Transcript No Slide Title

HIGH - TECH INDUSTRIES STRATEGIC GOAL FOR
LATVIAN ECONOMY
Dr. Māris Ēlerts
Director General
Latvian Development Agency
Vilnius, December 2, 2002
INTERNATIONAL MEMBERSHIP
• Invited to join NATO (Summit in Prague, 21.11.2002)
 Planning to conclude accession negotiations with
EU by the end of 2002, ready for accessions in 2004
Latvia’s current membership:
UN - United Nations Organisation,
- Council of Europe,
WTO - World Trade Organisation,
IMF - International Monetary Fund,
- Euro-Atlantic Partnership Council,
EBRD - European Bank for Reconstruction and Development,
- NATO Partnership for Peace,
WB - World Bank,
UNESCO
STABLE MACROECONOMIC ENVIRONMENT
between western Europe and Russian market
 Currency (Lats) pegged to SDR since 1994
 The lowest inflation among Central European Countries
(1999: 2.4%; 2000: 2.6%; 2001: 2.5%; 2002F: 2.5%)
 Rapid GDP growth rates
(1999: 1.1%; 2000: 6.8%; 2001: 7.7%; 2002F: 5 %)
 Latvia rated as investment safe and stable country by:
Moody`s: A2, S&P: BBB+, Fitch IBCA: BBB
 61% of exports to EU in 2001
FDI stock 2.34 billion USD at the end of 2001
CUMULATIVE FDI IN LATVIA BY SECTOR
(END OF PERIOD, MILLION USD)
400
369
340
350
329
317
307
328
299
300
277
250
231
270
251
234
229
189
301
257
233
211
200
315
295
Manufacturing
247
218
Transport and
communications
188
Trade
150
118
114
100
63
123
78
120
Financial services
77
Others
50
0
1996
1997
1998
1999
2000
2001
• In 2001 18% of FDI invested in manufacturing, increasing by 13.7% to
compare with 2002, in high technology sectors growth was 7%.
•In 2001 75% of FDI was invested in services - trade (31.5%), financial sector
(22.8 %), real estate (22.5%) and transport and telecommunications (21.1 %)
MAJOR INVESTORS
Foreign investor
Country
Company in Latvia
Activity
Sonera
Finland
Lattelekom
Telecommunications
Tele2
Sweden
Baltcom GSM
Telecommunications
Transneteprodukt
Russia
Latrostrans
Transit of oil products
Varner Gruppen, ICA/Hakon Gruppen,
Linstow ASA
New Century Holding
Norway
Linstow Varner
Real estate
USA
New Century Holding
Real estate, insurance
Ernesto Preatoni Group
Italy
Pro Kapital Latvija
Real estate
Den Norske Stats Oljeselskap
Norway
Latvija Statoil
Port services, trade
SE-Banken
Sweden
Unibanka
Finance
Vereinsbank Riga A./s
Finance
Port services
Vereinsbank und Westbank
Noord Natie
Belgium
Neste OY
Finland
Preussen Electra & Ruhrgas
Germany
Noord Natie Bentspils
Termināls
Neste Oil Terminal Riga /
Neste Oil Latvia
Latvijas Gāze
Gazprom
Russia
Latvijas Gāze
Gas supply
Hebeda TRA AB (consotium: AB Karl
Hedin, Axel Bergkvist AB, Daniels
Trovaru AB) & Thomesto Sverige AB
Telia AB
Sweden
Vika Wood, Ltd.
Wood processing
Sweden
SIA Telia Latvia
Communications
Swedwood (IKEA group)
Sweden
Incukans Timbers
Wood processing
Enso Group (Pakenso OY)
Finland
Pakenso Baltica
Production of packaging
Rhodia
France
Rhodia Yarns
Textiles
Codan
Denmark
Balta AS
Insurance
Port services, trade
Gas supply
Total investment
in M USD
305
277
61,8
56
45,3
41
40
38
24
20
20
19,3
19,3
15
13
13
12
9
8,6
LEGAL FRAMEWORK
 By law, the foreign investor has the same
rights and duties as local investors
 The foreign investor may be the sole founder
and owner of a company in Latvia
 No restricted sectors activities
 The foreign investor may freely repatriate
after tax profits and investment capital
 Foreign companies registered in Latvia are
entitled to buy land and property
 Active dialogue between the Foreign
Investors’ Council in Latvia (FICIL) and the
Latvian Government
EXCELLENT BUSINESS ENVIRONMENT
LOW TAX RATES AND INCENTIVES
 Corporate income tax 19% from 2003
down to 15% till 31.12.2003
 High-tech manufacturers - reduction
by 30%
 Depreciation rate for high-tech equipment 70%
 Real estate tax 1.5%, from 2004
1%
 Corporate income tax holiday for large
investment projects, equal to
of the invested amount
40%
LONG TERM ECONOMIC STRATEGY OF LATVIA
Creating new knowledge based sectors of industry
Using already existing science base in
 Information Technologies
 Biotechnologies and pharmaceuticals
 New materials
Restructuring of traditional sectors of the economy
 Based on principles of comparative advantages
of traditional industrial sectors;
 Introduction of new technologies and
increasing competitiveness
INNOVATION POLICY - KEY PRIORITY FOR DEVELOPMENT OF
INDUSTRIAL COMPETITIVENESS
KEY OBJECTIVES OF THE NATIONAL INNOVATION PROGRAMME
(being developed):
 Formation of the society open to innovative activity;
 Innovation policy coordinated with the EU regulations;
 legal environment favorable for innovative business;
 support to innovative enterprises and to their further growth;
 efficient cooperation between all elements of the innovation
system.
Innovation policy in Latvia is at its development stage. The Latvian
Government has passed in 2001 the National concept for innovation,
and is soon going to accept the National program for innovation and
its action plan that will set concrete goals for a period of 3 to 5 years.
Reduction of the trade deficit and an increase by 20% of the high-tech
products in total exports is expected.
Ministry of Economics, Republic of Latvia
THE GOVERNMENT IS SERIOUS ABOUT DEVELOPING AN INFORMATION SOCIETY IN LATVIA, BY INCREASING SPENDING…
 National Program for Information Society development adopted and
National Information Society Council established, led by Prime Minister
 IT education a priority:
 spending on IT education programs increased by 20% in academic year
2000, translating into 33% enrolment growth
 currently all educational institutions have permanent Internet
connections and PC classes
• Implementation of strategic IT projects
– - Public Investment Program instituted for 2000-2005
– 40 MUSD annual public spending for IT projects
 Latvian National Library: making state-of-the-art information resources
available in every region of the country
 E-government project: linking of public databases, registries, public offices
into a uniform information system
 Legislation on digital documents and signatures, introduction of microchipenabled personal IDs by 2002
KNOWLEDGE BASED ECONOMY
Number of students (thsd)
120,0
110,5
101,3
100,0
89,5
76,6
80,0
64,2
55,4
60,0
46,2
39,0
40,0
20,0
0,0
1994/95 1995/96 1996/97 1997/98 1998/99 1999/00 2000/01 2001/02
Source: Ministry of Education and Science
 High third-level
enrolment rates: 37.3
students per 1000
population
 of those, 35% Engineering
and technology
 and 26% Business
Administration and Social
Sciences
 University-level
enrolment: 26.4 students
per 1000 population
 of those, 15% Engineering
and technology
 and 21% Business
Administration
KNOWLEDGE BASED ECONOMY
GROVING NUMBER OF HIGH EDUCATION ESTABLISHMENTS
Number of high education establishments (public/private).
40
35
33
34
33
31
30
26
25
20
20
17
14
15
13
12
10
20
19
18
14
20
13
14
9
10
6
5
2
0
1990
1992
1994
Source: Ministry of Education and Science
1996
1998
2000
2002
KNOWLEDGE BASED ECONOMY
RAPIDLY GROWING AMOUNT OF IT STUDENTS
Number of IT students
6000
4804
5000
3876
4000
2940
3000
2520
2538
1997/98
1998/99
2100
2000
1000
0
1996/97
Source: Ministry of Education and Science
1999/00
2000/01
2001/02
Quality of the university IT
curriculum
 Internationally recognized IT studies in Job profiles of new specialists
Riga Technical University, Latvian University,
Institute of Transports & Communications
Participation of IT companies in
curriculum quality assurance, ex. CISCO joint
participation in the development of IT study
program in the Latvian University
Acquiring of practical IT skills in Latvian
software houses
Targeted support from local firms
(research prizes, scholarships, donations etc.)
Joint activities to promote the interest of
youth in this sector

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
Applications Design
Communications Network Design
Software & Services
Software & Applications Development
Software Architecture and Design
Multimedia Design
IT Business Consulting
Technical Support
Products & Systems
Product Design
Integration & Test
Implementation & Test Engineering
Systems Specialist
Telecommunications
Radio Frequency (RF) Engineering
Digital Design
Data Communications Engineering
Digital Signal Processing
HIGHLY EDUCATED AND SKILLED LABOR FORCE
 Over 10 000 employees in ICT sector:
Telecommunications
Computers and
computer-related operations
6756
4235
Over 3,500 highly-skilled professionals in top 20 IT companies
 Major international customers of Latvian IT companies: Boeing,
IBM, Nokia, Siemens Nixdorf, Unisys
 Established technology partnerships with Cisco, Lotus, Microsoft,
Oracle, SAP
About 36% of IT specialists work in ISO certified companies
 About 85% of IT specialists work for companies with
international experience
 200 % growth of software development specialists
foreseen by 2005
WAGE ADJUSTED PRODUCTIVITY
Output per one salary EUR invested in employee
Sweden
10,36
Latvia
9,37
Germany
8,73
Finland
8,60
Denmark
4,75
0,0
2,00
4,00
6,00
8,00
10,00
12,00
Source: Eurostat yearbook, CSB 2001
Low tax burden: CIT only 15 % by 2004
High capacity Telecom network
INT
INT
INT
Source: Lattelekom, Latvenergo 2001
EASY NETWORK ACCESS
 High capacity telecommunication network
- Backbone for Latvia’s telecom system - growing optical cable network
- Optical cable network length is 3000 km, density ratio is 0.04 km per square km of territory
- Digitalization ratio for Telecom switchboards is 99%
- 80% digital lines in cities, 64% overall digitalization ratio
- Full range telecom services for customer (e. g. digital line lease, ISDN, DSL, LAN 2 LAN, X.25)
 Latvia is fully integrated into the international telecom network
- Broadband optical cable & satellite access to the regional telecom network (e. g. access to Ebone,
UUNET, Metrocom with international transmission capacity of 110 Mb/s)
- New Baltic Sea Region optical cable ring by 2002 enabling 32 Gb/s and using the latest DWDM
technology (LinxTelecommunications B.V.)
- Significant data and voice transmission transit via Latvia
 Competing & complementary networks
- 4 independent optical networks offered by telecom, energy & transport companies
(e. g. Lattelekom, Latvian Railway, Latvenergo)
- Comprehensive network held by number of cable TV & Internet providers (e. g. Telia, Baltcom)
- Separate telecom network for public bodies (VITA)
ADVANCED TELECOM INFRASTRUCTURE
Telecommunications
 Telephone penetration
32 / 100 inhabitants
 Digitalisation rate
72,7% (2002)
 ISDN 128 kbps (basic)
from 1998
 ISDN 2Mbps (primary)
from 1998
 GSM Operators
2
 Mobile penetration
34.2%
 PC density
9,5/100 inhabitants
(among companies 39%)
 ISP providers
50
 Uses Internet regularly
21% of economically
active population
 Cable TV subscribers
 WAP service available
Source: Central Bureau of Statistics
31.25% of households
WAP banking, GPRS
LATVIAN ICT SECTOR
THE MAIN SPECIALISTIONS AND PRODUCTS
Public institutions
Banking & finance
Business process re-engineering,
Integrated networks, ASP, Databases &
data storage, Specific applications
Data transmission & storage IS,
Transaction software, Financial
applications, WAP solutions, Client
handling systems
Wireless & cable
communications
Data transmission & storage IS, Large
customer registers, WAP solutions, Call
Centers, ASP solutions
Education & science
LAN, Internet & Intranet solutions, Digital
signal processing
Transport
Software development
IT consultations
Hardware architecture
Networking & data
transmission solutions
EDI systems, warehousing, distribution &
transport software, aviation software
Healthcare
Patient & case-record registers, medical
equipment support software, telemedicine
Service & manufacturing
Client handling systems, Accounting &
financial software, Network architecture,
WEB solutions, office software, ASP
services
GOVERNMENT SUPPORTS DEVELOPMENT
OF KNOWLEDGE BASED SECTORS
SUPPORT TO IS CLUSTER DEVELOPMENT
EU Phare funded project “Support to Industrial Cluster Restructuring,
LE9812.01/0001” (2001):
- Articulated and agreed cluster strategy (vision, mission and values)
- IS Cluster Code of Ethics signed by all involved companies
- Cluster resources pool and costs assessed
- Several legislative initiatives started with government of Latvia
- web site operational - document’s sharing and collaboration tools - www.is.lv
IS Cluster Development Activities, Supported by the Government in 2002:
- The Applied Informatics R&D and Software Outsourcing summit, Riga, April 4-5
- Export marketing training program “Partnerships in Digital Age”, Riga, May 6-10
- Participation in IT exhibition “Systems”, Munich, October 14 - 18
- Development of IT professional standards
- Development of project of Latvian - Danish IT college
- Development of project Postgraduate IT&T professional training centre
- Participation in process of improvement of business environment
(through identification of the main problems and legislative initiatives)
VISION OF LATVIA’S IS CLUSTER UNTIL 2010
 Latvia would be a leading software services
exporter in Eastern Europe
 Cluster of more than 10 000 qualified specialists
 Annual export of services over 1 billion USD
 Sourcing of additional HR
 Provision of ASP services, know-how and products
 Current expertise in implementing large-scale
projects enhanced by 2010
 Establishment of an R&D center for the
development of IS projects
Background for integrated
product development
 Strong and competitive related sectors stipulating IT demand banking, insurance, telecommunications, logistics etc.
- Highly competitive international banking sector dealing with Scandinavian
and German business practice (Foreign investment into Latvian banking
sector accounts for 65%)
- Scandinavian multinationals in the telecommunication sector (ex. Sonera,
Telia)
- Latvia as a regional logistics hub & distribution center for Western and CIS
customers
Traditions in hi-tech inventions & unique IS development
- Pioneers in computer and data transmission network architecture in former
USSR
- Experience in digital signal processing equipment & information systems

LATVIA’S IS CLUSTER
THE MAIN EXPORT PRODUCTS AND SERVICES
 New system development
SAP / Oracle consultations,
for public utility projects
JAVA software design,
Re-engineering
Software product
development
System maintenance &
testing
CASE tools
B2B Internet technologies
SAP/R3 interfaces
Web solutions
Networking solutions
Payment card systems
Localization & documenting
of software,
application service
provision,
data storage and
transmission,
software outsourcing
services
Source: ICT Country Profile, Latvia, ITC, October 2002
Competency areas by company
Development of large
scale IS
Software outsourcing
Localisation
Financial, insurance,
telecom applications
B2B systems
Software for public
bodies
Internet technologies
Electronics integrated IS
Call centres
E-commerce
DATI JSC, SWH-T (Exigen) JSC, IT Alise Ltd.
DATI JSC, SWH-T JSC (Exigen), DataPro Ltd.,
IT Alise Ltd., Fortech Ltd.
Tilde Ltd.
Tieto Konts, Baltic Technology Group,
Information Technologies Ltd., IT Alise Ltd.,
Solcraft, Fortech Ltd.
Baltic Data Ltd., Information Technologies Ltd.,
Blue Bridge Ltd
DATI, SWH-T (Exigen), Information
Technologies Ltd., DataPro Ltd., Fortech Ltd.
Delfi JSC, Information Technologies Ltd., Baltic
Data Ltd.
Arcus Elektronika Ltd., Amerilat Ltd.
Lattlekom, Latvijas Elektroniskais Telefons
Baltic Data Ltd., BTG Ltd.,
SUCCESS STORY: SYBASE
 Sybase, a leading supplier of database software, has
set up a company in Latvia
Sybase competence areas are co-ordination of operations,
outsourcing, sales & marketing in Latvia
 Sybase Baltic, the Finnish subsidiary of Sybase Inc
(US) aims to become the leading supplier of mobile and
Internet solutions in the Baltic Sea Region
 In less than a year, Sybase has established
outsourcing partnerships with 8 local software
companies
Latvian Electrical Engineering and
Electronics Industry Association
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THE MAIN AREAS OF
LATVIAN E & E INDUSTRY
intelligent e-technologies
original equipment and software for industrial application
electrical equipment for electric trains
electromechanical tools
power electrical engineering equipment
microelectronics
telecommunication equipment
nuclear electronics for radiation measurements
consumer electronics
automotive electronics
fiber optics
electrical filament lamps, including decorative and reflector lamps
wind power engineering
LATVIAN ELECTRICAL ENGINEERING
AND ELECTRONICS INDUSTRY
ASSOCIATION
MAIN INDUSTRIAL BRANCHES
electrical engineering, electronics, microelectronics,
telecommunications, fiber optics
KEY FIGURES
Association represents:
Total:
Total turnover:
Share in GDP:
Export:
Employees:
9 large companies (250 < employees)
12 medium companies (50 – 249)
29 small companies (10 – 49)
50 companies
EUR 97.1 mln (2001)
EUR 107.0 mln (2002 estimated)
1.2 %
75 %
5400
AUTOMATION CLUSTER INITIATIVE
• Business leaders – around 15
Locals: Dambis, Arcus Elektronika, Hansa
Elektronika, Jauda, Fundus, Peruza, LF Machinery
Plant, Olimps etc.
MNS: ABB, Festo, Siemens, Klinkmann, Danfoss
• Support industries – 20-30
• Universities & Colleges – around 6
• R&D centres – around 12
HIGH R&D COMPETENCE (2)
ACCENTIA® DISPLAY MATERIALS
SIDRABE
System for coating ITO



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ITO coated films
Barrier coatings
Hard coatings
Patterned ITO
Success story: ARCUS ELEKTRONIKA
 Arcus Elektronika: a producer of
electronic control devices and
software for the energy industry
 A number of joint-projects have been effected
with well-known multinationals such as ABB,
Siemens, AEG, Alstom and ELGA.
 Deloitte and Touche rated Arcus Elektronika as
a High-Tech company front-runner in Central
Europe in 2000.
 Arcus Elektronika’s growth is
supported by a developed R&D base
 The company oversees the development
process, from conception to final product, using
the latest technology.
 Year-on-year growth of 40%,
projected at 60% for 2002
Success story: SAF TEHNIKA
 SAF Tehnika: a pioneer in wireless communication
 SAF Tehnika offers original solutions for fixed wireless radio and
infrared laser communications equipment.
 SAF Tehnika equipment meets CE standards.
 In 2000, SAF Tehnika merged with Microlink - the largest IT holding
in the Baltics.
 In 2000, growth rate of 100%; in 2002, projected growth
rate of 200%
 Turnover per employee was USD 0.15 million (2000)
 SAF Tehnika serves the regional ITC market
 The company exports to European and American markets.
 Customers include Telia, NetCom, Sonera, and Tele Denmark.
 In a field dominated by competitors Ericsson, Nokia, and Siemens,
SAF Tehnika has successfully found it’s market niche.
LATVIA’S ICT GROWTH RATES

TOTAL ICT MARKET IN LATVIA:
2001
600 MUSD
2005
1 160 MUSD
SOFTWARE and COMPUTING SERVICES 106 MUSD
HARDWARE MARKET
+ 20 %
SOFTWARE MARKET
+ 18 %
SOFTWARE EXPORTS (+13 % in 2000)
+ 15 %
INTERNET SERVICES
+ 45 %
MOBILE TELEPHONY
+ 65 %
Source: ICT Country Profile, Latvia, ITC, October 2002
R&D: CENTERS OF EXCELLENCE
Riga Technical university
Improves manufacturing with areas of specialization including automated and
flexible manufacturing and assembly systems, process planning, and
processing of engineering materials, telecommunications.
Institute of Solid State Physics
Focuses on research, testing and development of new materials, nanosize
technologies, new power sources, sensors, optoelectronic solutions
Institute of Electronics
digital signal processing
Institute of Transport and Communications
Telecommunications, radioelectronics
Institute of Physics
MHD technologies
SIGNIFICANT NEW PROJECTS
SCIENCE TECHNOLOGY PARK
Physical result of the project
The optimisation and concentration in Riga of the currently scattered
STP elements by forming complex infrastructure for scientific
research, higher education and high tech enterprises, including:
 the relevant faculties of universities – natural sciences, engineering
sciences etc.;
 the relevant research institutes;
 spin-off high-tech companies;
Business Environment result
 co-operation between universities, enterprises, risk capitalists,
 creation of a national and an international, formal and informal
organisational platform;
 creation of new knowledge based companies, commercialisation of
ideas;
 attraction of foreign high tech companies and their branches;
 training of workforce to meet the requirements of the sector;
 creation and introduction of new technologies;
LATVIA IS CLEARLY ONE OF THE MOST
SUCCESSFUL TRANSITION ECONOMY
CENTRES IN EASTERN EUROPE
THE LATVIAN DEVELOPMENT AGENCY
Pērses iela 2, Rīga, LV 1442, Latvia
Phone: +371 7039400
Fax: +371 7039401
E-mail: [email protected]
HTTP://WWW.LDA.GOV.LV