By journalist Inga Karlinska.
Although entrepreneurs and organisations protecting their interests have been actively trying to draw attention of the government and politicians to the necessity to improve competitiveness of Latvian entrepreneurs and promote openness for investments for many years, there are no significant improvements at sight. Mr Aigars Rostovskis, President of the Latvian Chamber of Commerce and Industry (LCCI) very recently publicly expressed his opinion on the necessity for the entrepreneurs to consider options to move their businesses to other countries, and it should be assessed as a clear signal of the goals the entrepreneurs are expecting from the politicians.
“First of all, I will stress that I expressed this opinion as a natural person and an entrepreneur, however, if this situation will not change, we cannot rule out that such a call could also be distributed by organisations representing the entrepreneurs”, explains Mr Aigars Rostovskis. The most recent years have not been the easiest ones for entrepreneurs at all – approximately 70% of the goods are exported to Europe, where the market currently sees stagnation, and the demand has fallen, thus affecting turnover of our companies as well. If the tax burden is increased in such a situation, it is only logical that the bucket of dissatisfaction is filled up at a higher speed, and decrease in public spending could be one of the most realistic solutions in “finding” the necessary funds.
Latvia loses its battle for smart people
According to the President of the LCCI, entrepreneurs represent minority of the society, and, at the same time, they and their teams maintain this country and act as a pillar of our economics, while politicians and public servants are the persons operating with these funds. Hasty policy and failure to listen in entrepreneurs can lead us to a situation where part of these “feeders” disappears, and then there will be a question – how to live in a long term.
“If the state does wrong to teachers or doctors, their number is huge, demonstrations are possible, since no sanctions can be imposed against the protesters – they cannot dismiss everybody. We as entrepreneurs do not possess so broad options – we can publicly discuss our hardship and contact the politicians and top level public servants trying to convince them of our considerations. If talking does not work, each entrepreneur can make a decision, whether he wants to stay here or try to organize business in some other country with less red tape, lower taxes and larger market”, adds A. Rostovskis, stressing that since 2004, when Latvia joined the European Union, it is easy.
Tax burden varies by Member States at the European level, and currently Latvia is among the countries which are not competitive in this respect.
According to A. Rostovskis, currently, a fierce global battle for talented, smart, wealthy and educated people is underway, and various studies, including those conducted by the OECD, Latvia loses its battle, since “drainage” rates of talented people exceed those of supplement. “If the state, politicians and public servants will not fight for very capable people who hold decent capital, it is only logical that they will be looking for some other place to implement their wishes and ambitions. Furthermore, these people will not leave just with a handbag, they will take their capital, business and family, children with them, and this means that such events will have domino effect”, says A. Rostovskis, adding that this is the main reason why the power elite should sit down and think at last as to how to keep entrepreneurs in Latvia and increase their number.
Limited spending in public sector should come first
Head of the LCCI draws attention to the spending in public sector over at least the last ten years – exaggerated staffs, largely inadequate salaries, regular purchases of vehicles and equipment reminding feast during time of plague. Entrepreneurs understand that it is necessary to increase defence spending in the current situation, but the first thing that should be done is decrease in or “freezing” of various less urgent things for at least a year – purchase of vehicles and office equipment, cosmetic repairs and such. “It is just like with family budget – when the situation gets more difficult, they do not buy new furniture and vehicles, postpone lavish trips. That is a reasonable action to take”, A. Rostovskis expresses his conviction, offering to decrease public sector spending in the above positions next year by half a billion or even a billion euro, furthermore, audit should be conducted resulting in decrease in the unnecessary functions provided by the public sector.
Answering the question as to what the government should do today, A. Rostovskis is specific. He mentions exports, attraction of investments and increase in productivity as the most significant cornerstones, while the excessive bureaucracy is marked as the most disturbing factor. To explain it in more detail, it is significant that every entrepreneur who wants to work, should be allowed to do so without burdening him with unnecessary audits, loads of documents and similar impeding factors. This would allow decrease in the number of public servants offering them vacancies in private sector which still faces staff shortages. It should be mentioned for a short note that, according to the Central Statistical Bureau, number of employees in the sector of general government in the structural units of state and local governments has increased by 8,505 in the last two years amounting to nearly 400,000 in the second quarter of this year.
The next step should be decrease in the labour force taxes by raising the untaxable minimum, compensating it by spending decrease in the public sector. Finally, the ongoing process must continue – negotiations with banks, increasing availability of funds for business development, development of more liberal approach to the labour force issue and energy strategy, since Latvia is unable to compete in the field of energy prices – our prices are higher.