Just another business hotel. The same soft music playing in the background, the same gigantic hall full of light, noise and luggage. Outside, the sky is grey, the park is shimmering with dew, blue bulbs emerging eerily from dark green foliage. The atmosphere is one where revolutions are born, dramas unfold and life happens.
This is Riga, capital of Latvia, one of the Baltic states. While I am here – this time to talk about diversity as a creator of business value for the EU Progress programme at the Society Integration Foundation – there is something more important unfolding in the country – elections. As the results are announced and a new coalition is being formed, it is the perfect time to take a deeper look at this country with my investor hat on. There is a rich mix of advantages.
I see a geographical advantage. Latvia is positioned strategically between two massive markets in crisis – western Europe and Russia. While there is an internal crisis in the EU as it reinvents itself, the situation is more complex for Russia. The country stands in the eye of a storm. The Ukraine crisis is pushing the west into sanctions that jeopardise many financial and economic ties to the country. Just look at the massive exit of foreign investment, falling by 50% in recent months. Russia’s future is at stake, and the country will quickly have to explore alternatives, to the east or through historical partners.
What does this mean for Latvia? To an investor, three things spring to mind.
Latvia is a perfect passageway from one economy to the other, with the related competitive advantages of ability to control flow and influence decisions, even more so in the energy sector.
There is a prospect of new leadership for the EU. Latvia, a relatively new entrant to the union, is a young country when it comes to capitalist mindset, and one with a unique history. National pride and the notion of sacrifice for the greater good are still prevalent in Latvian society. The country could play a role in the current European leadership vacuum and drive the reshaping of the union.
It is a perfect base for any investor wanting to maintain ties with Russia. Companies and investors are currently assessing current and future commitments there. Latvia could play a toe-hold role in the equation – close enough to understand and monitor. Think about the role Hong Kong has played inthe development of foreign investment to China.
You want to deal with people who will do whatever it takes to do business. You want people around you that understand culture and draw the best strategic options. And you want to rely on people who will be there for the long term and are more interested in partnerships than one-off deal-making. These are Latvians.
I also see an economic advantage. To me it is a land of opportunities. Other examples could be Singapore, Hong Kong, Luxembourg, Switzerland and Malta. Perhaps you think these examples are more mature and sophisticated markets with a strong financial services backbone – my point exactly.
They are now, but were not once, and this is the beauty of Latvia. I have Latvia-based partner, and have experienced first hand what is going on in the country. It is a country in transformation, with a highly favourable tax and legal environment compared to the rest of Europe. It is a country with real prospects for growth. Latvia has one of the highest GDP growth rates in Europe. Riga is currently emerging as a regional financial and commercial centre on the Baltic Sea. It has a real will to embrace western capitalist ways. The country is exploring what it wants to do, and stand for – the mission, vision part of strategy building.
As far as I am concerned, it could build on tech entrepreneurship and emulate neighbouring Estonia. There are the roots of a tech startup ecosystem in Latvia. It could choose to push the technological side, based on competencies in pharmaceuticals or agricultural machinery. It could decide to become a competence hub to favour its forestry knowledge and strong agricultural know-how. Or strategically, it coud define an energy-based strategy due to the proximity of Russia, the presence of massive natural gas storage facilities and freeze-free ports.
What will it be? No one knows, but it would be wise to go there, explore, observe, get involved, and most probably be part of a new page of political and economic history.