Eva B.Nellemann: Investments in Agriculture Play Role of Stepchildren
Eva Branta Nellemann
CEO, business consulting company "ActusQ"
Statistics show that Latvia’s agricultural sector provides approximately one-half of GDP, and agriculture and its related sectors are also important sources of exports for Latvia – more than one-half of our country’s exports come from those sectors. And yet agriculture seems to be in the role of a stepchild if we are talking about money and investments in the sector. The newspaper Diena conducted a journalistic experiment to see how hard it is for potential investors to receive information about the opportunity to invest in a pork farm (April 26), and the article precisely reflected the existing situation – hardly anyone thinks about investments in agriculture in this country, and no one is responsible for these issues.
The experiment showed just one of many instances in which investors have not been heard, understood or supported by the Latvian Investment and Development Agency (LIAA). Recently an Irish investor sought assistance to provide substantial agricultural investments in the beef sector, which is an area in which there is much export potential in the direction of Russia. A bureaucrat at the LIAA did not even understand the scope of the offer. The situation is even more confusing given that the LIAA has a database about investment opportunities in Latvia, and it concludes agreements with those who offer investments, asking them to describe their potential investments in great detail. The LIAA database also includes information from SIA ActusQ on investment opportunities, and agreements between the agency and others mean that intentions must be in line with the offers that are made.
Latvia has a whole series of agencies, institutions and officials charged with attracting as much financing and investment for economic development as possible. The sad fact is that no one is doing serious work when it comes to investments in the agricultural sector. Our consulting firm has years of experience to show that the most difficult obstacle against investments and the development of agricultural production is the weighty process of bureaucracy in terms of the permits that are needed. Also important is the subjective approach which bureaucrats take in interpreting normative acts in this regard, and that only means that investors must engage in a circle dance to find the necessary assistance and recommendations for the best solutions. Despite that dance, however, investors to do not receive what they need, and the approach taken to them by bureaucrats is often apathetic and negative.
It was just last February that investors from the agriculture sector met with the agriculture minister, representatives from the Latvian Association of Local Governments, and people from the Rural Support Service, the LIAA and the Economics Ministry. It seemed that agreement was reached on purposeful work and support for investment projects in agriculture. I very much hope that these promises will lead to actual work and results. We are continuing initiatives in this regard.
I don’t think that the issue here is any fundamental lack of desire on the part of the state to support investments in the agricultural system. The overall system is not in good order. The big minus is hidden behind the names of the many agencies and institutions which relate to this area. The state itself does not know who should do what to attract investments. The system of administration, implementation of government policies and controls is too crumbled, and the logical result of this is that collective responsibility is total irresponsibility in which the subjective views of each bureaucrat are dominant. It is also true that agriculture has always been a hot potato in the collective consciousness of the state and its residents. Foreign investors often encounter serious opposition from local residents and local governments. Agriculture has always been a hot potato for the state and for the people of Latvia. The attraction of foreign investments is often opposed seriously by local residents and local governments. There are job shortages in Latvia’s regions, and local governments do not earn enough tax revenues, but on the other hand, these same residents and local governments try to hinder businesses and the attraction of true financing for the region. Far-sighted and long-term developmental policies are very uncommon in Latvia’s administrative districts. When serious investors suggest that local residents should become co-owners in projects, they are mocked and criticised as people who are trying to bribe others.
The current system is, to a certain extent, of advantage to bureaucrats and government officials who think in this way. At the end of the day, potential investors will get lost in the long corridors of getting information, they will be surprised about the attitude, and they will forget about working in Latvia. Why would anyone make a pointless effort if it is far more comfortable to do business elsewhere – in countries where there is government support and understanding? The result is that people in our country have to seek jobs elsewhere, and Latvia will gain the international reputation of a country where there is too much bureaucracy, along with unequal attitudes toward investors.
PS: I would like to hope that the study conducted by Diena will encourage inter-institutional co-operation which by no means requires additional administrative resources. Perhaps this is an area for public-private partnerships and co-operation, because there are quite a few companies in Latvia which have experience in attracting private investments.