In recent years, Latvia has seen a rapid development of bioeconomy, which processes biomass into various industrial materials using the biorefinery method. The latter is utilized to produce raw materials for building materials, road construction, food industry, among others. To ensure the availability of raw materials, the Coordination Council for Large and Strategically Significant Investment Projects has decided to enhance the growth for wood auctioning, with a potential investment impact of €1.1bn.
Efforts were also made to reduce the CO2 footprint by ensuring that the extraction and production of raw materials occur in close geographical proximity. For instance, investors have shown interest in storing CO2 in geological structures similar to the Incukalns gas storage facility. Latvia has several geological structures suitable for CO2 storage, which can be utilized to produce aviation fuel and other resources. The total investment could reach up to €3.6 bn.
Several potential investment projects are currently in progress within the energy sector. For instance, developing wind parks is paving the way for the creation of various green products. The ports of Liepaja and Ventspils offer suitable infrastructure and locations for green hydrogen projects, particularly in light of the Estonian-Latvian cross-border offshore wind project, ELWIND. This framework aims to a total investment impact of €3.6bn.
The war in Ukraine and the general economic downturn in several EU countries, Latvia’s main export markets, have slowed investment flows. The situation improved in the second quarter of this year, when 28 projects have been implemented, contributing €263m to the economy and creating 1,245 new jobs. Notable sectors include ICT, bioeconomy, smart energy, mobility, smart materials, and photonics. While Riga traditionally hosts the most significant number of projects, Kurzeme is also emerging as a strong contender, particularly in Liepaja and Ventspils, where favorable conditions attract investment in manufacturing.
Looking at the countries of origin, most current investment projects in Latvia are related to the Netherlands, Germany, Denmark, Finland, and the USA. The latest EY’s European Attractiveness Survey, which gathers FDI data across Europe and evaluates investors’ perceptions, indicates that despite a decline in new projects last year, 44% of foreign investors are optimistic about Latvia’s investment climate improving over the next three years.
Foreign investors are the most positive about Lithuania’s investment climate improving in the next three years: 70% think that Lithuania’s attractiveness for foreign capital will improve. 50% of foreign investors are optimistic about Estonia.
In the 36th IMD World Competitiveness Ranking, released last June, Latvia has advanced to 45th place among 67 countries, up from 51st last year. Key factors behind Latvia’s success are improvements in public administration efficiency, effective decision-making processes, and general infrastructure development.