Riga, Hotel Bergs, Glass Hall

Honourable President Schmid,

Mr. Minister (K. Karins),

Excellencies,

Entrepreneurs, investors,

Ladies and gentlemen,

I am very pleased to see that so many business representatives from Switzerland have come here to learn more about the promising potential of Latvia as an economic partner.

Latvia and the Swiss Confederation have historically enjoyed a friendly relationship, which has grown even closer since Latvia regained its independence in 1991 and since Latvia became a full member of the EU and the NATO alliance last year. Both of our countries share a common interest in promoting security, stability and prosperity in Europe, as well as a wish to develop our bilateral cooperation on a broader scale.

Both of our countries see economic cooperation in the traditional sectors, as well as in modern technologies and in tourism, as a priority. There are good perspectives for increasing the flow of trade between Latvia and Switzerland, and very promising opportunities for Swiss investments in Latvia. Latvia is seeking to consolidate a knowledge-based economy and to produce goods and services with high added value. Therefore, Swiss investments in innovation and science-based industries are especially welcome.

Latvia has a great deal to offer to Swiss investors. Our main comparative advantages include our strategic location between East and West, a modern and well-developed infrastructure, a well-educated, productive and cost efficient labour force, an attractive tax regime with a 15% Corporate Income Tax rate, political stability and a dynamic economy.

Latvia's accession to the EU and to the NATO alliance has increased the stability of the Baltic Sea region and of Europe as a whole. It is ensuring the sustainability of our economic development and continued growth, and it has increased the interest and confidence of foreign investors looking for new markets. Latvia plans to accede both to the euro zone and to the Schengen common visa space within the next three years.

Taking into account that Switzerland is one of the largest economic co-operation partners of the EU, along with our successfully evolving bilateral relations, I am very optimistic about the perspectives for furthering our economic and business partnership.

I am pleased to note that during the past few years, Latvia has been experiencing one of the fastest growth rates in Europe. For the last three years, Latvia's GDP has grown at an average rate of 7.5 percent per annum. Last year it reached 8.5 percent, which was the highest among the EU countries. Continued annual growth rates exceeding 7 percent are expected to continue in the next few years. Latvia's economic growth has been achieved in a solid macroeconomic environment that has been sustained by the stability of Latvia's national currency – the lat, which was reintroduced in 1993.

The structure of Latvia's GDP is in line with that of Europe's more developed countries. The share of services has increased to over 70 % of our total value added. And in 2004, around 80 percent of Latvia's foreign trade was conducted with the EU member states.

Latvia's largest trade partners are Germany (14% of Latvia's total exports in 2004), Lithuania (11%), Sweden (8%), Russia (8%) and the United Kingdom (6%). Trade flows between Latvia and Switzerland are also gradually increasing. Last year Latvia's exports to Switzerland increased four times compared to 2003. We hope that this trend continues.

One of the best indicators for measuring a country's economic development potential is investment growth. From 1996 to 2004, gross capital formation increased annually in Latvia by around 17 % on average, and in this respect Latvia is the leader among the new EU member countries. During 2004 the inflow of foreign direct investment increased twofold compared to 2003. A fact which speaks for itself is the "A" grade credit rating awarded to Latvia by leading international agencies.

Switzerland is the thirteenth largest investor in Latvia and by this year around 130 (129) Latvian-Swiss joint ventures have been registered in the Latvian Enterprise Register. The main Swiss investments are in IT, transport and logistics, woodworking, textiles, the chemical and cosmetics industries, tourism and hotels. I would like to mention an investment project in Ventspils by the German – Swiss company Bucher Schoerling, which is planning to start assembling street cleaning machines this fall for the European and local markets. I hope that we will soon see more and more similar investment projects with the participation of Swiss companies.

As you already may know, Latvia is a very good location for investing in engineering, bio-technologies, pharmacology, high-technology, furniture, machine building, food and other industries, as well as the services sector. We also invite Swiss companies to consider Latvia as a place for doing financial outsourcing.

Mr. President,

Ladies and gentlemen,

Swiss banking has long become synonymous the world over with high standards of service, tradition, discretion, innovation and performance. In comparison, the history of Latvian banking is much shorter. It started anew a little over a decade ago, when Latvia regained its independence from the Soviet Union.

Despite its comparatively shorter experience in the area of financial services, Latvia has established a sound and reliable banking system, which has become one of the most developed sectors of the national economy. At present, 22 commercial banks are operating in Latvia, along with a branch office of Nordea Bank Finland. Needless to say, this is not quite in the same league as more than 300 private banks in Switzerland.

Nevertheless, Latvia's financial sector is among the most stable in Central and Eastern Europe. This stability has in part been due to the early liberalization of financial services and to the establishment of a well-defined regulatory framework for banking and financial operations. But perhaps the most important factor has been the fruitful combination of local expertise with the know-how and resources of foreign investors in many Latvian banks and financial institutions. Respectable foreign banks such as Skandinavske Enskilda Banken, MeritaNordBanken, Norddeutsche Landesbank, and others are contributing to the development of the Latvian financial services sector, which generates about 5% (=4.7%) of Latvia's GDP directly and which contributes considerably to other sectors as well.

I am pleased to see that representatives from one of the largest Swiss banks – UBS AG, as well as several other banks of Switzerland are present at today's meeting. I would like to note that Latvia is the first of the new EU member states to have entered the Swiss financial market, when the Latvian Parex bank fully acquired AP Anlage und Privatbank AG.

Mr. President,

Ladies and gentlemen:

Riga, the capital of Latvia, is fast becoming a significant commercial, financial and transportation centre in the Baltic Sea region. Thanks to its favourable geographical location and modern infrastructure, foreign investors are increasingly using Riga as a base from which to expand their activity elsewhere in Latvia, as well as in the direction of both the Russian and European Union marketplaces.

As you can see, Riga is also a very beautiful city, and I encourage you to come back again for business and for pleasure. Those of you who will have a chance to see the seaside city of Jūrmala tomorrow may consider returning for a spa holiday or to enjoy our vast, sandy beaches. I am sure you will feel right at home here in Latvia, where visitors are always received with a warm welcome.

With the continued expansion of the Riga International Airport, I hope that direct flights between Latvia and Switzerland will be soon started to make connections between our countries more practical and efficient.

In the meantime, I wish a very pleasant and productive stay in Latvia. I also hope that your visit here will serve to generate new and beneficial partnerships between the entrepreneurs of our two countries.