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HIGH - TECH INDUSTRIES STRATEGIC GOAL FOR LATVIAN ECONOMY
Dr. Māris Ēlerts Director General Latvian Development Agency
Vilnius, December 2, 2002
INTERNATIONAL MEMBERSHIP
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Invited to join NATO (Summit in Prague, 21.11.2002)
Planning to conclude accession negotiations with EU by the end of 2002, ready for accessions in 2004
Latvia’s current membership: UN WTO IMF EBRD WB UNESCO - United Nations Organisation, Council of Europe , - World Trade Organisation, - International Monetary Fund, Euro-Atlantic Partnership Council , - European Bank for Reconstruction and Development, NATO Partnership for Peace , - World Bank,
STABLE MACROECONOMIC ENVIRONMENT between western Europe and Russian market
Currency (Lats) pegged to SDR since 1994
The lowest inflation among Central European Countries
(1999: 2.4%; 2000: 2.6%; 2001: 2.5%; 2002F: 2.5%)
Rapid GDP growth rates (1999: 1.1%; 2000: 6.8%; 2001: 7.7%; 2002F: 5 %)
Latvia rated as investment safe and stable country by: Moody`s: A2, S&P: BBB+, Fitch IBCA: BBB
61% of exports to EU in 2001
FDI stock 2.34 billion USD at the end of 2001
CUMULATIVE FDI IN LATVIA BY SECTOR
(END OF PERIOD, MILLION USD) 400 350 300 250 307 200 150 100 118 63 114 78 50 231 317 189 229 188 340 277 329 270 211 251 234 299 328 295 233 218 369 315 301 257 247 123 77 120 Manufacturing Transport and communications Trade Financial services Others 0 1996 1997 1998 1999 2000 2001
• In 2001 18% of FDI invested in manufacturing, increasing by 13.7% to
compare with 2002, in high technology sectors growth was 7%.
•In 2001 75% of FDI was invested in services - trade (31.5%), financial sector
(22.8 %), real estate (22.5%) and transport and telecommunications (21.1 %)
MAJOR INVESTORS
Foreign investor Country Company in Latvia Activity Sonera Tele2 Transneteprodukt Varner Gruppen, ICA/Hakon Gruppen, Linstow ASA New Century Holding Ernesto Preatoni Group Den Norske Stats Oljeselskap SE-Banken Vereinsbank und Westbank Noord Natie Neste OY Preussen Electra & Ruhrgas Gazprom Hebeda TRA AB (consotium: AB Karl Hedin, Axel Bergkvist AB, Daniels Trovaru AB) & Thomesto Sverige AB Telia AB Swedwood (IKEA group) Enso Group (Pakenso OY) Rhodia Codan Finland Sweden Russia Norway USA Italy Norway Sweden Belgium Finland Germany Russia Sweden Lattelekom Baltcom GSM Latrostrans Linstow Varner Telecommunications Telecommunications Transit of oil products Real estate New Century Holding Pro Kapital Latvija Latvija Statoil Unibanka Vereinsbank Riga A./s Noord Natie Bentspils Termināls Neste Oil Terminal Riga / Neste Oil Latvia Latvijas Gāze Latvijas Gāze Vika Wood, Ltd.
Real estate, insurance Real estate Port services, trade Finance Finance Port services Port services, trade Gas supply Gas supply Wood processing Sweden Sweden Finland France Denmark SIA Telia Latvia Incukans Timbers Pakenso Baltica Rhodia Yarns Balta AS Communications Wood processing Production of packaging Textiles Insurance Total investment in M USD 305 277 61,8 56 45,3 41 40 38 24 20 20 19,3 19,3 15 13 13 12 9 8,6
LEGAL FRAMEWORK
By law, the foreign investor has the same rights and duties as local investors
The foreign investor may be the sole founder and owner of a company in Latvia
No restricted sectors activities
The foreign investor may freely repatriate after tax profits and investment capital
Foreign companies registered in Latvia are entitled to buy land and property
Active dialogue between the Foreign Investors’ Council in Latvia (FICIL) and the Latvian Government
EXCELLENT BUSINESS ENVIRONMENT LOW TAX RATES AND INCENTIVES
Corporate income tax 19% from 2003 down to 15% till 31.12.2003
High-tech manufacturers - reduction by 30%
Depreciation rate for high-tech equipment 70%
Real estate tax 1.5%, from 2004 1%
Corporate income tax holiday for large investment projects, equal to 40% of the invested amount
LONG TERM ECONOMIC STRATEGY OF LATVIA
Creating new knowledge based sectors of industry Using already existing science base in
Information Technologies Biotechnologies and pharmaceuticals New materials Restructuring of traditional sectors of the economy
Based on principles of comparative advantages of traditional industrial sectors;
Introduction of new technologies and increasing competitiveness
INNOVATION POLICY - KEY PRIORITY FOR DEVELOPMENT OF INDUSTRIAL COMPETITIVENESS KEY OBJECTIVES OF THE NATIONAL INNOVATION PROGRAMME (being developed):
Formation of the society open to innovative activity;
Innovation policy coordinated with the EU regulations; legal environment favorable for innovative business;
support to innovative enterprises and to their further growth; efficient cooperation between all elements of the innovation system.
Innovation policy in Latvia is at its development stage. The Latvian Government has passed in 2001 the National concept for innovation, and is soon going to accept the National program for innovation and its action plan that will set concrete goals for a period of 3 to 5 years.
Reduction of the trade deficit and an increase by 20% of the high-tech products in total exports is expected.
Ministry of Economics, Republic of Latvia
THE GOVERNMENT IS SERIOUS ABOUT DEVELOPING AN INFOR MATION SOCIETY IN LATVIA, BY INCREASING SPENDING…
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National Program for Information Society development adopted and National Information Society Council established, led by Prime Minister IT education a priority:
spending on IT education programs increased by 20% in academic year 2000, translating into 33% enrolment growth
currently all educational institutions have permanent Internet connections and PC classes Implementation of strategic IT projects
– - Public Investment Program instituted for 2000-2005 – 40 MUSD annual public spending for IT projects
Latvian National Library: making state-of-the-art information resources available in every region of the country E-government project: linking of public databases, registries, public offices into a uniform information system Legislation on digital documents and signatures, introduction of microchip enabled personal IDs by 2002
KNOWLEDGE BASED ECONOMY
120,0 100,0 80,0 60,0 40,0 20,0 0,0 39,0 Number of students (thsd) 46,2 55,4 64,2 76,6 89,5 101,3 110,5 1994/95 1995/96 1996/97 1997/98 1998/99 1999/00 2000/01 2001/02 Source: Ministry of Education and Science
High third-level enrolment rates: 37.3 students per 1000 population
of those, 35% Engineering and technology and 26% Business Administration and Social Sciences University-level enrolment: 26.4 students per 1000 population
of those, 15% Engineering and technology and 21% Business Administration
KNOWLEDGE BASED ECONOMY
GROVING NUMBER OF HIGH EDUCATION ESTABLISHMENTS Number of high education establishments (public/private).
40 35 30 25 20 15 10 5 0 10 12 2 1990 14 6 1992 20 17 9 1994 26 18 13 1996 31 19 14 1998 33 20 13 2000 33 20 14 2002 34 Source: Ministry of Education and Science
KNOWLEDGE BASED ECONOMY
RAPIDLY GROWING AMOUNT OF IT STUDENTS Number of IT students 6000 4804 5000 3876 4000 2940 3000 2520 2538 2100 2000 1000 0 1996/97 1997/98 1998/99 Source: Ministry of Education and Science 1999/00 2000/01 2001/02
Quality of the university IT curriculum
Internationally recognized IT studies
in Riga Technical University, Latvian University,
Job profiles of new specialists
Applications Design Communications Network Design Institute of Transports & Communications
Participation of IT companies
in curriculum quality assurance, ex. CISCO joint Software & Services Software & Applications Development Software Architecture and Design Multimedia Design participation in the development of IT study program in the Latvian University
Acquiring of practical IT skills
in Latvian software houses
Targeted support from local firms
(research prizes, scholarships, donations etc.)
Joint activities to promote the interest of youth in this sector
IT Business Consulting Technical Support Products & Systems Product Design Integration & Test Implementation & Test Engineering Systems Specialist Telecommunications Radio Frequency (RF) Engineering Digital Design Data Communications Engineering Digital Signal Processing
HIGHLY EDUCATED AND SKILLED LABOR FORCE
Over 10 000 employees in ICT sector:
Telecommunications
Computers and computer-related operations 6756 4235
Over 3,500 highly-skilled professionals in top 20 IT companies
Major international customers of Latvian IT companies: Boeing, IBM, Nokia, Siemens Nixdorf, Unisys
Established technology partnerships with Cisco, Lotus, Microsoft, Oracle, SAP
About 36% of IT specialists work in ISO certified companies
About 85% of IT specialists work for companies with international experience
200 % growth of software development specialists foreseen by 2005
WAGE ADJUSTED PRODUCTIVITY
Output per one salary EUR invested in employee
Sweden 10,36 Latvia Germany Finland 8,60 9,37 8,73 Denmark 4,75 0,0 2,00 4,00 6,00 8,00 10,00 12,00 Source: Eurostat yearbook, CSB 2001
Low tax burden:
CIT only 15 % by 2004
High capacity Telecom network
INT
Source: Lattelekom, Latvenergo 2001
INT INT
EASY NETWORK ACCESS
High capacity telecommunication network
Backbone for Latvia’s telecom system - growing optical cable network Optical cable network length is 3000 km, density ratio is 0.04 km per square km of territory Digitalization ratio for Telecom switchboards is 99% 80% digital lines in cities, 64% overall digitalization ratio Full range telecom services for customer (e. g. digital line lease, ISDN, DSL, LAN 2 LAN, X.25)
Latvia is fully integrated into the international telecom network
Broadband optical cable & satellite access to the regional telecom network (e. g. access to Ebone, UUNET, Metrocom with international transmission capacity of 110 Mb/s) New Baltic Sea Region optical cable ring by 2002 enabling 32 Gb/s and using the latest DWDM technology (LinxTelecommunications B.V.) Significant data and voice transmission transit via Latvia
Competing & complementary networks
4 independent optical networks offered by telecom, energy & transport companies (e. g. Lattelekom, Latvian Railway, Latvenergo) Comprehensive network held by number of cable TV & Internet providers (e. g. Telia, Baltcom) Separate telecom network for public bodies (VITA)
ADVANCED TELECOM INFRASTRUCTURE
Telecommunications
Telephone penetration 32 / 100 inhabitants
Digitalisation rate 72,7% (2002)
ISDN 128 kbps (basic)
ISDN 2Mbps (primary)
GSM Operators
Mobile penetration
PC density from 1998 from 1998 2 34.2% 9,5/100 inhabitants
(among companies 39%)
ISP providers
Uses Internet regularly 50 21% of economically active population
Cable TV subscribers
WAP service available 31.25% of households WAP banking, GPRS Source: Central Bureau of Statistics
LATVIAN ICT SECTOR
THE MAIN SPECIALISTIONS AND PRODUCTS Banking & finance
Data transmission & storage IS, Transaction software, Financial applications, WAP solutions, Client handling systems
Wireless & cable communications
Data transmission & storage IS, Large customer registers, WAP solutions, Call Centers, ASP solutions
Education & science
LAN, Internet & Intranet solutions, Digital signal processing
Software development IT consultations Hardware architecture Networking & data transmission solutions Public institutions
Business process re-engineering, Integrated networks, ASP, Databases & data storage, Specific applications
Transport
EDI systems, warehousing, distribution & transport software, aviation software
Healthcare
Patient & case-record registers, medical equipment support software, telemedicine
Service & manufacturing
Client handling systems, Accounting & financial software, Network architecture, WEB solutions, office software, ASP services
GOVERNMENT SUPPORTS DEVELOPMENT OF KNOWLEDGE BASED SECTORS
SUPPORT TO IS CLUSTER DEVELOPMENT
EU Phare funded project “Support to Industrial Cluster Restructuring, LE9812.01/0001” (2001):
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Articulated and agreed cluster strategy (vision, mission and values)
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IS Cluster Code of Ethics signed by all involved companies
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Cluster resources pool and costs assessed
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Several legislative initiatives started with government of Latvia
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web site operational - document’s sharing and collaboration tools - www.is.lv
IS Cluster Development Activities, Supported by the Government in 2002:
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The Applied Informatics R&D and Software Outsourcing summit, Riga, April 4-5
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Export marketing training program “Partnerships in Digital Age”, Riga, May 6-10
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Participation in IT exhibition “Systems”, Munich, October 14 - 18
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Development of IT professional standards
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Development of project of Latvian - Danish IT college
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Development of project Postgraduate IT&T professional training centre
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Participation in process of improvement of business environment (through identification of the main problems and legislative initiatives)
VISION OF LATVIA’S IS CLUSTER UNTIL 2010
Latvia would be a leading software services exporter in Eastern Europe
Cluster of more than 10 000 qualified specialists
Annual export of services over 1 billion USD
Sourcing of additional HR
Provision of ASP services, know-how and products
Current expertise in implementing large-scale projects enhanced by 2010
Establishment of an R&D center for the development of IS projects
Background for integrated product development
Strong and competitive related sectors stipulating IT demand banking, insurance, telecommunications, logistics etc.
- Highly competitive international banking sector dealing with Scandinavian and German business practice (Foreign investment into Latvian banking sector accounts for 65%) - Scandinavian multinationals in the telecommunication sector (ex. Sonera, Telia) - Latvia as a regional logistics hub & distribution center for Western and CIS customers
Traditions in hi-tech inventions & unique IS development
- Pioneers in computer and data transmission network architecture in former USSR - Experience in digital signal processing equipment & information systems
LATVIA’S IS CLUSTER
THE MAIN EXPORT PRODUCTS AND SERVICES
New system development for public utility projects
SAP / Oracle consultations,
JAVA software design,
Re-engineering System maintenance & testing
Software product development
Localization & documenting of software,
CASE tools
B2B Internet technologies SAP/R3 interfaces Web solutions
application service provision,
data storage and transmission,
Networking solutions
Payment card systems
software outsourcing services
Source: ICT Country Profile, Latvia, ITC, October 2002
Competency areas by company
Development of large scale IS Software outsourcing Localisation Financial, insurance, telecom applications B2B systems Software for public bodies Internet technologies Electronics integrated IS Call centres E-commerce
DATI JSC, SWH-T (Exigen) JSC, IT Alise Ltd.
DATI JSC, SWH-T JSC (Exigen), DataPro Ltd., IT Alise Ltd., Fortech Ltd.
Tilde Ltd.
Tieto Konts, Baltic Technology Group, Information Technologies Ltd., IT Alise Ltd., Solcraft, Fortech Ltd.
Baltic Data Ltd., Information Technologies Ltd., Blue Bridge Ltd DATI, SWH-T (Exigen), Information Technologies Ltd., DataPro Ltd., Fortech Ltd.
Delfi JSC, Information Technologies Ltd., Baltic Data Ltd.
Arcus Elektronika Ltd., Amerilat Ltd.
Lattlekom, Latvijas Elektroniskais Telefons Baltic Data Ltd., BTG Ltd.,
SUCCESS STORY: SYBASE
Sybase, a leading supplier of database software, has set up a company in Latvia
Sybase competence areas are co-ordination of operations, outsourcing, sales & marketing in Latvia
Sybase Baltic, the Finnish subsidiary of Sybase Inc (US) aims to become the leading supplier of mobile and Internet solutions in the Baltic Sea Region
In less than a year, Sybase has established outsourcing partnerships with 8 local software companies
Latvian Electrical Engineering and Electronics Industry Association
THE MAIN AREAS OF LATVIAN E & E INDUSTRY
intelligent e-technologies original equipment and software for industrial application electrical equipment for electric trains electromechanical tools power electrical engineering equipment microelectronics telecommunication equipment nuclear electronics for radiation measurements consumer electronics automotive electronics fiber optics electrical filament lamps, including decorative and reflector lamps wind power engineering
LATVIAN ELECTRICAL ENGINEERING AND ELECTRONICS INDUSTRY ASSOCIATION
MAIN INDUSTRIAL BRANCHES
electrical engineering, electronics, microelectronics, telecommunications, fiber optics .
KEY FIGURES
Association represents: 9 large companies (250 < employees) 12 medium companies (50 – 249) 29 small companies (10 – 49) Total: 50 companies Total turnover: EUR 97.1 mln (2001) EUR 107.0 mln (2002 estimated) Share in GDP: 1.2 % Export: 75 % Employees: 5400
AUTOMATION CLUSTER INITIATIVE
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Business leaders – around 15
Locals: Dambis, Arcus Elektronika, Hansa Elektronika, Jauda, Fundus, Peruza, LF Machinery Plant, Olimps etc.
MNS: ABB, Festo, Siemens, Klinkmann, Danfoss
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Support industries – 20-30
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Universities & Colleges – around 6
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R&D centres – around 12
HIGH R&D COMPETENCE (2)
SIDRABE System for coating ITO ACCENTIA ® DISPLAY MATERIALS
ITO coated films Barrier coatings Hard coatings Patterned ITO
Success story: ARCUS ELEKTRONIKA
Arcus Elektronika: a producer of electronic control devices and software for the energy industry
A number of joint-projects have been effected with well-known multinationals such as ABB, Siemens, AEG, Alstom and ELGA. Deloitte and Touche rated Arcus Elektronika as a High-Tech company front-runner in Central Europe in 2000.
Arcus Elektronika’s growth is supported by a developed R&D base
The company oversees the development process, from conception to final product, using the latest technology.
Year-on-year growth of 40%, projected at 60% for 2002
Success story: SAF TEHNIKA
SAF Tehnika: a pioneer in wireless communication
SAF Tehnika offers original solutions for fixed wireless radio and infrared laser communications equipment.
SAF Tehnika equipment meets CE standards.
In 2000, SAF Tehnika merged with Microlink - the largest IT holding in the Baltics.
In 2000, growth rate of 100%; in 2002, projected growth rate of 200%
Turnover per employee was USD 0.15 million (2000) SAF Tehnika serves the regional ITC market
The company exports to European and American markets.
Customers include Telia, NetCom, Sonera, and Tele Denmark.
In a field dominated by competitors Ericsson, Nokia, and Siemens, SAF Tehnika has successfully found it’s market niche.
LATVIA’S ICT GROWTH RATES
TOTAL ICT MARKET IN LATVIA: 2001 600 MUSD 2005 1 160 MUSD
SOFTWARE and COMPUTING SERVICES 106 MUSD
HARDWARE MARKET + 20 %
SOFTWARE MARKET
SOFTWARE EXPORTS ( +13 % in 2000 )
INTERNET SERVICES
MOBILE TELEPHONY + 18 % + 15 % + 45 % + 65 %
Source: ICT Country Profile, Latvia, ITC, October 2002
R&D: CENTERS OF EXCELLENCE
Riga Technical university Improves manufacturing with areas of specialization including automated and flexible manufacturing and assembly systems, process planning, and processing of engineering materials, telecommunications.
Institute of Solid State Physics Focuses on research, testing and development of new materials, nanosize technologies, new power sources, sensors, optoelectronic solutions Institute of Electronics digital signal processing Institute of Transport and Communications Telecommunications, radioelectronics Institute of Physics MHD technologies
SIGNIFICANT NEW PROJECTS
SCIENCE TECHNOLOGY PARK Physical result of the project The optimisation and concentration in Riga of the currently scattered STP elements by forming complex infrastructure for scientific research, higher education and high tech enterprises, including:
the relevant faculties of universities – natural sciences, engineering sciences etc.; the relevant research institutes;
Business Environment result
spin-off high-tech companies; co-operation between universities, enterprises, risk capitalists,
organisational platform;
creation of a national and an international, formal and informal creation of new knowledge based companies, commercialisation of ideas; attraction of foreign high tech companies and their branches;
training of workforce to meet the requirements of the sector; creation and introduction of new technologies;
LATVIA IS CLEARLY ONE OF THE MOST SUCCESSFUL TRANSITION ECONOMY CENTRES IN EASTERN EUROPE
THE LATVIAN DEVELOPMENT AGENCY Pērses iela 2, Rīga, LV 1442, Latvia Phone: +371 7039400 Fax: +371 7039401 E-mail: [email protected]
HTTP://WWW.LDA.GOV.LV