BUSINESS CLIMATE SURVEY 215 THE BALTIC STATES May-June 215 Ansis Murnieks Business Sweden in Latvia
INTRODUCTION This document is not complete without oral comments of the research team from Business Sweden. Any copying or commenting is prohibited without a written permission from Business Sweden. The Business Climate Survey 215 was conducted by Business Sweden in cooperation with Embassies of Sweden in Riga, Tallinn and Vilnius, Handelsbanken, the Law firm SORAINEN and Investment and Development Agency of Latvia. The study aims to present the perception of the business climate in the Baltic states among companies with Swedish and Nordic capital, identify areas for improvement and outline future expectations. The survey was conducted by using closed-ended questions, yet the majority of questions allowed respondents to write comments and recommendations. The results are based on answers of 17 respondents from approximately 5 executives who were identified as potential respondents pool. Sweden is by far the largest investor in the Baltic States accounting for 26% of FDI in Lithuania and Estonia, 21% in Latvia. The study was conducted by Business Sweden during March April 215. BUSINESS SWEDEN 2
THE AVERAGE RESPONDENT IS A 49 YEARS OLD SWEDISH MANAGER OR BUSINESS OWNER RESPONDENTS POSITION, % RESPONDENTS NATIONALITY, % Other Partner Member of the board Managing director Other expat Swedish Owner RESPONDENTS GENDER, % RESPONDENTS AGE (AVERAGE AGE IS 49) Female Male BUSINESS SWEDEN 3
REPRESENTED COMPANIES ARE WELL SPREAD ACROSS INDUSTRIES, SIZES AND YEARS OF ESTABLISHMENT YEAR OF COMPANY ESTABLISHMENT COMPANY TYPE, % Other Public Limited Company Private Limited Company AREA OF OPERATIONS, % ANNUAL TURNOVER Other Trade Services Production BUSINESS SWEDEN 4
BALTIC STATES A GOOD PLACE TO LIVE IN AND TO DO BUSINESS WITH PLEASE EVALUATE THE QUALITY OF LIFE IN THE BALTIC STATES? GENERALLY, IS ESTONIA, LATVIA AND LITHUANIA A GOOD PLACE TO DO BUSINESS? in 212 in 215 expected in 218 BUSINESS SWEDEN 5
COMPANIES ARE MORE PROFITABLE THAN THREE YEARS AGO AND EXPECT TO IMPROVE FURTHER YOUR COMPANY IN LITHUANIA, LATVIA OR ESTONIA GENERATES: in 212 in 215 expected in 218 WHAT PART OF THE TOTAL GROUP REVENUE IS FROM OPERATIONS IN THE BALTIC STATES? in 215 expected in 218 in 212 HALF OF THE RESPONDENTS HAVE ONLY A SMALL PART OF THEIR GLOBAL OPERATIONS IN THE BALTIC STATES BUSINESS SWEDEN 6
OVERALL BUSINESS CLIMATE IS IMPROVING AND FUTURE EXPECTATIONS ARE POSITIVE GENERALLY, IS LATVIA, LITHUANIA, AND ESTONIA A GOOD PLACE TO DO BUSINESS? 212 215 218 The best 1% in Estonia 2% in Latvia 3% in Lithuania The best 5% 2% % The best 12% 5% 3% Good 76 59 66 Good 55 74 67 Good 67 72 83 Not good or bad 1 32 23 Not good or bad 19 21 45 Not good or bad 19 16 14 Poor 4 5 8 Poor 2 9 in Latvia Poor 2 7 in Latvia Very bad 2 in Latvia Very bad Very bad BUSINESS SWEDEN 7
SWEDISH COMPANIES PLAN TO CONTINUE TO INVEST ARE YOU PLANNING NEW INVESTMENTS? TO WHAT EXTENT HAVE THE RECENT GEOPOLITICAL DEVELOPMENTS AFFECTED YOUR INVESTMENT DECISIONS IN THE BALTIC STATES? Yes No 66% We made very big investments last year, but we will continue to invest and grow in Latvia We have not changed our plans for 215-216, but this can change rapidly depending on the geopolitical situation. RECENT GEOPOLITICAL EVENTS HAVE HAD LITTLE OR SOME EFFECT FOR THE AVERAGE RESPONDENT S INVESTMENT DECISIONS BUSINESS SWEDEN 8
SWEDISH & NORDIC FIRMS ARE VERY WELL PERCEIVED POSITIONING AS A NORDIC COMPANY CAN BE UTILIZED FOR POSITIVE BRANDING HOW ARE YOU PERCEIVED IN THE BALTICS AS A REPRESENTATIVE OF A NORDIC COMPANY? NOT WELL or BADLY I think quite well in general. When it comes to suppliers we sometimes feel like we are looked upon like a big moneybag. BUSINESS SWEDEN 9
FINDING A LOCAL PARTNER IS NEITHER EASY NOR DIFFICULT, BUT GRADUALLY IMPROVING HOW EASY OR DIFFICULT IS IT TO FIND A RELIABLE BUSINESS PARTNER? in 212 in 215 expected in 218 The country is adapting and developing all the time and companies are becoming more focused on long term relations rather than quick business opportunities. It was harder 5-6 years ago but can still be better. Companies must think 3-4-5 years ahead not only about tomorrow. BUSINESS SWEDEN 1
SWEDISH SPEAKING STAFF IS GENERALLY NOT CRUCIAL FOR MOST OPERATIONS IS HIRING OF SWEDISH SPEAKING STAFF CRUCIAL FOR YOUR OPERATIONS IN THE BALTIC STATES? in 215* * NO HISTORIC COMPARISON IS AVAILABLE, BECAUSE IT IS THE FIRST TIME WE HAVE ASKED THE QUESTION, BUSINESS SWEDEN 11
BALTIC STATES OFFER BALANCED SALARY LEVEL AND PRODUCTIVITY IN YOUR OPINION, HOW ARE SALARIES COMPARED TO THE PRODUCTIVITY? 212 215 Very low salary level compared to high productivity 2% in Estonia 4% in Latvia 3% in Lithuania Very low salary level compared to high productivity % in Estonia 5% in Latvia 4% in Lithuania Low salary level compared to high productivity 39 36 4 Low salary level compared to high productivity 24 29 56 Well-balanced salary level and productivity 49 45 49 Well-balanced salary level and productivity 41 52 53 High salary level and low productivity 7 8 13 High salary level and low productivity 13 24 Very high salary level and low productivity 2 2 Very high salary level and low productivity ESTONIA LEANED TOWARDS HIGHER SALARY FOR LESS PRODUCTIVITY LEVEL, WHILE LITHUANIA TOWARDS LOWER SALARY FOR HIGHER PRODUCTIVITY. BUSINESS SWEDEN 12
SALES RELATED POSITIONS ARE HARDER TO FILL THAN ADMINISTRATIVE OR PRODUCTION IN YOUR OPINION, HOW IS THE AVAILABILITY OF COMPETENT LOCAL STAFF IN REGARD TO JOB POSITIONS: Highly educated people are available from the universities. Skilled people and especially young are keen on leaving to Western Europe. BUSINESS SWEDEN 13
STAFF IS SEEN AS HARDWORKING AND EASY TO TRAIN, BUT SOMETIMES LACK INITIATIVE AND CREATIVITY IS THE BALTIC STAFF: HARDWORKING, EASY TO TRAIN, LOYAL, CREATIVE, INITIATIVE? BUSINESS SWEDEN 14
ICT CONNECTIVITY IS VALUED VERY WELL ACROSS THE BALTIC STATES IN YOUR OPINION, HOW DOES THE INFRASTRUCTURE WORK IN THE BALTIC STATES IN REGARD TO MOBILE TELEPHONY, INTERNET, ELECTRICITY AND HEATING? Very well Well Not well BUSINESS SWEDEN 15
BALTIC STATES HAVE DIFFERENT ADVANTAGES IN TRANSPORT INFRASTRUCTURE IN YOUR OPINION, HOW DOES INFRASTRUCTURE WORK IN THE BALTIC STATES IN REGARDS TO AVIATION, SEA ROUTES, ROADS AND RAILROADS? Latvia 7% 74 7 Estonia 43% Lithuania 44% 55 36 4 27 27 2 17 Well Badly 14 1 2 6 12 7 26 36 4 33 35 51 Aviation Sea routes Roads Railroads LATVIA LEADS IN AIR CONNECTIONS, ESTONIA SEA ROUTES, LITHUANIA ROADS. BUSINESS SWEDEN 16
RESPONDENTS FIND ACCESS TO CAPITAL SOMEWHAT DIFFICULT ACCESS TO THE CAPITAL / FUNDS IN THE BALTIC STATES IS: NOT EASY or DIFFICULT RESPONDENTS STATE THAT THEY MOSTLY USE MOTHER COMPANY FUNDS OR BANK FUNDING BUSINESS SWEDEN 17
TAX SYSTEM: RESPONDENTS IN LATVIA SAY THAT SITUATION HAS IMPROVED DURING LAST THREE YEARS TAXATION SYSTEM IN THE BALTIC STATES IS: 212 215 218 The best % % 21% in Estonia in Latvia in Lithuania The best 3% 4% 26% The best 11% 7% 29% Good 32 27 57 Good 57 5 48 Good 38 41 5 Not good or bad 19 48 54 Not good or bad 17 33 33 Not good or bad 21 41 41 Poor 2 11 14 Poor 15 in Latvia 11 Poor 11 in Latvia 11 Very bad 9 in Latvia 5 Very bad 4 in Lithuania Very bad BUSINESS SWEDEN 18
PAYMENT TERMS ARE GENERALLY WELL FOLLOWED BOTH PRIVATE AND PUBLIC SECTOR IMPROVED SIGNIFICANTLY HOW ARE PAYMENT TERMS FOLLOWED IN THE BALTIC STATES BY PRIVATE COMPANIES? HOW ARE PAYMENT TERMS FOLLOWED IN THE BALTIC STATES BY GOVERNMENTAL BODIES? in 212 in 215 +8% in 212 in 215 +6% -4% -9% There is room for improvement, however, generally better than in many other EU countries. Public sector institutions are bad debtors in general. BUSINESS SWEDEN 19
ALSO OVERALL LEGAL ENVIRONMENT IS PERCEIVED TO HAVE IMPROVED IN THE BALTIC STATES DO YOU FIND THE LOCAL LEGAL ENVIRONMENT FAVORABLE TOWARDS YOUR BUSINESS? 212 215 218 14% in Estonia To very high extent 4% in Latvia 3% in Lithuania To very high extent 12% % 4% To very high extent 15% 2% 4% To high extent 25 22 45 To high extent 3 38 26 To high extent 32 39 35 To some extent 31 46 51 To some extent 47 48 41 To some extent 41 44 46 To little extent 7 19 19 To little extent 5 1 26 To little extent 5 1 15 Legislation is unfavorable for our operations 2 7 5 Legislation is unfavorable for our operations 7 5 4 Legislation is unfavorable for our operations 7 5 BUSINESS SWEDEN 2
RESPONDENTS ACKNOWLEDGE THAT CORRUPTION PERCEPTION HAS DECREASED DURING LAST YEARS HAVE YOU EXPERIENCED CORRUPTION IN ANY WAY WHILE DOING BUSINESS IN THE BALTICS DURING THE LAST THREE YEARS? 215 DO YOU ASSUME THAT YOUR COMPETITORS WON A TENDER / CONTRACT BECAUSE OF CORRUPTION MECHANISMS INVOLVED? 212 215 Estonia Lithuania Latvia Lithuania Estonia RESPONDENTS FROM LATVIA OBSERVE THE LARGEST DECREASE IN PERCEPTION OF CORRUPTION BUSINESS SWEDEN 21
PROGRESS IN DISPUTE SETTLING SYSTEM, BUT THERE IS STILL CONSIDERABLE ROOM FOR IMPROVEMENT DO YOU TRUST THE DISPUTE SETTLING SYSTEMS IN THE BALTIC STATES? 212 215 To very high extent 7% in Estonia % in Latvia % in Lithuania To very high extent 5% % 17% in Estonia To high extent 15 25 43 To high extent 2 16 24 To some extent 31 51 5 To some extent 51 48 52 To little extent 14 22 27 To little extent 5 2 32 in Lithuania No trust at all 5 7 3 No trust at all 2 8 ESTONIA LEANS TOWARDS MORE TRUST, WHILE LITHUANIA TOWARDS LESS TRUST BUSINESS SWEDEN 22
RESULT SUMMARY BALTIC STATES (1/2) INVESTMENT ENVIRONMENT, HUMAN CAPITAL AND INFRASTRUCTURE Criteria Good Moderate Bad Trend Quality of life Good place to do business Perception of Nordic companies Easiness of finding business partner Easiness of hiring of staff Salary to productivity ratio ICT infrastructure Electricity and heating Air connections Sea routes Roads Railroads BUSINESS SWEDEN 23
RESULT SUMMARY BALTIC STATES (2/2) LEGAL AND FINANCIAL ENVIRONMENT Criteria Good Moderate Bad Trend Profitability of local market Access to capital Tax system Following payment terms Favourability of legislation Easiness of establishing Following the law Corruption Trust in dispute settling system BUSINESS SWEDEN 24
BUSINESS SWEDEN PRESENT IN ALL REGIONS AND 57 MARKETS AROUND THE WORLD Business Sweden The Swedish Trade and Invest Council Merger of Exportrådet (Swedish Trade Council) and Invest Sweden in 213 Owned by the Swedish government and industry Our mission to support Swedish companies on foreign markets and attract strategic investments to Sweden Head office in Stockholm Representatives in all regions of Sweden 57 offices around the world including Baltic states with offices in Riga, Vilnius, Tallinn 8 professionals serving Swedish companies in the Baltic states BUSINESS SWEDEN 25
WE HELP SWEDISH COMPANIES TO REACH THEIR FULL INTERNATIONAL POTENTIAL Stockholm Tallinn Riga Vilnius World Trade Center, Klarabergsviadukten 7 Stockholm Embassy of Sweden, Pikk 28 EE-1555 Tallinn Estonia Kr. Barona str. 13/15 LV-111 Riga Latvia Konstitucijos av. 7 LT-938 Vilnius Lithuania +46 8 588 66 +372 665 18 +371 6 782 8 46 +37 5 212 61 55 info@business-sweden.se estland@business-sweden.se lettland@business-sweden.se litauen@business-sweden.se