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LATVIA – THE COMPETITIVE LOCATION FOR IT and ICT SERVICES

For the last decade Western companies have been outsourcing their functions and searching for skilled specialists in Eastern Europe. At the same time for the last 20 years the Baltic governments have been internationalising their ICT sector and attracted foreign companies by promoting modern ICT infrastructure, setting up a legislative framework and raising the issue onto the political agenda.

According to Canada’s Trade Comissioner Service Market report[1], the Baltic ICT competencies are dominated by service, computer programming, consulting, and telecommunications. Business process support functions, software development for the finance and insurance industry, and internet banking are rapidly growing subsectors. Competencies of Baltic ICT specialists rank very high on the global labour market due to the high-quality ICT education, and the region is well-known for its strong experts in cybernetics and electronics.

All three countries are pressing ahead with the creation of an information society, although, according to Investinlatvia[2], Latvia is the leading ICT exporter in the Baltics with a 9% added value growth YoY, which contributes 4.3% of total GDP. There have been 37k people employed in the 5,000 ICT sector companies in 2019. Latvia is #1 in Europe in terms of ICT students per 1 M population.

On a recent ranking of the world’s 100 most innovative fintechs, as many as 33 were from the European Union, and within the EU, the Baltics are at the forefront,” says European Commission vice president Valdis Dombrovskis. “This is linked to many factors, including the early adoption of digital technology, a culture for startups and innovation, and growing crossborder cooperation.”[3]

In Latvia, this quality is tied to the education infrastructure. We have a substantial base of financial experts, in part because we have significantly more universities focusing on relevant sectors than other Baltic countries. In our region, this industry has something of a symbiotic relationship with our education system, which has a real focus on financial services.[4]

A skills advantage leads to strong businesses,” says Roberts Lasovskis, investment platform lead at Twino, one of Latvia’s successful startups. “Industry employs top tech talent, and the technology talent pool in Latvia is getting better and better.”[5]

Moreover, following a legislative change to the country’s stock option policy, Latvia is now ranked as the most startup-friendly country in Europe, sharing the top spots with neighbouring Estonia and Lithuania. In January 2021, a very favourable new approach to stock options was introduced in Latvia. It is slightly more flexible than Estonia’s (already existing) scheme.[6]

According to Labsoflatvia, The new reforms in Latvia, and earlier last year in Lithuania, have turned the Baltics into a region with the world’s most favourable stock option policies, making it easier for startups to attract and retain the talent they need to succeed.

In response to the recent policy changes, global venture capital firm Index Ventures has revised its ranking of employee stock ownership plans, placing all three Baltic nations ahead of 22 other countries including the US, the UK, Israel, France and Germany.

In response to the changes, Index Ventures partner Martin Mignot said: “It’s great to see policymakers in the Baltic countries with such a forward-thinking approach, recognising the value of the startup economy and the role that entrepreneurs can play in creating jobs and economic growth. While these policy changes will be welcome news to Latvian and Lithuanian startups and startups expanding into those countries, we now need the rest of Europe and the EU to follow suit.”[7]

Author: Marina Briškena

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[1] Market Report: Information and Communication Technology – Baltic States (2019), available at: https://www.tradecommissioner.gc.ca/latvia-lettonie/market-reports-etudes-de-marches/0004131.aspx?lang=eng

[2] https://investinlatvia.org/en/key-sectors/sectors/information-and-communications-technology

[3] https://www.accaglobal.com/ca/en/member/member/accounting-business/2019/02/insights/baltic-states.html

[4] Ibid.

[5] Ibid.

[6] https://labsoflatvia.com/en/news/latvia-ranked-as-the-most-startup-friendly-country-in-europe

[7] Ibid.

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