Latvia is one of the fastest growing economies in Eastern Europe and in May 2004 the country became a full member of the European Union. The national currency is the lat which is currently pegged to the SDR (a basket of currencies). It is anticipated that Latvia will adopt the euro by 2008.

Economy:
Latvia is a small and open economy. Since regaining independence in 1991, successive governments have prioritised macroeconomic stability and a conservative public spending discipline driving the nation to restore its market economy. The country's GDP has grown steadily in recent years and, according to the Central Statistical Bureau of Latvia, increased by 6.1 per cent in 2002 and by 7.4 per cent in the first nine months of 2003.

During the past ten years major efforts have been made to stabilise and improve the business environment. This includes the development of secure legislation, a favourable tax regime (from 2004 corporate tax rates will be at 15 per cent) and efforts to reduce administrative barriers, fostering an increased transparency of both government and business activities.

Latvia is located at the centre of the three Baltic States which an ideal location for bridging the economies between the East and the West. Latvia continues developing trade with its historical partners in the Scandinavian countries and Russia. Latvia's excellent geographical location (Baltic Sea Area) and role as a transhipment centre for East-West trade have proved major strengths in attracting FDI and services sector growth. Three sea-ports ensure year round export and transit trade. Latvia is also rich in natural resources and biodiversity. Forests cover over 45 per cent of Latvia's territory. The overall environment is of a very high international standard.

The Latvian economy has undergone rigorous restructuring in a relatively short time period. Services now form the most important economic sector. Key sub-sectors include transport/transhipment, construction, wholesale and retail trade, communications and real estate management.

Infrastructure:
Latvia is in the process of integrating its transportation system into the European Union. Latvia has three major sea-ports, two of which (Ventspils and Liepaja) are ice-free. These ports offer the most competitively advantageous entry and exit points for East-West trade.

There is broadband (ICT) coverage connecting all of Latvia's major towns. Due to on-going liberalisation of the telecommunications sector new providers will enter the market increasing coverage and competition. There are many IT companies in Latvia contributing the demand and development of IT infrastructure and services in the nation.

Mobile communication services have expanded rapidly and are supplied throughout the most of the country. More than 25 per cent of the population are mobile communication users.

Latvia has a well-developed passenger air travel system connecting travellers with the Scandinavian countries, continental Europe and Russia. There are also regular passenger ferries, train service and auto transport networks connecting the country to the rest of Europe.

Workforce:
Latvia has a well-educated workforce with more than 63 per cent of the population holding secondary/vocational education (well above the EU average 46 per cent). Latvia has a strong tradition of scientific research. There are research/teaching strengths in specific hi-tech areas where the educational system has traditionally been strong including physics, modern material sciences, information technologies, biomedicine, pharmaceuticals and wood chemistry.

Labour law has been brought into line with EU standards. The labour force remains very competitive due to its flexibility, adaptability and low wages. Although the law encourages trade union activity, in practice trade unions are not very active and it appears that the appeal of trade unions is diminishing among the workforce.

Latvian labour law provides for a 40 hour work week and restricts the amount of overtime that can be worked. However, the legislation is flexible enough to allow for alternate arrangements in certain cases. Employees are provided with state social benefits including health care and pensions plans. Mandatory social insurance contributions are made by both employee and employer.

New technologies:
Latvia has developed a national policy in the information and communications sector for the time period 1999-2005. The program consists of 13 sub-parts dealing with various aspects of building an information society, which is integrated with the global information society. The main aspects of the program include accessibility of the internet (a cheaper, faster, more secure internet), investing in people and skills (general internet access skills), and meaningful use of the internet (information services and applications). As a result various programs are being implemented for the development of state, municipal and branch information systems, telecommunication networks and services and universal information service.

Business Costs:
Business costs in Latvia tend to be significantly lower in comparison to other European countries. Wages are considerably lower, with the statutory minimum salary set at Ls 80 per month (approximately €120). The average national salary is close to Ls 160 per month. Latvia has a relatively beneficial corporate tax regime. From 2004 onwards the corporate tax rate will be 15 per cent. The tax legislation also provides for certain tax relief for both small businesses as well as large investment projects. There are also three special economic zones for the purpose of developing manufacturing and export activities. Businesses operating in these zones are eligible for additional investment incentives and benefits.