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Indriksone: Everyone must participate in the transformation of the Latvian economy Today, on the 20th of June this year, the Minister of Economics Ilze Indriksone introduced the Cabinet of Ministers to the vision of the Ministry of Economics on the significance of structural transformation in promoting economic growth, its main challenges, and priority directions of action in line with the Latvian National Industrial Policy Guidelines for 2027 and other planning documents. The Minister also encouraged ministers and the public administration to actively participate in the processes of economic transformation.
Global technology development trends and the development of strategically important sectors under new geopolitical realities offer new opportunities to promote the export capacity of the Latvian economy, improve productivity levels by investing in new technologies, digitalization, and innovation. To achieve the maximum effect, it is necessary to strategically and purposefully invest both short-term and medium-term available private and public financial resources.
By investing in strengthening production capacity, innovation, and human capital development, and reducing bureaucracy in public administration, we can achieve an economic transformation that will enhance Latvia's competitiveness and ensure sustainable economic development. We all will be participants in the change process – both the public administration, which must agree on a common understanding and cooperation to achieve the goal, and every member of society/resident, who must be prepared to upgrade their qualifications and learn according to market demand. However, the main driver must be the entrepreneur – he makes the decision to modernize production or move resources to another sector, region, country. Therefore, encouraging entrepreneur motivation to change the business model, explore, and create new competitive advantages must be the main policy objective," emphasizes the Minister of Economics Ilze Indriksone.
The goal of the Ministry of Economics is to achieve an economic transformation that will promote Latvia's competitiveness and sustainable development. Economic transformation involves fundamental changes in the economy that will increase overall productivity while ensuring adequate employment quantity and quality, access to quality public services. In this process, it is essential to move labor and other production resources from low productivity to high productivity areas, sectors, and economic activities.
The Ministry of Economics offers four main directions of action:
- Investments to strengthen production capacity. Private investments currently account for only 17% of GDP, but the goal is to reach at least 23-25% of GDP. Modernization of production, improvement of existing technologies, and the introduction of new technologies are crucial for raising productivity levels. Therefore, future reforms will include improving the existing support programs of Altum and developing new investment support instruments to increase capital availability for entrepreneurs. At the same time, opportunities for attracting resources for state-owned enterprises through capital market instruments will be evaluated, including the establishment of subsidiaries for investment project implementation.
- Innovations for the development of new goods and services. To achieve the set goal of investing in research and development (R&D) - 1.5% of GDP by 2027, it is necessary to promote innovations and establish a clear framework for involving state-owned capital companies in R&D projects. Future reforms will include the development of an action plan to achieve the set investment goals, the implementation of state-funded R&D programs aiming to ensure that state budget expenditures for R&D in 2027 reach 0.5% of GDP or at least 265 million EUR, as well as preparing additional proposals to increase R&D investments, such as tax reliefs, investment support, public procurement of innovations.
- Investments in human capital for the acquisition of necessary skills. In the context of economic transformation, it is important to motivate employees to move from low-wage enterprises and sectors to higher-income jobs. By 2027, retraining will be necessary for at least 50,000 unskilled workers. In changing labor market conditions, regular qualification, including digital skills, upgrading opportunities will need to be provided for at least 160,000 residents to adapt to economic changes. Future reforms will include the development of a human capital development strategy, proposals to improve the immigration process with the goal of ensuring a dynamic labor market, including proposals for attracting highly qualified specialists, and developing an action plan to improve flexible employment forms (part-time, remote work, efficient and quick employee registration for short-term employment by employers, etc.).
- Institutional transformation and reduction of bureaucracy. To improve the business environment, it is necessary to eliminate administrative barriers and ensure more effective dialogue with entrepreneurs. Future reforms will include reducing bureaucracy, speeding up decision-making, and regular dialogue with entrepreneurs, providing solutions to the problems identified by entrepreneurs in reducing bureaucracy in the following areas: labor management and accessibility improvement; construction process and related requirement improvement; improvement of municipal territorial planning; reducing the administrative burden on merchants; reducing business costs. It is planned to review the services provided by public administration to ensure decision-making within 3 working days from the moment the conditions for making a final decision have occurred. It is also necessary to evaluate all public investments in digital transformation solutions – i.e., public investments (especially EU-funded projects) in digital transformation should clearly define benefits for entrepreneurs – to address the above-mentioned business environment problems.
Detailed information on the "Priority Action Directions for Implementing Economic Transformation" can be found in the Legal Acts Portal.