Identification of Potential Entrepreneurs and Analysis of Business Environment in Latvia. Project ESTER team meeting Riga, 4-5 September, 2003

Transcription

1 Identification of Potential Entrepreneurs and Analysis of Business Environment in Latvia Project ESTER team meeting Riga, 4-5 September, 2003

2 Macroeconomic development transition of economy from a planned to free market type (denationalisation, deregulation) hyperinflation bank crisis of 1995 economy crisis in Russia of 1998

3 Macroeconomic development Real cumulative GDP growth 1995 = Latvia EU 15 ACC

4 Macroeconomic development GDP per capita PPS (EU 15 = 100) %

5 Macroeconomic development Economic sectors development Agriculture Manufacturing Energetics Construction Trade Transport and communications Financial intermediation Real estate

6 Macroeconomic development Investment as % of GDP 40 %

7 Financial and capital markets introduction of international accounting standards independence of Latvian central bank principles of prudence and caution of regulators low activity of secondary capital markets

8 Financial and capital markets Credit interest rates

9 Financial and capital markets Credits to domestic enterprises and private persons in lats (mln EUR) in foreign currencies (mln EUR)

10 Enterprise functioning main legal form limited liability company foundation capital 2000 LVL (3200 EUR) easy and cheap registering procedure (one-stop shop)

11 Enterprise functioning additional procedures of (licences, customs operations, interface with revenue service) experience difficulties liquidation procedures may be lengthy bankruptcy legislation is insufficiently effective in practice

12 Taxation Corporate income tax 19% Employment related taxes together create a high taxation level, e.g. wage taxation index (gross remuneration spending to net salary) is 1.81 standard VAT rate 18%

13 Taxation

14 Taxation

15 Educational profile historically strong bias towards natural sciences and engineering currently reversal trend in higher education, reasoned by relative lack of funding for education interface between fundamental and applied science/ education is poor

16 Educational profile Economically active population by level of education higher education 100% 80% 60% 40% 20% 0% 20 39,1 24,6 1,1 14, vocational education and professional secondary education general education primary education basic education

17 Educational profile Students by field of study 2001/2002 3% 2% 4% 7% 7% 51% 10% 16% social sciences, business and law teacher education and education sciences engineering and technology natural sciences and mathematics humanities and arts health and welfare services agriculture

18 Protection of IPRs legislation on IPRs almost fully harmonised with EU many examples of fraudulent use of IP low court activity in regard to infringements in practice lack of patenting culture

19 Protection of IPRs Total number of granted patents

20 Potential for innovation State support measures: up to 2001 sporadic (Latvian Technology Centre, 1993) National Concept for Innovation, 2001 National Innovation Programme, 2003

21 Potential for innovation Innovation expenditure by type of innovation 2% 13% 6% 5% intramural R&D extramural R&D 74% machinery and equipment acquisition external knowledge acquisition industrial design

22 Potential for innovation R&D personnel as % of labour force in Latvia (0.69%) is lower than ACC (0.84%) and EU (1.38%) averages 57% of R&D force work in academia related institutions thus they provide for remarkable potential for innovation

23 Potential for innovation Despite the assumed potential, academia currently account for a very little spin-off activity the main limiting factor appears to be the lack of entrepreneurial culture the researchers, who have international exposure, tend to be more active in spinning-off

24 Potential for innovation Gross expenditure on R&D, % of GDP 3,50 3,00 2,50 2,00 1,50 1,00 USA Japan EU 15 Latvia 0,50 0,

25 Potential for innovation Funding innovation 5% 1% 3% (loans, re - investment, etc.) local or regional private sources authorities central government 91% the European Union

26 Potential for innovation Sources of finance: reinvestment of profits collateralled loans (banks, funds) investment funds not experienced in investing into start-ups [public funding (EU, governmental)]

27 RTU D of E&E UoL D of Ph&M Belss Lexel fabrika Daina EL Alfa Hanzas elektronika Datorkarte UoL I of G&G Jana Seta I of SSP I of SSP Anda Optec Baltijas Lazeru centrs ISB Optics Latvia MHD SKB I of P Elmatec RTU D of MB UoL D of Ph&M Sidrabe Baltic Scientific Instruments RVR Rebir Latnet Tilde Dati I of M&CS I of E&CS IT Alise Microlink Latvia Lursoft IT Electronics & electrotechnology Geoinformatics Composites Applied maths & computation Optics Magnetohydrodynamics Machine & equipment buiding Applied physics Chemistry Biotechnology Medical technologies Pharmaceutical ch Basic/ fine ch Nanotechnologies UoL I of M&B Biolat BF-ESSE Bogmeds RSU Biosan Elmi I of OS Grindeks Olainfarm Kalceks Silvanols Riga PharmFactory MedPro UoL D of Ch RTU D of MS&ACh Antikors Valmieras Stikla skiedra Tenax Spodriba European Plastic Industries Latplast Dobele PCT I of IC Neomat Preili RNS D Scruples

28 Conclusions From the standpoint of innovative enterprises: General climate of economy appears to be improving Main problems encountered in innovation-related activities are lack of entrepreneurial culture, limited availability of appropriate financial instruments, insufficient business orientation and lack of designated infrastructure

29 Conclusions (cont.) Other limiting factors appear to be: malfunctioning of some legal frameworks (IPRs, direct investment protection), adversarial trends in educational profile, ageing of R&D-related workforce, as well as excessive bureaucracy and elements of corruption Despite the mentioned failures several technology and research-related sectors could be regarded having remarkable potential for innovation