Transcript Reflection on Attitude Towards Attraction of Foreign Investment in

Reflection on Attitude Towards Attraction
of Foreign Investment in Latvia
Kristaps Lešinskis
Assistant Professor
BA School of Business and Finance
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
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Source: Ministry of Economics, Report on Economic Development in Latvia, December,2009
3
Have we observed and considered
enough
• Increase of gap between GDP and GNP
before crisis started?
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IEK
(faktiskajās cenās; tūkst. latu)
1.ceturksnis
2.ceturksnis
3.ceturksnis
4.ceturksnis
IEKŠZEMES KOPPRODUKTS
2 287 617
2 666 106
2 944 913
3 273 057
NACIONĀLAIS
KOPIENĀKUMS
2 249 715
2 570 939
2 842 564
3 178 589
IEKŠZEMES KOPPRODUKTS
3 091 263
3 631 138
3 840 052
4 217 357
NACIONĀLAIS
KOPIENĀKUMS
3 022 327
3 462 697
3 705 843
4 100 274
IEKŠZEMES KOPPRODUKTS
3 757 816
4 162 501
4 167 513
4 186 666
NACIONĀLAIS
KOPIENĀKUMS
3 674 324
3 986 660
4 115 288
4 253 925
IEKŠZEMES KOPPRODUKTS
3 311 112
3 397 967
3 247 863
-
NACIONĀLAIS
KOPIENĀKUMS
3 449 579
3 798 334
3 500 776
-
2006
2007
2008
2009
Piezīmes:
Avots: LR Centrālā statistikas pārvalde
GDP-GNP: 0,33 billion lats in 2006, 0,49 billion lats in 2007, 0,26 billion lats in the 1st half of 2008
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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
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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
External debt (gross; % of GDP)
External debt (net; % of GDP)
145.8
56.4
Source: Bank of Latvia
Accumulated FDI at the end of September, 2009:
5,780 million lats
Source: Bank of Latvia
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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?
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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?
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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."
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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
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Paldies par uzmanību!
Thank You for Attention!
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