| Overview:
The
development of an information society requires commitment as well as real
resources from the whole society: the government, the private sector, civil
society and its representative non-governmental organizations. The ambitious national program
"Informatics" has provided a catalyst for further progress, but the
hardware and technology aspects of this are simply the foundation upon
which the information society will be built. Latvia must also focus
on developing an education system that will allow Latvian inhabitants to
benefit from information technology and to raise their standards of living
because of it--both the urban elite and the rural poor. This will
take place by proper prioritization and placement of investments,
appropriate regulation, innovative technology and knowledge transfer for
all ages and social levels. Technological progress must be
stimulated, with opportunities to learn the tools and skills for
application of these advances provided to everyone.
|
The Latvian ICT sector
has come a long way in ten years. The
development of an information society requires commitment as well as real
resources from the whole society: the government, the private sector, civil
society and its representative non-governmental organizations. The ambitious national program
"Informatics" has provided a catalyst for further progress and has
encouraged dialogue and cooperation among the three sectors (public, private and
non-governmental organizations), especially between industry and academia.
Latvia's prime geographical location--among the Baltic states, near Scandinavia and
the "gateway" to Russia--has brought additional foreign direct
investment, which in turn has brought increased opportunity for knowledge
transfer and increased innovation. Latvia's history of interest
and expertise in electronics and related fields, along with a growing interest
among the younger generation in information services and Western technologies,
is providing a qualified but relatively inexpensive labor force. In
addition, it is widely agreed that Latvia holds great potential in the area of
software development.
In order to capitalize
upon these strengths and realize its full potential, Latvia must first place the
utmost importance on the development of its human resources. With limited
financing opportunities and a lack of well-developed infrastructure nation-wide,
it is only by maximizing the potential of Latvia's human capital and leveraging
it to its fullest extent that Latvia will thrive in this highly
competitive environment. With Estonia--Latvia's neighbor to the
north that is significantly further advanced technologically--fighting for financing and foreign
direct investment as well as market share possibilities and innovation
opportunities, Latvia's true potential lies in its inhabitants potential to
excel. Latvia must develop this advantage to the extent that it creates a
competitive advantage to outweigh its small (in absolute terms) labor force and
market and its lack of funding.
Upgrading and innovation
have been hindered by slow governmental action and bureaucracy, which has further caused a lack of
investment. Although the government will not suddenly erase its layers of
bureaucracy, it has taken great strides already by enacting the Informatics
program, then allowing a guiding committee made up of business, academia and IT
professionals. And even with the bureaucracy and the lack
of funds in Latvia, substantial investment has still been allowed to come from
outside, and that is helping push progress forward.
The role of the
government should be to invest substantial resources in improvement of the
educational system and to extend opportunities for development beyond the limits
of Riga. Currently, investment dollars--both internal and external--are
heavily invested in the capital, with insufficient resources trickling to the
countryside. These resources should go toward development of the
educational systems, achieving the top priorities as set forth in the
Informatics program, and opening the country up to additional (and easier) FDI,
entrepreneurial activity and venture capital funds.
It
is important that the Lattelekom monopoly issue be resolved as quickly as
possible, as it seems to be slowing progress in a number of areas while the
issue lingers. With the remaining monopoly and the resultant lack of
intense competition, there is less incentive for firms to innovate or work more
effectively to offer much-needed lower prices. With increased competition
and lower prices, a market that is currently out of reach will open up, allowing
for more opportunities for e-commerce, e-government and cost-reducing innovation
in other non-IT industries.
Another
obstacle to be overcome in this development process will be the cultural issues
of lack of trust--which translates into lack of cooperation among firms and
sectors--and the old Soviet approach to "customer service" and
innovation. According to Contreras and
Kasemaa2,
the foreign-based manufacturing companies were
attracted to Latvia and Estonia mainly by the relatively cheap and high-skilled
labor. Due to the
closeness to Finland, Estonia was in a better position at the initial phase of
transition-investors felt less risk in investing there. After the first movers
proved the viability of the business, more risk averse investors started to
follow. This process of gradual investment (based on experience and evaluating
the actual results against the planned ones) emphasized the importance of the
right business environment and explains why Estonia was able to develop faster
in the particular sector. The relatively high skills of the local labor already
at the beginning of the transition facilitated knowledge and know-how transfer. Although in Latvia FDI was and is very welcomed, a lot of
investors have been complaining about the constant changes in government
policies and the high level of bureaucracy (which often leads to corruption).
Although the impact of FDI on the R & D activities of locally based
companies is difficult to
evaluate,
some companies have been able to get involved in product development. An important aspect of having local
R & D activities is the level of trust and confidence the investors have for
the local company as well as the local business environment. This could be one
of the reasons why R & D activities are less developed among Latvian
companies. The lack of trustful environment and understanding of the benefits from
cooperation hinder the
investment in such efforts.
In
summary, the hardware and technology aspects are simply the foundation upon
which the information society will be built. The role of the government
must go beyond simply bringing in the investment and the hardware. The
role of the government must be to develop an education system that will allow
Latvian inhabitants to benefit from information technology and to raise their
standards of living because of it--both the urban elite and the rural
poor. This will take place by proper prioritization and placement of
investments, appropriate regulation, innovative technology and knowledge
transfer for all ages and social levels. Technological progress must be
stimulated, with opportunities to learn the tools and skills for application of
these advances provided to everyone.
According
to ESIS, Latvia’s economy is
currently based on wood processing, light and food industry, and the focus in
the economy presently is not such as to ensure overall welfare in the state.
Latvia has few natural resources, and because of the small domestic market,
there is no hope at all of developing many mutually linked technological
sectors. The only possible route for economic development, therefore, is to
emphasize the intensive use of knowledge and high technologies23.
Last
updated December 13, 2001