In a context where global foreign investment increased by 10.9% in 2013, in particular in Europe (+25.2%) and in Latin America (+17.5%), FDI flows to developing economies reached a new high of US$759 billion. However macroeconomic fragility and policy uncertainties are driving investors to caution.
Before the country opened up to a market economy, the main source of the country's FDI came from privatizations. Today, a significant portion of FDI comes from re-investments and classic merger/acquisition operations. The main foreign investments were made in the telecommunications, oil pipelines, real estate, retailing and banking sectors. After strong annual growth since its accession to the EU, the stock of foreign direct investment (FDI) in Latvia decreased in 2009 as a result of the international crisis, and again resumed a modest growth since 2010. The 2008-2009 financial crisis and the risk of bankruptcy of the Latvian economy have indeed made foreign investment fall sharply. The rating agencies ranked Latvia among the most risky destinations for investment. Since the end of 2008, Latvia experienced an enormous fall in FDI flows, and these have started to revive slowly since the second quarter of 2010. In 2012 the flows remain positive, although weakened by the unfavorable state of the European economy. In 2013 FDI reached only USD 988 million.
The largest investors in Latvia are Estonia and the Scandinavian countries - especially Sweden (over 20% of all investments in 2013) - representing more than a third of all FDI, Denmark and Germany.
Information on the 2013 FDI influx in this region can be accessed in the Global Investment Trade Monitor published in January 2014 by the United Nations Conference on Trade and Development (UNCTAD).
|Latvia||Eastern Europe & Central Asia||United States||Germany|
|Index of Transaction Transparency*||5.0||7.0||7.0||5.0|
|Index of Manager’s Responsibility**||4.0||5.0||9.0||5.0|
|Index of Shareholders’ Power***||6.0||9.0||5.0|
|Index of Investor Protection****||5.7||5.9||8.3||5.0|
Source: Doing Business - Last Available Data.
Note: *The Greater the Index, the More Transparent the Conditions of Transactions. **The Greater the Index, the More the Manager is Personally Responsible. *** The Greater the Index, the Easier it Will Be For Shareholders to Take Legal Action. **** The Greater the Index, the Higher the Level of Investor Protection.
|Foreign Direct Investment||2011||2012||2013|
|FDI Inward Flow (million USD)||1,466||1,109||808|
|FDI Stock (million USD)||12,092||13,577||15,654|
|Performance Index*, Ranking on 181 Economies||117||-||-|
|Potential Index**, Ranking on 177 Economies||80||-||-|
|Number of Greenfield Investments***||20||14||18|
|FDI Inwards (in % of GFCF****)||24.1||17.2||11.5|
|FDI Stock (in % of GDP)||42.5||47.8||50.6|
Source: UNCTAD - Last Available Data.
Note: * The UNCTAD Inward FDI Performance Index is Based on a Ratio of the Country's Share in Global FDI Inflows and its Share in Global GDP. ** The UNCTAD Inward FDI Potential Index is Based on 12 Economic and Structural Variables Such as GDP, Foreign Trade, FDI, Infrastructures, Energy Use, R&D, Education, Country Risk. *** Green Field Investments Are a Form of Foreign Direct Investment Where a Parent Company Starts a New Venture in a Foreign Country By Constructing New Operational Facilities From the Ground Up. **** Gross Fixed Capital Formation (GFCF) Measures the Value of Additions to Fixed Assets Purchased By Business, Government and Households Less Disposals of Fixed Assets Sold Off or Scrapped.
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Last Updates: October 2014