2014 SBA Fact Sheet LATVIA. In a nutshell. About the SBA Fact Sheets 1

EN Enterprise and Industry 2014 SBA Fact Sheet LATVIA In a nutshell Latvia s economy is dominated by small and medium-sized enterprises and has proportionally fewer micro-firms than the EU as a whole. Latvian SMEs provide 78 % of employment and 72 % of value added, significantly higher than the EU averages (67 % and 58 % respectively). The Latvian businesses were hard hit by the crisis, as observed by the falls in employment and value added recorded between 2008 and 2013, of 13 % and 6 % in SMEs, and of 16 % and 5 % respectively, in large enterprises. However, mirroring the developments in other Baltic states, Latvia s SMEs started to grow again in post-crisis years at high growth rates. Their expansion continued in the first half of 2013, with a value added growth and employment growth of 6.8% and 4% respectively. This good economic performance is mainly due to growth in exports and domestic demand. Latvian SMEs continue to benefit from good framework conditions for trade, an administration that is very responsive to the needs of small businesses, and good access to state aid and public procurement opportunities. Moreover, Latvia s SBA profile show improvement across the board and performance above the EU average in all areas except environment and skills and innovation. In the latter, it still trails significantly despite recent policy efforts to improve the situation. About the SBA Fact Sheets 1 The Small Business Act for Europe (SBA) is the EU s flagship policy initiative to support small and mediumsized enterprises (SMEs). It comprises a set of policy measures organised around 10 principles ranging from entrepreneurship and responsive administration to internationalisation. To improve the governance of the SBA, the 2011 review of the Act called for better monitoring. The SBA Fact Sheets are published annually and aim to improve understanding of recent trends and national policies affecting SMEs. Enterprise and Industry

1. SMEs in Latvia basic figures Uzņēmumu skaits Nodarbināto skaits Pievienotā vērtība Latvija EU 28 Latvija EU 28 Latvija EU 28 Skaits Daļa Daļa Skaits Daļa Daļa Miljardi EUR Daļa Daļa Mikrouzņēmumi 78 200 89.1% 92.4% 160 489 27.5% 29.1% 2 21.3% 21.6% Mazi 7 905 9.0% 6.4% 153 196 26.3% 20.6% 2 24.0% 18.2% Vidēji 1 511 1.7% 1.0% 144 165 24.7% 17.2% 3 26.3% 18.3% MVU 87 616 99.8% 99.8% 457 850 78.5% 66.9% 7 71.6% 58.1% Lieli 186 0.2% 0.2% 125 713 21.5% 33.1% 3 28.4% 41.9% Kopā 87 802 100.0% 100.0% 583 563 100.0% 100.0% 10 100.0% 100.0% Šīs ir aplēses 2013. gadam, kuras veica DIW Econ, balstoties uz 2008. 2011. gada datiem no uzņēmējdarbības strukturālās statistikas datubāzes (Eurostat). Dati attiecas uz "uzņēmējdarbības ekonomiku", kas ietver rūpniecību, celtniecību, tirdzniecību un pakalpojumus (NACE 2. red. B J, L, M un N sadaļas), bet tie neattiecas uz uzņēmumiem lauksaimniecības, mežsaimniecības, zivsaimniecības nozarē vai ārpustirgus pakalpojumiem, piemēram, izglītību un veselības aprūpi. Eurostat datu izmantošanas priekšrocība ir tāda, ka dažādu valstu statistika ir saskaņota un savstarpēji salīdzināma. Trūkums ir tāds, ka dažu valstu gadījumā šie dati atšķiras no valsts iestāžu publicētajiem datiem. SMEs are of great importance to Latvia s business economy as they provide 78 % of employment and 72 % of value added, significantly higher than the EU averages (67 % and 58 % respectively). Latvia has proportionally fewer micro-firms and more SMEs than the EU as a whole. SMEs are more prevalent in wholesale and retail trade and transportation and less common in accommodation, food services and professional activities. The Latvian economy was severely hit by the economic crisis. From 2008 to 2009 GDP shrank by 17.7 %, the biggest drop as compared to any western European country. However, in 2010 and 2011, mirroring the development in the other Baltic states, Latvia s GDP started to increase again at very high growth rates of about 5 % 2. In the first half of 2013, the Latvian economy continued its growth and GDP was 4.1 % higher than in the same period of the previous year. This good economic performance is mainly due to growth in exports and domestic demand 3. Nevertheless, GDP in 2013 is still 9 % lower than it was in the pre-crisis year 2007 4. Not surprisingly, the whole business economy suffered from the crisis, as can be seen in the falls in employment and value added recorded between 2008 and 2013 in SMEs by 13 % and 6 %, respectively, and in large enterprises (LEs) by 16 % and 5 %. Yet SMEs have caught up remarkably since 2009, with growth rates in value added of 45 %. In terms of the performance of individual sectors, construction stands out for its big drop in value added and employment between 2008 and 2013 (SMEs: - 26 % for both; large firms: -55 % and -51%, respectively). While SMEs show signs of recovery since 2009, with both indicators recording increases (of 74 % and 13 %, respectively), large firms performance remained negative (-34% and -28 %, respectively). SMEs better showing can be explained by the type of work they do. SMEs mainly focus on the construction itself and do small projects which allow them to retain a high degree of flexibility and adapt swiftly to changes. By contrast, a few large firms operate mainly in civil engineering where a bigger and more qualified workforce is required and adjustment to new economic situations is slower. 5 The rapid recovery from the crisis applies to SMEs in all sectors. The highest growth rates in value added have been in manufacturing (up 50 %) and in wholesale and retail trade (53 %). This was mainly due to exports. Both sectors accounted for the highest export levels within the EU in 2010, together comprising 92 % of the total export volume. This strong position encouraged SMEs to expand to increase exports and their competitive advantage further. 6 The fast recovery is also reflected in the development of Latvia s business demography. The number of business registrations increased steadily in 2011. This was mainly due to an option introduced in 2010 allowing new companies to register with a capital share of 1 Lat (EUR 1.41) instead of the 2000 Lats (EUR 2 857) required previously. Following this 2014 SBA Fact Sheet Latvia 2

SME trends in Latvia 11 measure, 18 045 new businesses were registered in 2011 7, 16 891 in 2012 and 16 365 in 2013. Company liquidations peaked in 2010 at 8 853 and then dropped sharply the following year to 3 921. This decline was due to the new insolvency law which came into force on 1 November 2010. The law focuses on rescuing viable businesses and eliminating ineffective ones. In 2012 and 2013 the numbers of firms liquidated, at 4 308 and 4 152 respectively, 8 remained far below the levels seen before the new law was introduced. Most of the new companies are in accounting, bookkeeping and auditing services, tax advice, business and management consulting and construction. 9 In line with the recent trend, the Latvian economy is expected to keep growing, but at a moderate pace. For 2014, most Latvian SMEs expect their turnover to increase modestly by up to 5 %, while 13 % are more optimistic and see up to 30 % growth and another 13 % expect a fall of up to 5 %. Investment and innovation activity is expected to remain modest as well, and primarily concentrated among companies focused on the domestic market. Growth in 2014 will continue in sectors of national economic importance such as sales and construction as well as the processing industry. In the coming quarters manufacturing and the trade sector are expected to become the leading drivers of growth again. 10 2014 SBA Fact Sheet Latvia 3

2. Latvia s SBA profile Latvia s SBA profile shows improvements across the board and performance above the EU average in all areas except environment and skills and innovation. In the latter, it still trails significantly behind the average despite recent policy efforts to improve the situation. Latvia has not adopted a specific strategy to implement the Small Business Act for Europe, but there have been many different strategic papers focusing on specific industries. The Action Plan for Business Environment Improvement is the main policy planning document to improve the business environment. It aims to create an attractive business environment based on well-designed systemic reforms to ensure the transparency, simplicity and coherence of the legislative process, as well as to work only on regulations that would not impede businesses development cycles. The Action Plan has been drawn up annually since 1999 and approved by the Cabinet of Ministers. Implementation of SBA policy has improved since the SBA was adopted in 2008. Every year the government has come up with measures to help entrepreneurs, including SMEs, to develop their businesses. The greatest advances over this period have been made in access to finance, the think small first principle and second chance. While there were previously almost no programmes giving entrepreneurs, especially SMEs, access to finance, there are now many different instruments for entrepreneurs to start and develop their businesses. In 2013 specifically, the most substantial progress was made in entrepreneurship, think small first and skills and innovation. The priorities for 2014 are to design rules according to think small first, take further steps to lighten administrative burdens, and make it easier for SMEs to access finance. Action on finance will need to take into account the EU s funding framework for 2014-20 and the need to revise support programmes for entrepreneurship. This means that existing programmes need to be improved and new ones designed to help the establishment and development of SMEs, as well as liquidation procedures. Latvia is striving to improve its business environment but faces challenges in completing all the initiatives planned and expected on time. Several laws are continually being improved and further developed, such as the insolvency law, which makes the business environment more attractive to new entrepreneurs by giving entrepreneurs the possibility of saving their business. 2014 SBA Fact Sheet Latvia 4

Latvia s SBA performance: current situation and development between 2008 and 2014 12 The think small first principle The think small first principle aims to ensure that SME concerns are integrated into mainstream EU and national legislation and policies. Policy makers at all levels are expected to consult small businesses and keep their needs and limitations in mind during all phases of legislative and policy processes. The aim is to ensure that regulations do not unnecessarily or excessively burden SMEs or hamper their competitiveness. In Latvia, the principle has been taken into account to some extent and recent years have seen some progress in this area. The think small first initiative has helped micro-enterprises by promoting the creation of a special tax rate and simplified tax accounting system. In 2011, amendments to the Value Added Tax law became effective which target smaller companies by allowing the threshold for VAT registration to be gradually increased. Moreover, a micro-credit programme brought information about launching a business together in one place, which has helped greatly in promoting SMEs across the country. The role of Latvia s SME Envoy is very important as it is an ambassador of the Small Business Act and helps to ensure the SBA is implemented in the most effective way possible. The Envoy assesses whether EU legislation on SMEs is properly applied in Latvia, and provides business-friendly policies at national, regional and local level. 2014 SBA Fact Sheet Latvia 5

Entrepreneurship Early stage entrepreneurial activity (%); 2013; Latvia: 13.3; EU avg: 8 Early stage entrepreneurial activity for female population (%); 2013; Latvia: 10; EU avg: 6 Established business ownership rate (%); 2013; Latvia: 8.8; EU avg: 6.4 Opportunity-driven entrepreneurial activity (%); 2013; Latvia: 52.7; EU avg: 47 Entrepreneurial intentions (percentage of adults who intend to start a business within 3 years); 2013; Latvia: 22.7; EU avg: 13.5 Degree to which school education helped develop an entrepreneurial attitude; 2012; Latvia: 55; EU avg: 50 Entrepreneurship as a desirable career choice (%); 2013; Latvia: 61.4; EU avg: 56.9 High status given to successful entrepreneurship (%); 2013; Latvia: 59.5; EU avg: 65.5 Media attention given to entrepreneurship (%); 2013; Latvia: 58.6; EU avg: 49 In entrepreneurship, Latvia does much better than its EU peers and has registered steady progress in recent years. Latvia has a high number both of startups and of established businesses. The rates of both early-stage entrepreneurial activity and established business ownership are thus above the EU average. The percentage of people planning to start their own business in the near future, at almost 23 %, is among the highest in the EU despite the potential obstacles and challenges they are likely to face. This high level is probably the result of a strong entrepreneurial culture in which entrepreneurs are the subject of comparatively frequent positive media reports. In addition, more than half of Latvians (55 %, against an EU average of 50 %) believe that school education is successful in developing a sense of initiative and action, qualities characteristic of entrepreneurs. Also notable is that proportionally more Latvians claim to be motivated to become entrepreneurs by a market opportunity they have identified and a desire to be independent and increase their income. The remaining 47 % are pushed into starting a business by a lack of better alternatives for earning a living. No major policy initiatives were reported in this area in 2013. 2014 SBA Fact Sheet Latvia 6

Second chance Time to resolve insolvency (in years); 2014; Latvia: 1.5; EU avg: 2 Cost of resolving insolvency (cost of recovering debt as percentage of the debtor's estate); 2014; Latvia: 10; EU avg: 10.29 Degree of support for a second chance (%); 2012; Latvia: 87; EU avg: 82 Fear of failure rate (%); 2013; Latvia: 41.6; EU avg: 39.8 Latvia s overall performance on giving failed entrepreneurs a second chance is slightly better than the EU average. The indicators on second chance are mixed but reflect a relatively favourable environment for those starting again. Entrepreneurs who have failed and need to go through insolvency procedures face shorter than average procedures of about 1.5 years, compared with 2 years in the EU as a whole, although the cost (10 % of the debtor s estate) is similar to the EU average. Latvians are more supportive than the average EU citizen of giving unsuccessful entrepreneurs a second chance. In principle, Latvia has no legal restrictions on running a new business after a business failure: restrictions only exist in some professions (e.g. for doctors and lawyers) and for those convicted of a criminal offence, e.g. tax evasion. An important measure adopted in 2013 in this area is the new insolvency law (updating the law from 2010). This aims to protect as many people and organisations as possible that have suffered due to the crisis, and to relieve their debt obligations. 2014 SBA Fact Sheet Latvia 7

Responsive administration Time to start a business (in calendar days); 2013; Latvia: 2; EU avg: 4.2 Cost to start a business (in euros); 2013; Latvia: 34.5; EU avg: 318 Paid-in minimum capital (percentage of income per capita); 2014; Latvia: 0; EU avg: 10.42 Time required to transfer property (in calendar days); 2014; Latvia: 18; EU avg: 27.7 Cost required to transfer property (percentage of property value); 2014; Latvia: 2; EU avg: 4.7 Number of tax payments per year; 2014; Latvia: 7; EU avg: 12.54 Time it takes to pay taxes (hours per year); 2014; Latvia: 264; EU avg: 192.57 Cost of enforcing contracts (percentage of claim); 2014; Latvia: 23.1; EU avg: 21.49 Fast-changing legislation and policies are a problem for doing business (percentage of respondents who agree); 2013; Latvia: 63; EU avg: 70 The complexity of administrative procedures is a problem for doing business (percentage of respondents who agree); 2013; Latvia: 42; EU avg: 63 SMEs interacting online with public authorities (%); 2013; Latvia: 92.43; EU avg: 87.58 Licenses and permits systems (1=lowest level of complexity, 26=highest level of complexity); 2011; Latvia: 11.2; EU avg: 15.77 Burden of government regulations (1=burdensome, 7=not burdensome); 2013; Latvia: 3.4; EU avg: 3.2 Out of all SBA areas, Latvia scores the highest in responsive administration, thanks to having a modern public administration that reacts well to the needs of businesses. Latvia does better than the EU average on all indicators in this area with two exceptions: paying taxes takes 264 hours per year, against 192 hours in the EU as a whole, while the cost of enforcing contracts in Latvia, at 23 % of the value of the claim, is slightly higher than the 21.5 % EU average. It is now possible to start a business in Latvia in two days and at a cost of EUR 34 with no capital requirements. The day-to-day running of a business is typically also easier than elsewhere in the EU. For example, transferring property is less bureaucratic and costly, as are other operations relating to day-today business, so the picture is generally positive. On the policy side, the Concept for Improvement of the Public Service System sets out common principles and obligations on delivery of public services, limiting the administrative burden and improving the business environment. The Action Plan to improve the business environment aims to create an attractive business environment based on well-designed systemic reforms to ensure the transparency, simplicity and coherence of the legislative process. The government has also adopted a new law that will govern almost all construction-related processes. The new regulation sets out the principles of construction, such as engineering quality, sustainable construction and transparency: the construction process should be sufficiently open and the public informed of construction plans and relevant decisions. 2014 SBA Fact Sheet Latvia 8

State aid and public procurement Percentage SMEs account for in the total value of public contracts awarded (%); 2013; Latvia: 74; EU avg: 29 Percentage of businesses participating in public tenders (%); 2013; Latvia: 51; EU avg: 37 Average delay in payments from public authorities (in days); 2013; Latvia: 17; EU avg: 28.05 Percentage of businesses submitting proposals in a public electronic tender system (e-procurement) (%); 2013; Latvia: 18.02; EU avg: 12.85 Latvia s performance in this area is also very good, and shows that SMEs continue to enjoy comparatively easy access to public contracts. SMEs share of the value of public procurement contracts reached 71 % in 2013, one of the highest in the EU and more than twice the EU average. Similarly, the proportion of Latvian businesses taking part in public tenders, at 51 %, is very high, suggesting that Latvian SMEs are more successful in securing public contracts than their EU peers. At the same time, it should be noted that the amount of Access to finance public works and services performed by SMEs is probably higher than the figures show: in many cases small businesses act as subcontractors to larger firms but the value of these agreements is not quantified in the statistics. Latvian SMEs also make better use of e- procurement services than their EU counterparts, and benefit from less lengthy payment delays from public authorities. No major policy initiatives were reported in this area in 2013. Rejected loan applications and unacceptable loan offers (percentage of loan applications by SMEs); 2013; Latvia: 27.3; EU avg: 14.4 Access to public financial support including guarantees (percentage of respondents that indicated a deterioration); 2013; Latvia: 3.6; EU avg: 17.3 Willingness of banks to provide a loan (percentage of respondents that indicated a deterioration); 2013; Latvia: 5.6; EU avg: 24.6 Cost of borrowing for small loans relative to large loans (%); 2013; Latvia: 17.88; EU avg: 23.82 Total amount of time it takes to get paid (days); 2013; Latvia: 34.33; EU avg: 50.76 Bad debt loss (percentage of total turnover); 2013; Latvia: 5; EU avg: 3.83 Strength of legal rights index (0-10); 2014; Latvia: 10; EU avg: 6.82 2014 SBA Fact Sheet Latvia 9

Latvia scores higher than average in access to finance. It offers SMEs an attractive financing environment in almost all areas, with better-thanaverage access to public financial support including guarantees, an increasing willingness of banks to provide loans, and a low differential in interest rates between large and small loans. Despite this, 27 % Latvian SMEs reported in 2013 that their loan applications were rejected by banks or the interest rates offered were too high. Compared with the EU as a whole, SMEs in Latvia have greater cash-flow difficulties due to the loss of payments from bankrupt customers (5 % of total turnover, against the EU average of almost 4 %). However, the time it takes for customers to pay for goods or services delivered at 34 days is below the EU average of 50. One of the most successful programmes for supporting start-ups is one implemented by Mortgage and Land Bank of Latvia (renamed Altum from 2014), under which loans for start-ups are combined with training in entrepreneurship and management skills and with consultancy advice on how to implement business plans. By the end of 2013 around 3 600 people had had consultations or training under the programme, more than 2 100 business plans had been submitted for loan applications and 1 161 loans have been issued to people starting business. A state aid programme to provide loans for start-ups and microcredits is also planned for the 2014-20 period. Single market SMEs with intra-eu exports of goods (percentage of SMEs in industry); 2011; Latvia: 28.24; EU avg: 13.89 SMEs with intra-eu imports of goods (percentage of SMEs in industry); 2011; Latvia: 40.56; EU avg: 17.47 Public contracts secured abroad by SMEs (percentage of total value of public contracts); 2013; Latvia: 2.9; EU avg: 2.6 Number of single market directives not yet transposed; 2013; Latvia: 4; EU avg: 8.69 Average transposition delay for overdue directives (in months); 2013; Latvia: 4.4; EU avg: 8 Number of pending infringement proceedings; 2013; Latvia: 9; EU avg: 30 Latvia scores very well in this area. SMEs in manufacturing are much more inclined than their EU peers to trade in goods either imports or exports with other EU countries. Latvia is also faster in turning internal market legislation into national law. It has fewer directives awaiting transposition, shorter accumulated delays and a lower number of infringement cases where the transposition is presumed not to comply with the directive itself or the single market rules. No major policy initiatives were reported in this area in 2013. 2014 SBA Fact Sheet Latvia 10

Skills & innovation Percentage of SMEs introducing product or process innovations; 2010; Latvia: 15.78; EU avg: 38.44 Percentage of SMEs introducing marketing or organisational innovations ; 2010; Latvia: 22.68; EU avg: 40.3 Percentage of SMEs innovating in-house; 2008; Latvia: 14.44; EU avg: 31.83 Percentage of innovative SMEs collaborating with others; 2010; Latvia: 4.19; EU avg: 11.69 Sales of new-to-market and new-to-firm innovations (percentage of turnover); 2010; Latvia: 3.14; EU avg: 14.37 Percentage of SMEs selling online; 2013; Latvia: 7.36; EU avg: 13.87 Percentage of SMEs purchasing online; 2013; Latvia: 12.4; EU avg: 26.31 Turnover from e-commerce; 2013; Latvia: 7.73; EU avg: 13.98 Percentage of all enterprises that train their employees; 2010; Latvia: 40; EU avg: 66 Of the 10 SBA areas, skills and innovation is where Latvia has its lowest score, lagging very far behind the EU average. Lack of innovation and a shortage of specialised skilled labour are the key challenges to Latvia s competitiveness. All core indicators relating to innovation are below the EU average, some of them significantly so. Latvian SMEs are overall less likely than their EU peers to introduce innovations in products or processes, collaborate with each other or innovate in-house. Their involvement in online commerce is also below average, though less markedly so. On the policy side, the Investment and Development Agency of Latvia has renewed for the third time the measure financing companies purchase of equipment and product development by SMEs. The agency has also announced a measure to promote development of new products by micro, small and medium-sized enterprises. It covers goods and services that are completely new or have improved functional characteristics and intended use, and which are new to the company s target market. 2014 SBA Fact Sheet Latvia 11

Environment Percentage of SMEs that have taken resource-efficiency measures; 2013; Latvia: 89; EU avg: 95 Percentage of SMEs that have benefited from public support measures for their resource-efficiency actions; 2013; Latvia: 57; EU avg: 35 Percentage of SMEs that offer green products or services; 2013; Latvia: 19; EU avg: 26 Percentage of SMEs with a turnover share of more than 50% generated by green products or services; 2013; Latvia: 23; EU avg: 22 Percentage of SMEs that have benefited from public support measures for their production of green products; 2013; Latvia: 43; EU avg: 26 Latvia s overall performance in this area is on a par with the EU average. Latvian SMEs are, however, less likely than their EU counterparts to take resourceefficiency measures or offer green products and services, despite higher-than-average use of public support measures for their production. No major policy initiatives were reported in this area in 2013. Internationalisation SMEs with extra-eu exports of goods (percentage of SMEs in industry); 2011; Latvia: 10.22; EU avg: 9.68 SMEs with extra-eu imports of goods (percentage of SMEs in industry); 2011; Latvia: 11.45; EU avg: 8.18 Cost required to import (in USD); 2014; Latvia: 801; EU avg: 1069.89 Time required to import (in days); 2014; Latvia: 11; EU avg: 10.71 Number of documents required to import; 2014; Latvia: 5; EU avg: 4.68 Cost required to export (in USD); 2014; Latvia: 600; EU avg: 1034.64 Time required to export (in days); 2014; Latvia: 10; EU avg: 11.82 Number of documents required to export; 2014; Latvia: 5; EU avg: 4.25 Latvia generally offers generally good conditions for trade with third countries. It performs very well in terms of the costs it imposes on exporters and importers: only $ 600 and $ 801 respectively, well below the EU averages of $ 1034 and $ 1069. On the other hand, more documents are required from businesses trading in non-eu markets. Latvia is very close to the EU average on the time it takes to import or export goods and the proportion of SMEs involved in trade outside the EU. Exports of goods and services have grown very rapidly over the past three years and have become the main driver of Latvia s growth. Export volumes in 2012 were almost 20 % higher than pre-crisis levels. 2014 SBA Fact Sheet Latvia 12

However, it is projected that the increase will slow. 13 Indeed, exports moderated in the first half of 2013, with a rise of only 2.9 % against the previous year. One reason is that production volumes lagged 2012 levels. However, the weaker dynamism of exports in 2013 was partly offset by growing domestic demand. 14 The Latvian export market is very diversified and has become much more so in the past couple of years. The food industry, for instance, has grown in recent years from 6 % to 15 % of exports, perhaps thanks to EU membership giving Latvia access to EU food markets. Exports of machinery and electrical equipment have also grown, from a 5 % share to almost 13 %. 15 Today Latvia s main exports are timber, food processing, metallurgy, mechanical engineering and electrical equipment, as well as chemical and pharmaceutical products. 16 On the policy side, a programme financing participation in fairs and exhibitions for companies involved in internationalization has been renewed in 2013. 2014 SBA Fact Sheet Latvia 13

3. Good practice Below is an example of an interesting policy practice from Latvia, to show what governments can do to support SMEs: The Business Environment Action Plan for 2013 to 2014 The action plan was developed by the Ministry of Economics, in cooperation with business organizations and the various ministries and was adopted by the Cabinet of Ministers on the 9 th of April 2013. It includes 32 policy measures that should help Latvia will move closer in the direction of creating an excellent business environment for all its enterprises. The measures proposed focus on areas such as: - Starting a business: evaluation of the employee registration process with a view to optimizing it, reducing fees for company registration, expansion of the e-signature functionality for company registration portal www.latvija.lv, etc. - The construction process: adoption of a construction bill and development of the related amendments to the Regulations of the Cabinet of Ministers, etc. - Protecting investors: introducing a new Company Registry service; - Taxation: introducing an electronic payroll tax booklet to provide warning information on the taxpayer's counterparty suspended business activities, etc. - Registration of real estate: reducing state levies on property rights in the Land Register, etc.; - The performance of contracts: the arbitral tribunal is to adopt a draft law to take steps to attract additional judges to ease the burden on courts and speed up the savings of the proceedings, to prepare amendments to the procedural laws to ensure that the electronic document exchange and e-services, etc. http://www.em.gov.lv/em/2nd/?id=33163&cat=621 Important remarks The Small Business Act (SBA) Fact Sheets are produced by DG Enterprise and Industry as part of the SME Performance Review (SPR), which is its main vehicle for economic analysis of SME issues. They combine the latest available statistical and policy information for the 28 EU Member States and nine non-eu countries which also contribute to the EU s Competitiveness and Innovation Framework Programme (CIP). Produced annually, the Fact Sheets help to organise the available information to facilitate SME policy assessments and monitor SBA implementation. They take stock and record progress. They are not an assessment of Member States policies but should be regarded as an additional source of information designed to improve evidencebased policy-making. For example, the Fact Sheets cite only those policy measures deemed relevant by local SME policy experts. They do not, and cannot, reflect all measures taken by the government over the reference period. More policy information can be found on a database accessible from the SPR website. Please also see the end notes overleaf. 2014 SBA Fact Sheet Latvia 14

For more information SME Performance Review: http://ec.europa.eu/enterprise/policies/sme/facts-figures-analysis/performance-review/index_en.htm Small Business Act: http://ec.europa.eu/enterprise/policies/sme/small-business-act/index_en.htm The European Small Business Portal: http://ec.europa.eu/small-business/index_en.htm Entr-SPR@ec.europa.eu 1 The 2014 SBA Fact Sheets benefited substantially from input from the European Commission s Joint Research Centre (JRC) in Ispra, Italy. The JRC made major improvements to the methodological approach, statistical work on the dataset and the visual presentation of the data. 2 AMECO, Annual Macroeconomic Database from the European Commission: http://ec.europa.eu/economy_finance/ameco/user/serie/selectserie.cfm; accessed: 25.02.2014. 3 http://www.swedbank.lv/files/analitiskie_materiali/swedbank_ekonomikas_apskati/swedbank_ekonomikas_ apskats_2013_04_lv.pdf; accessed: 27.02.2014. 4 http://www.em.gov.lv/images/modules/items/tsdep/makro_situac_valsti/emzino_22_151013.pdf; accessed: 27.02.2014. 5 http://www.viaa.gov.lv/files/free/12/14912/apraksts_buvnieciba_final_07052012.pdf (page 16); accessed: 23.03.2014. & http://buvlaukums.lv/en/news/article/lursoft-petijums-liecina-ka-buvniecibas-nozare-atk-1971/; accessed: 23.03.2014. 6 http://ec.europa.eu/enterprise/policies/sme/facts-figures-analysis/performance-review/files/countriessheets/2013/latvia_en.pdf; accessed: 23.03.2014 & http://www.em.gov.lv/images/modules/items/tsdep/zin_2012_2/2012_dec.pdf; accessed: 23.03.2014. 7 http://www.lursoft.lv/press/2013/05/30/lursoft-petijums-mikro-un-mazie-uznemumi-latvijas-ekonomikaienem-aizvien-nozimigaku-lomu; accessed: 23.03.2014. 8 http://www.lursoft.lv/lursoft-statistika/lr-uznemumu-registra-registreto-subjektu-dibinasanas-unlikvidesanas-dinamika&id=3, accessed: 27.02.2014; accessed: 27.02.2014. 9 http://www.lursoft.lv/press/2013/08/12/veiksmigakie-uznemumi-kuri-darbibu-uzsakusi-ka-mazkapitala-siaapgroza-vairak-neka-9 milj; accessed: 27.02.2014. 10 http://www.makroekonomika.lv/latvijas-bankas-prognozes; accessed: 27.02.2014. 11 The three graphs below present the trend over time for the variables. They consist of index values for 2008 to 2015, with the base year 2008 set at a value of 100. As from 2012, the graphs show estimates of the development over time, produced by DIW Econ on the basis of 2008 11 figures from the Structural Business Statistics Database (Eurostat). The data cover the business economy, which includes industry, construction, trade and services (NACE Rev. 2 sections B to J, L, M and N). They do not cover enterprises in the financial sector, agriculture, forestry and fisheries or largely non-market service sectors such as education and health. A detailed methodology can be consulted at: http://ec.europa.eu/enterprise/policies/sme/facts-figuresanalysis/performance-review/index_en.htm. 2014 SBA Fact Sheet Latvia 15

12 The quadrant chart combines two sets of information: first, it shows the status quo performance based on data for the latest available years. This information is plotted along the X-axis measured in standard deviations of the simple, non-weighted arithmetical average for EU-27. The vertical corridor marked by the dotted lines defines the EU average. Secondly, it reveals progress over time, i.e. the average annual growth rates for 2008-13. The growth rates are measured against the individual indicators which make up the SBA area averages. Hence, the location of a particular SBA area average in any of the four quadrants provides information not only about where the country is located in this SBA area relative to the rest of the EU at a given point in time, but also about the extent of progress made in 2008-13. 13 http://balticexport.com/?article=latvijas-areja-tirdznieciba&lang=lv; accessed: 27.02.2014. 14 http://www.em.gov.lv/images/modules/items/tsdep/makro_situac_valsti/emzino_22_151013.pdf; accessed: 27.02.2014. 15 http://www.makroekonomika.lv/sites/default/files/2011_02_22_urutkastelatvijas_eksporta_attistibas_tendences_0.pdf; accessed: 27.02.2014. 16 http://www.bank.lv/presei/tautsaimniecibas-attistiba/latvijas-eksporta-spozums-un-posts; accessed: 27.02.2014. 2014 SBA Fact Sheet Latvia 16