private sector participants for FDI attraction. In addition, while investors receive some support regarding specific investment projects, there is only limited support for further business development.
So far, Latvia has maintained mostly a passive approach and has not been actively attracting FDI. LIDA plays a key role, namely the post-service activities and reactive response, which according to the Latvian authorities are being performed at a satisfactory manner; however proactive activities, led by the Ministry of Economics, lag behind mainly due to the lack of capacity to pursue an active foreign investment attraction.